<PAGE>
As filed with the Securities and Exchange Commission on June 2, 1999
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
Under
The Securities Act of 1933
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PROLOGIS TRUST
(Exact name of registrant as specified in its charter)
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Maryland 74-2604728
(State of organization) (I.R.S. Employer Identification No.)
14100 East 35th Place, Aurora, Colorado 80011
(303) 375-9292
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
--------------
Edward S. Nekritz, Secretary
ProLogis Trust
14100 East 35th Place
Aurora, Colorado 80011
(303) 375-9292
(Name, address, including zip code, and telephone number, including area code,
of agent for service):
Copies to:
Michael T. Blair
Mayer, Brown & Platt
190 South LaSalle Street
Chicago, Illinois 60603
(312) 786-0600
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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, check the following box: [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act of 1933 registration statement number
of the earlier effective registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act of 1933 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. [_]
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CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
Proposed
Proposed Maximum
Amount Maximum Aggregate Amount of
to be Offering Price Offering Registration
Title of Securities to be Registered Registered Per Share(1) Price(1) Fee
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<S> <C> <C> <C> <C>
Debt Securities.................................................... (2) 100% (2) --
Preferred Shares of Beneficial Interest, par value $0.01 per share. (2) 100% (2) --
Common Shares of Beneficial Interest, par value $0.01 per share.... (2)(3) 100% (2) --
Rights to Purchase Common Shares of Beneficial Interest............ (4) N/A N/A N/A
Preferred Shares Purchase Rights................................... (5) N/A N/A N/A
Total.............................................................. $500,000,000 100% $500,000,000 $139,000
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</TABLE>
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(1) Estimated solely for purposes of determining the registration fee.
(2) In no event will the aggregate initial price of debt securities, preferred
shares of beneficial interest and common shares of beneficial interest
registered under this registration statement exceed $500,000,000 or the
equivalent thereof in one or more foreign currencies or composite
currencies including European Currency Units.
(3) There are hereby registered such indeterminate number of common shares of
beneficial interest as may be issued upon conversion of preferred shares of
beneficial interest registered hereunder, for which no separate
consideration will be received.
(4) There are hereby registered such indeterminate number of Rights to Purchase
common shares of beneficial interest as may be issued as a dividend, for
which no separate consideration will be received, to holders of common
shares of beneficial interest entitling such holders to subscribe for and
purchase common shares of beneficial interest registered hereunder.
(5) There are hereby registered such indeterminate number of Preferred Share
Purchase Rights as may be issued together with common shares of beneficial
interest registered hereunder and with common shares of beneficial interest
issued upon conversion of preferred shares of beneficial interest
registered hereunder, for which no separate consideration will be received.
Pursuant to Rule 429 under the Securities Act of 1933, the prospectus
constituting a part of this registration statement also relates to $108,029,182
of the Registrant's securities registered under Registration Statement No. 333-
39797.
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The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities and it is not soliciting an offer to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION DATED JUNE 2, 1999
PROSPECTUS
PROLOGIS TRUST
$500,000,000*
Debt Securities
Preferred Shares
Common Shares
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ProLogis will provide specific terms of these securities in supplements to
this prospectus. You should carefully read this prospectus and any supplement
before you invest.
* Pursuant to Rule 429 under the Securities Act of 1933, this prospectus also
relates to an additional $108,029,182 of the debt securities, preferred shares
and common shares, which were registered under a previous registration
statement.
-----------
These securities have not been approved or disapproved by the securities and
exchange commission or any state Securities Commission, nor has the Securities
and Exchange Commission or any state securities commission passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is
a criminal offense.
-----------
The date of this Prospectus is June 2, 1999.
<PAGE>
TABLE OF CONTENTS
<TABLE>
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Page
----
<S> <C>
WHERE YOU CAN FIND MORE INFORMATION....................................... 1
INCORPORATION BY REFERENCE................................................ 1
FORWARD-LOOKING STATEMENTS................................................ 2
PROLOGIS TRUST............................................................ 2
RISK FACTORS.............................................................. 4
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED SHARE
DISTRIBUTIONS............................................................ 7
USE OF PROCEEDS........................................................... 8
DESCRIPTION OF DEBT SECURITIES............................................ 8
DESCRIPTION OF PREFERRED SHARES........................................... 21
DESCRIPTION OF COMMON SHARES.............................................. 27
FEDERAL INCOME TAX CONSIDERATIONS......................................... 29
PLAN OF DISTRIBUTION...................................................... 38
EXPERTS................................................................... 39
LEGAL MATTERS............................................................. 39
</TABLE>
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
ProLogis is subject to the informational requirements of the Securities
Exchange Act of 1934 and, in accordance therewith, files reports, proxy
statements and other information with the Securities and Exchange Commission.
Such reports, proxy statements and other information can be inspected and
copied at the public reference facilities maintained by the Securities and
Exchange Commission at 450 Fifth Street, N.W., Washington, D.C. 20549;
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661;
and 7 World Trade Center, 13th Floor, New York, New York 10048. Copies of such
material can be obtained at prescribed rates from the Public Reference Room of
the Securities and Exchange Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549 or by calling the Securities and Exchange Commission at
1-800-SEC-0330. Such material can also be obtained from the Securities and
Exchange Commission's worldwide web site at http://www.sec.gov. ProLogis'
outstanding common shares, Series A cumulative redeemable preferred shares of
beneficial interest, Series B cumulative convertible redeemable preferred
shares of beneficial interest, Series D cumulative redeemable preferred shares
of beneficial interest and Series E cumulative redeemable preferred shares of
beneficial interest, are listed on the New York Stock Exchange under the
symbols "PLD", "PLD-PRA", "PLD-PRB", "PLD-PRD" and "PLD-PRE", respectively, and
all such reports, proxy statements and other information filed by ProLogis with
the New York Stock Exchange may be inspected at the New York Stock Exchange's
offices at 20 Broad Street, New York, New York 10005.
This prospectus constitutes part of a registration statement on Form S-3
filed by ProLogis with the Securities and Exchange Commission under the
Securities Act of 1933. This prospectus does not contain all of the information
set forth in the registration statement, parts of which are omitted in
accordance with the rules and regulations of the Securities and Exchange
Commission. For further information, reference is made to the registration
statement.
INCORPORATION BY REFERENCE
There are incorporated by reference in this prospectus the following
documents previously filed by ProLogis with the Securities and Exchange
Commission.
(a) ProLogis' Annual Report on Form 10-K for the fiscal year ended
December 31, 1998 and amended by Form 10-K/A filed April 30, 1999;
(b) ProLogis' Quarterly Report on Form 10-Q for the fiscal quarter ended
March 31, 1999;
(c) ProLogis' Current Reports on Form 8-K filed March 24, 1999, March
31, 1999, April 13, 1999, April 15, 1999, and April 16, 1999, and Form 8-
K/A filed April 22, 1999;
(d) The description of the common shares contained in ProLogis'
registration statement on Form 8-A, as amended; and
(e) The description of ProLogis' preferred share purchase rights
contained in ProLogis' registration statement on Form 8-A, as amended.
The Securities and Exchange Commission has assigned file number 1-12846 to
reports and other information that ProLogis files with the Securities and
Exchange Commission.
All documents subsequently filed by ProLogis pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act of 1934 prior to the termination of the
offering of the offered securities, shall be deemed to be incorporated by
reference in this prospectus and to be a part of this prospectus from the date
of filing of such documents. Any statement contained in this prospectus or in a
document incorporated or deemed to be incorporated by reference in this
prospectus shall be deemed to be modified or superseded for purposes of this
prospectus to the extent that a statement contained in this prospectus, or in
any subsequently filed document which is incorporated or deemed to be
incorporated by reference in this prospectus, modifies or supersedes such
<PAGE>
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this prospectus.
ProLogis will provide without charge to each person, including any
beneficial owner, to whom a copy of this prospectus is delivered, upon the
written or oral request of such person, a copy of any or all of the documents
incorporated by reference in this prospectus, other than exhibits to such
documents unless such exhibits are specifically incorporated by reference into
such documents. Requests should be addressed to Secretary, ProLogis Trust,
14100 East 35th Place, Aurora, Colorado 80011, telephone number: (303) 375-
9292.
FORWARD-LOOKING STATEMENTS
The following statements are or may constitute forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934:
(1) statements, including possible or assumed future results of
operations of ProLogis including any forecasts, projections and
descriptions of anticipated cost savings or other synergies referred to in
such statements, and any such statements incorporated by reference from
documents filed with the Securities and Exchange Commission by ProLogis,
including any statements contained in such documents or this prospectus
regarding the development or possible or assumed future results of
operations of ProLogis' businesses, the markets for ProLogis' services and
products, anticipated capital expenditures or competition;
(2) any statements preceded by, followed by or that include the words
"believes," "expects," "anticipates," "intends" or similar expressions; and
(3) other statements contained or incorporated by reference in this
prospectus regarding matters that are not historical facts.
Because such statements are subject to risks and uncertainties, actual
results may differ materially from those expressed or implied by such forward-
looking statements. ProLogis shareholders are cautioned not to place undue
reliance on such statements, which speak only as of the date the statements
were made.
Among the factors that could cause actual results to differ materially are:
general economic conditions, competition and the supply of and demand for
industrial distribution facilities in the combined company's markets, interest
rate levels, the availability of financing, potential environmental liability
and other risks associated with the ownership, development and acquisition of
industrial distribution facilities, including risks that tenants will not take
or remain in occupancy or pay rent, or that construction or operating costs may
be greater than anticipated, inflationary trends, and other risks detailed from
time to time in the reports filed with the Securities and Exchange Commission
by ProLogis.
Except for their ongoing obligations to disclose material information as
required by the federal securities laws, ProLogis does not undertake any
obligation to release publicly any revisions to any forward-looking statements
to reflect events or circumstances after the date of the filing of this
prospectus or to reflect the occurrence of unanticipated events.
PROLOGIS TRUST
ProLogis is a real estate investment trust organized under Maryland law and
has elected to be taxed as a real estate investment trust under the Internal
Revenue Code of 1986, as amended. ProLogis deploys capital in markets that
ProLogis believes have excellent long-term growth prospects and in markets
where ProLogis believes it can achieve a strong position through the
acquisition and development of flexible facilities designed for both
warehousing and light manufacturing uses. ProLogis is an international company
focused exclusively
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<PAGE>
on meeting the distribution space needs of international, national, regional
and local industrial real estate users through the ProLogis Operating
System(TM) and believes it has distinguished itself from its competition by
being the only entity that combines all of the following:
(1) An international operating platform dedicated to providing
distribution facilities to a targeted customer base of the 1,000 largest
users of distribution facilities worldwide, 422 of which are currently
ProLogis customers;
(2) An organizational structure and service delivery system built around
the customer--ProLogis believes its service approach is unique to the real
estate industry as it combines international scope and expertise with
strong local presence in each of its target markets; and
(3) A disciplined investment strategy based on proprietary research that
identifies high growth markets with sustainable demand for ProLogis'
distribution facilities.
As of March 31, 1999, ProLogis' real estate assets, including assets held by
unconsolidated subsidiaries and joint ventures, consisted of approximately
146.4 million square feet of operating distribution facilities and
approximately 16.8 million square feet of refrigerated distribution facilities.
In addition, ProLogis had 5.4 million square feet of distribution facilities
under development at a total expected investment of $269.3 million. ProLogis
has facilities in 94 North American and European Markets. Also, ProLogis owned
or controlled approximately 5,200 acres of land for future development of
approximately 90.9 million square feet of distribution facilities.
ProLogis' objective is to increase shareholder value by achieving long-term
sustainable growth in cash flow. To accomplish this objective ProLogis has
developed a business strategy that combines an operational plan, an investment
plan and a financing plan to achieve its overall objective.
ProLogis was originally formed in June 1991 to take advantage of two
strategic opportunities identified as a result of extensive market research:
. the opportunity to build a distribution and light manufacturing asset
base at costs significantly below replacement cost and a land inventory
at attractive prices; and
. the opportunity to create, for the first time, a national operating
company which would differentiate itself from its competition through
its ability to meet a corporate customer's distribution facility
requirements on a national, regional and local basis.
In 1997, ProLogis began expanding its operations into Mexico and Europe to
meet the needs of its targeted national and international customers as they
expanded and reconfigured their distribution facility requirements globally.
Consistent with ProLogis' objective of expanding its services platform for its
targeted customer base, in 1997 and 1998 ProLogis further expanded to serve the
refrigerated logistics needs of its customers by acquiring an international
refrigerated distribution network. Today, ProLogis' business is organized into
the following segments:
. acquisition and development of industrial distribution facilities for
long-term ownership and leasing in the United States, Europe, a portion
of which is owned through an unconsolidated subsidiary, and Mexico;
. operation of refrigerated distribution facilities through unconsolidated
subsidiaries, one operating in the United States and Canada and one
operating in nine countries in Europe; and
. development of distribution facilities for future sale or on a fee basis
in the United States and Mexico and in the United Kingdom through an
unconsolidated subsidiary.
This global network of distribution facilities has ProLogis well positioned
to become the global leader in this rapidly consolidating industry.
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<PAGE>
RISK FACTORS
Significant influence of ProLogis' principal shareholder may impact ProLogis'
management and operations
ProLogis and Security Capital Group Incorporated are parties to a Third
Amended and Restated Investor Agreement, dated as of September 9, 1997.
Pursuant to the investor agreement, Security Capital has the right, so long as
it owns between 10% and 25% of the common shares, to nominate one person to the
board of trustees. So long as Security Capital owns 25% or more of the common
shares, Security Capital will be entitled to nominate a proportionate number of
persons to the board of trustees subject to a maximum of three nominees if the
size of the board of trustees does not increase above the current size of ten
trustees. Under the investor agreement, so long as it owns at least 25% of the
common shares, Security Capital also has the right of prior approval with
respect to the following matters:
(1) the issuance of equity securities or securities convertible into
equity securities, other than issuances in connection with option, dividend
reinvestment and similar plans, for less than the fair market value of such
securities;
(2) the issuance of any preferred shares which would result in the fixed
charge coverage ratio being less than 1.4 to 1.0;
(3) adopting any employee benefit plans under which common shares may be
issued;
(4) the compensation of senior officers of ProLogis; and
(5) the incurrence of additional indebtedness which would result in the
interest expense coverage ratio being less than 2.0 to 1.0.
In addition, ProLogis is required to consult with Security Capital's
nominees to the board of trustees prior to taking any action with respect to
the following:
(1) finalization of the annual budget and substantial deviations
therefrom;
(2) the acquisition or sale of assets in a single transaction or group
of related transactions where the price exceeds $25 million;
(3) any contract for investment, property management or leasing
services; and
(4) any service contract providing for payments in excess of $1.0
million.
ProLogis has no obligation to follow the advice of Security Capital with
respect to these matters.
ProLogis is exposed to the general economic conditions of the markets in which
it owns property
ProLogis' operating performance depends on the economic conditions of
markets in which its facilities are concentrated. ProLogis' operating
performance could be adversely affected if conditions, such as an oversupply of
space or a reduction in demand for industrial distribution facilities, in
ProLogis' larger markets become less favorable relative to other geographic
areas. Any material oversupply of space or material reduction of demand for
space could adversely effect ProLogis' operating income and the value of
ProLogis shares.
ProLogis' investments are subject to risks particular to real estate
Value of real estate dependent on numerous factors
Real property investments are subject to varying degrees of risk. Real
estate values are affected by a number of factors, including:
(1) changes in the general economic climate;
4
<PAGE>
(2) local conditions, such as an oversupply of space or a reduction in
demand for real estate in an area;
(3) the quality and philosophy of management;
(4) competition from other available space;
(5) the ability of the owner to provide adequate maintenance and
insurance;
(6) the ability of the owner to control variable operating costs;
(7) governmental regulations;
(8) interest rate levels;
(9) the availability of financing; and
(10) potential liability under, and changes in, environmental, zoning,
and other laws.
Restrictions on, and risks of, unsuccessful development activities
ProLogis intends to continue to pursue development activities as
opportunities arise. Such development activities generally require various
government and other approvals. ProLogis may not receive such approvals.
ProLogis will be subject to risks associated with any such development
activities. These risks include:
(1) the risk that development opportunities explored by ProLogis may be
abandoned;
(2) the risk that construction costs of a project may exceed original
estimates, possibly making the project less profitable than originally
estimated;
(3) limited cash flow during the construction period; and
(4) the risk that occupancy rates and rents of a completed project will
not be sufficient to make the project profitable.
In case of an unsuccessful development project, ProLogis' loss could exceed
its investment in the project.
Tenant default
ProLogis' income and distributable cash flow would be adversely affected if
a significant number of ProLogis' tenants is unable to meet their obligations
to ProLogis, or if ProLogis is unable to lease, on economically favorable
terms, a significant amount of space in its industrial distribution
facilities. In the event of default by a significant number of tenants,
ProLogis may experience delays and incur substantial costs in enforcing its
rights as landlords.
Illiquidity of real estate investments
Equity real estate investments are relatively illiquid and therefore may
tend to limit the ability of ProLogis to react promptly to changes in economic
or other conditions. In addition, significant expenditures associated with
equity real estate investments, such as mortgage payments, real estate taxes
and maintenance costs, are generally not reduced when circumstances cause a
reduction in income from the investments. Like other companies qualifying as
real estate investment trusts under the Internal Revenue Code of 1986,
ProLogis must comply with the safe harbor rules, relating to the number of
properties sold in a year, their tax bases and the cost of improvements made
to the properties, or meet other tests which enable a real estate investment
trust to avoid punitive taxation on the sale of assets. Thus, ProLogis'
ability to sell assets at any time to change its asset base may be restricted.
5
<PAGE>
Share prices may be affected by market interest rates
The annual distribution rate on the ProLogis common shares as a percentage
of its market price may influence the trading price of such common shares. An
increase in market interest rates may lead investors to demand a higher annual
distribution rate, which could adversely affect the market price of such common
shares. A decrease in the market price of the ProLogis common shares could
reduce ProLogis' ability to raise additional equity capital in the public
markets.
Uninsured losses may adversely affect ProLogis
Some types of losses, such as from acts of war, may be uninsurable, or the
cost of insuring against such losses may not be economically justifiable. If an
uninsured loss occurs, ProLogis could lose both the invested capital in and
anticipated revenues from the affected facility, but would still be obligated
to repay any recourse mortgage indebtedness on the facility.
Potential environmental liability
Under various federal, state and local laws, ordinances and regulations, a
current or previous owner, developer or operator of real estate may be liable
for the costs of removal or remediation of hazardous or toxic substances at,
on, under or in its property. The costs of removal or remediation of such
substances could be substantial. Such laws often impose liability without
regard to whether the owner or operator knew of, or was responsible for, the
release or presence of such hazardous substances. The presence of such
substances on ProLogis' properties may adversely affect its ability to sell
such properties or to borrow using such properties as collateral and may also
have an adverse affect on ProLogis' ability to pay distributions to its
shareholders.
Debt financing, increases in interest rates, financial covenants and absence of
limitations on debt may result in decreased distribution to shareholders
Debt financing
ProLogis is subject to risks normally associated with debt financing,
including the risk that ProLogis' cash flow will be insufficient to meet
required payments or principal and interest and the risk that ProLogis will not
be able to refinance existing indebtedness or that the terms of such
refinancings will not be as favorable as terms of the existing indebtedness.
There can be no assurance that ProLogis will be able to refinance any
indebtedness or otherwise obtain funds by selling assets or raising equity to
make required payments on maturing indebtedness.
Requirements of credit facilities; foreclosures
The terms of ProLogis' indebtedness require ProLogis to comply with a number
of customary financial and other covenants, such as maintaining debt service
coverage and leverage ratios, maintaining insurance coverage, etc. These
covenants may limit ProLogis' flexibility in its operations, and breaches of
these covenants could result in defaults under the instruments governing the
applicable indebtedness even if ProLogis has satisfied its payment obligations.
If ProLogis is unable to refinance its indebtedness at maturity or meet its
payment obligations, the amount of cash available for distribution may be
adversely affected.
No limitations on debt
ProLogis currently has a policy if incurring debt only, if upon such
incurrence, ProLogis' debt-to-book capitalization ratio, as adjusted, would
equal 50% or less. The ProLogis board of trustees could alter or eliminate this
policy without shareholder approval and would do so if, for example, it were
necessary in order for ProLogis to continue to qualify as a real estate
investment trust under the Internal Revenue Code of 1986. If this policy were
changed, ProLogis could become more highly leveraged, resulting in an increase
in debt service that could adversely affect the cash available for distribution
to shareholders.
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Failure to qualify as a real estate investment trust could adversely affect
shareholders
ProLogis has elected to be taxed as a real estate investment trust under the
Internal Revenue Code of 1986 commencing with its taxable year ended December
31, 1993. To maintain real estate investment trust status, ProLogis must meet a
number of highly technical requirements on a continuing basis. Those
requirements seek to ensure, among other things, that the gross income and
investments of a real estate investment trust are largely real estate related,
that a real estate investment trust distributes substantially all its ordinary
taxable income to shareholders on a current basis and that the real estate
investment trust's ownership is not overly concentrated. Due to the complex
nature of these rules, the limited available guidance concerning interpretation
of the rules, the importance of ongoing factual determinations and the
possibility of adverse changes in the law, administrative interpretations of
the law and developments at ProLogis, no assurance can be given that ProLogis
will qualify as a real estate investment trust for any particular year.
If ProLogis fails to qualify as a real estate investment trust, it will be
taxed as a regular corporation, and distributions to shareholders will not be
deductible in computing ProLogis' taxable income. The resulting corporate tax
liabilities could materially reduce the funds available for distribution to
ProLogis' shareholders or for reinvestment. In the absence of real estate
investment trust status, distributions to shareholders would no longer be
required. Moreover, ProLogis might not be able to elect to be treated as a real
estate investment trust for the four taxable years after the year during which
ProLogis ceased to qualify as a real estate investment trust. In addition, if
ProLogis later requalified as a real estate investment trust, it might be
required to pay a full corporate-level tax on any unrealized gain in its assets
as of the date of requalification and to make distributions to shareholders
equal to any earnings accumulated during the period of non-real estate
investment trust status.
Potential adverse effect of real estate investment trust distribution
requirements
To maintain its qualification as a real estate investment trust under the
Internal Revenue Code of 1986, ProLogis must annually distribute to ProLogis'
shareholders at least 95% of its ordinary taxable income, excluding net capital
gains. This requirement limits ProLogis' ability to accumulate capital.
ProLogis may not have sufficient cash or other liquid assets to meet the
distribution requirements. Difficulties in meeting the distribution
requirements might arise due to competing demands for ProLogis' funds or to
timing differences between tax reporting and cash receipts and disbursements,
because income may have to be reported before cash is received, because
expenses may have to be paid before a deduction is allowed or because
deductions may be disallowed or limited. In those situations, ProLogis might be
required to borrow funds or sell facilities on adverse terms in order to meet
the distribution requirements. If ProLogis fails to make a required
distribution, it would cease to be a real estate investment trust.
RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED SHARE DISTRIBUTIONS
For the purpose of computing these ratios, "earnings" consist of earnings
from operations plus fixed charges other than capitalized interest and "fixed
charges" consist of interest on borrowed funds, including capitalized interest
and amortization of debt discount and expense.
<TABLE>
<CAPTION>
Three Months
Ended
March 31, Years Ended December 31,
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1999 1998 1998 1997 1996 1995 1994
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<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to combined fixed
charges and preferred share dividends
(a)................................... 1.0 1.7 1.3 (b) 1.5 1.7 3.3
</TABLE>
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(a) ProLogis had no preferred shares in any of the periods presented prior to
1995.
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<PAGE>
(b) Earnings were insufficient to cover combined fixed charges and preferred
share dividends for the year ended December 31, 1997 by $21.3 million due
to a one-time, non-recurring charge of $75.4 million relating to the costs
incurred in acquiring the real estate investment trust management and
property management companies from Security Capital.
USE OF PROCEEDS
Unless otherwise described in the applicable prospectus supplement, the net
proceeds from the sale of the offered securities will be used for the
acquisition and development of additional distribution properties as suitable
opportunities arise, for the repayment of any outstanding indebtedness at such
time, for capital improvements to properties and for general corporate
purposes.
DESCRIPTION OF DEBT SECURITIES
The debt securities are to be issued under an Indenture, dated as of March
1, 1995, between ProLogis and State Street Bank and Trust Company as trustee.
The Indenture has been incorporated by reference as an exhibit to the
registration statement of which this prospectus is a part and is available for
inspection at the corporate trust office of the trustee at 225 Franklin Street,
Boston, Massachusetts 02110 or as described above under "Where You Can Find
More Information." The Indenture is subject to, and governed by, the Trust
Indenture Act of 1939. The statements made in this section of the prospectus
relating to the Indenture and the debt securities to be issued pursuant to the
Indenture are summaries of some provisions of the Indenture and do not purport
to be complete. The statements are subject to and are qualified in their
entirety by reference to all the provisions of the Indenture and the debt
securities.
General
The debt securities will be direct, unsecured and unsubordinated obligations
of ProLogis and will rank equally with all other unsecured and unsubordinated
indebtedness of ProLogis from time to time outstanding. The Indenture provides
that the debt securities may be issued without limit as to aggregate principal
amount, in one or more series. Each series may be as established from time to
time in or pursuant to authority granted by a resolution of the board of
trustees of ProLogis or as established in one or more indentures supplemental
to the Indenture. All debt securities of one series need not be issued at the
same time and, unless otherwise provided, a series may be reopened for
issuances of additional debt securities of such series without the consent of
the holders of the debt securities of such series.
Reference is made to the prospectus supplement relating to the series of
debt securities being offered for the specific terms of the securities,
including:
(1) the title of such series of debt securities;
(2) the aggregate principal amount of such series of debt securities and
any limit on such principal amount;
(3) the percentage of the principal amount at which the debt securities
of such series will be issued and, if other than the full principal amount
of the debt securities, the portion of the principal amount of the debt
securities payable upon declaration of acceleration of the maturity of the
securities, or the method by which any such portion shall be determined;
(4) the date or dates, or the method by which such date or dates will be
determined, on which the principal of the debt securities of such series
will be payable and the amount of principal payable thereon;
(5) the rate or rates, which may be fixed or variable, or the method by
which such rate or rates shall be determined, at which the debt securities
of such series will bear interest, if any;
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(6) the date or dates, or the method by which such date or dates will be
determined, from which any such interest will accrue, the interest payment
dates on which any such interest will be payable, the regular record dates
for such interest payment dates, or the method by which such dates shall be
determined, the person to whom, and the manner in which, such interest
shall be payable, and the basis upon which interest shall be calculated if
other than that of a 360-day year comprised of twelve 30-day months;
(7) the place or places where the principal of, and premium or make-
whole amount, if any, and interest and additional amounts, if any, on the
debt securities of such series will be payable, where such debt securities
may be surrendered for registration of transfer or exchange and where
notices or demands to or upon ProLogis in respect of such debt securities
and the Indenture may be served;
(8) the period or periods within which, the price or prices, including
the premium or make-whole amount, if any, at which, the currency or
currencies in which, and the other terms and conditions upon which the debt
securities of such series may be redeemed, as a whole or in part, at the
option of ProLogis, if ProLogis is to have such an option;
(9) the obligation, if any, of ProLogis to redeem, repay or purchase the
debt securities of such series pursuant to any sinking fund or analogous
provision or at the option of a holder of the debt securities, and the
period or periods within which, the date or dates upon which, the price or
prices at which, the currency or currencies, currency unit or units or
composite currency or currencies in which, and the other terms and
conditions upon which such debt securities shall be redeemed, repaid or
purchased, as a whole or in part, pursuant to such obligation;
(10) if other than United States dollars, the currency or currencies in
which the debt securities of such series are denominated and payable, which
may be a foreign currency or units of two or more foreign currencies or a
composite currency or currencies, and the terms and conditions relating to
the currency;
(11) whether the amount of payments of principal, and premium or make-
whole amount, if any, or interest, if any, on the debt securities of such
series may be determined with reference to an index, formula or other
method, which index, formula or method may be, but need not be, based on a
currency, currencies, currency unit or units or composite currency or
currencies, and the manner in which such amounts shall be determined;
(12) whether the principal, and premium or make-whole amount, if any, or
interest or additional amounts, if any, on the debt securities of such
series are to be payable, at the election of ProLogis or a holder, in a
currency or currencies, currency unit or units or composite currency or
currencies, other than that in which such debt securities are denominated
or stated to be payable, the period or periods within which, and the terms
and conditions upon which, such election may be made, and the time and
manner of, and identity of the exchange rate agent with responsibility for,
determining the exchange rate between the currency or currencies in which
such debt securities are denominated or stated to be payable and the
currency or currencies in which such debt securities are to be so payable;
(13) any deletions from, modifications of or additions to the terms of
such series of debt securities with respect to the events of default or
covenants set forth in the Indenture;
(14) whether the debt securities of such series will be issued in
certificated or book-entry form;
(15) whether the debt securities of such series will be in registered or
bearer form and, if in registered form, the denominations of the debt
securities if other than $1,000 and any integral multiple of the securities
and, if in bearer form, the denominations of the securities if other than
$5,000 and the terms and conditions relating to the securities;
(16) the applicability, if any, of the defeasance and covenant
defeasance provisions of Article Fourteen of the Indenture to such series
of debt securities and any additions to or replacements of the provisions;
(17) if the debt securities of such series are to be issued upon the
exercise of debt warrants, the time, manner and place for such debt
securities to be authenticated and delivered;
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(18) whether and under what circumstances ProLogis will pay additional
amounts as contemplated in the Indenture on the debt securities of such
series in respect of any tax, assessment or governmental charge and, if so,
whether ProLogis will have the option to redeem such debt securities rather
than pay such additional amounts; and
(19) any other terms of such series of debt securities not inconsistent
with the provisions of the Indenture.
The debt securities may be original issue discount securities, which provide
for less than the entire principal amount of the securities to be payable upon
declaration of acceleration of the maturity of the securities or bear no
interest or bear interest at a rate which at the time of issuance is below
market rates. Special United States federal income tax, accounting and other
considerations applicable to original issue discount securities will be
described in the applicable prospectus supplement.
Except as set forth below under "--Covenants--Limitations on incurrence of
debt," the Indenture does not contain any other provisions that would limit the
ability of ProLogis to incur indebtedness or that would afford holders of debt
securities protection in the event of a highly leveraged or similar transaction
involving ProLogis or in the event of a change of control. However, ProLogis'
Declaration of Trust restricts beneficial ownership of ProLogis' outstanding
shares of beneficial interest by a single person, or persons acting as a group,
to 9.8% of such shares, with exceptions, including an exception in the case of
Security Capital. See "Description of Common Shares--Restriction on size of
holdings." Additionally, the articles supplementary relating to the Series A
preferred shares, Series B preferred shares, Series C preferred shares and
Series D preferred shares restrict beneficial ownership of such shares by a
person, or persons acting as a group, to 25% of the Series A preferred shares,
the Series B preferred shares, Series C preferred shares and Series D preferred
shares, respectively, with limited exceptions. The articles supplementary
relating to the Series E preferred shares restrict beneficial ownership of such
shares to 9.8% of the Series E preferred shares, with limited exceptions.
Similarly, the articles supplementary for each other series of preferred shares
will contain specific provisions restricting the ownership and transfer of the
preferred shares. See "Description of Preferred Shares--Restrictions on
ownership." These restrictions are designed to preserve ProLogis' status as a
real estate investment trust under the Internal Revenue Code of 1986 and may
act to prevent or hinder a change of control. Reference is made to the
applicable prospectus supplement for information with respect to any deletions
from, modifications of or additions to the events of default or covenants of
ProLogis that are described below, including any addition of a covenant or
other provision providing event risk or similar protection.
Denominations
Unless otherwise described in the applicable prospectus supplement, the debt
securities of any series issued in registered form will be issuable in
denominations and integral multiples of $1,000. Unless otherwise described in
the applicable prospectus supplement, the debt securities of any series issued
in bearer form will be issuable in denominations of $5,000.
Principal and interest
Unless otherwise specified in the applicable prospectus supplement, the
principal of, and premium or make-whole amount, if any, and interest on any
series of debt securities will be payable at the corporate trust office of
State Street Bank and Trust Company, initially located at 225 Franklin Street,
Boston, Massachusetts 02110; provided that, at the option of ProLogis, payment
of interest may be made by check mailed to the address of the person entitled
to such payment as it appears in the security register or by wire transfer of
funds to such person to an account maintained within the United States.
If any interest payment date, principal payment date or the maturity date
falls on a day that is not a business day, the required payment shall be made
on the next business day as if it were made on the date such payment was due
and no interest shall accrue on the amount so payable for the period from and
after such
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interest payment date, principal payment date or the maturity date, as the case
may be. Any interest not punctually paid or duly provided for on any interest
payment date with respect to any debt security, will cease to be payable to the
holder on the applicable regular record date and may either be paid to the
person in whose name such debt security is registered at the close of business
on a special record date for the payment of such defaulted interest to be fixed
by the trustee or may be paid at any time in any other lawful manner, all as
more completely described in the Indenture. Notice of the special record date
shall be given to the holder of such debt security not less than 10 days prior
to the special record date.
Merger, consolidation or sale
ProLogis may consolidate with or merge with or into another entity, or sell,
lease or convey all or substantially all of its assets to another entity,
provided that the following three conditions are met:
(1) After the transaction, the continuing entity is ProLogis or a person
organized and existing under the laws of the United States or one of the
fifty states. If the continuing entity is an entity other than ProLogis,
that entity must also assume the payment of ProLogis' obligations under the
Indenture, as well as, the due and punctual performance and observance of
all of the covenants contained in the Indenture.
(2) After giving effect to the transaction and any additional
indebtedness incurred by ProLogis or any of its subsidiaries as a result of
the transaction, an event of default has not occurred under the Indenture.
Additionally, the transaction may not cause an event which, after notice or
a lapse of time, or both, would become an event of default.
(3) The continuing entity delivers an officer's certificate and legal
opinion covering (1) and (2) above.
Covenants
Limitations on incurrence of debt.
ProLogis will not, and will not permit any subsidiary to, incur any debt if,
immediately after giving effect to the incurrence of such additional debt and
the application of the proceeds of the additional debt, the aggregate principal
amount of all outstanding debt of ProLogis and its subsidiaries on a
consolidated basis determined in accordance with generally accepted accounting
principles is greater than 60% of the sum of
(1) ProLogis' total assets,
(2) the purchase price of any real estate assets or mortgages receivable
acquired, and
(3) the amount of any securities offering proceeds received by ProLogis
or any subsidiary since the end of the last calendar quarter, including
those proceeds obtained in connection with the incurrence of the additional
debt.
ProLogis' total assets will be measured at the end of the calendar quarter
covered in ProLogis' annual report on Form 10-K or quarterly report on Form 10-
Q, as the case may be, most recently filed with the Securities and Exchange
Commission. If such filing is not permitted under the Securities Exchange Act
of 1934 ProLogis shall provide this information to the trustee, prior to the
incurrence of such additional debt. To the extent that any real estate assets
or mortgages had been previously included in ProLogis' total assets, or the
proceeds from a securities offering were used to purchase real estate assets,
their accounting will not be duplicated.
In addition to this limitation on the incurrence of debt, ProLogis and its
subsidiaries will not allow their outstanding debt that is secured by any
mortgage, lien, charge, pledge, encumbrance or security interest on property of
ProLogis or any subsidiary, on a consolidated basis, to be greater than 40% of
the sum of ProLogis' total assets, real estate or mortgage receivables, and
proceeds from the sale of securities, determined as described above. This ratio
will be measured immediately after giving effect to the incurrence of such
additional debt and the application of the proceeds of the additional debt.
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In addition to these limitations on the incurrence of debt, no subsidiary
may incur any unsecured debt other than intercompany debt subordinate to the
debt securities; provided, however, that ProLogis or a subsidiary may acquire
an entity that becomes a subsidiary that has unsecured debt if the incurrence
of such debt, including any guarantees of such debt assumed by ProLogis or any
subsidiary, was not intended to evade the restrictions on incurring unsecured
debt and the incurrence of such debt, including any guarantees of such debt
assumed by ProLogis or any subsidiary, would otherwise be permitted under the
Indenture.
ProLogis and its subsidiaries may not at any time own total unencumbered
assets equal to less than 150% of the aggregate outstanding principal amount of
the unsecured debt of ProLogis and its subsidiaries on a consolidated basis.
In addition to these limitations on the incurrence of debt, ProLogis will
not, and will not permit any subsidiary to, incur any debt if the ratio of
consolidated income available for debt service to the annual service charge or
the four consecutive fiscal quarters most recently ended prior to the date on
which such additional debt is to be incurred shall have been less than 1.5, on
a pro forma basis after giving effect the incurrence of such debt and to the
application of the proceeds therefrom, and calculated on the assumption that:
. such debt and any other debt incurred by ProLogis and its subsidiaries
since the first day of such four-quarter period and the application of
the proceeds therefrom, including to refinance other debt, had occurred
at the beginning of such period;
. the repayment or retirement of any other debt by ProLogis and its
subsidiaries since the first day of such four-quarter period had been
incurred, repaid or retired at the beginning of such period, except
that, in making such computation, the amount of debt under any revolving
credit facility shall be computed based upon the average daily balance
of such debt during such period;
. in the case of acquired debt or debt incurred in connection with any
acquisition since the first day of such four-quarter period, the related
acquisition had occurred as of the first day of such period with the
appropriate adjustments with respect to such acquisition being included
in such pro forma calculation; and
. in the case of any acquisition or disposition by ProLogis or its
subsidiaries of any asset or group of assets since the first day of such
four-quarter period, whether by merger, stock purchase or sale, or asset
purchase or sale, such acquisition or disposition or any related
repayment of debt had occurred as of the first day of such period with
the appropriate adjustments with respect to such acquisition or
disposition being included in such pro forma calculation.
Existence
Except as permitted under "--Merger, consolidation or sale," ProLogis will
do or cause to be done all things necessary to preserve and keep in full force
and effect its existence, rights, both charter and statutory, and franchises;
provided, however, that ProLogis shall not be required to preserve any right or
franchise if it determines that the preservation of the right or franchise is
no longer desirable in the conduct of its business and that the loss of the
right or franchise is not disadvantageous in any material respect to the
holders of the debt securities.
Maintenance of properties
ProLogis will cause all of its properties used or useful in the conduct of
its business or the business of any subsidiary to be maintained and kept in
good condition, repair and working order and supplied with all necessary
equipment and will cause to be made all necessary repairs, renewals,
replacements, betterments and improvements of its properties, all as in the
judgment of ProLogis may be necessary so that the business carried on in
connection therewith may be properly and advantageously conducted at all times;
provided, however, that ProLogis and its subsidiaries shall not be prevented
from selling or otherwise disposing for value its properties in the ordinary
course of business.
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Insurance
ProLogis will, and will cause each of its subsidiaries to, keep all of its
insurable properties insured against loss or damage at least equal to their
then full insurable value with financially sound and reputable insurance
companies.
Payment of taxes and other claims
ProLogis will pay or discharge or cause to be paid or discharged, before the
same shall become delinquent, all taxes, assessments and governmental charges
levied or imposed upon it or any subsidiary or upon the income, profits or
property of ProLogis or any subsidiary and all lawful claims for labor,
materials and supplies which, if unpaid, might by law become a lien upon the
property of ProLogis or any subsidiary; provided, however, that ProLogis shall
not be required to pay or discharge or cause to be paid or discharged any such
tax, assessment, charge or claim whose amount, applicability or validity is
being contested in good faith by appropriate proceedings.
Provision of financial information
Whether or not ProLogis is subject to Section 13 or 15(d) of the Securities
Exchange Act of 1934, ProLogis will file with the Securities and Exchange
Commission, to the extent permitted under the Securities Exchange Act of 1934,
the annual reports, quarterly reports and other documents which ProLogis would
have been required to file with the Securities and Exchange Commission pursuant
to Section 13 or 15(d) if ProLogis were so subject. ProLogis will file the
documents with the Securities and Exchange Commission on or prior to the
respective filing dates by which ProLogis would have been required so to file
the documents if ProLogis were so subject. ProLogis will also in any event
within 15 days of each required filing date transmit by mail to all holders of
debt securities, as their names and addresses appear in the security register,
without cost to such holders, copies of the annual reports and quarterly
reports which ProLogis would have been required to file with the Securities and
Exchange Commission pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 if ProLogis were subject to Section 13 or 15(d). Additionally,
ProLogis will provide the trustee with copies of the annual reports, quarterly
reports and other documents which ProLogis would have been required to file
with the Securities and Exchange Commission pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934 if ProLogis were subject to such sections.
If filing the documents by ProLogis with the Securities and Exchange Commission
is not permitted under the Securities Exchange Act of 1934, ProLogis will
promptly upon written request and payment of the reasonable cost of duplication
and delivery, supply copies of such documents to any prospective holder.
Events of default, notice and waiver
The Indenture provides that the following events are events of default with
respect to any series of debt securities issued pursuant to it:
(1) default in the payment of any installment of interest or additional
amounts payable on any debt security of such series which continues for 30
days;
(2) default in the payment of the principal, or premium or make-whole
amount, if any, on, any debt security of such series at its maturity;
(3) default in making any sinking fund payment as required for any debt
security of such series;
(4) default in the performance of any other covenant of ProLogis
contained in the Indenture, other than a covenant added to the Indenture
solely for the benefit of another series of debt securities issued under
the Indenture, continued for 60 days after written notice as provided in
the Indenture;
(5) default in the payment of an aggregate principal amount exceeding
$10,000,000 of any evidence of indebtedness of ProLogis or any mortgage,
indenture or other instrument under which such
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indebtedness is issued or by which such indebtedness is secured, such
default having occurred after the expiration of any applicable grace period
and having resulted in the acceleration of the maturity of such
indebtedness, but only if such indebtedness is not discharged or such
acceleration is not rescinded or annulled;
(6) the entry by a court of competent jurisdiction of one or more
judgments, orders or decrees against ProLogis or any of its subsidiaries in
an aggregate amount, excluding amounts fully covered by insurance, in
excess of $10,000,000 and such judgments, orders or decrees remain
undischarged, unstayed and unsatisfied in an aggregate amount, excluding
amounts fully covered by insurance, in excess of $10,000,000 for a period
of 30 consecutive days;
(7) events of bankruptcy, insolvency or reorganization, or court
appointment of a receiver, liquidator or trustee of ProLogis or any
significant subsidiary or for all or substantially all of either of its
property; and
(8) any other event of default provided with respect to a particular
series of debt securities.
The term significant subsidiary means each significant subsidiary of ProLogis,
as defined in Regulation S-X promulgated under the Securities Act of 1933.
If an event of default under the Indenture with respect to debt securities
of any series at the time outstanding occurs and is continuing, then in every
such case, unless the principal of all of the outstanding debt securities of
such series shall already have become due and payable, the trustee or the
holders of not less than 25% in principal amount of the outstanding debt
securities of such series may declare the principal and the make-whole amount,
if any, on, all of the debt securities of such series to be due and payable
immediately by written notice to ProLogis that payment of the debt securities
is due, and to the trustee if given by the holders. If the debt securities of
such series are original issue discount securities or indexed securities, the
holders of not less than 25% of such securities may declare such portion of the
principal as may be specified in the terms of the debt security, along with any
make-whole amount, to be due and payable immediately. However, at any time
after such a declaration of acceleration with respect to debt securities of any
series has been made, but before a judgment or decree for payment of the money
due has been obtained by the trustee, the holders of not less than a majority
in principal amount of the outstanding debt securities of such series may
rescind and annul such declaration and its consequences if ProLogis shall have
deposited with the trustee all required payments of the principal of, and
premium or make-whole amount, if any, and interest, and any additional amounts,
on the debt securities of such series, plus fees, expenses, disbursements and
advances of the trustee and all events of default, other than the nonpayment of
accelerated principal, or specified portion of the principal and the make-whole
amount, if any, or interest, with respect to debt securities of such series
have been cured or waived as provided in the Indenture. The Indenture also
provides that the holders of not less than a majority in principal amount of
the outstanding debt securities of any series may waive any past default with
respect to such series and its consequences, except a default in the payment of
the principal of, or premium or make-whole amount, if any, or interest or
additional amounts payable on any debt security of such series or in respect of
a covenant or provision contained in the Indenture that cannot be modified or
amended without the consent of the holder of each outstanding debt security
affected the proposed modification or amendment.
The trustee is required to give notice to the holders of debt securities
within 90 days of a default under the Indenture; provided, however, that the
trustee may withhold notice to the holders of any series of debt securities of
any default with respect to such series, except a default in the payment of the
principal of, or premium or make-whole amount, if any, or interest or
additional amounts payable on any debt security of such series or in the
payment of any sinking fund installment in respect of any debt security of such
series, if the responsible officers of the trustee consider such withholding to
be in the interest of such holders.
The Indenture provides that no holders of debt securities of any series may
institute any proceedings, judicial or otherwise, with respect to the Indenture
or for any remedy which the Indenture provides, except in the case of failure
of the trustee, for 60 days, to act after it has received a written request to
institute
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proceedings in respect of an event of default from the holders of not less than
25% in principal amount of the outstanding debt securities of such series, as
well as an offer of reasonable indemnity. This provision will not prevent,
however, any holder of debt securities from instituting suit for the
enforcement of payment of the principal of, and premium or make-whole amount,
if any, interest on, and additional amounts payable with respect to, such debt
securities at the respective due dates of the securities.
Subject to provisions in the Indenture relating to its duties in case of
default, the trustee is under no obligation to exercise any of its rights or
powers under the Indenture at the request or direction of any holders of any
series of debt securities then outstanding under the Indenture, unless such
holders shall have offered to the trustee reasonable security or indemnity. The
holders of not less than a majority in principal amount of the outstanding debt
securities of any series shall have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the trustee, or
of exercising any trust or power conferred upon the trustee. However, the
trustee may refuse to follow any direction which is in conflict with any law or
the Indenture, which may involve the trustee in personal liability or which may
be unduly prejudicial to the holders of debt securities of such series not
joining in the proceeding.
Within 120 days after the close of each fiscal year, ProLogis must deliver
to the trustee a certificate, signed by one of several specified officers,
stating whether or not such officer has knowledge of any default under the
Indenture and, if so, specifying each such default and the nature and status of
the default.
Modification of the Indenture
Modifications and amendments of the Indenture may be made with the consent
of the holders of not less than a majority in principal amount of all
outstanding debt securities which are affected by such modification or
amendment; provided, however, that no such modification or amendment may,
without the consent of the holder of each such debt security affected by the
modification or amendment:
(1) change the stated maturity of the principal of, or premium or make-
whole amount, if any, or any installment of principal of or interest or
additional amounts payable on, any such debt security;
(2) reduce the principal amount of, or the rate or amount of interest
on, or any premium or make-whole amount payable on redemption of, or any
additional amounts payable with respect to, any such debt security, or
reduce the amount of principal of an original issue discount security or
make-whole amount, if any, that would be due and payable upon declaration
of acceleration of the maturity of the security or would be provable in
bankruptcy, or adversely affect any right of repayment of the holder of any
such debt security;
(3) change the place of payment, or the coin or currency, for payment of
principal of, and premium or make-whole amount, if any, or interest on, or
any additional amounts payable with respect to, any such debt security;
(4) impair the right to institute suit for the enforcement of any
payment on or with respect to any such debt security;
(5) reduce the above-stated percentage of outstanding debt securities of
any series necessary to modify or amend the Indenture, to waive compliance
with a provisions of the debt security or defaults and consequences under
the Indenture or to reduce the quorum or voting requirements set forth in
the Indenture; or
(6) modify any of the provisions relating to modification of the
Indenture or any of the provisions relating to the waiver of past defaults
or covenants, except to increase the required percentage to effect such
action or to provide that other provisions may not be modified or waived
without the consent of the holder of such debt security.
The holders of not less than a majority in principal amount of outstanding debt
securities have the right to waive compliance by ProLogis with covenants in the
Indenture.
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Modifications and amendments of the Indenture may be made by ProLogis and
the trustee without the consent of any holder of debt securities for any of the
following purposes:
(1) to evidence the succession of another person to ProLogis as obligor
under the Indenture;
(2) to add to the covenants of ProLogis for the benefit of the holders
of all or any series of debt securities or to surrender any right or power
conferred upon ProLogis in the Indenture;
(3) to add events of default for the benefit of the holders of all or
any series of debt securities;
(4) to add or change any provisions of the Indenture to facilitate the
issuance of, or to liberalize terms of, debt securities in bearer form, or
to permit or facilitate the issuance of debt securities in uncertificated
form, provided that such action shall not adversely affect the interests of
the holders of the debt securities of any series in any material respect;
(5) to change or eliminate any provisions of the Indenture, provided
that any such change or elimination shall become effective only when there
are no debt securities outstanding of any series created prior such change
which are entitled to the benefit of such provision;
(6) to secure the debt securities;
(7) to establish the form or terms of debt securities of any series and
any related coupons;
(8) to provide for the acceptance of appointment by a successor trustee
or facilitate the administration of the trust under the Indenture by more
than one trustee;
(9) to cure any ambiguity, defect or inconsistency in the Indenture or
to make any other changes, provided that in each case, such action shall
not adversely affect the interests of holders of debt securities of any
series in any material respect;
(10) to close the Indenture with respect to the authentication and
delivery of additional series of debt securities or to qualify, or maintain
qualification of, the Indenture under the Trust Indenture Act of 1939; or
(11) to supplement any of the provisions of the Indenture to the extent
necessary to permit or facilitate defeasance and discharge of any series of
such debt securities, provided that such action shall not adversely affect
the interests of the holders of the debt securities of any series in any
material respect.
The Indenture provides that in determining whether the holders of the
requisite principal amount of outstanding debt securities of a series have
given any request, demand, authorization, direction, notice, consent or waiver
under the Indenture or whether a quorum is present at a meeting of holders of
debt securities:
(1) the principal amount of an original issue discount security that
shall be deemed to be outstanding shall be the amount of the principal of
the security that would be due and payable as of the date of such
determination upon declaration of acceleration of the maturity of the
security;
(2) the principal amount of a debt security denominated in a foreign
currency that shall be deemed outstanding shall be the United States dollar
equivalent, determined on the issue date for such debt security, of the
principal amount, or, in the case of an original issue discount security,
the United States dollar equivalent on the issue date of such debt security
of the amount determined as provided in (1) above;
(3) the principal amount of an indexed security that shall be deemed
outstanding shall be the principal face amount of such indexed security at
original issuance, unless otherwise provided with respect to such indexed
security pursuant to Section 301 of the Indenture; and
(4) debt securities owned by ProLogis or any other obligor upon the debt
securities or any affiliate of ProLogis or of such other obligor shall be
disregarded.
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The Indenture contains provisions for convening meetings of the holders of
debt securities of a series. A meeting may be called at any time by the
trustee, and also, upon request, by ProLogis or the holders of at least 10% in
principal amount of the outstanding debt securities of such series, in any such
case upon notice given as provided in the Indenture.
Except for any consent that must be given by the holder of each debt
security affected by modifications and amendments of the Indenture, any
resolution presented at a meeting or at an adjourned meeting duly reconvened,
at which a quorum is present, may be adopted by the affirmative vote of the
holders of a majority in principal amount of the outstanding debt securities of
such series; provided, however, that, except as referred to above, any
resolution with respect to any request, demand, authorization, direction,
notice, consent, waiver or other action that may be made, given or taken by the
holders of a specified percentage, which is less than a majority, in principal
amount of the outstanding debt securities of a series may be adopted at a
meeting or adjourned meeting duly reconvened at which a quorum is present by
the affirmative vote of the holders of such specified percentage in principal
amount of the outstanding debt securities of such series. Any resolution passed
or decision taken at any meeting of holders of debt securities of any series
duly held in accordance with the Indenture will be binding on all holders of
debt securities of such series. The quorum at any meeting called to adopt a
resolution, and at any reconvened meeting, will be persons holding or
representing a majority in principal amount of the outstanding debt securities
of a series; provided, however, that if any action is to be taken at such
meeting with respect to a consent or waiver which may be given by the holders
of not less than a specified percentage in principal amount of the outstanding
debt securities of a series, the persons holding or representing such specified
percentage in principal amount of the outstanding debt securities of such
series will constitute a quorum.
Notwithstanding the foregoing provisions, if any action is to be taken at a
meeting of holders of debt securities of any series with respect to any
request, demand, authorization, direction, notice, consent, waiver or other
action that the Indenture expressly provides may be made, given or taken by the
holders of a specified percentage in principal amount of all outstanding debt
securities affected the action, or of the holders of such series and one or
more additional series:
(1) there shall be no minimum quorum requirement for such meeting, and
(2) the principal amount of the outstanding debt securities of such
series that vote in favor of such request, demand, authorization,
direction, notice, consent, waiver or other action shall be taken into
account in determining whether such request, demand, authorization,
direction, notice, consent, waiver or other action has been made, given or
taken under the Indenture.
Any request, demand, authorization, direction, notice, consent, waiver or
other action provided by the Indenture to be given or taken by a specified
percentage in principal amount of the holders of any or all series of debt
securities may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such specified percentage of holders in
person or by agent duly appointed in writing; and, except as otherwise
expressly provided in the Indenture, such action shall become effective when
such instrument or instruments are delivered to the trustee. Proof of execution
of any instrument or of a writing appointing any such agent shall be sufficient
for any purpose of the Indenture and, subject to the Indenture provisions
relating to the appointment of any such agent, conclusive in favor of the
trustee and ProLogis, if made in the manner specified above.
Discharge, defeasance and covenant defeasance
ProLogis may discharge various obligations to holders of any series of debt
securities that have not already been delivered to the trustee for cancellation
and that either have become due and payable or will become due and payable
within one year, or that are scheduled for redemption within one year. The
discharge will be completed by irrevocably depositing with the trustee the
funds needed to pay the principal, any make-whole amounts, interest and
additional amounts payable to the date of deposit or to the date of maturity,
as the case may be.
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If the ProLogis board of trustees has resolved to incorporate the defeasance
provisions into a series of debt securities, ProLogis may take either of the
following actions with respect to that series of debt securities.
(1) ProLogis may elect to defease and be discharged from any and all
obligations with respect to that series of debt securities. However,
ProLogis would continue to be obligated to pay any additional amounts
resulting from tax events, assessment or governmental charges with respect
to payments on the series of debt securities and the obligations to
register the transfer or exchange of the series of debt securities.
Additionally, ProLogis would remain responsible for replacing temporary or
mutilated, destroyed, lost or stolen debt securities, for maintaining an
office or agency in respect of the series of debt securities and for
holding moneys for payment in trust.
(2) With respect to the series of debt securities, ProLogis may elect to
effect covenant defeasance and be released from its obligations to fulfill
the covenants contained under the heading "--Covenants" in this prospectus.
Further, ProLogis may elect to be released from its obligations with
respect to any other covenant in the Indenture, if the ProLogis board of
trustees has included such a provision in the series of debt securities at
the time that they are issued. Once, ProLogis has made this election, any
omission to comply with these obligations shall not constitute a default or
an event of default with respect to the series of debt securities.
In either case, ProLogis must irrevocably deposit the needed funds in trust,
with the trustee, as described above.
The trust may only be established if, among other things, ProLogis has
delivered an opinion of counsel to the trustee. The opinion of counsel shall
state that the holders of the series of debt securities will not recognize
income, gain or loss for United States federal income tax purposes as a result
of the defeasance or covenant defeasance and will be subject to United States
federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such defeasance or covenant defeasance had
not occurred. The opinion of counsel, in the case of defeasance, must refer to
and be based upon a ruling of the Internal Revenue Service or a change in
applicable United States federal income tax law occurring after the date of the
Indenture.
Unless otherwise provided in the applicable prospectus supplement, if after
ProLogis has deposited funds and/or government obligations to effect defeasance
or covenant defeasance with respect to debt securities of any series, the
holder of a series of debt securities is entitled to and elects to receive
payment in a currency, currency unit or composite currency other than that in
which the deposit has been made in respect of the debt security or a conversion
event occurs in respect of the currency, currency unit or composite currency in
which such deposit has been made, the indebtedness represented by such debt
security shall be deemed to have been, and will be, fully discharged. The
indebtedness will be satisfied through the payment of the principal of, and
premium or any make-whole amount and interest on, the debt security as they
become due out of the proceeds yielded by converting the amount so deposited in
respect of the debt security into the currency, currency unit or composite
currency in which the debt security becomes payable as a result of the holder's
election or such cessation of usage based on the applicable market exchange
rate.
"Conversion event" means the cessation of use of
(1) a currency, currency unit or composite currency, other than the
European Community Unit or other currency unit, both by the government of
the country which issued such currency and for the settlement of
transactions by a central bank or other public institutions of or within
the international banking community;
(2) the European Community Unit both within the European Monetary
System and for the settlement of transactions by public institutions of or
within the European Communities; or
(3) any currency unit or composite currency other than the European
Community Unit for the purposes for which it was established.
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Unless otherwise provided in the applicable prospectus supplement, all
payments of principal of, and premium or any make-whole amount and interest on
any debt security that is payable in a foreign currency that ceases to be used
by its government of issuance shall be made in United States dollars.
In the event ProLogis effects covenant defeasance with respect to any debt
securities and the debt securities are declared due and payable because of the
occurrence of any event of default, other than the events of default that would
no longer be applicable because of the covenant defeasance or an event of
default triggered by an event of bankruptcy or other insolvency proceeding, the
amount of funds on deposit with the trustee, will be sufficient to pay amounts
due on the debt securities at the time of their stated maturity, but may not be
sufficient to pay amounts due on the debt securities at the time of the
acceleration resulting from the event of default. However, ProLogis would
remain liable to make payment of the amounts due at the time of acceleration.
The applicable prospectus supplement may further describe the provisions, if
any, permitting such defeasance or covenant defeasance, including any
modifications to the provisions described above, with respect to the debt
securities of or within a particular series.
Registration and transfer
Subject to limitations imposed upon debt securities issued in book-entry
form, the debt securities of any series will be exchangeable for other debt
securities of the same series and of a like aggregate principal amount and
tenor of different authorized denominations upon surrender of such debt
securities at the corporate trust office of the trustee referred to above. In
addition, subject to the limitations imposed upon debt securities issued in
book-entry form, the debt securities of any series may be surrendered for
conversion or registration of transfer of the security at the corporate trust
office of the trustee referred to above. Every debt security surrendered for
registration of transfer or exchange shall be duly endorsed or accompanied by a
written instrument of transfer. No service charge will be made for any
registration of transfer or exchange of any debt securities, but ProLogis may
require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith. ProLogis may at any time designate a
transfer agent, in addition to the trustee, with respect to any series of debt
securities. If ProLogis has designated such a transfer agent or transfer
agents, ProLogis may at any time rescind the designation of any such transfer
agent or approve a change in the location at which any such transfer agent
acts, except that ProLogis will be required to maintain a transfer agent in
each place of payment for such series.
Neither ProLogis nor the trustee shall be required to
(1) issue, register the transfer of or exchange debt securities of any
series during a period beginning at the opening of business 15 days before
any selection of debt securities of that series to be redeemed and ending
at the close of business on the day of mailing of the relevant notice of
redemption;
(2) register the transfer of or exchange any debt security, or portion
of security, called for redemption, except the unredeemed portion of any
debt security being redeemed in part; or
(3) issue, register the transfer of or exchange any debt security which
has been surrendered for repayment at the option of the holder, except the
portion, if any, of such debt security not to be so repaid.
Book-entry procedures
The debt securities of a series may be issued in whole or in part in the
form of one or more global securities that will be deposited with, or on behalf
of, a depository identified in the applicable prospectus supplement relating to
such series. Global securities, if any, are expected to be deposited with The
Depository Trust Company, as depository. Global securities may be issued in
fully registered form and may be issued in either temporary or permanent form.
Unless and until it is exchanged in whole or in part for the individual debt
securities represented the global security, a global security may not be
transferred except as a whole by the
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depository for such global security to a nominee of such depository or by a
nominee of such depository to such depository or another nominee of such
depository or by the depository or any nominee of such depository to a
successor depository or any nominee of such successor.
The specific terms of the depository arrangement with respect to a series of
debt securities will be described in the applicable prospectus supplement
relating to such series. Unless otherwise indicated in the applicable
prospectus supplement, ProLogis anticipates that the following provisions will
apply to depository arrangements.
Upon the issuance of a global security, the depository for such global
security or its nominee will credit on its book-entry registration and transfer
system the respective principal amounts of the individual debt securities
represented by such global security to the accounts of persons that have
accounts with such depository. Such accounts shall be designated by the
underwriters, dealers or agents with respect to such debt securities or by
ProLogis if such debt securities are offered and sold directly by ProLogis.
Ownership of beneficial interests in a global security will be limited to
participants or persons that may hold interests through participants. Ownership
of beneficial interests in such global security will be shown on, and the
transfer of that ownership will be effected only through, records maintained by
the applicable depository or its nominee, with respect to beneficial interests
of participants, and records of participants, with respect to beneficial
interests of persons who hold through participants. The laws of some states
require that some purchasers of securities take physical delivery of such
securities in definitive form. Such limits and laws may impair the ability to
own, pledge or transfer beneficial interests in a global security.
So long as the depository for a global security or its nominee is the
registered owner of such global security, such depository or such nominee, as
the case may be, will be considered the sole owner or holder of the debt
securities represented by such global security for all purposes under the
Indenture. Except as provided below or in the applicable prospectus supplement,
owners of beneficial interests in a global security will not be entitled to
have any of the individual debt securities of the series represented by such
global security registered in their names, will not receive or be entitled to
receive physical delivery of any such debt securities of such series in
definitive form and will not be considered the owners or holders the global
security under the Indenture.
Payments of principal of, any premium or make-whole amount and any interest
on, or any additional amounts payable with respect to, individual debt
securities represented by a global security registered in the name of a
depository or its nominee will be made to the depository or its nominee, as the
case may be, as the registered owner of the global security representing such
debt securities. None of ProLogis, the trustee, any paying agent or the
security registrar for such debt securities will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interests in the global security for such debt
securities or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.
ProLogis expects that the depository for a series of debt securities or its
nominee, upon receipt of any payment of principal, premium, make-whole amount
or interest in respect of a permanent global security representing any of such
debt securities, immediately will credit participants' accounts with payments
in amounts proportionate to their respective beneficial interests in the
principal amount of such global security for such debt securities as shown on
the records of such depository or its nominee. ProLogis also expects that
payments by participants to owners of beneficial interests in such global
security held through such participants will be governed by standing
instructions and customary practices, as is the case with securities held for
the account of customers in bearer form or registered in "street name." Such
payments will be the responsibility of such participants.
If a depository for a series of debt securities is at any time unwilling,
unable or ineligible to continue as depository and a successor depository is
not appointed by ProLogis within 90 days, ProLogis will issue individual debt
securities of such series in exchange for the global security representing such
series of debt
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securities. In addition, ProLogis may, at any time and in its sole discretion,
subject to any limitations described in the applicable prospectus supplement
relating to such debt securities, determine not to have any debt securities of
such series represented by one or more global securities and, in such event,
will issue individual debt securities of such series in exchange for the
global security or securities representing such series of debt securities.
Individual debt securities of such series so issued will be issued in
denominations and integral multiple of $1,000, unless otherwise specified by
ProLogis.
No personal liability
No past, present or future trustee, officer, employee or shareholder of
ProLogis or any successor to ProLogis shall have any liability for any
obligations of ProLogis under the debt securities or the Indenture or for any
claim based on, in respect of, or by reason of, such obligations or their
creation. Each holder of debt securities by accepting such debt securities
waives and releases all such liability. The waiver and release are part of the
consideration for the issue of debt securities.
Trustee
The Indenture provides that there may be more than one trustee, each with
respect to one or more series of debt securities. Any trustee under the
Indenture may resign or be removed with respect to one or more series of debt
securities, and a successor trustee may be appointed to act with respect to
such series. In the event that two or more persons are acting as trustee with
respect to different series of debt securities, each such trustee shall be a
trustee of a trust under the Indenture separate and apart from the trust
administered by any other trustee. Except as otherwise indicated in this
prospectus, any action described in this prospectus to be taken by the trustee
may be taken by each such trustee with respect to, and only with respect to,
the one or more series of debt securities for which it is trustee under the
Indenture.
DESCRIPTION OF PREFERRED SHARES
General
Subject to limitations prescribed by Maryland law and the declaration of
trust, the board of trustees is authorized to issue, from the authorized but
unissued shares of beneficial interest of ProLogis, preferred shares in series
and to establish from time to time the number of preferred shares to be
included in such series and to fix the designation and any preferences,
conversion and other rights, voting powers, restrictions, limitations as to
dividends, qualifications and terms and conditions of redemption of the shares
of each series, and such other subjects or matters as may be fixed by
resolution of the board of trustees or one of its duly authorized committees.
At May 21, 1999, 5,400,000 Series A preferred shares were issued and
outstanding and held of record by approximately 277 shareholders, 7,221,100
Series B preferred shares were issued and outstanding and held of record by
approximately 28 shareholders, 2,000,000 Series C preferred shares were issued
and outstanding and held of record by 5 shareholders, 10,000,000 Series D
preferred shares were issued and outstanding and held of record by 50
shareholders and 2,000,000 Series E preferred shares were issued and
outstanding and held of record by 1 shareholder.
Reference is made to the prospectus supplement relating to the series of
preferred shares being offered in such prospectus supplement for the specific
terms of the series, including:
(1) The title and stated value of such series of preferred shares;
(2) The number of shares of such series of preferred shares offered, the
liquidation preference per share and the offering price of such preferred
shares;
(3) The dividend rate(s), period(s) and/or payment date(s) or the
method(s) of calculation for those values relating to the preferred shares
of such series;
(4) The date from which dividends on preferred shares of such series
shall cumulate, if applicable;
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(5) The procedures for any auction and remarketing, if any, for
preferred shares of such series;
(6) The provision for a sinking fund, if any, for preferred shares of
such series;
(7) The provision for redemption, if applicable, of preferred shares of
such series;
(8) Any listing of such series of preferred shares on any securities
exchange;
(9) The terms and conditions, if applicable, upon which preferred shares
of such series will be convertible into common shares, including the
conversion price, or manner of calculating the conversion price;
(10) Whether interests in preferred shares of such series will be
represented by global securities;
(11) Any other specific terms, preferences, rights, limitations or
restrictions of such series of preferred shares;
(12) A discussion of federal income tax considerations applicable to
preferred shares of such series;
(13) The relative ranking and preferences of preferred shares of such
series as to dividend rights and rights upon liquidation, dissolution or
winding up of the affairs of ProLogis;
(14) Any limitations on issuance of any series of preferred shares
ranking senior to or on a parity with such series of preferred shares as to
dividend rights and rights upon liquidation, dissolution or winding up of
the affairs of ProLogis; and
(15) Any limitations on direct or beneficial ownership and restrictions
on transfer of preferred shares of such series, in each case as may be
appropriate to preserve the status of ProLogis as a real estate investment
trust under the Internal Revenue Code of 1986.
Rank
Unless otherwise specified in the applicable prospectus supplement, the
preferred shares of each series will rank with respect to dividend rights and
rights upon liquidation, dissolution or winding up of the affairs of ProLogis:
. senior to all classes or series of common shares, and to all equity
securities ranking junior to such series of preferred shares;
. on a parity with all equity securities issued by ProLogis the terms of
which specifically provide that such equity securities rank on a parity
with preferred shares of such series; and
. junior to all equity securities issued by ProLogis the terms of which
specifically provide that such equity securities rank senior to
preferred shares of such series.
Dividends
Holders of preferred shares of each series shall be entitled to receive
cash dividends at such rates and on such dates as will be set forth in the
applicable prospectus supplement. When and if declared by the board of
trustees, dividends shall be payable out of assets of ProLogis legally
available for payment of dividends. Each such dividend shall be payable to
holders of record as they appear on the share transfer books of ProLogis on
such record dates as shall be fixed by the board of trustees.
Dividends on any series of the preferred shares may be cumulative or
noncumulative, as provided in the applicable prospectus supplement. Dividends,
if cumulative, will be cumulative from and after the date set forth in the
applicable prospectus supplement. If the board of trustees fails to declare a
dividend payable on a dividend payment date on any series of the preferred
shares for which dividends are noncumulative, then the holders of such series
of the preferred shares will have no right to receive a dividend in respect of
the dividend
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period ending on such dividend payment date, and ProLogis will have no
obligation to pay the dividend accrued for such period, whether or not
dividends on such series are declared payable on any future dividend payment
date.
If preferred shares of any series are outstanding, no full dividends shall
be declared or paid or set apart for payment on the preferred shares of
ProLogis of any other series ranking, as to dividends, on a parity with or
junior to the preferred shares of the series for any period unless full
dividends, including cumulative dividends if applicable, for the then current
dividend period and any past period, if any, have been or contemporaneously are
declared and paid or declared and a sum sufficient for the payment of the
dividend set apart for such payment on the preferred shares of the series. When
dividends are not paid in full, or a sum sufficient for the full payment is not
so set apart, upon the preferred shares of any series and the shares of any
other series of preferred shares ranking on a parity as to dividends with the
preferred shares of the series, all dividends declared upon preferred shares of
the series and any other series of preferred shares ranking on a parity as to
dividends with the preferred shares shall be declared pro rata so that the
amount of dividends declared per share on the preferred shares of the series
and the other series of preferred shares shall in all cases bear to each other
the same ratio that accrued dividends per share on the preferred shares of the
series and the other series of preferred shares bear to each other. The pro
rata amount shall not include any cumulation in respect of unpaid dividends for
prior dividend periods if the series of preferred shares does not have a
cumulative dividend. No interest, or sum of money in lieu of interest, shall be
payable in respect of any dividend payment or payments on preferred shares of
the series which may be in arrears.
Except as provided in the immediately preceding paragraph, unless full
dividends, including cumulative dividends, if applicable, on the preferred
shares of such series have been or contemporaneously are declared and paid or
declared and a sum sufficient for the payment of the dividend set apart for
payment for the then current dividend period, and any past period, if any, no
dividends shall be declared or paid or set aside for payment or other
distribution shall be declared or made upon the common shares or any other
capital shares of ProLogis ranking junior to or on a parity with the preferred
shares of the series as to dividends or upon liquidation. Additionally, shares
ranking junior to or in parity with the series of preferred shares may not be
redeemed, purchased or otherwise acquired for any consideration, except by
conversion into or exchange for other capital shares of ProLogis ranking junior
to the preferred shares of the series as to dividends and upon liquidation.
ProLogis also may not pay any money or make any money available for a sinking
fund for the redemption of junior or parity shares. Notwithstanding the
preceding sentences, ProLogis may continue to make dividends of common shares
or other capital shares ranking junior to the preferred shares of the series of
preferred shares, although full dividends may not have been paid or set aside.
Any dividend payment made on a series of preferred shares shall first be
credited against the earliest accrued but unpaid dividend due with respect to
shares of such series which remains payable.
Redemption
If so provided in the applicable prospectus supplement, the preferred shares
of a series will be subject to mandatory redemption or redemption at the option
of ProLogis, as a whole or in part, in each case upon the terms, at the times
and at the redemption prices set forth in such prospectus supplement.
The prospectus supplement relating to a series of preferred shares that is
subject to mandatory redemption will specify the number of preferred shares of
such series that shall be redeemed by ProLogis in each year commencing after a
date to be specified, at a redemption price per share to be specified, together
with an amount equal to all accrued and unpaid dividends thereon, which shall
not, if such series of preferred shares does not have a cumulative dividend,
include any cumulation in respect of unpaid dividends for prior dividend
periods, to the date of redemption. The redemption price may be payable in cash
or other property, as specified in the applicable prospectus supplement. If the
redemption price for preferred shares of any series is payable only from the
net proceeds of the issuance of capital shares of ProLogis, the terms of such
series of preferred
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shares may provide that, if no such capital shares shall have been issued or to
the extent the net proceeds from any issuance are insufficient to pay in full
the aggregate redemption price then due, preferred shares of such series shall
automatically and mandatorily be converted into shares of the applicable
capital shares of ProLogis pursuant to conversion provisions specified in the
applicable prospectus supplement.
If full dividends on all preferred shares of any series, including
cumulative dividends if applicable, have not been or contemporaneously are
declared and paid or declared and a sum sufficient for the payment of the
dividend set apart for payment for the then current dividend period and any
past dividends, if any, ProLogis may not redeem preferred shares of any series
unless all outstanding preferred shares of such series are simultaneously
redeemed. This shall not prevent, however, the purchase or acquisition of
preferred shares of the series pursuant to a purchase or exchange offer made on
the same terms to holders of all outstanding preferred shares of such series,
and, unless full dividends, including cumulative dividends if applicable, on
all preferred shares of any series shall have been or contemporaneously are
declared and paid or declared and a sum sufficient for the payment of the
dividend set apart for payment for the then current dividend period and any
past period, if any, ProLogis shall not purchase or otherwise acquire directly
or indirectly any preferred shares of such series, except by conversion into or
exchange for capital shares of ProLogis ranking junior to the preferred shares
of such series as to dividends and upon liquidation.
If fewer than all of the outstanding preferred shares of any series are to
be redeemed, the number of shares to be redeemed will be determined by ProLogis
and such shares may be redeemed pro rata from the holders of record of
preferred shares of such series in proportion to the number of preferred shares
of such series held by such holders with adjustments to avoid redemption of
fractional shares or by lot in a manner determined by ProLogis.
Notice of redemption will be mailed at least 30 days but not more than 90
days before the redemption date to each holder of record of preferred shares of
any series to be redeemed at the address shown on the share transfer books of
ProLogis. Each notice shall state:
(1) the redemption date;
(2) the number of shares and series of the preferred shares to be
redeemed;
(3) the redemption price;
(4) the place or places where certificates for such preferred shares are
to be surrendered for payment of the redemption price;
(5) that dividends on the preferred shares to be redeemed will cease to
accrue on such redemption date; and
(6) the date upon which the holder's conversion rights, if any, as to
such preferred shares shall terminate.
If fewer than all the preferred shares of any series are to be redeemed, the
notice mailed to each such holder of the series shall also specify the number
of preferred shares to be redeemed from each such holder. If notice of
redemption of any preferred shares has been given and if the funds necessary
for such redemption have been set aside by ProLogis in trust for the benefit of
the holders of any preferred shares so called for redemption, then from and
after the redemption date dividends will cease to accrue on such preferred
shares, and all rights of the holders of such preferred shares will terminate,
except the right to receive the redemption price.
Liquidation preference
Upon any voluntary or involuntary liquidation, dissolution or winding up of
the affairs of ProLogis, then, before any distribution or payment shall be made
to the holders of any common shares or any other class or series of shares of
beneficial interest of ProLogis ranking junior to such series of preferred
shares in the
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distribution of assets upon any liquidation, dissolution or winding up of
ProLogis, the holders of each series of preferred shares shall be entitled to
receive out of assets of ProLogis legally available for distribution to
shareholders liquidating distributions in the amount of the liquidation
preference per share, set forth in the applicable prospectus supplement, plus
an amount equal to all dividends accrued and unpaid thereon, which shall not
include any cumulation in respect of unpaid dividends for prior dividend
periods if such series of preferred shares does not have a cumulative dividend.
After payment of the full amount of the liquidating distributions to which they
are entitled, the holders of preferred shares of such series will have no right
or claim to any of the remaining assets of ProLogis. In the event that, upon
any such voluntary or involuntary liquidation, dissolution or winding up, the
available assets of ProLogis are insufficient to pay the amount of the
liquidating distributions on all outstanding preferred shares of such series
and the corresponding amounts payable on all shares of other classes or series
of capital shares of ProLogis ranking on a parity with preferred shares of such
series in the distribution of assets, then the holders of preferred shares of
such series and all other such classes or series of capital shares shall share
ratably in any such distribution of assets in proportion to the full
liquidating distributions to which they would otherwise be respectively
entitled.
If liquidating distributions shall have been made in full to all holders of
preferred shares of such series, the remaining assets of ProLogis shall be
distributed among the holders of any other classes or series of capital shares
ranking junior to the preferred shares of such series upon liquidation,
dissolution or winding up, according to their respective rights and preferences
and in each case according to their respective number of shares. For such
purposes, the consolidation or merger of ProLogis with or into any other
entity, or the sale, lease or conveyance of all or substantially all of the
property or business of ProLogis, shall not be deemed to constitute a
liquidation, dissolution or winding up of ProLogis.
Voting rights
Holders of the preferred shares of each series will not have any voting
rights, except as set forth below or in the applicable prospectus supplement or
as otherwise required by applicable law. The following is a summary of the
voting rights that, unless provided otherwise in the applicable prospectus
supplement, will apply to each series of preferred shares, as in the case of
the Series A preferred shares.
If six quarterly dividends, whether or not consecutively payable on the
preferred shares of such series or any other series of preferred shares ranking
on a parity with such series of preferred shares with respect in each case to
the payment of dividends, amounts upon liquidation, dissolution and winding up
are in arrears, whether or not earned or declared, the number of trustees then
constituting the board of trustees will be increased by two, and the holders of
preferred shares of such series, voting together as a class with the holders of
any other series of shares ranking in parity with such shares, will have the
right to elect two additional trustees to serve on the board of trustees at any
annual meeting of shareholders or a properly called special meeting of the
holders of preferred shares of such series and other preferred shares ranking
in parity with such shares and at each subsequent annual meeting of
shareholders until all such dividends and dividends for the current quarterly
period on the preferred shares of such series and other preferred shares
ranking in parity with such shares have been paid or declared and set aside for
payment. Such voting rights will terminate when all such accrued and unpaid
dividends have been declared and paid or set aside for payment. The term of
office of all trustees so elected will terminate with the termination of such
voting rights. For so long as Security Capital and its affiliates beneficially
own in excess of 10% of the outstanding common shares, in any such vote by
holders of preferred shares of such series, Security Capital and its affiliates
shall vote their preferred shares of such series, if any, in the same
respective percentages as the preferred shares of such series and other
preferred shares ranking in parity with such shares that are not held by such
persons.
The approval of two-thirds of the outstanding preferred shares of such
series and all other series of preferred shares similarly affected, voting as a
single class, is required in order to
(1) amend the declaration of trust to affect materially and adversely
the rights, preferences or voting power of the holders of the preferred
shares of such series or other preferred shares ranking in parity with such
shares;
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(2) enter into a share exchange that affects the preferred shares of
such series, consolidate with or merge into another entity, or permit
another entity to consolidate with or merge into ProLogis, unless in each
such case each preferred share of such series remains outstanding without a
material and adverse change to its terms and rights or is converted into or
exchanged for preferred shares of the surviving entity having preferences,
conversion or other rights, voting powers, restrictions, limitations as to
dividends, qualifications and terms or conditions of redemption of the
series identical to that of a preferred share of such series, except for
changes that do not materially and adversely affect the holders of the
preferred shares of such series; or
(3) authorize, reclassify, create, or increase the authorized amount of
any class of shares having rights senior to the preferred shares of such
series with respect to the payment of dividends or amounts upon
liquidation, dissolution or winding up.
However, ProLogis may create additional classes of parity shares and other
series of preferred shares ranking junior to such series of preferred shares
with respect in each case to the payment of dividends, amounts upon
liquidation, dissolution and winding up junior shares, increase the authorized
number of parity shares and junior shares and issue additional series of parity
shares and junior shares without the consent of any holder of preferred shares
of such series.
Except as provided above and as required by law, the holders of preferred
shares of each series will not be entitled to vote on any merger or
consolidation involving ProLogis or a sale of all or substantially all of the
assets of ProLogis.
Conversion rights
The terms and conditions, if any, upon which preferred shares of any series
are convertible into common shares will be set forth in the applicable
prospectus supplement relating to the series. Such terms will include the
number of common shares into which the preferred shares of such series are
convertible, the conversion price, or manner of calculation of the conversion
price, the conversion period, provisions as to whether conversion will be at
the option of the holders of the preferred shares of such series or ProLogis,
the events requiring an adjustment of the conversion price and provisions
affecting conversion in the event of the redemption of the preferred shares of
such series.
Restrictions on ownership
As discussed below under "Description of Common Shares--Restriction on size
of holdings," for ProLogis to qualify as a real estate investment trust under
the Internal Revenue Code of 1986, not more than 50% in value of its
outstanding shares of beneficial interest may be owned by five or fewer
individuals at any time during the last half of any taxable year. Therefore,
the articles supplementary for each series of preferred shares will contain
various provisions restricting the ownership and transfer of the preferred
shares. Except as otherwise described in the applicable prospectus supplement
relating the relevant series of preferred shares, the provisions of each
articles supplementary relating to the preferred shares ownership limit will
provide, as in the case of the Series A preferred shares, the Series B
preferred shares, the Series C preferred shares and Series D preferred shares
ownership restriction similar to the ownership restrictions of the series
described below.
The preferred shares ownership limit provision will provide that, subject to
the exceptions contained in such articles supplementary, no person, or persons
acting as a group, may beneficially own more than 25% of such series of
preferred shares outstanding at any time, except as a result of ProLogis'
redemption of preferred shares. Shares acquired in excess of the preferred
shares ownership limit provision must be redeemed by ProLogis at a price equal
to the average daily per share closing sale price during the 30-day period
ending on the business day prior to the redemption date. Such redemption is not
applicable if a person's ownership exceeds the limitations due solely to
ProLogis' redemption of preferred shares; provided that thereafter any
additional preferred shares acquired by such person shall be excess shares. See
"Description of Common
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Shares--Restriction on size of holdings." From and after the date of notice of
such redemption, the holder of the preferred shares thus redeemed shall cease
to be entitled to any distribution, other than distributions declared prior to
the date of notice of redemption, voting rights and other benefits with respect
to such shares except the right to receive payment of the redemption price
determined as described above. The preferred shares ownership limit provision
may not be waived with respect to some affiliates of ProLogis.
All certificates representing shares of preferred shares will bear a legend
referring to the restrictions described above.
DESCRIPTION OF COMMON SHARES
General
The declaration of trust authorizes ProLogis to issue up to 230,000,000
shares of beneficial interest, par value $0.01 per share, consisting of common
shares, preferred shares and such other types or classes of shares of
beneficial interest as the board of trustees may create and authorize from time
to time. At May 21, 1999, approximately 161,238,976 common shares were issued
and outstanding and held of record by approximately 12,348 shareholders.
The following description sets forth general terms and provisions of the
common shares to which any prospectus supplement may relate, including a
prospectus supplement which provides for common shares issuable pursuant to
subscription offerings or rights offerings or upon conversion of preferred
shares which are offered pursuant to such prospectus supplement and convertible
into common shares for no additional consideration. The statements below
describing the common shares are in all respects subject to and qualified in
their entirety by reference to the applicable provisions of the declaration of
trust and ProLogis' bylaws.
The outstanding common shares are fully paid and, except as set forth below
under "--Shareholder liability," non-assessable. Each common share entitles the
holder to one vote on all matters requiring a vote of shareholders, including
the election of trustees. Holders of common shares do not have the right to
cumulate their votes in the election of trustees, which means that the holders
of a majority of the outstanding common shares can elect all of the trustees
then standing for election. Holders of common shares are entitled to such
distributions as may be declared from time to time by the board of trustees out
of funds legally available therefor. Holders of common shares have no
conversion, redemption, preemptive or exchange rights to subscribe to any
securities of ProLogis. In the event of a liquidation, dissolution or winding
up of the affairs of ProLogis, the holders of the common shares are entitled to
share ratably in the assets of ProLogis remaining after provision for payment
of all liabilities to creditors and payment of liquidation preferences and
accrued dividends, if any, on the Series A preferred shares, Series B preferred
shares, Series C preferred shares, Series D preferred shares and Series E
preferred shares, and subject to the rights of holders of other series of
preferred shares, if any. The right of holders of the common shares are subject
to the rights and preferences established by the board of trustees for the
Series A preferred shares, Series B preferred shares, Series C preferred
shares, Series D preferred shares and Series E preferred shares and any other
series of preferred shares which may subsequently be issued by ProLogis. See
"Description of Preferred Shares."
Purchase rights
On December 7, 1993, the board of trustees declared a dividend of one
preferred share purchase right for each common share outstanding, payable to
holders of common shares of record at the close of business on December 31,
1993. The holders of any additional common shares issued after such date and
before the redemption or expiration of the purchase rights are also entitled to
receive one purchase right for each such additional common share. Each purchase
right entitles the holder under set circumstances to purchase from ProLogis one
one-hundredth of a share of Series A junior participating preferred shares, par
value $0.01 per share at a price of $40.00 per one one-hundredth of a Series A
junior preferred share, subject to adjustment. Purchase rights are exercisable
when a person or group of persons, other than Security Capital, acquires 20% or
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more of the outstanding common shares or announces a tender offer or exchange
offer for 25% or more of the outstanding common shares. Under set
circumstances, each purchase right entitles the holder to purchase, at the
purchase right's then current exercise price, a number of common shares having
a market value of twice the purchase right's exercise price. The acquisition of
ProLogis pursuant to some types mergers or other business transactions would
entitle each holder to purchase, at the purchase right's then current exercise
price, a number of the acquiring company's common shares having a market value
at that time equal to twice the purchase right's exercise price. The purchase
rights held by 20% shareholders, other than Security Capital would not be
exercisable. The purchase rights will expire on December 7, 2003 and are
subject to redemption in whole, but not in part, at a price of $0.01 per
purchase right payable in cash, shares of ProLogis or any other form of
consideration determined by the board of trustees.
Transfer agent
The transfer agent and registrar for the common shares is BankBoston, N.A.,
150 Royall Street, Canton, Massachusetts 02021. The common shares are listed on
the New York Stock Exchange under the symbol "PLD."
Restriction on size of holdings
The declaration of trust restricts beneficial ownership of ProLogis'
outstanding shares of beneficial interest by a single person, or persons acting
as a group, to 9.8% of such shares. The purposes of the restriction are to
assist in protecting and preserving ProLogis' real estate investment trust
status under the Internal Revenue Code of 1986 and to protect the interest of
shareholders in takeover transactions by preventing the acquisition of a
substantial block of shares without the prior consent of the Prologis board of
trustees. For ProLogis to qualify as a real estate investment trust under the
Internal Revenue Code of 1986, not more than 50% in value of its outstanding
shares of beneficial interest may be owned by five or fewer individuals at any
time during the last half of any taxable year. The restriction permits five
persons to acquire up to a maximum of 9.8% each, or an aggregate of 49% of the
outstanding shares, and, thus, assists the board of trustees in protecting and
preserving ProLogis' real estate investment trust status under the Internal
Revenue Code of 1986. This restriction does not apply to Security Capital,
which counts as numerous holders for purposes of the tax rule, because its
shares are attributed to its shareholders for purposes of this rule.
Excess shares of beneficial interest owned by a person or group of persons
in excess of 9.8% of the outstanding shares of beneficial interest, other than
Security Capital and 30% in the case of shareholders who acquired shares prior
to ProLogis' initial public offering, are subject to redemption by ProLogis, at
its option, upon 30 days' notice, at a price equal to the average daily per
share closing sale price during the 30-day period ending on the business day
prior to the redemption date. ProLogis may make payment of the redemption price
at any time or times up to the earlier of five years after the redemption date
or liquidation of ProLogis. ProLogis may refuse to effect the transfer of any
shares of beneficial interest which would make the transferee a holder of
excess shares. Shareholders of ProLogis are required to disclose, upon demand
of the board of trustees, such information with respect to their direct and
indirect ownership of shares of ProLogis as the board of trustees deems
necessary to comply with the provisions of the Internal Revenue Code of 1986
pertaining to qualification, for tax purposes, of real estate investment
trusts, or to comply with the requirements of any other appropriate taxing
authority.
The 9.8% restriction does not apply to acquisitions by an underwriter in a
public offering and sale of shares of beneficial interest of ProLogis or to any
transaction involving the issuance of shares of beneficial interest in which a
majority of the board of trustees determines that the eligibility of ProLogis
to qualify as a real estate investment trust for federal income tax purposes
will not be jeopardized or the disqualification of ProLogis as a real estate
investment trust under the Internal Revenue Code of 1986 is advantageous to the
shareholders. Security Capital's ownership of shares is attributed for tax
purposes to its shareholders. The board of trustees has exempted Security
Capital from this restriction and has permitted the shareholders who acquired
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shares prior to ProLogis' initial public offering to acquire up to 30% of the
outstanding shares of beneficial interest.
Trustee liability
The declaration of trust provides that trustees shall not be individually
liable for any obligation or liability incurred by or on behalf of ProLogis or
by trustees for the benefit and on behalf of ProLogis. Under the declaration of
trust and Maryland law governing real estate investment trusts, trustees are
not liable to ProLogis or the shareholders for any act or omission except for
acts or omissions which constitute bad faith, willful misfeasance or gross
negligence in the conduct of their duties.
Shareholder liability
Both Maryland statutory law governing real estate investment trusts
organized under the laws of that state and the declaration of trust provide
that shareholders shall not be personally or individually liable for any debt,
act, omission or obligation of ProLogis or the board of trustees. The
declaration of trust further provides that ProLogis shall indemnify and hold
each shareholder harmless from all claims and liabilities to which the
shareholder may become subject by reason of his being or having been a
shareholder and that ProLogis shall reimburse each shareholder for all legal
and other expenses reasonably incurred by the shareholder in connection with
any such claim or liability, except to the extent that such claim or liability
arises out of the shareholder's bad faith, willful misconduct or gross
negligence and provided that such shareholder gives ProLogis prompt notice of
any such claim or liability and permits ProLogis to conduct the defense of the
shareholder. In addition, ProLogis is required to, and as a matter of practice
does, insert a clause in its management and other contracts providing that
shareholders assume no personal liability for obligations entered into on
behalf of ProLogis. Nevertheless, with respect to tort claims, contractual
claims where shareholder liability is not so negated, claims for taxes and
statutory liability, the shareholders may, in some jurisdictions, be personally
liable to the extent that such claims are not satisfied by ProLogis. Inasmuch
as ProLogis carries public liability insurance which it considers adequate, any
risk of personal liability to shareholders is limited to situations in which
ProLogis' assets plus its insurance coverage would be insufficient to satisfy
the claims against ProLogis and its shareholders.
FEDERAL INCOME TAX CONSIDERATIONS
ProLogis intends to operate in a manner that permits it to satisfy the
requirements for taxation as a real estate investment trust under the
applicable provisions of the Internal Revenue Code of 1986. No assurance can be
given, however, that such requirements will be met. The following is a
description of the federal income tax consequences to ProLogis and its
shareholders of the treatment of ProLogis as a real estate investment trust.
Since these provisions are highly technical and complex, each prospective
purchaser of the ProLogis common shares is urged to consult his or her own tax
advisor with respect to the federal, state, local, foreign and other tax
consequences of the purchase, ownership and disposition of the ProLogis common
shares.
Based upon representations of ProLogis with respect to the facts as set
forth and explained in the discussion below, in the opinion of Mayer, Brown &
Platt, counsel to ProLogis, ProLogis has been organized in conformity with the
requirements for qualification as a real estate investment trust beginning with
its taxable year ending December 31, 1993, and its actual and proposed method
of operation described in this prospectus and as represented by management will
enable it to satisfy the requirements for such qualification.
This opinion is based on representations made by ProLogis as to factual
matters relating to ProLogis' organization and intended or expected manner of
operation. In addition, this opinion is based on the law existing and in effect
on the date of this prospectus. ProLogis' qualification and taxation as a real
estate investment trust will depend upon ProLogis' ability to meet on a
continuing basis, through actual operating results, asset composition,
distribution levels and diversity of stock ownership, the various qualification
tests
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imposed under the Internal Revenue Code discussed below. Mayer, Brown & Platt
will not review compliance with these tests on a continuing basis. No assurance
can be given that ProLogis will satisfy such tests on a continuing basis.
In brief, if the conditions imposed by the real estate investment trust
provisions of the Internal Revenue Code are met, entities, such as ProLogis,
that invest primarily in real estate and that otherwise would be treated for
federal income tax purposes as corporations, are generally not taxed at the
corporate level on their Areal estate investment trust taxable income" that is
currently distributed to shareholders. This treatment substantially eliminates
the "double taxation," at both the corporate and shareholder levels that
generally results from the use of corporations.
If ProLogis fails to qualify as a real estate investment trust in any year,
however, it will be subject to federal income taxation as if it were a domestic
corporation, and its shareholders will be taxed in the same manner as
shareholders of ordinary corporations. In this event, ProLogis could be subject
to potentially significant tax liabilities, and therefore the amount of cash
available for distribution to its shareholders would be reduced or eliminated.
ProLogis elected real estate investment trust status effective beginning
with its taxable year ended December 31, 1993 and the ProLogis board of
trustees believes that ProLogis has operated and currently intends that
ProLogis will operate in a manner that permits it to qualify as a real estate
investment trust in each taxable year thereafter. There can be no assurance,
however, that this expectation will be fulfilled, since qualification as a real
estate investment trust depends on ProLogis continuing to satisfy numerous
asset, income and distribution tests described below, which in turn will be
dependent in part on ProLogis' operating results.
The following summary is based on the Internal Revenue Code, its legislative
history, administrative pronouncements, judicial decisions and Treasury
regulations, subsequent changes to any of which may affect the tax consequences
described in this prospectus, possibly on a retroactive basis. The following
summary is not exhaustive of all possible tax considerations and does not give
a detailed discussion of any state, local, or foreign tax considerations, nor
does it discuss all of the aspects of federal income taxation that may be
relevant to a prospective shareholder in light of his or her particular
circumstances or to various types of shareholders, including insurance
companies, tax-exempt entities, financial institutions or broker-dealers,
foreign corporations and persons who are not citizens or residents of the
United States, subject to special treatment under the federal income tax laws.
Taxation of ProLogis
General
In any year in which ProLogis qualifies as a real estate investment trust,
in general it will not be subject to federal income tax on that portion of its
real estate investment trust taxable income or capital gain which is
distributed to shareholders. ProLogis may, however, be subject to tax at normal
corporate rates upon any taxable income or capital gain not distributed.
Notwithstanding its qualification as a real estate investment trust,
ProLogis may also be subject to taxation in other circumstances. If ProLogis
should fail to satisfy either the 75% or the 95% gross income test, as
discussed below, and nonetheless maintains its qualification as a real estate
investment trust because other requirements are met, it will be subject to a
100% tax on the greater of the amount by which ProLogis fails to satisfy either
the 75% test or the 95% test, multiplied by a fraction intended to reflect
ProLogis' profitability. ProLogis will also be subject to a tax of 100% on net
income from any "prohibited transaction," as described below, and if ProLogis
has net income from the sale or other disposition of "foreclosure property"
which is held primarily for sale to customers in the ordinary course of
business or other non-qualifying income from
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foreclosure property, it will be subject to tax on such income from foreclosure
property at the highest corporate rate. In addition, if ProLogis should fail to
distribute during each calendar year at least the sum of:
(1) 85% of its real estate investment trust ordinary income for such
year;
(2) 95% of its real estate investment trust capital gain net income for
such year, other than capital gains ProLogis elects to retain and pay tax
on as described below; and
(3) any undistributed taxable income from prior years,
ProLogis would be subject to a 4% excise tax on the excess of such required
distribution over the amounts actually distributed.
The Taxpayer Relief Act of 1997 permits a real estate investment trust, to
designate in a notice mailed to shareholders within 60 days of the end of the
taxable year, or in a notice mailed with its annual report for the taxable
year, such amount of undistributed net long-term capital gains it received
during the taxable year, which its shareholders are to include in their taxable
income as long-term capital gains. Thus, if ProLogis made this designation, the
shareholders of ProLogis would include in their income as long-term capital
gains their proportionate share of the undistributed net capital gains as
designated by ProLogis and ProLogis would have to pay the tax on such gains
within 30 days of the close of its taxable year. Each shareholder of ProLogis
would be deemed to have paid such shareholder's share of the tax paid by
ProLogis on such gains, which tax would be credited or refunded to the
shareholder. A shareholder would increase his tax basis in his ProLogis shares
by the difference between the amount of income to the holder resulting from the
designation less the holder's credit or refund for the tax paid by ProLogis.
ProLogis may also be subject to the corporate "alternative minimum tax," as
well as tax in various situations and on some types of transactions not
presently contemplated. ProLogis will use the calendar year both for federal
income tax purposes and for financial reporting purposes.
In order to qualify as a real estate investment trust, ProLogis must meet,
among others, the following requirements:
Share ownership test
ProLogis' shares must be held by a minimum of 100 persons for at least 335
days in each taxable year or a proportional number of days in any short taxable
year. In addition, at all times during the second half of each taxable year, no
more than 50% in value of the ProLogis shares may be owned, directly or
indirectly and by applying constructive ownership rules, by five or fewer
individuals, which for this purpose includes some tax-exempt entities. Any
stock held by a qualified domestic pension or other retirement trust will be
treated as held directly by its beneficiaries in proportion to their actuarial
interest in such trust rather than by such trust. Pursuant to the constructive
ownership rules, Security Capital's ownership of shares is attributed to its
shareholders for purposes of the 50% test. Under the Taxpayer Relief Act, for
taxable years beginning after August 5, 1997, if ProLogis complies with the
Treasury regulations for ascertaining its actual ownership and did not know, or
exercising reasonable diligence would not have reason to know, that more than
50% in value of its outstanding shares of stock were held, actually or
constructively, by five or fewer individuals, then ProLogis will be treated as
meeting such requirement.
In order to ensure compliance with the 50% test ProLogis has placed
restrictions on the transfer of the shares of its stock to prevent additional
concentration of ownership. Moreover, to evidence compliance with these
requirements under Treasury regulations, ProLogis must maintain records which
disclose the actual ownership of its outstanding shares of stock and such
regulations impose penalties against ProLogis for failing to do so. In
fulfilling its obligations to maintain records, ProLogis must and will demand
written statements each year from the record holders of designated percentages
of shares of its stock disclosing the actual owners of such shares as
prescribed by Treasury regulations. A list of those persons failing or refusing
to comply with such demand must be maintained as a part of ProLogis' records. A
shareholder failing or refusing to comply
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with ProLogis' written demand must submit with his or her tax returns a similar
statement disclosing the actual ownership of shares of ProLogis' stock and
other information. In addition, ProLogis' declaration of trust provides
restrictions regarding the transfer of shares that are intended to assist
ProLogis in continuing to satisfy the share ownership requirements. ProLogis
intends to enforce the percentage limitations on ownership of shares of its
stock to assure that its qualification as a real estate investment trust will
not be compromised.
Asset tests
At the close of each quarter of ProLogis' taxable year, ProLogis must
satisfy tests relating to the nature of its assets determined in accordance
with generally accepted accounting principles. First, at least 75% of the value
of ProLogis' total assets must be represented by interests in real property,
interests in mortgages on real property, shares in other real estate investment
trusts, cash, cash items, and government securities, and qualified temporary
investments. Second, although the remaining 25% of ProLogis' assets generally
may be invested without restriction, securities in this class may not exceed
either, in the case of securities of any non-government issuer, 5% of the value
of ProLogis' total assets, or 10% of the outstanding voting securities of any
one issuer.
Gross income tests
There are currently two separate percentage tests relating to the sources of
ProLogis' gross income which must be satisfied for each taxable year. Prior to
taxable years beginning August 5, 1997, there were three separate percentage
tests relating to the sources of ProLogis' gross income which must have been
satisfied for each prior taxable year. For purposes of these tests, where
ProLogis invests in a partnership, ProLogis will be treated as receiving its
share of the income and loss of the partnership, and the gross income of the
partnership will retain the same character in the hands of ProLogis as it has
in the hands of the partnership. The three tests are as follows:
1. At least 75% of ProLogis' gross income for the taxable year must be
"qualifying income." Qualifying income generally includes:
(1) rents from real property, except as modified below;
(2) interest on obligations collateralized by mortgages on, or interests
in, real property;
(3) gains from the sale or other disposition of non-"dealer property,"
which means interests in real property and real estate mortgages, other
than gain from property held primarily for sale to customers in the
ordinary course of ProLogis' trade or business;
(4) dividends or other distributions on shares in other real estate
investment trust, as well as gain from the sale of such shares;
(5) abatements and refunds of real property taxes;
(6) income from the operation, and gain from the sale, of "foreclosure
property," which means property acquired at or in lieu of a foreclosure of
the mortgage collateralized by such property; and
(7) commitment fees received for agreeing to make loans collateralized
by mortgages on real property or to purchase or lease real property.
Rents received from a tenant will not however, qualify as rents from real
property in satisfying the 75% test, or the 95% gross income test described
below, if ProLogis, or an owner of 10% or more of ProLogis, directly or
constructively owns 10% or more of such tenant. In addition, if rent
attributable to personal property leased in connection with a lease of real
property is greater than 15% of the total rent received under the lease, then
the portion of rent attributable to such personal property will not qualify as
rents from real property. Moreover, an amount received or accrued will not
qualify as rents from real property or as interest income for purposes of the
75% and 95% gross income tests if it is based in whole or in part on the income
or profits of
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any person, although an amount received or accrued generally will not be
excluded from Arents from real property" solely by reason of being based on a
fixed percentage or percentages of receipts or sales. Finally, for rents
received to qualify as rents from real property, ProLogis generally must not
operate or manage the property or furnish or render services to tenants, other
than through an "independent contractor" from whom ProLogis derives no income,
except that the "independent contractor" requirement does not apply to the
extent that the services provided by ProLogis are "usually or customarily
rendered" in connection with the rental of properties for occupancy only, or
are not otherwise considered "rendered to the occupant for his convenience."
For taxable years beginning after August 5, 1997, a real estate investment
trust is permitted to render a de minimis amount of impermissible services to
tenants, or in connection with the management of property, and still treat
amounts received with respect to that property as rent from real property. The
amount received or accrued by the real estate investment trust during the
taxable year for the impermissible services with respect to a property may not
exceed one percent of all amounts received or accrued by the real estate
investment trust directly or indirectly from the property. The amount received
for any service or management operation for this purpose shall be deemed to be
not less than 150% of the direct cost of the real estate investment trust in
furnishing or rendering the service or providing the management or operation.
2. In addition to deriving 75% of its gross income from the sources listed
above, at least 95% of ProLogis' gross income for the taxable year must be
derived from the above-described qualifying income, or from dividends, interest
or gains from the sale or disposition of stock or other securities that are not
dealer property. Dividends, other than on real estate investment trust shares,
and interest on any obligations not collateralized by an interest in real
property are included for purposes of the 95% test, but not for purposes of the
75% test. In addition, payments to ProLogis under an interest rate swap, cap
agreement, option, futures contract, forward rate agreement or any similar
financial instrument entered into by ProLogis to hedge indebtedness incurred or
to be incurred, and any gain from the sale or other disposition of these
instruments, are treated as qualifying income for purposes of the 95% test, but
not for purposes of the 75% test.
For purposes of determining whether ProLogis complies with the 75% and 95%
income tests, gross income does not include income from prohibited
transactions. A "prohibited transaction" is a sale of dealer property,
excluding foreclosure property, unless such property is held by ProLogis for at
least four years and other requirements relating to the number of properties
sold in a year, their tax bases, and the cost of improvements made to the
property are satisfied. See "--Taxation of ProLogis--General."
Even if ProLogis fails to satisfy one or both of the 75% or 95% gross income
tests for any taxable year, it may still qualify as a real estate investment
trust for such year if it is entitled to relief under provisions of the
Internal Revenue Code. These relief provisions will generally be available if:
(1) ProLogis' failure to comply was due to reasonable cause and not to
willful neglect;
(2) ProLogis reports the nature and amount of each item of its income
included in the tests on a schedule attached to its tax return; and
(3) any incorrect information on this schedule is not due to fraud with
intent to evade tax.
If these relief provisions apply, however, ProLogis will nonetheless be subject
to a special tax upon the greater of the amount by which it fails either the
75% or 95% gross income test for that year.
3. For taxable years beginning prior to August 5, 1997, ProLogis must have
derived less than 30% of its gross income for each taxable year from the sale
or other disposition of:
(1) real property held for less than four years, other than foreclosure
property and involuntary conversions;
(2) stock or securities held for less than one year; and
(3) property in a prohibited transaction.
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The 30% gross income test has been repealed by the Taxpayer Relief Act for
taxable years beginning after August 5, 1997.
Annual distribution requirements
In order to qualify as a real estate investment trust, ProLogis is required
to make distributions, other than capital gain dividends, to its shareholders
each year in an amount at least equal to the sum of 95% of ProLogis' real
estate investment trust taxable income, computed without regard to the
dividends paid deduction and real estate investment trust net capital gain,
plus 95% of its net income after tax, if any, from foreclosure property, minus
the sum of some items of non-cash income. Such distributions must be paid in
the taxable year to which they relate, or in the following taxable year if
declared before ProLogis timely files its tax return for such year and if paid
on or before the first regular dividend payment after such declaration. To the
extent that ProLogis does not distribute all of its net capital gain or
distributes at least 95%, but less than 100%, of its real estate investment
trust taxable income, as adjusted, it will be subject to tax on the
undistributed amount at regular capital gains or ordinary corporate tax rates,
as the case may be. For taxable years beginning after August 5, 1997, the
Taxpayer Relief Act permits a real estate investment trust, with respect to
undistributed net long-term capital gains it received during the taxable year,
to designate in a notice mailed to shareholders within 60 days of the end of
the taxable year, or in a notice mailed with its annual report for the taxable
year, such amount of such gains which its shareholders are to include in their
taxable income as long-term capital gains. Thus, if ProLogis made this
designation, the shareholders of ProLogis would include in their income as
long-term capital gains their proportionate share of the undistributed net
capital gains as designated by ProLogis and ProLogis would have to pay the tax
on such gains within 30 days of the close of its taxable year. Each shareholder
of ProLogis would be deemed to have paid such shareholder's share of the tax
paid by ProLogis on such gains, which tax would be credited or refunded to the
shareholder. A shareholder would increase his tax basis in his ProLogis stock
by the difference between the amount of income to the holder resulting from the
designation less the holder's credit or refund for the tax paid by ProLogis.
ProLogis intends to make timely distributions sufficient to satisfy the
annual distribution requirements. It is possible that ProLogis may not have
sufficient cash or other liquid assets to meet the 95% distribution
requirement, due to timing differences between the actual receipt of income and
actual payment of expenses on the one hand, and the inclusion of such income
and deduction of such expenses in computing ProLogis' real estate investment
trust taxable income on the other hand. To avoid any problem with the 95%
distribution requirement, ProLogis will closely monitor the relationship
between its real estate investment trust taxable income and cash flow and, if
necessary, intends to borrow funds in order to satisfy the distribution
requirement. However, there can be no assurance that such borrowing would be
available at such time.
If ProLogis fails to meet the 95% distribution requirement as a result of an
adjustment to ProLogis' tax return by the Internal Revenue Service, ProLogis
may retroactively cure the failure by paying a "deficiency dividend," plus
applicable penalties and interest, within a specified period.
Tax aspects of ProLogis' investments in partnerships
A significant portion of ProLogis' investments are owned through various
limited partnerships. ProLogis will include its proportionate share of each
partnership's income, gains, losses, deductions and credits for purposes of the
various real estate investment trust gross income tests and in its computation
of its real estate investment trust taxable income and the assets held by each
partnership for purposes of the real estate investment trust asset tests.
ProLogis' interest in the partnerships involves special tax considerations,
including the possibility of a challenge by the Internal Revenue Service of the
status of the partnerships as partnerships, as opposed to associations taxable
as corporations, for federal income tax purposes. If a partnership were to be
treated as an association, such partnership would be taxable as a corporation
and therefore subject to an entity-level tax on its income. In such a
situation, the character of ProLogis' assets and items of gross income would
change,
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which may preclude ProLogis from satisfying the real estate investment trust
asset tests and may preclude ProLogis from satisfying the real estate
investment trust gross income tests. See "--Failure to Qualify" below, for a
discussion of the effect of ProLogis' failure to meet such tests. Based on
factual representations of ProLogis, in the opinion of Mayer, Brown, & Platt,
under existing federal income tax law and regulations, ProLogis Limited
Partnership-I, ProLogis Limited Partnership-II, ProLogis Limited Partnership-
III and ProLogis Limited Partnership-IV will be treated for federal income tax
purposes as partnerships, and not as associations taxable as corporations. Such
opinion, however, is not binding on the Internal Revenue Service.
Failure to qualify
If ProLogis fails to qualify for taxation as a real estate investment trust
in any taxable year and relief provisions do not apply, ProLogis will be
subject to tax, including applicable alternative minimum tax, on its taxable
income at regular corporate rates. Distributions to shareholders in any year in
which ProLogis fails to qualify as a real estate investment trust will not be
deductible by ProLogis, nor generally will they be required to be made under
the Internal Revenue Code. In such event, to the extent of current and
accumulated earnings and profits, all distributions to shareholders will be
taxable as ordinary income, and subject to limitations in the Internal Revenue
Code, corporate distributees may be eligible for the dividends-received
deduction. Unless entitled to relief under specific statutory provisions,
ProLogis also will be disqualified from re-electing taxation as a real estate
investment trust for the four taxable years following the year during which
qualification was lost.
Taxation of ProLogis' shareholders
Taxation of taxable domestic shareholders
As long as ProLogis qualifies as a real estate investment trust,
distributions made to ProLogis' taxable domestic shareholders out of current or
accumulated earnings and profits, and not designated as capital gain dividends,
will be taken into account by them as ordinary income and will not be eligible
for the dividends-received deduction for corporations. Distributions, and for
tax years beginning after August 5, 1997, undistributed amounts, that are
designated as capital gain dividends will be taxed as long-term capital gains,
to the extent they do not exceed ProLogis' actual net capital gain for the
taxable year, without regard to the period for which the shareholder has held
its shares. However, corporate shareholders may be required to treat up to 20%
of some capital gain dividends as ordinary income. To the extent that ProLogis
makes distributions in excess of current and accumulated earnings and profits,
these distributions are treated first as a tax-free return of capital to the
shareholder, reducing the tax basis of a shareholder's shares by the amount of
such distribution, but not below zero, with distributions in excess of the
shareholder's tax basis taxable as capital gains, if the shares are held as a
capital asset. In addition, any dividend declared by ProLogis in October,
November or December of any year and payable to a shareholder of record on a
specific date in any such month shall be treated as both paid by ProLogis and
received by the shareholder on December 31 of such year, provided that the
dividend is actually paid by ProLogis during January of the following calendar
year. Shareholders may not include in their individual income tax returns any
net operating losses or capital losses of ProLogis. Federal income tax rules
may also require that minimum tax adjustments and preferences be apportioned to
ProLogis shareholders.
In general, any loss upon a sale or exchange of shares by a shareholder who
has held such shares for six months or less, after applying holding period
rules, will be treated as a long-term capital loss, to the extent of
distributions from ProLogis required to be treated by such shareholder as long-
term capital gains.
The Internal Revenue Service Restructuring and Reform Act of 1998 provides
that gain from the sale or exchange of shares held for more than one year is
taxed at a maximum capital gain rate of 20%. Pursuant to Internal Revenue
Service guidance, ProLogis may classify portions of its capital gain dividends
as gains eligible for the 20% capital gains rate or as unrecaptured Internal
Revenue Code Section 1250 gain taxable at a maximum rate of 25%.
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Shareholders of ProLogis should consult their tax advisor with regard to the
application of the changes made by the Internal Revenue Service Restructuring
and Reform Act of 1998 with respect to taxation of capital gains and capital
gain dividends and with regard to state, local and foreign taxes on capital
gains.
Backup withholding
ProLogis will report to its domestic shareholders and to the Internal
Revenue Service the amount of distributions paid during each calendar year, and
the amount of tax withheld, if any, with respect to the paid distributions.
Under the backup withholding rules, a shareholder may be subject to backup
withholding at applicable rates with respect to distributions paid unless such
shareholder is a corporation or comes within other exempt categories and, when
required, demonstrates this fact or 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
shareholder that does not provide ProLogis with its correct taxpayer
identification number may also be subject to penalties imposed by the Internal
Revenue Service. Any amount paid as backup withholding will be credited against
the shareholder's income tax liability. In addition, ProLogis may be required
to withhold a portion of capital gain distributions made to any shareholders
who fail to certify their non-foreign status to ProLogis.
Taxation of tax-exempt shareholders
The Internal Revenue Service has issued a revenue ruling in which it held
that amounts distributed by a real estate investment trust to a tax-exempt
employees' pension trust do not constitute unrelated business taxable income.
Subject to the discussion below regarding a "pension-held real estate
investment trust," based upon the ruling, the analysis in the ruling and the
statutory framework of the Internal Revenue Code, distributions by ProLogis to
a shareholder that is a tax-exempt entity should also not constitute unrelated
business taxable income, provided that the tax-exempt entity has not financed
the acquisition of its shares with "acquisition indebtedness" within the
meaning of the Internal Revenue Code, and that the shares are not otherwise
used in an unrelated trade or business of the tax-exempt entity, and that
ProLogis, consistent with its present intent, does not hold a residual interest
in a real estate mortgage investment conduit.
However, if any pension or other retirement trust that qualifies under
Section 401(a) of the Internal Revenue Code holds more than 10% by value of the
interests in a "pension-held real estate investment trust" at any time during a
taxable year, a portion of the dividends paid to the qualified pension trust by
such real estate investment trust may constitute unrelated business taxable
income. For these purposes, a "pension-held real estate investment trust" is
defined as a real estate investment trust if such real estate investment trust
would not have qualified as a real estate investment trust but for the
provisions of the Internal Revenue Code which look through such a qualified
pension trust in determining ownership of stock of the real estate investment
trust and at least one qualified pension trust holds more than 25% by value of
the interests of such real estate investment trust or one or more qualified
pension trusts, each owning more than a 10% interest by value in the real
estate investment trust, hold in the aggregate more than 50% by value of the
interests in such real estate investment trust.
Taxation of foreign shareholders
ProLogis will qualify as a "domestically-controlled real estate investment
trust" so long as less than 50% in value of its Shares is held by foreign
persons, for example, nonresident aliens and foreign corporations,
partnerships, trust and estates. It is currently anticipated that ProLogis will
qualify as a domestically controlled real estate investment trust. Under these
circumstances, gain from the sale of the shares by a foreign person should not
be subject to U.S. taxation, unless such gain is effectively connected with
such person's U.S. business or, in the case of an individual foreign person,
such person is present within the U.S. for more than 182 days in such taxable
year.
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Distributions of cash generated by ProLogis' real estate operations, but not
by its sale or exchange of such properties, that are paid to foreign persons
generally will be subject to U.S. withholding tax at a rate of 30%, unless an
applicable tax treaty reduces that tax and the foreign shareholder files with
ProLogis the required form evidencing such lower rate or unless the foreign
shareholder files an Internal Revenue Service Form 4224 with ProLogis claiming
that the distribution is "effectively connected" income. Recently promulgated
Treasury Regulations revise in some respects the rules applicable to foreign
shareholders with respect to payments made after December 31, 1999.
Distributions of proceeds attributable to the sale or exchange by ProLogis
of U.S. real property interests are subject to income and withholding taxes
pursuant to the Foreign Investment in Real Property Tax Act of 1980, and may be
subject to branch profits tax in the hands of a shareholder which is a foreign
corporation if it is not entitled to treaty relief or exemption. ProLogis is
required by applicable Treasury regulations to withhold 35% of any distribution
to a foreign person that could be designated by ProLogis as a capital gain
dividend; this amount is creditable against the foreign shareholder's Foreign
Investment in Real Property Tax Act tax liability.
The federal income taxation of foreign persons is a highly complex matter
that may be affected by many other considerations. Accordingly, foreign
investors in ProLogis should consult their own tax advisors regarding the
income and withholding tax considerations with respect to their investment in
ProLogis.
Other tax considerations
Investments in taxable subsidiaries
ProLogis Development Services Incorporated, ProLogis Logistics Services
Incorporated and Meridian Refrigerated, Inc. will pay federal and state income
taxes at the full applicable corporate rates on their income prior to payment
of any dividends. ProLogis Development Services Incorporated, ProLogis
Logistics Services Incorporated and Meridian Refrigerated, Inc. will attempt to
minimize the amount of such taxes, but there can be no assurance whether or the
extent to which measures taken to minimize taxes will be successful. To the
extent that ProLogis Development Services Incorporated, ProLogis Logistics
Services Incorporated or Meridian Refrigerated, Inc. is required to pay
federal, state or local taxes, the cash available for distribution by either
company to its shareholders will be reduced accordingly.
Tax on built-in gain
Pursuant to Notice 88-19. 1988-1 C.B. 486, a C corporation that elects to be
taxed as a real estate investment trust has to recognize any gain that would
have been realized if the C corporation had sold all of its assets for their
respective fair market values at the end of its last taxable year before the
taxable year in which it qualifies to be taxed as a real estate investment
trust and immediately liquidated unless the real estate investment trust elects
to be taxed under rules similar to the rules of Section 1374 of the Internal
Revenue Code.
Since ProLogis has made this election, if during the "recognition period,"
being the 10-year period beginning on the first day of the first taxable year
for which ProLogis qualifies as a real estate investment trust, ProLogis
recognizes gain on the disposition of any asset held by ProLogis as of the
beginning of the recognition period, then, to the extent of the excess of the
fair market value of such asset as of the beginning of the recognition period
over ProLogis' adjusted basis in such asset as of the beginning of the
recognition period, such gain will be subject to tax at the highest regular
corporate rate. Because ProLogis acquires many of its properties in fully
taxable transactions and presently expects to hold each property beyond the
recognition period, it is not anticipated that ProLogis will pay a substantial
corporate level tax on its built-in gain.
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Possible legislative or other actions affecting tax consequences
Prospective shareholders should recognize that the present federal income
tax treatment of an investment in ProLogis may be modified by legislative,
judicial or administrative action at any time and that any such action may
affect investments and commitments previously made. The rules dealing with
federal income taxation are constantly under review by persons involved in the
legislative process and by the Internal Revenue Service and the Treasury,
resulting in revisions of regulations and revised interpretations of
established concepts as well as statutory changes. Revisions in federal tax
laws and interpretations of these laws could adversely affect the tax
consequences of an investment in ProLogis.
State and local taxes
ProLogis and its shareholders may be subject to state or local taxation in
various jurisdictions, including those in which it or they transact business or
reside. The state and local tax treatment of ProLogis and its shareholders may
not conform to the federal income tax consequences discussed above.
Consequently, prospective shareholders should consult their own tax advisors
regarding the effect of state and local tax laws on an investment in the
offered securities of ProLogis.
Foreign taxes
Frigoscandia S.A., a Luxembourg corporation, Garonor Holdings S.A., a
Luxembourg corporation, Kingspark Holding S.A., a Luxembourg corporation, and
ProLogis International Incorporated, a Delaware corporation, and each of their
subsidiaries and affiliates, may be subject to taxation in various foreign
jurisdictions. Each of the parties will pay any such foreign taxes prior to
payment of any dividends. Each entity will attempt to minimize the amount of
such taxes, but there can be no assurance whether or the extent to which
measures taken to minimize taxes will be successful. To the extent that any of
these entities is required to pay foreign taxes, the cash available for
distribution to its shareholders will be reduced accordingly.
Each prospective purchaser is advised to consult with his or her tax advisor
regarding the specific tax consequences to him or her of the purchase,
ownership, and sales of ProLogis common shares, including the federal, state,
local, foreign, and other tax consequences of such purchase, ownership, sale
and election and of potential changes in applicable tax laws.
PLAN OF DISTRIBUTION
ProLogis may sell the offered securities to one or more underwriters for
public offering and sale by them or may sell the offered securities to
investors directly or through agents, which agents may be affiliated with
ProLogis. Direct sales to investors may be accomplished through subscription
offerings or through subscription rights distributed to ProLogis' shareholders.
In connection with subscription offerings or the distribution of subscription
rights to shareholders, if all of the underlying offered securities are not
subscribed for, ProLogis may sell such unsubscribed offered securities to third
parties directly or through agents and, in addition, whether or not all of the
underlying offered securities are subscribed for, ProLogis may concurrently
offer additional offered securities to third parties directly or through
agents, which agents may be affiliated with ProLogis. Any underwriter or agent
involved in the offer and sale of the offered securities will be named in the
applicable prospectus supplement.
The distribution of the offered securities may be effected from time to time
in one or more transactions at a fixed price or prices, which may be changed,
or at prices related to the prevailing market prices at the time of sale or at
negotiated prices, any of which may represent a discount from the prevailing
market price. ProLogis also may, from time to time, authorize underwriters
acting as ProLogis' agents to offer and sell the offered securities upon the
terms and conditions set forth in the applicable prospectus supplement. In
connection with the sale of offered securities, underwriters may be deemed to
have received compensation from ProLogis in the
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form of underwriting discounts or commissions and may also receive commissions
from purchasers of offered securities for whom they may act as agent.
Underwriters may sell offered securities to or through dealers, and such
dealers may receive compensation in the form of discounts, concessions or
commissions from the underwriters and/or commissions from the purchasers for
whom they may act as agent.
Any underwriting compensation paid by ProLogis to underwriters or agents in
connection with the offering of offered securities, and any discounts,
concessions or commissions allowed by underwriters to participating dealers,
will be set forth in the applicable prospectus supplement. Underwriters,
dealers and agents participating in the distribution of the offered securities
may be deemed to be underwriters, and any discounts and commissions received by
them and any profit realized by them on resale of the offered securities may be
deemed to be underwriting discounts and commissions, under the Securities Act
of 1933. Underwriters, dealers and agents may be entitled, under agreements
entered into with ProLogis, to indemnification against and contribution toward
civil liabilities, including liabilities under the Securities Act of 1933. Any
such indemnification agreements will be described in the applicable prospectus
supplement.
If so indicated in the applicable prospectus supplement, ProLogis will
authorize dealers acting as ProLogis' agents to solicit offers by institutions
to purchase offered securities from ProLogis at the public offering price set
forth in such prospectus supplement pursuant to delayed delivery contracts
providing for payment and delivery on the date or dates stated in such
prospectus supplement. Each contract will be for an amount not less than, and
the aggregate principal amount of offered securities sold pursuant to contracts
shall be not less nor more than, the respective amounts stated in the
applicable prospectus supplement. Institutions with whom contracts, when
authorized, may be made include commercial and savings banks, insurance
companies, pension funds, investment companies, educational and charitable
institutions, and other institutions but will in all cases be subject to the
approval of ProLogis. Contracts will not be subject to any conditions except
the purchase by an institution of the offered securities covered by its
contracts shall not at the time of delivery be prohibited under the laws of any
jurisdiction in the United States to which such institution is subject, and if
the offered securities are being sold to underwriters, ProLogis shall have sold
to such underwriters the total principal amount of the offered securities less
the principal amount of the securities covered by contracts.
Some of the underwriters and their affiliates may be customers of, engage in
transactions with and perform services for ProLogis and its subsidiaries in the
ordinary course of business.
EXPERTS
The financial statements and related schedules of ProLogis incorporated by
reference in this prospectus and in the registration statement have been
audited by Arthur Andersen LLP, independent public accountants, to the extent
and for the periods indicated in their reports. In those reports, Arthur
Andersen LLP states that with respect to a subsidiary accounted for under the
equity method, its opinion is based on the report of other independent public
accountants, namely KPMG. The financial statements and related schedules
referred to above have been incorporated by reference in this prospectus and in
the registration statement in reliance upon the authority of those firms as
experts in accounting and auditing in giving the reports.
With respect to the unaudited interim financial information for the quarter
ended March 31, 1999, Arthur Andersen LLP has applied limited procedures in
accordance with professional standards for a review of that information.
However, their separate report thereon states that they did not audit and they
do not express an opinion on that interim financial information. Accordingly,
the degree of reliance on their report on that information should be restricted
in light of the limited nature of the review procedures applied. In addition,
the accountants are not subject to the liability provisions of Section 11 of
the Securities Act of 1933 for their report on the unaudited interim financial
information because that report is not a "report" or a "part" of the
registration statement prepared or certified by the accountants within the
meaning of Sections 7 and 11 of the Securities Act of 1933.
LEGAL MATTERS
The validity of the offered securities will be passed upon for ProLogis by
Mayer, Brown & Platt, Chicago, Illinois. Mayer, Brown & Platt has in the past
represented and is currently representing ProLogis and some of its affiliates,
including Security Capital.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the estimated expenses in connection with the
issuance and distribution of the securities registered hereby, which will be
borne by ProLogis:
<TABLE>
<S> <C>
SEC registration fee.......................................... $ 139,000
Printing and duplicating expenses............................. 125,000
Legal fees and expenses....................................... 200,000
Blue sky fees and expenses (including legal fees)............. 25,000
Accounting fees and expenses.................................. 100,000
Rating agency fees............................................ 225,000
Trustee and transfer agent fees (including counsel fees)...... 50,000
Miscellaneous expenses........................................ 136,000
----------
Total..................................................... $1,000,000
==========
</TABLE>
Item 15. Indemnification of Trustees and Officers.
Article 4, Section 11, of the Declaration of Trust provides as follows with
respect to indemnification of Trustees:
"The Trust shall indemnify and hold harmless each Trustee from and against
all claims and liabilities, whether they proceed to judgment or are settled, to
which such Trustee may become subject by reason of his being or having been a
Trustee, or by reason of any action alleged to have been taken or omitted by
him as Trustee, and shall reimburse him for all legal and other expenses
reasonably incurred by him in connection with any such claim or liability,
including any claim or liability arising under the provisions of federal or
state securities laws; provided, however, that no Trustee shall be indemnified
or reimbursed under the foregoing provisions in relation to any matter unless
it shall have been adjudicated that his action or omission did not constitute
willful misfeasance, bad faith or gross negligence in the conduct of his
duties, or, unless, in the absence of such an adjudication, the Trust shall
have received a written opinion from independent counsel, approved by the
Trustees, to the effect that if the matter of willful misfeasance, bad faith or
gross negligence in the conduct of duties had been adjudicated, it would have
been adjudicated in favor of such Trustee. The Trust, without requiring a
preliminary determination of the ultimate entitlement to indemnification, shall
pay or reimburse reasonable expenses incurred by any Trustee in connection with
any threatened, pending or completed action, suit or proceeding to which such
Trustee is, was or at any time becomes a party or is threatened to be made a
party, as a result directly or indirectly, of serving at any time as a Trustee.
The rights accruing to a Trustee under these provisions shall not exclude any
other right to which he may be lawfully entitled, nor shall anything herein
contained restrict the right of the Trust to indemnify or reimburse such
Trustee in any proper cause even though not specifically provided for herein."
Article 9, Section 1 of the Declaration of Trust provides as follows with
respect to the limitation of liability of Trustees and officers and
indemnification:
"A Trustee or officer of the Trust shall not be liable for monetary damages
to the Trust or its shareholders for any act or omission in the performance of
his duties unless:
(1) The Trustee or officer actually received an improper benefit in
money, property or services (in which case, such liability shall be for the
amount of the benefit in money, property or services actually received);
(2) The Trustee's or officer's action or failure to act was the result
of active and deliberate dishonesty and was material to the cause of action
being adjudicated;
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(3) The Trustee's or officer's action or failure to act constitutes
willful misconduct or deliberate recklessness; or
(4) Such liability to the Trust is specifically imposed upon Trustees or
officers by statute."
Article 9, Section 6 of the Declaration of Trust provides as follows with
respect to the indemnification of Trustees and officers:
"Notwithstanding any other provisions of this Declaration of Trust, the
Trust, for the purpose of providing indemnification for its Trustees and
officers, shall have the authority, without specific shareholder approval, to
enter into insurance or other arrangements, with persons or entities which are
not regularly engaged in the business of providing insurance coverage, to
indemnify all Trustees and officers of the Trust against any and all
liabilities and expenses incurred by them by reason of their being Trustees or
officers of the Trust, whether or not the Trust would otherwise have the power
under this Declaration of Trust or under Maryland law to indemnify such persons
against such liability. Without limiting the power of the Trust to procure or
maintain any kind of insurance or other arrangement, the Trust may, for the
benefit of persons indemnified by it, (i) create a trust fund, (ii) establish
any form of self-insurance, (iii) secure its indemnity obligation by grant of
any security interest or other lien on the assets of the corporation, or (iv)
establish a letter of credit, guaranty or surety arrangement. Any such
insurance or other arrangement may be procured, maintained or established
within the Trust or with any insurer or other person deemed appropriate by the
Board of Trustees regardless of whether all or part of the stock or other
securities thereof are owned in whole or in part by the Trust. In the absence
of fraud, the judgment of the Board of Trustees as to the terms and conditions
of insurance or other arrangement and the identity of the insurer or other
person participating in any arrangement shall be conclusive, and such insurance
or other arrangement shall not be subject to voidability, nor subject the
Trustees approving such insurance or other arrangement to liability, on any
ground, regardless of whether Trustees participating and approving such
insurance or other arrangement shall be beneficiaries thereof."
ProLogis has entered into indemnity agreements with each of its officers and
Trustees which provide for reimbursement of all expenses and liabilities of
such officer or Trustee, arising out of any lawsuit or claim against such
officer or Trustee due to the fact that he was or is serving as an officer or
Trustee, except for such liabilities and expenses (a) the payment of which is
judicially determined to be unlawful, (b) relating to claims under Section
16(b) of the Securities Exchange Act of 1934 or (c) relating to judicially
determined criminal violations. In addition, ProLogis has entered into
indemnity agreements with each of its Trustees who is not also an officer of
ProLogis which provide for indemnification and advancement of expenses to the
fullest lawful extent permitted by Maryland law in connection with any pending
or completed action, suit or proceeding by reason of serving as a Trustee and
ProLogis has established a trust to fund payments under the indemnification
agreements.
Item 16. Exhibits.
See the Exhibit Index which is hereby incorporated herein by reference.
Item 17. Undertakings.
The undersigned registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement; notwithstanding the foregoing, any
increase or decrease in the volume of securities offered
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(if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high and of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Securities and Exchange Commission pursuant
to Rule 424(b) if, in the aggregate, the changes in volume and price
represent no more than a 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table
in the effective Registration Statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement;
Provided, however, that paragraphs (a)(i) and (a)(ii) do not apply if
the information required to be included in a post-effective amendment
by those paragraphs is contained in periodic reports filed with or
furnished to the Securities and Exchange Commission by the registrant
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
that are incorporated by reference in the Registration Statement.
(b) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(c) 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.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 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.
The undersigned registrant hereby undertakes to supplement the prospectus,
after the expiration of the subscription period, to set forth the results of
the subscription offer, the transactions by the underwriters during the
subscription period, the amount of unsubscribed securities to be purchased by
the underwriters, and the terms of any subsequent reoffering thereof. If any
public offering by the underwriters is to be made on terms differing from those
set forth on the cover page of the prospectus, a post-effective amendment will
be filed to set forth the terms of such offering.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to Trustees, officers and controlling persons of the
registrant pursuant to the provisions set forth or described in Item 15 of this
Registration Statement, or otherwise, the registrant has been advised that in
the opinion of the Securities and Exchange Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a Trustee, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such Trustee, 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 whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
ProLogis has duly caused this Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized in the City of Aurora, State of
Colorado, on June 1, 1999.
ProLogis Trust
/s/ K. Dane Brooksher
By: _________________________________
K. Dane Brooksher
Chairman, Chief Executive Officer
SPECIAL POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of ProLogis Trust, a Maryland real
estate investment trust, and the undersigned trustees and officers of ProLogis
Trust, hereby constitutes and appoints K. Dane Brooksher, M. Gordon Keiser,
Jr., Edward F. Long, and Edward S. Nekritz, its or his true and lawful
attorneys-in-fact and agents, for it or him and in its or his name, place and
stead, in any and all capacities, with full power to act alone, to sign any and
all amendments to this report, and to file each such amendment to this report,
with all exhibits thereto, and any and all documents in connection therewith,
with the Securities and Exchange Commission, hereby granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform any and all acts and things requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as it or he might
or could do in person, hereby ratifying and confirming all that said attorneys-
in-fact and agents, or any of them may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1993, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ K. Dane Brooksher Chairman, Chief Executive June 1, 1999
____________________________________ Officer and Trustee
K. Dane Brooksher
/s/ Irving F. Lyons III President, Chief Investment June 1, 1999
____________________________________ Officer and Trustee
Irving F. Lyons III
/s/ Walter C. Rakowich Chief Financial Officer and June 1, 1999
____________________________________ Managing Director
Walter C. Rakowich
/s/ Shari J. Jones Vice President (Principal June 1, 1999
____________________________________ Accounting Officer)
Shari J. Jones
/s/ Thomas G. Wattles Trustee June 1, 1999
____________________________________
Thomas G. Wattles
/s/ Stephen L. Feinberg Trustee June 1, 1999
____________________________________
Stephen L. Feinberg
/s/ Donald P. Jacobs Trustee June 1, 1999
____________________________________
Donald P. Jacobs
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ William G. Myers Trustee June 1, 1999
____________________________________
William G. Myers
/s/ John E. Robson Trustee June 1, 1999
____________________________________
John E. Robson
/s/ J. Andre Teixeira Trustee June 1, 1999
____________________________________
J. Andre Teixeira
/s/ John S. Moody Trustee June 1, 1999
____________________________________
John S. Moody
/s/ Kenneth N. Stensby Trustee June 1, 1999
____________________________________
Kenneth N. Stensby
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Description
------- -----------
<C> <S>
3.1 Amended and Restated Declaration of Trust of ProLogis (Incorporated by
reference to exhibit 4.1 to ProLogis' registration statement No. 33-
73382)
3.2 First Certificate of Amendment of Amended and Restated Declaration of
Trust of ProLogis (Incorporated by reference to exhibit 3.1 to
ProLogis' Form 8-K dated June 14, 1994)
3.3 Second Articles of Amendment of Restated Declaration of Trust of
ProLogis (Incorporated by reference to exhibit 4.3 to ProLogis'
Registration Statement No. 33-87306)
3.4 Articles Supplementary relating to ProLogis' Series A Cumulative
Redeemable Preferred Shares of Beneficial Interest (Incorporated by
reference to exhibit 4.8 to ProLogis' Form 8-A registration statement
relating to such shares)
3.5 First Articles of Amendment to Articles Supplementary relating to
ProLogis' Series A Cumulative Redeemable Preferred Shares of
Beneficial Interest (Incorporated by reference to exhibit 10.3 to
ProLogis' Form 10-Q for the quarter ended September 30, 1995)
3.6 Articles Supplementary relating to ProLogis' Series B Cumulative
Convertible Redeemable Preferred Shares of Beneficial Interest
(Incorporated by reference to exhibit 4.1 to ProLogis' Form 8-K dated
February 14, 1996)
3.7 Articles Supplementary with respect to ProLogis' Series C Cumulative
Redeemable Preferred Shares of Beneficial Interest (Incorporated by
reference to exhibit 4.8 to ProLogis' Form 8-A dated November 13,
1996)
3.8 Articles Supplementary with respect to ProLogis' Series D Cumulative
Redeemable Preferred Shares of Beneficial Interest (Incorporated by
reference to exhibit 4.10 to ProLogis' Form 8-A filed on April 8,
1998)
3.9 Form of Articles Supplementary with respect to ProLogis' Series E
Cumulative Redeemable Preferred Shares of Beneficial Interest
(Incorporated by reference to exhibit 3.9 to ProLogis' registration
statement No. 333-69001)
3.10 Form of Articles of Merger (Incorporated by reference to exhibit 3.9
to ProLogis' registration statement No. 333-69001)
3.11 Articles of Amendment of Amended and Restated Declaration of Trust of
ProLogis Trust (Incorporated by reference to exhibit 3.1 ProLogis'
Form 10-Q for the quarter ended June 30, 1998)
3.12 Articles of Supplementary Rights of Series A Junior Participating
Preferred Shares of ProLogis Trust (Incorporated by reference to
Exhibit 3.2 to ProLogis' Form 10-Q for the quarter ended June 30,
1998)
3.13 Certificate of Amendment of Amended and Restated Declaration of Trust
of ProLogis Trust (Incorporated by reference to Exhibit 3.2 to
ProLogis' Form 10-Q for the quarter ended June 30, 1998)
3.14 Restated Bylaws of ProLogis (Incorporated by reference to exhibit 3.1
to ProLogis' Form 8-K/A filed April 16, 1999)
4.1 Rights Agreement, dated as of December 31, 1993, between ProLogis and
State Street Bank and Trust Company, as Rights Agent, including form
of Rights Certificate (Incorporated by reference to exhibit 4.4 to
ProLogis' registration statement No. 33-78080)
4.2 First Amendment to Rights Amendment, dated as of February 15, 1995,
between ProLogis, State Street Bank and Trust Company and The First
National Bank of Boston, as successor Rights Agent (Incorporated by
reference to exhibit 3.1 to ProLogis' Form 10-Q for the quarter ended
September 30, 1995)
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
Exhibit Description
------- -----------
<C> <S>
4.3 Second Amendment to Rights Agreement, dated as of June 22, 1995,
between ProLogis State Street Bank and Trust Company and The First
National Bank of Boston (Incorporated by reference to Exhibit 3.1 to
ProLogis' Form 10-Q for the quarter ended September 30, 1995)
4.4 Form of share certificate for Common Shares of Beneficial Interest of
ProLogis (Incorporated by reference to exhibit 4.4 to ProLogis'
registration statement No. 33-73382)
4.5 Form of share certificate for Series A Cumulative Redeemable Preferred
Shares of Beneficial Interest of ProLogis (Incorporated by reference
to exhibit 4.7 to ProLogis' Form 8-A registration statement relating
to such shares)
4.6 8.72% Note due March 1, 2009 (Incorporated by reference to exhibit 4.7
to ProLogis' Form 10-K for the year ended December 31, 1994)
4.7 Form of share certificate for Series B Cumulative Convertible
Redeemable Preferred Shares of Beneficial Interest of ProLogis
(Incorporated by reference to exhibit 4.8 to ProLogis' Form 8-A
registration statement relating to such shares)
4.8 Form of share certificate for Series C Cumulative Redeemable Preferred
Shares of Beneficial Interest of ProLogis (Incorporated by reference
to exhibit 4.8 to ProLogis' Form 10-K for the year ended December 31,
1996)
4.9 Form of share certificate for Series D Cumulative Redeemable Preferred
Shares of Beneficial Interest of ProLogis (Incorporated by reference
to exhibit 4.21 to ProLogis' registration statement No. 69001)
4.10 Form of share certificate for Series E Cumulative Redeemable Preferred
Shares of Beneficial Interest of ProLogis (Incorporated by reference
to exhibit 4.22 to ProLogis' registration statement No. 69001)
4.11 9.34% Note due March 1, 2015 (Incorporated by reference to exhibit 4.8
to ProLogis' Form 10-K for the year ended December 31, 1994)
4.12 7.875% Note due May 15, 2009 (Incorporated by reference to exhibit 4.4
to ProLogis' Form 8-K dated May 9, 1995)
4.13 7.30% Note due May 15, 2001 (Incorporated by reference to exhibit 4.3
to ProLogis' Form 8-K dated May 9, 1995)
4.14 7.25% Note due May 15, 2000 (Incorporated by reference to exhibit 4.2
to ProLogis' Form 8-K dated May 9, 1995)
4.15 7.125% Note due May 15, 1998 (Incorporated by reference to exhibit 4.1
to ProLogis' Form 8-K dated May 9, 1995)
4.16 7.25% Note due May 15, 2002 (Incorporated by reference to exhibit 4.1
to ProLogis' Form 10-Q for the quarter ended June 30, 1996)
4.17 7.95% Note due May 15, 2008 (Incorporated by reference to exhibit 4.2
to ProLogis' Form 10-Q for the quarter ended June 30, 1996)
4.18 8.65% Note due May 15, 2016 (Incorporated by reference to exhibit 4.3
to ProLogis' Form 10-Q for the quarter ended June 30, 1996)
4.19 7.81% Medium-Term Notes, Series A, due February 1, 2015 (Incorporated
by reference to exhibit 4.17 to ProLogis' Form 10-K for the year ended
December 31, 1996)
4.20 Indenture, dated as of March 1, 1995, between ProLogis and State
Street Bank and Trust Company, as Trustee (Incorporated by reference
to exhibit 4.9 to ProLogis' Form 10-K for the year ended December 31,
1994)
</TABLE>
II-7
<PAGE>
<TABLE>
<CAPTION>
Exhibit Description
------- -----------
<C> <S>
4.21 Collateral Trust Indenture, dated as of July 22, 1993, between
Krauss/Schwartz Properties, Ltd. and NationsBank of Virginia, N.A., as
Trustee (Incorporated by reference to exhibit 4.10 to ProLogis' Form
10-K for the year ended December 31, 1994)
4.22 First Supplemental Collateral Trust Indenture, dated as of October 28,
1994, among ProLogis Limited Partnership-IV, Krauss/Schwartz
Properties, Ltd., and NationsBank of Virginia, N.A., as Trustee
(Incorporated by reference to exhibit 10.6 to ProLogis' Form 10-Q for
the quarter ended September 30, 1994)
5.1 Opinion of Mayer, Brown & Platt as to the validity of the shares being
offered
8.1 Opinion of Mayer, Brown & Platt as to certain tax matters
15 Letter regarding unaudited interim financial information
23.1 Consent of Arthur Andersen LLP, Chicago, Illinois
23.2 Consent of KPMG LLP, Stockholm, Sweden
23.3 Consent of Mayer, Brown & Platt (included in Exhibits 5.1 and 8.1)
24.1 Power of Attorney (included at page II-4)
25 Statement of Eligibility of Trustee on Form T-1
</TABLE>
II-8
<PAGE>
Exhibit 5.1
June 2, 1999
The Board of Trustees
ProLogis Trust
14100 East 35th Place
Aurora, Colorado 80011
Re: ProLogis Trust Registration Statement on Form S-3
-------------------------------------------------
Ladies and Gentlemen:
We have acted as special counsel to ProLogis Trust, a Maryland real estate
investment trust ("ProLogis"), in connection with the proposed sale of the
following securities (the "Securities") of ProLogis, as set forth in the Form S-
3 Registration Statement filed with the Securities and Exchange Commission on
the date hereof (the "Registration Statement"): (i) one or more series of
unsecured senior debt securities (the "Debt Securities"), (ii) one or more
series of preferred shares of beneficial interest, par value $0.01 per share
(the "Preferred Shares"), and (iii) common shares of beneficial interest, par
value $0.01 per share (the "Common Shares").
Each series of the Debt Securities will be issued under an Indenture dated
as of March 1, 1995 (the "Indenture"), between ProLogis and State Street Bank
and Trust Company, as Trustee. Each series of the Preferred Shares will be
issued under ProLogis' Amended and Restated Declaration of Trust, as amended and
supplemented (the "Charter"), and Articles Supplementary to be filed with the
Maryland State Department of Assessments and Taxation (the "Maryland SDAT"). The
Common Shares will be issued under the Charter. Certain terms of the Securities
to be issued by ProLogis from time to time will be approved by the Board of
Trustees of ProLogis or a committee thereof as part of the trust action taken
and to be taken in connection with the authorization of the issuance of the
Securities (the "Trust Proceedings").
As special counsel to ProLogis, we have examined originals or copies
certified or otherwise identified to our satisfaction of the Charter, ProLogis'
Bylaws, resolutions of ProLogis' Board of Trustees and such ProLogis records,
certificates and other documents and such questions of law as we considered
necessary or appropriate for the purpose of this opinion. As to certain facts
material to our opinion, we have relied, to the extent we deem such reliance
[LETTERHEAD]
<PAGE>
ProLogis Trust
June 2, 1999
Page 2
proper, upon certificates of public officials and officers of ProLogis. In
rendering this opinion, we have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals and the conformity to
authentic original documents of all documents submitted to us as copies.
Based upon and subject to the foregoing and to the assumptions, conditions
and limitations set forth herein, we are of the opinion that:
(1) upon the completion of the Trust Proceedings relating to a series of the
Debt Securities and the due execution, authentication, issuance and
delivery of the Debt Securities of such series, the Debt Securities of such
series, when sold in exchange for the consideration set forth in the
Prospectus contained in the Registration Statement and any Prospectus
Supplement relating to such series of the Debt Securities, will be duly
authorized and will be binding obligations of ProLogis enforceable in
accordance with their terms and entitled to the benefits of the Indenture,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally and
subject to general principles of equity;
(2) upon the completion of the Trust Proceedings relating to a series of the
Preferred Shares, the execution, delivery and filing with, and recording
by, the Maryland SDAT of Articles Supplementary relating to such series of
the Preferred Shares, and the due execution, countersignature and delivery
of the Preferred Shares of such series, the Preferred Shares of such
series, when sold in exchange for the consideration set forth in the
Prospectus and any Prospectus Supplement relating to such series of the
Preferred Shares, will be duly authorized, legally issued, fully paid and,
except as described in the Prospectus, nonassessable; and
(3) upon the completion of the Trust Proceedings relating to the Common Shares
and the due execution, countersignature and delivery of the Common Shares,
the Common Shares, when sold in exchange for the consideration set forth in
the Prospectus and any Prospectus Supplement relating to the Common Shares,
will be duly authorized, legally issued, fully paid and, except as
described in the Prospectus, nonassessable.
<PAGE>
ProLogis Trust
June 2, 1999
Page 3
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to all references to our firm in the Registration
Statement.
Very truly yours,
/s/ MAYER, BROWN & PLATT
<PAGE>
Exhibit 8.1
June 2, 1999
ProLogis Trust
14100 East 35th Place
Aurora, Colorado 80011
Re: Partnership Classification; Status as a Real Estate Investment Trust
("REIT"); Information in the Registration Statement under "FEDERAL
INCOME TAX CONSIDERATIONS"
--------------------------------------------------------------------
Gentlemen:
In connection with the filing of a Registration Statement with the
Securities and Exchange Commission on the date hereof (the "Registration
Statement"), by ProLogis Trust, a Maryland real estate investment trust (the
"Company"), you have requested our opinions concerning (i) the treatment of
ProLogis Limited Partnership-I, ProLogis Limited Partnership-II, ProLogis
Limited Partnership-III, and ProLogis Limited Partnership-IV (collectively, the
"Partnerships") as partnerships for Federal income tax purposes, and not as
associations taxable as corporations; (ii) the qualification and taxation of the
Company as a REIT; and (iii) the information in the Registration Statement under
the heading "FEDERAL INCOME TAX CONSIDERATIONS."
In formulating our opinions, we have reviewed and relied upon the
partnership agreements of the Partnerships, the Registration Statement, such
other documents and information provided by you, and such applicable provisions
of law as we have considered necessary or desirable for purposes of the opinions
expressed herein.
In addition, we have relied upon certain representations made by the
Company relating to the organization and actual and proposed operation of the
Company and the Partnerships. For purposes of our opinions, we have not made an
independent investigation of the facts set forth in such documents,
representations from the Company, the partnership agreements for the
Partnerships or the Registration Statement. We have, consequently, relied upon
your representations that the information presented in such documents or
otherwise furnished to us accurately and completely describes all material
facts. We have also relied upon the opinion of Vinson & Elkins L.L.P., dated
March 30, 1999, with respect to the qualification as a real estate investment
trust of Meridian Industrial Trust, Inc., a Maryland corporation, for its
taxable years ending December 31,
[Letterhead]
<PAGE>
ProLogis Trust
June 2, 1999
Page 2
1995, 1996, 1997, 1998 and its taxable year ending March 30, 1999.
In rendering these opinions, we have assumed that the transactions
contemplated by the foregoing documents will be consummated in accordance with
the operative documents, and that such documents accurately reflect the material
facts of such transactions. In addition, the opinions are based on the
correctness of the following specific assumptions: (i) the Company and the
Partnerships have operated and will continue to each be operated in the manner
described in the applicable partnership agreement or other organizational
documents and in the Registration Statement, and all terms and provisions of
such agreements and documents have been and will continue to be complied with by
all parties thereto; and (ii) each partner in the Partnerships has been
motivated in acquiring its partnership interest by its anticipation of economic
rewards apart from tax considerations. Our opinions expressed herein are based
on the applicable laws of the States of Maryland and Delaware, the Code, the
Treasury regulations promulgated thereunder, and the interpretations of the Code
and such regulations by the courts and the Internal Revenue Service, all as they
are in effect and exist at the date of this letter. It should be noted that
statutes, regulations, judicial decisions, and administrative interpretations
are subject to change at any time and, in some circumstances, with retroactive
effect. A material change that is made after the date hereof in any of the
foregoing bases for our opinions, could adversely affect our conclusions.
Based upon and subject to the foregoing, it is our opinion that:
1. The Partnerships will be treated, for Federal income tax purposes, as
partnerships, and not as associations taxable as corporations.
2. Beginning with the Company's taxable year ending December 31, 1993, the
Company has been organized in conformity with the requirements for qualification
as a REIT under the Code, and the Company's actual and proposed method of
operation, as described in the Registration Statement and as represented by the
Company, has enabled it and will continue to enable it to satisfy the
requirements for qualification as a REIT.
3. The information in the Registration Statement under the headings
"FEDERAL INCOME TAX CONSIDERATIONS," to the extent that it constitutes matters
of law or legal conclusions, has been reviewed by us and is correct in all
material respects.
<PAGE>
ProLogis Trust
June 2, 1999
Page 3
Other than as expressly stated above, we express no opinion on any issue
relating to the Company and the Partnerships or to any investment therein.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of the name of our firm therein and under
the caption "FEDERAL INCOME TAX CONSIDERATIONS" in the Registration Statement.
Very truly yours,
/s/ MAYER, BROWN & PLATT
<PAGE>
EXHIBIT 15
May 28, 1999
Board of Trustees and Shareholders of
ProLogis Trust:
We are aware that ProLogis Trust has incorporated by reference in this
registration statement its Form 10-Q for the quarter ended March 31, 1999, which
includes our report dated May 13, 1999, covering the unaudited interim financial
information contained therein. Pursuant to Regulation C of the Securities Act of
1993 (the "Act"), that report is not considered a part of the registration
statements prepared or certified by our firm or a report prepared or certified
by our firm within the meaning of Sections 7 and 11 of the Act.
Very truly yours,
/s/ Arthur Andersen LLP
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this registration statement of our reports dated March 5, 1999,
included in ProLogis Trust's Form 10-K for the year ended December 31, 1998, and
to our report dated March 26, 1999, included in ProLogis Trust's Form 8-K dated
April 13, 1999, and to all references to our Firm included in this registration
statement.
/s/ Arthur Andersen LLP
Chicago, Illinois
May 28, 1999
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants of Frigoscandia Holding AB, we hereby
consent to the incorporation of our report dated January 28, 1999 included in
the ProLogis Trust's Form 10-K for the year ended December 31, 1998 into the
ProLogis Trust registration statement on Form S-3. It should be noted that we
have not audited any financial statements of the company subsequent to
December 31, 1998 or performed any audit procedures subsequent to the date of
our report.
/s/ KPMG LLP
Stockholm, June 2, 1999
<PAGE>
EXHIBIT 25
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM T-1
______
STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
Check if an Application to Determine Eligibility
of a Trustee Pursuant to Section 305(b)(2)
STATE STREET BANK AND TRUST COMPANY
(Exact name of trustee as specified in its charter)
Massachusetts 04-1867445
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national bank) Identification No.)
225 Franklin Street, Boston, Massachusetts 02110
(Address of principal executive offices) (Zip Code)
Maureen Scannell Bateman, Esq. Executive Vice President and General Counsel
225 Franklin Street, Boston, Massachusetts 02110
(617) 654-3253
(Name, address and telephone number of agent for service)
PROLOGIS TRUST
(Exact name of obligor as specified in its charter)
MARYLAND 74-2604728
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
14100 EAST 35TH PLACE,
AURORA, COLORADO 80011
(Address of principal executive offices) (Zip Code)
DEBT SECURITIES
(Title of indenture securities)
<PAGE>
GENERAL
Item 1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervisory authority to which
it is subject.
Department of Banking and Insurance of The Commonwealth of
Massachusetts, 100 Cambridge Street, Boston, Massachusetts.
Board of Governors of the Federal Reserve System, Washington, D.C.,
Federal Deposit Insurance Corporation, Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
Trustee is authorized to exercise corporate trust powers.
Item 2. Affiliations with Obligor.
If the Obligor is an affiliate of the trustee, describe each such
affiliation.
The obligor is not an affiliate of the trustee or of its parent, State
Street Corporation.
(See note on page 2.)
Item 3. through Item 15. Not applicable.
Item 16. List of Exhibits.
List below all exhibits filed as part of this statement of eligibility.
1. A copy of the articles of association of the trustee as now in effect.
A copy of the Articles of Association of the trustee, as now in
effect, is on file with the Securities and Exchange Commission as
Exhibit 1 to Amendment No. 1 to the Statement of Eligibility and
Qualification of Trustee (Form T-1) filed with the Registration
Statement of Morse Shoe, Inc. (File No. 22-17940) and is incorporated
herein by reference thereto.
2. A copy of the certificate of authority of the trustee to commence
business, if not contained in the articles of association.
A copy of a Statement from the Commissioner of Banks of Massachusetts
that no certificate of authority for the trustee to commence business
was necessary or issued is on file with the Securities and Exchange
Commission as Exhibit 2 to Amendment No. 1 to the Statement of
Eligibility and Qualification of Trustee (Form T-1) filed with the
Registration Statement of Morse Shoe, Inc. (File No. 22-17940) and is
incorporated herein by reference thereto.
3. A copy of the authorization of the trustee to exercise corporate trust
powers, if such authorization is not contained in the documents specified
in paragraph (1) or (2), above.
<PAGE>
A copy of the authorization of the trustee to exercise corporate trust
powers is on file with the Securities and Exchange Commission as
Exhibit 3 to Amendment No. 1 to the Statement of Eligibility and
Qualification of Trustee (Form T-1) filed with the Registration
Statement of Morse Shoe, Inc. (File No. 22-17940) and is incorporated
herein by reference thereto.
4. A copy of the existing by-laws of the trustee, or instruments
corresponding thereto.
A copy of the by-laws of the trustee, as now in effect, is on file
with the Securities and Exchange Commission as Exhibit 4 to the
Statement of Eligibility and Qualification of Trustee (Form T-1) filed
with the Registration Statement of Eastern Edison Company (File No.
33-37823) and is incorporated herein by reference thereto.
5. A copy of each indenture referred to in Item 4. if the obligor is in
default.
Not applicable.
6. The consents of United States institutional trustees required by
Section 321(b) of the Act.
The consent of the trustee required by Section 321(b) of the Act is
annexed hereto as Exhibit 6 and made a part hereof.
7. A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or examining
authority.
A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or examining
authority is annexed hereto as Exhibit 7 and made a part hereof.
NOTES
In answering any item of this Statement of Eligibility which relates to
matters peculiarly within the knowledge of the obligor or any underwriter for
the obligor, the trustee has relied upon information furnished to it by the
obligor and the underwriters, and the trustee disclaims responsibility for the
accuracy or completeness of such information.
The answer furnished to Item 2. of this statement will be amended, if
necessary, to reflect any facts which differ from those stated and which would
have been required to be stated if known at the date hereof.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, State Street Bank and Trust Company, a corporation
organized and existing under the laws of The Commonwealth of Massachusetts, has
duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of Boston and The
Commonwealth of Massachusetts, on the June 1, 1999.
STATE STREET BANK AND TRUST COMPANY
By: /s/ Carolina D. Altomare
---------------------------------
NAME Carolina D. Altomare
TITLE Assistant Vice President
<PAGE>
EXHIBIT 6
CONSENT OF THE TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act
of 1939, as amended, in connection with the proposed issuance by ProLogis Trust
of its Debt Securities, we hereby consent that reports of examination by
Federal, State, Territorial or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon request therefor.
STATE STREET BANK AND TRUST COMPANY
By: /s/ Carolina D. Altomare
------------------------------------
NAME Carolina D. Altomare
TITLE Assistant Vice President
Dated: June 1, 1999
<PAGE>
EXHIBIT 7
Consolidated Report of Condition of State Street Bank and Trust Company,
Massachusetts and foreign and domestic subsidiaries, a state banking institution
organized and operating under the banking laws of this commonwealth and a member
of the Federal Reserve System, at the close of business March 31, 1999,
published in accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act and in accordance
with a call made by the Commissioner of Banks under General Laws, Chapter 172,
Section 22(a).
<TABLE>
<CAPTION>
Thousands of
ASSETS Dollars
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin....................... 1,249,670
Interest-bearing balances................................................ 13,236,699
Securities.................................................................... 10,970,415
Federal funds sold and securities purchased
under agreements to resell in domestic offices
of the bank and its Edge subsidiary...................................... 9,561,556
Loans and lease financing receivables:
Loans and leases, net of unearned income......... 7,053,580
Allowance for loan and lease losses.............. 85,416
Allocated transfer risk reserve.................. 0
Loans and leases, net of unearned income and allowances.................. 6,968,164
Assets held in trading accounts............................................... 1,553,354
Premises and fixed assets..................................................... 536,535
Other real estate owned....................................................... 0
Investments in unconsolidated subsidiaries.................................... 606
Customers' liability to this bank on acceptances outstanding.................. 71,273
Intangible assets............................................................. 207,323
Other assets.................................................................. 1,371,043
----------
Total assets.................................................................. 45,726,638
==========
LIABILITIES
Deposits:
In domestic offices...................................................... 10,101,297
Noninterest-bearing............................ 6,932,549
Interest-bearing............................... 3,168,748
In foreign offices and Edge subsidiary................................... 18,061,721
Noninterest-bearing............................ 54,654
Interest-bearing............................... 18,007,067
Federal funds purchased and securities sold under
agreements to repurchase in domestic offices of
the bank and of its Edge subsidiary...................................... 12,063,069
Demand notes issued to the U.S. Treasury and Trading Liabilities.............. 149,322
Trading Liabilities.................................................... 1,140,080
Other borrowed money.......................................................... 285,027
Subordinated notes and debentures............................................. 0
Bank's liability on acceptances executed and outstanding...................... 71,273
Other liabilities............................................................. 1,079,470
Total liabilities............................................................. 49,951,259
----------
EQUITY CAPITAL
Perpetual preferred stock and related surplus................................. 0
Common stock.................................................................. 29,931
Surplus....................................................................... 480,330
Undivided profits and capital reserves/Net unrealized holding gains (losses).. 2,258,177
Realized holding gains (losses) on available-for-sale securities.............. 15,937
Cumulative foreign currency translation adjustments........................... (8,996)
Total equity capital.......................................................... 2,775,379
----------
Total liabilities and equity capital.......................................... 45,726,638
==========
</TABLE>
<PAGE>
I, Rex S. Schuette, Senior Vice President and Comptroller of the above named
bank do hereby declare that this Report of Condition has been prepared in
conformance with the instructions issued by the Board of Governors of the
Federal Reserve System and is true to the best of my knowledge and belief.
Rex S. Schuette
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
David A. Spina
Marshall N. Carter
Truman S. Casner
