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As filed with the Securities and Exchange Commission on December 17, 1999.
Registration No. 333-_______
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
CAMDEN PROPERTY TRUST
(Exact name of registrant as specified in its charter)
TEXAS 76-6088377
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification No.)
organization)
THREE GREENWAY PLAZA, SUITE 1300
HOUSTON, TEXAS 77046
(713) 354-2500
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
----------------
RICHARD J. CAMPO
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
CAMDEN PROPERTY TRUST
THREE GREENWAY PLAZA, SUITE 1300
HOUSTON, TEXAS 77046
(713) 354-2500
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
----------------
Copies to:
BRYAN L. GOOLSBY
LOCKE LIDDELL & SAPP LLP
2200 ROSS AVENUE, SUITE 2200
DALLAS, TEXAS 75201
(214) 740-8000
FAX: (214) 740-8800
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From
time to time after the effective date of this Registration Statement as
determined by market conditions.
If the only securities being registered on this form are being offered
pursuant to divided or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
===================================================================================================================
Title of Each Class
of Proposed Maximum
Securities to be Amount to be Proposed Maximum Offering Aggregate Offering Amount of
Registered(1) Registered(2) Price Per Unit(3) Price(2)(3) Registration Fee
- -------------------- ------------- ------------------------- ------------------ ----------------
<S> <C> <C> <C> <C>
Debt Securities(4)
Preferred Shares(5) $660,230,000 (8) $660,230,000 $174,301 (9)
Common Shares(6)
Securities
Warrants(7)
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(Footnotes from previous page)
(1) This Registration Statement also covers delayed delivery contracts that
may be issued by the Registrant under which the party purchasing such
contracts may be required to purchase Debt Securities, Preferred
Shares, Common Shares or Securities Warrants. Such contracts may be
issued together with the specific Securities to which they relate. In
addition, Securities registered hereunder either may be sold separately
or as units comprised of more than one type of Security registered
hereunder.
(2) In U.S. Dollars or the equivalent thereof denominated in one or more
foreign currencies or units of two or more foreign currencies or
composite currencies.
(3) Estimated solely for the purpose of calculating the registration fee.
This Registration Statement is intended to register both the issuance
of Common Shares and Preferred Shares issued for sale directly by the
Company, as well as the issuance of such Common Shares and Preferred
Shares upon the conversion of the Debt Securities or the Preferred
Shares, as appropriate, or upon exercise of Securities Warrants. No
separate consideration will be received for Common Shares or Preferred
Shares that are issued upon conversion of Debt Securities or Preferred
Shares registered hereunder as the case may be. The aggregate maximum
offering price of all Securities issued pursuant to this Registration
Statement will not exceed $660,230,000.
(4) Such indeterminate principal amount of Debt Securities as may from time
to time be issued at indeterminate prices.
(5) Such indeterminate number of Preferred Shares as may from time to time
be issued at indeterminate prices or issuable upon conversion of Debt
Securities or exercise of Securities Warrants.
(6) Such indeterminate number of Common Shares as may from time to time be
issued at indeterminate prices or issuable upon conversion of Debt
Securities or Preferred Shares registered hereunder, as the case may
be, or exercise of Securities Warrants.
(7) Such indeterminate number of Debt Securities Warrants, Preferred Shares
Warrants and Common Shares Warrants representing rights to purchase
Debt Securities, Preferred Shares and Common Shares, respectively,
registered pursuant to this Registration Statement, as may from time to
time be issued at indeterminate prices.
(8) Omitted pursuant to General Instruction II.D of Form S-3 under the
Securities Act of 1933, as amended.
(9) Calculated pursuant to Rule 457(o) under the Securities Act of 1933,
as amended.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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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 IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES
IN ANY STATE WHERE THE OFFER OF SALES IS NOT LEGAL.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED DECEMBER 17, 1999.
PROSPECTUS
CAMDEN PROPERTY TRUST
By this prospectus, we may offer up to $660,230,000 of our:
DEBT SECURITIES
PREFERRED SHARES
COMMON SHARES
WARRANTS
These securities have not been approved or disapproved by the SEC or any state
securities commission.
None of those authorities has determined that this prospectus is accurate or
complete.
Any representation to the contrary is a criminal offense.
We will provide the specific terms of these securities in supplements to this
prospectus. You should read this prospectus and the supplements carefully before
you invest.
YOU SHOULD CAREFULLY CONSIDER THE RISKS SET FORTH UNDER "RISK FACTORS" STARTING
ON PAGE 1 OF THIS PROSPECTUS.
We may offer the securities directly or through underwriters, agents or dealers.
The supplement will describe the terms of that plan of distribution. "Plan of
Distribution" below also provides more information on this topic.
The date of this prospectus is __________, 1999
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TABLE OF CONTENTS
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PAGE
<S> <C>
RISK FACTORS.......................................................................................................1
WHERE YOU CAN FIND MORE INFORMATION................................................................................4
THE COMPANY........................................................................................................5
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS.........................................................5
USE OF PROCEEDS....................................................................................................6
DESCRIPTION OF CAPITAL SHARES......................................................................................6
DESCRIPTION OF WARRANTS............................................................................................7
DESCRIPTION OF DEBT SECURITIES.....................................................................................8
PLAN OF DISTRIBUTION..............................................................................................12
RATIO OF EARNINGS TO FIXED CHARGES................................................................................13
FEDERAL INCOME TAX CONSIDERATIONS AND CONSEQUENCES OF YOUR INVESTMENT.............................................14
LEGAL MATTERS.....................................................................................................26
EXPERTS...........................................................................................................26
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RISK FACTORS
The following sets forth the most significant factors that make an
investment in our securities speculative or risky. You should carefully consider
the following information in conjunction with the other information contained or
incorporated by reference in this prospectus or any prospectus supplement before
making a decision to invest in our securities.
RISING INTEREST RATES WOULD INCREASE OUR COSTS AND COULD AFFECT THE MARKET PRICE
OF OUR SECURITIES
We have incurred and expect to continue to incur debt in the future. Some of
this debt has variable or floating interest rates. Accordingly, if interest
rates increase, our interest costs will also increase. In addition, an increase
in market interest rates may lead purchasers of our securities to demand a
higher annual yield, which could adversely affect the market price of our
outstanding equity or debt securities.
FAILURE TO GENERATE SUFFICIENT CASH FLOWS COULD LIMIT OUR ABILITY TO MAKE
REQUIRED PAYMENTS FOR DEBT SERVICE AND PAY DISTRIBUTIONS TO SHAREHOLDERS
The following factors, among others, may adversely affect the cash flows
generated by our properties:
o the national and local economic climates;
o local real estate market conditions, such as an oversupply of apartment
homes;
o the perceptions by prospective residents of the safety, convenience and
attractiveness of our properties and the neighborhoods in which they are
located;
o the need to periodically repair, renovate and relet space; and
o our ability to pay for adequate maintenance and insurance and increased
operating costs, including real estate taxes.
Some significant expenditures associated with each property, such as mortgage
payments, if any, real estate taxes and maintenance costs, are generally not
reduced when cash flows from operations from the property decreases.
UNFAVORABLE CHANGES IN MARKET AND ECONOMIC CONDITIONS COULD HURT OCCUPANCY OR
RENTAL RATES
The market and economic conditions in the southeastern, southwestern, midwestern
and western regions of the United States may significantly affect apartment home
occupancy or rental rates. Occupancy and rental rates in those markets, in turn,
may significantly affect our profitability and our ability to satisfy our
financial obligations and make distributions to shareholders. The risks that may
affect conditions in these markets include the following:
o the economic climate, which may be adversely impacted by plant closings,
industry slowdowns and other factors;
o local conditions, such as oversupply of apartments or a reduction in demand
for apartments in an area;
o a future economic downturn that simultaneously affects more than one of our
geographical markets;
o the inability or unwillingness of residents to pay their current rent or
rent increases;
o the potential effect of rent control or rent stabilization laws, or other
laws regulating housing, that could prevent us from raising rents; and
o competition from other available apartments and changes in market rental
rates.
DIFFICULTIES OF SELLING REAL ESTATE COULD LIMIT OUR FLEXIBILITY
Real estate investments can be hard to sell, especially if market conditions are
poor. This may limit our ability to vary our portfolio promptly in response to
changes in economic or other conditions. In addition, the Internal Revenue Code
limits our ability to sell properties that we have held for fewer than four
years, which may affect our ability to sell properties without adversely
affecting our return.
FAILURE TO IMPLEMENT OUR PROPERTY DEVELOPMENT STRATEGY COULD IMPACT OUR
PROFITABILITY
We intend to continue to develop and construct multifamily apartment
communities. Our
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development and construction activities may be exposed to a number of risks that
may increase our construction costs. This could adversely impact our
profitability and our ability to satisfy our financial obligations and make
distributions to shareholders. These risks include the following:
o we may be unable to obtain, or may face delays in obtaining, necessary
zoning, land-use, building, occupancy and other required permits and
authorizations, which could result in increased costs;
o we may incur construction costs for a property that exceed our original
estimates due to increased materials, labor or other costs, which could
make completion of the property uneconomical, and we may not be able to
increase rents to compensate for the increase in construction costs;
o occupancy rates and rents at a newly completed community may fluctuate
depending on a number of factors, including market and economic conditions,
and may result in the community not being profitable;
o we may not be able to obtain financing with favorable terms for the
development of a community, which may make us unable to proceed with its
development;
o we may not be able to complete construction and lease-up of a community on
schedule, which could result in increased costs; and
o construction costs have been increasing in many of our markets, and may
continue to increase in the future.
FAILURE TO IMPLEMENT OUR PROPERTY ACQUISITION STRATEGY COULD IMPACT OUR
PROFITABILITY
In the normal course of our business, we continually evaluate a number of
potential acquisitions and may acquire additional operating properties. Our
inability to successfully implement our acquisition strategy could result in our
market penetration decreasing, which could adversely affect our profitability
and our ability to satisfy our financial obligations and make distributions to
shareholders. Our acquisition activities and their success may be exposed to a
number of risks, including the following:
o we may not be able to identify properties to acquire or effect the
acquisition;
o we may not be able to successfully integrate acquired properties and
operations;
o our estimate of the costs of repositioning or redeveloping the acquired
property may prove inaccurate; and
o the acquired property may fail to perform as we expected in analyzing our
investment.
INSUFFICIENT CASH FLOW COULD AFFECT OUR DEBT FINANCING AND CREATE REFINANCING
RISK
As of September 30, 1999, we had outstanding mortgage indebtedness of
approximately $346.0 million and senior unsecured debt of approximately $739.5
million, of which approximately $143.9 million was floating rate debt. This
indebtedness could have important consequences. For example:
o if a property is mortgaged to secure payment of indebtedness, and if we are
unable to meet our mortgage payments, we could sustain a loss as a result
of foreclosure on the mortgage;
o if funds from operations are less than the required principal and interest
payments on our existing indebtedness, which in all cases will not have
been fully amortized at maturity, we might not be able to refinance the
debt or the terms of such refinancing might not be as favorable as the
terms of our existing indebtedness;
o our vulnerability to general adverse economic and industry conditions could
be increased; and
o our flexibility in planning for, or reacting to, changes in our business
and industry could be limited.
ISSUANCES OF ADDITIONAL DEBT OR EQUITY MAY ADVERSELY IMPACT OUR FINANCIAL
CONDITION
Our capital requirements depend on numerous factors, including the occupancy
rates of our apartment properties, dividend payment rates to our shareholders,
development and capital expenditures, costs of operations and potential
acquisitions. We
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cannot accurately predict the timing and amount of our capital requirements. If
our capital requirements vary materially from our plans, we may require
additional financing sooner than anticipated. Accordingly, we could become more
leveraged, resulting in increased risk of default on our obligations and in an
increase in our debt service requirements, both of which could adversely affect
our financial condition and our ability to access debt and equity capital
markets in the future.
LOSSES FROM NATURAL CATASTROPHES MAY EXCEED OUR INSURANCE COVERAGE
We carry comprehensive liability, fire, flood, extended coverage and rental loss
insurance on our properties, which we believe is of the type and amount
customarily obtained on real property assets. We intend to obtain similar
coverage for properties we acquire in the future. However, some losses,
generally of a catastrophic nature, such as losses from floods or earthquakes,
may be subject to limitations. We exercise our discretion in determining
amounts, coverage limits and deductibility provisions of insurance, with a view
to maintaining appropriate insurance on our investments at a reasonable cost and
on suitable terms. If we suffer a substantial loss, our insurance coverage may
not be sufficient to pay the full current market value or current replacement
value of our lost investment. Inflation, changes in building codes and
ordinances, environmental considerations and other factors also might make it
infeasible to use insurance proceeds to replace a property after it has been
damaged or destroyed.
POTENTIAL LIABILITY FOR ENVIRONMENTAL CONTAMINATION COULD RESULT IN SUBSTANTIAL
COSTS
Under various federal, state and local laws, ordinances and regulations, we are
liable for the costs to investigate and remove or remediate hazardous or toxic
substances on or in our properties, often regardless of whether we knew of or
were responsible for the presence of these substances. These costs may be
substantial. Also, if hazardous or toxic substances are present on a property,
or if we fail to properly remediate such substances, our ability to sell or rent
the property or to borrow using that property as collateral may be adversely
affected.
COMPLIANCE OR FAILURE TO COMPLY WITH LAWS REQUIRING ACCESS TO OUR PROPERTIES BY
DISABLED PERSONS COULD RESULT IN SUBSTANTIAL COST
The Americans with Disabilities Act, the Fair Housing Act of 1988 and other
federal, state and local laws generally require that public accommodations be
made accessible to disabled persons. Noncompliance could result in the
imposition of fines by the government or the award of damages to private
litigants. These laws may require us to modify our existing properties. These
laws may also restrict renovations by requiring improved access to such
buildings by disabled persons or may require us to add other structural features
that increase our construction costs. Legislation or regulations adopted in the
future may impose further burdens or restrictions on us with respect to improved
access by disabled persons. We cannot ascertain the costs of compliance with
these laws, which may be substantial.
FAILURE TO QUALIFY AS A REIT WOULD CAUSE US TO BE TAXED AS A CORPORATION, WHICH
WOULD SIGNIFICANTLY LOWER FUNDS AVAILABLE FOR DISTRIBUTION TO SHAREHOLDERS
If we fail to qualify as a REIT for federal income tax purposes, we will be
taxed as a corporation for both current and past years. We cannot assure you
that the Internal Revenue Service will not challenge our qualification as a
REIT. We also cannot assure you that new legislation, regulations,
administrative interpretations or court decisions will not change the tax laws
with respect to qualification as a REIT or the federal tax consequences of such
qualification.
For any taxable year that we fail to qualify as a REIT, we would be subject to
federal income tax on our taxable income at corporate rates, plus any applicable
alternative minimum tax. In addition, unless entitled to relief under applicable
statutory provisions, we would be disqualified from treatment as a REIT for the
four taxable years following the year during which qualification is lost. This
treatment would reduce our net earnings available for investment or distribution
to shareholders because of the additional tax liability for the year or years
involved. In addition, distributions would no longer qualify for the dividends
paid deduction nor be required to be made. To the extent that distributions to
shareholders would have been made in anticipation of our qualifying as a REIT,
we might be required to borrow funds or to liquidate some of our investments to
pay the applicable tax.
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SHARE OWNERSHIP LIMITS AND OUR ABILITY TO ISSUE ADDITIONAL EQUITY SECURITIES MAY
PREVENT TAKEOVERS BENEFICIAL TO SHAREHOLDERS
For us to maintain our qualification as a REIT, not more than 50% in value of
our outstanding shares may be owned, directly or indirectly, by five or fewer
individuals. As defined for federal income tax purposes, the term "individuals"
includes a number of specified entities. To minimize the possibility that we
will fail to qualify as a REIT under this test, our declaration of trust
includes restrictions on transfers of our shares and ownership limits. The
ownership limits, as well as our ability to issue other classes of equity
securities, may delay, defer or prevent a change in control. These provisions
may also deter tender offers for our shares, which may be attractive to you, or
limit your opportunity to receive a premium for your shares that might otherwise
exist if a third party were attempting to effect a change in control
transaction.
INCREASED COMPETITION COULD LIMIT OUR ABILITY TO LEASE APARTMENTS OR INCREASE OR
MAINTAIN RENTS
Our apartment communities compete with numerous housing alternatives in
attracting residents, including other rental apartments and single-family homes
that are available for rent or sale. Competitive residential housing in a
particular area could adversely affect our ability to lease apartments and
increase or maintain rents.
UNEXPECTED YEAR 2000 PROBLEMS COULD ADVERSELY AFFECT OUR FINANCIAL CONDITION
Many of the world's computer systems currently record years in a two-digit
format. These computer systems will be unable to properly interpret dates beyond
the year 1999, which could lead to disruptions in our operations. This is
commonly referred to as the "Year 2000" issue. Unexpected problems associated
with the Year 2000 could arise during the implementation of our Year 2000
program, which could adversely affect our financial condition and results of
operations. Our financial condition and results of operations could also be
adversely affected if all of our systems are not Year 2000 compliant or other
companies on which we rely are not timely converted.
WHERE YOU CAN FIND MORE INFORMATION
We are a public company and file annual, quarterly and special reports, proxy
statements and other information with the SEC. You may read and copy any
document we file at the SEC's public reference room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. You can request copies of these documents by writing to
the SEC and paying a fee for the copying cost. Please call the SEC at
1-800-SEC-0330 for more information about the operation of the public reference
room. Our SEC filings are also available to the public at the SEC's web site at
http://www.sec.gov. In addition, you may read and copy our SEC filings at the
office of the New York Stock Exchange at 20 Broad Street, New York, New York
10005. Our website address is http://www.camdenprop.com.
This prospectus is only part of a registration statement on Form S-3 that we
have filed with the SEC under the Securities Act of 1933 and therefore omits
some of the information contained in the registration statement. We have also
filed exhibits and schedules to the registration statement that are excluded
from this prospectus, and you should refer to the applicable exhibit or schedule
for a complete description of any statement referring to any contract or other
document. You may inspect or obtain a copy of the registration statement,
including the exhibits and schedules, as described in the previous paragraph.
The SEC allows us to "incorporate by reference" the information we file with it,
which means that we can disclose important information to you by referring you
to those documents. The information incorporated by reference is considered to
be part of this prospectus and the information we file later with the SEC will
automatically update and supersede this information.
We incorporate by reference the documents listed below and any future filings
made with the SEC (File No. 1-12110) under Sections 13(a), 13(c), 14 or 15(d) of
the Securities Exchange Act of 1934 until this offering is completed:
o Annual Report on Form 10-K for the year ended December 31, 1998, as amended
by Amendment No. 1 thereto;
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o Quarterly Reports on Form 10-Q for the quarters ended March 31, 1999, June
30, 1999 and September 30, 1999;
o Current Reports on Form 8-K filed on March 10, 1999, April 16, 1999 and
April 20, 1999; and
o Current Report on Form 8-K/A filed on March 10, 1999.
You may request a copy of these filings at no cost by writing or telephoning G.
Steven Dawson, Senior Vice President-Finance and Chief Financial Officer, at the
following address and telephone number:
Camden Property Trust
Three Greenway Plaza
Suite 1300
Houston, Texas 77046
(713) 354-2500
You should rely only on the information incorporated by reference or provided in
this prospectus or in the supplement. We have not authorized anyone else to
provide you with different information. You should not assume that the
information in this prospectus or any supplement is accurate as of any date
other than the date on the front of those documents.
THE COMPANY
Camden Property Trust is a Houston-based real estate investment trust that owns,
develops, acquires, manages and disposes of multifamily apartment communities in
the Southwest, Southeast, Midwest and Western regions of the United States. At
September 30, 1999, we owned interests in, operated or were developing 159
multifamily properties containing 55,785 apartment homes located in nine states.
Eight of our multifamily properties containing 3,570 apartment homes were under
development at September 30, 1999. Two of our newly developed multifamily
properties containing 820 apartment homes were in lease up at September 30,
1999. We have several additional sites which we intend to develop into
multifamily apartment communities.
Our executive offices are located at Three Greenway Plaza, Suite 1300, Houston,
Texas 77046, and our telephone number is (713) 354-2500.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
We have made statements in this prospectus and any supplement that are
"forward-looking" in that they do not discuss historical fact, but instead note
future expectations, projections, intentions or other items relating to the
future. These forward-looking statements include those made in the documents
incorporated by reference in this prospectus.
Reliance should not be placed on these forward-looking statements because they
are subject to known and unknown risks, uncertainties and other factors that may
cause our actual results or performance to differ materially from those
contemplated by the forward-looking statements. Many of those factors are noted
in conjunction with the forward-looking statements in the text. Other important
factors that could cause actual results to differ include:
o the results of our efforts to implement our property development strategy;
o the effect of economic conditions;
o failure to qualify as a real estate investment trust;
o the costs of our capital;
o actions of our competitors and our ability to respond to those actions;
o changes in government regulations, tax rates and similar matters;
o environmental uncertainties and natural disasters;
o unexpected Year 2000 problems; and
o other risks detailed in our other SEC reports or filings.
These forward-looking statements represent our estimates and assumptions only as
of the date of this prospectus.
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USE OF PROCEEDS
We intend to use the net proceeds from the sale of the securities for general
corporate purposes. Those purposes include the repayment or refinancing of debt,
acquisitions in the ordinary course of business, working capital, investment in
financing transactions and capital expenditures.
We will describe in the supplement any proposed use of proceeds other than for
general corporate purposes.
DESCRIPTION OF CAPITAL SHARES
Our declaration of trust provides that we may issue up to 110,000,000 shares of
beneficial interest, consisting of 100,000,000 common shares and 10,000,000
preferred shares. At November 10, 1999, we had issued and outstanding 40,213,322
common shares and 4,165,000 series A cumulative convertible preferred shares.
COMMON SHARES
Holders of common shares are entitled to one vote per share. There is no
cumulative voting in the election of trust managers. The board may declare
dividends on common shares in its discretion if funds are legally available for
those purposes. On liquidation, common shareholders are entitled to receive pro
rata any of our remaining assets, after we satisfy or provide for the
satisfaction of all liabilities and obligations on our preferred shares, if any.
Common shareholders do not have preemptive rights to subscribe for or purchase
any of our capital shares or any other of our securities, except as may be
granted by the board.
PREFERRED SHARES
Under our declaration of trust, the board is authorized, without shareholder
approval, to issue preferred shares in one or more series, with the
designations, powers, preferences, rights, qualifications, limitations and
restrictions as the board determines. Thus, the board, without shareholder
approval, could authorize the issuance of preferred shares with voting,
conversion and other rights that could adversely affect the voting power and
other rights of common shareholders or that could make it more difficult for
another company to enter into a business combination with us.
SERIES A PREFERRED SHARES
No holder of series A preferred shares has any preemptive right to subscribe for
any securities. Unless converted into common shares or redeemed, our series A
preferred shares have a perpetual term, with no maturity.
Maturity; Redemption. Our series A preferred shares have no stated maturity, and
are not subject to any sinking fund or mandatory redemption. The shares are not
redeemable prior to April 30, 2001 after which date we may, at our option,
redeem the shares, in whole or in part, either for:
o $25.00 in cash, plus any accumulated, accrued and unpaid dividends; or
o the number of common shares equal to the per share liquidation preference
of the preferred shares to be redeemed without regard to any accumulated,
accrued and unpaid cash dividends to the date of redemption divided by
$32.4638. This divisor is subject to adjustment if we change our
capitalization.
Ranking; Liquidation Preference. Our series A preferred shares rank senior to
our common shares with respect to payment of dividends and amounts upon our
liquidation, dissolution or winding up. Upon any such event, the holders of
series A preferred shares will be entitled to receive a liquidation preference
of $25.00 per share plus an amount equal to all accumulated, accrued and unpaid
dividends.
Dividends. Holders of series A preferred shares are entitled to receive, when
and if declared by our board, cumulative cash dividends payable in an amount per
share equal to the greater of:
o $0.5625 per quarter, which is equivalent to $2.25 per year; or
o the cash dividend payable on a common share.
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Voting Rights. Holders of our series A preferred shares do not have any voting
rights, except if the dividends are in arrears for six or more quarterly
periods, in which case such holders may vote for the election of a total of two
additional trust managers.
Conversion. Holders of series A preferred shares may convert each of their
shares at any time up to the redemption date for such shares into 0.7701 of a
common share, subject to adjustment.
RESTRICTIONS ON OWNERSHIP
In order for us to qualify as a REIT under the Internal Revenue Code, not more
than 50% in value of our outstanding capital shares may be owned, directly or
indirectly, by five or fewer individuals or entities during the last half of a
taxable year. In addition, our capital shares must be beneficially owned by 100
or more persons during at least 335 days of a taxable year of 12 months, or
during a proportionate part of a shorter taxable year.
Because our board believes it is essential for us to continue to qualify as a
REIT, our declaration of trust provides that in general no holder may own, or be
deemed to own by virtue of the attribution provisions of the Internal Revenue
Code, more than 9.8% of our total outstanding capital shares. Any transfer of
shares will not be valid if it would:
o create a direct or indirect ownership of shares in excess of 9.8% of our
total outstanding capital shares;
o result in shares being owned by fewer than 100 persons;
o result in our being "closely held" within the meaning of Section 856(h) of
the Internal Revenue Code; or
o result in our disqualification as a REIT.
If any person owns or is deemed to own more than 9.8% of our total outstanding
capital shares, the shares that exceed this ownership limit will automatically
be deemed to be transferred to us. We will act as trustee of a trust for the
exclusive benefit of the transferees to whom these shares may ultimately be
transferred without violating the 9.8% ownership limit. While in trust, these
shares will not be entitled to participate in dividends or other distributions
and, except as required by law, will not be entitled to vote. We will have the
right, for a period of 90 days during the time any securities are held by us in
trust, to purchase all or any portion of these securities from the original
shareholder at the lesser of the price paid for the shares and the market price
of the shares on the date we exercise our option to purchase. All certificates
representing capital shares will bear a legend referring to the restrictions
described above.
These restrictions on ownership may have the effect of precluding acquisition of
control unless the board and shareholders determine that maintenance of REIT
status is no longer in our best interests.
SHAREHOLDER LIABILITY
Our declaration of trust provides that no shareholder will be personally or
individually liable in any manner whatsoever for any debt, act, omission or
obligation incurred by us or our board. A shareholder will be under no
obligation to us or to our creditors with respect to such shares, other than the
obligation to pay to us the full amount of the consideration for which such
shares were issued or to be issued. By statute, the State of Texas provides
limited liability for shareholders of a REIT organized under the Texas Real
Estate Investment Trust Act.
TRANSFER AGENT AND REGISTRAR
American Stock Transfer & Trust Company or its successor is the transfer agent
and registrar for our common and preferred shares.
DESCRIPTION OF WARRANTS
We may issue warrants for the purchase of debt securities, preferred shares or
common shares. We may issue warrants independently or together with debt
securities, preferred shares or common shares or attached to or separate from
the offered securities. We will issue each series of warrants under a separate
warrant agreement between us and a bank or trust company as warrant agent.
The warrant agent will act solely as our agent in connection with the warrants
and will not act for or on behalf of warrant holders. This summary of some
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of the provisions of the warrants is not complete. You should refer to the
provisions of the warrant agreement that will be filed with the SEC as part of
the offering of any warrants. To obtain a copy of this document, see "Where You
Can Find More Information" on page 4.
DESCRIPTION OF DEBT SECURITIES
The debt securities will be issued under an indenture between us and U.S. Trust
Company of Texas, N.A., as trustee.
The following summary of some of the provisions of the indenture is not
complete. You should look at the indenture that is filed as an exhibit to the
registration statement of which this prospectus is a part. To obtain a copy of
the indenture, see "Where You Can Find More Information" on page 4.
GENERAL
The debt securities will be direct, unsecured and unsubordinated obligations and
will rank equally with all other of our unsecured and unsubordinated
indebtedness. The indenture does not limit the amount of debt securities that we
can offer under it.
We may issue additional debt securities without your consent. We may issue debt
securities in one or more series. We are not required to issue all debt
securities of one series at the same time. Also, unless otherwise provided, we
may open a series without the consent of the holders of the debt securities of
this series, for issuances of additional debt securities of this series.
The supplement will address the following terms of the debt securities:
o their title;
o any limits on the principal amounts to be issued;
o the dates on which the principal is payable;
o the rates, which may be fixed or variable, at which they will bear
interest, or the method for determining rates;
o the dates from which the interest will accrue and be payable, or the method
of determining those dates, and any record dates for the payments due;
o any provisions for redemption, conversion or exchange, at our option or
otherwise, including the periods, prices and terms of redemption or
conversion;
o any sinking fund or similar provisions, whether mandatory or at the
holder's option, along with the periods, prices and terms of redemption,
purchase or repayment;
o the amount or percentage payable if we accelerate their maturity, if other
than the principal amount;
o any changes to the events of default or covenants set forth in the
indenture;
o the terms of subordination, if any;
o whether the series may be reopened; and
o any other terms consistent with the indenture.
We may authorize and determine the terms of a series of debt securities by
resolution of our board of trust managers or one of its committees or through a
supplemental indenture.
FORM OF DEBT SECURITIES
The debt securities will be issued in registered form. We will issue debt
securities only in denominations of $1,000 and integral multiples of that
amount.
Unless the supplement otherwise provides, we will issue debt securities as one
or more global securities. This means that we will not issue certificates to
each holder. We generally will issue global securities in the total principal
amount of the debt securities in a series. Debt securities in global form will
be deposited with or on behalf of a depositary. Debt securities in global form
may not be transferred except as a whole among the depositary, a nominee of or a
successor to the depositary and any nominee of that successor. Unless otherwise
identified in the supplement, the depositary will be The Depository Trust
Company ("DTC").
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We may determine not to use global securities for any series. In that event, we
will issue debt securities in certificated form.
The laws of some jurisdictions require that some purchasers of securities take
physical delivery of securities in certificated form. Those laws and some
conditions on transfer of global securities may impair the ability to transfer
interests in global securities.
OWNERSHIP OF GLOBAL SECURITIES
So long as the depositary or its nominee is the registered owner of a global
security, that entity will be the sole holder of the debt securities represented
by that instrument. Both we and the trustee are only required to treat the
depositary or its nominee as the legal owner of those securities for all
purposes under the indenture.
Unless otherwise specified in this prospectus or the supplement, no actual
purchaser of debt securities represented by a global security will be entitled
to receive physical delivery of certificated securities or will be considered
the holder of those securities for any purpose under the indenture. In addition,
no actual purchaser will be able to transfer or exchange global securities
unless otherwise specified in this prospectus or the supplement. As a result,
each actual purchaser must rely on the procedures of the depositary to exercise
any rights of a holder under the indenture. Also, if an actual purchaser is not
a participant in the depositary, the actual purchaser must rely on the
procedures of the participant through which it owns its interest in the global
security.
THE DEPOSITORY TRUST COMPANY
The following is based on information furnished by DTC and applies to the extent
that it is the depositary, unless otherwise provided in the supplement.
Registered Owner. The debt securities will be issued as fully registered
securities in the name of Cede & Co., which is DTC's partnership nominee. The
trustee will deposit the global security with the depositary. The deposit with
the depositary and its registration in the name of Cede & Co. will not change
the nature of the actual purchaser's ownership interest in the debt securities.
DTC's Organization. DTC is a limited purpose trust company organized under the
New York Banking Law, a "banking organization" within the meaning of that law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and a "clearing agency"
registered under the provisions of Section 17A of the Securities Exchange Act of
1934.
DTC is owned by a number of its direct participants and the New York Stock
Exchange, Inc., the American Stock Exchange, Inc. and the National Association
of Securities Dealers, Inc. Direct participants include securities brokers and
dealers, banks, trust companies, clearing corporations and some other
organizations who directly participate in DTC. Other entities may access DTC's
system by clearing transactions through or maintaining a custodial relationship
with direct participants. The rules applicable to DTC and its participants are
on file with the SEC.
DTC's Activities. DTC holds securities that its participants deposit with it.
DTC also facilitates the settlement among participants of securities
transactions, such as transfers and pledges, in deposited securities through
electronic computerized book-entry changes in participant's accounts. Doing so
eliminates the need for physical movement of securities certificates.
Participants' Records. Except as otherwise provided in this prospectus or a
supplement, purchases of debt securities must be made by or through a direct
participant, which will receive a credit for the securities on the depositary's
records. The purchaser's interest is in turn to be recorded on the participants'
records. Actual purchasers will not receive written confirmations from the
depositary of their purchase, but they generally receive confirmations along
with periodic statements of their holdings from the participants through which
they entered into the transaction.
Transfers of interest in the global securities will be made on the books of the
participants on behalf of the actual purchasers. Certificates representing the
interest of the actual purchasers in the securities will not be issued unless
the use of global securities is suspended.
The depositary has no knowledge of the actual purchasers of global securities.
The depositary's records only reflect the identity of the direct participants,
who are responsible for keeping account of their holdings on behalf of their
customers.
Notices Among the Depositary, Participants and Actual Owners. Notices and other
communications
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by the depositary, its participants and the actual purchasers will be governed
by arrangements among them, subject to any legal requirements in effect.
Voting Procedures. Neither DTC nor Cede & Co. will give consents for or vote the
global securities. The depositary generally mails an omnibus proxy to us just
after the applicable record date. That proxy assigns Cede & Co.'s voting rights
to the direct participants to whose accounts the securities are credited at that
time.
Payments. Principal and interest payments made by us will be delivered to the
depositary. DTC's practice is to credit direct participants' accounts on the
applicable payment date unless it has reason to believe that it will not receive
payment on that date. Payments by participants to actual purchasers will be
governed by standing instructions and customary practices, as is the case with
securities held for customers in bearer form or registered in "street name."
Those payments will be the responsibility of that participant, not the
depositary, the trustee or us, subject to any legal requirements in effect at
that time.
We are responsible for payment of principal, interest and premium, if any, to
the trustee, who is responsible to pay it to the depositary. The depositary is
responsible for disbursing those payments to direct participants. The
participants are responsible for disbursing payment to the actual purchasers.
TRANSFER OR EXCHANGE OF DEBT SECURITIES
You may transfer or exchange debt securities other than global securities
without service charge at the corporate trust office of the trustee. You may
also surrender debt securities other than global securities for conversion or
registration of transfer without service charge at the corporate trust office of
the trustee. You must execute a proper form of transfer and pay any taxes or
other governmental charges resulting from that action.
TRANSFER AGENT
If we designate a transfer agent in addition to the trustee in a supplement, we
may at any time rescind this designation or approve a change in the location
through which the transfer agent acts. We will, however, be required to maintain
a transfer agent in each place of payment for a series of debt securities. We
may at any time designate additional transfer agents for a series of debt
securities.
COVENANTS
The following is a summary of some of the covenants we have made in the
indenture.
Existence. Except in connection with permitted mergers, consolidations or sales
of assets, we agreed to do or cause to be done all things necessary to preserve
and keep our corporate existence, rights and franchises in full force and
effect. We are not, however, required to preserve any right or franchise if we
determine that its preservation is no longer desirable in the conduct of our
business and that the loss is not disadvantageous in any material respect to the
holders of debt securities.
Maintenance of Properties. We agreed to maintain and keep in good conditions all
of our properties. This does not, however, preclude us from disposing of our
properties in the ordinary course of business.
Insurance. We agreed to keep all of our insurable properties insured against
loss or damage in accordance with industry practices and with insurers of
recognized responsibility and of suitable financial stability.
Payment of Taxes and Other Claims. We agreed to pay or discharge before they
become delinquent all taxes and other governmental charges and all lawful claims
for labor, materials and supplies which, if unpaid, might by law become a lien
upon our property.
Provision of Financial Information. We agreed to timely file with the SEC all
required reports and documents.
EVENTS OF DEFAULT, NOTICE AND WAIVER
Events of default under the indenture for any series of debt securities are:
o failure for 30 days to pay interest on any debt securities of that series;
o failure to pay principal or premium, if any, of any debt securities of that
series;
o default or breach in the performance of any of our covenants contained in
the indenture, other than a covenant added to the indenture
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solely for the benefit of a series of debt securities other than that
series, which continues for 60 days after written notice as provided in the
indenture;
o default under any other of our debt instruments with an aggregate principal
amount outstanding of at least $10,000,000;
o entry by a court of competent jurisdiction of one or more judgments, orders
or decrees against us in an aggregate amount, excluding amounts covered by
insurance, over $10,000,000 and these judgments, orders or decrees remain
undischarged for a period of 30 consecutive days; or
o specified events of bankruptcy, insolvency or reorganization, or court
appointment of a receiver, liquidator or trustee.
If an event of default occurs and continues, the trustee and the holders of not
less than 25% of the series may declare the principal amount of all of the debt
securities of that series to be immediately due and payable.
The rights of holders of a series to commence an action for any remedy is
subject to a number of conditions, including the requirement that the holders of
25% of that series request that the trustee take action and offer a reasonable
indemnity to the trustee against its liabilities incurred in doing so. This
provision will not, however, prevent any holder from instituting suit for the
enforcement of payment.
Subject to provisions in the indenture relating to the trustee's 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 holder unless the
holder has offered to the trustee reasonable security or indemnity. However, the
trustee may refuse to follow any direction that is in conflict with any law or
the indenture, that may involve the trustee in personal liability or that may be
unduly prejudicial to holders.
MODIFICATION OF THE INDENTURE
We must obtain the consent of holders of at least a majority in principal amount
of all outstanding debt securities affected by a change to the indenture. The
consent of holders of at least a majority in principal amount of each series of
outstanding debt securities is required to waive compliance by us with some of
the covenants in the indenture. We must obtain the consent of each holder
affected by a change to extend the maturity; reduce the principal, redemption
premium or interest rate; change the place of payment, or the coin or currency,
for payment; limit the right to sue for payment; reduce the level of consents
needed to approve a change to the indenture; or modify any of the foregoing
provisions or any of the provisions relating to the waiver of some past defaults
or covenants, except to increase the required level of consents need to approve
a change to the indenture.
DEFEASANCE
We may defease the debt securities of a series, which means that we would
satisfy our duties under that series before maturity. We may do so by depositing
with the trustee, in trust for the benefit of the holders, sufficient funds to
pay the entire indebtedness on that series, including principal, premium, if
any, and interest. Some other conditions must be met before we may do so. We
must also deliver an opinion of counsel to the effect that the holders of that
series will have no federal income tax consequences as a result of that deposit.
CONVERSION
Debt securities may be convertible into or exchangeable for common shares,
preferred shares or debt securities of another series. The supplement will
describe the terms of any conversion rights. To protect our status as a REIT,
debt securities are not convertible if, as a result of a conversion, any person
would then be deemed to own, directly or indirectly, more than 9.8% of our
capital shares.
SUBORDINATION
The terms and conditions of any subordination of subordinated debt securities to
other of our indebtedness will be described in the supplement. The terms will
include a description of the indebtedness ranking senior to the subordinated
debt securities, the restrictions on payments to the holders of subordinated
debt securities while a default exists with respect to senior indebtedness, any
restrictions on payments to the holders of the subordinated debt securities
following an event of default and provisions requiring holders of the
subordinated debt securities to remit payments to holders of senior
indebtedness.
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Because of the subordination, if we become insolvent, holders of subordinated
debt securities may recover less, ratably, than other of our creditors,
including holders of senior indebtedness.
LIMITATIONS ON INCURRENCE OF DEBT
The indenture imposes the following limitations on our ability to incur debt.
We will not incur some types of debt if as a result the aggregate principal
amount of all our outstanding debt would exceed 60% of the sum of our total
assets as of the end of the last fiscal quarter and the purchase price of any
real estate assets or mortgages receivable acquired, and the amount of any
securities offering proceeds we receive, to the extent that the proceeds were
not used to acquire real estate assets or mortgages receivable or used to reduce
debt, since the end of that quarter, including those proceeds obtained in
connection with the incurrence of this additional debt.
We will not incur debt secured by any mortgage, lien, charge, pledge or security
interest of any kind ("Lien") on any of our properties if as a result the
aggregate principal amount of all of our outstanding debt that is secured by any
Lien on our property would exceed 40% of the sum of our total assets as of the
end our last fiscal quarter and the purchase price of any real estate assets or
mortgages receivable acquired, and the amount of any securities offering
proceeds received, to the extent that the proceeds were not used to acquire real
estate assets or mortgages receivable or used to reduce debt, since the end of
that quarter, including those proceeds obtained in connection with the
incurrence of this additional debt.
We will not at any time own assets not encumbered by Liens equal to less than
150% of the aggregate outstanding principal amount of debt not secured by Liens
on our properties.
We will not incur debt if the ratio of Consolidated Income Available for Debt
Service (as defined in the indenture) to the Annual Service Charge (as defined
in the indenture) for the four consecutive fiscal quarters most recently ended
prior to the date on which this additional debt is to be incurred will have been
less than 1.5:1, on a pro forma basis and calculated as described in the
indenture.
MERGER, CONSOLIDATION AND SALE OF ASSETS
We cannot consolidate with, or sell, lease or convey all or substantially all of
our assets to, or merge with or into, any other corporation unless:
o we will be the surviving entity; or
o the successor corporation, if other than us, expressly assumes all of our
obligations under the debt securities and the indenture, and immediately
after that transaction no default under the indenture will occur and be
continuing.
PLAN OF DISTRIBUTION
We may offer securities directly or through underwriters, dealers or agents. The
supplement will identify those underwriters, dealers or agents and will describe
the plan of distribution, including commissions to be paid. If we do not name a
firm in the supplement, the firm may not directly or indirectly participate in
any underwriting of those securities, although it may participate in the
distribution of securities under circumstances entitling it to a dealer's
allowance or agent's commission.
An underwriting agreement will entitle the underwriters to indemnification
against specified civil liabilities under the federal securities laws and other
laws. The underwriters' obligations to purchase securities will be subject to
specified conditions and generally will require them to purchase all of the
securities if any are purchased.
Unless otherwise noted in the supplement, the securities will be offered by the
underwriters, if any, when, as and if issued by us, delivered to and accepted by
the underwriters and subject to their right to reject orders in whole or in
part.
We may sell securities to dealers, as principals. Those dealers then may resell
the securities to the public at varying prices set by those dealers from time to
time.
We may also offer securities through agents. Agents generally act on a "best
efforts" basis during their
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appointment, meaning that they are not obligated to purchase securities.
Dealers and agents may be entitled to indemnification as underwriters by us
against some liabilities under the federal securities laws and other laws.
We or the underwriters or the agent may solicit offers by institutions approved
by us to purchase securities under contracts providing for further payment.
Permitted institutions include commercial and savings banks, insurance
companies, pension funds, investment companies, educational and charitable
institutions and others. Certain conditions apply to those purchases.
An underwriter may engage in over-allotment, stabilizing transactions, short
covering transactions and penalty bids in accordance with Regulation M under the
Securities Exchange Act of 1934. Over-allotment involves sales in excess of the
offering size, which creates a short position. Stabilizing transactions permit
bidders to purchase the underlying security so long as the stabilizing bids do
not exceed a specified maximum. Short covering transactions involve purchases of
the securities in the open market after the distribution is completed to cover
short positions. Penalty bids permit the underwriters to reclaim a selling
concession from a dealer when the securities originally sold by the dealer are
purchased in a covering transaction to cover short positions. Those activities
may cause the price of the securities to be higher than it would otherwise be.
The underwriters may engage in any activities on any exchange or other market in
which the securities may be traded. If commenced, the underwriters may
discontinue those activities at any time.
The supplement or pricing supplement, as applicable, will set forth the
anticipated delivery date of the securities being sold at that time.
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges and the ratio of earnings to combined
fixed charges and preferred distributions for each of our last five fiscal years
and the nine months ended September 30, 1999 are presented below. We computed
our ratios of earnings to fixed charges by dividing earnings by fixed charges.
We computed our ratios of earnings to combined fixed charges and preferred share
dividends by dividing earnings by the sum of fixed charges and preferred share
dividend requirements.
For these purposes, earnings have been calculated by adding fixed charges to
income from operations before income taxes. Fixed charges consist of interest
costs, the interest portion of rental expense, other than on capital leases,
estimated to represent the interest factor in this rental expense and the
amortization of debt discounts and issue costs.
<TABLE>
<CAPTION>
Nine months
Year ended December 31, ended
--------------------------------------------------- September 30,
1998 1997(1) 1996(2) 1995 1994 1999(3)
------ ------- ------- ------ ------ -------------
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges 1.81x 2.13x 1.20x 1.35x 1.60x 1.63x
Ratio of earnings to combined fixed
charges and preferred share dividends 1.70x 2.13x 1.20x 1.35x 1.60x 1.57x
</TABLE>
(1) Earnings include a $10,170,000 impact related to gain on sales of
properties. Excluding this impact, these ratios would be 1.83x.
(2) Earnings include a $(5,351,000) impact from the extinguishment of hedges
upon debt refinancing. Excluding the impact, these ratios would be 1.44x.
(3) Earnings include a $2,979,000 impact related to gain on sales of
properties. Excluding this impact, these ratios would be 1.58x and 1.52x.
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FEDERAL INCOME TAX CONSIDERATIONS AND CONSEQUENCES OF YOUR INVESTMENT
The following is a general summary of the material federal income tax
considerations associated with an investment in the securities. The summary is
based on current law. It is not tax advice and presents general information
only. The summary does not deal with particular types of securityholders that
are subject to special treatment under the Internal Revenue Code, such as
insurance companies, financial institutions and broker-dealers. In addition, the
summary is not exhaustive of all possible tax considerations. Your actual tax
consequences as a taxpayer can be complicated and will depend on your specific
situation, including variables you cannot control. You should consult your own
tax advisor for a full understanding of the tax consequences of the purchase,
holding and sale of the securities. You should also consult your tax advisor to
determine the effect of any potential changes in applicable tax laws. The
Internal Revenue Code provisions governing the federal income tax treatment of
REITs are highly technical and complex, and the summary is qualified in its
entirety by the applicable Internal Revenue Code provisions, rules and
regulations promulgated thereunder, and administrative and judicial
interpretations thereof. The following discussion is based upon current law and
on representations from us concerning our compliance with the requirements for
qualification as a REIT.
WE URGE YOU, AS A PROSPECTIVE INVESTOR, TO CONSULT YOUR OWN TAX ADVISOR WITH
RESPECT TO THE SPECIFIC FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX
CONSEQUENCES TO YOU OF THE PURCHASE, HOLDING AND SALE OF OUR SECURITIES.
We have elected to be taxed as a REIT under the Internal Revenue Code since our
taxable year ended December 31, 1993. We believe that we have been organized and
have operated in a manner that qualifies for taxation as a REIT under the
Internal Revenue Code. We also believe that we will continue to operate in a
manner that will preserve our status as a REIT. We cannot, however, assure you
that these requirements will be met in the future.
We have not requested a ruling from the Internal Revenue Service regarding our
REIT status. However, we have received an opinion from the law firm of Locke
Liddell & Sapp LLP to the effect that:
o we have met the requirements for qualification and taxation as a REIT for
each taxable year commencing with the taxable year ended December 31, 1993;
o our diversity of equity ownership, operations through the date of the
opinion and proposed method of operation should allow us to qualify as a
REIT for the taxable year ending December 31, 1999; and
o the discussion regarding "Federal Income Tax Considerations and
Consequences of Your Investment" set forth in this section, to the extent
that it describes matters of law or legal conclusions, is correct in all
material respects.
The opinion is expressed as of its date and Locke Liddell & Sapp LLP has no
obligation to advise us of any change in applicable law or of any matters
stated, represented or assumed, after the date of this opinion.
You should be aware that opinions of counsel are not binding upon the Internal
Revenue Service or any court. Our opinion of counsel is based upon factual
representations and covenants made by us regarding the past, present and future
conduct of our business operations. Furthermore, our opinion of counsel
regarding our continued qualification as a REIT is conditioned upon, and our
continued qualification as a REIT will depend on, our ability to meet, through
actual annual operating results, the various REIT qualification tests under the
Internal Revenue Code.
In addition, we cannot assure you that new legislation, regulations or
administrative interpretations will not change the tax laws with respect to our
qualification as a REIT or any other matter discussed herein.
FEDERAL INCOME TAXATION OF THE COMPANY
As long as we qualify for taxation as a REIT, we generally will not be subject
to federal corporate income taxes on that portion of our ordinary income or
capital gain that is currently distributed to shareholders. The REIT provisions
of the Internal Revenue Code generally allow us to deduct dividends paid to our
shareholders. The deduction for dividends paid to shareholders substantially
eliminates the federal "double taxation" on earnings, once at the corporate
level and once again at the shareholder level.
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Even if we qualify for taxation as a REIT, we will be subject to federal income
tax as follows:
o We will be taxed at regular corporate rates on our undistributed REIT
taxable income, including undistributed net capital gain.
o Under some circumstances, we may be subject to the "alternative minimum
tax" as a consequence of our items of tax preference.
o We will be taxed at the highest corporate rate on our net income from the
sale or other disposition of "foreclosure property" that is held primarily
for sale to customers in the ordinary course of business and other
non-qualifying income from foreclosure property. Foreclosure property is,
in general, any real property and any personal property incident to real
property acquired through foreclosure or deed in lieu of foreclosure.
o We will be subject to a 100% tax on any net income from prohibited
transactions, which are, in general, sales or other dispositions of
property held primarily for sale to customers in the ordinary course of
business, other than foreclosure property.
o If we fail to satisfy the gross income tests under the REIT provisions of
the Internal Revenue Code, but have maintained our qualification as a REIT,
we will be subject to a tax equal to 100% of the net income attributable to
the greater of the amount by which we fail these tests, multiplied by a
fraction intended to reflect our profitability.
o If we fail to distribute during each year at least the sum of (a) 85% of
our ordinary income for such year, (b) 95% of our capital gain net income
for such year and (c) any undistributed taxable income from prior periods,
we will be subject to a 4% excise tax on the excess of the required
distribution over the amounts actually distributed.
o If (a) we acquire any asset from a C corporation, which is a corporation
subject to full corporate level tax, in a carryover-basis transaction, and
(b) we subsequently recognize gain on the disposition of this asset during
the 10-year period beginning on the date on which we acquire the asset,
then the excess of the fair market value of the asset as of the beginning
of the 10-year period over our adjusted basis in the asset at that time
will be subject to tax at the highest regular corporate rate.
REIT QUALIFICATION
Organizational Requirements. The Internal Revenue Code defines a REIT as a
corporation, trust or association that meets the following conditions:
1. it is managed by one or more trustees or directors;
2. its beneficial ownership is evidenced by transferable shares or by
transferable certificates of beneficial interest;
3. it would be taxable as a domestic corporation but for the REIT
requirements;
4. it is neither a financial institution nor an insurance company;
5. its beneficial ownership is held by 100 or more persons; and
6. during the last half of each taxable year, five or fewer individuals do not
own, directly or indirectly, more than 50% in value of its outstanding
stock, taking into account applicable attribution rules.
In addition, other tests, described below, regarding the nature of income and
assets of the REIT also must be satisfied. The Internal Revenue Code provides
that conditions (1) through (4), inclusive, must be met during the entire
taxable year. Condition (5) must be met during at least 335 days of a taxable
year of 12 months, or during a proportionate part of a taxable year of less than
12 months. Conditions (5) and (6) will not apply until after the first taxable
year for which an election is made to be taxed as a REIT. For purposes of
conditions (5) and (6), pension funds and particular other tax-exempt entities
are treated as individuals, subject to an exception in the case of condition (6)
that looks through the fund or entity to actual participants of the fund or
beneficial owners of the entity in determining the number of owners of the
outstanding stock.
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Our declaration of trust currently includes restrictions regarding transfers of
capital shares, which restrictions are intended, among other things, to assist
us in continuing to satisfy conditions (5) and (6). In rendering its opinion
that we have met the requirements for qualification and taxation as a REIT,
Locke Liddell & Sapp LLP is relying on our representations that the ownership of
our capital shares will satisfy conditions (5) and (6). There can be no
assurance, however, that the restrictions in our declaration of trust will, as a
matter of law, preclude us from failing to satisfy these conditions or that a
transfer in violation of these restrictions would not cause us to fail these
conditions.
If a REIT owns a qualified REIT subsidiary, the Internal Revenue Code provides
that the qualified REIT subsidiary is disregarded for federal income tax
purposes. Thus, all assets, liabilities and items of income, deduction and
credit of the qualified REIT subsidiary are treated as assets, liabilities and
these items of the REIT itself. When we use the term "qualified REIT
subsidiary," we mean a corporation in which all of its shares are held by the
REIT. We own, directly or indirectly, 100% of the shares of several corporations
which constitute qualified REIT subsidiaries. Thus, all of the assets,
liabilities and items of income, deduction and credit of these qualified REIT
subsidiaries will be treated as our assets and liabilities and our items of
income, deduction and credit. Unless the context requires otherwise, all
references to "we," "us" and "our company" in this "Federal Income Tax
Considerations and Consequences of Your Investment" section, refer to Camden
Property Trust and its qualified REIT subsidiaries.
In the case of a REIT that is a partner in a partnership, Treasury Regulations
provide that the REIT will be deemed to own its proportionate share of the
assets of the partnership and will be deemed to be entitled to the income of the
partnership attributable to this share. A REIT's proportionate share of the
assets of the partnership will be determined based on the REIT's capital
interest in the partnership. In addition, the character of the assets and gross
income of the partnership will retain the same character in the hands of the
REIT for purposes of Section 856 of the Internal Revenue Code, including
satisfying the gross income tests and asset tests. Thus, our proportionate share
of the assets, liabilities and items of income of Camden Operating, L.P. and any
other entity taxable as a partnership for federal income tax purposes in which
we hold an interest will be treated as our assets and liabilities and our items
of income for purposes of applying the requirements described in this section.
The assets, liabilities and items of income of Camden Operating, L.P. include
Camden Operating, L.P.'s share of the assets and liabilities and items of income
with respect to any entity taxable as a partnership in which it holds an
interest.
Income Tests. In general, in order to qualify as a REIT, we must derive at least
95% of our gross income from real estate sources and passive investments. We
must also derive at least 75% of our gross income from real estate sources. Rent
derived from leases will be qualifying income under the REIT requirements,
provided several requirements are satisfied. First, a lease may not have the
effect of giving us a share of the income or profits of the lessee. Second, the
rent attributable to personal property that is leased in connection with a lease
of real property must not exceed 15% of the total rent received under the lease.
The rent attributable to personal property under the lease is determined based
on the average adjusted bases of the personal property at the beginning and the
end of each tax year as compared to the average adjusted bases of the personal
property and real property subject to the lease at the beginning and the end of
the tax year. Any personal property rents in excess of the foregoing 15%
threshold will not qualify as rents from real property. Third, rents received
from a related party tenant will not qualify as rents from real property. For
these purposes, a tenant will be a related party tenant if the REIT, directly or
indirectly, actually or constructively, owns 10% or more of the tenant. Fourth,
the REIT generally must not operate or manage its property or furnish or render
services to tenants. However, the REIT may provide customary services or provide
non-customary services through an independent contractor who is adequately
compensated and from whom the REIT derives no income. Also, for tax years
beginning after August 5, 1997, the REIT may provide non-customary services with
respect to its properties as long as the income from the provision of these
services with regard to each property does not exceed 1% of all amounts received
by the REIT from each property. Finally, all leases must also qualify as "true"
leases for federal income tax purposes, and not as service contracts, joint
ventures or other types of arrangements.
If we fail to satisfy one or both of the 75% or 95% gross income tests for any
taxable year, we may nevertheless qualify as a REIT for that year if we are
eligible for relief under the Internal Revenue Code. These relief provisions
generally will be available if:
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o our failure to meet these tests was due to reasonable cause and not due to
willful neglect;
o we attach a schedule of the sources of our income to our federal income tax
return; and
o any incorrect information on the schedule is not due to fraud with intent
to evade tax.
It is not possible, however, to state whether, in all circumstances, we would be
entitled to the benefit of these relief provisions. For example, if we fail to
satisfy the gross income tests because nonqualifying income that we
intentionally incur exceeds the limits on such income, the Internal Revenue
Service could conclude that our failure to satisfy the tests was not due to
reasonable cause. As discussed above, even if these relief provisions apply, a
tax would be imposed with respect to the excess net income. No similar
mitigation provision provides relief if we failed the 30% gross income test in a
taxable year beginning on or before January 1, 1997, and any failure to so
qualify would have caused us to fail to qualify as a REIT.
Asset Tests. On the last day of each calendar quarter, we must meet two tests
concerning the nature of our assets. First, at least 75% of the value of our
total assets generally must consist of real estate assets, cash, cash items,
including receivables, and government securities. For this purpose, "real estate
assets" include interests in real property, interests in loans secured by
mortgages on real property or by certain interests in real property, shares in
other REITs and particular options, but exclude mineral, oil or gas royalty
interests. The temporary investment of new capital in debt instruments also
qualifies under this 75% asset test, but only for the one-year period beginning
on the date we receive the new capital. Second, no more than 25% of our total
assets may be represented by securities, other than securities in the 75% asset
class. With regard to these securities, we may not hold 10% or more of the
voting securities of a corporate issuer, other than our wholly-owned corporate
subsidiaries, or invest more than 5% of our assets in securities of any
corporate issuer, other than our wholly-owned corporate subsidiaries. We must
satisfy the asset tests at the close of each quarter. If we fail an asset test
as of the close of the quarter due to the acquisition of securities or other
property during the quarter, we may satisfy this test by disposing of the
securities or other property within the 30-day period following the close of
that quarter. We cannot assure you that the Internal Revenue Service will not
challenge our compliance with these tests. If we hold assets in violation of the
applicable asset tests, we would be disqualified as a REIT.
Other Restrictions. The REIT requirements impose a number of other restrictions
on our operations. For example, any net income that we derive from sales of
property in the ordinary course of business, other than inventory acquired by
reason of some foreclosures, is subject to a 100% tax unless eligible under a
safe harbor.
Distributions. Due to minimum distribution requirements, we must generally
distribute each year an amount at least equal to:
o the sum of (a) 95% of our REIT taxable income, as computed without regard
to the dividends-paid deduction or our capital gains, and (b) 95% of our
net income, if any, from foreclosure property in excess of the special tax
on income from foreclosure property; minus
o the sum of specific items of noncash income.
This distribution must be paid in the taxable year to which it relates, or in
the following taxable year, if declared before we timely file our federal income
tax return for that year and if paid on or before the first regular dividend
payment after that declaration. Capital gain dividends are not included in the
calculation to determine whether we satisfy the above-described distribution
requirement. In general, a capital gain dividend is a dividend attributable to
net capital gain recognized by us and properly designated as such.
Even if we satisfy the foregoing distribution requirement, to the extent that we
do not distribute all of our net capital gain or REIT taxable income as
adjusted, we will be subject to tax on this gain or income at a regular capital
gains or ordinary corporate tax rates. Furthermore, if we fail to distribute
during each calendar year at least the sum of:
o 85% of our ordinary income for that year;
o 95% of our capital gain net income for that year; and
o any undistributed taxable income from prior periods,
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we would be subject to a 4% excise tax on the excess of the required
distribution over the amounts actually distributed.
Typically, our REIT taxable income is less than our cash flow due to the
allowance of depreciation and other noncash charges in computing REIT taxable
income. Accordingly, we anticipate that we will generally have sufficient cash
or liquid assets to enable us to satisfy the 95% distribution requirement.
However, from time to time, we may not have sufficient cash or other liquid
assets to meet the 95% distribution requirement or to distribute a greater
amount as may be necessary to avoid income and excise taxation. This may occur
because of:
o timing differences between the actual receipt of income and the actual
payment of deductible expenses and the inclusion of this income and the
deduction of these expenses in arriving at our taxable income, or
o as a result of nondeductible expenditures, such as principal amortization
or capital expenditures, including any reinvestment of proceeds received
from the sale of our properties, other than in a tax-free exchange, in
excess of noncash deductions.
If these timing differences occur, or if our nondeductible expenditures exceed
our noncash deductions, we may find it necessary to arrange for borrowings or,
if possible, pay taxable stock dividends in order to meet the dividend
requirement.
Under some circumstances, we may be able to rectify a failure to meet the
distribution requirement for a year by paying dividends to shareholders in a
later year, which may be included in our deduction for dividends paid for the
earlier year. We will refer to these dividends as "deficiency dividends." Thus,
we may be able to avoid being taxed on amounts distributed as deficiency
dividends. We will, however, be required to pay interest and any applicable
penalties based upon the amount of any deficiency.
FAILURE TO QUALIFY AS A REIT
If we fail to qualify for taxation as a REIT in any taxable year and relief
provisions do not apply, the following consequences will occur:
o we will be subject to tax, including any applicable alternative minimum
tax, on our taxable income at regular corporate rates;
o we will be unable to deduct distributions to our shareholders;
o we will not be required to make shareholder distributions;
o to the extent that we make distributions from our current and accumulated
earnings and profits, the distributions will be dividends, taxable to our
shareholders as ordinary income;
o subject to the limitations of the Internal Revenue Code, our corporate
shareholders may be eligible for the dividends-received deduction; and
o unless we are entitled to relief under specific statutory provisions, we
will be disqualified from qualification as a REIT for the four taxable
years following the year during which qualification is lost.
It is not possible to state whether in all circumstances we would be entitled to
statutory relief.
TAXATION OF TAXABLE U.S. SHAREHOLDERS
As used below, the term "U.S. Shareholder" means a security holder who for
United States federal income tax purposes:
o is a citizen or resident of the United States;
o is a corporation, partnership, or other entity created or organized in or
under the laws of the United States or of any state thereof or in the
District of Columbia, unless, in the case of a partnership, Treasury
Regulations provide otherwise;
o is an estate the income of which is subject to United States federal income
taxation regardless of its source; or
o is a trust whose administration is subject to the primary supervision of a
United States court and which has one or more United States persons who
have the authority to control all substantial decisions of the trust.
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However, to the extent provided in Treasury Regulations, some trusts in
existence on August 20, 1996, and treated as United States persons prior to this
date that elect to continue to be treated as United States persons, will also be
considered U.S. Shareholders.
Distributions Generally. As long as we qualify as a REIT, any distributions that
we make to our shareholders out of our current or accumulated earnings and
profits, other than capital gain dividends discussed below, will constitute
dividends taxable to our taxable U.S. Shareholders as ordinary income. These
distributions will not be eligible for the dividends-received deduction in the
case of U.S. Shareholders that are corporations. For purposes of determining
whether the distributions we make to holders of shares are out of current or
accumulated earnings and profits, our earnings and profits will be allocated
first to our outstanding preferred shares and then to common shares.
To the extent that we make a distribution to a U.S. Shareholder, other than a
capital gain dividend, in excess of our current and accumulated earnings and
profits, these distributions will be treated first as a tax-free return of
capital with respect to the U.S. Shareholder's shares. This will reduce the U.S.
Shareholder's adjusted basis and, to the extent that the distribution exceeds
the U.S. Shareholder's adjusted basis in its shares, the excess portion of the
distribution will be taxable to the U.S. Shareholder as gain realized from the
sale of the shares.
The Internal Revenue Service will deem us to have sufficient earnings and
profits to treat as a dividend any distribution by us up to the amount required
to be distributed in order to avoid imposition of the 4% excise tax discussed
above. Moreover, any deficiency dividend will be treated as an ordinary or
capital gain dividend, as the case may be, regardless of our earnings and
profits. As a result, shareholders may be required to treat particular
distributions that would otherwise result in a tax-free return of capital as
taxable dividends.
If we make distributions to a shareholder in excess of the U.S. Shareholder's
adjusted basis in its shares, and if these shares have been held as a capital
asset, the distributions will be taxable as capital gains. If held for more than
one year, this gain will be taxable as long-term capital gain.
If (a) we declare dividends in October, November, or December of any year that
are payable to shareholders of record on a specified date in any of these
months, and (b) we actually pay the dividend on or before January 31 of the
following calendar year, we will treat such dividends as both paid by us and
received by the shareholders on December 31 of that year. Shareholders may not
include in their own income tax returns any of our net operating losses or
capital losses.
Capital Gain Distributions. Distributions that we properly designate as capital
gain dividends will be taxable to taxable U.S. Shareholders as long-term capital
gains to the extent that they do not exceed our actual net capital gain for the
taxable year without regard to the period for which the U.S. Shareholder has
held its shares. U.S. Shareholders that are corporations may, however, be
required to treat up to 20% of particular capital gain dividends as ordinary
income. Capital gain dividends are not eligible for the dividends-received
deduction for corporations.
Passive Activity Losses and Investment Interest Limitations. Distributions we
make and gain arising from the sale or exchange by a U.S. Shareholder of our
shares will not be treated as passive activity income. As a result, U.S.
Shareholders generally will not be able to apply any "passive losses" against
this income or gain. Generally, our distributions that do not constitute a
return of capital will be treated as investment income for purposes of computing
the investment interest limitation. Gain arising from the sale or other
disposition of our shares, however, will generally not be treated as investment
income.
Retention of Net Long-Term Capital Gains. We may elect to retain, rather than
distribute as a capital gain dividend, our net long-term capital gains received
during the year. If we make this election, we would pay tax on our retained net
long-term capital gains. In addition, to the extent we elect to retain net
long-term capital gains, a U.S. Shareholder generally would:
o subject to limitations, include its proportionate share of our
undistributed long-term capital gains in computing its long-term capital
gains in its return for its taxable year in which the last day of our
taxable year falls;
o be deemed to have paid the capital gains tax imposed on us on the
designated amounts
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included in the U.S. Shareholder's long-term capital gains;
o receive a credit or refund for the amount of tax deemed paid by it;
o increase the adjusted basis of its shares by the difference between the
amount of includable gains and the tax deemed to have been paid by it; and
o in the case of a U.S. Shareholder that is a corporation, appropriately
adjust its earnings and profits for the retained capital gains in
accordance with Treasury Regulations to be prescribed by the Internal
Revenue Service.
SALE OF SHARES
U.S. Shareholders who sell or exchange shares will recognize gain or loss for
federal income tax purposes in an amount equal to the difference between the
amount of cash and the fair market value of any property received on the sale or
exchange and the holder's adjusted basis in the shares for tax purposes. If the
shares were held as a capital asset, then this gain or loss will be capital gain
or loss. If the shares were held for more than one year, the capital gain or
loss will be long-term capital gain or loss. However, if the shares were held
for six months or less and a U.S. Shareholder recognizes loss upon the sale or
exchange of shares, the loss will be treated as a long-term capital loss, to the
extent the U.S. Shareholder received distributions from us that were required to
be treated as long-term capital gains.
TAXATION OF DEBT SECURITIES
Stated Interest and Market Discount. Holders of debt securities will be required
to include stated interest on the debt securities in gross income for federal
income tax purposes in accordance with their methods of accounting for tax
purposes. Purchasers of debt securities should be aware that the holding and
disposition of debt securities may be affected by the market discount provisions
of the Internal Revenue Code. These rules generally provide that if a holder of
a debt security purchases it at a market discount and thereafter recognizes gain
on a disposition of the debt security, including a gift or payment on maturity,
the lesser of the gain or appreciation, in the case of a gift, and the portion
of the market discount that accrued while the debt security was held by the
holder will be treated as ordinary interest income at the time of the
disposition. For this purpose, a purchase at a market discount includes a
purchase after original issuance at a price below the debt security's stated
principal amount. The market discount rules also provide that a holder who
acquires a debt security at a market discount and who does not elect to include
the market discount in income on a current basis may be required to defer a
portion of any interest expense that may otherwise be deductible on any
indebtedness incurred or maintained to purchase or carry the debt security until
the holder disposes of the debt security in a taxable transaction.
A holder of a debt security acquired at a market discount may elect to include
the market discount in income as the discount on the debt security accrues,
either on a ratable accrual basis or, if elected, on a constant interest rate
basis. The current inclusion election, once made, applies to all market discount
obligations acquired by the holder on or after the first day of the first
taxable year to which the election applies and may not be revoked without the
consent of the Securities and Exchange Commission or the Internal Revenue
Service. If a holder of a debt security elects to include market discount in
income in accordance with the preceding sentence, the foregoing rules with
respect to the recognition of ordinary income on a sale or particular other
dispositions of such debt security and the deferral of interest deductions on
indebtedness related to such debt security would not apply.
Amortizable Bond Premium. Generally, if the tax basis of a debt security held as
a capital asset exceeds the amount payable at maturity of the debt security, the
excess may constitute amortizable bond premium that the holder may elect to
amortize under the constant interest rate method and deduct the amortized
premium over the period from the holder's acquisition date to the debt
security's maturity date. A holder who elects to amortize bond premium must
reduce the tax basis in the related debt security by the amount of the aggregate
deductions allowable for amortizable bond premium.
The amortizable bond premium deduction is treated as an offset to interest
income on the related security for federal income tax purposes. Each prospective
purchaser is urged to consult its tax advisor as to the consequences of the
treatment of this premium as an offset to interest income for federal income tax
purposes.
Disposition. In general, a holder of a debt security will recognize gain or loss
upon the sale, exchange, redemption, payment upon maturity or other taxable
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disposition of the debt security. The gain or loss is measured by the difference
between (a) the amount of cash and the fair market value of property received
and (b) the holder's tax basis in the debt security as increased by any market
discount previously included in income by the holder and decreased by any
amortizable bond premium deducted over the term of the debt security. However,
the amount of cash and the fair market value of other property received excludes
cash or other property attributable to the payment of accrued interest not
previously included in income, which amount will be taxable as ordinary income.
Subject to the market discount and amortizable bond premium rules described
above, any gain or loss will generally be long-term capital gain or loss,
provided the debt security was a capital asset in the hands of the holder and
had been held for more than one year.
BACKUP WITHHOLDING ON DEBT SECURITIES AND SHARES
Under the backup withholding rules, a domestic holder of debt securities or
shares may be subject to backup withholding at the rate of 31% with respect to
interest or dividends paid on, and gross proceeds from the sale of, the
securities unless the holder (a) is a corporation or comes within other specific
exempt categories and, when required, demonstrates this fact or (b) provides a
correct 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 holder of debt securities or shares who does not
provide us with its current taxpayer identification number may be subject to
penalties imposed by the Internal Revenue Service. Any amount paid as backup
withholding will be creditable against the holder's federal income tax
liability.
We will report to holders of debt securities or shares and the Internal Revenue
Service the amount of any interest or dividends paid and any amount withheld
with respect to the debt securities or shares during the calendar year.
EFFECT OF TAX STATUS OF CAMDEN OPERATING, L.P. ON REIT QUALIFICATION
A substantial portion of our investments are through Camden Operating, L.P.
(formerly Paragon Group L.P.). Camden Operating, L.P. may involve special tax
considerations. These considerations include:
o the allocations of income and expense items of Camden Operating, L.P.,
which could affect the computation of our taxable income;
o the status of Camden Operating, L.P. as a partnership, as opposed to an
association taxable as a corporation for income tax purposes; and
o the taking of actions by Camden Operating, L.P. that could adversely affect
our qualification as a REIT.
In addition, Camden Operating, L.P. owns properties through subsidiary entities
taxable as partnerships for federal income tax purposes. These entities have
been structured in a manner that is intended to qualify them for taxation as
partnerships for federal income tax purposes. If Camden Operating, L.P. or any
of the foregoing entities in which Camden Operating, L.P. has an interest were
treated as an association taxable as a corporation, we would fail to qualify as
a REIT.
TAX ALLOCATIONS WITH RESPECT TO CONTRIBUTED PROPERTIES
When property is contributed to a partnership in exchange for an interest in the
partnership, the partnership generally takes a carryover basis in that property
for tax purposes equal to the adjusted basis of the contributing partner in the
property, rather than a basis equal to the fair market value of the property at
the time of contribution. Under Section 704(c) of the Internal Revenue Code,
income, gain, loss and deduction attributable to this contributed property must
be allocated in a manner such that the contributing partner is charged with, or
benefits from, respectively, the unrealized gain or unrealized loss associated
with the property at the time of the contribution. The amount of such unrealized
gain or unrealized loss is generally equal to the difference between the fair
market value of the contributed property at the time of contribution and the
adjusted tax basis of such property at the time of contribution. We will refer
to this allocation as the "book-tax difference." These allocations are solely
for federal income tax purposes and do not affect the book capital accounts or
other economic or legal arrangements among the partners.
In connection with the formation of Camden Operating, L.P., appreciated property
was contributed to Camden Operating, L.P. Consequently, the Third
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Amended and Restated Agreement of Limited Partnership of Camden Operating, L.P.
requires tax allocations to be made in a manner consistent with Section 704(c)
of the Internal Revenue Code. The Treasury Regulations under Section 704(c) of
the Internal Revenue Code provide partnerships with a choice of several methods
of accounting for book-tax differences for property contributed on or after
December 21, 1993, including the retention of the traditional method that was
available under prior law or the election of particular alternative methods.
Camden Operating, L.P. has elected the traditional method of Section 704(c)
allocations. Under the traditional method, which is the least favorable method
from our perspective, the carryover basis of contributed interests in the
properties in the hands of Camden Operating, L.P. could cause us (a) to be
allocated lower amounts of depreciation deductions for tax purposes than would
be allocated to us if such properties were to have a tax basis equal to their
fair market value at the time of the contribution and (b) to be allocated
taxable gain in the event of a sale of such contributed interests in our
properties in excess of the economic or book income allocated to us as a result
of such sale, with a corresponding benefit to the other partners in Camden
Operating, L.P. These allocations possibly could cause us to recognize taxable
income in excess of cash proceeds, which might adversely affect our ability to
comply with REIT distribution requirements. However, we do not anticipate that
this adverse effect will occur.
Interests in the properties purchased by Camden Operating, L.P., other than in
exchange for interests in Camden Operating, L.P., were acquired with an initial
tax basis equal to their fair market value. Thus, Section 704(c) of the Internal
Revenue Code will not apply to these interests.
SPECIAL TAX CONSIDERATIONS OF NON-U.S. SHAREHOLDERS AND POTENTIAL TAX
CONSEQUENCES OF THEIR INVESTMENT
The rules governing federal income taxation of nonresident alien individuals,
foreign corporations, foreign partnerships and other foreign shareholders are
complex and no attempt will be made herein to provide more than a summary of
such rules. IF YOU ARE A PROSPECTIVE NON-U.S. SHAREHOLDER, YOU SHOULD CONSULT
WITH YOUR OWN TAX ADVISORS TO DETERMINE THE IMPACT OF FEDERAL, STATE AND LOCAL
INCOME TAX LAWS WITH REGARD TO AN INVESTMENT BY YOU IN THE SECURITIES, INCLUDING
ANY REPORTING REQUIREMENTS.
Distributions not Attributable to Gain from the Sale or Exchange of a U.S. Real
Property Interest. Distributions to non-U.S. Shareholders that are not
attributable to gain from sales or exchanges by us of U.S. real property
interests and are not designated by us as capital gains dividends will be
treated as dividends and result in ordinary income to the extent that they are
made out of our current or accumulated earnings and profits. These distributions
ordinarily will be subject to a withholding tax equal to 30% of the gross amount
of the distribution unless an applicable tax treaty reduces or eliminates that
tax. However, if income from the investment in the common shares or preferred
shares is treated as effectively connected with the non-U.S. Shareholder's
conduct of a U.S. trade or business, the non-U.S. Shareholder generally will be
subject to federal income tax at graduated rates, in the same manner as U.S.
Shareholders are taxed with respect to these distributions. In the case of a
non-U.S. Shareholder that is a non-U.S. corporation, the holder may also be
subject to the 30% branch profits tax. Distributions in excess of our current
and accumulated earnings and profits will not be taxable to a non-U.S.
Shareholder to the extent that these distributions do not exceed the adjusted
basis of the non-U.S. Shareholder's common shares or preferred shares, but
rather will reduce the adjusted basis of these shares. To the extent that these
distributions in excess of current and accumulated earnings and profits exceed
the adjusted basis of a non-U.S. Shareholder's shares, these distributions will
give rise to tax liability if the non-U.S. Shareholder otherwise would be
subject to tax on any gain from the sale or disposition of its shares.
Distributions Attributable to Gain from the Sale or Exchange of a U.S. Real
Property Interest. For any year in which we qualify as a REIT, distributions
that are attributable to gain from sales or exchanges by us of U.S. real
property interests will be taxed to a non-U.S. Shareholder under the provisions
of the Foreign Investment in Real Property Tax Act of 1980. Under the Foreign
Investment in Real Property Tax Act, distributions attributable to gain from
sales of U.S. real property interests are taxed to a non-U.S. Shareholder as if
this gain was effectively connected with a U.S. business. Non-U.S. Shareholders
thus would be taxed at the normal capital gain rates applicable to U.S.
Shareholders, subject to applicable alternative minimum tax and a special
alternative minimum tax in the case of nonresident alien
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individuals. Distributions subject to the Foreign Investment in Real Property
Tax Act also may be subject to a 30% branch profits tax in the hands of a
non-U.S. corporate shareholder not entitled to treaty relief or exemption.
Withholding Obligations from Distributions to Non-U.S. Shareholders. Although
tax treaties may reduce our withholding obligations, we generally will be
required to withhold from distributions to non-U.S. Shareholders, and remit to
the Internal Revenue Service, (a) 35% of designated capital gain dividends, or,
if greater, 35% of the amount of any distributions that could be designated as
capital gain dividends and (b) 30% of ordinary dividends paid out of earnings
and profits. In addition, if we designate prior distributions as capital gain
dividends, subsequent distributions, up to the amount of such prior
distributions, will be treated as capital gain dividends for purposes of
withholding. Under final Treasury Regulations, generally effective for
distributions on or after January 1, 2000, a distribution in excess of our
earnings and profits will be subject to 30% dividend withholding if at the time
of the distribution it cannot be determined whether the distribution will be in
an amount in excess of our current or accumulated earnings and profits. If we
withhold an amount of tax with respect to a distribution to a non-U.S.
Shareholder in excess of the shareholder's U.S. tax liability with respect to
this distribution, the non-U.S. Shareholder may file for a refund of the excess
from the Internal Revenue Service. Furthermore, the U.S. Treasury Department has
issued final Treasury Regulations governing information reporting and
certification procedures regarding withholding and backup withholding on some
amounts paid to non-U.S. Shareholders. These withholding regulations, which will
apply to covered payments after December 31, 1999, may alter the procedure for
claiming the benefits of an income tax treaty.
Sales of Common Shares or Preferred Shares by a Non-U.S. Shareholder. Gain
recognized by a non-U.S. Shareholder upon a sale of its common shares or
preferred shares generally will not be taxed under the Foreign Investment in
Real Property Tax Act of 1980 if we are a domestically controlled REIT. A
domestically controlled REIT is defined generally as a REIT in which at all
times during a specified testing period less than 50% in value of the stock was
held directly or indirectly by non-U.S. persons. It is currently anticipated
that we will be a domestically controlled REIT, and, therefore, sales of common
shares or preferred shares will not be subject to taxation under the Foreign
Investment in Real Property Tax Act. However, because our common shares and
preferred shares will be traded publicly, we may not continue to be a
domestically controlled REIT. Furthermore, gain not subject to the Foreign
Investment in Real Property Tax Act will be taxable to a non-U.S. Shareholder if
(a) investment in the common shares or preferred shares is effectively connected
with the non-U.S. Shareholder's U.S. trade or business, in which case the
non-U.S. Shareholder will be subject to the same treatment as U.S. Shareholders
with respect to such gain, or (b) the non-U.S. Shareholder is a nonresident
alien individual who was present in the U.S. for 183 days or more during the
taxable year and other conditions apply, in which case the nonresident alien
individual will be subject to a 30% tax on the individual's capital gains. If
the gain on the sale of common shares or preferred shares were to be subject to
taxation under the Foreign Investment in Real Property Tax Act, the non-U.S.
Shareholder would be subject to the same treatment as U.S. Shareholders with
respect to this gain. The non-U.S. Shareholder may, however, be subject to
applicable alternative minimum tax, a special alternative minimum tax in the
case of nonresident alien individuals and the possible application of the 30%
branch profits tax in the case of non-U.S. corporations. In addition, a
purchaser of common shares or preferred shares subject to taxation under the
Foreign Investment in Real Property Tax Act would generally be required to
deduct and withhold a tax equal to 10% of the amount realized on the disposition
by a non-U.S. Shareholder. Any amount withheld would be creditable against the
non-U.S. Shareholder's Foreign Investment in Real Property Tax Act tax
liability.
STATE AND LOCAL TAX
We and our shareholders may be subject to state and local tax in various states
and localities, including those in which we or you transact business, own
property or reside. Our and your tax treatment in these jurisdictions may differ
from the federal income tax treatment described above. Consequently, as a
prospective investor, you should consult your own tax advisors regarding the
effect of state and local tax laws on an investment in our debt securities and
shares.
PROPOSED LEGISLATION
In November of 1999, Congress passed the Ticket to Work and Work Incentives
Improvement Act of 1999, which contains changes in federal income tax laws that
will affect REITs. Beginning after December 31, 1999, this legislation would
allow a REIT to own stock in "taxable REIT
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<PAGE> 28
subsidiaries," corporations that may provide services to tenants of the REIT and
others without disqualifying the rents that the REIT receives from its tenants.
Under the bill, a taxable REIT subsidiary is a corporation in which a REIT owns
stock, directly or indirectly, and with respect to which the corporation and the
REIT have made a joint election to treat the corporation as a taxable REIT
subsidiary. Although, under the bill, a REIT could own up to 100% of the stock
of a taxable REIT subsidiary, (i) the value of all securities in taxable REIT
subsidiaries held by the REIT may not exceed 20% of the value of the total
assets of the REIT; and (ii) any dividends received by the REIT from its taxable
REIT subsidiaries will not constitute qualifying income under the 75% income
test. The bill also limits the deduction of interest paid by a taxable REIT
subsidiary to the REIT and limits the amount of rental payments that may be made
by a taxable REIT subsidiary to the REIT.
The bill would also impose a tax on a REIT equal to 100% of redetermined rents,
redetermined deductions and excess interest. Redetermined rents are generally
rents from real property which would otherwise be reduced on distribution,
apportionment or allocation to clearly reflect income as a result of services
furnished or rendered by a taxable REIT subsidiary to tenants of the REIT. The
bill does provide a number of exceptions with regard to redetermined rents,
which are summarized below.
o Redetermined rents would not include amounts received directly or
indirectly by a REIT for customary services.
o Redetermined rents would not include de minimus payments received by the
REIT with respect to non-customary services rendered to the tenants of a
property owned by the REIT that do not exceed 1% of all amounts received by
the REIT with respect to this property.
o The redetermined rent provisions would not apply with respect to any
services rendered by a taxable REIT subsidiary to the tenants of the REIT,
as long as the taxable REIT subsidiary renders a significant amount of
similar services to persons other than the REIT and tenants who are
unrelated to the REIT or the taxable REIT subsidiary or the REIT tenants,
and the charge for these services is substantially comparable to the charge
for similar services rendered to such unrelated persons.
o The redetermined rent provisions would not apply to any services rendered
by a taxable REIT subsidiary to a tenant of a REIT if the rents paid by
tenants leasing at least 25% of the net leasable space in the REIT's
property who are not receiving such services are substantially comparable
to the rents paid by tenants leasing comparable space who are receiving the
services and the charge for the services is separately stated.
o The redetermined rent provisions would not apply to any services rendered
by a taxable REIT subsidiary to tenants of a REIT if the gross income of
the taxable REIT subsidiary from these services is at least 150% of the
taxable REIT subsidiary's direct cost of rendering the services.
o The Secretary would have the power to waive the tax that would otherwise be
imposed on redetermined rents if the REIT establishes to the satisfaction
of the Secretary that rents charged to tenants were established on an arms'
length basis even though a taxable REIT subsidiary provided services to the
tenants.
Redetermined deductions are deductions, other than redetermined rents, of a
taxable REIT subsidiary if the amount of these deductions would be decreased on
distribution, apportionment or allocation to clearly reflect income between the
taxable REIT subsidiary and the REIT. Excess interest means any deductions for
interest payments made by a taxable REIT subsidiary to the REIT to the extent
that the interest payments exceed a commercially reasonable rate of interest.
Under the bill, a REIT would be prohibited from owning more than 10%, by vote or
by value, of the securities, other than specified debt securities, of a non-REIT
C corporation. This would not, however, apply to taxable REIT subsidiaries,
qualified REIT subsidiaries and non-qualified corporate subsidiaries in which
the REIT does not own more than 10% of the voting securities but does own more
than 10% of the outstanding securities by value, provided the subsidiary was
established on or before July 12, 1999, does not engage in a new line of
business or increase its existing business and the REIT does not acquire any new
securities in such subsidiary. Under the bill, a REIT may convert existing
non-qualified corporate subsidiaries into taxable REIT subsidiaries
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in a tax-free reorganization at any time prior to January 1, 2004.
Under the bill, the 95% distribution requirement discussed above would be
reduced to 90% of REIT taxable income.
Under the bill, the basis for determining whether more than 15% of the rents is
received by a REIT from a property are attributable to personal property would
be based upon a comparison of the fair market value of the personal property
leased by the tenant as compared to the fair market value of all of the property
leased by the tenant, rather than the adjusted basis of such personal property
compared to the adjusted basis of all such property.
President Clinton is scheduled to sign the Ticket to Work and Work Incentives
Improvement Act of 1999 on December 17, 1999.
TAXATION OF TAX-EXEMPT SHAREHOLDERS
The Internal Revenue Service has ruled that amounts distributed as dividends by
a qualified REIT do not constitute unrelated business taxable income when
received by a tax-exempt entity. Based on that ruling, except for the tax-exempt
shareholders described below, if a tax-exempt shareholder does not hold its
shares as "debt financed property" within the meaning of the Internal Revenue
Code and the shares are not otherwise used in a trade or business, then dividend
income received from us will not be unrelated business taxable income to the
tax-exempt shareholder. Generally, shares will be "debt financed property" if
the exempt holder financed the acquisition of the shares through a borrowing.
Similarly, income from the sale of shares will not constitute unrelated business
taxable income unless a tax-exempt shareholder has held its shares as "debt
financed property" within the meaning of the Internal Revenue Code or has used
the shares in its trade or business.
For tax-exempt shareholders that are social clubs, voluntary employee benefit
associations, supplemental unemployment benefit trusts, or qualified group
legal services plans exempt from federal income taxation under Internal Revenue
Code Section 501(c)(7), (c)(9), (c)(17) and (c)(20), respectively, income from
an investment in our shares will constitute unrelated business taxable income
unless the organization is able to properly deduct amounts set aside or placed
in reserve for specified purposes so as to offset the income generated by its
investment in our shares. These prospective investors should consult their own
tax advisors concerning these "set aside" and reserve requirements. However, a
portion of the dividends paid by a "pension held REIT" will be treated as
unrelated business taxable income to any trust that:
o is described in Section 401(a) of the Internal Revenue Code;
o is tax-exempt under Section 501(a) of the Internal Revenue Code; and
o holds more than 10% by value of the interests in the REIT.
Tax-exempt pension funds that are described in Section 401(a) of the Internal
Revenue Code are referred to below as "qualified trusts." A REIT is a "pension
held REIT" if:
o it would not have qualified as a REIT but for the fact that Section
856(h)(3) of the Internal Revenue Code provides that stock owned by
qualified trusts will be treated, for purposes of the "not closely held"
requirement, as owned by the beneficiaries of the trust rather than by the
trust itself; and
o either, (1) at least one such qualified trust holds more than 25% by value
of the interests in the REIT, or (2) one or more such qualified trusts,
each of which owns more than 10% by value of the interests in the REIT,
holds in the aggregate more than 50% by value of the interests in the REIT.
The percentage of any REIT dividend treated as unrelated business taxable income
is equal to the ratio of:
o the unrelated business taxable income earned by the REIT, treating the REIT
as if it were a qualified trust and therefore subject to tax on its
unrelated business taxable income, to
o the total gross income of the REIT.
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A de minimis exception applies where the percentage is less than 5% for any
year. The provisions requiring qualified trusts to treat a portion of REIT
distributions as unrelated business taxable income will not apply if the REIT is
able to satisfy the "not closely held" requirement without relying upon the
"look-through" exception with respect to qualified trusts.
LEGAL MATTERS
Unless otherwise noted in a supplement, Locke Liddell & Sapp LLP, Dallas, Texas,
will pass on the legality of the securities offered through this prospectus.
EXPERTS
The consolidated financial statements and related financial statement schedule
incorporated in this prospectus by reference from Camden Property Trust's Annual
Report on Form 10-K for the year ended December 31, 1998 have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their reports, which
are incorporated herein by reference, and have been so incorporated in reliance
upon the reports of such firm given upon their authority as experts in
accounting and auditing.
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PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated expenses in connection
with the offering contemplated by this Registration Statement:
<TABLE>
<S> <C>
SEC Registration Fee..................................................................................... $183,544
Printing and Engraving Costs............................................................................. 20,000
Accounting Fees and Expenses............................................................................. 10,000
Legal Fees and Expenses.................................................................................. 20,000
Trustee and Registrar Fees............................................................................... 10,000
Miscellaneous............................................................................................ 6,456
--------
Total.................................................................................................... $250,000
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Subsection (B) of Section 9.20 of the Texas Real Estate Investment
Trust Act, as amended (the "Act"), empowers a real estate investment trust to
indemnify any person who was, is, or is threatened to be made a named defendant
or respondent in any threatened, pending, or completed action, suit, or
proceeding, whether civil, criminal, administrative, arbitrative, or
investigative, any appeal in such an action, suit, or proceeding, or any inquiry
or investigation that can lead to such an action, suit or proceeding because the
person is or was a trust manager, officer, employee or agent of the real estate
investment trust or is or was serving at the request of the real estate
investment trust as a trust manager, director, officer, partner, venturer,
proprietor, trustee, employee, agent, or similar functionary of another real
estate investment trust, corporation, partnership, joint venture, sole
proprietorship, trust, employee benefit plan, or other enterprise against
expenses (including court costs and attorney fees), judgments, penalties, fines
and settlements if he conducted himself in good faith and reasonably believed
his conduct was in or not opposed to the best interests of the real estate
investment trust and, in the case of any criminal proceeding, had no reasonable
cause to believe that his conduct was unlawful.
The Act further provides that, except to the extent otherwise permitted
by the Act, a person may not be indemnified in respect of a proceeding in which
the person is found liable on the basis that personal benefit was improperly
received by him or in which the person is found liable to the real estate
investment trust. Indemnification pursuant to Subsection (B) of Section 9.20 of
the Act is limited to reasonable expenses actually incurred and may not be made
in respect of any proceeding in which the person has been found liable for
willful or intentional misconduct in the performance of his duty to the real
estate investment trust.
Subsection (C) of Section 15.10 of the Act provides that a trust
manager shall not be liable for any claims or damages that may result from his
acts in the discharge of any duty imposed or power conferred upon him by the
real estate investment trust, if, in the exercise of ordinary care, he acted in
good faith and in reliance upon information, opinions, reports, or statements,
including financial statements and other financial data, concerning the real
estate investment trust, that were prepared or presented by officers or
employees of the real estate investment trust, legal counsel, public
accountants, investment bankers, or certain other professionals, or a committee
of trust manager of which the trust manager is not a member. In addition, no
trust manager shall be liable to the real estate investment trust for any act,
omission, loss, damage, or expense arising from the performance of his duty to a
real estate investment trust, save only for his own willful misfeasance, willful
malfeasance or gross negligence.
Article Sixteen of the Company's Amended and Restated Declaration of
Trust provides that the Company shall indemnify officers and trust managers, as
set forth below:
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1. In this Article:
1. "Indemnitee" means (A) any present or former Trust Manager or
officer of the Trust, (B) any person who while serving in any
of the capacities referred to in clause (A) hereof served at
the Trust's request as a trust manager, director, officer,
partner, venturer, proprietor, trustee, employee, agent or
similar functionary of another real estate investment trust or
foreign or domestic corporation, partnership, joint venture,
sole proprietorship, trust, employee benefit plan or other
enterprise and (C) any person nominated or designated by (or
pursuant to authority granted by) the Trust Managers or any
committee thereof to serve in any of the capacities referred
to in clauses (A) or (B) hereof.
2. "Official Capacity" means (A) when used with respect to a
Trust Manager, the office of Trust Manager of the Trust and
(B) when used with respect to a person other than a Trust
Manager, the elective or appointive office of the Trust held
by such person or the employment or agency relationship
undertaken by such person on behalf of the Trust, but in each
case does not include service for any other real estate
investment trust or foreign or domestic corporation or any
partnership, joint venture, sole proprietorship, trust,
employee benefit plan or other enterprise.
3. "Proceeding" means any threatened, pending or completed
action, suit or proceeding, whether civil, criminal,
administrative, arbitrative or investigative, any appeal in
such an action, suit or proceeding, and any inquiry or
investigation that could lead to such an action, suit or
proceeding.
2. The Trust shall indemnify every Indemnitee against all judgments,
penalties (including excise and similar taxes), fines, amounts paid in
settlement and reasonable expenses actually incurred by the Indemnitee in
connection with any Proceeding in which he or she was, is or is threatened to be
named defendant or respondent, or in which he or she was or is a witness without
being named a defendant or respondent, by reason, in whole or in part, of his or
her serving or having served, or having been nominated or designated to serve,
in any of the capacities referred to in paragraph (a)(i) of this Article
Sixteen, to the fullest extent that indemnification is permitted by Texas law.
An Indemnitee shall be deemed to have been found liable in respect of any claim,
issue or matter only after the Indemnitee shall have been so adjudged by a court
of competent jurisdiction after exhaustion of all appeals therefrom. Reasonable
expenses shall include, without limitation, all court costs and all fees and
disbursements of attorneys for the Indemnitee.
3. Without limitation of paragraph (b) of this Article Sixteen and in
addition to the indemnification provided for in paragraph (b) of this Article
Sixteen, the Trust shall indemnify every Indemnitee against reasonable expenses
incurred by such person in connection with any proceeding in which he or she is
a witness or a named defendant or respondent because he or she served in any of
the capacities referred to in paragraph (a)(i) of this Article Sixteen.
4. Reasonable expenses (including court costs and attorneys' fees)
incurred by an Indemnitee who was or is a witness or was, is or is threatened to
be made a named defendant or respondent in a Proceeding shall be paid or
reimbursed by the Trust at reasonable intervals in advance of the final
disposition of such Proceeding after receipt by the Trust of a written
undertaking by or on behalf of such Indemnitee to repay the amount paid or
reimbursed by the Trust if it shall ultimately be determined that he or she is
not entitled to be indemnified by the Trust as authorized in this Article
Sixteen. Such written undertaking shall be an unlimited obligation of the
Indemnitee but need not be secured and it may be accepted without reference to
financial ability to make repayment. Notwithstanding any other provision of this
Article Sixteen, the Trust may pay or reimburse expenses incurred by an
Indemnitee in connection with his or her appearance as a witness or other
participation in a Proceeding at a time when he or she is not named a defendant
or respondent in the Proceeding.
5. The indemnification provided by this Article Sixteen shall (i) not
be deemed exclusive of, or to preclude, any other rights to which those seeking
indemnification may at any time be entitled under the Trust's Bylaws, any law,
agreement or vote of shareholders or disinterested Trust Managers, or otherwise,
or under any
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policy or policies of insurance purchased and maintained by the Trust on behalf
of any Indemnitee, both as to action in his or her Official Capacity and as to
action in any other capacity, (ii) continue as to a person who has ceased to be
in the capacity by reason of which he or she was an Indemnitee with respect to
matters arising during the period he or she was in such capacity, and (iii)
inure to the benefit of the heirs, executors and administrators of such a
person.
6. The provisions of this Article Sixteen (i) are for the benefit of,
and may be enforced by, each Indemnitee of the Trust, the same as if set forth
in their entirety in a written instrument duly executed and delivered by the
Trust and such Indemnitee and (ii) constitute a continuing offer to all present
and future Indemnities. The Trust, by its adoption of this Declaration of Trust,
(x) acknowledges and agrees that each Indemnitee of the Trust has relied upon
and will continue to rely upon the provisions of this Article Sixteen in
becoming, and serving in any of the capacities referred to in paragraph (a)(i)
of this Article Sixteen, (y) waives reliance upon, and all notice of acceptance
of, such provisions by such Indemnities and (z) acknowledges and agrees that no
present or future Indemnitee shall be prejudiced in his or her right to enforce
the provisions of this Article Sixteen in accordance with their terms by any act
or failure to act on the part of the Trust.
7. No amendment, modification or repeal of this Article Sixteen or any
provision of this Article Sixteen shall in any manner terminate, reduce or
impair the right of any past, present or future Indemnities to be indemnified by
the Trust, nor the obligation of the Trust to indemnify any such Indemnities,
under and in accordance with the provisions of this Article Sixteen as in effect
immediately prior to such amendment, modification or repeal with respect to
claims arising from or relating to matters occurring, in whole or in part, prior
to such amendment, modification or repeal, regardless of when such claims may be
asserted.
8. If the indemnification provided in this Article Sixteen is either
(i) insufficient to cover all costs and expenses incurred by any Indemnitee as a
result of such Indemnitee being made or threatened to be made a defendant or
respondent in a Proceeding by reason of his or her holding or having held a
position named in paragraph (a)(i) of this Article Sixteen or (ii) not permitted
by Texas law, the Trust shall indemnify, to the fullest extent that
indemnification is permitted by Texas law, every Indemnitee with respect to all
costs and expenses incurred by such Indemnitee as a result of such Indemnitee
being made or threatened to be made a defendant or respondent in a Proceeding by
reason of his or her holding or having held a position named in paragraph (a)(i)
of this Article Sixteen.
9. The indemnification provided by this Article Sixteen shall be
subject to all valid and applicable laws, including, without limitation, the
Texas REIT Act, and, in the event this Article Sixteen or any of the provisions
hereof or the indemnification contemplated hereby are found to be inconsistent
with or contrary to any such valid laws, such laws shall be deemed to control
and this Article Sixteen shall be regarded as modified accordingly, and, as so
modified, to continue in full force and effect.
ITEM 16. EXHIBITS.
*1.1 Form of Underwriting Agreement for Debt Securities
*1.2 Form of Underwriting Agreement for Equity Securities
*1.3 Form of Distribution Agreement for Medium-Term Notes
4.1 Indenture for Senior Debt Securities dated as of February 15,
1996 between the Company and U.S. Trust Company of Texas,
N.A., as trustee (filed as Exhibit 4.1 to the Company's
Current Report on Form 8-K dated February 15, 1996 and
incorporated herein by reference)
4.2 First Supplemental Indenture dated as of February 15, 1996
between the Company and U.S. Trust Company of Texas, N.A., as
trustee (filed as Exhibit 4.2 to the Company's Current Report
on Form 8-K dated February 15, 1996 and incorporated herein by
reference)
*4.3 Form of Senior Debt Security
*4.4 Form of Fixed Rate Senior Medium-Term Note
*4.5 Form of Floating Rate Senior Medium-Term Note
4.6 Amended and Restated Declaration of Trust, as amended (filed
as Exhibit 3.1 to the Company's Annual Report on Form 10-K for
the year ended December 31, 1993 (File No. 1-12110) and
incorporated herein by reference)
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4.7 Second Amended and Restated Bylaws of the Company (filed as
Exhibit 3.1 to the Company's Annual Report on Form 10-K for
the year ended December 3, 1997 (File No. 1-12110) and
incorporated herein by reference)
4.8 Specimen certificate for Common Shares (filed as Exhibit 4.1
to the Company's Registration Statement on Form S-11 filed
September 15, 1993 (No. 33-68736) and incorporated herein by
reference)
*4.9 Form of Statement of Designation of Preferred Shares
*4.10 Form of Preferred Share Certificate
*4.11 Form of Securities Warrant Agreement
5.1 Opinion of Locke Liddell & Sapp LLP as to the legality of the
securities being registered
8.1 Opinion of Locke Liddell & Sapp LLP as to certain tax matters
12.1 Statement regarding computation of ratios
23.1 Consent of Deloitte & Touche LLP
23.2 Consent of Locke Liddell & Sapp LLP (included in Exhibit 5.1
hereto)
23.3 Consent of Locke Liddell & Sapp LLP (included in Exhibit 8.1
hereto)
24.1 Power of Attorney (included on signature page)
25.1 Statement of Eligibility of Trustee for Senior Debt Securities
(U.S. Trust Company of Texas, N.A.) on Form T-1 (filed as
Exhibit 25.1 to the Company's Registration Statement on Form
S-3 filed April 4, 1997 (File No. 333-24637) and incorporated
herein by reference)
----------
* To be filed by amendment or incorporated by reference in connection with the
offering of the securities.
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933, as amended (the
"Securities Act");
(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;
(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)(1)(i) and (a)(1)(ii) do not apply if
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), that are incorporated by reference in the Registration
Statement.
(2) That, for the purpose of determining any liability under
the Securities Act, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
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<PAGE> 35
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Exchange Act) that is incorporated by
reference in the Registration Statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(c) The undersigned Registrant hereby further undertakes to supplement
the applicable prospectus supplement, 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.
(d) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to trust managers, directors, officers and
controlling persons of the registrant pursuant to the provisions described in
Item 15 of this Registration Statement or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than in payment by the registrant of expenses
incurred or paid by a trust manager, director, officer or controlling person in
the successful defense of any action, suit or proceeding) is asserted against
the registrant by such trust manager, director, officer or controlling person in
connection with the securities being registered hereby, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Houston, State of Texas, on the 17th day of December,
1999.
CAMDEN PROPERTY TRUST
By: /s/ G. Steven Dawson
----------------------------------------
G. Steven Dawson, Senior Vice
President - Finance, Chief
Financial Officer, Treasurer and
Secretary
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints Richard J. Campo, D. Keith Oden
and G. Steven Dawson, and each of them, his true and lawful attorneys-in-fact
and agents, with full power of substitution and resubstitution, for him, and on
his behalf and in his name, place and stead, in any and all capacities, to sign,
execute and file this Registration Statement under the Securities Act of 1933,
as amended, and any or all amendments (including, without limitation,
post-effective amendments), with all exhibits and any and all documents required
to be filed with respect thereto, with the Securities and Exchange Commission or
any regulatory authority, granting unto such attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises in order to
effectuate the same, as fully to all intents and purposes as he himself might or
could do if personally present, hereby ratifying and confirming all that such
attorneys-in-fact and agents, or any of them, or their substitute or
substitutes, may lawfully do or cause to be done.
Pursuant to the requirements of the Securities Act of 1933, 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/ Richard J. Campo Chairman of the Board of Trust Managers and December 17, 1999
- ------------------------------- Chief Executive Officer
Richard J. Campo (Principal Executive Officer)
/s/ D. Keith Oden President, Chief Operating Officer and Trust December 17, 1999
- ------------------------------- Manager
D. Keith Oden
/s/ G. Steven Dawson Senior Vice President-Finance, Chief December 17, 1999
- ------------------------------- Financial Officer, Treasurer and Secretary
G. Steven Dawson (Principal Financial and Accounting Officer)
/s/ William R. Cooper Trust Manager December 17, 1999
- -------------------------------
William R. Cooper
/s/ George R. Hrdlicka Trust Manager December 17, 1999
- -------------------------------
George R. Hrdlicka
/s/ Scott S. Ingraham Trust Manager December 17, 1999
- -------------------------------
Scott S. Ingraham
/s/ Lewis A. Levey Trust Manager December 17, 1999
- -------------------------------
Lewis A. Levey
/s/ F. Gardner Parker Trust Manager December 17, 1999
- -------------------------------
F. Gardner Parker
/s/ Steven A. Webster Trust Manager December 17, 1999
- -------------------------------
Steven A. Webster
</TABLE>
II-6
<PAGE> 37
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
<S> <C>
*1.1 Form of Underwriting Agreement for Debt Securities
*1.2 Form of Underwriting Agreement for Equity Securities
*1.3 Form of Distribution Agreement for Medium-Term Notes
4.1 Indenture for Senior Debt Securities dated as of February 15,
1996 between the Company and U.S. Trust Company of Texas,
N.A., as trustee (filed as Exhibit 4.1 to the Company's
Current Report on Form 8-K dated February 15, 1996 and
incorporated herein by reference)
4.2 First Supplemental Indenture dated as of February 15, 1996
between the Company and U.S. Trust Company of Texas, N.A., as
trustee (filed as Exhibit 4.2 to the Company's Current Report
on Form 8-K dated February 15, 1996 and incorporated herein by
reference)
*4.3 Form of Senior Debt Security
*4.4 Form of Fixed Rate Senior Medium-Term Note
*4.5 Form of Floating Rate Senior Medium-Term Note
4.6 Amended and Restated Declaration of Trust, as amended (filed
as Exhibit 3.1 to the Company's Annual Report on Form 10-K for
the year ended December 31, 1993 (File No. 1-12110) and
incorporated herein by reference)
4.7 Second Amended and Restated Bylaws of the Company (filed as
Exhibit 3.1 to the Company's Annual Report on Form 10-K for
the year ended December 3, 1997 (File No. 1-12110) and
incorporated herein by reference)
4.8 Specimen certificate for Common Shares (filed as Exhibit 4.1
to the Company's Registration Statement on Form S-11 filed
September 15, 1993 (No. 33-68736) and incorporated herein by
reference)
*4.9 Form of Statement of Designation of Preferred Shares
*4.10 Form of Preferred Share Certificate
*4.11 Form of Securities Warrant Agreement
5.1 Opinion of Locke Liddell & Sapp LLP as to the legality of the
securities being registered
8.1 Opinion of Locke Liddell & Sapp LLP as to certain tax matters
12.1 Statement regarding computation of ratios
23.1 Consent of Deloitte & Touche LLP
23.2 Consent of Locke Liddell & Sapp LLP (included in Exhibit 5.1
hereto)
23.3 Consent of Locke Liddell & Sapp LLP (included in Exhibit 8.1
hereto)
24.1 Power of Attorney (included on signature page)
25.1 Statement of Eligibility of Trustee for Senior Debt Securities
(U.S. Trust Company of Texas, N.A.) on Form T-1 (filed as
Exhibit 25.1 to the Company's Registration Statement on Form
S-3 filed April 4, 1997 (File No. 333-24637) and incorporated
herein by reference)
</TABLE>
- ----------
* To be filed by amendment or incorporated by reference in connection with
the offering of the securities.
<PAGE> 1
EXHIBIT 5.1
December 17, 1999
Camden Property Trust
Three Greenway Plaza
Suite 1300
Houston, Texas 77046
Re: $660,230,000 Aggregate Offering Price of Securities of Camden
Property Trust
Gentlemen:
We are acting as securities counsel to Camden Property Trust, a Texas
real estate investment trust (the "Company"), in connection with the
registration statement on Form S-3 (the "Registration Statement") being filed by
the Company with the Securities and Exchange Commission (the "Commission") under
the Securities Act of 1933, as amended (the "Securities Act"), relating to the
offering from time to time, as set forth in the prospectus contained in the
Registration Statement (the "Prospectus") and as to be set forth in one or more
supplements to the Prospectus (each, a "Prospectus Supplement"), by the Company
of up to $660,230,000 aggregate offering price of (i) one or more series of
senior debt securities (the "Debt Securities"), (ii) one or more series of
preferred shares of beneficial interest, par value of $0.01 per share (the
"Preferred Shares"), (iii) common shares of beneficial interest, par value $0.01
per share (the "Common Shares"), and/or (iv) warrants to purchase Debt
Securities, Preferred Shares or Common Shares (collectively, the "Securities
Warrants"). The Debt Securities, the Preferred Shares, the Common Shares and the
Securities Warrants are collectively referred to herein as the "Securities." Any
Debt Securities and Preferred Shares may be convertible into shares of
beneficial interest of the Company or one or more series of Debt Securities.
The Debt Securities will be issued pursuant to an Indenture (the
"Indenture") between the Company and a financial institution identified therein
as trustee (the "Trustee"). The Securities Warrants will be issued under one or
more warrant agreements (each, a "Securities Warrant Agreement"), each to be
between the Company and a financial institution identified therein as warrant
agent (each, a "Warrant Agent").
In our capacity as your counsel in connection with such registration,
we are familiar with the proceedings taken and proposed to be taken by the
Company in connection with the authorization and issuance of the Securities, and
for the purposes of this opinion, have assumed such proceedings will be timely
completed in the manner presently proposed. In addition, we have made such legal
and factual examinations and inquiries, including an examination of originals or
copies, certified or otherwise identified to our satisfaction, of such
documents, corporate records, certificates of public officials and other
instruments as we have deemed necessary or advisable in connection with this
opinion, including (a) the Declaration of Trust of the Company and the Bylaws of
the Company, as amended, and (b) the Registration Statement. In our examination,
we have assumed the genuineness of all signatures, the legal capacity of natural
persons, the authenticity of all documents submitted to us as originals, the
conformity to original documents of all documents submitted to us as certified
or photostatic copies, the authenticity of the originals of such copies and the
authenticity of telegraphic or telephonic confirmations of public officials and
others. As to facts material to our opinion, we have relied upon certificates or
telegraphic or telephonic confirmations of public officials and certificates,
documents, statements and other information of the Company or representatives or
officers thereof.
The opinions set forth below address the effect on the subject
transaction only of the federal laws of the United States and the internal laws
of the State of Texas, and we express no opinion with respect to the
applicability thereto, or the effect thereon, of the laws of any other
jurisdiction.
Subject to the foregoing and the other matters set forth herein, it is
our opinion that, as of the date hereof:
<PAGE> 2
1. The Indenture has been duly authorized, executed and delivered by
the Company, and is the legally valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms.
2. The Debt Securities have been duly authorized by the Company, and
when the Debt Securities have been duly established by the Indenture, duly
authenticated by the Trustee and duly executed and delivered on behalf of the
Company against payment therefor in accordance with the terms and provisions of
the Indenture and as contemplated by the Registration Statement and/or the
applicable Prospectus Supplement, the Debt Securities will constitute legally
valid and binding obligations of the Company, enforceable against the Company in
accordance with their terms.
3. The Preferred Shares have been duly authorized by the Company, and
when the Preferred Shares have been duly established in accordance with the
terms of the Company's Articles Supplementary defining the rights and
preferences of the Preferred Shares, and applicable law, and, upon issuance,
delivery and payment therefor in the manner contemplated by the Registration
Statement and/or the applicable Prospectus Supplement, the Preferred Shares will
be validly issued, fully paid and nonassessable.
4. The Common Shares have been duly authorized, and upon issuance,
delivery and payment therefor in the manner contemplated by the Registration
Statement and/or the applicable Prospectus Supplement, will be validly issued,
fully paid and nonassessable.
5. The Warrant Agreements have been duly authorized and, when the final
terms thereof have been duly established, and when duly executed and delivered
by the Company will constitute the legally valid and binding agreements of the
Company, enforceable against the Company in accordance with their respective
terms.
6. The Securities Warrants have been duly authorized by the Company,
and when the final terms thereof have been duly established, and when duly
executed and delivered by the Company and countersigned by the applicable
Warrant Agent in accordance with the applicable Warrant Agreement and delivered
to and paid for by the purchasers thereof in the manner contemplated by the
Registration Statement and/or the applicable Prospectus Supplement, will
constitute legally valid and binding obligations of the Company, enforceable
against the Company in accordance with their respective terms.
The opinions set forth above are subject to the following exceptions,
limitations and qualifications: (i) the effect of bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to or affecting the rights and remedies of creditors; (ii) the effect
of general principles of equity whether enforcement is considered in a
proceeding in equity or at law, and the discretion of the court before which any
proceeding therefor may be brought, (iii) the unenforceability under certain
circumstances under law or court decisions of provisions providing for the
indemnification of or contribution to a party with respect to a liability where
such indemnification or contribution is contrary to public policy, (iv) we
express no opinion concerning the enforceability of the waiver of rights or
defenses contained in Section 514 of the Indenture, and (v) we express no
opinion with respect to whether acceleration of Debt Securities may affect the
collectability of any portion of the stated principal amount thereof which might
be determined to constitute unearned interest thereon.
To the extent that the obligations of the Company under the Indenture
may be dependent upon such matters, we assume for purposes of this opinion that
the Trustee is duly organized, validly existing and in good standing under the
laws of its jurisdiction of organization; that the Trustee is duly qualified to
engage in the activities contemplated by the Indenture, that the Indenture has
been duly authorized, executed and delivered by the Trustee and constitutes the
legally valid and binding obligation of the Trustee enforceable against the
Trustee in accordance with its terms; that the Trustee is in compliance,
generally with respect to acting as a trustee under the Indenture, with all
applicable laws and regulations; and that the Trustee has the requisite
organizational and legal power and authority to perform its obligations under
the Indenture.
To the extent that the obligations of the Company under each Warrant
Agreement may be dependent upon such matters, we assume for purposes of this
opinion that the Warrant Agent is duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization; that the Warrant
Agent is duly qualified to engage
<PAGE> 3
in the activities contemplated by the Warrant Agreement; that the Warrant
Agreement has been duly authorized, executed and delivered by the Warrant Agent
and constitutes the legally valid and binding obligation of the Warrant Agent
enforceable against the Warrant Agent in accordance with its terms; that the
Warrant Agent is in compliance, generally with respect to acting as a Warrant
Agent under the Warrant Agreement, with all applicable laws and regulations; and
that the Warrant Agent has the requisite organizational and legal power and
authority to perform its obligations under the Warrant Agreement.
We consent to your filing this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the caption "Legal
Matters" in the prospectus included therein. In giving this consent, we do not
thereby admit that we are in the category of persons whose consent is required
under Section 7 of the Securities Act or the rules and regulations of the
Commission.
This opinion is rendered only to you and is solely for your benefit in
connection with the transactions covered hereby. This opinion may not be relied
upon by you for any other purpose, or furnished to, quoted to, or relied upon by
any other person, firm or corporation for any purpose, without our prior written
consent.
Very truly yours,
/s/ Locke Liddell & Sapp LLP
<PAGE> 1
EXHIBIT 8.1
December 17, 1999
Camden Property Trust
Three Greenway Plaza
Suite 1300
Houston, Texas 77046
Ladies and Gentlemen:
These opinions are delivered to you in our capacity as counsel to
Camden Property Trust (the "Company") in connection with the Registration
Statement on Form S-3 (the "Registration Statement") filed with the Securities
and Exchange Commission (the "Commission"). These opinions relate to (1) the
Company's qualification for federal income tax purposes as a real estate
investment trust (a "REIT") under the Internal Revenue Code of 1986, as amended
(the "Code"), and (2) the accuracy of the section entitled "Federal Income Tax
Considerations and Consequences of Your Investment" (the "Prospectus Tax
Section") in the prospectus contained in the Registration Statement.
In rendering the following opinions, we have examined the Declaration
of Trust and Bylaws of the Company and such other records, certificates and
documents as we have deemed necessary or appropriate for purposes of rendering
the opinions set forth herein.
We have reviewed the descriptions set forth in the Registration
Statement of the Company and its investments, activities, operations and
governance. We have relied upon the facts set forth in the Registration
Statement and upon the factual representations of officers of the Company that
the company has been and will be owned and operated in such a manner that the
Company has and will continue to satisfy the requirements for qualification as a
REIT under the Code. We assume that the Company has been and will be operated in
accordance with applicable laws and the terms and conditions of applicable
documents. In addition, we have relied on certain additional facts and
assumptions described below.
In rendering the opinions set forth herein, we have assumed (i) the
genuineness of all signatures on documents we have examined, (ii) the
authenticity of all documents submitted to us as originals, (iii) the conformity
to the original documents of all documents submitted to us as copies, (iv) the
conformity of final documents to all documents submitted to us as drafts, (v)
the authority and capacity of the individual or individuals who executed any
such documents on behalf of any person, (vi) the accuracy and completeness of
all records made available to us and (vii) the factual accuracy of all
representations, warranties and other statements made by all parties. We have
also assumed, without investigation, that all documents, certificates,
representations, warranties and covenants on which we have relied in rendering
the opinions set forth below and that were given or dated earlier than the date
of this letter continue to remain accurate, insofar as relevant to the opinions
set forth herein, from such earlier date through and including the date of this
letter.
The discussion and conclusions set forth below are based upon the Code,
the Treasury Regulations and Procedure and Administration Regulations
promulgated thereunder and existing administrative and judicial interpretations
thereof, all of which are subject to change. No assurance can therefore be given
that the federal income tax consequences described below will not be altered in
the future.
Based upon and subject to the foregoing and the assumptions,
qualifications and factual matters in the Registration statement, and provided
that the Company continues to meet the applicable asset composition, source of
income, shareholder diversification, distribution and other requirements of the
Code necessary for a corporation to qualify as a REIT, we are of the opinion
that:
<PAGE> 2
1. The Company has met the requirements for qualification and
taxation as a REIT for each taxable year commending with the
taxable year ended December 31, 1993.
2. The diversity of equity ownership, operations through the date
of this opinion and proposed method of operation should allow
the Company to qualify as a REIT for the taxable year ending
December 31, 1999.
3. The discussion in the Prospectus Tax Section to the extent it
describes matters of law or legal conclusions is correct in
all material respects.
We express no opinion with respect to the transactions described herein
and in the Registration Statement other than those expressly set forth herein.
We assume no obligation to advise you of any changes in our opinion subsequent
to the delivery of this opinion letter. The Company's qualification and taxation
as a REIT depend upon the Company's ability to meet on a continuing basis,
through actual annual operating and other results, the various requirements
under the Code with regard to, among other things, the sources of its income,
the composition of its assets, the level of its distributions to shareholders,
and the diversity of its share ownership. Locke Liddell & Sapp LLP will not
review the Company's compliance with these requirements on a continuing basis.
Accordingly, no assurance can be given that the actual operating results of the
Company and the entities in which the Company owns interests, the sources of
their income, the nature of their assets, the level of distributions to
shareholders and the diversity of share ownership for any given taxable year
will satisfy the requirements under the Code for qualification and taxation as a
REIT. Additionally, you should recognize that our opinions are not binding on
the Internal Revenue Service (the "IRS") and that the IRS may disagree with the
opinions contained herein.
This opinion letter has been prepared and furnished to you solely for
use in connection with the filing of the Registration Statement. We hereby
consent to the use and filing of this opinion as an exhibit to the Registration
Statement and to all references to us in the Registration Statement. In giving
this consent, we do not admit that we are in the category of persons whose
consent is required under Section 7 of the Securities Act of 1933, as amended or
the rules and regulations of the Commission.
Very truly yours,
/s/ Locke Liddell & Sapp LLP
<PAGE> 1
EXHIBIT 12.1
CAMDEN PROPERTY TRUST
STATEMENT REGARDING COMPUTATION OF RATIOS
(In thousands, except for ratio amounts)
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED
------------------------ SEPTEMBER 30,
1998 1997 (1) 1996 (2) 1995 1994 1999 (3)
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
EARNINGS BEFORE FIXED CHARGES:
Income before minority interests $ 58,655 $ 40,093 $ 8,713 $ 12,330 $ 9,522 $ 54,350
Less: equity in income of joint ventures (1,312) (1,141) -- -- -- (472)
--------- --------- --------- --------- --------- ---------
57,343 38,952 8,713 12,330 9,522 53,878
Distributed income of joint ventures 2,350 1,939 -- -- -- 2,435
Less: interest capitalized (9,929) (3,338) (4,129) (5,321) (2,167) (12,306)
Less: preferred distribution of subsidiaries (5,392)
--------- --------- --------- --------- --------- ---------
Total earnings before fixed charges 49,764 37,553 4,584 7,009 7,355 38,615
--------- --------- --------- --------- --------- ---------
FIXED CHARGES:
Interest expense 50,467 28,537 17,336 13,843 8,807 42,227
Interest capitalized 9,929 3,338 4,129 5,321 2,167 12,306
Accretion of discount 169 142 -- -- -- 223
Loan amortization 785 864 825 720 1,079 507
Interest portion of rental expense 300 235 143 143 126 383
Preferred distribution of subsidiaries 5,392
--------- --------- --------- --------- --------- ---------
Total fixed charges 61,650 33,116 22,433 20,027 12,179 61,038
--------- --------- --------- --------- --------- ---------
Total earnings and fixed charges $ 111,414 $ 70,669 $ 27,017 $ 27,036 $ 19,534 $ 99,653
========= ========= ========= ========= ========= =========
RATIO OF EARNINGS TO FIXED CHARGES 1.81x 2.13x 1.20x 1.35x 1.60x 1.63x
RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED SHARE DIVIDENDS:
Total fixed charges $ 61,650 $ 33,116 $ 22,433 $ 20,027 $ 12,179 $ 61,038
Preferred share dividends 9,371 -- 4 39 20 7,029
--------- --------- --------- --------- --------- ---------
Total combined fixed charges and
preferred share dividends 71,021 33,116 22,437 20,066 12,199 68,067
--------- --------- --------- --------- --------- ---------
Total earnings and combined fixed
charges and preferred share dividends $ 120,785 $ 70,669 $ 27,021 $ 27,075 $ 19,554 $ 106,682
========= ========= ========= ========= ========= =========
RATIO OF EARNINGS TO COMBINED FIXED
CHARGES AND PREFERRED SHARE DIVIDENDS 1.70x 2.13x 1.20x 1.35x 1.60x 1.57x
</TABLE>
(1) Earnings include a $10,170 impact related to gain on sales of
properties. Excluding this impact, such ratios would be 1.83x.
(2) Earnings include a $(5,351) impact from the extinguishment of hedges
upon debt refinancing. Excluding the impact, such ratios would be
1.44x.
(3) Earnings include a $2,979 impact related to gain on sales of
properties. Excluding this impact, such ratios would be 1.58x and
1.52x.
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
Camden Property Trust on Form S-3 of our reports dated January 26, 1999, except
for Notes 3, 6, 11 and 12 as to which the date is February 23, 1999, appearing
in or incorporated by reference in the Annual Report on Form 10-K of Camden
Property Trust for the year ended December 31, 1998 and to the reference to us
under the heading "Experts" in the prospectus, which is part of this
Registration Statement.
/s/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Houston, Texas
December 17, 1999
