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As filed with the Securities and Exchange Commission on September 18, 1997
Registration No. 333-__________
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
URBAN SHOPPING CENTERS, INC.
(Exact Name of Registrant as Specified in Its Charter)
Maryland 36-3886885
(State of Incorporation) (I.R.S. Employer Identification Number)
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<S> <C> <C>
900 North Michigan Avenue Matthew S. Dominski Copy of Service to:
Suite 1500 900 North Michigan Avenue Edward J. Schneidman
Chicago, Illinois 60611 Suite 1500 Mayer, Brown & Platt
(312) 915-2000 Chicago, Illinois 60611 190 South LaSalle Street
(Address, Including Zip Code, (312) 915-2000 Chicago, Illinois 60603
and Telephone Number, Including (Name, Address, Including Zip
Area Code, of Registrant's Code, and Telephone Number, Including
Principal Executive Offices) Area Code, of Agent for Service)
</TABLE>
Approximate date of commencement of proposed sale to the public: From
time to time after the Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: [ ]
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box: [x]
If this form is 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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<CAPTION>
CALCULATION OF REGISTRATION FEE
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Proposed Maximum Aggregate
Title of Each Class of Security to Be Registered Offering Price Amount of Registration Fee(1)
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Series Preferred Stock, par value $.01 per share . . . . . . . (2) --
- -----------------------------------------------------------------------------------------------------------------------------
Depositary Shares . . . . . . . . . . . . . . . . . . . . . . . (3) --
- -----------------------------------------------------------------------------------------------------------------------------
Common Stock, par value $.01 per share . . . . . . . . . . . . (2)(4) --
- -----------------------------------------------------------------------------------------------------------------------------
Stock Warrants . . . . . . . . . . . . . . . . . . . . . . . . (2)(5) --
- -----------------------------------------------------------------------------------------------------------------------------
Stockholder Purchase Rights . . . . . . . . . . . . . . . . . . (6) --
- -----------------------------------------------------------------------------------------------------------------------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $250,000,000(7) $75,758
=============================================================================================================================
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(1) Pursuant to Rule 457(o) under the Securities Act of 1933, the
registration fee has been calculated on the basis of the maximum
aggregate offering price of all the securities listed.
(2) In no event will the aggregate offering price of Series Preferred
Stock, Common Stock and Stock Warrants registered under this
registration statement exceed $250,000,000 or the equivalent thereof
in one or more foreign currencies or composite currencies including
European Currency Units.
(3) There is hereby registered such indeterminate amount of Depositary
Shares which may be issued pursuant to a Deposit Agreement if
fractional interests in shares of the Series Preferred Stock
registered hereunder are offered to the public.
(4) There is hereby registered such indeterminate amount of Common Stock
as may be issued upon conversion of Series Preferred Stock registered
hereunder, for which no separate consideration will be received.
(5) Subject to footnote (2), there is hereby registered an indeterminate
amount of Preferred Stock Warrants and Common Stock Warrants
representing rights to purchase Series Preferred Stock and Common
Stock, respectively, registered hereunder.
(6) There is hereby registered such indeterminate amount of Stockholder
Purchase Rights as may be issued as a dividend, for which no separate
consideration will be received, to stockholders entitling such holders
to subscribe for and purchase securities registered hereunder.
(7) Pursuant to Rule 429 under the Securities Act of 1933, the prospectus
contained in this Registration Statement also relates to $117,762,500
of the listed securities which were registered on Registration
Statement No. 333-334 and with respect to which a fee of $68,966 was
previously paid.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
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Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
PROSPECTUS
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED SEPTEMBER 18, 1997
URBAN SHOPPING CENTERS, INC.
$367,762,500
PREFERRED STOCK, DEPOSITARY SHARES, COMMON STOCK,
STOCK WARRANTS AND RIGHTS
Urban Shopping Centers, Inc. (the "Company") may from time to time offer
and sell in one or more series (i) its series preferred stock, par value $.01
per share ("Preferred Stock"); (ii) depositary shares representing entitlement
to all rights and preferences of a fraction of a share of Preferred Stock of a
specified series ("Depositary Shares"); (iii) its common stock, par value $.01
per share ("Common Stock"); (iv) warrants to purchase Preferred Stock
("Preferred Stock Warrants") and warrants to purchase Common Stock ("Common
Stock Warrants" and, together with Preferred Stock Warrants, "Stock Warrants");
or (v) stockholder purchase rights entitling stockholders to subscribe for and
purchase Offered Securities (as defined below) ("Rights"), with an aggregate
public offering price of up to $367,762,500, on terms to be determined by market
conditions at the time of offering. The Preferred Stock, Depositary Shares,
Common Stock, Stock Warrants and Rights (collectively, the "Offered Securities")
may be offered separately or together, in separate series, in amounts, at prices
and on terms to be set forth in a supplement to this Prospectus (a "Prospectus
Supplement").
The specific terms of the Offered Securities in respect of which this
Prospectus is being delivered will be set forth in the applicable Prospectus
Supplement and will include, if applicable: (i) in the case of Preferred Stock,
the designation, any liquidation, dividend, redemption, conversion, voting and
other rights, whether interests in the Preferred Stock will be represented by
Depositary Shares, and the initial public offering price, along with any other
relevant specific terms; (ii) in the case of Common Stock, the initial public
offering price; (iii) in the case of Stock Warrants, the duration, exercise
price and detachability, if applicable, and the initial public offering price,
along with any other relevant specific terms; and (iv) in the case of Rights,
the kind and number of Offered Securities which will be offered pursuant to the
Rights, and the period during which and the price at which the Rights will be
exercisable, along with any other relevant specific terms. In addition, such
specific terms may include limitations on direct or beneficial ownership and
restrictions on transfer of the Offered Securities, in each case as may be
appropriate to preserve the status of the Company as a real estate investment
trust ("REIT") for Federal income tax purposes.
The applicable Prospectus Supplement will also contain information, if
applicable, about certain United States Federal income tax considerations
relating to, and any listing on a securities exchange of, the Offered Securities
covered by such Prospectus Supplement.
The Offered Securities may be offered directly by the Company, through
agents designated from time to time by the Company, or to or through
underwriters or dealers. If any agents or underwriters are involved in the sale
of any of the Offered Securities, their names, and any applicable purchase
price, fee, commission or discount arrangement between or among them, will be
set forth, or will be calculable from the information set forth, in the
applicable Prospectus Supplement. See "Plan of Distribution." No Offered
Securities may be sold without delivery of the applicable Prospectus Supplement
describing the method and terms of the offering of such Offered Securities.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
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The date of this Prospectus is , 1997
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy and information statements and other
information with the Securities and Exchange Commission (the "Commission").
Reports, proxy and information statements and other information filed by the
Company can be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549
and at its regional offices at Citicorp Center, 500 West Madison Street,
Chicago, Illinois 60661 and Seven World Trade Center, New York, New York 10048.
Copies of such material can be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. The Commission maintains a Web site that contains such reports, proxy and
information statements and other information at http://www.sec.gov. The
Company's outstanding Common Stock is listed on the New York Stock Exchange (the
"NYSE") and the Chicago Stock Exchange (the "CSE") under the symbol "URB", and
all reports, proxy and information statements and other information concerning
the Company may be inspected at the offices of the NYSE at 20 Broad Street, New
York, New York 10005 and at the offices of the CSE at One Financial Place, 440
South LaSalle Street, Chicago, Illinois 60605.
The Company has filed with the Commission a registration statement on
Form S-3 (together with all amendments and exhibits, the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act"),
with respect to the securities offered hereby. This prospectus ("Prospectus"),
which constitutes a part of the Registration Statement, does not contain all the
information set forth in the Registration Statement, certain parts of which are
omitted as permitted by the rules and regulations of the Commission. Statements
made in this Prospectus as to the content of any contract, agreement or other
document referred to are not necessarily complete. With respect to each such
contract, agreement or other document which is filed or incorporated by
reference as an exhibit to the Registration Statement, reference is made to the
exhibit for a more complete description, and each such statement shall be deemed
qualified in its entirety by such reference.
INCORPORATION BY REFERENCE
The following documents filed by the Company with the Commission (File
No. 1-12278) pursuant to the Exchange Act are incorporated by reference in this
Prospectus:
(1) The Company's Annual Report on Form 10-K for the year ended
December 31, 1996;
(2) The Company's Quarterly Reports on Form 10-Q for the quarters
ended March 31, 1997 and June 30, 1997; and
(3) The description of the Common Stock included in the Company's
Registration Statement on Form 8-A.
All documents subsequently filed by the Company pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the termination of the
offering made hereby shall be deemed to be incorporated by reference in this
Prospectus from the date of filing of such documents. Any statement contained in
a document incorporated or deemed to be incorporated by reference herein shall
be deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein, or in any subsequently filed document
which is incorporated or deemed to be incorporated by reference herein, modifies
or supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon written or oral
request of such person, a copy of any and all of the information that has been
incorporated by reference herein (not including exhibits to such information
unless such exhibits are specifically incorporated by reference in such
information). Requests should be directed to Urban Shopping Centers, Inc., 900
North Michigan Avenue, Suite 1500, Chicago, Illinois 60611, Attention:
Secretary, telephone (312) 915-2000.
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THE COMPANY
The Company is a self-administered REIT in the business of owning,
acquiring, managing, leasing, developing and redeveloping super- regional and
regional malls throughout the United States. It commenced operations in October
1993 and the outstanding Common Stock is listed on the NYSE and the CSE under
the symbol "URB".
The Company currently owns, through its ownership interest in Urban
Shopping Centers, L.P. (the "Operating Partnership"), interests in a portfolio
consisting of fifteen retail and mixed-use properties comprised of more than
twelve million square feet of retail space and approximately 1.2 million square
feet of office space. The Company also has a 1.2 million square foot regional
mall and a 450,000 square foot community center under development. The Company
opened the Brandon TownCenter in Tampa, Florida in 1995 and Wolfchase Galleria
in Memphis, Tennessee in February 1997. The Company's portfolio produced sales
per square foot of $351 in 1996, which it believes ranks among the highest in
the industry.
The Company owns interests in some of the premier shopping centers in
the United States including Oakbrook Center (Oak Brook, Illinois), Water Tower
Place (Chicago, Illinois), Old Orchard Center (Skokie, Illinois) and Copley
Place (Boston, Massachusetts) as well as in Urban Retail Properties Co. (the
"Management Company"), its property management, leasing and development
affiliate. The Management Company is one of the nation's largest retail
property managers, managing more than 56 million square feet of regional malls
and community centers in 22 states and the District of Columbia.
The Company's executive offices are located at 900 North Michigan
Avenue, Suite 1500, Chicago, Illinois 60611, and its telephone number is (312)
915-2000. The Company is a Maryland corporation that was incorporated on May
12, 1993.
USE OF PROCEEDS
Unless otherwise described in the applicable Prospectus Supplement,
the Company intends to use the net proceeds from the sale of the Offered
Securities for general corporate purposes, which may include acquisition and
development of regional malls and community centers, capital improvements to
existing Properties and repayment of certain then-outstanding secured or
unsecured indebtedness.
STOCK OF THE COMPANY
The authorized stock of the Company consists of 140,000,000 shares of
Common Stock, 5,000,000 shares of unit voting common stock, par value $.01 per
share ("Unit Voting Stock"), and 5,000,000 shares of Preferred Stock. No holder
of any class of stock of the Company will have any preemptive right to
subscribe to any securities of the Company except as may be granted by the
Company's Board of Directors (the "Board") in authorizing the issuance of a
class of Preferred Stock.
DESCRIPTION OF COMMON STOCK
GENERAL
The following description sets forth certain general terms and
provisions of the Common Stock to which any Prospectus Supplement may relate,
including a Prospectus Supplement which provides for Common Stock issuable
pursuant to subscription offerings or rights offerings or upon conversion of
Preferred Stock which is offered pursuant to such Prospectus Supplement and is
convertible into Common Stock for no additional consideration. The following
description of the terms of the Common Stock does not purport to be complete
and is subject to and qualified in its entirety by reference to the Company's
Charter and Bylaws.
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The outstanding shares of Common Stock are fully paid and
nonassessable. Each outstanding share of Common Stock entitles the holder to
one vote on all matters requiring a vote of stockholders, including the
election of directors. Holders of Common Stock are entitled to such
distributions as may be authorized from time to time by the Board out of assets
legally available therefor. The Company currently pays regular quarterly
dividends. Upon any liquidation, dissolution or winding up of the Company,
holders of outstanding shares of Common Stock and Unit Voting Stock will be
entitled to share ratably in the assets of the Company remaining after payment
of, or adequate provision for, all debts and liabilities of the Company,
subject to the rights of holders of any Preferred Stock. The rights of holders
of Common Stock are subject to the rights and preferences established by the
Board for any Preferred Stock which may subsequently be issued by the Company.
See "Description of Preferred Stock." First Chicago Trust Company of New York
is the transfer agent and registrar for the Common Stock.
UNIT VOTING STOCK
The outstanding shares of Unit Voting Stock are fully paid and
nonassessable. Each outstanding share of Unit Voting Stock entitles the holder
to 25 votes on all matters requiring a vote of stockholders, including the
election of directors. Holders of Unit Voting Stock are entitled to share
equally with the holders of Common Stock in such distributions as may be
authorized from time to time by the Board out of assets legally available
therefor. Upon any liquidation, dissolution or winding up of the Company,
holders of outstanding shares of Unit Voting Stock will be entitled to share
ratably with holders of outstanding shares of Common Stock in the assets of the
Company remaining after payment of, or adequate provision for, all debts and
liabilities of the Company, subject to the rights of holders of any Preferred
Stock. Shares of Unit Voting Stock are freely transferrable, subject to
applicable securities law limitations. In addition, upon any transfer of Unit
Voting Stock (other than transfers to affiliates of the transferor) each share
of Unit Voting Stock so transferred shall be automatically converted into a
share of Common Stock on the same basis as discussed below.
The Company's Charter provides that, at the time of any issuance of
Unit Voting Stock, the outstanding Unit Voting Stock as a class, after giving
effect to such issuance, may not exceed 40% of the voting power of the
then-outstanding stock of the Company entitled to vote in the election of
directors. Further, Unit Voting Stock may only be issued to any person to
provide such person a voting interest in the Company which does not exceed such
person's economic interest in the Operating Partnership.
EXCHANGE OF UNITS AND UNIT VOTING STOCK INTO COMMON STOCK
Any holder of Units and Unit Voting Stock may exchange one share of
Unit Voting Stock together with 24 Units for 25 shares of Common Stock at any
time. Upon any such exchange, the shares of Unit Voting Stock will be returned
to the authorized but unissued shares of Unit Voting Stock.
RESTRICTIONS ON TRANSFER
The Company's Charter contains certain limitations on the number of
shares of Common Stock that individual stockholders may own. For the Company to
qualify as a REIT under the Internal Revenue Code of 1986, as amended (the
"Code"), no more than 50% in value of its stock (after taking into account
options to acquire stock) may be owned, directly or indirectly, by five or
fewer individuals (as defined in the Code to include certain entities and
constructive ownership among specified family members) during the last half of
a taxable year or during a proportionate part of a shorter taxable year. The
Common Stock must also be beneficially owned by 100 or more persons during at
least 335 days of a taxable year or during a proportionate part of a shorter
taxable year. Because the Company expects to continue to qualify as a REIT, the
Company's Charter contains limitations on the ownership of its stock intended
to ensure compliance with these requirements.
Subject to certain exceptions specified in the Company's Charter, no
holder may own, or be deemed to own by virtue of the attribution provisions of
the Code, more than 4.9% (the "Ownership Limit") of the number or value of the
issued and outstanding stock of the Company. The Board, upon receipt of a
ruling from the Internal Revenue Service (the "Service"), an opinion of counsel
or other evidence satisfactory to the Board and upon such other conditions as
the Board may direct, may exempt a proposed transferee from the Ownership
Limit. As a condition of such exemption, the intended transferee must give
written notice to the Company of the proposed transfer no later
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than the fifteenth day prior to any transfer which, if consummated, would
result in the intended transferee owning stock in excess of the Ownership
Limit. The Board may require such opinions of counsel, affidavits, undertakings
or agreements as it may deem necessary or advisable in order to determine or
ensure the Company's status as a REIT. Any transfer of Common Stock that would
(i) result in a direct or beneficial ownership of the Company's stock in excess
of the Ownership Limit, (ii) result in the Company's stock being owned by fewer
than 100 persons or (iii) result in the Company being "closely held" within the
meaning of Section 856(h) of the Code, will be null and void, and the intended
transferee will acquire no rights to the Common Stock. The foregoing
limitations on ownership and restrictions on transfer will not apply if the
Board determines, which determination must be approved by the stockholders,
that it is no longer in the best interests of the Company to attempt to
qualify, or to continue to qualify, as a REIT.
The Company's Charter excludes from the foregoing ownership limitation
JMB Realty Corporation ("JMB Realty") and certain of its affiliates who would
exceed the Ownership Limit as a result of the exchange of Units or Unit Voting
Stock for Common Stock. These persons may also acquire additional stock through
the Company's option plan or dividend reinvestment plan, but in no event will
such persons be entitled to acquire additional stock such that the five largest
beneficial owners of the Company's stock beneficially own more than 50% of the
total outstanding stock. The Board has exempted Messrs. Neil Bluhm and Judd
Malkin and their respective families from the foregoing ownership limitations,
provided that neither the Bluhm family nor the Malkin family may beneficially
own in excess of 30% of the outstanding Common Stock or together beneficially
own in excess of 35% of the outstanding Common Stock.
All certificates representing shares of the Company's stock will bear a
legend referring to the restrictions described above.
DESCRIPTION OF PREFERRED STOCK
GENERAL
No shares of Preferred Stock are currently outstanding. The Board is
authorized, without the approval of the stockholders, to cause shares of
Preferred Stock to be issued in one or more series, to determine the number of
shares of each series and to set the preferences, conversion or other rights,
voting powers, restrictions, limitations as to dividends, qualifications and
terms or conditions of redemption of each series, which may be senior to the
rights of Common Stock or Unit Voting Stock.
The following description sets forth certain general terms and
provisions of the Preferred Stock to which any Prospectus Supplement may
relate. The following description of the general terms of the Preferred Stock
does not purport to be complete and is subject to and qualified in its entirety
by reference to the Company's Charter and Bylaws. Reference is made to the
Prospectus Supplement relating to the series of Preferred Stock offered thereby
for the specific terms of such Preferred Stock, including:
(1) The designation of such series of Preferred Stock;
(2) The number of shares of such series of Preferred Stock offered, the
liquidation preference per share and the initial public offering price per
share of such series of Preferred Stock;
(3) The dividend rate(s), period(s) and/or payment date(s) or method(s)
of calculation thereof applicable to such series of Preferred Stock;
(4) The date from which dividends on such series of Preferred Stock
shall cumulate, if applicable;
(5) The procedures for the auction and remarketing, if any, for such
series of Preferred Stock;
(6) The provisions for a sinking fund, if any, for such series of
Preferred Stock;
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(7) The terms and conditions of redemption, if applicable, of such
series of Preferred Stock;
(8) Any listing of such series of Preferred Stock on any securities
exchange;
(9) The terms and conditions upon which such series of Preferred Stock
will be convertible into Common Stock, if applicable, including the conversion
price (or manner of calculation thereof);
(10) Whether interests in such series of Preferred Stock will be
represented by global securities;
(11) A discussion of Federal income tax considerations applicable to
such series of Preferred Stock;
(12) The relative ranking and preferences of such series of Preferred
Stock as to dividends and in the distribution of assets;
(13) Any limitations on issuance of any series of Preferred Stock
ranking senior to or on a parity with such series of Preferred Stock as to
dividends and in the distribution of assets;
(14) Any limitations on direct or beneficial ownership and restrictions
on transfer of such series of Preferred Stock, in each case as may be
appropriate to preserve the status of the Company as a REIT; and
(15) Any other specific preferences, rights, voting powers,
restrictions, limitations as to dividends or qualifications of such series of
Preferred Stock.
RANKING
Unless otherwise specified in the applicable Prospectus Supplement,
each series of Preferred Stock will, as to dividends and in the distribution of
assets, rank (i) senior to all classes or series of Common Stock and Unit
Voting Stock and to all other equity securities ranking junior to such series
of Preferred Stock; (ii) on a parity with all equity securities issued by the
Company the terms of which specifically provide that such equity securities
rank on a parity with such series of Preferred Stock; and (iii) junior to all
equity securities issued by the Company the terms of which specifically provide
that such equity securities rank senior to such series of Preferred Stock. The
rights of the holders of each series of Preferred Stock will be subordinate to
those of the Company's general creditors.
DIVIDENDS
The holders of each series of Preferred Stock will be entitled to
receive, when, as and if declared by the Board, out of funds legally available
for that purpose, cash dividends at such rates and on such dates as will be set
forth in the applicable Prospectus Supplement. Such rates may be fixed or
variable or both. Dividends will be payable to holders of record as they appear
in the stock records of the Company on such record dates as are fixed by the
Board.
Dividends on any series of Preferred Stock may be cumulative or
non-cumulative, as provided in the applicable Prospectus Supplement.
Dividends, if cumulative, will begin to accrue and will be fully cumulative
from the date set forth in the applicable Prospectus Supplement. If the Board
fails to declare a dividend payable on a dividend payment date on any series of
Preferred Stock for which dividends are non- cumulative, then the holders of
such Preferred Stock will have no right to receive a dividend in respect of the
dividend period ending on such dividend payment date, and the Company will have
no obligation to pay the dividend accrued for such period, whether or not
dividends on such Preferred Stock are declared payable on any future dividend
payment date. No interest, or sum of money in lieu of interest, will be payable
in respect of any dividend payment or payments on any series of Preferred Stock
which may be in arrears.
So long as any shares of any series of Preferred Stock are outstanding,
no full dividends may be declared or paid or set apart for payment on any other
stock of the Company ranking on a parity with such series of Preferred Stock as
to dividends ("Dividend Parity Stock") for any period unless (i) if such series
of Preferred Stock
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has a cumulative dividend, full cumulative dividends have been or
contemporaneously are paid or declared and a sum sufficient for the payment
thereof set apart for such payments for all past dividend periods and the then
current dividend period with respect to such series of Preferred Stock or (ii)
if such series of Preferred Stock does not have a cumulative dividend, full
dividends have been or contemporaneously are paid or declared and a sum
sufficient for the payment thereof set apart for such payments for the then
current dividend period with respect to such series of Preferred Stock. When
dividends are not paid in full, or a sum sufficient for the payment thereof is
not set apart for payment, on any series of Preferred Stock and any Dividend
Parity Stock, all dividends declared on such series of Preferred Stock and such
Dividend Parity Stock will be declared ratably in proportion to the amount of
dividends accrued and unpaid on such series of Preferred Stock (which will not
include any cumulation in respect of unpaid dividends for past dividend periods
if such series of Preferred Stock does not have a cumulative dividend) and on
such Dividend Parity Stock.
So long as any shares of any series of Preferred Stock are outstanding,
except as provided in the immediately preceding paragraph, no dividends (other
than in Common Stock or other stock of the Company ranking junior to such
series of Preferred Stock as to dividends and in the distribution of assets
("Fully Junior Stock")) may be declared or paid or set apart for payment or
other distribution may be declared or made on the Common Stock or any other
stock of the Company ranking junior to such series of Preferred Stock as to
dividends or in the distribution of assets ("Junior Stock"), nor may any Junior
Stock be redeemed, purchased or otherwise acquired for any consideration (or
any moneys be paid to or made available for a sinking fund for the redemption
of any Junior Stock) by the Company (except by conversion into or exchange for
Fully Junior Stock) unless (i) if such series of Preferred Stock has a
cumulative dividend, full cumulative dividends have been or contemporaneously
are paid or declared and a sum sufficient for the payment thereof set apart for
such payments for all past dividend periods and the then current dividend
period with respect to such series of Preferred Stock or (ii) if such series of
Preferred Stock does not have a cumulative dividend, full dividends have been
or contemporaneously are paid or declared and a sum sufficient for the payment
thereof set apart for such payments for the then current dividend period with
respect to such series of Preferred Stock.
Any dividend payment made on a series of Preferred Stock will first be
credited against the earliest accrued but unpaid dividend due with respect to
such series of Preferred Stock which remains payable.
REDEMPTION
If so provided in the applicable Prospectus Supplement, a series of
Preferred Stock will be subject to mandatory redemption or redemption at the
option of the Company, in whole or in part, in each case upon the terms, at the
times and at the redemption prices set forth in such Prospectus Supplement.
The Prospectus Supplement relating to a series of Preferred Stock that
is subject to mandatory redemption will specify the number of shares of such
series of Preferred Stock that will be redeemed by the Company in each year
commencing after a specified date, and the redemption price per share which
will include all dividends thereon accrued and unpaid, if any, to the date
fixed for redemption, without interest (which will not include any cumulation
in respect of unpaid dividends for past dividend periods if such series of
Preferred Stock does not have a cumulative dividend). The redemption price may
be payable in cash or other property, as specified in the applicable Prospectus
Supplement. If the redemption price for any series of Preferred Stock is
payable solely out of the sale proceeds of stock of the Company, the terms of
such series of Preferred Stock may provide that, if no such stock has been
issued or to the extent the sale proceeds from such stock are insufficient to
pay in full the aggregate redemption price then due, shares of such series of
Preferred Stock will automatically and mandatorily be converted into shares of
the applicable stock of the Company pursuant to conversion provisions specified
in the applicable Prospectus Supplement. If fewer than all the outstanding
shares of any series of Preferred Stock are to be redeemed, the shares to be
redeemed will be selected by the Company by lot or pro rata or by any other
method determined by the Company.
Notwithstanding the foregoing, unless (i) if such series of Preferred
Stock has a cumulative dividend, full cumulative dividends have been or
contemporaneously are paid or declared and a sum sufficient for the payment
thereof set apart for such payments for all past dividend periods and the then
current dividend period with respect to such series of Preferred Stock and any
other stock of the Company ranking on a parity with such series of
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Preferred Stock as to distributions and in the distribution of assets ("Parity
Stock") or (ii) if such series of Preferred Stock does not have a cumulative
dividend, full dividends have been or contemporaneously are paid or declared
and a sum sufficient for the payment thereof set apart for such payments for
the then current dividend period with respect to such series of Preferred Stock
and any Parity Stock, the Preferred Stock of such series may not be redeemed
and the Company may not purchase or otherwise acquire any Preferred Stock of
such series, except pursuant to a purchase or exchange offer made on the same
terms to all holders of outstanding Preferred Stock of such series or by
conversion into or exchange for Fully Junior Stock.
Notice of the redemption of any Preferred Stock of any series will be
mailed not less than 30 days nor more than 90 days prior to the redemption date
to each holder of record of such series of Preferred Stock at the address of
such holder as shown on the Company's stock records. Each notice shall state:
(i) the redemption date; (ii) the number of shares of such series of Preferred
Stock to be redeemed; (iii) the redemption price; (iv) the place or places at
which certificates representing such Preferred Stock are to be surrendered; (v)
that dividends on such Preferred Stock will cease to accrue on such redemption
date; and (vi) the date upon which the holder's conversion rights, if any, as
to such Preferred Stock will terminate. If fewer than all the shares of any
series of Preferred Stock are to be redeemed, the notice mailed to each such
holder will also specify the number of shares of such series of Preferred Stock
to be redeemed from such holder. If notice of redemption of any Preferred Stock
has been mailed and if the Company has deposited the funds necessary for such
redemption in trust, for the benefit of the holders of the Preferred Stock so
called for redemption, then from and after the redemption date; dividends will
cease to accrue on such Preferred Stock, such Preferred Stock will no longer be
deemed outstanding and all rights of the holders of such Preferred Stock will
terminate, except the right to receive the redemption price.
LIQUIDATION PREFERENCE
Upon any liquidation, dissolution or winding up of the Company, whether
voluntary or involuntary, before any payment or distribution is made to or set
apart for the holders of any Common Stock or any other stock of the Company
ranking junior to such series of Preferred Stock in the distribution of assets
("Liquidation Junior Stock"), the holders of each series of Preferred Stock
will be entitled to receive out of assets of the Company legally available for
that purpose, liquidating distributions in the amount of the liquidation
preference per share (as specified in the applicable Prospectus Supplement),
plus an amount equal to all dividends (whether or not earned or declared)
thereon accrued and unpaid, if any (which will not include any cumulation in
respect of unpaid dividends for past dividend periods if such series of
Preferred Stock does not have a cumulative dividend); but the holders of such
series of Preferred Stock will not be entitled to any further payment. If, upon
any liquidation, dissolution or winding up of the Company, the assets of the
Company are insufficient to pay in full such preferential amount with respect
to such series of Preferred Stock and the corresponding amounts with respect to
all other stock of the Company ranking on a parity with such series of
Preferred Stock in the distribution of assets ("Liquidation Parity Stock"),
then such assets will be distributed among the holders of such series of
Preferred Stock and such Liquidation Parity Stock in proportion to the full
liquidating distributions to which they would otherwise be respectively
entitled.
Subject to the rights of the holders of any class or series of stock of
the Company ranking on a parity with or senior to such series of Preferred
Stock in the distribution of assets, upon any liquidation, dissolution or
winding up of the Company, whether voluntary or involuntary, after payment has
been made in full to all holders of a series of Preferred Stock, the remaining
assets of the Company will be distributed among the holders of any Liquidation
Junior Stock, according to their respective rights and preferences and in each
case according to their respective number of shares.
For the above purposes, a consolidation or merger of the Company with
or into any other entity, a sale or transfer of all or substantially all of the
Company's assets or a statutory share exchange will not be deemed to be a
liquidation, dissolution or winding up of the Company.
VOTING RIGHTS
Holders of each series of Preferred Stock will not have any voting
rights, except as set forth below or in the applicable Prospectus Supplement or
as otherwise required by applicable law. The following is a summary of
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the voting rights that, unless provided otherwise in the applicable Prospectus
Supplement, will apply to each series of Preferred Stock.
If and whenever six quarterly dividends (whether or not consecutive)
payable on any series of Preferred Stock or any Parity Stock are in arrears,
whether or not earned or declared, the number of directors then constituting
the Board will be increased by two, and the holders of such series of Preferred
Stock, together with the holders of any such Parity Stock, voting as a single
class, will have the right to elect two additional directors to serve on the
Board at the next annual meeting of stockholders or a special meeting of the
holders of such series of Preferred Stock and such Parity Stock and at each
subsequent annual meeting of stockholders until all such dividends in arrears
have been paid and a sum sufficient for the payment thereof has been set apart
for payment of the distribution for the current distribution period with
respect to such series of Preferred Stock and such Parity Stock. The term of
office of all directors so elected will terminate with the termination of such
voting rights. For so long as JMB Realty and its affiliates beneficially own in
excess of 10% of the outstanding Common Stock, in any such vote by holders of
such series of Preferred Stock and such Parity Stock, any Preferred Stock of
such series and Parity Stock beneficially owned by JMB Realty and its
affiliates will be voted in the same percentages as Preferred Stock of such
series and Parity Stock that is not beneficially owned by JMB Realty and its
affiliates.
The approval of two-thirds of the outstanding Preferred Stock of any
series and all series of Parity Stock similarly affected, voting as a single
class, will be necessary in order to (i) amend the Company's Charter to
materially and adversely affect the voting powers, rights or preferences of the
holders of such series of Preferred Stock, (ii) enter into a share exchange
that affects such series of Preferred Stock, consolidate with or merge into
another entity, or permit another entity to consolidate with or merge into the
Company, unless in each such case, each share of Preferred Stock of such series
remains outstanding without a material and adverse change to its terms and
rights or is converted into or exchanged for preferred stock of the surviving
entity having preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications and terms or
conditions of redemption identical to those of a share of Preferred Stock of
such series (except for changes that do not materially and adversely affect the
holders of such series of Preferred Stock) or (iii) authorize, reclassify,
create or increase the authorized amount of any class of stock ranking senior
to such series of Preferred Stock in the payment of dividends or in the
distribution of assets. However, the Company may create additional classes and
series of Parity Stock, Junior Stock and Fully Junior Stock, increase the
authorized number of shares of such stock and issue additional series of such
stock without the consent of any holder of such series of Preferred Stock.
Except as provided above and as required by law, the holders of each
series of Preferred Stock will not be entitled to vote on any merger or
consolidation involving the Company or a sale of all or substantially all of
the assets of the Company.
CONVERSION RIGHTS
The terms and conditions, if any, upon which any series of Preferred
Stock is convertible into Common Stock will be set forth in the applicable
Prospectus Supplement. Such terms will include the number of shares of Common
Stock into which each share of such series of Preferred Stock is convertible,
the conversion price (or manner of calculation thereof), the conversion period,
provisions as to whether conversion will be at the option of the holders of
such series of Preferred Stock or the Company, the events requiring an
adjustment of the conversion price and provisions affecting conversion upon the
redemption of such series of Preferred Stock.
RESTRICTIONS ON TRANSFER
See "Description of Common Stock--Restrictions on Transfer" for a
discussion of the limitations on ownership and restrictions on transfer of
stock of the Company. In order to enable the Company to continue to qualify as
a REIT, the Articles Supplementary for each series of Preferred Stock may
contain certain limitations on ownership and restrictions on transfer of such
series of Preferred Stock. Any such limitations and restrictions will be
described in the applicable Prospectus Supplement.
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DESCRIPTION OF DEPOSITARY SHARES
GENERAL
The Company may, at its option, elect to offer fractional shares of
Preferred Stock, rather than full shares of Preferred Stock. In such event, the
Company will issue to the public receipts for Depositary Shares, each of which
will represent a fraction (to be set forth in the Prospectus Supplement
relating to a particular series of Preferred Stock) of a share of a particular
series of Preferred Stock as described below.
The shares of any series of Preferred Stock represented by Depositary
Shares will be deposited under a Deposit Agreement (the "Deposit Agreement") to
be entered into between the Company and a depositary specified in the
applicable Prospectus Supplement (the "Depositary"). Subject to the terms of
the Deposit Agreement, each owner of a Depositary Share will be entitled, in
proportion to the applicable fraction of a share of Preferred Stock represented
by such Depositary Share, to all the rights and preferences of the Preferred
Stock represented thereby (including liquidation, dividend, redemption and
voting rights).
The Depositary Shares will be evidenced by depositary receipts
("Depositary Receipts") issued pursuant to the Deposit Agreement. Depositary
Receipts will be distributed to the persons purchasing the fractional shares of
Preferred Stock in accordance with the terms of the offering. The following
description of certain terms of the Deposit Agreement and the Depositary
Receipts does not purport to be complete and is subject to and qualified in its
entirety by reference to the Deposit Agreement and the Depositary Receipts,
which will be filed as exhibits to a document incorporated by reference in this
Prospectus, are hereby incorporated herein by reference from the date of such
filing and will be available from such date as described above under "Available
Information."
DIVIDENDS AND OTHER DISTRIBUTIONS
The Depositary will distribute all cash dividends received in respect
of the Preferred Stock to the record holders of Depositary Shares relating to
such Preferred Stock in proportion to the number of Depositary Shares owned by
such holders. The Depositary will distribute only such amount, however, as can
be distributed without attributing to any holder of Depositary Shares a
fraction of one cent, and the balance not so distributed will be added to and
treated as part of the next sum received by the Depositary for distribution to
record holders of Depositary Shares.
If there is a noncash distribution, the Depositary will distribute
property received by it to the record holders of Depositary Shares entitled
thereto, unless the Depositary determines that it is not feasible to make such
distribution, in which case the Depositary may, with the approval of the
Company, sell such property and distribute the net proceeds from such sale to
such holders.
The Deposit Agreement will also contain provisions relating to the
manner in which any subscription or similar rights offered by the Company to
holders of the Preferred Stock will be made available to holders of the
Depositary Shares.
REDEMPTION
If a series of Preferred Stock represented by Depositary Shares is
subject to redemption, the Depositary Shares will be redeemed from the proceeds
received by the Depositary resulting from the redemption, in whole or in part,
of the Preferred Stock held by the Depositary. The redemption price per
Depositary Share will be equal to the applicable fraction of the redemption
price per share payable with respect to such Preferred Stock. Whenever the
Company redeems shares of Preferred Stock held by the Depositary, the
Depositary will redeem as of the same redemption date the number of Depositary
Shares representing the shares of Preferred Stock so redeemed. If fewer than
all the outstanding Depositary Shares are to be redeemed, the Depositary Shares
to be redeemed will be selected by the Depositary, by lot or pro rata or by any
other method determined by the Depositary. From and after the redemption date,
all rights of the holders of the Depositary Shares so called for redemption
will terminate, except the right to receive the redemption price.
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VOTING RIGHTS
Upon receipt of notice of any meeting at which the holders of a series
of Preferred Stock represented by Depositary Shares are entitled to vote, the
Depositary will mail the information contained in such notice of meeting to the
record holders of the Depositary Shares relating to such series of Preferred
Stock. Each record holder of such Depositary Shares on the record date (which
will be the same date as the record date for such series of Preferred Stock)
will be entitled to instruct the Depositary as to the exercise of the voting
rights pertaining to the amount of such series of Preferred Stock represented
by such holder's Depositary Shares. The Depositary will endeavor, insofar as
practicable, to vote the amount of such series of Preferred Stock represented
by such holder's Depositary Shares in accordance with such instructions, and
the Company will agree to take all action which may be deemed necessary by the
Depositary in order to enable the Depositary to do so. The Depositary may
abstain from voting Preferred Stock to the extent it does not receive specific
instructions from the holders of Depositary Shares representing such Preferred
Stock.
AMENDMENT AND TERMINATION OF THE DEPOSIT AGREEMENT
The form of Depositary Receipt evidencing the Depositary Shares and any
provision of the Deposit Agreement may at any time be amended by agreement
between the Company and the Depositary. However, any amendment that materially
and adversely affects the rights of the holders of Depositary Shares will not
be effective unless such amendment has been approved by a majority of the
outstanding Depositary Shares. The Deposit Agreement may be terminated by the
Company or the Depositary only if (i) all outstanding Depositary Shares have
been redeemed or (ii) there has been a final distribution in respect of the
Preferred Stock in connection with any liquidation, dissolution or winding up
of the Company and such distribution has been distributed to the holders of
Depositary Receipts.
CHARGES OF DEPOSITARY
The Company will pay all transfer and other taxes and governmental
charges arising solely from the existence of the depositary arrangements. The
Company will pay charges of the Depositary in connection with the initial
deposit of the Preferred Stock and any redemption of the Preferred Stock.
Holders of Depositary Receipts will pay other transfer and other taxes and
governmental charges and such other charges, including a fee for the withdrawal
of shares of Preferred Stock upon surrender of Depositary Receipts, as are
expressly provided in the Deposit Agreement.
MISCELLANEOUS
The Depositary will forward to holders of Depositary Receipts all
reports and communications from the Company that are delivered to the
Depositary and that the Company is required to furnish to holders of Preferred
Stock.
Neither the Depositary nor the Company will be liable if it is
prevented or delayed by law or any circumstance beyond its control in
performing its obligations under the Deposit Agreement. The obligations of the
Company and the Depositary under the Deposit Agreement will be limited to
performance in good faith of their duties thereunder and they will not be
obligated to prosecute or defend any legal proceeding in respect of any
Depositary Shares or Preferred Stock unless satisfactory indemnity is
furnished. They may rely on written advice of counsel or accountants, or on
information provided by persons presenting Preferred Stock for deposit, holders
of Depositary Receipts or other persons believed to be competent and on
documents believed to be genuine.
RESIGNATION AND REMOVAL OF DEPOSITARY
The Depositary may resign at any time by delivering to the Company
notice of its election to do so, and the Company may at any time remove the
Depositary, with any such resignation or removal to take effect upon the
appointment of a successor Depositary and its acceptance of such appointment.
Such successor Depositary must be appointed within 60 days after delivery of
the notice of resignation or removal.
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RESTRICTIONS ON TRANSFER
In order to enable the Company to continue to qualify as a REIT, the
Deposit Agreement may contain certain limitations on ownership and restrictions
on transfer of Depositary Shares. Any such limitations and restrictions will be
described in the applicable Prospectus Supplement and will be referenced on the
applicable Depositary Receipts.
DESCRIPTION OF STOCK WARRANTS
GENERAL
The Company may issue Stock Warrants for the purchase of Preferred
Stock or Common Stock. Stock Warrants may be issued independently or together
with any other Offered Securities offered by any Prospectus Supplement and may
be attached to or separate from such Offered Securities. Each series of Stock
Warrants will be issued under a separate warrant agreement (each, a "Warrant
Agreement") to be entered into between the Company and a warrant agent
specified in the applicable Prospectus Supplement (the "Warrant Agent"). The
Warrant Agent will act solely as an agent of the Company in connection with the
Stock Warrants of such series and will not assume any obligation or
relationship of agency or trust for or with any holders or beneficial owners of
Stock Warrants.
If Stock Warrants are offered, the applicable Prospectus Supplement
will describe the terms of such Stock Warrants, including the following, if
applicable: (i) the initial public offering price; (ii) the aggregate number of
shares purchasable upon exercise of such Stock Warrants, the exercise price,
and in the case of Stock Warrants for Preferred Stock, the designation and
terms of the series of Preferred Stock purchasable upon exercise of such Stock
Warrants; (iii) the designation and terms of any series of Preferred Stock with
which such Stock Warrants are being offered and the number of such Stock
Warrants being offered with such Preferred Stock; (iv) the date, if any, from
and after which such Stock Warrants and the related Preferred Stock or Common
Stock will be transferable separately; (v) the date on which the right to
exercise such Stock Warrants shall commence and the expiration date; (vi) any
special United States Federal income tax consequences; and (vii) any other
material terms of such Stock Warrants.
The following description of certain terms of the Warrant Agreement
and the Stock Warrants does not purport to be complete and is subject to and
qualified in its entirety by reference to the Stock Warrant Agreement and the
certificates relating to each series of Stock Warrants, which will be filed as
exhibits to a document incorporated by reference in this Prospectus, are hereby
incorporated herein by reference from the date of such filing and will be
available from such date as described above under "Available Information."
EXERCISE AND TRANSFER OF STOCK WARRANTS
Each Stock Warrant will entitle the holder thereof to purchase such
number of shares of Preferred Stock or Common Stock, as the case may be, at
such exercise price as will in each case be set forth in, or calculable from
the information set forth in, the applicable Prospectus Supplement. After the
close of business on the Expiration Date (or such later date to which such
Expiration Date may be extended by the Company), unexercised Stock Warrants
will become void.
Stock Warrant certificates may be exchanged for new Stock Warrant
certificates of different denominations, may (if in registered form) be
presented for registration of transfer, and may be exercised at the corporate
trust office of the Warrant Agent or any other office indicated in the
applicable Prospectus Supplement. Prior to the exercise of any Stock Warrants,
holders of such Stock Warrants will not have any rights of holders of Preferred
Stock or Common Stock, including dividend and voting rights.
Stock Warrants may be exercised by delivering to the Warrant Agent
payment as provided in the applicable Prospectus Supplement of the amount
required to purchase the Preferred Stock or Common Stock, as the case may be,
purchasable upon such exercise together with certain information set forth on
the reverse side of the Stock
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Warrant certificate. Stock Warrants will be deemed to be exercised upon receipt
of payment of the exercise price, subject to the receipt within five business
days of the applicable Stock Warrant certificate. Upon receipt of such payment
and the certificate properly completed and duly executed at the corporate trust
office of the Warrant Agent or any other office indicated in the applicable
Prospectus Supplement, the Company will, as soon as practicable, issue and
deliver the Preferred Stock or Common Stock, as the case may be, purchasable
upon such exercise. If fewer than all the Stock Warrants represented by such
certificate are exercised, a new certificate will be issued for the remaining
amount of Stock Warrants.
ADJUSTMENTS
Unless otherwise indicated in the applicable Prospectus Supplement,
the exercise price of, and the number of shares of Common Stock purchasable
upon exercise of a Common Stock Warrant will be subject to adjustment in
certain events, including (i) the payment of a dividend on the Common Stock
payable in stock and stock splits, combinations or reclassifications of the
Common Stock; (ii) the issuance to all holders of Common Stock of rights or
warrants to subscribe for or purchase shares of Common Stock at less than their
current market price (as defined in the applicable Warrant Agreement); and
(iii) certain distributions of evidences of indebtedness or assets (including
securities but excluding cash dividends or distributions paid out of
consolidated earnings or retained earnings or dividends payable in Common
Stock) or of subscription rights and warrants (excluding those referred to
above).
No adjustment in the exercise price of, or the number of shares of
Common Stock purchasable upon exercise of a Common Stock Warrant will be made
for regular quarterly or other periodic or recurring cash dividends or
distributions or for cash dividends or distributions to the extent paid out of
consolidated earnings or retained earnings. No adjustment will be required
unless such adjustment would require a change of at least 1% in the exercise
price then in effect. Except as stated above, the exercise price of, and the
number of shares of Common Stock purchasable upon exercise of a Common Stock
Warrant will not be adjusted for the issuance of Common Stock or any securities
convertible into or exchangeable for Common Stock, or carrying the right or
option to purchase or otherwise acquire the foregoing, in exchange for cash,
other property or services.
Upon any (i) consolidation or merger of the Company with or into any
entity (other than a consolidation or merger that does not result in any
reclassification, conversion, exchange or cancellation of outstanding Common
Stock); (ii) sale, transfer, lease or conveyance of all or substantially all of
the assets of the Company; or (iii) reclassification, capital reorganization or
change of the Common Stock (other than solely a change in par value or from par
value to no par value), then any holder of a Common Stock Warrant will be
entitled, on or after the occurrence of any such event, to receive upon
exercise of such Common Stock Warrant the kind and amount of stock or other
securities, cash or other property (or any combination thereof) that the holder
would have received had such holder exercised such holder's Common Stock
Warrant immediately prior to the occurrence of such event. If the consideration
to be received upon exercise of the Common Stock Warrant following any such
event consists of common stock of the surviving entity, then from and after the
occurrence of such event, the exercise price of such Common Stock Warrant will
be subject to the same anti-dilution and other adjustments described above,
applied as if such common stock were Common Stock.
AMENDMENTS AND SUPPLEMENTS TO WARRANT AGREEMENT
The Warrant Agreements may at any time be amended or supplemented
without the consent of the holders of the Stock Warrants issued thereunder to
effect changes that are not inconsistent with the provisions of the Stock
Warrants and that do not materially and adversely affect the rights of the
holders of the Stock Warrants.
RESTRICTIONS ON TRANSFER
In order to enable the Company to continue to qualify as a REIT, the
Warrant Agreement may contain limitations on ownership and restrictions on
transfer of Stock Warrants similar to the limitations on ownership and
restrictions on transfer of Common Stock and Preferred Stock. See "Description
of Common Stock--Restrictions on Transfer" and "Description of Preferred
Stock--Restrictions on Transfer." Any such limitations and restrictions will be
described in the applicable Prospectus Supplement and will be referenced on the
applicable Stock Warrant certificates.
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DESCRIPTION OF RIGHTS
As described under "Plan of Distribution," the Company may sell the
Offered Securities to investors directly through Rights. If Offered Securities
are to be sold through Rights, such Rights will be distributed as a dividend to
the Company's stockholders for which such stockholders will pay no separate
consideration. The Prospectus Supplement with respect to the Rights offering
will set forth the relevant terms of the Rights, including (i) the kind and
number of Offered Securities which will be offered pursuant to the Rights, (ii)
the period during which and the price at which the Rights will be exercisable,
(iii) the number of Rights to be issued, (iv) any provisions for changes to or
adjustments in the exercise price of the Rights and (v) any other material
terms of the Rights. See "Plan of Distribution."
CERTAIN PROVISIONS OF MARYLAND LAW AND OF
THE COMPANY'S CHARTER AND BYLAWS
The following description of certain provisions of Maryland law and of
the Company's Charter and Bylaws does not purport to be complete and is subject
to and qualified in its entirety by reference to Maryland law and the Company's
Charter and Bylaws.
BOARD OF DIRECTORS
The Company's Bylaws provide that the number of directors of the
Company may be established by the Board but may not be fewer than three nor
more than fifteen. Any vacancy will be filled, at any regular meeting or at any
special meeting called for that purpose, by a majority of the remaining
directors, except that a vacancy resulting from an increase in the number of
directors will be filled by a majority of the entire Board. The Company's
Charter requires that the Board consist of a majority of directors who are not
affiliated with JMB Realty or its affiliates. Directors are elected at each
annual meeting of stockholders to serve a one-year term or until their
successors are duly elected and qualify. Holders of Common Stock have no right
to cumulative voting for the election of directors. Consequently, at each
annual meeting of stockholders, the holders of a majority of the shares of
Common Stock and Unit Voting Stock voting together as a single class are able
to elect all of the successors of the directors. Directors may be removed only
for cause and only with the affirmative vote of the holders of a majority of
the shares of Common Stock and Unit Voting Stock voting together as a single
class.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Maryland law permits a Maryland corporation to include in its charter
a provision limiting the liability of its directors and officers to the
corporation and its stockholders for money damages except for liability
resulting from (i) actual receipt of an improper benefit or profit in money,
property or services or (ii) active and deliberate dishonesty established by a
final judgment as being material to the cause of action. The Company's Charter
contains such a provision which eliminates such liability to the maximum extent
permitted by Maryland law.
The Company's directors and officers are and will be indemnified under
the Company's Charter against certain liabilities. The Company's Charter
requires it to indemnify its directors and officers, among others, against
judgments, penalties, fines, settlements and reasonable expenses actually
incurred by them in connection with any proceeding to which they may be made a
party by reason of their services in those or other capacities unless it is
established that the act or omission of the director or officer was material to
the matter giving rise to the proceeding and was committed in bad faith or was
the result of active and deliberate dishonesty, or the director or officer
actually received an improper personal benefit, or, in the case of any criminal
proceeding, the director or officer had reasonable cause to believe that the
act or omission was unlawful.
The partnership agreement of the Operating Partnership also provides
for indemnification of the Company and its directors and officers to the same
extent indemnification is provided to directors and officers of the Company
under the Company's Charter, and limits the liability of the Company and its
directors and officers to the Operating
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Partnership and its partners to the same extent the liability of the directors
and officers of the Company to the Company and its stockholders is limited
under the Company's Charter.
Maryland law requires a corporation (unless its charter provides
otherwise, which the Company's Charter does not) to indemnify a director or
officer who has been successful, on the merits or otherwise, in the defense of
any proceeding to which he or she is made a party by reason of his or her
service in that capacity. Maryland law permits a corporation to indemnify its
present and former directors and officers, among others, against judgments,
penalties, fines, settlements and reasonable expenses actually incurred by them
in connection with any proceeding to which they may be made a party by reason
of their service in those or other capacities unless it is established that (i)
the act or omission of the director or officer was material to the matter
giving rise to the proceeding and (a) was committed in bad faith or (b) was the
result of active and deliberate dishonesty, (ii) the director or officer
actually received an improper personal benefit in money, property or services
or (iii) in the case of any criminal proceeding, the director or officer had
reasonable cause to believe that the act or omission was unlawful. However, a
Maryland corporation may not indemnify for an adverse judgment in a suit by or
in the right of the corporation. Maryland law permits the Company to advance
reasonable expenses to a director or officer upon the Company's receipt of (i)
a written affirmation by the director or officer of his or her good faith
belief that he or she has met the standard of conduct necessary for
indemnification by the Company as authorized by the Company's Charter and (ii)
a written statement by or on his or her behalf to repay the amount paid or
reimbursed by the Company if it shall ultimately be determined that the
standard of conduct was not met.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or persons controlling
the Company pursuant to the foregoing provisions, the Company has been informed
that in the opinion of the Commission such indemnification is against public
policy as expressed in the Securities Act and is therefore unenforceable.
BUSINESS COMBINATIONS
Under Maryland law, certain "business combinations" (including a
merger, consolidation, share exchange or, in certain circumstances, an asset
transfer or issuance or reclassification of equity securities) between a
Maryland corporation and any person who beneficially owns 10% or more of the
voting power of the corporation's stock or an affiliate of the corporation who,
at any time within the two-year period prior to the date in question, was the
beneficial owner of 10% or more of the voting power of the then-outstanding
stock of the corporation (an "Interested Stockholder") or an affiliate of such
an Interested Stockholder are prohibited for five years after the most recent
date on which the Interested Stockholder became an Interested Stockholder.
Thereafter, any such business combination must be recommended by the board of
directors of such corporation and approved by the affirmative vote of at least
(i) 80% of the votes entitled to be cast by holders of outstanding shares of
voting stock of the corporation and (ii) two-thirds of the votes entitled to be
cast by holders of outstanding shares of voting stock other than stock held by
the Interested Stockholder with whom (or with whose affiliate) the business
combination is to be effected, unless, among other things, the corporation's
common stockholders receive a minimum price (as defined under Maryland law) for
their stock and the consideration is received in cash or in the same form as
previously paid by the Interested Stockholder for its stock. These provisions
of Maryland law do not apply, however, to business combinations that are
approved or exempted by the board of directors of the corporation prior to the
time that the Interested Stockholder becomes an Interested Stockholder. The
Company's Charter exempts from these provisions of Maryland law any business
combination with JMB Realty and its affiliates.
CONTROL SHARE ACQUISITIONS
Maryland law provides that "Control Shares" of a Maryland corporation
acquired in a "Control Share acquisition" have no voting rights except to the
extent approved by a vote of two-thirds of the votes entitled to be cast on the
matter, excluding shares of stock owned by the acquiror or by officers or
directors who are employees of the corporation. "Control Shares" are voting
shares of stock which, if aggregated with all other such shares of stock
previously acquired by the acquiror, or in respect of which the acquiror is
able to exercise or direct the exercise of voting power (except solely by
virtue of a revocable proxy), would entitle the acquiror to exercise voting
power in electing directors within one of the following ranges of voting power:
(i) one-fifth or more but less than one-third, (ii) one-third or more but less
than a majority or (iii) a majority of all voting power. Control Shares do
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not include shares the acquiring person is then entitled to vote as a result of
having previously obtained stockholder approval. A "Control Share acquisition"
means the acquisition of Control Shares, subject to certain exceptions.
A person who has made or proposes to make a Control Share acquisition,
upon satisfaction of certain conditions (including an undertaking to pay
expenses), may compel the board of directors to call a special meeting of
stockholders to be held within 50 days of demand to consider the voting rights
of the shares. If no request for a meeting is made, the corporation may itself
present the question at any stockholders meeting.
If voting rights are not approved at the meeting or if the acquiring
person does not deliver an acquiring person statement as required by the
statute, then, subject to certain conditions and limitations, the corporation
may redeem any or all of the Control Shares (except those for which voting
rights have previously been approved) for fair value determined, without regard
to the absence of voting rights for the Control Shares, as of the date of the
last Control Share acquisition or of any meeting of stockholders at which the
voting rights of such shares are considered and not approved. If voting rights
for Control Shares are approved at a stockholders meeting and the acquiror
becomes entitled to vote a majority of the shares entitled to vote, all other
stockholders may exercise appraisal rights. The fair value of the shares as
determined for purposes of such appraisal rights may not be less than the
highest price per share paid by the acquiror in the Control Share acquisition.
The Control Share acquisition statute does not apply to shares
acquired in a merger, consolidation or share exchange if the corporation is a
party to the transaction, or to acquisitions approved or exempted by the
charter or bylaws of the corporation. The Company's Charter contains a
provision exempting any and all acquisitions by JMB Realty and its affiliates
from the provisions of the Control Share acquisition statute.
AMENDMENT TO THE COMPANY'S CHARTER
The Company's Charter, including the provisions relating to the
removal of directors, may be amended only by the affirmative vote of the
holders of not less than a majority of all of the votes entitled to be cast on
the matter.
TERMINATION OF THE COMPANY
The Company's Charter permits the termination of the Company and the
discontinuation of the operations of the Company only upon the adoption of a
resolution of dissolution by the Board and (i) the affirmative vote, at a
meeting of stockholders called for that purpose, of a majority of the voting
power of the Company entitled to vote or (ii) the unanimous consent of the
voting power of the Company entitled to vote.
ADVANCE NOTICE OF DIRECTOR NOMINATIONS AND NEW BUSINESS
For nominations or other business to be properly brought before an
annual meeting of stockholders by a stockholder, the Company's Bylaws require
such stockholder to deliver a notice to the Secretary, absent specified
circumstances, not less than 60 days nor more then 90 days prior to the first
anniversary of the preceding year's annual meeting setting forth: (i) as to
each person whom the stockholder proposes to nominate for election or
reelection as a director, all information relating to such person that is
required to be disclosed in solicitations of proxies for the election of
directors pursuant to Regulation 14A of the Exchange Act; (ii) as to any other
business that the stockholder proposes to bring before the meeting, a brief
description of the business desired to be brought before the meeting, the
reasons for conducting such business at the meeting and any material interest
in such business of such stockholder and of the beneficial owner, if any, on
whose behalf the proposal is made; and (iii) as the stockholder giving the
notice and the beneficial owner, if any, on whose behalf the nomination or
proposal is made, (a) the name and address of such stockholder as they appear
on the Company's stock records, and of such beneficial owner and (b) the number
of shares which are owned beneficially and of record by such stockholder and
such beneficial owner, if any.
FEDERAL INCOME TAX CONSIDERATIONS
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The following is a description of the material Federal income tax
consequences to the Company and its stockholders of the treatment of the
Company as a REIT. The discussion is general in nature and not exhaustive of
all possible tax considerations, nor does the discussion give a detailed
description of any state, local, or foreign tax considerations. The discussion
does not discuss all aspects of Federal income tax law that may be relevant to
a prospective stockholder in light of his particular circumstances or to
certain types of stockholders (including insurance companies, financial
institutions or broker-dealers, tax exempt organizations, foreign corporations
and persons who are not citizens or residents of the United States) subject to
special treatment under the Federal income tax laws nor does the discussion
address special considerations, if any, which may relate to the purchase of
Preferred Stock or Stock Warrants.
THIS DISCUSSION IS NOT INTENDED AS A SUBSTITUTE FOR CAREFUL TAX
PLANNING, AND EACH PROSPECTIVE INVESTOR IS ADVISED TO CONSULT WITH ITS TAX
ADVISOR REGARDING THE SPECIFIC TAX CONSEQUENCES TO IT OF THE PURCHASE,
OWNERSHIP AND SALE OF THE OFFERED SECURITIES, INCLUDING THE FEDERAL, STATE,
LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES OF SUCH PURCHASE, OWNERSHIP AND SALE,
AND OF POTENTIAL CHANGES IN APPLICABLE TAX LAWS.
If certain detailed conditions imposed by the REIT provisions of the
Code are met, entities, such as the Company, that invest primarily in real
estate and that otherwise would be treated for Federal income tax purposes as
corporations, are generally not taxed at the corporate level on their "REIT
taxable income" that is currently distributed to stockholders. This treatment
substantially eliminates the "double taxation" (i.e., at both the corporate and
stockholder levels) that generally results from the use of corporations.
If the Company fails to qualify as a REIT in any year, however, it
will be subject to Federal income taxation as if it were a domestic
corporation, and its stockholders will be taxed in the same manner as
stockholders of ordinary corporations. In this event, the Company could be
subject to potentially significant tax liabilities, and therefore the amount of
cash available for distribution to its stockholders would be reduced or
eliminated.
The Company has elected REIT status effective for the taxable year
ended December 31, 1993 and the Board of Directors of the Company believes that
the Company has operated and expects that the Company will continue to operate
in a manner that will permit the Company to elect REIT status in each taxable
year thereafter. There can be no assurance, however, that this belief or
expectation will be fulfilled, since qualification as a REIT depends on the
Company continuing to satisfy numerous asset, income and distribution tests
described below, which in turn will be dependent in part on the Company's
operating results.
TAXATION OF THE COMPANY
General. In any year in which the Company qualifies as a REIT it will
not, in general, be subject to Federal income tax on that portion of its REIT
taxable income or capital gain which is distributed to stockholders. The
Company may, however, be subject to tax at normal corporate rates on any
taxable income or capital gain not distributed.
Notwithstanding its qualification as a REIT, the Company may also be
subject to taxation in certain other circumstances. If the Company should fail
to satisfy either the 75% or the 95% gross income test (as discussed below),
and nonetheless maintains its qualification as a REIT because certain other
requirements are met, it will be subject to a 100% tax on the greater of the
amount by which the Company fails either the 75% or the 95% test, multiplied by
a fraction intended to reflect the Company's profitability. The Company will
also be subject to a tax of 100% on net income from any "prohibited
transaction" as described below, and if the Company has (i) net income from the
sale or other disposition of "foreclosure property" which is held primarily for
sale to customers in the ordinary course of business or (ii) other
non-qualifying income from foreclosure property, it will be subject to tax on
such income from foreclosure property at the highest corporate rate. In
addition, if the Company should fail to distribute during each calendar year at
least the sum of (i) 85% of its REIT ordinary income for such year, (ii) 95% of
its REIT capital gain net income for such year, and (iii) any undistributed
taxable income from prior years, the Company would be subject to a 4% excise
tax on the excess of such required distribution over the amounts actually
distributed. For taxable years beginning after August 5, 1997, the Taxpayer
Relief Act of 1997
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(the "1997 Act") permits a REIT, with respect to undistributed net long-term
capital gains it received during the taxable year, to designate in a notice
mailed to shareholders within 60 days of the end of the taxable year (or in a
notice mailed with its annual report for the taxable year) such amount of such
gains which its stockholders are to include in their taxable income as
long-term capital gains. Thus, if the Company made this designation, the
stockholders of the Company would include in their income as long-term capital
gains their proportionate share of the undistributed long-term capital gains as
designated by the Company. Each stockholder of the Company would be deemed to
have paid such stockholder's share of the tax paid by the Company on such
gains, which tax would be credited or refunded to the stockholder. A
stockholder would increase his tax basis in his Company stock by the difference
between the amount of income to the holder resulting from the designation less
the holder's credit or refund for the tax paid by the Company. The Company may
also be subject to the corporate alternative minimum tax, as well as tax in
certain situations not presently contemplated. The Management Company will be
taxed on its income at regular corporate rates. The Company will use the
calendar year both for Federal income tax purposes and for financial reporting
purposes.
In order to qualify as a REIT, the Company must meet, among others,
the following requirements:
Stock Ownership Tests. The Company's stock must be held by a minimum
of 100 persons for at least 335 days in each taxable year (or a proportional
number of days in any short taxable year). In addition, at all times during the
second half of each taxable year, no more than 50% in value of the outstanding
stock of the Company may be owned, directly or indirectly and by applying
certain constructive ownership rules, by five or fewer individuals, which for
this purpose includes certain tax-exempt entities. However, for purposes of
this test, any stock held by a qualified domestic pension or other retirement
trust will be treated as held directly by its beneficiaries in proportion to
their actuarial interest in such trust rather than by such trust. Under the
1997 Act, for taxable years beginning after August 5, 1997, if the Company
complies with the Treasury regulations for ascertaining its actual ownership
and did not know, or exercising due diligence would not have reason to know,
that more than 50% in value of its outstanding shares of stock were held,
actually or constructively, by five or fewer individuals, then the Company will
be treated as meeting such requirement. These share ownership requirements need
not be met until the second taxable year of the Company for which a REIT
election is made.
In order to attempt to ensure compliance with the foregoing stock
ownership tests, the Company has placed certain restrictions on the transfer of
its stock to prevent additional concentration of stock ownership. Moreover, to
evidence compliance with these requirements, under Treasury regulations the
Company must maintain records which disclose the actual ownership of its
outstanding stock. In fulfilling its obligations to maintain records, the
Company must and will demand written statements each year from the record
holders of designated percentages of its stock disclosing the actual owners of
such stock (as prescribed by Treasury regulations). A list of those persons
failing or refusing to comply with such demand must be maintained as a part of
the Company's records. A stockholder failing or refusing to comply with the
Company's written demand must submit with his tax return a similar statement
disclosing the actual ownership of Company stock and certain other information.
In addition, the Company's Articles of Incorporation contain restrictions on
the transfer of its stock that are intended to assist the Company in continuing
to satisfy the stock ownership requirements. See "Description of Common
Stock--Restrictions on Transfer" and "Description of Preferred
Stock--Restrictions on Transfer."
Asset Tests. At the close of each quarter of the Company's taxable
year, the Company must satisfy two tests relating to the nature of its assets
(with "assets" being determined in accordance with generally accepted
accounting principles). First, at least 75% of the value of the Company's total
assets must be represented by interests in real property, interests in
mortgages on real property, stock in other REITs, cash, cash items, government
securities and qualified temporary investments. Second, although the remaining
25% of the Company's assets generally may be invested without restriction,
securities in this class may not exceed, in the case of securities of any one
non-government issuer, (i) 5% of the value of the Company's total assets or
(ii) 10% of the outstanding voting securities of any one such issuer. When the
Company invests in a partnership (such as the Operating Partnership), it will
be deemed to own a proportionate share of the partnership's assets. See "--Tax
Aspects of the Company's Investments in Partnerships--General." Accordingly,
the Company's investment in the Properties through its interest in the
Operating Partnership is intended to constitute an investment in qualified
assets for purposes of the 75% asset test.
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The Operating Partnership owns a 99% limited partnership interest in
Penn Square Mall Limited Partnership ("PSMLP"), which owns 100% of the
non-voting preferred stock of the Management Company and none of the voting
common stock of the Management Company. See "The Company." By virtue of its
partnership interest in the Operating Partnership and the Operating
Partnership's interest in PSMLP, the Company is deemed to own its pro rata
share of the assets of the Operating Partnership, including the securities of
the Management Company described above. Because PSMLP does not own any of the
voting securities of the Management Company and the preferred stock's approval
right is limited to certain fundamental corporate actions that could adversely
affect the preferred stock as a class, the 10% limitation on holdings of voting
securities of any one issuer should not be exceeded.
Based on its analysis of the total estimated value of the Management
Company securities owned by the Operating Partnership through PSMLP relative to
the estimated value of the total assets owned by the Operating Partnership and
the other assets of the Company, the Company believes that the Company's pro
rata share of the non-voting preferred stock of the Management Company and a
$10 million subordinated note (the "Subordinated Note") of the Management
Company owned by the Operating Partnership does not exceed, on the date of this
Prospectus, 5% of the value of the Company's total assets. This 5% limitation
must be satisfied not only as of the date that the Company (directly or through
the Operating Partnership or PSMLP) acquired securities of the Management
Company, but also at the end of any quarter in which the Company increases its
interest in the Management Company or so acquires other property. In this
respect, if the holder of a right to exchange Units for Common Stock exercises
such rights, the Company will thereby increase its proportionate (indirect)
ownership interest in the Management Company, thus requiring the Company to
meet the 5% test in any quarter in which such exchange option is exercised.
Although the Company plans to take steps to ensure that it satisfies the 5%
value test for any quarter with respect to which retesting is to occur, there
can be no assurance that such steps will always be successful or will not
require a reduction in the Operating Partnership's overall interest in the
Management Company.
Gross Income Tests. There are currently three separate percentage
tests relating to the sources of the Company's gross income which must be
satisfied for each taxable year. For purposes of these tests, when the Company
invests in a partnership, the Company will be treated as receiving its share of
the income and loss of the partnership, and the gross income of the partnership
will retain the same character in the hands of the Company as it has in the
hands of the partnership. See "--Tax Aspects of the Company's Investments in
Partnerships--General" below. The three tests are as follows:
The 75% Test. At least 75% of the Company's gross income for the
taxable year must be "qualifying income." Qualifying income generally includes
(i) rents from real property (except as modified below); (ii) interest on
obligations secured by mortgages on, or interests in, real property; (iii)
gains from the sale or other disposition of interests in real property and real
estate mortgages, other than gain from property held primarily for sale to
customers in the ordinary course of the Company's trade or business ("dealer
property"); (iv) dividends or other distributions on stock in other REITs, as
well as gain from the sale of such stock; (v) abatements and refunds of real
property taxes; (vi) income from the operation, and gain from the sale, of
property acquired at or in lieu of a foreclosure of the mortgage secured by
such property ("foreclosure property"); (vii) commitment fees received for
agreeing to make loans secured by mortgages on real property or to purchase or
lease real property; and (viii) certain qualified temporary investment income
attributable to the investment of new capital received by the Company in
exchange for its stock during the one-year period following the receipt of such
capital.
Rents received from a tenant will not, however, qualify as rents from
real property in satisfying the 75% test (or the 95% gross income test
described below) if the Company, or an owner of 10% or more of the Company,
directly or constructively owns 10% or more of such tenant. In addition, if
rent attributable to personal property leased in connection with a lease of
real property is greater than 15% of the total rent received under the lease,
then the portion of rent attributable to such personal property will not
qualify as rents from real property. Moreover, an amount received or accrued
will not qualify as rents from real property (or as interest income) for
purposes of the 75% and 95% gross income tests if it is based in whole or in
part on the income or profits of any person, although an amount received or
accrued generally will not be excluded from "rents from real property" solely
by reason of being based on a fixed percentage or percentages of receipts or
sales. Finally, for rents received to qualify as rents from real property for
purposes of the 75% and 95% gross income tests, the Company generally must not
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operate or manage the property or furnish or render services to tenants, other
than through an "independent contractor" from whom the Company derives no
income, except that the "independent contractor" requirement does not apply to
the extent that the services provided by the Company are "usually or
customarily rendered" in connection with the rental of space for occupancy
only, or are not otherwise considered "rendered to the occupant for his
convenience." For taxable years beginning after August 5, 1997, a REIT is
permitted to render a de minimis amount of impermissible services to tenants,
or in connection with the management of property, and still treat amounts
received with respect to that property as rent. The value of the impermissible
services may not exceed one percent of the gross income from the property. The
amount received for any service (or management operation) for this purpose
shall be deemed to be not less than 150% of the direct cost of the REIT in
furnishing or rendering the service (or providing the management or operation).
The Company believes for purposes of the 75% and 95% gross income
tests, that any services provided on the Operating Partnership's properties and
any other services and amenities provided by the Operating Partnership or its
agents with respect to such properties are and will continue to be of the type
usually or customarily rendered in connection with the rental of space for
occupancy only. The Company intends to monitor the services and amenities
provided on the properties of the Operating Partnership. The Company intends
that services that cannot be provided directly by the Operating Partnership,
the Management Company or other agents will be performed by independent
contractors.
The 95% Test. In addition to deriving 75% of its gross income from the
sources listed above, at least 95% of the Company's gross income for the
taxable year must be derived from the above-described qualifying income, or
from dividends, interest, or gains from the sale or other disposition of stock
or other securities that are not dealer property. Dividends and interest on any
obligations not collateralized by an interest in real property are included for
purposes of the 95% test, but not for purposes of the 75% test.
For purposes of determining whether the Company complies with the 75%
and the 95% gross income tests, gross income does not include income from
prohibited transactions. A "prohibited transaction" is a sale of dealer
property (excluding foreclosure property); however, it does not include a sale
of property if such property is held by the Company for at least four years and
certain other requirements (relating to the number of properties sold in a
year, their tax bases, and the cost of improvements made thereto) are
satisfied. See "--Taxation of the Company--General" and "--Tax Aspects of the
Company's Investments in Partnerships--Sale of the Properties."
The Company believes that, for purposes of both the 75% and the 95%
gross income tests, its investment in the Properties through the Operating
Partnership will in major part give rise to qualifying income in the form of
rents, and that gains on sales of the Properties, or of the Company's interest
in the Operating Partnership, generally will also constitute qualifying income.
However, with respect to certain Properties as to which the Operating
Partnership does not have decision making control, it may not be possible to
assure that gross income continues to qualify under these tests.
The Management Company receives and anticipates continuing to receive
fee income in consideration of the performance of property management and other
services with respect to properties not owned by the Company or the Operating
Partnership; however, substantially all income derived by the Company from the
Management Company will be in the form of dividends on the preferred stock
owned by the Operating Partnership through PSMLP and interest on the
Subordinated Note. Such dividends and interest income will satisfy the 95%, but
not the 75%, gross income test (as discussed above). In addition, the Company's
share of any income realized on interest rate swap or cap agreements, including
income received at the time of entering into such agreements, will satisfy the
95%, but not the 75%, gross income test. The Company intends to closely monitor
its non-qualifying income and anticipates that non-qualifying income on its
other investments and activities, including such dividend income, interest
income and interest rate swap or cap income (if any), will not result in the
Company failing either the 75% or 95% gross income test.
Even if the Company fails to satisfy one or both of the 75% or 95%
gross income tests for any taxable year, it may still qualify as a REIT for
such year if it is entitled to relief under certain provisions of the Code.
These relief provisions will generally be available if: (i) the Company's
failure to comply was due to reasonable cause and not to willful neglect; (ii)
the Company reports the nature and amount of each item of its income included
in the
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tests on a schedule attached to its tax return; and (iii) any incorrect
information on this schedule is not due to fraud with intent to evade tax. If
these relief provisions apply, however, the Company will nonetheless be subject
to a 100% tax on the greater of the amount by which it fails either the 75% or
95% gross income test, multiplied by a fraction intended to reflect the
Company's profitability.
The 30% Test. The Company must derive less than 30% of its gross
income for each taxable year from the sale or other disposition of (i) real
property held for less than four years (other than foreclosure property and
involuntary conversions); (ii) stock or securities (including an interest rate
swap or cap agreement) held for less than one year; and (iii) property in a
prohibited transaction. The Company does not anticipate that it will have
difficulty in complying with this test. However, if extraordinary circumstances
were to occur that give rise to dispositions of Properties held for less than
four years (for example, on account of the inability to obtain refinancing),
the 30% test could become an issue. The 30% gross income test has been repealed
by the 1997 Act for taxable years beginning after August 5, 1997.
Annual Distribution Requirements. In order to qualify as a REIT, the
Company is required to make distributions (other than capital gain dividends)
to its stockholders each year in an amount at least equal to (i) the sum of (a)
95% of the Company's REIT taxable income (computed without regard to the
dividends paid deduction and the Company's net capital gain) and (b) 95% of the
net income (after tax), if any, from foreclosure property, minus (ii) the sum
of certain items of non-cash income. For taxable years beginning after August
5, 1997, the 1997 Act (i) expands the class of non-cash income that is excluded
from the distribution requirement to include income from the cancellation of
indebtedness and (ii) extends the treatment of original issue discount ("OID")
(over cash and the fair market value of property received on the instrument) as
such non-cash income to OID instruments generally and for REITs, like the
Company, that use an accrual method of accounting. Such distributions must be
paid in the taxable year to which they relate, or in the following taxable year
if declared before the Company timely files its tax return for such year and if
paid on or before the first regular dividend payment after such declaration. To
the extent that the Company does not distribute all of its net capital gain or
distributes at least 95%, but less than 100%, of its REIT taxable income, as
adjusted, it will be subject to tax on the undistributed amount at regular
capital gains or ordinary corporate tax rates, as the case may be. For taxable
years beginning after August 5, 1997, the 1997 Act permits a REIT, with respect
to undistributed net long-term capital gains it received during the taxable
year, to designate in a notice mailed to shareholders within 60 days of the end
of the taxable year (or in a notice mailed with its annual report for the
taxable year) such amount of such gains which its stockholders are to include
in their taxable income as long-term capital gains. Thus, if the Company made
this designation, the stockholders of the Company would include in their income
as long-term capital gains their proportionate share of the undistributed
long-term capital gains as designated by the Company. Each stockholder of the
Company would be deemed to have paid such stockholder's share of the tax paid
by the Company on such gains, which tax would be credited or refunded to the
stockholder. A stockholder would increase his tax basis in his Company stock by
the difference between the amount of income to the holder resulting from the
designation less the holder's credit or refund for the tax paid by the Company.
The Company intends to make timely distributions sufficient to satisfy
the annual distribution requirements described in the first sentence of the
preceding paragraph. In this regard, the Partnership Agreement authorizes the
Company, as general partner, to take such steps as may be necessary to cause
the Operating Partnership to distribute to its partners an amount sufficient to
permit the Company to meet these distribution requirements. It is possible that
the Company may not have sufficient cash or other liquid assets to meet the 95%
distribution requirement, due to timing differences between the actual receipt
of income and actual payment of expenses on the one hand, and the inclusion of
such income and deduction of such expenses in computing the Company's REIT
taxable income on the other hand; due to the Operating Partnership's inability
to control cash distributions with respect to those Properties as to which it
does not have decision making control; or for other reasons. To avoid a problem
with the 95% distribution requirement, the Company will closely monitor the
relationship between its REIT taxable income and cash flow and, if necessary,
intends to borrow funds (or cause the Operating Partnership or other affiliates
to borrow funds) in order to satisfy the distribution requirement. However,
there can be no assurance that such borrowing would be available at such time.
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If the Company fails to meet the 95% distribution requirement as a
result of an adjustment to the Company's tax return by the Service, the Company
may retroactively cure the failure by paying a "deficiency dividend" (plus
applicable penalties and interest) within a specified period.
Failure to Qualify. If the Company fails to qualify for taxation as a
REIT in any taxable year and the relief provisions do not apply, the Company
will be subject to tax (including any applicable alternative minimum tax) on
its taxable income at regular corporate rates. Distributions to stockholders
in any year in which the Company fails to qualify as a REIT will not be
deductible by the Company, nor generally will they be required to be made under
the Code. In such event, to the extent of current and accumulated earnings and
profits, all distributions to stockholders will be taxable as ordinary income,
and, subject to certain limitations in the Code, corporate distributees may be
eligible for the dividends received deduction. Unless entitled to relief under
specific statutory provisions, the Company also will be disqualified from
re-electing taxation as a REIT for the four taxable years following the year
during which qualification was lost.
TAX ASPECTS OF THE COMPANY'S INVESTMENTS IN PARTNERSHIPS
General. The Company holds a partnership interest in the Operating
Partnership. See "The Company." In general, a partnership is a "pass-through"
entity which is not subject to Federal income tax. Rather, partners are
allocated their proportionate shares of the items of income, gain, loss,
deduction and credit of a partnership, and are potentially subject to tax
thereon, without regard to whether the partners receive a distribution from the
partnership. The Company will include its proportionate share of the foregoing
partnership items for purposes of the various REIT gross income tests and in
the computation of its REIT taxable income. See "--Taxation of the
Company--General" and "--Gross Income Tests."
Accordingly, any resultant increase in the Company's REIT taxable
income from its interest in the Operating Partnership (whether or not a
corresponding cash distribution is also received from the Operating
Partnership) will increase its distribution requirements (see "--Taxation of
the Company--Annual Distribution Requirements"), but will not be subject to
Federal income tax in the hands of the Company provided that an amount equal to
such income is distributed by the Company to its stockholders. Moreover, for
purposes of the REIT asset tests (see "--Taxation of the Company--Asset
Tests"), the Company will include its proportionate share of assets held by the
Operating Partnership.
Entity Classification. The Company's interest in the Operating
Partnership involves special tax considerations, including the possibility of a
challenge by the Service of the status of the Operating Partnership as a
partnership (as opposed to an association taxable as a corporation for Federal
income tax purposes). If the Operating Partnership were to be treated as an
association, it would be taxable as a corporation and therefore subject to an
entity-level tax on its income. In such a situation, the character of the
Company's assets and items of gross income would change, which would preclude
the Company from satisfying the REIT asset tests and the REIT gross income
tests (see "--Taxation of the Company--Asset Tests" and "--Gross Income
Tests"), which in turn would prevent the Company from qualifying as a REIT.
(See "--Taxation of the Company--Failure to Qualify" above, for a discussion of
the effect of the Company's failure to meet such tests.)
Tax Allocations with Respect to the Properties. Pursuant to Section
704(c) of the Code, income, gain, loss and deduction attributable to
appreciated or depreciated property that is contributed to a partnership in
exchange for an interest in the partnership (such as certain of the
Properties), 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 (a "Book-Tax Difference"). Such allocations are solely for
Federal income tax purposes and do not affect the book capital accounts or
other economic arrangements among the partners. The formation of the Operating
Partnership included contributions of appreciated property (including certain
Properties or interests therein). Consequently, the Partnership Agreement
requires certain allocations to be made in a manner consistent with Section
704(c) of the Code.
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In general, certain contributors of certain of the Properties or
interests therein will be allocated lower amounts of depreciation deductions
for tax purposes and increased taxable income and gain on sale by the Operating
Partnership on the contributed assets (including certain of the Properties).
This will tend to eliminate the Book-Tax Difference over the life of the
Operating Partnership. However, the special allocation rules of Section 704(c)
do not always entirely rectify the Book-Tax Difference on an annual basis or
with respect to a specific taxable transaction such as a sale or a deemed sale,
and accordingly variations from normal Section 704(c) principles may arise,
which could result in the allocation of additional taxable income to the
Company in excess of corresponding cash proceeds in certain circumstances.
Treasury regulations issued under Section 704(c) of the Code provide
partnerships with a choice of several methods of accounting for Book-Tax
Differences, including retention of the method under current law. The Operating
Partnership and the Company will use the remedial method for making allocations
under Section 704(c) with respect to the existing Properties.
With respect to any property purchased by the Operating Partnership
subsequent to the admission of the Company to the Operating Partnership, in
general, such property will initially have a tax basis equal to its fair market
value and Section 704(c) of the Code will not apply.
Sale of the Properties. The Company's share of any gain realized by
the Operating Partnership on the sale of any dealer property generally will be
treated as income from a prohibited transaction that is subject to a 100%
penalty tax. See "Taxation of the Company--General" and "Gross Income
Tests--The 95% Test." Under existing law, whether property is dealer property
is a question of fact that depends on all the facts and circumstances with
respect to the particular transaction. The Operating Partnership intends to
hold the Properties for investment with a view to long-term appreciation, to
engage in the business of acquiring, owning, operating and developing the
Properties and other retail properties, and to make such occasional sales of
the Properties and other properties acquired subsequent to the date hereof as
are consistent with the Company's investment objectives. The Operating
Partnership (or partnerships in which the Operating Partnership holds an
interest) may sell certain parcels of land incidental to the Properties, and
while the Company does not currently anticipate that a material portion of such
parcels would result in sales of dealer properties subject to the tax on
prohibited transactions, it might be asserted, particularly in the case of
partnerships in which the Operating Partnership holds an indirect interest and
is not a managing partner, that the Company's share of gain realized on the
sale is subject to such tax. However, based on the Company's investment
objectives, the Company believes that overall the Properties should not be
considered dealer property and that the amount of income from prohibited
transactions, if any, will not be material.
TAXATION OF STOCKHOLDERS
Taxation of Taxable Domestic Stockholders. As long as the Company
qualifies as a REIT, distributions made to the Company's taxable domestic
stockholders out of current or accumulated earnings and profits (and not
designated as capital gain dividends) will be taken into account by them as
ordinary income and will not be eligible for the dividends received deduction
for corporations. Distributions (and for taxable years beginning after August
5, 1997, undistributed amounts) that are designated as capital gain dividends
will be taxed as long-term capital gains (to the extent they do not exceed the
Company's actual net capital gain for the taxable year) without regard to the
period for which the stockholder has held its stock of the Company. However,
corporate stockholders may be required to treat up to 20% of certain capital
gain dividends as ordinary income. To the extent that the Company makes
distributions in excess of current and accumulated earnings and profits, these
distributions are treated first as a tax-free return of capital to the
stockholder, reducing the tax basis of a stockholder's Common Stock by the
amount of such excess distribution (but not below zero), with distributions in
excess of the stockholder's tax basis being taxed as capital gains (if the
Common Stock is held as a capital asset). In addition, any dividend declared by
the Company in October, November or December of any year and payable to a
stockholder of record on a specific date in any such month shall be treated as
both paid by the Company and received by the stockholder on December 31 of such
year, provided that the dividend is actually paid by the Company during January
of the following calendar year. Stockholders may not include in their
individual income tax returns any net operating losses or capital losses of the
Company. Federal income tax rules may also require that certain minimum tax
adjustments and preferences be apportioned to Company stockholders.
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The recently enacted Taxpayer Relief Act of 1997 made certain changes
to the Code with respect to taxation of long-term capital gains earned by
taxpayers other than a corporation. In general, for sales made after May 6,
1997, the maximum tax rate for individual taxpayers on net long-term capital
gains (i.e., the excess of net long-term capital gain over net short-term
capital loss) is lowered to 20% for most assets. This 20% rate applies to sales
on or after July 29, 1997 only if the asset was held for more than 18 months at
the time of disposition. Capital gains on the disposition of assets on or
after July 29, 1997 held for more than one year and up to 18 months at the time
of disposition will be taxed as "mid-term gain" at a maximum rate of 28%. Also,
so called "unrecaptured section 1250 gain" is subject to a maximum Federal
income tax rate of 25%. "Unrecaptured section 1250 gain" generally includes the
long-term capital gain realized on (i) the sale after May 6, 1997 of a real
property asset described in Section 1250 of the Code or (ii) the sale after
July 28, 1997 of a real property asset described in Section 1250 of the Code
which the taxpayer has held for more than 18 months, but in each case not in
excess of the amount of depreciation (less the gain, if any, treated as
ordinary income under Code Section 1250) taken on such asset. A rate of 18%
instead of 20% will apply after December 31, 2000 for assets held for more than
5 years. However, the 18% rate applies only to assets acquired after December
31, 2000 unless the taxpayer elects to treat an asset held prior to such date
as sold for fair market value on January 1, 2001. In the case of individuals
whose ordinary income is taxed at a 15% rate, the 20% rate is reduced to 10%
and the 10% rate for assets held for more than 5 years is reduced to 8%.
Certain aspects of the new legislation are currently unclear,
including how the reduced rates will apply to gains earned by REITs such as the
Company. Until the Service issues some guidance, it is unclear whether or how
the 20% or 10% rate will apply to distributions of long-term capital gains by
the Company. The 1997 Act gives the Service authority to apply the 1997 Act's
new rules on taxation of capital gains to sales by pass-thru entities,
including REITs. It is possible that the Service could provide in such
regulations that REIT capital gain dividends must be determined by looking
through to the assets sold by the REIT and treated by REIT stockholders as
"long-term capital gain", "mid-term gain" and "unrecaptured section 1250 gain"
to the extent of such respective gain realized by the REIT. No regulations have
yet been issued. Such regulations, if and when issued, may have a retroactive
effect.
Stockholders of the Company should consult their tax advisor with
regard to (i) the application of the changes made by the 1997 Act with respect
to taxation of capital gains and capital gain dividends and (ii) state, local
and foreign taxes on capital gains.
In general, any loss upon a sale or exchange of Common Stock by a
stockholder who has held such Common Stock for six months or less (after
applying certain holding period rules) will be treated as a long-term capital
loss, to the extent of distributions (including any designated undistributed
amounts for taxable years beginning after August 5, 1997--see--"Taxation of the
Company--Annual Distribution Requirements") from the Company required to be
treated by such stockholder as long-term capital gains.
Backup Withholding. The Company will report to its domestic
stockholders and to the Service the amount of dividends paid for each calendar
year, and the amount of tax withheld, if any, with respect thereto. Under the
backup withholding rules, a stockholder may be subject to backup withholding at
the rate of 31% with respect to dividends paid unless such stockholder (i) is a
corporation or comes within certain other exempt categories and, when required,
demonstrates this fact or (ii) provides a taxpayer identification number,
certifies as to no loss of exemption from backup withholding, and otherwise
complies with applicable requirements of the backup withholding rules. A
stockholder that does not provide the Company with its correct taxpayer
identification number may also be subject to penalties imposed by the Service.
Any amount paid as backup withholding is available as a credit against the
stockholder's income tax liability. In addition, the Company may be required to
withhold a portion of capital gain distributions made to any stockholders who
fail to certify their non-foreign status to the Company. See "Certain United
States Tax Considerations for Non-U.S. Stockholders--Distributions from the
Company--Capital Gain Dividends" below.
Taxation of Tax-Exempt Stockholders. The Service has issued a revenue
ruling in which it held that amounts distributed by a REIT to a tax-exempt
employees' pension trust do not constitute unrelated business taxable income
("UBTI"). Subject to the discussion below regarding a "pension-held REIT,"
based on such ruling and the statutory framework of the Code, distributions by
the Company to a stockholder that is a tax-exempt entity should not
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constitute UBTI, provided that the tax-exempt entity has not financed the
acquisition of its stock with "acquisition indebtedness" within the meaning of
the Code, that the stock is not otherwise used in an unrelated trade or
business of the tax-exempt entity, and that the Company, consistent with its
present intent, does not hold a residual interest in a REMIC.
However, if any pension or other retirement trust that qualifies under
Section 401(a) of the Code ("qualified pension trust") holds more than 10% by
value of the interests in a "pension-held REIT" at any time during a taxable
year, a portion of the dividends paid to the qualified pension trust by such
REIT may constitute UBTI. For these purposes, a "pension-held REIT" is defined
as a REIT if (i) such REIT would not have qualified as a REIT but for the
provisions of the Code which look through such a qualified pension trust in
determining ownership of stock of the REIT and (ii) at least one qualified
pension trust holds more than 25% by value of the interests of such REIT or one
or more qualified pension trusts (each owning more than a 10% interest by value
in the REIT) hold in the aggregate more than 50% by value of the interests in
such REIT.
OTHER TAX CONSIDERATIONS
The Management Company. A portion of the cash to be used by the
Operating Partnership to fund distributions to partners, including the Company,
is expected to come from the Management Company through dividends on the
preferred stock of the Management Company held by the Operating Partnership
through PSMLP and from interest on the Subordinated Note. In addition, the
Management Company will receive income from the Company, the Operating
Partnership and unrelated third parties. Because the Company, the Operating
Partnership and the Management Company are related through stock or partnership
ownership, income of the Management Company from services performed for the
Company and the Operating Partnership may be subject to certain rules under
which additional income may be allocated to the Management Company. On account
of such ownership relationships, the allocation of certain expenses and
reimbursements thereof among the Company, the Management Company and the
Operating Partnership could be subject to additional scrutiny by the Service.
Further, such ownership relationships may preclude the recognition of loss (if
any) on the sale of land parcels by the Management Company to the Operating
Partnership or the Company, and to the extent that tax-exempt entities and
foreign persons hold Company stock, a portion of the interest expense deduction
on the Subordinated Note could be reduced.
The Management Company will pay Federal and state income taxes at the
full applicable corporate rates on its income prior to payment of any
dividends. Such income could arise from the Management Company's operations as
well as from the sale or distribution in kind of land parcels by the Management
Company. The Management Company will attempt to minimize the amount of such
taxes, but there can be no assurance whether or the extent to which measures
taken to minimize taxes will be successful. To the extent that the Management
Company is required to pay Federal, state, or local taxes, the cash available
for distribution by the Company to stockholders will be reduced accordingly.
Possible Legislative or Other Actions Affecting Tax Consequences.
Prospective stockholders should recognize that the present Federal income tax
treatment of investment in the Company may be modified by legislative, judicial
or administrative action at any time and that any such action may affect
investments and commitments previously made. The rules dealing with Federal
income taxation are constantly under review by persons involved in the
legislative process and by the Service and the Treasury Department, resulting
in revisions of regulations and revised interpretations of established concepts
as well as statutory changes. No assurance can be given as to the form or
content (including with respect to effective dates) of any tax legislation
which may be enacted. Revisions in Federal tax laws and interpretations thereof
could adversely affect the tax consequences of investment in the Company.
State and Local Taxes. The Company and its stockholders may be subject
to state or local taxation, and the Company and the Operating Partnership may
be subject to state or local tax withholding requirements, in various
jurisdictions, including those in which it or they transact business or reside.
The state and local tax treatment of the Company and its stockholders may not
conform to the Federal income tax consequences discussed above. Consequently,
prospective stockholders should consult their own tax advisors regarding the
effect of state and local tax laws on an investment in Common Stock.
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CERTAIN UNITED STATES TAX CONSIDERATIONS
FOR NON-U.S. STOCKHOLDERS
The following is a discussion of certain anticipated U.S. Federal
income and U.S. Federal estate tax consequences of the ownership and
disposition of stock applicable to Non-U.S. Stockholders of such stock. A
"Non-U.S. Stockholder" is (i) any individual who is neither a citizen nor
resident of the United States, (ii) any corporation or partnership other than a
corporation or partnership created or organized in the United States or under
the laws of the United States or any state thereof or under the laws of the
District of Columbia (unless in the case of a partnership, Treasury regulations
provide otherwise), (iii) an estate or (iv) a trust that is not a "U.S. Trust."
A U.S. Trust is (i) for taxable years beginning after December 31, 1996, or if
the trustee of a trust elects to apply the following definition to an earlier
taxable year ending after August 20, 1996, a trust if, and only if, (a) a court
within the United States is able to exercise primary supervision over the
administration of the trust and (b) one or more U.S. persons has the authority
to control all substantial decisions of the trust and (ii) for all other
taxable years, any trust the income of which is subject to U.S. Federal income
taxation regardless of its source. The discussion is based on current law and
is for general information only. The discussion does not address other aspects
of U.S. Federal taxation other than income and estate taxation or all aspects
of U.S. Federal income and estate taxation. The discussion does not consider
any specific facts or circumstances that may apply to a particular Non-U.S.
Stockholder.
PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR TAX ADVISORS
REGARDING THE U.S. FEDERAL, STATE, LOCAL AND NON-U.S. INCOME, ESTATE AND OTHER
TAX CONSEQUENCES OF HOLDING AND DISPOSING OF STOCK.
DISTRIBUTIONS FROM THE COMPANY
Ordinary Dividends. The portion of dividends received by Non-U.S.
Stockholders payable out of the Company's earnings and profits that are not
attributable to capital gains of the Company and that are not effectively
connected with a U.S. trade or business of the Non-U.S. Stockholder will be
subject to U.S. withholding tax at the rate of 30% (unless reduced by treaty or
the Non-U.S. Stockholder files an Internal Revenue Service Form 4224 with the
Company certifying that the investment to which the distribution relates is
effectively connected to a United States trade or business of such Non-U.S.
Stockholder). Under certain limited circumstances, the amount of tax withheld
may be refundable, in whole or in part, because of the tax status of certain
partners or beneficiaries of Non-U.S. Stockholders that are either foreign
partnerships or foreign estates or trusts. In general, Non-U.S. Stockholders
will not be considered engaged in a U.S. trade or business solely as a result
of their ownership of stock. In cases in which the dividend income from a
Non-U.S. Stockholder's investment in stock is (or is treated as) effectively
connected with the Non-U.S. Stockholder's conduct of a U.S. trade or business,
the Non-U.S. Stockholder generally will be subject to U.S. tax at graduated
rates, in the same manner as U.S. stockholders are taxed with respect to such
dividends (and may also be subject to the 30% branch profits tax (unless
reduced by treaty) in the case of a Non-U.S. Stockholder that is a foreign
corporation).
Under currently applicable Treasury regulations, withholding agents
are required to determine the applicable withholding rate pursuant to the
appropriate tax treaty, and withhold the appropriate amount. Treasury
regulations proposed in 1996, which have not yet been adopted, and are
therefore not currently effective, would, if and when they become effective,
revise in certain respects the rules applicable to foreign stockholders with
respect to payments made after December 31, 1997.
Capital Gain Dividends. Under the Foreign Investment in Real Property
Tax Act of 1980 ("FIRPTA"), any distribution made by the Company to a Non-U.S.
Stockholder, to the extent attributable to gains from dispositions of United
States Real Property Interests ("USRPIs") by the Company ("USRPI Capital
Gains"), will be considered effectively connected with a U.S. trade or business
of the Non-U.S. Stockholder and subject to U.S. income tax at the rates
applicable to U.S. individuals or corporations, without regard to whether such
distribution is designated as a capital gain dividend. In addition, the Company
will be required to withhold tax equal to 35% of the amount of such
distribution to the extent it constitutes USRPI Capital Gains. Such
distribution may also be subject to the 30% branch profits tax (unless reduced
by treaty) in the case of a Non-U.S. Stockholder that is a foreign corporation.
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Non-Dividend Distributions. Any distributions by the Company that
exceed both current and accumulated earnings and profits of the Company will
not be taxed as either ordinary dividends or capital gain dividends. See
"Federal Income Tax Considerations--Taxation of Stockholders--Taxation of
Taxable Domestic Stockholders." However, if it cannot be determined at the time
a distribution is made whether or not such distribution will be in excess of
current and accumulated earnings and profits, the distribution will be subject
to withholding. Should this occur, the Non-U.S. Stockholder may seek a refund
of over withholding from the Service once it is subsequently determined that
such distribution was, in fact, in excess of current and accumulated earnings
and profits of the Company.
DISPOSITIONS OF STOCK
Unless the stock constitutes USRPIs, a sale or exchange of stock by a
Non-U.S. Stockholder generally will not be subject to U.S. taxation under
FIRPTA. The stock will not constitute USRPIs if the Company is a "domestically
controlled REIT." A domestically controlled REIT is a REIT in which, at all
times during a specified testing period, less than 50% in value of its stock is
held directly or indirectly by Non-U.S. Stockholders. It is currently
anticipated that the Company will be a domestically controlled REIT and,
therefore, that the sale of stock will not be subject to taxation under FIRPTA.
No assurance can be given that the Company will continue to be a domestically
controlled REIT.
If the Company does not constitute a domestically controlled REIT, a
Non-U.S. Stockholder's sale or exchange of stock generally will still not be
subject to tax under FIRPTA as a sale of USRPIs provided that (i) the Company's
stock is "regularly traded" (as defined by applicable Treasury regulations) on
an established securities market (e.g., the NYSE, on which the Common Stock is
listed) and (ii) the selling Non-U.S. Stockholder held 5% or less of the
Company's outstanding stock at all times during a specified testing period.
If gain on the sale or exchange of stock were subject to taxation
under FIRPTA, the Non-U.S. Stockholder would be subject to U.S. income tax at
the rates applicable to U.S. individuals or corporations, and the purchaser of
stock could be required to withhold 10% of the purchase price and remit such
amount to the Service. The branch profits tax would not apply to such sales or
exchanges.
Capital gains not subject to FIRPTA will nonetheless be taxable in the
United States to a Non-U.S. Stockholder in two cases: (i) if the Non-U.S.
Stockholder's investment in stock is effectively connected with a U.S. trade or
business conducted by such Non-U.S. Stockholder, the Non-U.S. Stockholder will
be subject to the same treatment as U.S. stockholders with respect to such gain
or (ii) if the Non-U.S. Stockholder is a nonresident alien individual who was
present in the United States for 183 days or more during the taxable year and
has a "tax home" in the United States, the nonresident alien individual will be
subject to 30% tax on the individual's capital gain (unless reduced or
eliminated by treaty).
FEDERAL ESTATE TAX
Stock owned or treated as owned by an individual who is not a citizen
or "resident" (as specifically defined for U.S. Federal estate tax purposes) of
the United States at the time of death will be includable in the individual's
gross estate for U.S. Federal estate tax purposes, unless an applicable estate
tax treaty provides otherwise. Such individual's estate may be subject to U.S.
Federal estate tax on the property includable in the estate for U.S. Federal
estate tax purposes.
INFORMATION REPORTING AND BACKUP WITHHOLDING
The Company must report annually to the Service and to each Non-U.S.
Stockholder the amount of dividends (including any capital gain dividends) paid
to, and the tax withheld with respect to, each Non-U.S. Stockholder. These
reporting requirements apply regardless of whether withholding was reduced or
eliminated by an applicable tax treaty. Copies of these returns may also be
made available under the provisions of a specific treaty or agreement with the
tax authorities in the country in which the Non-U.S. Stockholder resides.
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U.S. backup withholding (which generally is imposed at the rate of 31%
on certain payments to persons that fail to furnish the information required
under the U.S. information reporting requirements) and information reporting
will generally not apply to dividends (including any capital gain dividends)
paid on stock to a Non-U.S. Stockholder at an address outside the United
States.
The payment of the proceeds from the disposition of stock to or
through a U.S. office of a broker will be subject to information reporting and
backup withholding unless the owner, under penalties of perjury, certifies,
among other things, its status as a Non-U.S. Stockholder, or otherwise
establishes an exemption. The payment of the proceeds from the disposition of
stock to or through a non-U.S. office of a non-U.S. broker generally will not
be subject to backup withholding and information reporting, except as noted
below. In the case of a payment of proceeds from the disposition of stock to or
through a non-U.S. office of a broker which is (i) a U.S. person, (ii) a
"controlled foreign corporation" for U.S. Federal income tax purposes or (iii)
a foreign person 50% or more of whose gross income for certain periods is
derived from a U.S. trade or business, information reporting (but not backup
withholding) will apply unless the broker has documentary evidence in its files
that the holder is a Non-U.S. Stockholder (and the broker has no actual
knowledge to the contrary) and certain other conditions are met, or the holder
otherwise establishes an exemption. Under proposed Treasury regulations, a
payment of the proceeds from the disposition of stock to or through such broker
will be subject to backup withholding if such broker has actual knowledge that
the holder is a U.S. person.
Backup withholding is not an additional tax. Any amounts withheld
under the backup withholding rules will be refunded or credited against the
Non-U.S. Stockholder's U.S. Federal income tax liability, provided that
required information is furnished to the Service.
These backup withholding and information reporting rules are currently
under review by the Treasury Department, and their application to stock is
subject to change. In particular, Treasury regulations proposed in 1996, which
have not yet been adopted, and are therefore not currently effective, would, if
and when they become effective, revise in certain respects the rules applicable
to foreign stockholders with respect to payments made after December 31, 1997.
PLAN OF DISTRIBUTION
The Offered Securities may be offered directly by the Company, through
agents designated from time to time by the Company, to or through underwriters
or dealers. Direct sales to investors may be accomplished through subscription
offerings or through Rights distributed to the Company's stockholders. In
connection with subscription offerings or the distribution of Rights to
stockholders, if all of the underlying Offered Securities are not subscribed
for, the Company may sell such unsubscribed Offered Securities to third parties
directly or through underwriters or agents and, in addition, whether or not all
of the underlying Offered Securities are subscribed for, the Company may
concurrently offer additional Offered Securities to third parties directly or
through underwriters or agents. Any such underwriter, dealer or agent involved
in the offer and sale of the Offered Securities will be named in the applicable
Prospectus Supplement.
The distribution of the Offered Securities may be effected from time
to time in one or more transactions at a fixed price or prices, which may be
changed, or at prices related to the prevailing market prices at the time of
sale or at negotiated prices (any of which may represent a discount from the
prevailing market prices). The Company also may, from time to time, authorize
underwriters acting as the Company's agents to offer and sell the Offered
Securities on such terms and conditions as are set forth in the applicable
Prospectus Supplement. In connection with the sale of Offered Securities,
underwriters may be deemed to have received compensation from the Company in
the form of underwriting discounts or commissions and may also receive
commissions from purchasers of Offered Securities for whom they may act as
agent. Underwriters may sell Offered Securities to or through dealers, and such
dealers may receive compensation in the form of discounts, concessions or
commissions from the underwriters and/or commissions from the purchasers for
whom they may act as agent.
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Any underwriting compensation paid by the Company to underwriters or
agents in connection with the offering of Offered Securities, and any
discounts, concessions or commissions allowed by underwriters to participating
dealers, will be set forth in the applicable Prospectus Supplement.
Underwriters, dealers and agents participating in the distribution of the
Offered Securities may be deemed to be underwriters, and any discounts and
commissions received by them and any profit realized by them on resale of the
Offered Securities may be deemed to be underwriting discounts and commissions,
under the Securities Act. Underwriters, dealers and agents may be entitled,
under agreements entered into with the Company, to indemnification against and
contribution toward certain civil liabilities, including liabilities under the
Securities Act.
If so indicated in the applicable Prospectus Supplement, the Company
will authorize dealers acting as the Company's agents to solicit offers by
certain institutions to purchase Offered Securities from the Company at the
public offering price set forth in such Prospectus Supplement pursuant to
delayed delivery contracts ("Contracts") providing for payment and delivery on
the date or dates stated in such Prospectus Supplement. Each Contract will be
for an amount not less than, and the aggregate principal amount of Offered
Securities sold pursuant to Contracts will be not less nor more than, the
respective amounts stated in the applicable Prospectus Supplement. Institutions
with whom Contracts, when authorized, may be made include commercial and
savings banks, insurance companies, pension funds, investment companies,
educational and charitable institutions and other institutions but will in all
cases be subject to the approval of the Company. Contracts will not be subject
to any conditions except (i) the purchase by an institution of the Offered
Securities covered by its Contracts may not at the time of delivery be
prohibited under the laws of any jurisdiction in the United States to which
such institution is subject and (ii) if the Offered Securities are being sold
to underwriters, the Company must have sold to such underwriters the total
principal amount of the Offered Securities less the principal amount thereof
covered by Contracts.
Certain of the underwriters and their affiliates may be customers of,
engage in transactions with and perform services for the Company and its
subsidiaries in the ordinary course of business.
EXPERTS
The consolidated financial statements and schedule of Urban Shopping
Centers, Inc. and consolidated partnerships as of December 31, 1996 and 1995,
and for each of the years in the three-year period ended December 31, 1996,
have been incorporated by reference herein and in the Registration Statement in
reliance on the report of KPMG Peat Marwick LLP, independent certified public
accountants, which report is incorporated by reference herein, and on the
authority of such firm as experts in accounting and auditing.
LEGAL MATTERS
Certain legal matters relating to the validity of the Offered
Securities will be passed on for the Company by Mayer, Brown & Platt. Mayer,
Brown & Platt has in the past represented and is currently representing the
Company and certain of its affiliates.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated expenses in connection
with the issuance and distribution of the securities registered hereby, all of
which will be paid by the Registrant:
<TABLE>
<S> <C>
SEC registration fee . . . . . . . . . . . . . . . . . . . . . . . $ 75,758
Printing and duplicating expenses . . . . . . . . . . . . . . . . 100,000
Legal fees and expenses . . . . . . . . . . . . . . . . . . . . . 100,000
Blue Sky fees and expenses . . . . . . . . . . . . . . . . . . . . 2,000
Accounting fees and expenses . . . . . . . . . . . . . . . . . . . 50,000
Miscellaneous expenses . . . . . . . . . . . . . . . . . . . . . . 22,242
------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $350,000
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Maryland law permits a Maryland corporation to include in its charter
a provision limiting the liability of its directors and officers to the
corporation and its stockholders for money damages except for liability
resulting from (i) actual receipt of an improper benefit or profit in money,
property or services or (ii) active and deliberate dishonesty established by a
final judgment as being material to the cause of action. The Registrant's
Charter contains such a provision which eliminates such liability to the
maximum extent permitted by Maryland law.
The Registrant's directors and officers are and will be indemnified
under the Registrant's Charter against certain liabilities. The Registrant's
Charter requires it to indemnify its directors and officers, among others,
against judgments, penalties, fines, settlements and reasonable expenses
actually incurred by them in connection with any proceeding to which they may
be made a party by reason of their services in those or other capacities unless
it is established that the act or omission of the director or officer was
material to the matter giving rise to the proceeding and was committed in bad
faith or was the result of active and deliberate dishonesty, or the director or
officer actually received an improper personal benefit, or, in the case of any
criminal proceeding, the director or officer had reasonable cause to believe
that the act or omission was unlawful.
The partnership agreement of Urban Shopping Centers, L.P. also
provides for indemnification of the Registrant and its directors and officers
to the same extent indemnification is provided to directors and officers of the
Registrant under the Registrant's Charter, and limits the liability of the
Registrant and its directors and officers to Urban Shopping Centers, L.P. and
its partners to the same extent the liability of the directors and officers of
the Registrant to the Registrant and its stockholders is limited under the
Registrant's Charter.
Maryland law requires a corporation (unless its charter provides
otherwise, which the Registrant's Charter does not) to indemnify a director or
officer who has been successful, on the merits or otherwise, in the defense of
any proceeding to which he or she is made a party by reason of his or her
service in that capacity. Maryland law permits a corporation to indemnify its
present and former directors and officers, among others, against judgments,
penalties, fines, settlements and reasonable expenses actually incurred by them
in connection with any proceeding to which they may be made a party by reason
of their service in those or other capacities unless it is established that (i)
the act or omission of the director or officer was material to the matter
giving rise to the proceeding and (a) was committed in bad faith or (b) was the
result of active and deliberate dishonesty, (ii) the director or officer
actually received an improper personal benefit in money, property or services
or (iii) in the case of any criminal proceeding, the director or officer had
reasonable cause to believe that the act or omission was unlawful. However, a
Maryland corporation may not indemnify for an adverse judgment in a suit by or
in the right of the corporation. Maryland law permits the Registrant to
advance reasonable expenses to a director or officer upon the Registrant's
receipt of (i) a written affirmation by the director or officer of his or her
good faith belief that he or she has met the standard of conduct necessary for
indemnification by the Registrant as authorized by the Registrant's Charter
<PAGE> 32
and (ii) a written statement by or on his or her behalf to repay the amount
paid or reimbursed by the Registrant if it shall ultimately be determined that
the standard of conduct was not met.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
See the Exhibit Index included herewith which is hereby incorporated
herein by reference.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the Registration
Statement (or the most recent post-effective
amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the
information set forth in the Registration Statement;
notwithstanding the foregoing, any increase or
decrease in the volume of securities offered (if the
total dollar value of securities offered would not
exceed that which was registered) and any deviation
from the low or high and of the estimated maximum
offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume
and price represent no more than a 20 percent change
in the maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in the
effective Registration Statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in
the Registration Statement or any material change to
such information in the Registration Statement;
Provided, however, that paragraphs (a)(i) and (a)(ii)
do not apply if the information required to be
included in a post-effective amendment by those
paragraphs is contained in periodic reports filed
with or furnished to the Commission by the Registrant
pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 that are incorporated by
reference in the Registration Statement.
(b) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference in the Registration
Statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
The undersigned Registrant hereby undertakes to supplement the
prospectus, after the expiration of the subscription period, to set forth the
results of the subscription offer, the transactions by the underwriters during
the subscription period, the amount of unsubscribed securities to be purchased
by the underwriters, and the terms of
II-2
<PAGE> 33
any subsequent reoffering thereof. If any public offering by the underwriters
is to be made on terms differing from those set forth on the cover page of the
prospectus, a post-effective amendment will be filed to set forth the terms of
such offering.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions set forth or described in
Item 15 of this Registration Statement, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. If a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of Urban Shopping Centers,
Inc., a Maryland corporation, and each of the undersigned directors and
officers of Urban Shopping Centers, Inc., hereby constitutes and appoints
Matthew S. Dominski, Adam S. Metz and Michael G. Hilborn its, his or her true
and lawful attorneys-in-fact and agents, for it, him or her and in its, his or
her name, place and stead, in any and all capacities, with full power to act
alone, to sign any and all amendments to this Registration Statement, and any
registration statement to register additional securities pursuant to Rule 462
under the Securities Act of 1933, and to file each such document with all
exhibits thereto, and any and all documents in connection therewith, with the
Securities and Exchange Commission, hereby granting unto said attorneys-
in-fact and agents, and each of them, full power and authority to do and
perform any and all acts and things requisite and necessary to be done in and
about the premises, as fully and to all intents and purposes as it, he or she
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, may lawfully do or cause to be
done by virtue hereof.
II-3
<PAGE> 34
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 the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Chicago, State of Illinois on September 17,
1997.
URBAN SHOPPING CENTERS, INC.
By: /s/ MICHAEL G. HILBORN
-----------------------------
Michael G. Hilborn
Senior Vice President and General Counsel
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>
NAME TITLE DATE
---- ----- ----
<S> <C> <C>
/s/ MATTHEW S. DOMINSKI President, Chief Executive Officer and Director September 17, 1997
- ------------------------------------------ (Principal Executive Officer)
Matthew S. Dominski
/s/ ADAM S. METZ Executive Vice President and Chief Financial Officer September 17, 1997
- ------------------------------------------ (Principal Accounting and Financial Officer)
Adam S. Metz
/s/ NEIL G. BLUHM Director September 17, 1997
- ------------------------------------------
Neil G. Bluhm
/s/ JUDD D. MALKIN Director September 17, 1997
- ------------------------------------------
Judd D. Malkin
/s/ JAMES B. DIGNEY Director September 17, 1997
- ------------------------------------------
James B. Digney
Director
- ------------------------------------------
Susan Getzendanner
/s/ JOHN E. NEAL Director September 17, 1997
- ------------------------------------------
John E. Neal
/s/ PHILLIP B. ROONEY Director September 17, 1997
- ------------------------------------------
Phillip B. Rooney
/s/ JOHN G. SCHREIBER Director September 17, 1997
- ------------------------------------------
John G. Schreiber
/s/ HENRY T. SEGERSTROM Director September 17, 1997
- ------------------------------------------
Henry T. Segerstrom
</TABLE>
II-4
<PAGE> 35
INDEX TO EXHIBITS
EXHIBIT
NUMBER DOCUMENT DESCRIPTION
------- --------------------
4.1 Fourth Amended and Restated Articles of Incorporation of the
Registrant (incorporated by reference to exhibit 3.1 to the
Registrant's Form 10-K for the year ended December 31, 1994).
4.2 Second Amended and Restated By-laws of the Registrant
(incorporated by reference to exhibit 3.2 to the Registrant's
Form 10-K for the year ended December 31, 1994).
4.3 Form of Common Stock Certificate (incorporated by reference to
exhibit 4.1 to the Registrant's Form 10-Q for the period ended
September 30, 1993).
5 Opinion of Mayer, Brown & Platt as to the legality of the
securities offered.
8 Opinion of Mayer, Brown & Platt as to certain tax matters.
23.1 Consent of KPMG Peat Marwick LLP.
23.2 Consent of Mayer, Brown & Platt (included in its opinions filed
as Exhibits 5 and 8).
24 Power of Attorney (included at page II-3).
II-5
<PAGE> 1
EXHIBIT 5
[LETTERHEAD]
September 18, 1997
The Board of Directors
Urban Shopping Centers, Inc.
900 North Michigan Avenue, Suite 1500
Chicago, Illinois 60611
Ladies and Gentlemen:
We have acted as special counsel to Urban Shopping Centers, Inc., a
Maryland corporation (the "Company"), in connection with the proposed sale of
the following securities (the "Securities") of the Company, as set forth in the
Form S-3 Registration Statement filed with the Securities and Exchange
Commission on the date hereof (the "Registration Statement"): (i) one or more
series of series preferred stock, par value $.01 per share (the "Preferred
Stock"), (ii) common stock, par value $.01 per share (the "Common Stock"), and
(iii) one or more series of warrants to purchase Preferred Stock or Common
Stock (the "Stock Warrants").
The Preferred Stock will be issued under the Company's Fourth Amended
and Restated Articles of Incorporation (the "Articles") and Articles
Supplementary to be filed with the Maryland State Department of Assessments and
Taxation (the "Maryland SDAT"). The Common Stock will be issued under the
Articles. The Stock Warrants will be issued under one or more warrant
agreements (each, a "Warrant Agreement"), each to be entered into between the
Company and a financial institution identified therein as a warrant agent
(each, a "Warrant Agent"). Certain terms of the Securities to be issued by the
Company from time to time will be approved by the Board of Directors of the
Company or a committee thereof as part of the corporate action taken and to be
taken in connection with the authorization of the issuance of the Securities
(the "Corporate Proceedings").
As special counsel to the Company, we have examined originals or
copies certified or otherwise identified to our satisfaction of the Articles,
the Company's Bylaws, resolutions of the Company's Board of Directors and such
Company records, certificates and other documents and such questions of law as
we considered necessary or appropriate for the purpose of this opinion. As to
certain facts material to our opinion, we have relied, to the extent we deem
such reliance proper, upon certificates of public officials and officers of the
Company. In rendering this opinion, we have assumed the genuineness of all
signatures, the authenticity of all documents
<PAGE> 2
The Board of Directors
Urban Shopping Centers, Inc.
September 18, 1997
Page 2
submitted to us as originals and the conformity to authentic original documents
of all documents submitted to us as copies.
Based upon and subject to the foregoing and to the assumptions,
conditions and limitations set forth herein, we are of the opinion that:
(1) when the Registration Statement has become effective under the
Securities Act of 1933, as amended (the "Act"), and upon the completion of the
Corporate Proceedings relating to a series of the Preferred Stock, the
execution, delivery and filing with, and recording by, the Maryland SDAT of
Articles Supplementary relating to such series of the Preferred Stock and the
due execution, countersignature and delivery of certificates representing the
shares of the Preferred Stock of such series, the Preferred Stock of such
series, when sold in exchange for the consideration set forth in the Prospectus
and any Prospectus Supplement relating to such series of the Preferred Stock,
will be duly authorized, legally issued, fully paid and nonassessable;
(2) when the Registration Statement has become effective under the
Act and upon the completion of the Corporate Proceedings relating to the Common
Stock and the due execution, countersignature and delivery of certificates
representing the shares of the Common Stock, the Common Stock, when sold in
exchange for the consideration set forth in the Prospectus and any Prospectus
Supplement relating to the Common Stock, will be duly authorized, legally
issued, fully paid and nonassessable; and
(3) when the Registration Statement has become effective under the
Act and when a series of the Stock Warrants has been duly established pursuant
to the relevant Warrant Agreement and upon the completion of the Corporate
Proceedings relating to such series of the Stock Warrants and the due
execution, authentication, issuance and delivery of the Stock Warrants of such
series, the Stock Warrants of such series, when sold in exchange for the
consideration set forth in the Prospectus and any Prospectus Supplement
relating to such series of the Stock Warrants, will be duly authorized and will
be binding obligations of the Company enforceable against the Company in
accordance with their respective terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally and subject to general principles of equity.
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
<PAGE> 3
The Board of Directors
Urban Shopping Centers, Inc.
September 18, 1997
Page 3
will be duly organized, validly existing and in good standing under the laws of
its jurisdiction of organization; that the Warrant Agent will be duly qualified
to engage in the activities contemplated by the Warrant Agreement; that the
Warrant Agreement will be duly authorized, executed and delivered by the
Warrant Agent and will constitute the legal, valid and binding obligation of
the Warrant Agent enforceable against the Warrant Agent in accordance with its
terms; that the Warrant Agent will be 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 will have the requisite
organizational and legal power and authority to perform its obligations under
the Warrant Agreement.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to all references to our firm in the Registration
Statement.
Very truly yours,
/s/ Mayer, Brown & Platt
MAYER, BROWN & PLATT
<PAGE> 1
EXHIBIT 8
[LETTERHEAD]
September 18, 1997
The Board of Directors
Urban Shopping Centers, Inc.
900 North Michigan Avenue, Suite 1500
Chicago, Illinois 60611
Re: Partnership Classification; Status as a Real Estate
Investment Trust ("REIT"); Information in the Registration
Statement under "FEDERAL INCOME TAX CONSIDERATIONS" and
"CERTAIN UNITED STATES TAX CONSIDERATIONS FOR NON-U.S.
STOCKHOLDERS"
Gentlemen:
We have acted as special counsel to Urban Shopping Centers, Inc., a
Maryland corporation (the "Company"), in connection with the registration of
one or more series of preferred stock, par value $.01 per share (the "Preferred
Stock"), depository shares representing entitlement to all rights and
preferences of a fraction of a share of Preferred Stock (the "Depository
Shares"), common stock, par value $.01 per share (the "Common Stock"), warrants
exercisable for Preferred Stock or Common Stock (the "Warrants"), rights to
subscribe for and purchase the foregoing (the "Rights" and, together with the
Preferred Stock, the Common Stock, the Depository Shares and the Warrants, the
"Securities") with an aggregate public offering price of up to $250,000,000,
all of which Securities may be offered and sold by the Company from time to
time as set forth in the prospectus (the "Prospectus") which forms a part of
the Registration Statement on Form S-3 filed with the Securities and Exchange
Commission on September 18, 1997 (the "Registration Statement") and as may be
set forth in one or more supplements to the Prospectus (each a "Prospectus
Supplement"). Unless otherwise specifically defined herein, all capitalized
terms have the meanings assigned to them in the Registration Statement.
In connection with the registration of the Securities, you have
requested our opinions concerning (i) the treatment of Urban Shopping Centers,
L.P. (the "Operating Partnership") as a
<PAGE> 2
Urban Shopping Centers, Inc.
September 18, 1997
Page 2
partnership for Federal income tax purposes, and not as an association taxable
as a corporation; (ii) the qualification and taxation for Federal income tax
purposes of the Company as a REIT; and (iii) the information in the
Registration Statement under the headings "FEDERAL INCOME TAX CONSIDERATIONS"
and "CERTAIN UNITED STATES TAX CONSIDERATIONS FOR NON-U.S. STOCKHOLDERS."
In formulating our opinions, we have reviewed and relied upon the
partnership agreement of the Operating Partnership, the Registration Statement,
other documents and information provided by you, and such applicable provisions
of law and other documents as we have considered necessary or desirable for
purposes of the opinions expressed herein.
In addition, we have relied upon the Company's certificate (the
"Officer's Certificate"), executed by a duly appointed officer of the Company,
setting forth certain representations relating to the organization and actual
and proposed operation of the Company, the Operating Partnership, the
Management Company and each of the partnerships in which the Operating
Partnership will directly or indirectly hold an interest and which actually
owns an interest in real property (the "Property Partnerships"). For purposes
of our opinions, we have not made an independent investigation of the facts set
forth in such documents, the Officer's Certificate, the partnership agreements
for the Operating Partnership or the Property Partnerships, or the Registration
Statement. We have, consequently, relied upon your representations that the
information presented in such documents or otherwise furnished to us accurately
and completely describes all material facts. No facts have come to our
attention, however, that would cause us to question the accuracy or
completeness of such facts or documents in a material way.
In rendering these opinions, we have assumed that the transactions
contemplated by the foregoing documents will be consummated in accordance with
the operative documents, and that such documents accurately reflect the
material facts of such transactions. In addition, the opinions are based on
the assumption that the Company, the Operating Partnership, the Management
Company and the Property Partnerships have operated and will continue to each
be operated in the manner described in the applicable partnership agreement or
other organizational documents and in the Registration Statement, and all terms
and provisions of such agreements and documents have been and will continue to
be complied with. Our opinions expressed herein are based on the applicable
laws of the States of Maryland and Delaware, the Code, Treasury regulations
promulgated thereunder, and interpretations of the Code and such regulations by
the courts and the Internal Revenue Service, all as they are in effect and
exist at the date of this letter. It should be noted that statutes,
regulations, judicial decisions, and administrative interpretations are subject
to change at any time and, in some circumstances, with retroactive effect. A
material change that is made after the date hereof in any of the foregoing
bases for our opinions could adversely affect our conclusions.
<PAGE> 3
Urban Shopping Centers, Inc.
September 18, 1997
Page 3
Based upon and subject to the foregoing, it is our opinion that:
1. The Operating Partnership will be treated, for Federal income tax
purposes, as a partnership, and not as an association taxable as a corporation.
2. Beginning with the Company's taxable year ending December 31,
1993, the Company has been organized in conformity with the requirements for
qualification as a REIT under the Code, and the Company's actual and proposed
method of operation, as described in the Registration Statement and as
represented in the Officer's Certificate, has enabled it and will continue to
enable it to satisfy the requirements for qualification as a REIT.
3. The information in the Registration Statement under the headings
"FEDERAL INCOME TAX CONSIDERATIONS" and "CERTAIN UNITED STATES TAX
CONSIDERATIONS FOR NON-U.S. STOCKHOLDERS," to the extent that it constitutes
matters of law or legal conclusions, has been reviewed by us and is correct in
all material respects.
Other than as expressly stated above, we express no opinion on any
issue relating to the Company, the Operating Partnership, any Property
Partnership or to any investment therein.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of the name of our firm therein and under
the caption "FEDERAL INCOME TAX CONSIDERATIONS" in the Registration Statement.
Very truly yours,
/s/ Mayer, Brown & Platt
MAYER, BROWN & PLATT
<PAGE> 1
EXHIBIT 23.1
ACCOUNTANTS' CONSENT
The Board of Directors and Shareholders
Urban Shopping Centers, Inc.:
We consent to incorporation by reference in the registration statement on Form
S-3 of Urban Shopping Centers, Inc. of our report dated January 24, 1997,
except as to note 11 which is as of February 10, 1997, relating to the
consolidated balance sheets of Urban Shopping Centers, Inc. as of December 31,
1996 and 1995, and the related consolidated statements of operations,
stockholders' equity, and cash flows for each of the years in the three-year
period ended December 31, 1996, and related schedule, which reports appear in
the December 31, 1996 annual report on Form 10-K of Urban Shopping Centers,
Inc. and to the reference to our firm under the heading "Experts" in the
registration statement.
/s/ KPMG Peat Marwick LLP
Chicago, Illinois
September 18, 1997
