<PAGE>
As filed with the Securities and Exchange Commission on December 19, 1996
REGISTRATION NO. 333-______
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
COLONIAL PROPERTIES TRUST
(Exact Name of Registrant as Specified in Its Charter)
ALABAMA 59-7007599
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
2101 SIXTH AVENUE NORTH, SUITE 750
BIRMINGHAM, ALABAMA 35202
(205) 250-8700
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
THOMAS H. LOWDER
2101 SIXTH AVENUE NORTH, SUITE 750
BIRMINGHAM, ALABAMA 35202
(202) 250-8700
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent For Service)
______________________
COPIES TO:
J. WARREN GORRELL, JR.
ALAN L. DYE
HOGAN & HARTSON L.L.P.
COLUMBIA SQUARE
555 THIRTEENTH STREET, N.W.
WASHINGTON, D.C. 20004-1109
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
possible after the effective date of this Registration Statement and from time
to time as determined by market conditions.
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, please 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. [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE AGGREGATE PRICE PER AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED (1)(2)(3) SECURITY PRICE (2)(4) REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Debt Securities.....................
Preferred Shares of
Beneficial Interest (5)............ $216,762,500 (7) $216,762,500 $65,686
Common Shares of
Beneficial Interest (6)............
Common Share Warrants...............
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</TABLE>
(Footnotes on the following page)
THE REGISTRANT HEREBY AMENDS THE REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
PURSUANT TO RULE 429 UNDER THE SECURITIES ACT OF 1933, AS AMENDED, THE
PROSPECTUS WHICH CONSTITUTES PART OF THIS REGISTRATION STATEMENT ALSO RELATES TO
AND INCLUDES AN AGGREGATE PRINCIPAL AMOUNT OF $33,237,500 OF SECURITIES
REGISTERED ON FORM S-3, REGISTRATION NO. 33-89612.
================================================================================
<PAGE>
(Footnotes continued from previous page)
(1) This Registration Statement also covers delayed delivery contracts which
may be issued by the Registrant under which the counterparty may be
required to purchase Debt Securities, Preferred Shares, Common Shares or
Common Share Warrants. Such contracts may be issued together with the
specific Securities to which they relate. In addition, Securities
registered hereunder may be sold separately, together or as units with
other Securities registered hereunder.
(2) In U.S. Dollars or the equivalent thereof denominated in one or more
foreign currencies or units of two or more foreign currencies or composite
currencies (such as European Currency Units).
(3) Pursuant to Rule 429 under the Securities Act of 1933, as amended, the
Prospectus included in this Registration Statement relates also to
$33,237,500 of Securities registered on Form S-3 Registration No. 33-89612
and unissued as of the date hereof.
(4) Estimated solely for purposes of calculating the registration fee. No
separate consideration will be received for Common Shares or Preferred
Shares that are issued upon conversion of Debt Securities or Preferred
Shares or upon exercise of Common Share Warrants registered hereunder, as
the case may be. The aggregate maximum offering price of all Securities
issued pursuant to this Registration Statement will not exceed
$216,762,500.
(5) Such indeterminate number of Preferred Shares as may from time to time be
issued at indeterminate prices or issuable upon conversion of Debt
Securities.
(6) Such indeterminate number of Common Shares as may from time to time be
issued at indeterminate prices or issuable upon conversion of Debt
Securities or Preferred Shares registered hereunder or upon exercise of
Common Share Warrants registered hereunder, as the case may be.
(7) Omitted pursuant to General Instruction II.D of Form S-3 under the
Securities Act of 1933, as amended.
<PAGE>
SUBJECT TO COMPLETION, DATED DECEMBER 19, 1996
PROSPECTUS
$250,000,000
COLONIAL PROPERTIES TRUST
DEBT SECURITIES, PREFERRED SHARES, COMMON SHARES AND COMMON SHARE WARRANTS
_________________
Colonial Properties Trust (the "Company") may from time to time offer in one
or more series of (i) unsecured debt securities ("Debt Securities"), (ii)
preferred shares of beneficial interest ("Preferred Shares"), (iii) common
shares of beneficial interest, $.01 par value ("Common Shares"), and (iv)
warrants exercisable for Common Shares ("Common Share Warrants"), with an
aggregate public offering price of up to $250,000,000 (or its equivalent based
on the exchange rate at the time of sale) in amounts, at prices and on terms to
be determined at the time of offering. The Debt Securities, Preferred Shares,
Common Shares and Common Share Warrants (collectively, the "Securities") may
be offered, separately or together, in separate series in amounts, at prices and
on terms to be described in one or more supplements to this Prospectus (a
"Prospectus Supplement").
The specific terms of the Securities in respect of which this Prospectus is
being delivered will be set forth in the applicable Prospectus Supplement and
will include, where applicable: (i) in the case of Debt Securities, the specific
title, aggregate principal amount, currency, form (which may be registered or
bearer, or certificated or global), authorized denominations, maturity, rate (or
manner of calculation thereof) and time of payment of interest, any terms for
redemption at the option of the Company or repayment at the option of the
holder, any terms for any sinking fund payments, any terms for conversion into
Preferred Shares or Common Shares of the Company, covenants and any initial
public offering price; (ii) in the case of Preferred Shares, the specific title
and stated value, any dividend, liquidation, redemption, conversion, voting and
other rights, and any initial public offering price; (iii) in the case of Common
Shares, any initial public offering price or, if applicable, information
regarding the exchange of units of partnership interest ("Units") of Colonial
Realty Limited Partnership for Common Shares; and (iv) in the case of Common
Share Warrants, the specific title and aggregate number, and the issue price and
the exercise price. In addition, such specific terms may include limitations on
direct or beneficial ownership and restrictions on transfer of the Securities,
in each case as may be appropriate to preserve the status of the Company as a
real estate investment trust for federal income tax purposes.
The applicable Prospectus Supplement also will contain information, where
applicable, about certain U.S. federal income tax considerations relating to,
and any listing on a securities exchange of, the Securities covered by such
Prospectus Supplement.
The Securities may be offered directly, 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 Securities, their names, and
any applicable purchase price, fee, commission or discount arrangement with,
between or among them, will be set forth, or will be calculable from the
information set forth, in an accompanying Prospectus Supplement. See "Plan of
Distribution." No Securities may be sold without delivery of a Prospectus
Supplement describing the method and terms of the offering of such Securities.
SEE "RISK FACTORS" BEGINNING ON PAGE 3 OF THIS PROSPECTUS FOR CERTAIN FACTORS
RELATING TO AN INVESTMENT IN THE SECURITIES.
_________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
_________________
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED THE
MERITS OF THIS OFFERING. ANY REPRESENTATION
TO THE CONTRARY IS UNLAWFUL.
_________________
THE DATE OF THIS PROSPECTUS IS ___________ __, 19__
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 by 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.
<PAGE>
As used herein, the term "Company" includes Colonial Properties Trust, an
Alabama real estate investment trust, and one or more of its subsidiaries
(including Colonial Properties Holding Company, Inc., Colonial Realty Limited
Partnership, Colonial Properties Services Limited Partnership and Colonial
Properties Services, Inc.) or, as the context may require, Colonial Properties
Trust only or Colonial Realty Limited Partnership only.
THE COMPANY
The Company is one of the largest developers, owners and operators of
multifamily, retail and office properties in the Southeastern United States.
The Company's common shares are traded on the New York Stock Exchange ("NYSE")
under the symbol "CLP." It is a fully-integrated real estate company, whose
activities include ownership of a diversified portfolio of 71 properties located
in Alabama, Florida, Georgia and South Carolina, development of new properties,
acquisitions of existing properties and build-to-suit development. The Company
is a self-administered equity real estate investment trust ("REIT") that owns 40
garden-style multifamily apartment communities containing a total of 13,657
apartment units (the "Multifamily Properties"), 21 retail properties
(including five regional malls, two "power centers" and 14 neighborhood shopping
centers) containing a total of approximately 5.7 million square feet of retail
space (the "Retail Properties"), ten office properties containing a total of
approximately 1.0 million square feet of office space (the "Office
Properties") and parcels of land adjacent to certain of these properties (the
"Land"). (The Multifamily Properties, the Retail Properties, the Office
Properties and the Land are referred to collectively as the "Properties").
The Company also is expanding four Multifamily Properties and two Retail
Properties and is developing four new multifamily properties.
The Company, through Colonial Properties Holding Company, Inc., a wholly owned
subsidiary ("CPHC"), is the sole general partner of, and, as of December 1,
1996, holds approximately 67.7% of the interests in, Colonial Realty Limited
Partnership, a Delaware limited partnership (the "Operating Partnership"). The
Operating Partnership owns all of the Properties (or interests therein). The
Company conducts all of its business through CPHC, the Operating Partnership and
the Company's two management subsidiaries, Colonial Properties Services Limited
Partnership (the "Management Partnership"), which provides management services
for the Company's properties, and Colonial Properties Services, Inc. (the
"Management Corporation"), which provides management services for properties
owned by third parties. As sole general partner of the Operating Partnership,
the Company, through CPHC, has the exclusive power to manage and conduct the
business of the Operating Partnership, subject to certain limited exceptions.
Since the Company's initial public offering in September 1993 (the "IPO"),
the Company has significantly expanded its portfolio of Properties and its
operating businesses. The Company has acquired direct or indirect interests in
24 additional Multifamily Properties, twelve additional Retail Properties (while
disposing of a 36,000 square foot mini-warehouse storage facility previously
included as a Retail Property) and several additional parcels of Land. The
Company also has completed the expansion of three Multifamily Properties, has
initiated or is planning the expansion or development of six additional
Multifamily Properties, and has initiated major expansions of Macon Mall and
Montgomery Promenade. The Company's acquisitions and its expansion and
development activities have increased the Company's presence in Alabama, Florida
and Georgia, and the Company has expanded its operations into South Carolina
through the acquisition of a 488,000 square foot regional mall located in Myrtle
Beach.
The Company's experienced staff of approximately 570 employees provides a full
range of real estate services from its headquarters in Birmingham, Alabama and
from five regional offices located in the Mobile, Huntsville and Montgomery,
Alabama and Orlando and Tampa, Florida metropolitan areas.
The Company is an Alabama REIT that was formed in July 1993. The principal
executive offices of the Company are located at 2101 Sixth Avenue North, Suite
750, Birmingham, Alabama 35203, and its telephone number is (205) 250-8700.
2
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RISK FACTORS
Prospective investors should carefully consider, among other factors, the
matters described below.
REAL ESTATE INVESTMENT RISKS
General. Real property investments are subject to varying degrees of risk.
The yields available from equity investments in real estate and the Company's
ability to service debt will depend in large part on the amount of income
generated, expenses incurred and capital expenditures required. The Company's
income from retail, multifamily or office properties may be adversely affected
by a number of factors, including the general economic climate and local real
estate conditions, such as an oversupply of, or a reduction in demand, for
retail, apartment or office space in the area and the attractiveness of the
properties to shoppers, residents and tenants. In addition, income from
properties and real estate values also are affected by such factors as the cost
of compliance with government regulation, including zoning and tax laws, the
potential for liability under applicable laws, interest rate levels and the
availability of financing. Certain significant expenditures associated with each
equity investment by the Company in a property (such as mortgage payments, if
any, real estate taxes and maintenance costs) also are generally not reduced
when circumstances cause a reduction in income from the property.
Debt Financing. The Company is subject to the risks associated with debt
financing, including the risk that the Company's cash provided by operating
activities will be insufficient to meet required payments of principal and
interest, the risks of rising interest rates on the Company's floating rate
debt, the risk that the Company will not be able to prepay or refinance existing
indebtedness on the Properties (which generally will not have been fully
amortized at maturity) or that the terms of such refinancing will not be as
favorable as the terms of existing indebtedness. In the event the Company is
unable to secure refinancing of such indebtedness on acceptable terms, the
Company might be forced to dispose of properties upon disadvantageous terms,
which might result in losses to the Company and might adversely affect the cash
flow available for distribution to equity holders or debt service. In addition,
if a property or properties are mortgaged to secure payment of indebtedness and
the Company is unable to meet mortgage payments, the mortgage securing the
property could be foreclosed upon by, or the property could be otherwise
transferred to, the mortgagee with a consequent loss of income and asset value
to the Company.
Renewal of Leases and Reletting of Space. The Company is subject to the
risks that upon expiration of leases for space located at the Properties, the
leases may not be renewed, the space may not be relet or the terms of the
renewal or reletting (including the cost of required renovations or concessions
to tenants) may be less favorable than current lease terms. Although the Company
has established an annual budget for renovation and reletting expenses that it
believes are reasonable in light of each Property's situation, no assurance can
be given that this budget will be sufficient to cover these expenses. If the
Company is unable to promptly relet or renew leases for all or substantially all
of the space at its Properties, if the rental rates upon such renewal or
reletting are significantly lower than expected, or if the Company's reserves
for these purposes prove inadequate, then the Company's cash provided by
operating activities and ability to make expected distributions to shareholders
or debt service payments could be adversely affected.
Dependence on Primary Markets. All of the Company's Properties are located
in the Southeastern United States and 40 of the Properties are located in
Birmingham and Montgomery, Alabama, Orlando, Florida and Macon, Georgia. The
Company's performance and its ability to make distributions to shareholders or
debt service payments could be adversely affected by economic conditions in the
Southeast and in Birmingham, Montgomery, central Florida and Macon in
particular.
Possible Environmental Liabilities. Under various Federal, state and local
laws, ordinances and regulations, a current or previous owner or operator of
real estate may be required to investigate and clean up certain hazardous
substances released at the property, and may be held liable to a governmental
entity or to third parties for property damage and for investigation and cleanup
costs incurred by such parties in connection with the contamination. In
addition, some environmental laws create a lien on the contaminated site in
favor of the government for damages and costs it incurs in connection with the
contamination. The presence of contamination or the failure to remediate
contamination may adversely affect the owner's ability to sell or lease real
estate or to borrow using the real estate as
3
<PAGE>
collateral. The owner or operator of a site may be liable under common law to
third parties for damages and injuries resulting from environmental
contamination emanating from the site. The Company has not been notified by any
governmental authority of any material non-compliance, liability or other claim
in connection with any of the Properties and the Company is not aware of any
other environmental condition with respect to any of the Properties that could
be material. No assurance, however, can be given that no prior owner created any
material environmental condition not known to the Company, that no material
environmental condition with respect to any Property has occurred during the
Company's ownership thereof, or that future uses or conditions (including,
without limitation, changes in applicable environmental laws and regulations)
will not result in imposition of environmental liability.
At one of the Company's Properties, the Gadsden Mall in Gadsden, Alabama, four
underground storage tanks were removed in 1989. In connection with the removal
of these gasoline storage tanks, associated petroleum contamination was
discovered in the soil and groundwater. The Company is currently working with
the state regulatory agency to remediate the contamination in accordance with
applicable requirements. Because the tanks were registered with the Alabama
Department of Environmental Management and the facility was in compliance with
regulations prior to the incident, the Company has been reimbursed under the
Alabama Underground Storage Tank Trust Fund for the costs incurred to date in
connection with the ongoing cleanup, and expects to be reimbursed for the
remaining costs as well. Currently, a free product recovery program is
underway.
CONFLICTS OF INTEREST
Certain members of the Company's Board of Trustees ("Board of Trustees") and
officers (including Thomas and James Lowder, Harold Ripps and Herbert Meisler)
own Units in the Operating Partnership and, thus, may have interests that
conflict with shareholders with respect to business decisions affecting the
Company and the Operating Partnership. In particular, a holder of Units may
suffer different and/or more adverse tax consequences than the Company upon the
sale or refinancing of some of the Properties as a result of unrealized gain
attributable to certain Properties. These Unit holders and the Company,
therefore, may have different objectives regarding the appropriate pricing and
timing of any sale or refinancing of Properties. Although the Company (through
CPHC), as the sole general partner of the Partnership, has the exclusive
authority as to whether and on what terms to sell or refinance an individual
Property, these Unit holders might seek to influence the Company not to sell or
refinance the Properties, even though such sale might otherwise be financially
advantageous to the Company, or may seek to influence the Company to refinance a
Property with a higher level of debt than would be in the best interests of the
Company. The Company has agreed to use its reasonable efforts to minimize the
adverse impact of any such refinancing upon the former owners, and to take into
account the tax consequences to such former owners in deciding whether to sell a
Property, which also may result in decisions that are not in the best interest
of all of the shareholders.
The Lowder family (which includes Thomas, James, Robert and Catherine Lowder
and their affiliates) holds interests in certain companies that in the past have
performed construction management, insurance brokerage and other services with
respect to the Properties. These companies may perform similar services for the
Company in the future. As a result of its financial interest in these companies,
the Lowder family may realize benefits from transactions between such companies
and the Company that are not realized by other shareholders of the Company. In
addition, Thomas Lowder and his brother, James Lowder, as trustees of the
Company, may be in a position to influence the Company to do business with
companies in which the Lowder family has a financial interest. Although the
Company has adopted certain policies designed to eliminate or minimize potential
conflicts of interest, including a policy which requires that transactions in
which a trustee or officer of the Company has a conflict of interest be approved
by a majority of the disinterested trustees, there can be no assurance that
these policies will be successful in eliminating the influence of such
conflicts, or that such transactions, if any, will be on terms as favorable to
the Company as could be obtained in an arms-length transaction with a third
party.
4
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DEVELOPMENT AND ACQUISITION RISKS
The Company intends to continue development of new multifamily, retail and
office properties (including expansions of existing Properties on the land
adjacent to those Properties) and to consider acquisitions of multifamily,
retail and office properties where it believes that such development or
acquisition is consistent with the business strategies of the Company. New
project development is subject to a number of risks, including construction
delays or cost overruns that may increase project costs, financing risks as
described above, the failure to meet anticipated occupancy or rent levels,
failure to receive required zoning, occupancy and other governmental permits and
authorizations and changes in applicable zoning and land use laws, which may
result in the incurrence of development costs in connection with projects that
are not pursued to completion. In addition, because the Company must distribute
95% of its taxable income in order to maintain its qualification as a REIT, the
Company anticipates that new developments and acquisitions will be financed
primarily through lines of credit or other forms of secured or unsecured
construction financing. If permanent debt or equity financing is not available
on acceptable terms to refinance such new developments or acquisitions are
undertaken without permanent financing, further development activities or
acquisitions may be curtailed or cash available for distribution to shareholders
or to meet debt service obligations may be adversely affected. Acquisitions
entail risks that investments will fail to perform in accordance with
expectations and that judgments with respect to the costs of improvements to
bring an acquired property up to standards established for the market position
intended for that property will prove inaccurate, as well as general investment
risks associated with any new real estate investment. See "Real Estate
Investment Risks" above.
MANAGEMENT, LEASING AND BROKERAGE RISKS; CONTROL OF MANAGEMENT CORPORATION
The Company is subject to the risks associated with the property management,
leasing and brokerage businesses. These risks include the risk that management
contracts or service agreements with third-party owners will be lost to
competitors, that contracts will not be renewed upon expiration or will not be
renewed on terms consistent with current terms and that leasing and brokerage
activity generally may decline. Each of these developments could adversely
affect the ability of the Company to make expected distributions to shareholders
or debt service payments.
In order to maintain the Company's qualification as a REIT while realizing
income from the Company's third-party management business, the capital stock of
the Management Corporation (which conducts the Company's third-party management,
leasing and brokerage businesses) is divided into two classes. Voting common
stock, representing 1.01% of the total equity of the Management Corporation, is
held 99% by the Lowder family and 1% by the Company. Nonvoting common stock,
representing 98.99% of the total equity of the Management Corporation, is held
entirely by the Company. Although the Company holds a total of 99% of the equity
interests in the Management Corporation, the Company is not able to elect
directors of the Management Corporation and, consequently, the Company's ability
to influence the day-to-day decisions of such entity is limited.
CHANGES IN POLICIES
The major policies of the Company, including its policies with respect to
development, acquisitions, financing, growth, operations, debt capitalization
and distributions, are determined by its Board of Trustees. Although it has no
present intention to do so, the Board of Trustees may amend or revise these and
other policies from time to time without a vote of the shareholders of the
Company. A change in these policies could adversely affect the Company's
financial condition, results of operations, funds available for distributions to
shareholders or debt service or the market price of the Securities. The Company
cannot change its policy of seeking to maintain its qualification as a REIT
without the approval of the holders of a majority of the Common Shares.
5
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CERTAIN TAX RISKS
Tax Liabilities as a Consequence of the Failure to Qualify as a REIT. The
Company believes that it has operated so as to qualify as a REIT under the
Internal Revenue Code of 1986, as amended (the "Code"), commencing with its
taxable year ended December 31, 1993, and intends to continue to so operate. No
assurance, however, can be given that the Company has so qualified or will be
able to remain so qualified. Qualification as a REIT involves the application of
highly technical and complex Code provisions as to which there are only limited
judicial and administrative interpretations. Certain facts and circumstances
that may be wholly beyond the Company's control may affect its ability to
qualify or to continue to qualify as a REIT. In addition, no assurance can be
given that new legislation, Treasury Regulations, administrative interpretations
or court decisions will not significantly change the tax laws with respect to
the qualification as a REIT or the Federal income consequences of such
qualification to the Company. If the Company fails to qualify as a REIT, it will
be subject to Federal income tax (including any applicable alternative minimum
tax) on its taxable income at regular corporate rates. In addition, unless
entitled to relief under certain statutory provisions, the Company would be
disqualified from treatment as a REIT for the four taxable years following the
year during which qualification is lost. The additional tax incurred in such
event would significantly reduce the cash flow available for distribution to
shareholders and to meet debt service obligations. See "Federal Income Tax
Considerations--Taxation of the Company."
REIT Distribution Requirements and Potential Impact of Borrowings. To obtain
the favorable tax treatment associated with qualifying as a REIT under the Code,
the Company generally is required each year to distribute to its shareholders at
least 95% of its net taxable income. See "Federal Income Tax Considerations--
Taxation of the Company (Annual Distribution Requirements)." The Company could
be required to borrow funds on a short-term basis to meet the distribution
requirements that are necessary to achieve the tax benefits associated with
qualifying as a REIT, even if management believed that then prevailing market
conditions were not generally favorable for such borrowings.
Other Tax Liabilities. Even if the Company qualifies as a REIT, it will be
subject to certain Federal, state and local taxes on its income and property.
See "Federal Income Tax Considerations--Taxation of the Company and --Other Tax
Considerations." In particular, CPHC will be subject to income tax and certain
intangible property taxes in Alabama and the State of Alabama may seek to
contend that the Company is subject to such taxes as well.
PRICE FLUCTUATIONS OF THE COMMON SHARES AND TRADING VOLUME; SHARES AVAILABLE FOR
FUTURE SALE
A number of factors may adversely influence the price of the Company's Common
Shares in the public markets, many of which are beyond the control of the
Company. These factors include possible increases in market interest rates,
which may lead purchasers of Common Shares to demand a higher annual yield from
distributions by the Company in relation to the price paid for Common Shares,
the relatively low daily trading volume of REITs in general, including the
Common Shares and any inability of the Company to invest the proceeds of a
future offering of Securities in a manner that will increase earnings per share.
Sales of a substantial number of Common Shares, or the perception that such
sales could occur, could adversely affect prevailing market prices for shares.
The Company also may currently issue up to 8,141,023 Common Shares (subject to
the Ownership Limit, as defined below) upon redemption of Units issued in
connection with the formation of the Company and subsequent acquisitions. In
addition, 800,000 Common Shares of the Company have been issued or reserved for
issuance pursuant to share option and restricted share plans, and these shares
will be available for sale in the public markets from time to time pursuant to
exemptions from registration requirements or upon registration. No prediction
can be made about the effect that future sales of Common Shares will have on the
market prices of shares.
POSSIBLE ADVERSE CONSEQUENCES OF LIMITS ON OWNERSHIP OF SHARES
In order to maintain its qualification as a REIT, the Company has limited
ownership of the issued and outstanding Common Shares by any single shareholder
(other than Lowder family members) to 5% of the outstanding Common Shares (the
"Ownership Limit"). The Board of Trustees could waive this restriction if it
were satisfied, based upon the advice of tax counsel, that ownership in excess
of the Ownership Limit would not
6
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jeopardize the Company's status as a REIT and the Board of Trustees otherwise
decided such action would be in the best interests of the Company. Common Shares
acquired or transferred in breach of the limitation may be redeemed by the
Company for the lesser of the price paid and the average closing price for the
ten trading days immediately preceding redemption. The Company may elect to
redeem such shares for Units, which are subject to certain limitations on
transfer. A transfer of Common Shares to a person who, as a result of the
transfer, violates the Ownership Limit will be void. See "Description of Shares
of Beneficial Interest--Restrictions on Transfer" for additional information
regarding the Ownership Limit. A similar restriction would be imposed on any
Preferred Shares or Debt Securities convertible into Preferred or Common Shares
that the Company may issue under this Prospectus.
RESTRICTIONS ON ACQUISITION AND CHANGE IN CONTROL
Various provisions of the Company's Declaration of Trust (the "Declaration of
Trust") restrict the possibility for acquisition or change in control of the
Company, even if such acquisition or change in control were in the shareholders'
interest, including the Ownership Limit, the staggered terms of the Company's
Trustees and the ability of the board to issue preferred shares.
USE OF PROCEEDS
Unless otherwise specified in the applicable Prospectus Supplement, the
Company intends to invest, contribute or otherwise transfer the net proceeds of
any sale of Securities to the Operating Partnership, which would use such net
proceeds for general business purposes, including, without limitation, the
development and acquisition of additional properties and other acquisition
transactions as suitable opportunities arise, the repayment of certain debt
outstanding at such time, capital expenditures, improvements to certain
properties in the Company's portfolio, working capital and other general
purposes.
RATIOS OF EARNINGS TO FIXED CHARGES
The Company's ratio of earnings to fixed charges for the years ended December
31, 1993, 1994 and 1995 and the nine months ended September 30, 1996 was 1.31,
2.24, 1.92 and 2.39, respectively.
The ratios of earnings to fixed charges were computed by dividing earnings by
fixed charges. For this purpose, earnings consist of income (loss) before gains
from sales of property and extraordinary items plus fixed charges. Fixed charges
consist of interest expense (including interest costs capitalized) and the
amortization of debt issuance costs. To date, the Company has not issued any
Preferred Shares; therefore, the ratios of earnings to combined fixed charges
and preferred share dividends are unchanged from the ratios presented in this
section.
Prior to completion of the Company's IPO, certain of the predecessor entities
to the Company operated in a highly leveraged manner. As a result, although the
Properties have historically generated positive net cash flow, the combined
financial statements of the predecessor entities for the fiscal years ended
December 31, 1992 and 1991 show net losses. Consequently, the computation of the
ratio of earnings to fixed charges for such periods indicates that earnings were
inadequate to cover fixed charges by approximately $0.8 million and $3.4 million
for the years ended December 31, 1992 and 1991, respectively.
The reorganization and recapitalization of the Company effected in connection
with the IPO permitted the Operating Partnership to deleverage the Properties
significantly, resulting in an improved ratio of earnings to fixed charges for
periods subsequent to the IPO.
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DESCRIPTION OF DEBT SECURITIES
The following description sets forth certain general terms and provisions of
the Debt Securities to which this Prospectus and any applicable Prospectus
Supplement may relate. The particular terms of the Debt Securities being offered
and the extent to which such general provisions may apply will be set forth in
the applicable Indenture or in one or more indentures supplemental thereto and
described in a Prospectus Supplement relating to such Debt Securities. The Forms
of the Senior Indenture (as defined herein) and the Subordinated Indenture (as
defined herein) have been filed as exhibits to the Registration Statement of
which this Prospectus is a part.
GENERAL
The Debt Securities will be direct, unsecured obligations of the Company and
may be either senior Debt Securities ("Senior Securities") or subordinated
Debt Securities ("Subordinated Securities"). The Debt Securities will be
issued under one or more indentures (the "Indentures"). Senior Securities and
Subordinated Securities will be issued pursuant to separate indentures
(respectively, a "Senior Indenture" and a "Subordinated Indenture"), in each
case between the Company and a trustee (a "Trustee"). The Indentures will be
subject to and governed by the Trust Indenture Act of 1939, as amended (the
"TIA"). The statements made under this heading relating to the Debt Securities
and the Indentures are summaries of the anticipated provisions thereof, do not
purport to be complete and are qualified in their entirety by reference to the
Indentures and such Debt Securities. All section references appearing herein are
to sections of each Indenture unless otherwise indicated and capitalized terms
used but not defined below shall have the respective meanings set forth in each
Indenture.
The indebtedness represented by Subordinated Securities will be subordinated
in right of payment to the prior payment in full of the Senior Debt of the
Company as described under "--Subordination."
Except as set forth in the applicable Indenture or in one or more indentures
supplemental thereto and described in a Prospectus Supplement relating thereto,
the Debt Securities may be issued without limit as to aggregate principal
amount, in one or more series, in each case as established from time to time in
or pursuant to authority granted by a resolution of the Board of Trustees of the
Company or as established in the applicable Indenture or in one or more
indentures supplemental to such Indenture. All Debt Securities of one series
need not be issued at the same time and, unless otherwise provided, a series may
be reopened, without the consent of the Holders of the Debt Securities of such
series, for issuances of additional Debt Securities of such series.
It is anticipated that each Indenture will provide that there may be more than
one Trustee thereunder, each with respect to one or more series of Debt
Securities. Any Trustee under an Indenture may resign or be removed with respect
to one or more series of Debt Securities, and a successor Trustee may be
appointed to act with respect to such series. In the event that two or more
persons are acting as Trustee with respect to different series of Debt
Securities, each such Trustee shall be a trustee of a trust under the applicable
Indenture separate and apart from the trust administered by any other Trustee,
and, except as otherwise indicated herein, any action described herein to be
taken by each Trustee may be taken by each such Trustee with respect to, and
only with respect to, the one or more series of Debt Securities for which it is
Trustee under the applicable Indenture.
The Prospectus Supplement relating to any series of Debt Securities being
offered will contain the specific terms thereof, including, without limitation:
(1) The title of such Debt Securities and whether such Debt Securities are
Senior Securities or Subordinated Securities;
(2) The aggregate principal amount of such Debt Securities and any limit on
such aggregate principal amount;
(3) The percentage of the principal amount at which such Debt Securities will
be issued and, if other than the principal amount thereof, the portion of
the principal amount thereof payable upon declaration of acceleration of
the maturity thereof;
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(4) If convertible in whole or in part into Common Shares or Preferred Shares,
the terms on which such Debt Securities are convertible, including the
initial conversion price or rate (or method for determining the same), the
portion that is convertible and the conversion period, and any applicable
limitations on the ownership or transferability of the Common Shares or
Preferred Shares receivable on conversion;
(5) The date or dates, or the method for determining such date or dates, on
which the principal of such Debt Securities will be payable;
(6) The rate or rates (which may be fixed or variable), or the method by which
such rate or rates shall be determined, at which such Debt Securities will
bear interest, if any;
(7) The date or dates, or the method for determining such date or dates, from
which any such interest will accrue, the dates on which any such interest
will be payable, the regular record dates for such interest payment dates,
or the method by which such dates shall be determined, the persons to whom
such interest shall be payable, and the basis upon which interest shall be
calculated if other than that of a 360-day year of twelve 30-day months;
(8) The place or places where the principal of (and premium, if any) and
interest, if any, on such Debt Securities will be payable, where such Debt
Securities may be surrendered for conversion or registration of transfer or
exchange and where notices or demands to or upon the Company in respect of
such Debt Securities and the applicable Indenture may be served;
(9) The period or periods within which, the price or prices at which and the
other terms and conditions upon which such Debt Securities may be redeemed,
in whole or in part, at the option of the Company, if the Company is to
have such an option;
(10) The obligation, if any, of the Company to redeem, repay or purchase such
Debt Securities pursuant to any sinking fund or analogous provision or at
the option of a Holder thereof, and the period or periods within which or
the date and dates on which, the price or prices at which and the other
terms and conditions upon which such Debt Securities will be redeemed,
repaid or purchased, in whole or in part, pursuant to such obligation;
(11) If other than U.S. dollars, the currency or currencies in which such Debt
Securities are denominated and payable, which may be a foreign currency or
units of two or more foreign currencies or a composite currency or
currencies, and the terms and conditions relating thereto;
(12) Whether the amount of payments of principal of (and premium, if any) or
interest, if any, on such Debt Securities may be determined with reference
to an index, formula or other method (which index, formula or method may,
but need not be, based on a currency, currencies, currency unit or units or
composite currency or currencies) and the manner in which such amounts
shall be determined;
(13) Any additions to, modifications of or deletions from the terms of such Debt
Securities with respect to Events of Default or covenants set forth in the
applicable Indenture;
(14) Whether such Debt Securities will be issued in certificate or book-entry
form;
(15) Whether such Debt Securities will be in registered or bearer form and, if
in registered form, the denominations thereof if other than $1,000 and any
integral multiple thereof and, if in bearer form, the denominations thereof
and terms and conditions relating thereto;
(16) The applicability, if any, of the defeasance and covenant defeasance
provisions of Article Fourteen of the applicable Indenture;
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(17) Whether and under what circumstances the Company will pay any additional
amounts on such Debt Securities in respect of any tax, assessment or
governmental charge and, if so, whether the Company will have the option to
redeem such Debt Securities in lieu of making such payment; and
(18) Any other terms of such Debt Securities not inconsistent with the
provisions of the applicable Indenture (Section 301).
The Debt Securities may provide for less than the entire principal amount
thereof to be payable upon declaration of acceleration of the maturity thereof
("Original Issue Discount Securities"). Special federal income tax, accounting
and other considerations applicable to Original Issue Discount Securities will
be described in the applicable Prospectus Supplement.
Except as set forth in the applicable Indenture or in one or more indentures
supplemental thereto, the applicable Indenture will not contain any provisions
that would limit the ability of the Company to incur indebtedness or that would
afford Holders of Debt Securities protection in the event of a highly leveraged
or similar transaction involving the Company or in the event of a change of
control. Restrictions on ownership and transfers of the Company's Common Shares
and Preferred Shares are designed to preserve its status as a REIT and,
therefore, may act to prevent or hinder a change of control. See "Description
of Preferred Shares of Beneficial Interest--Restrictions on Ownership" and
"Description of Common Shares of Beneficial Interest--Restrictions on
Transfer." Reference is made to the applicable Prospectus Supplement for
information with respect to any deletions from, modifications of or additions to
the Events of Default or covenants of the Company that are described below,
including any addition of a covenant or other provision providing event risk or
similar protection.
"Significant Subsidiary" means any Subsidiary that is a "significant
subsidiary" (within the meaning of Regulation S-X promulgated under the
Securities Act) of the Company.
"Subsidiary" means a corporation or a partnership a majority of the
outstanding voting stock or partnership interests, as the case may be, of which
is owned or controlled, directly or indirectly, by the Company or by one or more
other Subsidiaries of the Company. For the purposes of this definition, "voting
stock" means stock having voting power for the election of directors, or
trustees, as the case may be, whether at all times or only so long as no senior
class of stock has such voting power by reason of any contingency.
DENOMINATION, INTEREST, REGISTRATION AND TRANSFER
Unless otherwise described in the applicable Prospectus Supplement, the Debt
Securities of any series will be issuable in denominations of $1,000 and
integral multiples thereof (Section 302).
Unless otherwise specified in the applicable Prospectus Supplement, the
principal of (and applicable premium, if any) and interest on any series of Debt
Securities will be payable at the corporate trust office of the Trustee, the
address of which will be stated in the applicable Prospectus Supplement;
provided that, at the option of the Company, payment of interest may be made by
check mailed to the address of the person entitled thereto as it appears in the
applicable register for such Debt Securities or by wire transfer of funds to
such person at an account maintained within the United States (Sections 301,
305, 306, 307 and 1002).
Any interest not punctually paid or duly provided for on any Interest Payment
Date with respect to a Debt Security ("Defaulted Interest") will forthwith
cease to be payable to the Holder on the applicable regular record date and may
either be paid to the person in whose name such Debt Security is registered at
the close of business on a special record date (the "Special Record Date") for
the payment of such Defaulted Interest to be fixed by the Trustee, notice
whereof shall be given to the Holder of such Debt Security not less than ten
days prior to such Special Record Date, or may be paid at any time in any other
lawful manner, all as more completely described in the Indenture (Section 307).
Subject to certain limitations imposed upon Debt Securities issued in book-
entry form, the Debt Securities of any series will be exchangeable for other
Debt Securities of the same series and of a like aggregate principal amount
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and tenor of different authorized denominations upon surrender of such Debt
Securities at the corporate trust office of the applicable Trustee referred to
above. In addition, subject to certain limitations imposed upon Debt Securities
issued in book-entry form, the Debt Securities of any series may be surrendered
for conversion or registration of transfer or exchange thereof at the corporate
trust office of the applicable Trustee. Every Debt Security surrendered for
conversion, registration of transfer or exchange must be duly endorsed or
accompanied by a written instrument of transfer. No service charge will be made
for any registration of transfer or exchange of any Debt Securities, but the
Company may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith. If the applicable
Prospectus Supplement refers to any transfer agent (in addition to the
applicable Trustee) initially designated by the Company with respect to any
series of Debt Securities, the Company may at any time rescind the designation
of any such transfer agent or approve a change in the location through which any
such transfer agent acts, except that the Company will be required to maintain a
transfer agent in each place of payment for such series. The Company may at any
time designate additional transfer agents with respect to any series of Debt
Securities (Section 1002).
Neither the Company nor any Trustee shall be required to (i) issue, register
the transfer of or exchange Debt Securities of any series during a period
beginning at the opening of business 15 days before any selection of Debt
Securities of that series to be redeemed and ending at the close of business on
the day of mailing of the relevant notice of redemption; (ii) register the
transfer of or exchange any Debt Security, or portion thereof, called for
redemption, except the unredeemed portion of any Debt Security being redeemed in
part; or (iii) issue, register the transfer of or exchange any Debt Security
that has been surrendered for repayment at the option of the Holder, except the
portion, if any, of such Debt Security not to be so repaid (Section 305).
MERGER, CONSOLIDATION OR SALE
The Company will be permitted to consolidate with, or sell, lease or convey
all or substantially all of its assets to, or merge with or into, any other
entity provided that (a) either the Company shall be the continuing entity, or
the successor entity (if other than the Company) formed by or resulting from any
such consolidation or merger or which shall have received the transfer of such
assets shall expressly assume payment of the principal of (and premium, if any)
and interest on all of the Debt Securities and the due and punctual performance
and observance of all of the covenants and conditions contained in each
Indenture; (b) immediately after giving effect to such transaction and treating
any indebtedness that becomes an obligation of the Company or any Subsidiary as
a result thereof as having been incurred by the Company or Subsidiary at the
time of such transaction, no Event of Default under the Indentures, and no event
which, after notice or the lapse of time, or both, would become such an Event of
Default, shall have occurred and be continuing; and (c) an officer's certificate
and legal opinion covering such conditions shall be delivered to each Trustee
(Sections 801 and 803).
CERTAIN COVENANTS
Existence. Except as described above under "Merger, Consolidation or
Sale", the Company will be required to do or cause to be done all things
necessary to preserve and keep in full force and effect its existence, rights
(by declaration of trust, by-laws and statute) and franchises; provided,
however, that the Company shall not be required to preserve any right or
franchise if it determines that the preservation thereof is no longer desirable
in the conduct of its business and that the loss thereof is not disadvantageous
in any material respect to the Holders of the Debt Securities.
Maintenance of Properties. The Company will be required to cause all of its
material properties used or useful in the conduct of its business or the
business of any Subsidiary to be maintained and kept in good condition, repair
and working order and supplied with all necessary equipment and will cause to be
made all necessary repairs, renewals, replacements, betterments and improvements
thereof, all as in the judgment of the Company may be necessary so that the
business carried on in connection therewith may be properly and advantageously
conducted at all times (Section 1007).
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Insurance. The Company will be required to, and will be required to cause
each of its Subsidiaries to, keep all of its insurable properties insured
against loss or damage at least equal to their then full insurable value with
insurers of recognized responsibility and, if described in the applicable
Prospectus Supplement, having a specified rating from a recognized insurance
rating service (Section 1008).
Payment of Taxes and Other Claims. The Company will be required to pay or
discharge or cause to be paid or discharged, before the same shall become
delinquent, (i) all taxes, assessments and governmental charges levied or
imposed upon it or any Subsidiary or upon the income, profits or property of the
Company or any Subsidiary, and (ii) all lawful claims for labor, materials and
supplies which, if unpaid, might by law become a lien upon the property of the
Company or any Subsidiary; provided, however, that the Company shall not be
required to pay or discharge or cause to be paid or discharged any such tax,
assessment, charge or claim whose amount, applicability or validity is being
contested in good faith by appropriate proceedings (Section 1009).
Provision of Financial Information. Whether or not the Company is subject to
Section 13 or 15(d) of the Exchange Act, the Company will be required, to the
extent permitted under the Exchange Act, to file with the Commission the annual
reports, quarterly reports and other documents which the Company would have been
required to file with the Commission pursuant to such Sections 13 or 15(d) if
the Company were so subject (the "Financial Information"), such documents to
be filed with the Commission on or prior to the respective dates (the "Required
Filing Dates") by which the Company would have been required so to file such
documents if the Company were so subject. The Company also will in any event (x)
within 15 days of each Required Filing Date (i) to transmit by mail to all
Holders of Debt Securities, as their names and addresses appear in the Security
Register, without cost to such Holders, copies of the Financial Information and
(ii) to file with the Trustee copies of the Financial Information, and (y) if
filing such documents by the Company with the Commission is not permitted under
the Exchange Act, promptly upon written request and payment of the reasonable
cost of duplication and delivery, to supply copies of such documents to any
prospective Holder (Section 1010).
ADDITIONAL COVENANTS AND/OR MODIFICATIONS TO THE COVENANTS DESCRIBED ABOVE
Any additional covenants of the Company and/or modifications to the covenants
described above with respect to any Debt Securities or series thereof, including
any covenants relating to limitations on incurrence of indebtedness or other
financial covenants, will be set forth in the applicable Indenture or an
indenture supplemental thereto and described in the Prospectus Supplement
relating thereto.
EVENTS OF DEFAULT, NOTICE AND WAIVER
Each Indenture will provide that the following events are "Events of
Default" with respect to any series of Debt Securities issued thereunder: (i)
default for 30 days in the payment of any installment of interest on any Debt
Security of such series; (ii) default in the payment of principal of (or
premium, if any, on) any Debt Security of such series at its maturity; (iii)
default in making any sinking fund payment as required for any Debt Security of
such series; (iv) default in the performance or breach of any other covenant or
warranty of the Company contained in the applicable Indenture (other than a
covenant added to the Indenture solely for the benefit of a series of Debt
Securities issued thereunder other than such series), continued for 60 days
after written notice as provided in the applicable Indenture; (v) default in the
payment of an aggregate principal amount exceeding $10,000,000 of any
indebtedness of the Company or any mortgage, indenture or other instrument under
which such indebtedness is issued or by which such indebtedness is secured, such
default having occurred after the expiration of any applicable grace period and
having resulted in the acceleration of the maturity of such indebtedness, but
only if such indebtedness is not discharged or such acceleration is not
rescinded or annulled; (vi) certain events of bankruptcy, insolvency or
reorganization, or court appointment of a receiver, liquidator or trustee of the
Company or any Significant Subsidiary or either of its property; and (vii) any
other Event of Default provided with respect to a particular series of Debt
Securities (Section 501).
If an Event of Default under any Indenture with respect to Debt Securities of
any series at the time outstanding occurs and is continuing, then in every such
case the applicable Trustee or the Holders of not less than 25% of the
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principal amount of the Outstanding Debt Securities of that series will have the
right to declare the principal amount (or, if the Debt Securities of that series
are Original Issue Discount Securities or indexed securities, such portion of
the principal amount as may be specified in the terms thereof) of all the Debt
Securities of that series to be due and payable immediately by written notice
thereof to the Company (and to the applicable Trustee if given by the Holders).
However, at any time after such a declaration of acceleration with respect to
Debt Securities of such series (or of all Debt Securities then Outstanding under
any Indenture, as the case may be) has been made, but before a judgment or
decree for payment of the money due has been obtained by the applicable Trustee,
the Holders of not less than a majority in principal amount of Outstanding Debt
Securities of such series (or of all Debt Securities then Outstanding under the
applicable Indenture, as the case may be) may rescind and annul such declaration
and its consequences if (a) the Company shall have deposited with the applicable
Trustee all required payments of the principal of (and premium, if any) and
interest on the Debt Securities of such series (or of all Debt Securities then
Outstanding under the applicable Indenture, as the case may be), plus certain
fees, expenses, disbursements and advances of the applicable Trustee and (b) all
events of default, other than the non-payment of accelerated principal (or
specified portion thereof), with respect to Debt Securities of such series (or
of all Debt Securities then Outstanding under the applicable Indenture, as the
case may be) have been cured or waived as provided in such Indenture (Section
502). Each Indenture also will provide that the Holders of not less than a
majority in principal amount of the Outstanding Debt Securities of any series
(or of all Debt Securities then Outstanding under the applicable Indenture, as
the case may be) may waive any past default with respect to such series and its
consequences, except a default (x) in the payment of the principal of (or
premium, if any) or interest on any Debt Security of such series or (y) in
respect of a covenant or provision contained in the applicable Indenture that
cannot be modified or amended without the consent of the Holder of each
Outstanding Debt Security affected thereby (Section 513).
Each Trustee will be required to give notice to the Holders of Debt Securities
within 90 days of a default under the applicable Indenture unless such default
shall have been cured or waived; provided, however, that such Trustee may
withhold notice to the Holders of any series of Debt Securities of any default
with respect to such series (except a default in the payment of the principal of
(or premium, if any) or interest on any Debt Security of such series or in the
payment of any sinking fund installment in respect of any Debt Security of such
series) if specified responsible officers of such Trustee consider such
withholding to be in the interest of such Holders (Section 601).
Each Indenture will provide that no Holders of Debt Securities of any series
may institute any proceedings, judicial or otherwise, with respect to such
Indenture or for any remedy thereunder, except in the cases of failure of the
applicable Trustee, for 60 days, to act after it has received a written request
to institute proceedings in respect of an Event of Default from the Holders of
not less than 25% in principal amount of the Outstanding Debt Securities of such
series, as well as an offer of indemnity reasonably satisfactory to it (Section
507). This provision will not prevent, however, any Holder of Debt Securities
from instituting suit for the enforcement of payment of the principal of (and
premium, if any) and interest on such Debt Securities at the respective due
dates thereof (Section 508).
Subject to provisions in each Indenture relating to its duties in case of
default, no Trustee will be under any obligation to exercise any of its rights
or powers under an Indenture at the request or direction of any Holders of any
series of Debt Securities then Outstanding under such Indenture, unless such
Holders shall have offered to the Trustee thereunder reasonable security or
indemnity (Section 602). The Holders of not less than a majority in principal
amount of the Outstanding Debt Securities of any series (or of all Debt
Securities then Outstanding under an Indenture, as the case may be) shall have
the right to direct the time, method and place of conducting any proceeding for
any remedy available to the applicable Trustee, or of exercising any trust or
power conferred upon such Trustee. However, a Trustee may refuse to follow any
direction which is in conflict with any law or the applicable Indenture, which
may involve such Trustee in personal liability or which may be unduly
prejudicial to the Holders of Debt Securities of such series not joining therein
(Section 512).
Within 120 days after the close of each fiscal year, the Company will be
required to deliver to each Trustee a certificate, signed by one of several
specified officers, stating whether or not such officer has knowledge of any
default under the applicable Indenture and, if so, specifying each such default
and the nature and status thereof (Section 1011).
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MODIFICATION OF THE INDENTURES
Modifications and amendments of an Indenture will be permitted to be made only
with the consent of the Holders of not less than a majority in principal amount
of all Outstanding Debt Securities issued under such Indenture which are
affected by such modification or amendment; provided, however, that no such
modification or amendment may, without the consent of the Holder of each such
Debt Security affected thereby, (a) change the stated maturity of the principal
of, or any installment of interest (or premium, if any) on, any such Debt
Security; (b) reduce the principal amount of, or the rate or amount of interest
on, or any premium payable on redemption of, any such Debt Security, or reduce
the amount of principal of an Original Issue Discount Security that would be due
and payable upon declaration of acceleration of the maturity thereof or would be
provable in bankruptcy, or adversely affect any right of repayment of the Holder
of any such Debt Security; (c) change the place of payment, or the coin or
currency, for payment of principal or premium, if any, or interest on any such
Debt Security; (d) impair the right to institute suit for the enforcement of any
payment on or with respect to any such Debt Security; (e) reduce the above-
stated percentage of Outstanding Debt Securities of any series necessary to
modify or amend the applicable Indenture, to waive compliance with certain
provisions thereof or certain defaults and consequences thereunder or to reduce
the quorum or voting requirements set forth in the applicable Indenture; or (f)
modify any of the foregoing provisions or any of the provisions relating to the
waiver of certain past defaults or certain covenants, except to increase the
required percentage to effect such action or to provide that certain other
provisions may not be modified or waived without the consent of the Holder of
such Debt Security (Section 902).
The Holders of not less than a majority in principal amount of Outstanding
Debt Securities of each series affected thereby will have the right to waive
compliance by the Company with certain covenants in such Indenture (Section
1013).
Modifications and amendments of an Indenture will be permitted to be made by
the Company and the respective Trustee thereunder without the consent of any
Holder of Debt Securities for any of the following purposes: (i) to evidence the
succession of another person to the Company as obligor under such Indenture;
(ii) to add to the covenants of the Company for the benefit of the Holders of
all or any series of Debt Securities or to surrender any right or power
conferred upon the Company in the Indenture; (iii) to add Events of Default for
the benefit of the Holders of all or any series of Debt Securities; (iv) to add
or change any provisions of an Indenture to facilitate the issuance of, or to
liberalize certain terms of, Debt Securities in bearer form, or to permit or
facilitate the issuance of Debt Securities in uncertificated form, provided that
such action shall not adversely affect the interests of the Holders of the Debt
Securities of any series in any material respect; (v) to change or eliminate any
provisions of an Indenture, provided that any such change or elimination shall
become effective only when there are no Debt Securities Outstanding of any
series created prior thereto which are entitled to the benefit of such
provision; (vi) to secure the Debt Securities; (vii) to establish the form or
terms of Debt Securities of any series, including the provisions and procedures,
if applicable, for the conversion of such Debt Securities into Common Shares or
Preferred Shares of the Company; (viii) to provide for the acceptance of
appointment by a successor Trustee or facilitate the administration of the
trusts under an Indenture by more than one Trustee; (ix) to cure any ambiguity,
defect or inconsistency in an Indenture, provided that such action shall not
adversely affect the interests of Holders of Debt Securities of any series
issued under such Indenture in any material respect; or (x) to supplement any of
the provisions of an Indenture to the extent necessary to permit or facilitate
defeasance and discharge of any series of such Debt Securities, provided that
such action shall not adversely affect the interests of the Holders of the Debt
Securities of any series in any material respect (Section 901).
Each Indenture will provide that in determining whether the Holders of the
requisite principal amount of Outstanding Debt Securities of a series have given
any request, demand, authorization, direction, notice, consent or waiver
thereunder or whether a quorum is present at a meeting of Holders of Debt
Securities, (i) the principal amount of an Original Issue Discount Security that
shall be deemed to be Outstanding shall be the amount of the principal thereof
that would be due and payable as of the date of such determination upon
declaration of acceleration of the maturity thereof, (ii) the principal amount
of any Debt Security denominated in a foreign currency that shall be deemed
Outstanding shall be the U.S. dollar equivalent, determined on the issue date
for such Debt Security, of the principal amount (or, in the case of Original
Issue Discount Security, the U.S. dollar equivalent on the issue date of such
Debt Security of the amount determined as provided in (i) above), (iii) the
principal
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amount of an indexed security that shall be deemed Outstanding shall be the
principal face amount of such indexed security at original issuance, unless
otherwise provided with respect to such indexed security pursuant to the
applicable Indenture, and (iv) Debt Securities owned by the Company or any other
obligor upon the Debt Securities or any affiliate of the Company or of such
other obligor shall be disregarded.
Each Indenture will contain provisions for convening meetings of the Holders
of Debt Securities of a series (Section 501). A meeting will be permitted to be
called at any time by the applicable Trustee, and also, upon request, by the
Company or the Holders of at least 10% in principal amount of the Outstanding
Debt Securities of such series, in any such case upon notice given as provided
in the Indenture. Except for any consent that must be given by the Holder of
each Debt Security affected by certain modifications and amendments of an
Indenture, any resolution presented at a meeting or adjourned meeting duly
reconvened at which a quorum is present may be adopted by the affirmative vote
of the Holders of a majority in principal amount of the Outstanding Debt
Securities of that series; provided, however, that, except as referred to above,
any resolution with respect to any request, demand, authorization, direction,
notice, consent, waiver or other action that may be made, given or taken by the
Holders of a specified percentage, which is less than a majority, in principal
amount of the Outstanding Debt Securities of a series may be adopted at a
meeting or adjourned meeting or adjourned meeting duly reconvened at which a
quorum is present by the affirmative vote of the Holders of such specified
percentage in principal amount of the Outstanding Debt Securities of that
series. Any resolution passed or decision taken at any meeting of Holders of
Debt Securities of any series duly held in accordance with an Indenture will be
binding on all Holders of Debt Securities of that series. The quorum at any
meeting called to adopt a resolution, and at any reconvened meeting, will be
persons holding or representing a majority in principal amount of the
Outstanding Debt Securities of a series; provided, however, that if any action
is to be taken at such meeting with respect to a consent or waiver which may be
given by the Holders of not less than a specified percentage in principal amount
of the Outstanding Debt Securities of a series, the persons holding or
representing such specified percentage in principal amount of the Outstanding
Debt Securities of such series will constitute a quorum.
Notwithstanding the foregoing provisions, each Indenture will provide that if
any action is to be taken at a meeting of Holders of Debt Securities of any
series with respect to any request, demand, authorization, direction, notice,
consent, waiver and other action that such Indenture expressly provides may be
made, given or taken by the Holders of a specified percentage in principal
amount of all Outstanding Debt Securities affected thereby, or the Holders of
such series and one or more additional series: (i) there shall be no minimum
quorum requirement for such meeting, and (ii) the principal amount of the
Outstanding Debt Securities of such series that vote in favor of such request,
demand, authorization, direction, notice, consent, waiver or other action shall
be taken into account in determining whether such request, demand,
authorization, direction, notice, consent, waiver or other action has been made,
given or taken under such Indenture.
SUBORDINATION
Upon any distribution to creditors of the Company in a liquidation,
dissolution or reorganization, the payment of the principal of and interest on
any Subordinated Securities will be subordinated to the extent provided in the
applicable Indenture in right of payment to the prior payment in full of all
Senior Debt (Sections 1601 and 1602 of the Subordinated Indenture), but the
obligation of the Company to make payment of the principal and interest on such
Subordinated Securities will not otherwise be affected (Section 1608 of the
Subordinated Indenture). No payment of principal or interest will be permitted
to be made on Subordinated Securities at any time if a default on Senior Debt
exists that permits the Holders of such Senior Debt to accelerate its maturity
and the default is the subject of judicial proceedings or the Company receives
notice of the default (Section 1602 of the Subordinated Indenture). After all
Senior Debt is paid in full and until the Subordinated Securities are paid in
full, Holders will be surrogated to the right of Holders of Senior Debt to the
extent that distributions otherwise payable to Holders have been applied to the
payment of Senior Debt (Section 1607 of the Subordinated Indenture). By reason
of such subordination, in the event of a distribution of assets upon insolvency,
certain general creditors of the Company may recover more, ratably, than Holders
of Subordinated Securities.
Senior Debt will be defined in the Subordinated Indenture as the principal of
and interest on, or substantially similar payments to be made by the Company in
respect of, the following, whether outstanding at the date of
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execution of the applicable Indenture or thereafter incurred, created or
assumed: (i) indebtedness of the Company for money borrowed or represented by
purchase-money obligations, (ii) indebtedness of the Company evidenced by notes,
debentures, or bonds or other securities issued under the provisions of an
indenture, fiscal agency agreement or other agreement, (iii) obligations of the
Company as lessee under leases of property either made as part of any sale and
leaseback transaction to which the Company is a party or otherwise, (iv)
indebtedness of partnerships and joint ventures which is included in the
consolidated financial statements of the Company, (v) indebtedness, obligations
and liabilities of others in respect of which the Company is liable contingently
or otherwise to pay or advance money or property or as guarantor, endorser or
otherwise or which the Company has agreed to purchase or otherwise acquire, and
(vi) any binding commitment of the Company to fund any real estate investment or
to fund any investment in any entity making such real estate investment, in each
case other than (1) any such indebtedness, obligation or liability referred to
in clauses (i) through (vi) above as to which, in the instrument creating or
evidencing the same pursuant to which the same is outstanding, it is provided
that such indebtedness, obligation or liability is not superior in right of
payment to the Subordinated Securities or ranks pari passu with the Subordinated
Securities, (2) any such indebtedness, obligation or liability which is
subordinated to indebtedness of the Company to substantially the same extent as
or to a greater extent than the Subordinated Securities are subordinated, and
(3) the Subordinated Securities. As used in the preceding sentence, the term
"purchase money obligations" shall mean indebtedness or obligations evidenced
by a note, debenture, bond or other instrument (whether or not secured by any
lien or other security interest but excluding indebtedness or obligations for
which recourse is limited to the property purchased) issued or assumed as all or
a part of the consideration for the acquisition of property, whether by
purchase, merger, consolidation or otherwise, but shall not include any trade
accounts payable. There will not be any restrictions in an Indenture relating to
Subordinated Securities upon the creation of additional Senior Debt.
If this Prospectus is being delivered in connection with a series of
Subordinated Securities, the accompanying Prospectus Supplement or the
information incorporated herein by reference will contain the approximate amount
of Senior Debt outstanding as of the end of the Company's most recent fiscal
quarter.
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
The Company may be permitted under the applicable Indenture to discharge
certain obligations to Holders of any series of Debt Securities issued
thereunder that have not already been delivered to the applicable Trustee for
cancellation and that either have become due and payable or will become due and
payable within one year (or scheduled for redemption within one year) by
irrevocably depositing with the applicable Trustee, in trust, funds in such
currency or currencies, currency unit or units or composite currency or
currencies in which such Debt Securities are payable in an amount sufficient to
pay the entire indebtedness on such Debt Securities in respect of principal (and
premium, if any) and interest to the date of such deposit (if such Debt
Securities have become due and payable) or to the stated maturity or redemption
date, as the case may be.
Each Indenture will provide that, if the provisions of Article Fourteen are
made applicable to the Debt Securities of or within any series pursuant to
Section 301 of such Indenture, the Company may elect either (a) to defease and
be discharged from any and all obligations with respect to such Debt Securities
(except for the obligation to pay additional amounts, if any, upon the
occurrence of certain events of tax, assessment or governmental charge with
respect to payments on such Debt Securities, and the obligations to register the
transfer or exchange of such Debt Securities, to replace temporary or mutilated,
destroyed, lost or stolen Debt Securities, to maintain an office or agency in
respect of such Debt Securities and to hold moneys for payment in trust)
("defeasance") (Section 1402) or (b) to be released from its obligations with
respect to such Debt Securities under certain specified sections of Article Ten
of such Indenture as specified in the applicable Prospectus Supplement and any
omission to comply with such obligations shall not constitute an Event of
Default with respect to such Debt Securities ("covenant defeasance") (Section
1403), in either case upon the irrevocable deposit by the Company with the
applicable Trustee, in trust, of an amount, in such currency or currencies,
currency unit or units or composite currency or currencies in which such Debt
Securities are payable at stated maturity, or Government Obligations (as defined
below), or both, applicable to such Debt Securities which through the scheduled
payment of principal and interest in accordance with their terms will provide
money in an amount sufficient without reinvestment to pay the principal of (and
premium, if any) and interest on such Debt Securities, and any mandatory sinking
fund or analogous payments thereon, on the scheduled due dates therefor.
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Such a trust will only be permitted to be established if, among other things,
the Company has delivered to the applicable Trustee an opinion of counsel (as
specified in the applicable Indenture) to the effect that the Holders of such
Debt Securities will not recognize income, gain or loss for federal income tax
purposes as a result of such defeasance or covenant defeasance and will be
subject to federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such defeasance or covenant defeasance
had not occurred, and such opinion of counsel, in the case of defeasance, will
be required to refer to and be based upon a ruling of the Internal Revenue
Service or a change in applicable U.S. federal income tax law occurring after
the date of the Indenture (Section 1404).
"Government Obligations" means securities which are (i) direct obligations
of the United States of America or the government which issued the foreign
currency in which the Debt Securities of a particular series are payable, for
the payment of which its full faith and credit is pledged or (ii) obligations of
a person controlled or supervised by and acting as an agency or instrumentality
of the United States of America or such government which issued the foreign
currency in which the Debt Securities of such series are payable, the timely
payment of which is unconditionally guaranteed as a full faith and credit
obligation of the United States of America or such government, which, in either
case, are not callable or redeemable at the option of the issuer thereof, and
shall also include a depository receipt issued by a bank or trust company as
custodian with respect to any such Government Obligation or a specific payment
of interest on or principal of any such Government Obligation held by such
custodian for the account of the Holder of a depository receipt, provided that
(except as required by law) such custodian is not authorized to make any
deduction from the amount payable to the Holder of such depository receipt from
any amount received by the custodian in respect of the Government Obligation or
the specific payment of interest on or principal of the Government Obligation
evidenced by such depository receipt (Section 101 of each Indenture).
Unless otherwise provided in the applicable Prospectus Supplement, if after
the Company has deposited funds and/or Government Obligations to effect
defeasance or covenant defeasance with respect to Debt Securities of any series,
(a) the Holder of a Debt Security of such series is entitled to, and does, elect
pursuant to the applicable Indenture or the terms of such Debt Security to
receive payment in a currency, currency unit or composite currency other than
that in which such deposit has been made in respect of such Debt Security, or
(b) a Conversion Event (as defined below) occurs in respect of the currency,
currency unit or composite currency in which such deposit has been made, the
indebtedness represented by such Debt Security will be deemed to have been, and
will be, fully discharged and satisfied through the payment of the principal of
(and premium, if any) and interest on such Debt Security as they become due out
of the proceeds yielded by converting the amount so deposited in respect of such
Debt Security into the currency, currency unit or composite currency in which
such Debt Security becomes payable as a result of such election or such
cessation of usage based on the applicable market exchange rate. "Conversion
Event" means the cessation of use of (i) a currency, currency unit or composite
currency both by the government of the country which issued such currency and
for the settlement of transactions by a central bank or other public
institutions of or within the international banking community, (ii) the ECU both
within the European Monetary System and for the settlement of transactions by
public institutions of or within the European Communities or (iii) any currency
unit or composite currency other than the ECU for the purposes for which it was
established. Unless otherwise provided in the applicable Prospectus Supplement,
all payments of principal of (and premium, if any) and interest on any Debt
Security that is payable in a foreign currency that ceases to be used by its
government of issuance shall be made in U.S. dollars.
In the event the Company effects covenant defeasance with respect to any Debt
Securities and such Debt Securities are declared due and payable because of the
occurrence of any Event of Default other than the Event of Default described in
clause (iv) under "Events of Default, Notice and Waiver" with respect to
certain specified sections of Article Ten of each Indenture (which sections
would no longer be applicable to such Debt Securities as a result of such
covenant defeasance) or described in clause (vii) under "Events of Default,
Notice and Waiver" with respect to any other covenant as to which there has
been covenant defeasance, the amount in such currency, currency unit or
composite currency in which such Debt Securities are payable, and Government
Obligations on deposit with the applicable Trustee, will be sufficient to pay
amounts due on such Debt Securities at the time of their stated maturity but may
not be sufficient to pay amounts due on such Debt Securities at the time of the
acceleration resulting from such Default. However, the Company would remain
liable to make payment of such amounts due at the time of acceleration.
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The applicable Prospectus Supplement may further describe the provisions, if
any, permitting such defeasance or covenant defeasance, including any
modifications to the provisions described above, with respect to the Debt
Securities of or within a particular series.
CONVERSION RIGHTS
The terms and conditions, if any, upon which the Debt Securities are
convertible into Common Shares or Preferred Shares will be set forth in the
applicable Prospectus Supplement relating thereto. Such terms will include
whether such Debt Securities are convertible into Common Shares or Preferred
Shares, the conversion price (or manner of calculation thereof), the conversion
period, provisions as to whether conversion will be at the option of the Holders
or the Company, the events requiring an adjustment of the conversion price and
provisions affecting conversion in the event of the redemption of such Debt
Securities and any restrictions on conversion, including restrictions directed
at maintaining the Company's REIT status.
REDEMPTION OF SECURITIES
The Indenture provides that the Debt Securities may be redeemed at any time at
the option of the Company, in whole or in part, at the Redemption Price, except
as may otherwise be provided in connection with any Debt Securities or series
thereof.
From and after notice has been given as provided in the Indenture, if funds
for the redemption of any Debt Securities called for redemption shall have been
made available on such redemption date, such Debt Securities will cease to bear
interest on the date fixed for such redemption specified in such notice, and the
only right of the Holders of the Debt Securities will be to receive payment of
the Redemption Price.
Notice of any optional redemption of any Debt Securities will be given to
Holders at their addresses, as shown in the Security Register, not more than 60
nor less than 30 days prior to the date fixed for redemption. The notice of
redemption will specify, among other items, the Redemption Price and the
principal amount of the Debt Securities held by such Holder to be redeemed.
If the Company elects to redeem Debt Securities, it will notify the Trustee at
least 45 days prior to the redemption date (or such shorter period as
satisfactory to the Trustee) of the aggregate principal amount of Debt
Securities to be redeemed and the redemption date. If less than all the Debt
Securities are to be redeemed, the Trustee shall select the Debt Securities to
be redeemed pro rata, by lot or in such manner as it shall deem fair and
appropriate.
GLOBAL SECURITIES
The Debt Securities of a series may be issued in whole or in part in the form
of one or more global securities (the "Global Securities") that will be
deposited with, or on behalf of, a depository identified in the applicable
Prospectus Supplement relating to such series. Global Securities may be issued
in either registered or bearer form and in either temporary or permanent form.
The specific terms of the depository arrangement with respect to a series of
Debt Securities will be described in the applicable Prospectus Supplement
relating to such series.
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DESCRIPTION OF PREFERRED SHARES OF BENEFICIAL INTEREST
The Company is authorized to issue 50,000,000 shares of beneficial interest,
which may include Preferred Shares. As of November 1, 1996, there were no
Preferred Shares outstanding.
Under the Company's Declaration of Trust, the Board of Trustees may from time
to time establish and issue one or more series of Preferred Shares. The Trustees
may classify or reclassify any unissued Preferred Shares by setting or changing
the number, designation, preference, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications and terms or
conditions of redemption of such series.
THE BOARD OF TRUSTEES
The following description of the Preferred Shares sets forth certain general
terms and provisions of the Preferred Shares to which any Prospectus Supplement
may relate. The statements below describing the Preferred Shares are in all
respects subject to and qualified in their entirety by reference to the
applicable provisions of the Company's Declaration of Trust and the Company's
bylaws (the "Bylaws").
GENERAL
The Board of Trustees is empowered by the Company's Declaration of Trust to
designate and issue from time to time one or more series of Preferred Shares
without shareholder approval. The Board of Trustees may determine the relative
rights, preferences and privileges of each series of Preferred Shares so issued.
Because the Board of Trustees has the power to establish the preferences and
rights of each series of Preferred Shares, it may afford the holders of any
series of Preferred Shares preferences, powers and rights, voting or otherwise,
senior to the rights of holders of Common Shares. The Preferred Shares will,
when issued, be fully paid and nonassessable.
The Prospectus Supplement relating to any Preferred Shares offered thereby
will contain the specific terms thereof, including, without limitation:
(l) The title and stated value of such Preferred Shares;
(2) The number of such Preferred Shares offered, the liquidation preference per
share and the offering price of such Preferred Shares;
(3) The dividend rate(s), period(s) and/or payment date(s) or method(s) of
calculation thereof applicable to such Preferred Shares;
(4) The date from which dividends on such Preferred Shares shall accumulate, if
applicable;
(5) The procedures for any auction and remarketing, if any, for such Preferred
Shares;
(6) The provision for a sinking fund, if any, for such Preferred Shares;
(7) The provision for redemption, if applicable, of such Preferred Shares;
(8) Any listing of such Preferred Shares on any securities exchange;
(9) The terms and conditions, if applicable, upon which such Preferred Shares
will be convertible into Common Shares of the Company, including the
conversion price (or manner of calculation thereof);
(10) Any other specific terms, preferences, rights, limitations or restrictions
of such Preferred Shares;
(11) A discussion of federal income tax considerations applicable to such
Preferred Shares;
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(12) The relative ranking and preferences of such Preferred Shares as to
dividend rights and rights upon liquidation, dissolution or winding up of
the affairs of the Company;
(13) Any limitations on issuance of any series of Preferred Shares ranking
senior to or on a parity with such series of Preferred Shares as to
dividend rights and rights upon liquidation, dissolution or winding up of
the affairs of the Company; and
(14) Any limitations on direct or beneficial ownership and restrictions on
transfer, in each case as may be appropriate to preserve the status of the
Company as a REIT.
RANK
Unless otherwise specified in the Prospectus Supplement, the Preferred Shares
will, with respect to dividend rights and rights upon liquidation, dissolution
or winding up of the Company, rank (i) senior to all classes or series of Common
Shares of the Company, and to all equity securities ranking junior to such
Preferred Shares; (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 the Preferred Shares; and (iii) junior to all equity securities
issued by the Company the terms of which specifically provide that such equity
securities rank senior to the Preferred Shares. The term ''equity securities''
does not include convertible debt securities.
DIVIDENDS
Holders of the Preferred Shares of each series will be entitled to receive,
when, as and if declared by the Board of Trustees of the Company, out of assets
of the Company legally available for payment, cash dividends (or dividends in
kind or in other property if expressly permitted and described in the applicable
Prospectus Supplement) at such rates and on such dates as will be set forth in
the applicable Prospectus Supplement. Each such dividend shall be payable to
holders of record as they appear on the share transfer books of the Company on
such record dates as shall be fixed by the Board of Trustees of the Company.
Dividends on any series of Preferred Shares may be cumulative or non-
cumulative, as provided in the applicable Prospectus Supplement. Dividends, if
cumulative, will be cumulative from and after the date set forth in the
applicable Prospectus Supplement. If the Board of Trustees of the Company fails
to declare a dividend payable on a dividend payment date on any series of the
Preferred Shares for which dividends are non-cumulative, then the holders of
such series of the Preferred Shares 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 series are declared payable on any future
dividend payment date.
Unless otherwise specified in the Prospectus Supplement, if any Preferred
Shares of any series are outstanding, no full dividends shall be declared or
paid or set apart for payment on any capital shares of the Company of any other
series ranking, as to dividends, on a parity with or junior to the Preferred
Shares of such series for any period unless (i) if such series of Preferred
Shares has a cumulative dividend, full cumulative dividends have been or
contemporaneously are declared and paid or declared and a sum sufficient for the
payment thereof set apart for such payment on the Preferred Shares of such
series for all past dividend periods and the then current dividend period or
(ii) if such series of Preferred Shares does not have a cumulative dividend,
full dividends for the then current dividend period have been or
contemporaneously are declared and paid or declared and a sum sufficient for the
payment thereof set apart for such payment on the Preferred Shares of such
series. When dividends are not paid in full (or a sum sufficient for such full
payment is not so set apart) upon Preferred Shares of any series and the shares
of any other series of Preferred Shares ranking on a parity as to dividends with
the Preferred Shares of such series, all dividends declared upon Preferred
Shares of such series and any other series of Preferred Shares ranking on a
parity as to dividends with such Preferred Shares shall be declared pro rata so
that the amount of dividends declared per share of Preferred Shares of such
series and such other series of Preferred Shares shall in all cases bear to each
other the same ratio that accrued dividends per share on the Preferred Shares of
such series (which shall not include
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any accumulation in respect of unpaid dividends for prior dividend periods if
such Preferred Shares do not have a cumulative dividend) and such other series
of Preferred Shares bear to each other. No interest, or sum of money in lieu of
interest, shall be payable in respect of any dividend payment or payments on
Preferred Shares of such series which may be in arrears.
Except as provided in the immediately preceding paragraph, unless (i) if such
series of Preferred Shares has a cumulative dividend, full cumulative dividends
on the Preferred Shares of such series have been or contemporaneously are
declared and paid or declared and a sum sufficient for the payment thereof set
apart for payment for all past dividend periods and the then current dividend
period, and (ii) if such series of Preferred Shares does not have a cumulative
dividend, full dividends on the Preferred Shares of such series have been or
contemporaneously are declared and paid or declared and a sum sufficient for the
payment thereof set apart for payment for the then current dividend period, no
dividends (other than in Common Shares or other capital shares ranking junior to
the Preferred Shares of such series as to dividends and upon liquidation) shall
be declared or paid or set aside for payment or other distribution upon the
Common Shares, or any other capital shares of the Company ranking junior to or
on a parity with the Preferred Shares of such series as to dividends or upon
liquidation, nor shall any Common Shares, or any other capital shares of the
Company ranking junior to or on a parity with the Preferred Shares of such
series as to dividends or upon liquidation 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 such shares) by the Company (except by
conversion into or exchange for other capital shares of the Company ranking
junior to the Preferred Shares of such series as to dividends and upon
liquidation).
REDEMPTION
If so provided in the applicable Prospectus Supplement, the Preferred Shares
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 Shares that is
subject to mandatory redemption will specify the number of such Preferred Shares
that shall be redeemed by the Company in each year commencing after a date to be
specified, at a redemption price per share to be specified, together with an
amount equal to all accrued and unpaid dividends thereon (which shall not, if
such Preferred Shares do not have a cumulative dividend, include any
accumulation in respect of unpaid dividends for prior dividend periods) to the
date of redemption. The redemption price may be payable in cash or other
property, as specified in the applicable Prospectus Supplement. If the
redemption price for Preferred Shares of any series is payable only from the net
proceeds of the issuance of capital shares of the Company, the terms of such
Preferred Shares may provide that, if no such capital shares shall have been
issued or to the extent the net proceeds from any issuance are insufficient to
pay in full the aggregate redemption price then due, such Preferred Shares shall
automatically and mandatorily be converted into the applicable capital shares of
the Company pursuant to conversion provisions specified in the applicable
Prospectus Supplement.
Notwithstanding the foregoing, unless (i) if such series of Preferred Shares
has a cumulative dividend, full cumulative dividends on all Preferred Shares of
any series shall have been or contemporaneously are declared and paid or
declared and a sum sufficient for the payment thereof set apart for payment for
all past dividend periods and the current dividend period and (ii) if such
series of Preferred Shares does not have a cumulative dividend, full dividends
of the Preferred Shares of any series have been or contemporaneously are
declared and paid or declared and a sum sufficient for the payment thereof set
apart for payment for the then current dividend period, no Preferred Shares of
any series shall be redeemed unless all outstanding Preferred Shares of such
series are simultaneously redeemed; provided, however, that the foregoing shall
not prevent the purchase or acquisition of Preferred Shares of such series to
preserve the REIT status of the Company or pursuant to a purchase or exchange
offer made on the same terms to holders of all outstanding Preferred Shares of
such series. In addition, unless (i) if such series of Preferred Shares has a
cumulative dividend, full cumulative dividends on all outstanding shares of any
series of Preferred Shares have been or contemporaneously are declared and paid
or declared and a sum sufficient for the payment thereof set apart for payment
for all past dividends periods and the then current dividend period, and (ii) if
such series of Preferred Shares does not have a cumulative dividend, full
dividends on the Preferred Shares of any
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series have been or contemporaneously are declared and paid or declared and a
sum sufficient for the payment thereof set apart for payment for the then
current dividend period, the Company shall not purchase or otherwise acquire
directly or indirectly any Preferred Shares of such series (except by conversion
into or exchange for capital shares of the Company ranking junior to the
Preferred Shares of such series as to dividends and upon liquidation); provided,
however, that the foregoing shall not prevent the purchase or acquisition of
Preferred Shares of such series to preserve the REIT status of the Company or
pursuant to a purchase or exchange offer made on the same terms to holders of
all outstanding Preferred Shares of such series.
If fewer than all of the outstanding Preferred Shares of any series are to be
redeemed, the number of shares to be redeemed will be determined by the Company
and such shares may be redeemed pro rata from the holders of record of such
shares in proportion to the number of such shares held or for which redemption
is requested by such holder (with adjustments to avoid redemption of fractional
shares) or by lot in a manner determined by the Company.
Notice of redemption will be mailed at least 30 days but not more than 60 days
before the redemption date to each holder of record of Preferred Shares of any
series to be redeemed at the address shown on the share transfer books of the
Company. Each notice shall state: (i) the redemption date; (ii) the number and
series of Preferred Shares to be redeemed; (iii) the redemption to be
surrendered for payment of the redemption price; (v) that dividends on the
shares to be redeemed will cease to accrue on such redemption date; and (vi) the
date upon which the holder's conversion rights, if any, as to such shares shall
terminate. If fewer than all of the Preferred Shares of any series are to be
redeemed, the notice mailed to each such holder thereof shall also specify the
number of Preferred Shares to be redeemed from each such holder. If notice of
redemption of any Preferred Shares has been given and if the funds necessary for
such redemption have been set aside by the Company in trust for the benefit of
the holders of any Preferred Shares so called for redemption, then from and
after the redemption date dividends will cease to accrue on such Preferred
Shares, and all rights of the holders of such shares will terminate, except the
right to receive the redemption price.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding up of
the affairs of the Company, then, before any distribution or payment shall be
made to the holders of any Common Shares or any other class or series of capital
shares of the Company ranking junior to the Preferred Shares in the distribution
of assets upon any liquidation, dissolution or winding up of the Company, the
holders of each series of Preferred Shares shall be entitled to receive out of
assets of the Company legally available for distribution to shareholders
liquidating distributions in the amount of the liquidation preference per share
(set forth in the applicable Prospectus Supplement), plus an amount equal to all
dividends accrued and unpaid thereon (which shall not include any accumulation
in respect of unpaid dividends for prior dividend periods if such Preferred
Shares do not have a cumulative dividend). After payment of the full amount of
the liquidating distributions to which they are entitled, the holders of
Preferred Shares will have no right or claim to any of the remaining assets of
the Company. In the event that, upon any such voluntary or involuntary
liquidation, dissolution or winding up, the available assets of the Company are
insufficient to pay the amount of the liquidating distributions on all
outstanding Preferred Shares and the corresponding amounts payable on all shares
of other classes or series of capital shares of the Company ranking on a parity
with the Preferred Shares in the distribution of assets, then the holders of the
Preferred Shares and all other such classes or series of capital shares shall
share ratably in any such distribution of assets in proportion to the full
liquidating distributions to which they would otherwise be respectively
entitled.
If liquidating distributions shall have been made in full to all holders of
Preferred Shares, the remaining assets of the Company shall be distributed among
the holders of any other classes or series of capital shares ranking junior to
the Preferred Shares upon liquidation, dissolution or winding up, according to
their respective rights and preferences and in each case according to their
respective number of shares. For such purposes, the consolidation or merger of
the Company with or into any other corporation, trust or entity, or the sale,
lease or conveyance of all or substantially all of the property or business of
the Company, shall not be deemed to constitute a liquidation, dissolution or
winding up of the Company.
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VOTING RIGHTS
Holders of Preferred Shares will not have any voting rights, except as set
forth below or as otherwise from time to time required by law or as indicated in
the applicable Prospectus Supplement.
Whenever dividends on any Preferred Shares shall be in arrears for six or more
consecutive quarterly periods, the holders of such Preferred Shares (voting
separately as a class with all other series of Preferred Shares upon which like
voting rights have been conferred and are exercisable) will be entitled to vote
for the election of two additional Trustees of the Company at a special meeting
called by the holders of record of at least ten percent (10%) of any series of
Preferred Shares so in arrears (unless such request is received less than 90
days before the date fixed for the next annual or special meeting of the
shareholders) or at the next annual meeting of shareholders, and at each
subsequent annual meeting until (i) if such series of Preferred Shares has a
cumulative dividend, all dividends accumulated on such shares of Preferred
Shares for the past dividend periods and the then current dividend period shall
have been fully paid or declared and a sum sufficient for the payment thereof
set aside for payment or (ii) if such series of Preferred Shares do not have a
cumulative dividend, four consecutive quarterly dividends shall have been fully
paid or declared and a sum sufficient for the payment thereof set aside for
payment. In such case, the entire Board of Trustees of the Company will be
increased by two Trustees.
Unless provided otherwise for any series of Preferred Shares, so long as any
Preferred Shares remain outstanding, the Company will not, without the
affirmative vote or consent of the holders of at least two-thirds of each series
of Preferred Shares outstanding at the time, given in person or by proxy, either
in writing or at a meeting (such series voting separately as a class), (i)
authorize or create, or increase the authorized or issued amount of, any class
or series of capital shares ranking prior to such series of Preferred Shares
with respect to the payment of dividends or the distribution of assets upon
liquidation, dissolution or winding up or reclassify any authorized capital
shares of the Company into such shares, or create, authorize or issue any
obligation or security convertible into or evidencing the right to purchase any
such shares; or (ii) amend, alter or repeal the provisions of the Company's
Declaration of Trust or the Designating Amendment for such series of Preferred
Shares, whether by merger, consolidation or otherwise (an "Event"), so as to
materially and adversely affect any right, preference, privilege or voting power
of such series of Preferred Shares or the holders thereof; provided, however,
with respect to the occurrence of any of the Events set forth in (ii) above, so
long as the Preferred Shares remain outstanding with the terms thereof
materially unchanged, taking into account that upon the occurrence of an Event,
the Company may not be the surviving entity, the occurrence of any such Event
shall not be deemed to materially and adversely affect such rights, preferences,
privileges or voting power of holders of Preferred Shares and provided further
that (x) any increase in the amount of the authorized Preferred Shares or the
creation or issuance of any other series of Preferred Shares, or (y) any
increase in the amount of authorized shares of such series or any other series
of Preferred Shares, in each case ranking on a parity with or junior to the
Preferred Shares of such series with respect to payment of dividends or the
distribution of assets upon liquidation, dissolution or winding up, shall not be
deemed to materially and adversely affect such rights, preferences, privileges
or voting powers.
The foregoing voting provisions will not apply if, at or prior to the time
when the act with respect to which such vote would otherwise be required shall
be effected, all outstanding Preferred Shares of such series shall have been
redeemed or called for redemption and sufficient funds shall have been deposited
in trust to effect such redemption.
CONVERSION RIGHTS
The terms and conditions, if any, upon which any series of Preferred Shares is
convertible into Common Shares will be set forth in the applicable Prospectus
Supplement relating thereto. Such terms will include the number of Common Shares
into which the Preferred Shares are 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 the Preferred Shares or the
Company, the events requiring an adjustment of the conversion price and
provisions affecting conversion in the event of the redemption of such series of
Preferred Shares.
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SHAREHOLDER LIABILITY
As discussed below under "Description of Common Shares of Beneficial
Interest--General," applicable Alabama law provides that no shareholder,
including holders of Preferred Shares, shall be personally liable for the acts
and obligations of the Company and that the funds and property of the Company
shall be the only recourse for such acts or obligations.
RESTRICTIONS ON OWNERSHIP
As discussed below under "Description of Common Shares of Beneficial
Interest--Ownership Limits," for the Company to qualify as a REIT under the
Internal Revenue Code of 1986, as amended (the "Code"), not more than 50% in
value of its outstanding capital shares may be owned, directly or indirectly, by
five or fewer individuals (as defined in the Code to include certain entities)
during the last half of a taxable year. To assist the Company in meeting this
requirement, the Company may take certain actions to limit the beneficial
ownership, directly or indirectly, by a single person of the Company's
outstanding equity securities, including any Preferred Shares of the Company.
Therefore, the Designating Amendment for each series of Preferred Shares may
contain provisions restricting the ownership and transfer of Preferred Shares.
REGISTRAR AND TRANSFER AGENT
The Registrar and Transfer Agent for the Preferred Shares will be set forth in
the applicable Prospectus Supplement.
DESCRIPTION OF COMMON SHARES OF BENEFICIAL INTEREST
GENERAL
The authorized capital stock of the Company of 50,000,000 shares includes
common shares of beneficial interest, $.01 par value per share ("Common
Shares"). The outstanding Common Shares entitle the holder to one vote on all
matters presented to shareholders for a vote. Holders of Common Shares have no
preemptive rights. At December 1, 1996, there were 17,660,527 Common Shares
outstanding.
Common Shares currently outstanding are listed for trading on the New York
Stock Exchange (the "NYSE"). The Company will apply to the NYSE to list the
additional Common Shares to be sold pursuant to any Prospectus Supplement, and
the Company anticipates that such shares will be so listed.
Both Alabama statutory law governing real estate investment trusts organized
under the laws of that state (the Alabama REIT Law") and the Company's
Declaration of Trust provide that no shareholder of the Company will be
personally liable for any obligations of the Company. The Company's Bylaws
further provide that the Company shall indemnify each shareholder against any
claim or liability to which the shareholder may become subject by reason of his
being or having been a shareholder, and that the Company shall reimburse each
shareholder for all legal and other expenses reasonably incurred by him in
connection with any such claim or liability. In addition, it will be the
Company's policy to include a clause in its contracts which provides that
shareholders assume no personal liability for obligations entered into on behalf
of the Company. However, with respect to tort claims, contractual claims where
shareholder liability is not so negated, claims for taxes and certain statutory
liability, the shareholder may, in some jurisdictions, be personally liable to
the extent that such claims are not satisfied by the Company. Inasmuch as the
Company will carry public liability insurance which it considers adequate, any
risk of personal liability to shareholders is limited to situations in which the
Company's assets plus its insurance coverage would be insufficient to satisfy
the claims against the Company and its shareholders.
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Subject to such preferential rights as may be granted by the Board of Trustees
in connection with the future issuance of Preferred Shares, holders of Common
Shares are entitled to one vote per share on all matters to be voted on by
shareholders and are entitled to receive ratably such dividends as may be
declared on the Common Shares by the Board of Trustees in its discretion from
funds legally available therefor. In the event of the liquidation, dissolution
or winding up of the Company, holders of Common Shares are entitled to share
ratably in all assets remaining after payment of all debts and other liabilities
and any liquidation preference of the holders of Preferred Shares. Holders of
Common Shares have no subscription, redemption, conversion or preemptive rights.
Matters submitted for shareholder approval generally require a majority vote of
the shares present and voting thereon.
Advance Notice of Trustee Nominations and New Business. The Bylaws of the
Company provide that, with respect to an annual meeting of shareholders, the
proposal of business to be considered by shareholders may be made only (i) by or
at the direction of the Board of Trustees or (ii) by a shareholder who has
complied with the advance notice procedures set forth in the Bylaws. In
addition, with respect to any meeting of shareholders, nominations of persons
for election to the Board of Trustees may be made only (i) by or at the
direction of the Board of Trustees or (ii) by any shareholder of the Company who
is entitled to vote at the meeting and has complied with the advance notice
provisions set forth in the Bylaws.
RESTRICTIONS ON TRANSFER
Ownership Limits. The Company's Declaration of Trust contains certain
restrictions on the number of Common Shares that individual shareholders may
own. For the Company to qualify as a REIT under the Code, no more than 50% in
value of its outstanding Common Shares may be owned, directly or indirectly, by
five or fewer individuals (as defined in the Code to include certain entities)
during the last half of a taxable year (other than the first year) or during a
proportionate part of a shorter taxable year. The Common Shares 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 intends to maintain its qualification as a REIT, the Declaration of
Trust of the Company contains restrictions on the ownership and transfer of
Common Shares intended to ensure compliance with these requirements.
Subject to certain exceptions specified in the Declaration of Trust, no holder
may own, or be deemed to own by virtue of certain attribution provisions of the
Code, more than 5% (the "Common Shares Ownership Limit") of the issued and
outstanding Common Shares. Members of the Lowder family (which includes Thomas
and James Lowder, members of their family and various corporations and
partnerships owned by them) are not subject to the Common Shares Ownership
Limit, but they are prohibited from acquiring additional Common Shares if, as a
result of such acquisition, a single member of the Lowder family would be
considered to own beneficially more than 29% of the outstanding Common Shares,
or any two members of the Lowder family would be considered to own beneficially
more than 34% of the outstanding Common Shares, or any three members of the
Lowder family would be considered to own beneficially more than 39% of the
outstanding Common Shares or any four members of the Lowder family would be
considered to own beneficially more than 44% of the outstanding Common Shares
(the "Excluded Holder Limit"). In addition, they are prohibited from acquiring
any Common Shares if such acquisition would cause five beneficial owners of
Common Shares to beneficially own in the aggregate more than 50% in value of the
outstanding Common Shares.
In addition to the foregoing ownership limits, no holder may own, directly or
by attribution, more than 9.8% of the issued and outstanding Common Shares and
Preferred Shares on a combined basis (the "Aggregate Ownership Limit"). Also,
no holder may own, directly or by attribution, more than 9.8% of any class or
series of Preferred Shares (the "Preferred Shares Ownership Limit"). (The
Common Shares Ownership Limit, the Excluded Holder Limit, the Preferred Shares
Ownership Limit and the Aggregate Ownership Limit are referred to collectively
herein as the "Ownership Limits".)
The Board of Trustees may increase the Ownership Limits from time to time, but
may not do so to the extent that after giving effect to such increase five
beneficial owners of shares could beneficially own in the aggregate more than
49% of the outstanding Shares. The Board of Trustees may, with a ruling from the
IRS or an opinion of
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counsel satisfactory to it, waive the Ownership Limits with respect to a holder
if such holder's ownership will not then or in the future jeopardize the
Company's status as a REIT.
Excess Shares. If any person owns, either directly or constructively under
the applicable attribution rules of the Code, Shares in excess of any of the
Ownership Limits (which include limits where the acquisition or ownership of
Shares would cause the Company to fail to qualify as a REIT), such person will
be deemed to have exchanged the Shares that cause an Ownership Limit to be
exceeded for an equal number of Excess Shares. The Excess Shares will not be
deemed issued to the person who exceeded the Ownership Limit, but instead will
be held by the Company as trustee of a trust for the exclusive benefit of a
transferee (or transferees) to be designated by the Company, provided that such
designee is a person to whom an equal number of Shares could be transferred
without violating the Ownership Limits. In addition, any purported transfer of
Shares which would cause the transferee to hold Shares in excess of the
Ownership Limits, shall be null and void. In such cases, the intended
transferee will acquire no rights or economic interest in the Shares, and the
transferor will be deemed instead to have transferred such Shares to the Company
in exchange for Excess Shares, which will be deemed to be held by the Company as
trustee of a trust for the exclusive benefit of the person or persons to whom
the Shares can be transferred without violating the Ownership Limits. The
Company generally must designate a transferee within 30 days of an event which
results in the deemed exchange for Excess Shares.
A person who holds or acquires Shares that shall have been deemed exchanged
for Excess Shares will not be entitled to vote the Excess Shares and will not be
entitled to receive any distributions (any distribution paid on Shares prior to
the discovery by the Company that such Shares have been exchanged for Excess
Shares shall be repaid to the Company upon demand, and any distribution declared
but unpaid shall be rescinded). Such person shall be entitled to receive
consideration paid by the Company's designated transferee in an amount that is
equal to the lesser of (i) in the case of a deemed exchange for Excess Shares
resulting from a transfer for value, the price paid for the Shares in such
transfer, or, in the case of a deemed exchange for Excess Shares resulting from
some other event, the market price, on the date of the deemed exchange, of the
Shares deemed exchanged, and (ii) the market price of the Shares for which such
Excess Shares are deemed to be exchanged, on the date of the designation of the
transferee. Any amount paid by the designated transferee in excess of the
amount described in the preceding sentence will be paid to the Company. For
these purposes, the market price on a given date is determined by reference to
the average closing price of the Shares for the five preceding days. The Excess
Shares so transferred will automatically be deemed to be exchanged for Shares.
Excess Shares may be purchased by the Company for the lesser of (i) in the case
of a deemed exchange for Excess Shares resulting from a transfer for value, the
price paid for the Shares in such transfer, or, in the case of a deemed exchange
for Excess Shares resulting from some other event, the market price, on the date
of the deemed exchange, of the Shares deemed exchanged, and (ii) the market
price of the Shares for which such Excess Shares are deemed to be exchanged, on
the date the Company purchases the Excess Shares.
The Board of Trustees has the authority at any time to waive the requirement
that Excess Shares be issued or be deemed outstanding in accordance with the
provisions of the Declaration of Trust if the issuance of such Excess Shares or
the fact that such Excess Shares are deemed to be outstanding would in the
opinion of counsel be satisfactory to jeopardize the status of the Company as a
REIT for Federal income tax purposes.
All certificates representing Common Shares will bear a legend referring to
the restrictions described above.
Every owner of more than 5% (or such lower percentage as required by the Code
or regulations thereunder) of the issued and outstanding Common Shares must file
a written notice with the Company containing the information specified in the
Declaration of Trust no later than December 31 of each year. In addition, each
shareholder shall upon demand be required to disclose to the Company in writing
such information as the Company may request in good faith in order to determine
the Company's status as a REIT.
REGISTRAR AND TRANSFER AGENT
The Registrar and Transfer Agent for the Common Shares is the First National
Bank of Boston.
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DESCRIPTION OF COMMON SHARE WARRANTS
The Company may issue Common Share Warrants for the purchase of Common Shares.
Common Share Warrants may be issued independently or together with any other
Securities offered by any Prospectus Supplement and may be attached to or
separate from such Securities. Each series of Common Share 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 Common Share 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 Common Share Warrants. The following
sets forth certain general terms and provisions of the Common Share Warrants
offered hereby. Further terms of the Common Share Warrants and the applicable
Warrant Agreements will be set forth in the applicable Prospectus Supplement.
The applicable Prospectus Supplement will describe the terms of the Common
Share Warrants in respect of which this Prospectus is being delivered,
including, where applicable, the following:
(1) The title of such Common Share Warrants;
(2) The aggregate number of such Common Share Warrants;
(3) The price or prices at which such Common Share Warrants will be issued;
(4) The designation, number and terms of the Common Shares purchasable upon
exercise of such Common Share Warrants;
(5) The designation and terms of the other Securities offered thereby with
which such Common Share Warrants are issued and the number of such Common Share
Warrants issued with each such Security offered thereby;
(6) The date, if any, on and after which such Common Share Warrants and the
related Common Stock will be separately transferable;
(7) The price at which each of the Common Shares purchasable upon exercise of
such Common Share Warrants may be purchased;
(8) The date on which the right to exercise such Common Share Warrants shall
commence and the date on which such right shall expire;
(9) The minimum or maximum number of such Common Share Warrants which may be
exercised at any one time;
(10) Information with respect to book entry procedures, if any;
(11) A discussion of certain federal income tax considerations; and
(12) Any other terms of such Common Share Warrants, including terms,
procedures and limitations relating to the exchange and exercise of such Common
Share Warrants.
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FEDERAL INCOME TAX CONSIDERATIONS
GENERAL
The following is a description of certain Federal income tax consequences to
the Company and the holders of Common Shares, Preferred Shares and Common Share
Warrants of the treatment of the Company as a REIT under applicable provisions
of the Code. The following discussion, which is not exhaustive of all possible
tax considerations, does not give a detailed discussion of any state, local or
foreign tax considerations. Nor does it discuss all of the aspects of Federal
income taxation that may be relevant to a prospective shareholder in light of
his or her particular circumstances or to certain types of shareholders
(including insurance companies, tax-exempt entities, financial institutions or
broker-dealers, foreign corporations and persons who are not citizens or
residents of the United States) who are subject to special treatment under the
Federal income tax laws. As used in this section, the term ''Company'' refers
solely to Colonial Properties Trust.
EACH PROSPECTIVE PURCHASER IS ADVISED TO CONSULT WITH HIS OR HER OWN TAX
ADVISOR REGARDING THE SPECIFIC TAX CONSEQUENCES TO HIM OR HER OF THE PURCHASE,
OWNERSHIP AND SALE OF SHARES IN AN ENTITY ELECTING TO BE TAXED AS A REIT,
INCLUDING THE FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES OF SUCH
PURCHASE, OWNERSHIP, SALE AND ELECTION AND OF POTENTIAL CHANGES IN APPLICABLE
TAX LAWS.
TAXATION OF THE COMPANY
General. The Company, which is considered a corporation for Federal income
tax purposes, has elected to be taxed as a REIT under Sections 856 through 860
of the Code effective as of its taxable year ending December 31, 1993. The
Company believes that it is organized and has operated in a manner so as to
qualify for taxation as a REIT under the Code, and the Company intends to
continue to operate in such a manner. No assurance, however, can be given that
the Company has operated in a manner so as to qualify as a REIT or that it will
continue to operate in such a manner in the future. Qualification and taxation
as a REIT depends upon the Company's ability to meet on a continuing basis,
through actual annual operating results, distribution levels and diversity of
stock ownership, the various qualification tests imposed under the Code on
REITs, some of which are summarized below. While the Company intends to operate
so that it qualifies as a REIT, given the highly complex nature of the rules
governing REITs, the ongoing importance of factual determinations, and the
possibility of future changes in circumstances of the Company, no assurance can
be given that the Company satisfies such tests or will continue to do so. See
"--Failure to Qualify" below.
The following is a general summary of the Code provisions that govern the
Federal income tax treatment of a REIT and its shareholders. These provisions of
the Code are highly technical and complex. This summary is qualified in its
entirety by the applicable Code provisions, Treasury Regulations and
administrative and judicial interpretations thereof.
If the Company qualifies for taxation as a REIT, it generally will not be
subject to Federal corporate income taxes on net income that it currently
distributes to shareholders. However, the Company will be subject to Federal
income tax on any income that it does not distribute and will be subject to
Federal income tax in certain circumstances on certain types of income even
though that income is distributed.
Requirements for Qualification. The Code defines a REIT as a corporation,
trust or association (1) that is managed by one or more trustees or directors;
(2) the beneficial ownership of which is evidenced by transferable shares of
stock, or by transferable certificates of beneficial interest; (3) that would be
taxable as a domestic corporation, but for Sections 856 through 859 of the Code;
(4) that is neither a financial institution nor an insurance company subject to
certain provisions of the Code; (5) the beneficial ownership of which is held by
100 or more persons; (6) that during the last half of each taxable year not more
than 50% in value of the outstanding stock of which is owned, directly or
indirectly, by five or fewer individuals (as defined in the Code to include
certain entities); and (7) that meets certain other tests, described below,
regarding the nature of its income and assets. The
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Code provides that conditions (1) through (4), inclusive, must be met during the
entire taxable year and that condition (5) must be met during at least 335 days
of a taxable year of 12 months, or during a proportionate part of a taxable year
of less than 12 months. The Company's Declaration of Trust contains restrictions
regarding the transfer of its Common Shares that are intended to assist the
Company in continuing to satisfy the share ownership requirements described in
(5) and (6) above. See "Description of Shares of Beneficial Interest--
Restrictions on Transfer."
Income Tests. In order to maintain qualification as a REIT, there are three
gross income requirements that must be satisfied annually. First, at least 75%
of the REIT's gross income (excluding gross income from prohibited transactions)
for each taxable year must be derived directly or indirectly from investments
relating to real property or mortgages on real property (including "rents from
real property" and, in certain circumstances, interest) or from certain types
of temporary investments. Second, at least 95% of the REIT's gross income
(excluding gross income from prohibited transactions) for each taxable year must
be derived from the same items which qualify under the 75% income test, and from
dividends, interest and gain from the sale or disposition of stock or
securities, or from any combination of the foregoing. Third, short-term gain
from the sale or other disposition of stock or securities, gain from prohibited
transactions and gain on the sale or other disposition of real property held for
less than four years (apart from involuntary conversions and sales of
foreclosure property) must represent less than 30% of the REIT's gross income
(including gross income from prohibited transactions) for each taxable year.
Rents received by the Company will qualify as "rents from real property" in
satisfying the gross income requirements for a REIT described above only if
several conditions (related to the identity of the tenant, the computation of
the rent payable, and the nature of the property leased) are met. The Company
does not anticipate receiving rents in excess of 1% of gross revenue that fail
to meet these conditions. In addition, for rents received to qualify as "rents
from real property," the Company generally must not operate or manage the
property or furnish or render services to tenants, other than through an
"independent contractor" from whom the Company derives no revenue. The
"independent contractor" requirement, however, does not apply to the extent
the services provided by the Company are "usually or customarily rendered" in
connection with the rental space for occupancy only and are not otherwise
considered "rendered to the occupant." The Management Partnership, which is
not an "independent contractor," provides certain services with respect to the
Properties, but the Company believes that all such services should be considered
"usually or customarily rendered" in connection with the rental of space for
occupancy only, although there is no assurance that the IRS might not contend
otherwise. If the Operating Partnership contemplates providing services in the
future that reasonably might be expected not to meet the "usual or customary"
standard, it will arrange to have such services provided by an independent
contractor from which the Operating Partnership will receive no income.
The Operating Partnership and/or the Management Partnership may receive fees
in consideration of the performance of property management services with respect
to certain Properties not owned entirely by the Operating Partnership. A portion
of such fees (corresponding to that portion of a Property owned by a third-
party) will not qualify under the 75% or 95% gross income test. The Operating
Partnership also may receive certain other types of income with respect to the
Properties it owns that will not qualify for the 75% or 95% gross income test.
In addition, dividends on the Company's stock in the Management Corporation and
its share of interest on the Management Corporation note will not qualify under
the 75% gross income test. The Company believes, however, that the aggregate
amount of such fees and other non-qualifying income in any taxable year will not
cause the Company to exceed the limits on nonqualifying income under the 75% and
95% gross income tests.
If the Company fails to satisfy one or both of the 75% or the 95% gross income
tests for any taxable year, it may nevertheless qualify as a REIT for such year
if it is entitled to relief under certain provisions of the Code. It is not
possible, however, to state whether in all circumstances the Company would be
entitled to the benefit of these relief provisions. Even if these relief
provisions were to apply, however, a tax would be imposed with respect to the
"excess net income" attributable to the failure to satisfy the 75% and 95%
gross income tests.
Asset Tests. At the close of each quarter of its taxable year, the Company
also must satisfy three tests relating to the nature of its assets: (i) at least
75% of the value of the Company's total assets must be represented by "real
estate assets", cash, cash items and government securities; (ii) not more than
25% of the Company's total assets may be represented by securities other than
those in the 75% asset class; and (iii) of the investments included in the 25%
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asset class, the value of any one issuer's securities (other than an interest in
a partnership, shares of a "qualified REIT subsidiary" or another REIT) owned
by the Company may not exceed 5% of the value of the Company's total assets, and
the Company may not own more than 10% of any one issuer's outstanding voting
securities (other than an interest in a partnership, shares of a "qualified
REIT subsidiary" or another REIT). The Company owns 100% of the nonvoting stock
and l% of the voting stock of the Management Corporation. In addition, the
Operating Partnership owns a note issued by the Management Corporation, and by
virtue of its ownership of Units, the Company is considered to own its pro rata
share of the note of the Management Corporation. Neither the Company nor the
Operating Partnership, however, own more than 10% of the voting securities of
the Management Corporation. In addition, the Company and its senior management
believe that the Company's pro rata share of the value of the securities of the
Management Corporation (taking into account both the stock of the Management
Corporation held directly and the Company's pro rata share of the note of the
Management Corporation held by the Operating Partnership) do not exceed 5% of
the total value of the Company's assets. There can be no assurance, however,
that the IRS might not contend either that the value of the securities of the
Management Corporation held by the Company (directly and through the Operating
Partnership) exceeds the 5% value limitation or that the nonvoting stock of the
Management Corporation owned by the Operating Partnership should be considered
"voting stock" for this purpose.
The 5% value requirement must be satisfied each time the Company increases its
ownership of securities of the Management Corporation (including as a result of
increasing its interest in the Operating Partnership as limited partners
exercise their redemption rights or, for example, as a result of investing the
proceeds of sales of Common Shares in the Operating Partnership). 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 Company's overall interest in the Management Corporation.
Annual Distribution Requirements. To qualify as a REIT, the Company
generally must distribute to its shareholders at least 95% of its income each
year. In addition, the Company will be subject to tax on the undistributed
amount at regular capital gains and ordinary corporate tax rates and also may be
subject to a 4% excise tax on undistributed income in certain events.
The Company believes that it has made, and intends to continue to make, timely
distributions sufficient to satisfy the annual distribution requirements. It is
possible, however, that the Company, from time to time, may not have sufficient
cash or other liquid assets to meet the distribution requirements. In that
event, CPHC may cause the Operating Partnership to arrange for short-term, or
possibly long-term, borrowing to permit the payments of required dividends.
Failure to Qualify. If the Company fails to qualify for taxation as a REIT
in any taxable year, the Company will be subject to tax (including any
applicable alternative minimum tax) on its taxable income at regular corporate
rates. Unless entitled to relief under specific statutory provisions, the
Company also will be disqualified from taxation as a REIT for the four taxable
years following the year during which qualification was lost. It is not possible
to state whether in all circumstances the Company would be entitled to such
statutory relief.
TAXATION OF HOLDERS OF COMMON SHARES
Taxation of Taxable Domestic Shareholders. As long as the Company qualifies
as a REIT, distributions made to the Company's taxable domestic shareholders out
of current or accumulated earnings and profits (and not designated as capital
gain dividends) will be taken into account by them as ordinary income, and
corporate shareholders will not be eligible for the dividends received deduction
as to such amounts. For purposes of determining whether distributions on the
Common Shares are out of current or accumulated earnings and profits, the
earnings and profits of the Company will be allocated first to Preferred Shares,
if any, and second to the Common Shares. There can be no assurance that the
Company will have sufficient earnings and profits to cover distributions on any
Preferred Shares. Distributions 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 shareholder has held its stock. However, corporate
shareholders may be required
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to treat up to 20% of certain capital gain dividends as ordinary income.
Distributions in excess of current or accumulated earnings and profits will not
be taxable to a shareholder to the extent that they do not exceed the adjusted
basis of the shareholder's Common Shares, but rather will reduce the adjusted
basis of such Common Shares. To the extent that such distributions exceed the
adjusted basis of a shareholder's Common Shares, they will be included in income
as long-term capital gain (or short-term capital gain if the Common Shares have
been held for one year or less), assuming the Common Shares are a capital asset
in the hands of the shareholder.
In general, a domestic shareholder will realize capital gain or loss on the
disposition of Common Shares equal to the difference between (i) the amount of
cash and the fair market value of any property received on such disposition and
(ii) the shareholder's adjusted basis of such Common Shares. Such gain or loss
generally will constitute long-term capital gain or loss if the shareholder has
held such shares for more than one year. Loss upon a sale or exchange of Common
Shares by a shareholder who has held such Common Shares 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 from the Company required to be
treated by such shareholder as long-term capital gain.
Under certain circumstances, domestic shareholders may be subject to backup
withholding at the rate of 31% with respect to dividends paid.
Taxation of Tax-Exempt Shareholders. The Company does not expect that
distributions by the Company to a shareholder that is a tax-exempt entity will
constitute "unrelated business taxable income" ("UBTI"), provided that the
tax-exempt entity has not financed the acquisition of its Common Shares with
"acquisition indebtedness" within the meaning of the Code and the Common
Shares are not otherwise used in an unrelated trade or business of the tax-
exempt entity.
Taxation of Non-U.S. Shareholders. The rules governing U.S. Federal income
taxation of nonresident alien individuals, foreign corporations, foreign
partnerships and other foreign shareholders (collectively, "Non-U.S.
Shareholders") are complex, and no attempt will be made herein to provide more
than a limited summary of such rules. Prospective Non-U.S. Shareholders should
consult with their own tax advisors to determine the impact of U.S. Federal,
state and local income tax laws with regard to an investment in Common Shares,
including any reporting requirements.
Distributions that are not attributable to gain from sales or exchanges by the
Company of U.S. real property interests and not designated by the Company as
capital gain dividends will be treated as dividends of ordinary income to the
extent that they are made out of current or accumulated earnings and profits of
the Company. Such distributions, ordinarily, will be subject to a withholding
tax equal to 30% of the gross amount of the distribution unless an applicable
tax treaty reduces that tax. Distributions in excess of current and accumulated
earnings and profits of the Company will not be taxable to a Non-U.S.
Shareholder to the extent that they do not exceed the adjusted basis of the
shareholder's Common Shares, but rather will reduce the adjusted basis of such
Common Shares. To the extent that such distributions exceed the adjusted basis
of a Non-U.S. Shareholder's Common Shares, they will give rise to tax liability
if the Non-U.S. Shareholder would otherwise be subject to tax on any gain from
the sale or disposition of his Common Shares as described below (in which case
they also may be subject to a 30% branch profits tax if the shareholder is a
foreign corporation). If it cannot be determined at the time a distribution is
made whether or not such distribution will be in excess of current or
accumulated earnings and profits, the entire distribution will be subject to
withholding at the rate applicable to dividends. However, the Non-U.S.
Shareholder may seek a refund of such amounts from the IRS if it is subsequently
determined that such distribution was, in fact, in excess of current or
accumulated earnings and profits of the Company.
For any year in which the Company qualifies as a REIT, distributions that are
attributable to gain from sales or exchanges by the Company of U.S. real
property interests will be taxed to a Non-U.S. Shareholder under the provisions
of the Foreign Investment in Real Property Tax Act of 1980 ("FIRPTA") at the
normal capital gain rates applicable to U.S. shareholders (subject to applicable
alternative minimum tax and a special alternative minimum tax in the case of
nonresident alien individuals). Also, distributions subject to FIRPTA may be
subject to a 30% branch profits tax in the hands of a corporate Non-U.S.
Shareholder not entitled to treaty relief or exemption. The Company is required
by applicable Treasury Regulations to withhold 35% of any distribution that is
or could be
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designated by the Company as a capital gain dividend. The amount withheld is
creditable against the Non-U.S. Shareholder's FIRPTA tax liability.
Gain recognized by a Non-U.S. Shareholder upon a sale of Common Shares
generally will not be taxed under FIRPTA if the Company is a "domestically
controlled REIT," defined generally as a REIT in which at all times during a
specified testing period less than 50% in value of the stock was held directly
or indirectly by foreign persons. The Company believes that it is a
"domestically controlled REIT," and, therefore, that the sale of Common Shares
will not be subject to taxation under FIRPTA. If the gain on the sale of Common
Shares were to be subject to tax under FIRPTA, the Non-U.S. Shareholder would be
subject to the same treatment as U.S. shareholders with respect to such gain
(subject to applicable alternative minimum tax and a special alternative minimum
tax in the case of nonresident alien individuals), and the purchaser of the
Common Shares would be required to withhold and remit to the IRS 10% of the
purchase price.
TAXATION OF HOLDERS OF PREFERRED SHARES OR COMMON SHARE WARRANTS
Additional Tax Consequences for Holders of Preferred Shares or Common Share
Warrants. If the Company offers one or more series of Preferred Shares or Common
Share Warrants, then there may be tax consequences for the holders of such
Securities not discussed herein. For a discussion of any such additional
consequences, see the applicable Prospectus Supplement.
OTHER TAX CONSIDERATIONS
Entity Classification. Substantially all of the Company's investments are
through the Operating Partnership and the Management Partnership. If either the
Operating Partnership or the Management Partnership were treated as an
association, the entity would be taxable as a corporation and therefore would be
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 and would
preclude the Company from qualifying as a REIT (see "Taxation of the Company--
Income Tests" and "--Asset Tests").
Prior to January 1, 1997, an organization formed as a partnership or a limited
liability company was treated as a partnership for Federal income tax purposes
rather than as a corporation only if it had no more than two of the four
corporate characteristics that the Treasury Regulations in effect at that time
used to distinguish a partnership from a corporation for tax purposes. These
four characteristics were (i) continuity of life, (ii) centralization of
management, (iii) limited liability and (iv) free transferability of interests.
Under final Treasury Regulations which became effective January 1, 1997, the
four factor test has been eliminated and an entity formed as a partnership or as
a limited liability company will be taxed as a partnership for Federal income
tax purposes, unless it specifically elects otherwise. The Regulations provide
that the IRS will not challenge the classification of an existing partnership or
limited liability company for tax periods prior to January 1, 1997 so long as
(1) the entity had a reasonable basis for its claimed classification, (2) the
entity and all of its members recognized the federal income tax consequences of
any changes in the entity's classification within the 60 months prior to January
1, 1997, and (3) neither the entity nor any member of the entity had been
notified in writing on or before May 8, 1996, that the classification of the
entity was under examination by the IRS.
The Company believes that the Operating Partnership and the Management
Partnership each will be treated as a partnership for Federal income tax
purposes (and not as an association taxable as a corporation) both under
existing Treasury Regulations and under the new Treasury Regulations that will
become effective January 1, 1997.
Tax Allocations with Respect to the Properties. The Operating Partnership was
formed by way of contributions of appreciated property (including certain of the
Properties and additional appreciated properties that have been contributed to
the Operating Partnership since its formation). When property is contributed to
a partnership in exchange for an interest in the partnership, the partnership
generally takes a carryover basis in that property for tax purposes equal to the
adjusted basis of the contributing partner in the property, rather than a basis
equal to the fair market value of the property at the time of contribution (this
difference is referred to as a "Book-Tax Difference"). The Partnership Agreement
requires allocations of income, loss, gain and deduction with respect to the
contributed Property be made in a manner consistent with the special rules in
section 704(c) of the Code and the regulations thereunder, which allocations
will tend to eliminate the Book-Tax Differences with respect to the contributed
Properties over the life of the Operating Partnership. However, because of
certain technical limitations, the special allocation rules of section 704(c) of
the Code may not always entirely eliminate the Book-Tax Difference on an annual
basis or with respect to a specific taxable transaction such as a sale. Thus,
the carryover basis of the contributed Properties in the hands of the Operating
Partnership could cause the Company (i) to be allocated lower amounts of
depreciation and other deductions for tax purposes than would be allocated to
the Company if all Properties were to have a tax basis equal to their fair
market value at the time of their contribution to the Operating Partnership, and
(ii) possibly to be allocated taxable gain in the event of a sale of such
contributed Properties in excess of the economic or book income allocated to the
Company as a result of such sale.
Management Corporation. A portion of the amount distributed by the Company
to shareholders comes from the Management Corporation, through dividends on
stock to the Operating Partnership held by the Company and
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payments on the note held by the Operating Partnership. The Management
Corporation does not qualify as a REIT and thus pays Federal, state and local
income taxes on its net income at normal corporate rates. As a result of
interest and amortization deductions, the Management Corporation does not pay
significant income taxes currently. There can be no assurance, however, that the
IRS will not challenge these deductions. In any event, future increases in the
income of the Management Corporation will be subject to income tax. Any Federal,
state or local income taxes that the Management Corporation is required to pay
will reduce the cash available for distribution by the Company to its
shareholders. In addition, as described above, the value of the securities of
the Management Corporation held by the Company cannot exceed 5% of the value of
the Company's assets at a time when a Partner exercises his redemption right (or
the Company otherwise is considered to acquire additional securities of the
Management Corporation, including as the result of the sale of Common Shares,
Preferred Shares, or Common Share Warrants pursuant to this Prospectus). See
"Taxation of the Company--Asset Tests." This limitation may restrict the
ability of the Management Corporation to increase the size of its respective
business unless the value of the assets of the Company is increasing at a
commensurate rate.
State and Local Taxes. The Company and its shareholders may be subject to
state or local taxation in various state or local jurisdictions, including those
in which it or they transact business or reside. The state and local tax
treatment of the Company and its shareholders may not conform to the Federal
income tax consequences discussed above. Consequently, prospective shareholders
should consult their own tax advisors regarding the effect of state and local
tax laws on an investment in the Common Shares, Preferred Shares or Common Share
Warrants of the Company.
The Alabama Real Estate Investment Trust Act (the "Act"), which was enacted in
July 1995, generally conforms the treatment of REITs (such as the Company) and
qualified REIT subsidiaries (such as CPHC) under Alabama tax law to federal law
for tax years beginning after December 31, 1994. In particular, the Act
specifically permits REITs to deduct dividends paid in computing taxable income
for Alabama income tax purposes. In addition, the Act provides that neither
REITs nor qualified REIT subsidiaries will be subject to a tax on the value of
their shares in Alabama. Under Alabama law, each beneficiary of a REIT is
required to report and pay Alabama tax on its share of the REIT's income to the
extent described below. An individual who is an Alabama resident is required to
report and pay tax on all of its share of the REIT's income, regardless of the
source of that income. An individual who is not resident in Alabama for Alabama
state income tax purposes is required to report and pay tax only on income
considered to be Alabama source income (i.e., income that would be subject to
tax in Alabama if received directly by the individual). For this purpose,
however, income derived by a REIT with respect to stock or securities is not
considered to be Alabama source income merely because the securities are issued
by a corporation organized under Alabama law or doing business in Alabama.
Similar treatment applies to a corporate beneficiary of a REIT that is not
organized or otherwise engaged in a "trade or business" in Alabama. The
Company has received an opinion from special Alabama tax counsel to the effect
that so long as the Company's sole assets consist of stock and securities of
other corporations (i.e., CPHC and the Management Corporation), (i) individual
shareholders of the Company who are not residents of Alabama for Alabama state
income tax purposes and who do not otherwise receive taxable income from
property owned or business transacted in Alabama and (ii) corporate shareholders
not organized in Alabama that do not otherwise receive income from sources
within, or business transacted in, Alabama will not be required to file tax
returns in Alabama or pay tax in Alabama as a result of investing in Common
Shares, Preferred Shares or Common Share Warrants of the Company.
The state of Alabama imposes a franchise tax on corporations organized under
Alabama law. The Company is organized as an Alabama real estate investment trust
under the Act and believes that it is not subject to the domestic franchise tax.
Nevertheless, there can be no assurance that the state of Alabama will not
contend that the Alabama franchise tax applies to the Company. Any Alabama
franchise tax that the Company is required to pay will reduce the cash available
for distribution by the Company to shareholders.
The Alabama Department of Revenue initiated a tax audit with respect to the
Company and CPHC for periods prior to the effective date of the Act. In meetings
with the Company and CPHC, the Alabama Department of Revenue initially raised
questions about whether the Company was subject to Alabama franchise tax as a
Maryland REIT and whether CPHC is entitled to certain substantial deductions
claimed by CPHC for Alabama income tax purposes for interest payments made by
CPHC to the Company. Under the Act, CPHC will not be subject to a
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franchise tax liability for tax years beginning after December 31, 1994. The
Company is unable at this time to predict whether any liability will result from
this audit proceeding or, if so, the amount thereof.
PLAN OF DISTRIBUTION
The Company may sell Securities in or through underwriters for public offer
and sale by them, and also may sell Securities offered hereby to investors
directly or through agents. Any such underwriter or agent involved in the offer
and sale of the Securities will be named in the applicable Prospectus
Supplement.
Underwriters may offer and sell the Securities at a fixed price or prices,
which may be changed, at prices related to the prevailing market prices at the
time of sale or at negotiated prices. The Company may also offer and sell the
Securities in exchange for one or more of its then outstanding issues of debt or
convertible debt securities. The Company also may, from time to time, authorize
underwriters acting as the Company's agents to offer and sell Securities upon
terms and conditions set forth in the applicable Prospectus Supplement. In
connection with the sale of the 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 the Securities
for whom they may act as agent. Underwriters may sell Securities to or through
dealers, and such dealers may receive compensation in the form of discounts,
concessions or commissions from the underwriters and/or commissions from the
purchasers for whom they may act as agent.
Any underwriting compensation paid by the Company to underwriters or agents in
connection with the offering of the 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 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 Securities may be deemed to be underwriting
discounts and commissions under the Securities Act. Underwriters, dealers and
agents may be entitled, under agreements to be 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 underwriters or other persons acting as the Company's agents to
solicit offers by certain institutions to purchase 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 Securities
sold pursuant to Contracts shall be not less nor more than, the respective
amounts stated in the applicable Prospectus Supplement. Institutions with whom
Contracts, when authorized, may be made include commercial and savings banks,
insurance companies, pension funds, investment companies, educational and
charitable institutions, and other institutions but will in all cases be subject
to the approval of the Company. Contracts will not be subject to any conditions
except (i) the purchase by an institution of the Securities covered by its
Contracts shall not at the time of delivery be prohibited under the laws of any
jurisdiction in the United States to which such institution is subject, and (ii)
if the Securities are being sold to underwriters, the Company shall have sold to
such underwriters the total principal amount of the 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.
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 and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy statements and other
information can be inspected at the Public Reference Section maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and the
following regional offices of the Commission: 500 West Madison Street, Suite
1400, Chicago,
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Illinois 60661-2511 and Seven World Trade Center, 13th Floor, New York, New York
10048. Copies of such material can be obtained from the Public Reference Section
of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. In addition, the Company's Common Shares are listed on the New York Stock
Exchange and such reports, proxy statements and other information concerning the
Company can be inspected at the offices of the New York Stock Exchange, 20 Broad
Street, New York, New York 10005.
The Company has filed with the Commission a registration statement on Form S-3
(the "Registration Statement"), of which this Prospectus is a part, under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
Securities offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement, certain portions of which
have been omitted as permitted by the rules and regulations of the Commission.
Statements contained in this Prospectus as to the contents of any contract or
other documents are not necessarily complete, and in each instance, reference is
made to the copy of such contract or documents filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference and the exhibits and schedules thereto. For further information
regarding the Company and the Securities, reference is hereby made to the
Registration Statement and such exhibits and schedules which may be obtained
from the Commission at its principal office in Washington, D.C. upon payment of
the fees prescribed by the Commission. The Commission maintains a 'web site'
that contains reports, proxy and information statements and other information
regarding issuers that file electronically with the Commission. The address of
such site is "http://www.sec.gov".
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The documents listed below have been filed by the Company under the Exchange
Act with the Commission and are incorporated herein by reference:
1. The Company's Annual Report on Form 10-K for the year ended December 31, 1995
(the "10-K").
2. The Company's current reports on Form 8-K filed January 22, 1996 and December
18, 1996.
3. The Company's Quarterly Reports on Form 10-Q for the quarters ended March 31,
1996, June 30, 1996 and September 30, 1996.
4. The Company's Registration Statement on Form 8-A, which incorporates by
reference a description of the Common Shares from the Company's Registration
Statement on Form S-11 (File No. 33-65954) including an amendment or report
filed for the purpose of updating such description.
All documents filed subsequent to the date of this Prospectus pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act and prior to termination
of the offering of all Securities to which this Prospectus relates shall be
deemed to be incorporated by reference in this Prospectus and shall be part
hereof from the date of filing of such document.
Any statement contained herein or 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 in this
Prospectus (in the case of a statement in a previously filed document
incorporated or deemed to be incorporated by reference herein), in any
accompanying Prospectus Supplement relating to a specific offering of Securities
or in any other subsequently filed document that is also 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 or any
accompanying Prospectus Supplement. Subject to the foregoing, all information
appearing in this Prospectus and each accompanying Prospectus Supplement is
qualified in its entirety by the information appearing in the documents
incorporated by reference.
The Company will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus is delivered, upon their
written or oral request, a copy of any or all of the documents incorporated
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herein by reference (other than exhibits to such documents, unless such exhibits
are specifically incorporated by reference in such documents). Written requests
for such copies should be addressed to Douglas B. Nunnelley, the Company's
Senior Vice President and Chief Financial Officer at 2101 Sixth Avenue North,
Suite 750, Birmingham, Alabama 35203, telephone number (205) 250-8700.
LEGAL MATTERS
The legality of the Debt Securities, the Preferred Shares, the Common Shares
and the Common Share Warrants offered hereby and certain tax matters will be
passed upon for the Company by Hogan & Hartson L.L.P., Washington, D.C. Certain
Alabama tax matters will be passed on for the Company by Sirote & Permutt, P.C.,
Birmingham, Alabama
EXPERTS
The consolidated and combined financial statements and the related financial
statement schedules of the Company for the years ended December 31, 1995, 1994,
and 1993, which are included in the Company's Form 10-K (incorporated herein by
reference); the combined historical summary of revenues and direct operating
expenses of Acquired Properties -- Crowne Chase Apartments and Crowne Point
Apartments for the year ending December 31, 1995; the historical summary of
revenues and direct operating expenses of Acquired Property -- Northdale Court
for the year ended December 31, 1995; the historical summary of revenues and
direct operating expenses of Acquired Property -- Wekiva RiverWalk for the year
ended December 31, 1995; the historical summary of revenues and direct operating
expenses of Acquired Property -- Bardmoor Village for the year ended December
31, 1995; and the historical summary of revenues and direct operating expenses
of Acquired Property -- Island Walk for the year ended December 31, 1995; all of
which are included in the Company's Form 8-K filed with the Commission on
December 18, 1996 (incorporated herein by reference), have been incorporated by
reference herein in reliance upon the report of Coopers & Lybrand L.L.P.,
independent accountants, given on the authority of said firm as experts in
accounting and auditing.
The historical summary of revenues and direct operating expenses of Acquired
Property -- Briarcliffe Mall for the year ended December 31, 1995, which is
included in the Company's Form 8-K filed with the Commission on December 18,
1996 (incorporated herein by reference), has been audited by Margolin, Winer &
Evens LLP, independent accountants, and is included herein in reliance upon the
authority of said firm as experts in accounting and auditing.
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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 to be incurred
in connection with the issuance and distribution of the securities being
registered.
<TABLE>
<S> <C>
Registration Fee................... $ 65,686
Fees of Rating Agencies............ 20,000
Printing and Duplicating Expenses.. 100,000
Legal Fees and Expenses............ 150,000
Accounting Fees and Expenses....... 50,000
NASD Fees.......................... 23,000
Blue Sky Fees and expenses......... 30,000
Miscellaneous...................... 100,000
--------
Total.............................. $538,686
========
</TABLE>
ITEM 15. INDEMNIFICATION OF TRUSTEES AND OFFICERS
Under the Alabama Real Estate Investment Trust Act of 1995 (the
"Alabama REIT law"), a real estate investment trust formed in Alabama is
permitted to eliminate, by provision in its declaration of trust, the liability
of trustees and officers to the trust and its shareholders for money damages
except for liability resulting from (a) actual receipt of an improper benefit or
profit in money, property or services or (b) acts or omissions established by a
final judgment as involving active and deliberate dishonesty and being material
to the matter giving rise to the proceeding. The Company's Declaration of Trust
includes such a provision eliminating such liability to the maximum extent
permitted by the Alabama REIT law.
The Alabama REIT law permits an Alabama real estate investment trust
to indemnify and advance expenses to its trustees, officers, employees and
agents to the same extent as permitted by Sections 10-2B-8.50 to 10-2B-8.58,
inclusive, of the Code of Alabama, 1975 (the "Alabama Corporate Code") for
directors and officers of Alabama corporations. In accordance with the Alabama
Corporate Code, the Company's Bylaws require it to indemnify (a) any present or
former trustee, officer or shareholder or any individual who, while a trustee,
officer or shareholder, served or is serving as a trustee, officer, director,
shareholder or partner of another entity at the Company's express request who
has been successful, on the merits or otherwise, in the defense of a proceeding
to which he was made a party by reason of service in such capacity, against
reasonable expenses incurred by him in connection with the proceeding, (b) any
present or former trustee or officer or any individual who, while a trustee or
officer served or is serving as a trustee, officer, director, shareholder or
partner of another entity at the Company's express request, who is made a party
to a proceeding by reason of service in such capacity, against reasonable
expenses incurred by him in connection with the proceeding if (i) he conducted
himself in good faith, (ii) he reasonably believed (A) in the case of conduct in
his official capacity with the Company, that the conduct was in the Company's
best interest and (B) in all other cases, that the conduct was at least not
opposed to its best interests, and (iii) in the case of any criminal proceeding,
he had no reasonable cause to believe his conduct was unlawful, provided,
however, that the indemnification provided for in this clause (b) will not be
available if it is established that (1) in connection with a proceeding by or in
the right of the Company, he was adjudged liable to the Company, or (2) in
connection with any other proceeding charging improper personal benefit to him,
whether or not involving action in his official capacity, he was adjudged liable
on the basis that personal benefit was improperly received by him, and (c) any
present or former shareholder or any individual who, while a trustee, officer or
shareholder, served or is serving as a trustee, officer, director, shareholder
or partner of another entity at the Company's express request
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against any claim or liability to which he may become subject by reason of such
status. In addition, the Company's Bylaws require the Company to pay or
reimburse, in advance of final disposition of a proceeding, reasonable expenses
incurred by a trustee, officer or shareholder or former trustee, officer or
shareholder made a party to a proceeding by reason of such status; provided,
that in the case of a trustee or officer, (i) the Company shall have received a
written affirmation by the trustee or officer of his good faith belief that he
has met the applicable standard of conduct necessary for indemnification by the
Company as authorized by the Bylaws, (ii) the Company shall have received a
written undertaking by or on his behalf to repay the amount paid or reimbursed
by the Company if it shall ultimately be determined that the applicable standard
of conduct was not met and (iii) a determination shall have been made, in
accordance with Section 8.55 of the Alabama Corporate Code, that the facts then
known to those making the determination would not preclude indemnification under
the provisions of the Bylaws. The Company may, with the approval of the
trustees, provide such indemnification and payment or reimbursement of expenses
to any trustee, officer or shareholder or any former trustee, officer or
shareholder who served a predecessor of the Company and to any employee or agent
of the Company or a predecessor of the Company.
Insofar as indemnification for liabilities arising under the Act may
be permitted to trustees and officers of the Company pursuant to the foregoing
provisions or otherwise, the Company has been advised that, although the
validity and scope of the governing statute have not been tested in court, in
the opinion of the Commission, such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In addition,
indemnification may be limited by state securities laws. In the event that a
claim for indemnification against such liabilities (other than payment by the
registrant in the successful defense of any action, suit or proceeding) is
asserted by such trustee, officer or controlling person in connection with the
Common Shares 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 is
against public policy as expressed in such Act and will be governed by the final
adjudication of such issue.
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
Exhibit Number Exhibit
- -------------- -------
<S> <C>
4.1 * Declaration of Trust of the Company
4.2 * Bylaws of the Company
4.3 * Specimen Certificate of Common Shares of the Company
4.4 ** Form of Senior Indenture
4.5 ** Form of Subordinated Indenture
5 Opinion of Hogan & Hartson L.L.P. regarding the legality of the securities being registered
8.1 Tax Opinion of Hogan & Hartson L.L.P.
8.2 Tax Opinion of Sirote & Permutt P.C.
12 Calculation of Ratio of Earnings to fixed charges
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Awareness Letter of Coopers & Lybrand L.L.P.
23.3 Consent of Margolin, Winer & Evens LLP
23.4 Consent of Hogan & Hartson L.L.P. (included as part of Exhibit 5)
23.5 Consent of Sirote & Permutt P.C. (included as part of Exhibit 8.2)
24 *** Power of Attorney
</TABLE>
_______
* Previously filed with Registration Statement No. 33-89612 on December 21,
1995.
** Previously filed with Registration Statement No. 33-89612 on February 17,
1995.
*** Filed as part of the signature page of this Registration Statement.
II-2
<PAGE>
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)3 of the
Securities Act of 1933;
(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 this registration
statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in this
registration statement or any material change to such
information in this registration statement; provided,
however, that subparagraphs (i) and (ii) do not apply if
the information required to be included in a post-effective
amendment by those paragraphs is contained in the periodic
reports filed by the registrant pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934 that
are incorporated by reference in this registration
statement.
(2) 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 Debt Securities offered herein, and
the offering of such Debt Securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the Debt Securities being registered which remain unsold at the
termination of the offering.
The undersigned Registrant hereby undertakes that, for the 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 Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in this
registration statement shall be deemed to be a new registration statement
relating to the Debt Securities offered herein, and the offering of such Debt
Securities at that time shall be deemed to be the initial bona fide offering
thereof.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance under Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act of 1933 shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of prospectus
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 that and 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 described under Item 15 above or otherwise, the
registrant has been advised
II-3
<PAGE>
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than 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 against the
registrant by such director, officer or controlling person in connection with
the Debt 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 Act and will be governed by the
final adjudication of such issue.
The undersigned registrant hereby undertakes to file an application
for purposes of determining the eligibility of the trustee to act under
subsection (a) of Section 310 of the Trust Indenture Act in accordance with the
rules and regulations prescribed by the Commission under Section 305(b)(2) of
the Act.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Act, the Company certifies that it
has reasonable grounds to believe that it meets all of the requirements for
filing on Form S-3 and has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Birmingham, State of Alabama, on December 19, 1996.
COLONIAL PROPERTIES TRUST
By: /s/ Thomas H. Lowder
-----------------------------------------------
Thomas H. Lowder
President, Chief Executive Officer
and Chairman of the Board
POWER OF ATTORNEY
We, the undersigned trustees and officers of Colonial Properties Trust,
do hereby constitute and appoint Thomas H. Lowder and Douglas B. Nunnelley, and
each and either of them, our true and lawful attorneys-in-fact and agents, to do
any and all acts and things in our names and on our behalf in our capacities as
trustees and officers and to execute any and all instruments for us and in our
name in the capacities indicated below, which said attorneys and agents, or
either of them, may deem necessary or advisable to enable said registrant to
comply with the Securities Act of 1933 and any rules, regulations and
requirements of the Securities and Exchange Commission, in connection with this
registration statement, or any registration statement for this offering that is
to be effective upon filing pursuant to Rule 462(b) under the Securities Act of
1933, including specifically, but without limitation, any and all amendments
(including post-effective amendments) hereto; and we hereby ratify and confirm
all that said attorneys and agents, or either of them, shall do or cause to be
done by virtue thereof.
Pursuant to the requirements of the Act, this Registration Statement has
been signed below by the following persons in the capacities December 19, 1996.
SIGNATURE TITLE
--------- -----
/s/ Thomas H. Lowder President, Chief Executive Officer
- -------------------------------------
Thomas H. Lowder and Chairman of the Board
/s/ Douglas B. Nunnelley Senior Vice President and
- -------------------------------------
Douglas B. Nunnelley Chief Financial Officer
(Principal Financial Officer)
/s/ Kenneth E. Howell Vice President and Controller
- -------------------------------------
Kenneth E. Howell (Principal Accounting Officer)
/s/ James K. Lowder Trustee
- -------------------------------------
James K. Lowder
II-5
<PAGE>
/s/ Carl F. Bailey Trustee
- -------------------------------------
Carl F. Bailey
/s/ M. Miller Gorrie Trustee
- -------------------------------------
M. Miller Gorrie
/s/ Donald T. Senterfitt Trustee
- -------------------------------------
Donald T. Senterfitt
/s/ Claude B. Nielsen Trustee
- -------------------------------------
Claude B. Nielsen
/s/ Harold W. Ripps Trustee
- -------------------------------------
Harold W. Ripps
/s/ Herbert A. Meisler Trustee
- -------------------------------------
Herbert A. Meisler
II-6
<PAGE>
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
EXHIBIT PAGE
- ------- ----
NUMBER EXHIBIT NUMBER
- ------ ------- ------
<S> <C> <C>
4.1 * Declaration of Trust of the Company................................................
4.2 * Bylaws of the Company..............................................................
4.3 * Specimen Certificate of Common Shares of the Company...............................
4.4 ** Form of Senior Indenture...........................................................
4.5 ** Form of Subordinated Indenture.....................................................
5 Opinion of Hogan & Hartson L.L.P. regarding the legality of the securities
being registered................................................................
8.1 Tax Opinion of Hogan & Hartson L.L.P...............................................
8.2 Tax Opinion of Sirote & Permutt P.C................................................
12 Calculation of Ratio of Earnings to fixed charges..................................
23.1 Consent of Coopers & Lybrand LLP...................................................
23.2 Awareness Letter of Coopers & Lybrand L.L.P........................................
23.3 Consent of Margolin, Winer & Evens LLP.............................................
23.4 Consent of Hogan & Hartson L.L.P. (included as part of Exhibit 5)..................
23.5 Consent of Sirote & Permutt P.C. (included as part of Exhibit 8.2).................
24 *** Power of Attorney..................................................................
</TABLE>
_______
* Previously filed with Registration Statement No. 33-89612 on December 21,
1995.
** Previously filed with Registration Statement No. 33-89612 on February 17,
1995.
*** Filed as part of the signature page of this Registration Statement.
<PAGE>
Exhibit 5
HOGAN & HARTSON L.L.P.
Columbia Square
555 Thirteenth Street, N.W.
Washington, D.C. 20004-1109
(tel.) 202-637-5600
(fax) 202-637-5901
December 19, 1996
Board of Trustees
Colonial Properties Trust
2101 Sixth Avenue North
Suite 750
Birmingham, Alabama 35202
Ladies and Gentlemen:
We are acting as counsel to Colonial Properties Trust, an Alabama real
estate investment trust (the "Company"), in connection with its registration
statement on Form S-3 (the "Registration Statement") filed with the Securities
and Exchange Commission relating to the proposed public offering of up to
$216,762,500 in aggregate amount of one or more series of (i) unsecured debt
securities (the "Debt Securities"), (ii) preferred shares of beneficial interest
(the "Preferred Shares"), (iii) common shares of beneficial interest, $.01 par
value (the "Common Shares") or (iv) warrants to purchase Common Shares (the
"Common Share Warrants" and, together with the Debt Securities, Preferred Shares
and Common Shares, the "Securities"), all of which Securities may be offered and
sold by the Company from time to time as set forth in the prospectus which forms
a part of the Registration Statement (the "Prospectus"), and as to be set forth
in one or more supplements to the Prospectus (each, a "Prospectus Supplement").
This opinion letter is furnished to you at your request to enable you to fulfill
the requirements of Item 601(b)(5) of Regulation S-K, 17 C.F.R. (S)
229.601(b)(5), in connection with the Registration Statement.
We assume that the issuance, sale, amount and terms of the Securities
to be offered from time to time will be duly authorized and determined by proper
action of the Board of Trustees of the Company consistent with the procedures
and terms described in the Registration Statement (each, a "Board Action") and
in accordance with the Company's Declaration of Trust, as amended (the
"Declaration
<PAGE>
Board of Trustees
Colonial Properties Trust
December 19, 1996
Page 2
of Trust"), and applicable Alabama law. We further assume that (i) any senior
Debt Securities will be issued pursuant to a "Senior Indenture" and any
subordinated Debt Securities will be issued pursuant to a "Subordinated
Indenture," the forms of which are incorporated by reference as Exhibits 4.4 and
4.5, respectively, to the Registration Statement; and (ii) any Common Share
Warrants will be issued under one or more common share warrant agreements (each,
a "Warrant Agreement"), each to be between the Company and a financial
institution identified therein as a warrant agent (each, a "Warrant Agent").
For purposes of this opinion letter, we have examined copies of the
following documents:
1. An executed copy of the Registration Statement.
2. The Declaration of Trust of the Company (the "Declaration of
Trust"), as certified by the Secretary of the Company on the date
hereof as then being complete, accurate and in effect.
3. The Bylaws of the Company, as certified by the Secretary of the
Company on the date hereof as then being complete, accurate and in
effect.
4. The forms of Indenture between the Company and the Bank to be
named therein, incorporated by reference as Exhibits 4.4 and 4.5,
respectively, to the Registration Statement (the "Indentures").
5. Resolutions of the Board of Trustees of the Company adopted on
October 24, 1996, as certified by the Secretary of the Company on
the date hereof as then being complete, accurate and in effect,
relating to the filing of the Registration Statement and related
matters.
In our examination of the aforesaid documents, we have assumed the
genuineness of all signatures, the legal capacity of all natural persons, the
accuracy and completeness of all documents submitted to us, the authenticity of
all original documents and the conformity to authentic original documents of all
documents submitted to us as copies (including telecopies). This opinion letter
is given, and all statements herein are made, in the context of the foregoing.
<PAGE>
Board of Trustees
Colonial Properties Trust
December 19, 1996
Page 3
This opinion letter is based as to matters of law solely on the
Alabama Business Corporation Act and Alabama contract law (but not including any
statutes, ordinances, administrative decisions, rules or regulations of any
political subdivision of Alabama). We express no opinion herein as to any other
laws, statutes, regulations, or ordinances.
Based upon, subject to and limited by the foregoing, we are of the
opinion that, as of the date hereof:
1. When the Registration Statement has become effective under the
Securities Act of 1933 (the "Act") and when the Debt Securities have been
(a) duly established under an Indenture or any supplemental indenture
thereto, (b) duly authorized and established by applicable Board Action and
duly authenticated by the Trustee, and (c) duly executed and delivered on
behalf of the Company against payment therefor in accordance with the terms
of such Board Action, any applicable underwriting agreement, an Indenture
and any applicable supplemental indenture, and as contemplated by the
Registration Statement and/or the applicable Prospectus Supplement, the
Debt Securities will constitute binding obligations of the Company,
enforceable in accordance with their terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium or other laws affecting
creditors' rights (including, without limitation, the effect of statutory
and other law regarding fraudulent conveyances, fraudulent transfers and
preferential transfers) and as may be limited by the exercise of judicial
discretion and the application of principles of equity, including, without
limitation, requirements of good faith, fair dealing, conscionability and
materiality (regardless of whether the Debt Securities are considered in a
proceeding in equity or at law).
2. When the Registration Statement has become effective under the Act
and when a series of the Preferred Shares has been duly authorized and
established by applicable Board Action, in accordance with the terms of the
Declaration of Trust and applicable law, and, upon issuance and delivery of
certificates for such series of Preferred Shares against payment therefor
in accordance with the terms of such Board Action and any applicable
underwriting agreement, and as contemplated by the Registration Statement
and/or the applicable Prospectus Supplement, the shares represented by such
certificates will be validly issued, fully paid and non-assessable by the
<PAGE>
Board of Trustees
Colonial Properties Trust
December 19, 1996
Page 4
Company, with no personal liability attaching to the holders of such shares
except as described in the Registration Statement or the applicable
Prospectus Supplement under the caption "Description of Preferred Shares --
Shareholder Liability."
3. When the Registration Statement has become effective under the
Act, upon due authorization by Board Action of an issuance of Common
Shares, and upon issuance and delivery of certificates for Common Shares
against payment therefor in accordance with the terms of such Board Action
and any applicable underwriting agreement, and as contemplated by the
Registration Statement and/or the applicable Prospectus Supplement, the
shares represented by such certificates will be validly issued, fully paid
and non-assessable by the Company, with no personal liability attaching to
the holders of such shares except as described in the Registration
Statement or the applicable Prospectus Supplement under the caption
"Description of Common Shares of Beneficial Interest -- General."
4. When the Registration Statement has become effective under the Act
and when the Common Share Warrants have been (a) duly established by the
related Warrant Agreement, (b) duly authorized and established by
applicable Board Action and duly authenticated by the Warrant Agent, and
(c) duly executed and delivered on behalf of the Company against payment
therefor in accordance with the terms of such Board Action, any applicable
underwriting agreement and the applicable Warrant Agreement and as
contemplated by the Registration Statement and/or the applicable Prospectus
Supplement, the Common Share Warrants will constitute binding obligations
of the Company, enforceable in accordance with their terms, except as may
be limited by bankruptcy, insolvency, reorganization, moratorium or other
laws affecting creditors' rights (including, without limitation, the effect
of statutory and other law regarding fraudulent conveyances, fraudulent
transfers and preferential transfers) and as may be limited by the exercise
of judicial discretion and the application of principles of equity,
including, without limitation, requirements of good faith, fair dealing,
conscionability and materiality (regardless of whether the Common Share
Warrants are considered in a proceeding in equity or at law).
To the extent that the obligations of the Company under an Indenture
may be dependent upon such matters, we assume for purposes of this opinion that
<PAGE>
Board of Trustees
Colonial Properties Trust
December 19, 1996
Page 5
the Trustee is duly organized, validly existing and in good standing under the
laws of its jurisdiction of organization; that the Trustee is duly qualified to
engage in the activities contemplated by the Indenture; that the Indenture has
been duly authorized, executed and delivered by the Trustee and constitutes the
legally valid and binding obligation of the Trustee enforceable against the
Trustee in accordance with its terms; that the Trustee is in compliance, with
respect to acting as a trustee under the Indenture, with all applicable laws and
regulations; and that the Trustee has the requisite organizational and legal
power and authority to perform its obligations under the Indenture.
To the extent that the obligations of the Company under any Warrant
Agreement may be dependent upon such matters, we assume for purposes of this
opinion that the applicable Warrant Agent is duly organized, validly existing
and in good standing under the laws of its jurisdiction of organization; that
the Warrant Agent is duly qualified to engage in the activities contemplated by
the Warrant Agreement; that the Warrant Agreement has been duly authorized,
executed and delivered by the Warrant Agent and constitutes the legally valid
and binding obligation of the Warrant Agent enforceable against the Warrant
Agent in accordance with its terms; that the Warrant Agent is in compliance,
with respect to acting as a Warrant Agent under the Warrant Agreement, with all
applicable laws and regulations; and that the Warrant Agent has the requisite
organizational and legal power and authority to perform its obligations under
the Warrant Agreement.
The opinions expressed in Paragraphs (1) and (4) above shall be
understood to mean only that if there is a default in performance of an
obligation, (i) if a failure to pay or other damage can be shown and (ii) if the
defaulting party can be brought into a court which will hear the case and apply
the governing law, then, subject to the availability of defenses and to the
exceptions set forth in Paragraphs (1) and (4), the court will provide a money
damage (or perhaps injunctive or specific performance) remedy.
We assume no obligation to advise you of any changes in the foregoing
subsequent to the delivery of this opinion letter. This opinion letter has been
prepared solely for your use in connection with the filing of the Registration
Statement on the date of this opinion letter and should not be quoted in whole
or in part or otherwise be referred to, nor filed with or furnished to any
governmental agency or other person or entity, without the prior written consent
of this firm.
<PAGE>
Board of Trustees
Colonial Properties Trust
December 19, 1996
Page 6
We hereby consent to the filing of this opinion letter as Exhibit 5 to
the Registration Statement and to the reference to this firm under the caption
"Legal Matters" in the prospectus constituting a part of the Registration
Statement. In giving this consent, we do not thereby admit that we are an
"expert" within the meaning of the Securities Act of 1933, as amended.
Very truly yours,
/s/ Hogan & Hartson L.L.P.
HOGAN & HARTSON L.L.P.
<PAGE>
Exhibit 8.1
HOGAN & HARTSON L.L.P.
Columbia Square
555 Thirteenth Street, N.W.
Washington, D.C. 20004-1109
(tel.) 202-637-5600
(fax) 202-637-5901
December 19, 1996
Colonial Properties Trust
2101 Sixth Avenue North
Suite 750
Birmingham, Alabama 35203
Ladies and Gentlemen:
We have acted as counsel to Colonial Properties Trust, an Alabama real
estate investment trust (the "Company"), in connection with the registration of
(i) unsecured debt securities ("Debt Securities"), (ii) preferred shares of
beneficial interest ("Preferred Shares"), (iii) common shares of beneficial
interest, $.01 par value ("Common Shares"), and (iv) warrants exercisable for
Common Shares ("Common Share Warrants"), with an aggregate public offering price
of up to $216,762,500 (or its equivalent based on the exchange rate at the time
of sale) as more fully described in the Company's Registration Statement on Form
S-3 (the "Registration Statement," which includes the "Prospectus"), filed with
the Securities and Exchange Commission on or about the date hereof. In
connection therewith, we have been asked to provide an opinion regarding certain
federal income tax matters related to the Company. Capitalized terms used in
this letter and not otherwise defined herein have the meaning set forth in the
Prospectus.
The opinion set forth in this letter is based on relevant provisions
of the Internal Revenue Code of 1986, as amended (the "Code"), Treasury
Regulations thereunder (including proposed and temporary Regulations), and
interpretations of the foregoing as expressed in court decisions, administrative
determinations, and the legislative history as of the date hereof. These
provisions and interpretations are subject to change, which may or may not be
retroactive in effect, that might result in modifications of our opinion.
In rendering our opinion, we have examined such statutes, regulations,
records, certificates and other documents as we have considered necessary or
appropriate as a basis for such opinion, including the following: (1) the
Registration Statement (including the exhibits thereto and all amendments made
through the date hereof); (2) the Second Amended and Restated Agreement of
Limited
<PAGE>
Colonial Properties Trust
December 19, 1996
Page 2
Partnership for the Operating Partnership, as amended; (3) the Declaration of
Trust of the Company (the "Declaration of Trust") as in effect on the date
hereof; (4) the First Amended and Restated Agreement of Limited Partnership for
the Management Partnership; (5) the the Articles of Incorporation of the
Management Corporation, as amended; and (6) the Articles of Incorporation of
CPHC. The opinion set forth in this letter also is premised on certain written
representations of the Company and the Operating Partnership contained in a
letter to us of even date herewith (the "Management Representation Letter").
In our review, we have assumed, with your consent, that all of the
representations and statements set forth in the documents we reviewed are true
and correct, and all of the obligations by any such documents on the parties
thereto, including obligations imposed under the Declaration of Trust, have been
and will be performed or satisfied in accordance with their terms. Moreover, we
have assumed that the Company, the Operating Partnership, the Management
Partnership and the Management Corporation each have been and will continue to
be operated in the manner described in the relevant partnership agreement,
articles of incorporation or other organizational documents and in the
Prospectus and that, as represented by the Company, there are no agreements or
understandings between the Company, on the one hand, and the imposed Lowder
family, on the other, that are inconsistent with the Lowder family being
considered to be both the record and beneficial owner of more than 90% of the
outstanding voting stock of the Management Company. We also have assumed the
genuineness of all signatures, the proper execution of all documents,
authenticity of all documents submitted to us as originals, the conformity to
originals of documents submitted to us as copies, and the authenticity of the
originals from which any copies were made.
For the purposes of our opinion, we have not made an independent
investigation of the facts set forth in the Registration Statement, the Second
Amended and Restated Agreement of Limited Partnership for the Operating
Partnership, as amended, the Declaration of Trust, the First Amended and
Restated Agreement of Limited Partnership for the Management Partnership, the
Articles of Incorporation of the Management Corporation, the Articles of
Incorporation of CPHC, the Management Representation Letter, or any other
document. We consequently have assumed that the information presented in such
documents or otherwise furnished to us accurately and completely describes all
material facts relevant to our opinion. No facts have come to our attention,
however, that would
<PAGE>
Colonial Properties Trust
December 19, 1996
Page 3
cause us to question the accuracy and completeness of such facts or documents in
a material way.
We assume for the purposes of this opinion that the Company is a
validly organized and duly incorporated real estate investment trust under the
laws of the State of Alabama, that the Management Corporation and CPHC are
validly organized and duly incorporated corporations under the laws of the State
of Alabama, and that the Operating Partnership and the Management Partnership
are duly organized and validly existing partnerships under the laws of the State
of Delaware.
Based upon, subject to, and limited by the assumptions and
qualifications set forth herein, we are of the opinion that:
1. The Company was organized and has operated in conformity with the
requirements for qualification and taxation as a real estate investment trust
("REIT") under the Code for its taxable years ended December 31, 1993, December
31, 1994, and December 31, 1995 and the Company's current organization and
method of operation will enable it to continue to meet the requirements for
qualification and taxation as a REIT.
2. The statements in the Prospectus under the heading "Federal Income
Tax Considerations" to the extent that they describe matters of federal income
tax law or legal conclusions relating thereto are correct in all material
respects.
We note that the Prospectus does not currently address the federal
income tax considerations that may be relevant to a holder of Debt Securities,
Preferred Shares or Common Share Warrants. It is our understanding that in the
event the Company issues Debt Securities, Preferred Shares or Common Share
Warrants, the Company will prepare a supplement to the Registration Statement,
which supplement will address the federal income tax considerations that are
likely to be material to a holder of such securities.
We assume no obligation to advise you of any changes in our opinion
subsequent to the delivery of this opinion letter. The Company's qualification
and taxation as a REIT depend upon the Company's ability to meet on a continuing
basis, through actual annual operating and other results, the various
requirements under the Code and described in the Prospectus with regard to,
among other things,
<PAGE>
Colonial Properties Trust
December 19, 1996
Page 4
the sources of its gross income, the composition of its assets, the level of its
distributions to stockholders, and the diversity of its stock ownership. Hogan &
Hartson L.L.P. will not review the Company's compliance with these requirements
on a continuing basis. Accordingly, no assurance can be given that the actual
results of the operations of the Company, the Operating Partnership, and their
subsidiaries, the sources of their income, the nature of their assets, the level
of the Company's distributions to stockholders and the diversity of its stock
ownership for any given taxable year will satisfy the requirements under the
Code for qualification and taxation as a REIT.
This opinion has been prepared solely for your benefit in connection
with the filing of the Registration Statement. This opinion may not be used or
relied upon by any other person or for any other purpose and may not be
disclosed, quoted, or filed with a governmental agency or otherwise referred to
without our prior written consent. We hereby consent to the incorporation by
reference of this opinion in the Registration Statement, to the filing of this
opinion as an exhibit to the Registration Statement, and to the use of the name
of our firm therein.
Very truly yours,
/s/ Hogan & Hartson L.L.P.
Hogan & Hartson L.L.P.
<PAGE>
[LETTERHEAD OF SIROTE & PERMUTT APPEARS HERE]
EXHIBIT 8.2
December 19, 1996
Colonial Properties Trust
2101 Sixth Avenue North
Suite 750
Birmingham, Alabama 35203
Ladies and Gentlemen:
We have acted as special Alabama tax counsel to Colonial Properties Trust,
an Alabama real estate investment trust (the "Company") in connection with the
registration of (i) unsecured debt securities ("Debt Securities"), (ii)
preferred shares of beneficial interest ("Preferred Shares"), (iii) common
shares of beneficial interest, $.01 par value ("Common Shares"), and (iv)
warrants exercisable for Common Shares (" Common Share Warrants"), with an
aggregate public offering price of up to $216,762,500 (or its equivalent based
on the exchange rate at the time of sale) as more fully described in the
Company's Registration Statement of Form S-3 (the "Registration Statement,"
which includes the "Prospectus"), filed with the Securities and Exchange
Commission on or about the date hereof. In connection therewith, we have been
asked to provide an opinion on certain Alabama tax matters described in the
discussion of "State and Local Taxes" within the Prospectus. Capitalized terms
used in this letter and not otherwise defined herein have the meaning set forth
in the Prospectus.
The opinions set forth in this letter are based on relevant provisions of
the Alabama Code of 1975, as amended (the "Code"), Department of Revenue
regulations issued thereunder, and interpretations of the foregoing as expressed
in court decisions, administrative determinations and legislative history as of
the date hereof. These provisions and interpretations are subject to changes.
We assume no obligation to supplement this opinion if any applicable law changes
after the date hereof or if we become aware of any fact that might change the
opinion expressed herein after the date hereof.
We have reviewed the description of Alabama state and local tax
implications of the Transaction contained in the section of the Prospectus under
the caption "State and Local Taxes" and such other matters as we feel necessary
to render the following opinions.
<PAGE>
Colonial Properties Trust
December 19, 1996
Page 2
Based on the foregoing and subject to the discussion contained under
the caption "State and Local Taxes" in the Prospectus, we are of the opinion
that the section of the Prospectus captioned "State and Local Taxes" accurately
summarizes the Alabama tax considerations that are likely to be material to a
holder of securities of the Company.
We consent to being named as special Alabama tax counsel to the
Company in the "State and Local Taxes" section of the Prospectus and to the
reference to our firm under the caption "Legal Matters." We further consent to
the filing of a copy of this opinion letter as an exhibit to the Registration
Statement.
Very truly yours
/s/ Sirote & Permitt, P.C.
/s/ SIROTE & PERMITT, P.C.
<PAGE>
EXHIBIT 12
COLONIAL PROPERTIES TRUST
CONSOLIDATED AND COMBINED INCLUDING
PREDECESSOR BUSINESS
EARNINGS TO FIXED CHARGES RATIO
<TABLE>
<CAPTION>
Nine Months Ended Year Ended December 31
------------------ ----------------------------------------------------------------------
September 30, 1996 1995 1994 1993 1992 1991
------------------ ----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Income before gains from
sales of property and
extraordinary items $28,503,819 $25,304,113 $16,645,298 $ 4,219,501 $ (780,119) $(3,365,952)
----------- ----------- ----------- ----------- ----------- -----------
Fixed charges:
Interest expense 16,614,047 24,059,736 10,876,513 12,771,645 14,508,800 14,654,142
Interest expense capitalized 2,588,799 868,093 333,197 -0- 131,890 799,553
Amortization of debts issuance
costs and interest rate caps 1,241,498 2,445,773 2,243,663 736,504 249,246 292,082
----------- ----------- ----------- ----------- ----------- -----------
Total Fixed Charges 20,444,344 27,285,973 13,453,373 13,508,149 14,889,936 15,745,777
----------- ----------- ----------- ----------- ----------- -----------
Earnings 48,948,163 $52,352,816 $30,098,671 $17,727,650 $14,109,817 $12,379,825
=========== =========== =========== =========== =========== ===========
Ratio of Earnings to
Fixed Charges 2.39 1.92 2.24 1.31 .95 .79
=========== =========== =========== =========== =========== ===========
Earnings deficiency to
cover fixed charges N/A N/A N/A NA $ 780,119 $ 3,365,952
=========== =========== =========== =========== =========== ===========
</TABLE>
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration statement on
Form S-3 (File No. 333-_________) of our report dated January 25, 1996 on our
audits of the consolidated and combined financial statements and financial
statement schedules of Colonial Properties Trust as of December 31, 1995 and
1994, and for the years ended December 31, 1995, 1994, and 1993 which report is
included in the 1995 Annual Report incorporated by reference in Form 10-K, as
amended. We also consent to the incorporation by reference in this registration
statement on Form S-3 (File No. 333-________) of our report dated June 28, 1996
on our audit of the Combined Historical Summary of Revenues and Direct Operating
Expenses of Acquired Properties - Crowne Chase Apartments and Crowne Point
Apartments; our report dated July 3, 1996 on our audit of the Historical Summary
of Revenues and Direct Operating Expenses of Acquired Property - Northdale
Court; our report dated December 6, 1996 on our audit of the Historical Summary
of Revenues and Direct Operating Expenses of Acquired Property - Wekiva
RiverWalk; our report dated December 13, 1996 on our audit of the Historical
Summary of Revenues and Direct Operating Expenses of Acquired Property -
Bardmoor Village; and our report dated December 13, 1996 on our audit of the
Historical Summary of Revenues and Direct Operating Expenses of Acquired
Property - Island Walk, which reports are included in a previously filed Form 8-
K. We also consent to the reference to our firm under the caption "Experts."
/s/ Coopers & Lybrand L.L.P.
----------------------------
COOPERS & LYBRAND L.L.P.
Birmingham, Alabama
December 19, 1996
<PAGE>
Exhibit 23.2
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Colonial Properties Trust
(File No. 333-_____________)
Registration on Form S-3
We are aware that our reports dated April 20, 1996, July 23, 1996, and October
21, 1996 on our reviews of interim financial information of Colonial Properties
Trust for the periods ended March 31, 1996, June 30, 1996, and September 30,
1996, respectively, and included in the Company's quarterly reports on Forms 10-
Q for the quarters then ended are incorporated by reference in this registration
statement of Form S-3. Pursuant to Rule 436(c) under the Securities Act of
1933, these reports should not be considered a part of the registration
statement prepared or certified by us within the meaning of Sections 7 and 11 of
that Act.
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Birmingham, Alabama
December 19, 1996
<PAGE>
Exhibit 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-3 (File No.
333-00000) of our report dated February 22, 1996 on our audit of the Historical
Summary of Revenues and Direct Operating Expenses of Acquired Property --
Briarcliffe Mall, which report is included in a previously filed Form 8-K. We
also consent to the reference to our firm under the caption "Experts."
/s/ Margolin, Winer & Evens LLP
MARGOLIN, WINER & EVENS LLP
Garden City, New York
December 19, 1996
