As filed with the Securities and Exchange Commission on January 30, 1997
Registration No. 333-xxxx
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
MID-ATLANTIC REALTY TRUST
(Exact Name of Registrant as Specified in Its Charter)
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<S> <C> <C> <C> <C> <C> <C>
Maryland 6798 52-1832411
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer Identification
of incorporation or organization) Classification Code Number) Number)
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1302 Concourse Drive, Suite 204
Linthicum, Maryland 21090
(410) 684-2000
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
F. Patrick Hughes, President
Mid-Atlantic Realty Trust
1302 Concourse Drive, Suite 204
Linthicum, MD 21090
(410) 684-2000
Name, address, including zip code, and telephone number, including area code, of
agent for service)
Copy to:
Abba David Poliakoff, Esquire
Gordon, Feinblatt, Rothman, Hoffberger & Hollander, LLC
233 East Redwood Street
Baltimore, Maryland 21202
(410) 576-4067
Approximate date of commencement of proposed sale to public: From
time to time after Registration Statement becomes effective.
If the only securities being registered on this form are being
offered pursuant to dividend or interest reinvestment plans, check the following
box. |_|
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. |X|
If this form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. |_|
____________________
If this form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. |_| ____________________
If delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following box. |_|
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================================================================================================================================
CALCULATION OF REGISTRATION FEE
================================================================================================================================
Proposed Proposed Maximum Amount of
Title of Securities to be Amount to be Maximum Offering Aggregate Offering Registration
Registered Registered Price Per Unit Price Fee
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- ----------------------------------------------------------------------------------------------------------------------
Debt Securities (1) (2) (1)
- ----------------------------------------------------------------------------------------------------------------------
Common Shares of Beneficial (1)(3) (2) (1)(3)
Interest, par value $.01 per
- -------------------------------------------------------------------------------------------------------------------
Total $150,000,000 (2) $150,000,000 $45,455(4)
======================================================================================================================
<FN>
(1) In no event will the aggregate initial price of Debt Securities and Common
Shares of Beneficial Interest registered under this registration statement
exceed $150,000,000. Any securities registered hereunder may be sold
separately or as units with other securities registered hereunder.
<PAGE>
(2) The proposed maximum offering price per share will be determined, from time
to time, by the Registrant of the securities registered hereunder.
(3) Subject to footnote (1), there is being registered hereunder an
indeterminate number of Common Shares of Beneficial Interest, par value
$.01 per share, as may be sold, from time to time, by the Registrant.
(4) Calculated pursuant to Rule 457(o) of the rules and regulations under the
Securities Act of 1933, as amended.
</FN>
</TABLE>
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commissioner, acting pursuant to said Section
8(a), may determine.
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION DATED JANUARY 30, 1997
PROSPECTUS
$150,000,000
MID-ATLANTIC REALTY TRUST
Common Shares of Beneficial Interest and Debt Securities
Mid-Atlantic Realty Trust (the "Company") may from time to time offer and
sell common shares of beneficial interest, par value $.01 per share (the "Common
Shares"), and debt securities (the "Debt Securities"), with an aggregate public
offering price not to exceed $150,000,000. The Common Shares and Debt Securities
(collectively, the "Offered Securities") may be offered, separately or together,
at prices and terms to be set forth in an accompanying supplement to this
Prospectus (the "Prospectus Supplement").
The specific terms of the Offered Securities in respect of which this
Prospectus is being delivered will be set forth in the applicable Prospectus
Supplement and will include, where applicable: (i) in the case of Common Shares,
the specific number of shares and issuance price per share; and (ii) in the case
of Debt Securities, the specific title, aggregate principal amount, currency of
denomination and payment, 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, terms for redemption at
the option of the Company or repayment at the option of the holder, terms for
sinking fund payments, terms for conversion into Common Shares or Preferred
Shares of Beneficial Interest (the "Preferred Shares"), and any initial public
offering price. In addition, such specific terms may include limitations on
direct or beneficial ownership and restrictions on transfer of the Offered
Securities, in each case as may be appropriate to preserve the status of the
Company as a real estate investment trust ("REIT") for federal income tax
purposes.
The applicable Prospectus Supplement will also contain information, where
applicable, about certain federal income tax considerations relating to, and any
listing on a securities exchange of, the Offered Securities covered by such
Prospectus Supplement.
The Offered Securities may be offered by the Company directly to one or
more purchasers, through agents designated from time to time by the Company or
to or through underwriters or dealers. If any agents or underwriters are
involved in the sale of any of the Offered Securities, their names, and any
applicable purchase price, fee, commission or discount arrangement between or
among them, will be set forth, or will be calculable from the information set
forth in an accompanying Prospectus Supplement. See "Plan of Distribution." None
of the Offered Securities may be sold by the Company through agents,
underwriters or dealers without a delivery of a Prospectus Supplement describing
the method and terms of the offering of such Offered Securities.
-----------------------
See "Risk Factors" for certain information that should be considered
by prospective investors.
-----------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE 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 , 1997
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company can be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at the Commission's
Regional Offices at 7 World Trade Center, 13th Floor, New York, New York 10048,
and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661, and copies may
be obtained at the prescribed rates from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549. The
Commission also maintains a web site that contains reports, proxy statements and
other information regarding registrants that file electronically with the
Commission. The address of such site is http:\\www.sec.gov. The Company's Common
Shares are listed on the American Stock Exchange (the "AMEX") under the symbol
"MRR" and such reports, proxy statements and other information concerning the
Company can be inspected at the offices of the AMEX, 22 Thames Street, 5th
Floor, New York, New York 10606.
The Company has filed with the Commission a Registration Statement (the
"Registration Statement") on Form S-3 under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the securities offered by this
Prospectus. This Prospectus, which constitutes part of the Registration
Statement, omits certain of the information contained in the Registration
Statement and the exhibits thereto on file with the Commission pursuant to the
Securities Act and the rules and regulations of the Commission thereunder. For
further information with respect to the Company and the Offered Securities,
reference is made to the Registration Statement. The material provisions of any
contract or other document referred to herein are described in this Prospectus;
statements concerning the contents of such contracts and documents, however, are
not necessarily complete, and in each such instance reference is made to the
copy of such contract or other document filed as an exhibit to such Registration
Statement, each such statement being qualified in all respects by such
reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed by the Company (File No. 1-12286)
with the Commission are incorporated herein by reference:
(a) the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995;
(b) the Company's Quarterly Reports on Form 10-Q for the quarters
ended March 31, June 30, and September 30, 1996;
(c) the description of the Common Shares included in the Company's
Registration Statement on Form 8-A, dated August 24, 1993, and the information
thereby incorporated by reference contained in the Company's Registration
Statement on Form S-11, dated July 22, 1993 are hereby incorporated by reference
into this Prospectus; and
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering made hereby shall be deemed to be incorporated
by reference into this Prospectus and to be part hereof from the date of filing
such documents. Any statement contained in a document all or a portion of which
is incorporated or
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deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of the Registration Statement and this Prospectus to the
extent that a statement contained in the Registration Statement, this
Prospectus, or any other subsequently filed document that is also incorporated
by reference herein modifies or supersedes that statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
The Company hereby undertakes to provide without charge to each person,
including any beneficial owner, to whom a Prospectus is delivered, upon written
or oral request of that person, a copy of any document incorporated herein by
reference (other than exhibits to those documents unless the exhibits are
specifically incorporated by reference into the documents that this Prospectus
incorporates by reference). Requests should be directed to the Secretary, 1302
Concourse Drive, Suite 204, Linthicum, Maryland 21090, telephone number (410)
684-2000.
3
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THE COMPANY
Mid-Atlantic Realty Trust (the "Company"), is a fully integrated,
self-administered, self-managed real estate investment trust ("REIT") which
owns, leases, develops, redevelops and manages its retail shopping center
facilities and commercial properties, primarily in the Middle Atlantic region of
the United States. The Company owns and operates 25 commercial projects
consisting of 19 neighborhood or community shopping centers, one enclosed large
regional mall, one office complex and other commercial facilities, and eight
undeveloped parcels (collectively, the "Properties"). The developed properties
total approximately 3,126,000 square feet of gross leasable area, of which
approximately 94% are in the states of Maryland, New York, Virginia and Delaware
(the Middle Atlantic area), and 6% are in Arizona and Illinois. At December 31,
1996, approximately 96% of the developed properties were leased.
The Company's primary objective is to manage its properties for long term
cash flow growth. The Company's principal strategies are to grow the portfolio
through the selective acquisition of additional properties in the Middle
Atlantic region, redeveloping or developing retail properties on a selective
basis, and when appropriate, divesting through the sale or exchange of
non-strategic properties, primarily those located outside the Middle Atlantic
region.
The Company was incorporated in Maryland in June, 1993. The Company's
executive offices are located at 1302 Concourse Drive, Suite 204, Linthicum,
Maryland 21090, and its telephone number is (410) 684-2000.
RISK FACTORS
In addition to the historical information contained herein, the discussions in
this Prospectus and in any Prospectus Supplement contain certain forward-looking
statements that involve risks and uncertainties, such as statements of the
Company's plans, objectives, expectations and intentions. The cautionary
statements made in this Prospectus and in any Prospectus Supplement should be
read as being applicable to all related forward-looking statements wherever they
appear in this Prospectus and in any Prospectus Supplement. The Company's actual
results could differ materially from those discussed herein and in any
Prospectus Supplement. Factors that could cause or contribute to such
differences include those discussed below, as well as those discussed elsewhere
herein and in any Prospectus Supplement. The following risk factors should be
considered carefully in addition to the other information in this Prospectus and
in any Prospectus Supplement before purchasing the Offered Securities.
Real Estate Investment Risks
General. Real property investments are subject to varying degrees of risk.
The yields available from equity investments in real estate depend on the amount
of income and capital appreciation generated by the related properties. If the
properties do not generate sufficient income to meet operating expenses,
including debt service, lease payments, capital expenditures and tenant
improvements, the Company's income and ability to make distributions to its
shareholders will be adversely affected. Income from properties may be adversely
affected by the general economic climate, local conditions, such as oversupply
of space or a reduction in demand for rental space in the area, the
attractiveness of the properties to tenants, competition from other available
space, the ability of the owner to provide adequate maintenance and insurance,
increased operating costs (including real estate taxes) and the inability of a
significant number of tenants to pay rent. Income from properties and real
estate values are also affected by such factors as applicable laws, including
tax laws, interest rate levels and the availability of financing. In addition,
real
4
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estate investments are relatively illiquid and, therefore, will tend to limit
the ability of the Company to vary its portfolio promptly in response to changes
in economic or other conditions.
Ability to Rent Unleased Space. The ability of the Company to rent unleased
space is affected by many factors, including certain covenants typically found
in leases with tenants in shopping center properties which restrict the use of
other space at a property. In addition, in the event of a default by a lessee or
sublessee in its obligations, the Company may experience delays in enforcing its
rights as lessor or sublessor and may incur substantial costs and experience
significant delays associated with protecting its investment, including costs
incurred in acquiring and making substantial improvements or repairs to a
property.
Risk of Bankruptcy of Tenants. At any time, a tenant of the Company's
properties may seek the protection of the bankruptcy laws, which could result in
the termination of such tenant's lease and cause a downturn in distributable
cash flow of the Company. In addition, a tenant from time to time may experience
a downturn in its business which may weaken its financial condition and result
in the failure to make rental payments when due.
Casualty. The Company carries comprehensive liability, fire, flood,
extended coverage and rental loss insurance with policy specifications, limits
and deductibles customarily carried for similar properties. There are, however,
certain types of extraordinary losses which may be either uninsurable or not
economically insurable. Should an uninsured loss occur, the Company could lose
its investment, anticipated profits and cash flows from a property.
Debt Financing and Existing Debt Maturities. The Company is subject to the
risks normally associated with debt financing, including the risks that the
Company's funds from operations will be insufficient to meet required payments
of principal and interest, that existing indebtedness on the properties (which
will not necessarily have been fully amortized at maturity) will not be able to
be refinanced or that the terms of such refinancing will not be as favorable as
the terms of existing indebtedness. If prevailing interest rates or other
factors at the time of refinancing result in higher interest rates on
refinancings, the Company's interest expenses would increase, which would
adversely affect the Company's funds from operations and its ability to make
distributions to shareholders. In addition, in the event the Company were unable
to secure refinancing of such indebtedness on acceptable terms, the Company
might be forced to dispose of its properties upon disadvantageous terms, which
might result in losses to the Company and might adversely affect the cash flow
available for distribution of the Company.
Competition. There are numerous developers and real estate companies which
compete with the Company in seeking properties for acquisition and tenants for
vacant space, some of which may have greater financial resources than the
Company. There can be no assurance that the Company will continue to compete
favorably with such other companies.
Environmental Matters. Under various federal, state and local environmental
laws, ordinances and regulations, an owner of real property may be held liable
for costs of removal or remediation of certain conditions relating to the
presence of hazardous or toxic substances at, under or disposed of in connection
with such property, as well as certain other potential costs relating to
hazardous or toxic substances (including government fines and injuries to
persons and adjacent property). These laws often impose such liability without
regard to whether the owner knew of, or was responsible for, the presence of
such hazardous or toxic substances. The cost of any required remediation,
removal, fines or personal or property damages and the owner's liability
therefor could exceed the value of the property. In addition, the presence of
such substances, or the failure to properly dispose of or remediate such
substances, may adversely affect
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the owner's ability to sell or rent such property or to borrow using such
property as collateral which, in turn, would reduce the owner's revenues.
Americans with Disabilities Act. The properties and any newly developed or
acquired properties must comply with Title III of the Americans with
Disabilities Act (the "ADA") to the extent that such properties are "public
accommodations" and/or "commercial facilities" as defined by the ADA. Compliance
with the ADA requirements could require removal of structural barriers to
handicapped access in certain public areas of the Company's properties, where
such removal is readily achievable. The Company believes that the properties
comply with all present requirements under the ADA and applicable state laws.
Noncompliance with the ADA could result in imposition of fines or an award of
damages to private litigants. If required changes involve a greater expenditure
than the Company currently anticipates, or if the changes must be made on a more
accelerated basis than it anticipates, the Company's ability to make expected
distributions could be adversely affected. The Company believes that its
competitors face similar costs to comply with the requirements of the ADA.
Dependence on the Middle Atlantic Area
Approximately 94% of the properties' gross leasable area is located in the
Middle Atlantic area. As a result, the Company will be affected more by any
adverse economic conditions in the Middle Atlantic area than would a real estate
company with properties in a number of different geographic areas.
No Limitation in Organizational Documents on Incurrence of Debt
The Board of Trustees of the Company currently has adopted a policy of
limiting its secured indebtedness to 50% of the estimated value of its
properties, but its Declaration of Trust does not contain any limitation on the
amount or percentage of indebtedness, funded or otherwise, the Company might
incur. Accordingly, the Board of Trustees could alter or eliminate its current
policy on borrowing. If this policy were to change, the Company could become
more highly leveraged, resulting in an increase in debt service that could
adversely affect the Company's funds from operations and ability to make
expected distributions to its shareholders and in an increased risk of default
on its obligations.
Dependence on Key Personnel
The Company is dependent on the efforts of its executive officers,
particularly F. Patrick Hughes, President and Chief Executive Officer of the
Company. The loss of Mr. Hughes' services could have an adverse effect on the
operations of the Company. The Company has key man insurance covering the life
of Mr. Hughes in the amount of $1,000,000.
Adverse Consequences of Failure to Qualify as a REIT
Tax Liabilities of Failure to Qualify as a REIT. The Company is treated as
a REIT for federal income tax purposes under the Internal Revenue Code of 1986,
as amended (the "Code"). No assurance can be given that the Company will
continue to operate in a manner enabling it to remain so qualified.
Qualification as a REIT involves the application of highly technical and complex
Code provisions for which there are only limited judicial or administrative
interpretations and the determinations of various factual matters and
circumstances not entirely within the Company's control. Furthermore, no
assurance can be given that legislation, new regulations, administrative
interpretations or court decisions will not change the tax laws with respect to
qualifications as a REIT or the federal income tax consequences of such
qualifications. The Company is not currently aware of any pending legislation
which would affect its qualification as a REIT.
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If in any taxable year 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 corporate rates. In addition, unless entitled to relief
under certain statutory provisions, the Company will also be disqualified from
treatment as a REIT for the four taxable years following the year during which
qualification is lost. This treatment would reduce the net earnings of the
Company available for investment or distribution to shareholders because of the
additional tax liability to the Company for the year or years involved. In
addition, the Company would no longer be required by the Code to make any
distributions.
Anti-Takeover Effect of Ownership Limitations
In order to maintain its qualifications as a REIT, not more than 50% of the
Company's Shares may be owned, directly or indirectly, by five or fewer
individuals (as defined in the Code to include certain entities). To ensure that
this rule is not violated and to safeguard the Company's qualification as a
REIT, shareholders are subject to the Beneficial Ownership Limitations which
restrict the ownership of more than 9.9% of the outstanding Common Shares,
either in the aggregate or of any class, unless waived by the Trustees. In
addition, the Constructive Ownership Limitations restrict the ownership, under
the applicable attribution rules of the Code (which are different from those
applicable with respect to the Beneficial Ownership Limitations), of more than
9.9% of the outstanding Common Shares either in the aggregate or of any class.
These ownership restrictions have the collateral effect of deterring
non-negotiated acquisitions of, and proxy fights for, the Company by a third
party. Limiting the ownership of the Common Shares may discourage a change of
control of the Company and may also (i) deter tender offers for the Common
Shares, which offers may be attractive to the shareholders, (ii) limit the
opportunity for shareholders to receive a premium for their Common Shares that
might otherwise exist if an investor attempted to assemble a block of Common
Shares in excess of 9.9% of the Common Shares, or (iii) limit the opportunity
for shareholders to effect a change of control of the Company.
Risks Inherent in Development and Acquisition Activities
The Company intends to continue development of its Properties and may
acquire additional properties in the future. While the Company's policies with
respect to development and acquisition activities are intended to limit some of
the risks otherwise associated with those activities, the Company nevertheless
will incur certain risks related to delays in construction and lease-up, costs
of materials, financing availability, volatility in interest rates, labor
availability, failure to achieve anticipated occupancy levels, and the failure
of its properties to perform as expected.
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RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges of
the Company and its predecessor BTR Realty, Inc. (the "Predecessor"), for the
periods indicated. The Predecessor was a publicly-held company and not a REIT.
For purposes of calculating such ratio, "earnings" represent earnings (losses)
from operations adjusted for sales of residential property net of the cost of
residential property sold, plus fixed charges. "Fixed charges" represent
interest expense on all indebtedness (including amortization of deferred debt
issuance costs) and the portion of operating lease rental expense that is
representative of the interest factor (deemed to be one-third of operating lease
rentals). There were no Preferred Shares outstanding during any of the periods
below indicated and therefore the ratio of earnings to combined fixed charges
and Preferred Shares dividend requirements would have been the same as the ratio
of earnings to fixed charges for each period indicated.
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<CAPTION>
Nine Months Ended
September 30, Years Ended December 31,
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1996 1995 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges(1): 1.20 1.16 1.15 1.15 -- -- --
- --------------------------------------
<FN>
(1) Mid-Atlantic Realty Trust, the "Company", is the successor to the
operations of BTR Realty, Inc., the predecessor company. The
computations above use the Consolidated Financial Statements of
Mid-Atlantic Realty Trust for the nine months ended September 30, 1996
and 1995, the years ended December 31, 1995, and 1994 and the period
September 11, 1993 (commencement of operations) through December 31,
1993, and also include the Consolidated Financial Statements of BTR
Realty, Inc. for the periods January 1, 1993 through September 10,
1993, and for the years ended December 31, 1992, and 1991. For the
years ended December 31, 1993, 1992 and 1991, the ratio of earnings to
fixed charges was less than one-to-one coverage. The approximate dollar
amounts necessary to cover the deficiency in those periods are as
follows: 1993 - $2,054,000; 1992 - $2,873,000; and 1991 - $6,637,000.
</FN>
</TABLE>
USE OF PROCEEDS
Unless otherwise described in the applicable Prospectus Supplement, the
Company intends to use the net proceeds from the sale of the Offered Securities
for general corporate purposes which may include acquiring additional properties
as suitable opportunities arise, making improvements to properties, repaying
certain then-outstanding secured or unsecured indebtedness and for working
capital.
DESCRIPTION OF THE DEBT SECURITIES
General
The Debt Securities will be unsecured general obligations of the
Company, subject to the rights of holders of mortgages and other secured
indebtedness of the Company. The Debt Securities may be issued under one or more
indentures, each dated as of a date before the issuance of the Debt Securities
to which it relates and in the form that has been filed as an exhibit to the
Registration Statement of which this Prospectus is a part, subject to such
amendments or supplements as may be adopted from time to time. Each such
indenture (collectively, the "Indenture") will be entered into between the
Company and a trustee (the "Trustee"), which may be the same Trustee. The
Indenture will be subject to, and governed by, the
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Trust Indenture Act of 1939, as amended. The statements made hereunder relating
to the Indenture and the Debt Securities are summaries of the provisions
thereof, do not purport to be complete and are subject to, and are qualified in
their entirety by reference to, all provisions of the Indenture and such Debt
Securities. Capitalized terms used but not defined herein shall have the
respective meanings set forth in the Indenture.
Terms
The particular terms of the Debt Securities offered by a Prospectus
Supplement will be described in the particular Prospectus Supplement, along with
any applicable modifications of or additions to the general terms of the Debt
Securities as described herein and in the applicable Indenture and any
applicable federal income tax considerations. Accordingly, for a description of
the terms of any series of Debt Securities, reference must be made to both the
Prospectus Supplement relating thereto and the description of the Debt
Securities set forth in this Prospectus.
Except as set forth in any Prospectus Supplement, the Debt Securities
may be issued without limits as to aggregate principal amount, in one or more
series, in each case as established from time to time by the Company's Board of
Trustees or as set forth in the applicable Indenture or one or more indentures
supplemental to the Indenture. All Debt Securities of one series need not be
issued at the same time and, unless otherwise provided, a series may be
reopened, without the consent of the holders of the Debt Securities of such
series, for issuance of additional Debt Securities of such series.
Each Indenture will provide that the Company may, but need not,
designate 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. If 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 a 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 following summaries set forth certain general terms and provisions
of the Indenture and the Debt Securities. The Prospectus Supplement relating to
the series of Debt Securities being offered will contain further terms of such
Debt Securities, including the following specific terms:
(1) the title of such Debt Securities;
(2) the aggregate principal amount of such Debt Securities and
any limit on such aggregate principal amount;
(3) if other than the principal amount thereof, the portion of
the principal amount thereof payable upon declaration of acceleration of the
maturity thereof, or (if applicable) the portion of the principal amount of such
Debt Securities which is convertible into Common Shares or Preferred Shares, or
the method by which any such portion shall be determined;
(4) if convertible, any applicable limitations on the ownership
or transferability of the Common Shares or Preferred Shares into which such Debt
Securities are convertible;
(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;
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(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 interest will accrue, the interest payment dates on which
any such interest will be payable, the regular record dates for such interest
payment dates, or the method by which any such date shall be determined, the
person 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, such Debt
Securities may be surrendered for conversion or registration of transfer or
exchange and 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 terms and conditions upon which such Debt Securities may be
redeemed, as a 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, the price or prices at which and the terms and conditions upon which such
Debt Securities will be redeemed, repaid or purchased, as a 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) of 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 the events of default or covenants
set forth in the Indenture;
(14) provisions, if any, for collateral security for repayment of
such Debt Securities;
(15) whether such Debt Securities will be issued in certificated
and/or book-entry form;
(16) 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;
(17) the applicability, if any, of defeasance and covenant
defeasance provisions of the applicable Indenture;
(18) the terms, if any, upon which such Debt Securities may be
convertible into Common Shares or Preferred Shares of the Company and the terms
and conditions upon which such conversion will be effected, including, without
limitation, the initial conversion price or rate and conversion period;
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(19) whether and under what circumstances the Company will pay
additional amounts as contemplated in the Indenture 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
(20) any other terms of such Debt Securities not inconsistent
with the provisions of the applicable Indenture.
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, the Debt Securities
contain provisions which would limit the ability of the Company to incur
indebtedness. These provisions 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 in
control. See "Description of Capital Stock - Restrictions on Ownership and
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.
Book-Entry Debt Securities
The Debt Securities of any series may be issued in whole or in part in
the form of one or more global securities ("Global Securities") that will be
deposited with, or on behalf of, a depositary (the "Global Depositary") or its
nominee identified in the applicable Prospectus Supplement. In such a case, one
or more Global Securities will be issued in a denomination or aggregate
denomination equal to the portion of the aggregate principal amount of
outstanding Debt Securities of the series to be represented by such Global
Security or Securities. Unless and until it is exchanged in whole or in part for
Debt Securities in registered form, a Global Security may not be registered for
transfer or exchange except as a whole by the Global Depositary for such Global
Security to a nominee of such Global Depositary or by a nominee of such Global
Depositary to such Global Depositary or another nominee of such global
Depositary or by such Global Depositary or any nominee to a successor Global
Depositary or a nominee of such successor Global Depositary and except in the
circumstances described in the applicable Prospectus Supplement.
The specific terms of the depositary arrangement with respect to any
portion of a series of Debt Securities to be represented by a Global Security
will be described in the applicable Prospectus Supplement. The Company expects
that the following provisions will apply to depositary arrangements, although no
assurance can be given that such will be the case.
Unless otherwise specified in the applicable Prospectus Supplement,
Debt Securities which are to be represented by a Global Security to be deposited
with or on behalf of a Global Depositary will be represented by a Global
Security registered in the name of such Global Depositary or its nominee. Upon
the issuance of such Global Security, and the deposit of such Global Security
with or on behalf of the Global Depositary for such Global Security, the Global
Depositary will credit, on its book-entry registration and transfer system, the
respective principal amounts of the Debt Securities represented by such Global
Security to the accounts of institutions that have accounts with such Global
Depositary or its nominee ("participants"). The accounts to be credited will be
designated by the underwriters or agents for the sale
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of such Debt Securities or by the Company, if such Debt Securities are offered
and sold directly by the Company. Ownership of beneficial interests in such
Global Security will be limited to participants or persons that may hold
interests through participants. Ownership of beneficial interests by
participants in such Global Security will be shown on, and the transfer of that
ownership interest will be effected only through, records maintained by the
Global Depositary or its nominee for such Global Security. Ownership of
beneficial interests in such Global Security by persons that hold through
participants will be shown on, and the transfer of such ownership interests
within such participant will be effected only through, records maintained by
such participant. The laws of some jurisdictions require that certain purchasers
of securities take physical delivery of such securities in certificated form.
The foregoing limitations and such laws may impair the ability to transfer
beneficial interests in such Global Securities.
So long as the Global Depositary for a Global Security, or its nominee,
is the registered owner of such Global Security, such Global Depositary or such
nominee, as the case may be, will be considered the sole owner or holder of the
Securities represented by such Global Security for all purposes under the
applicable Indenture. Except as set forth below, unless otherwise specified in
the applicable Prospectus Supplement, owners of beneficial interests in such
Global Security will not be entitled to have Debt Securities of the series
represented by such Global Security registered in their names, will not receive
or be entitled to receive physical delivery of Debt Securities of such series in
certificated form and will not be considered the holders thereof for any
purposes under the applicable Indenture. Accordingly, each person owning a
beneficial interest in such Global Security must rely on the procedures of the
Global Depositary and, if such person is not a participant, on the procedures of
the participant through which such person owns it interest, to exercise any
rights of a holder under the applicable Indenture. The Company understands that
under existing industry practices, if the Company requests any action of holders
or an owner of a beneficial interest in such Global Security desires to give any
notice or take any action a holder is entitled to give or take under the
applicable Indenture, the Global Depositary would authorize the participants to
give such notice or take such action, and participants would authorize
beneficial owners owning through such participants to give such notice or take
such action or would otherwise act upon the instructions of beneficial owners
owning through them.
If the Global Depositary for Debt Securities of a series is at any time
unwilling, unable or ineligible to continue as Global Depositary and a successor
Global Depositary is not appointed by the Company within 90 days or an Event of
Default under the applicable Indenture has occurred and is continuing, the
Company will issue Debt Securities of such series in definitive form in exchange
for the Global Security or Securities representing the Debt Securities of such
series. In addition, the Company may at any time and in its sole discretion,
subject to any limitations described in the applicable Prospectus Supplement,
determine not to have any Debt Securities of a series represented by one or more
Global Securities and, in such event, will issue Debt Securities of such series
in definitive form in exchange for the Global Security or Securities
representing such Debt Securities. Further, if the Company so specifies with
respect to the Debt Securities of a series, an owner of a beneficial interest in
a Global Security representing Debt Securities of such series may, on terms
acceptable to the Company and the Global Depositary for such Global Security,
receive Debt Securities of such series in definitive form in exchange for such
beneficial interest, subject to any limitations described in the applicable
Prospectus Supplement relating to such Debt Securities. In any such instance, an
owner of a beneficial interest in a Global Security will be entitled to physical
delivery in definitive form of Debt Securities of the series represented by such
Global Security equal in principal amount to such beneficial interest and to
have such Debt Securities registered in its name (if the Debt Securities of such
series are issuable as registered securities).
Principal of and any premium and interest on a Global Security will be
payable in the manner described in the applicable Prospectus Supplement.
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Conversion Rights
If so indicated in the applicable Prospectus Supplement with respect to
a particular series of Debt Securities, such series will be convertible into
Common Shares or other securities on the terms and conditions set forth therein.
Such terms shall include provisions as to whether conversion is mandatory, at
the option of the holder or at the option of the Company, and may include
provisions pursuant to which the number of Common Shares or other securities of
the Company to be received by the holders of Debt Securities would be calculated
according to the market price of the Common Shares or other securities of the
Company as of a time stated in the Prospectus Supplement. Certain restrictions
on ownership apply to the beneficial ownership and conversion of such
Convertible Debt Securities. See "Description of Capital Stock - Restrictions on
Ownership and Transfer."
If the Debt Securities of a particular series are to be convertible
("Convertible Debt Securities") then, unless otherwise provided in the
applicable Prospectus Supplement, the following general terms will apply with
respect to such series of Convertible Debt Securities: The holders of the
Convertible Debt Securities will be entitled at any time prior to maturity,
subject to prior redemption, to convert the Convertible Debt Securities or
portions thereof (which will be $1,000 or multiples thereof) into Common Shares
at the conversion price set forth in the appropriate accompanying Prospectus
Supplement (subject to adjustments as described below). No payment or adjustment
will be made for accrued interest on converted Convertible Debt Securities. If
any Convertible Debt Securities not called for redemption are converted between
a record date for the payment of interest and the next succeeding interest
payment date, such Convertible Debt Securities must be accompanied by funds
equal to the interest payable to the registered holder on such interest payment
date on the principal amount so converted. The Company will not issue fractional
Common Shares upon conversion of Convertible Debt Securities and, instead will
deliver a check for the fractional Common Share based upon the current market
price of the Common Shares on the last trading day prior to the conversion date.
If the Convertible Debt Securities are called for redemption, conversion rights
will expire at the close of business on the redemption date, unless the Company
defaults in payment due upon such redemption.
The conversion price will be subject to adjustment under certain
conditions including: (i) the payment of dividends (and other distributions) in
Common Shares; (ii) subdivisions, combinations and reclassifications of the
Common Shares, (iii) the issuance to all or substantially all shareholders of
rights or warrants entitling them to subscribe for or purchase Common Shares at
a price per share (or having a conversion price per share) less than the
conversion price or the then current market; and (iv) distributions to all or
substantially all holders of any shares of any class other than the Common
Shares of evidences of indebtedness or assets (including securities, but
excluding rights, warrants, dividends and distributions specified in the
Indenture) of the Company. The foregoing is subject to the limitation that all
adjustments by reason of any of the foregoing would not be made until they
result in a cumulative change in the conversion rate of at least 1%.
Notwithstanding the foregoing, no adjustment will be required if holders of the
Convertible Debt Securities receive notice of and are allowed to participate in
such transactions, and no adjustment will be required for rights to purchase
Common Shares pursuant to a Company plan for reinvestment of dividends or
interest, or for a change in the par value of the Common Shares. To the extent
that Convertible Debt Securities become convertible into cash, no adjustment
will be required thereafter as to cash. In the event the Company shall effect
any capital reorganization or reclassification of its shares or shall
consolidate or merge with or into any other entity (other than a consolidation
or merger in which the Company is the surviving entity) or shall sell or
transfer substantially all its assets to any other entity, the registered owners
of the Convertible Debt Securities shall, if entitled to convert such
Convertible Debt Securities at any time after such transaction, receive upon
conversion thereof, in lieu of each Common Share into which the Convertible Debt
Securities would have been convertible prior to such transaction, the same
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kind and amount of securities, cash or property as shall have been issuable or
distributable had the Convertible Debt Securities been converted immediately
prior to such transaction.
A conversion price adjustment made pursuant to the provisions of the
Convertible Debt Securities might result in a constructive distribution to the
holders of Common Shares that would be subject to taxation as a dividend. The
Company may, at its option, make such reductions in the conversion price, in
addition to those set forth above, as the Board of Trustees deems advisable to
avoid or diminish any income tax to holders of Common Shares resulting from any
dividend or distribution of Common Shares (or rights to acquire Common Shares)
or from any event treated as such for income tax purposes. The Board of Trustees
also has the authority to resolve any ambiguity or correct any error relating to
adjustment of the conversion price of the Convertible Debt Securities, and its
actions in so doing shall be final and conclusive.
Fractional Common Shares will not be issued upon conversion; the
Company will pay cash in lieu of fractional Common Shares based upon the then
current market price of the Common Shares.
The holders of Convertible Debt Securities at the close of business on
an interest payment record date shall be entitled to receive the interest
payable on such Convertible Debt Securities on the corresponding interest
payment date notwithstanding the conversion thereof. However, Convertible Debt
Securities surrendered for conversion during the period from the close of
business on any record date to the opening of business on the corresponding
interest payment date must be accompanied by payment of an amount equal to the
interest payable on such interest payment date. Holders of Convertible Debt
Securities who convert Convertible Debt Securities on an interest payment date
will receive the interest payable by the Company on such date and need not
include payment in the amount of such interest upon surrender of Convertible
Debt Securities for conversion. Except as aforesaid, no payment or adjustment is
to be made on conversion for interest accrued on the Convertible Debt Securities
or for dividends on the Common Shares.
Notwithstanding the foregoing, a Convertible Debt Securities Holder may
not convert any Convertible Debt Securities into Common Shares if as a result of
such conversion the Convertible Debt Securities Holder or any other person
having an interest in his Convertible Debt Securities would or, in the
determination of the Board of Trustees, might then be deemed to own Excess
Shares. See "Description of Capital Stock - General - Excess Shares."
Subordination of Convertible Debt Securities
The indebtedness evidenced by the Debt Securities will be subordinated
and junior in right of payment to the extent set forth in the Indenture to the
prior payment in full of all amounts then due on all Senior Indebtedness (as
defined in the Indenture). No payment shall be made by the Company on account of
principal of (or premium, if any) or interest on the Debt Securities or on
account of the purchase or other acquisition of Debt Securities, if there shall
have occurred and be continuing a default with respect to any Senior
Indebtedness permitting the holders to accelerate the maturity thereof, or with
respect to the payment of any Senior Indebtedness and such default shall be the
subject of a judicial proceeding or the Company shall have received notice of
such default from any holder of Senior Indebtedness, unless and until such
default or event of default shall have been cured or waived or shall have ceased
to exist. By reason of these provisions, in the event of default on any Senior
Indebtedness, whether now outstanding or hereafter issued, payments of principal
of (and premium, if any) and interest on the Debt Securities may not be
permitted to be made until such Senior Indebtedness is paid in full, or the
event of default on such Senior Indebtedness is cured or waived.
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Upon any acceleration of the principal of the Debt Securities or any
distribution of assets of the Company upon any receivership, dissolution,
winding-up, liquidation, reorganization, or similar proceedings of the Company,
whether voluntary or involuntary, or in bankruptcy or insolvency, all amounts
due or to become due upon all Senior Indebtedness must be paid in full before
the holders of the Debt Securities or the Trustee are entitled to receive or
retain any assets so distributed in respect of the Debt Securities. By reason of
this provision, in the event of insolvency, holders of the Debt Securities may
recover less, ratably, than holders of Senior Indebtedness.
"Senior Indebtedness" will be defined to mean the principal, premium,
if any, unpaid interest (including interest accruing on or after the filing of
any petition in bankruptcy or for reorganization relating to the Company whether
or not a claim for post-filing interest is allowed in such proceeding), fees,
charges, expenses, reimbursement and indemnification obligations, and all other
amounts payable under or in respect of secured Indebtedness (as defined) or
Indebtedness for money borrowed, whether any such Indebtedness exists as of the
date of the Indenture or is created, incurred, assumed or guaranteed after such
date. There is no limit on the amount of Senior Indebtedness that the Company
may incur.
"Indebtedness" with respect to any Person will be defined to mean:
(i) any debt (a) for money borrowed or (b) evidenced by a bond,
note, debenture, or similar instrument (including purchase money
obligations) given in connection with the acquisition of any business,
property or assets, whether by purchase, merger, consolidation or
otherwise, but shall not include any account payable or other
obligation created or assumed by a Person in the ordinary course of
business in connection with the obtaining of materials or services, or
(c) which is a direct or indirect obligation which arises as a result
of banker's acceptances or bank letters of credit issued to secure
obligations of such Person, or to secure the payment of revenue bonds
issued for the benefit of such Person, whether contingent or otherwise;
(ii) any debt of others described in the preceding clause (i)
which such Person has guaranteed or for which it is otherwise liable;
(iii) the obligation of such Person as lessee under any lease of
property which is reflected on such Person's balance sheet as a
capitalized lease; and
(iv) any deferral, amendment, renewal, extension, supplement or
refunding of any liability of the kind described in any of the
preceding clauses (i), (ii) and (iii),
provided, however, that, in computing the "Indebtedness" of any Person, there
shall be excluded any particular indebtedness if, upon or prior to the maturity
thereof, there shall have been deposited with a depository in trust money (or
evidences of indebtedness if permitted by the instrument creating such
indebtedness) in the necessary amount to pay, redeem or satisfy such
indebtedness as it becomes due, and the amount so deposited shall not be
included in any computation of the assets of such Person.
Optional Redemption
Unless otherwise provided in the applicable Prospectus Supplement, the
Debt Securities will be subject to redemption, as a whole or in part, at any
time and from time to time, at the option of the Company upon at least 30 days'
prior notice by mail at a redemption price equal to 100% of the principal amount
thereof, plus interest accrued to the date of redemption. The Debt Securities
will not be redeemable prior to the date, if any, specified in the applicable
Prospectus Supplement; provided, however, the Debt Securities will be subject to
redemption, in whole or in part, at any time at the option of the Company, if
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in the opinion of the Company, such redemption is reasonably prudent to protect
the Company's status as a REIT, at a redemption price equal to 100% of the
principal amount, plus interest accrued to the date of redemption. The Company
may exercise this redemption power solely with respect to the securities of the
security holder or holders which pose a threat to the Company's REIT status to
the extent deemed necessary by the Company's Board of Trustees to preserve such
status. The Company may at any time buy Debt Securities on the open market at
prices which may be greater or less than the optional redemption price listed
above.
Dividends, Distributions and Acquisitions of Capital Shares
Other than as the Company determines is required to maintain its status
as a REIT, the Company may not (i) declare or pay any dividend, or make any
distribution on its Common Shares to its shareholders (other than dividends) or
(ii) purchase, redeem or otherwise acquire or retire for value any of its Common
Shares or any warrants, rights or options to purchase or acquire any Common
Shares (other than the Debt Securities or any other convertible indebtedness of
the Company that is neither secured nor subordinated to the Debt Securities), if
at the time of such action an Event of Default has occurred and is continuing or
would exist immediately after such action.
Modification of the Indenture
The Company and the Indenture Trustee may amend the Indenture or the
Debt Securities with the written consent of the holders of at least 662/3% in
principal amount of the outstanding Debt Securities. However, without the
consent of each Debt Securities Holder affected, an amendment may not: (i)
reduce the amount of Debt Securities whose holders must consent to an amendment;
(ii) reduce the rate or extend the time for payment of interest on any Debt
Securities; (iii) reduce the principal or redemption price of or extend the
fixed maturity of any Debt Securities; (iv) waive a default in the payment of
the principal of (and premium, if any, on), interest on or redemption amounts
with respect to any Debt Securities; (v) make any Debt Securities payable in
money other than that stated in the Debt Securities; (vi) change the provisions
of the Indenture regarding the right of a majority of Debt Securities Holders to
waive defaults under the Indenture, impair the right of any Debt Securities
Holder to institute suit for the enforcement of any payment of principal of and
interest on the Debt Securities on and after their respective due dates, or
modify any provisions of the Indenture relating to the modification, supplement
and amendment of the Indenture or waivers of past defaults, except as otherwise
specified; (vii) make any change that adversely affects the right to convert any
Debt Security; or (viii) make any change regarding the subordination of the Debt
Securities.
No consent of Debt Securities Holders will be required for the Company
to consolidate with or merge into or transfer or lease substantially all of its
assets to another corporation or trust which assumes the obligations of the
Company under the Indenture and Debt Securities or for any reorganization within
the meaning of Section 368(a) of the Code; nor shall any such consent of Debt
Securities Holders be required for any amendment of the Indenture or the Debt
Securities by the Company and the Indenture Trustee to cure any ambiguity,
defect or inconsistency, or to provide for uncertificated Debt Securities in
addition to certificated Debt Securities, or to make any change that does not
adversely affect the right of any Debt Securities Holder.
Events of Default, Notice and Waiver
The Indenture will provide that the following events will constitute
"Events of Default": (i) default in the payment of interest on the Debt
Securities when due and payable, which default continues for 30 days; (ii)
default in the payment of principal (and premium, if any) when due, at maturity,
upon redemption
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or otherwise which default continues for fifteen business days; (iii) failure to
perform any other covenant of the Company contained in the Indenture or the Debt
Securities which continues for 60 days after written notice as provided in the
Indenture; and (iv) certain events of bankruptcy, insolvency or reorganization
relating to the Company. If an Event of Default shall occur and be continuing,
the Indenture Trustee or the holders of a majority in aggregate principal amount
of the outstanding Debt Securities may declare the Debt Securities due and
payable.
The Indenture will provide that the Indenture Trustee may require
indemnity satisfactory to it before it enforces the Indenture. Subject to
certain limitations, holders of a majority in principal amount of the Debt
Securities may direct the Indenture Trustee in its exercise of any trust or
power. The Indenture will provide that the Indenture Trustee shall, within 90
days after it receives notice of an Event of Default, give to the holders of
Debt Securities notice of all uncured defaults known to it, but the Indenture
Trustee shall be protected in withholding such notice if it in good faith
determines that the withholding of such notice is in the interest of such
holders, except in the case of a default in the payment of the principal of (or
premium, if any) or interest on any of the Debt Securities.
The Indenture will provide that the holders of a majority in principal
amount of the outstanding Debt Securities may direct the time, method and place
of conducting any proceedings for any remedy available to the Indenture Trustee
or exercising any trust or power conferred on the Trustee. The right of a holder
to institute a proceeding with respect to the Indenture will be subject to
certain conditions precedent including notice and indemnity to the Trustee, but
the holder has an absolute right to receipt of principal of (and premium, if
any) and interest on such holder's Debt Securities on or after the respective
due dates expressed in the Debt Securities, and to institute suit for the
enforcement of any such payments.
The holders of a majority in principal amount of the outstanding Debt
Securities may, on behalf of the holders of all Debt Securities, waive certain
past defaults except a default in payment of the principal of (or premium, if
any) or interest on any Debt Securities or in respect of certain provisions of
the Indenture which cannot be modified or amended without the consent of the
holder of each outstanding Debenture affected thereby.
Consolidation, Merger, Sale or Conveyance
The Company may merge or consolidate with, or sell, transfer or lease
all or substantially all of its assets to any other entity, provided that (i)
either the Company shall be the continuing entity, or the successor entity (if
other than the Company) shall be a corporation or trust organized and existing
under the laws of the United States or a state or territory thereof (although it
may, in turn, be owned by a foreign entity) and such entity shall expressly
assume by supplemental indenture all the obligations of the Company under the
Debt Securities and the Indenture; (ii) immediately after giving effect to such
transaction no Event of Default shall have occurred and be continuing; and (iii)
the Company shall have delivered to the Indenture Trustee an officer's
certificate and opinion of counsel, stating that the transaction and
supplemental indenture comply with the Indenture.
DESCRIPTION OF CAPITAL STOCK
The summary of the terms of the Capital Stock set forth below does not
purport to be complete and is subject to, and qualified in its entirety by,
reference to the Company's Declaration of Trust and the Company's Bylaws.
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General
The Company's Declaration of Trust authorizes it to issue up to
102,000,000 Shares, consisting of 100,000,000 of Common Shares and 2,000,000 of
Preferred Shares, and such other types or classes of shares of beneficial
interest as the Trustees may create and authorize from time to time. No
Preferred Shares are outstanding and the Company has no present plans to issue
any Preferred Shares.
The Declaration of Trust also provides that, subject to the provisions
of any class or series of the Common Shares other than Common Shares then
outstanding, the shareholders of the Company shall be entitled to vote only on
the following matters: (a) election or removal of Trustees; (b) amendment of the
Declaration of Trust; (c) termination of the Company; and (d) merger,
consolidation or share exchange of the Company or the sale or disposition of all
or substantially all of the Company's assets. Except for the election or removal
of Trustees, which requires the approval of holders of a majority of the Common
Shares present at a meeting at which a quorum is present, each of the other
matters requires the affirmative approval of holders of two-thirds of the Common
Shares issued and outstanding and entitled to vote upon the matter. Except with
respect to the foregoing matters, no action taken by the shareholders at any
meeting shall in any way bind the Trustees.
Both Maryland statutory law governing REITs and the Declaration of
Trust provide that no shareholder will be personally liable for any obligation
of the Company. Pursuant to the Declaration of Trust, 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.
The transfer agent and registrar for the Common Shares is the
Continental Stock Transfer and Trust Company, located in New York, New York.
Common Shares. Each outstanding Common Share entitles the holder to one
vote on all matters submitted to a vote of shareholders, including the election
of Trustees. There is no cumulative voting in the election of Trustees, which
means that the holders of a majority of the outstanding Shares can elect all of
the Trustees then standing for election. Holders of Common Shares are entitled
to such distributions as may be declared from time to time by the Trustees out
of funds legally available therefor.
Holders of Common Shares have no conversion, redemption or preemptive
rights to subscribe for any securities of the Company. All outstanding Common
Shares will be fully paid and nonassessable. In the event of any liquidation,
dissolution or winding-up of the affairs of the Company, holders of Common
Shares will be entitled to share ratably in the assets of the Company remaining
after provision for payment of liabilities to creditors and preferential rights
of the Preferred Shares, if any.
Common Shares shall have equal dividend, distribution, liquidation and
other rights, and shall have no preference, preemptive, appraisal, conversion or
exchange rights.
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Preferred Shares. The Preferred Shares authorized by the Company's
Declaration of Trust may be issued from time to time in one or more series in
such amounts and with such preferences, conversion or other rights, voting
powers, restrictions, limitations as to dividends, qualifications and terms or
conditions of redemption as may be fixed by the Trustees. Under certain
circumstances, the issuance of Preferred Shares could have the effect of
delaying, deferring or preventing a change of control of the Company and may
adversely affect the voting and other rights of the holders of the Common
Shares. No Preferred Shares are outstanding and the Company has no present plans
to issue any Preferred Shares.
Classification or Reclassification of Common Shares or Preferred
Shares. The Declaration of Trust authorizes the Trustees to classify or
reclassify any unissued Shares, including Common Shares or Preferred Shares, by
setting or changing the designations, preferences, conversion or other rights,
voting powers, restrictions, limitations as to distributions, qualifications or
terms or conditions of redemption of any such Shares.
Excess Shares. The Declaration of Trust provides that no holder may
own, or be deemed to own under the applicable attribution rules of the Code,
Common Shares in excess of the Beneficial Ownership Limitations or the
Constructive Ownership Limitations (the "Ownership Limit"), and that no
purported transfer of Common Shares may be given effect if it results in
ownership of all of the outstanding Common Shares by fewer than 100 persons or
results in the Company being "closely held" within the meaning of Section 856(h)
of the Code (a "Prohibited Transfer"). In the event of a purported transfer or
other event that would, if effective, result in Common Share ownership in
violation of the Ownership Limit, the number of Common Shares in excess of the
Ownership Limit would automatically be converted into "Excess Shares." Excess
Shares are Common Shares automatically transferred to a special trust to be
maintained by the Company in respect of each such transfer to the extent
necessary to ensure that the purported transfer or other event does not result
in Common Shares ownership in violation of the Ownership Limit.
A purported transferee of Common Shares converted into Excess Shares is
not entitled to voting rights, except to the extent required by law, or to any
dividends, distributions or other rights as a shareholder. If, after the
purported transfer or other event resulting in a conversion of Common Shares
into Excess Shares and prior to the discovery thereof by the Company, dividends
or distributions are paid with respect to such Common Shares, then such
dividends or distributions are to be repaid to the Company upon demand. Excess
Shares will be held in trust by the Company for the benefit of the ultimate
transferee of an interest in such trust. While Excess Shares are held in trust,
an interest in that trust may be transferred by the purported transferee or
other purported holder with respect to such Excess Shares only to a person whose
ownership of the Common Shares will not violate the Ownership Limit and to whom
such transfer will not constitute a Prohibited Transfer, at which time the
Excess Shares will be automatically converted into Common Shares of the same
type and class as the Common Shares for which the Excess Shares were originally
converted. The Declaration of Trust contains provisions that are designed to
ensure that the purported transferee or other purported holder of the Excess
Shares may not receive in return for such a transfer an amount that reflects any
appreciation in the Common Shares for which such Excess Shares were converted
during the period that such Excess Shares were outstanding. Any amount received
by a purported transferee or other purported holder in excess of the amount
permitted to be received must be turned over to the Company.
Restrictions on Ownership and Transfer
For the Company to qualify as a REIT under the Code, not more than 50%
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; the Common Shares must be beneficially owned by
100 or more persons during at least 335 days of a taxable year of 12 months or
during a
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proportionate part of a shorter taxable year; and certain percentages of the
Company's gross income must be from particular activities (see "Federal Income
Tax Considerations - Federal Income Taxation of the Company"). Because the
Trustees believe it is essential for the Company to continue to qualify as a
REIT, the Declaration of Trust contains provisions that restrict the ownership
and transfer of Common Shares. The Declaration of Trust contains a number of
provisions which restrict the ownership and transfer of Common Shares and which
are designed to safeguard the Company against an inadvertent loss of REIT
status. In order to prevent any shareholder from owning Common Shares in an
amount which would cause more than 50% in number or value of the outstanding
Common Shares of the Trust to be held by five or fewer individuals after the
offering, the Declaration of Trust contains Beneficial Ownership Limitations
that, with certain exceptions, restrict shareholders from owning, under the
applicable attribution rules of the Code, more than 9.9% of the outstanding
Common Shares, in number or value, either in the aggregate or of any class.
Shareholders who own, under the attribution rules of the Code that
apply for purposes of the Beneficial Ownership Limitations, more than 9.9% of
the outstanding Common Shares, in number or value, either in the aggregate or of
any class shall be required to provide the Company with information concerning
their ownership of Common Shares. In the event that such a shareholder does not
provide the Company with such information and, as a result, five or fewer
persons would, but for the exchange described below, own, under the attribution
rules of the Code that apply for purposes of the Beneficial Ownership
Limitations, more than 49.9% of the Common Shares, then, to the extent necessary
to prevent such ownership from exceeding 49.9%, Common Shares owned by such
shareholder in excess of 9.9% under the applicable attribution rules will be
automatically converted into Excess Shares on the day prior to the date that
such ownership would otherwise have risen above 49.9%, with the result that such
shareholder will not be entitled to the benefits associated with the ownership
of the Common Shares exchanged for any period following the automatic exchange.
See "Description of Capital Stock - General -
Excess Shares" above.
Shareholders should be aware that events other than a purchase or other
transfer of Common Shares can result in ownership, under the applicable
attribution rules of the Code, of Common Shares in excess of the Beneficial
Ownership Limitations. For instance, if two shareholders, each of whom own,
under the applicable attribution rules of the Code, 5% of the outstanding Common
Shares, were to marry, then after their marriage both shareholders would own,
under the applicable attribution rules of the Code, 10% of the outstanding
Common Shares, which is in excess of the Beneficial Ownership Limitation for
Common Shares. Similarly, if a shareholder who owns 9% of the Common Shares also
owns 50% of a corporation which owns 8% of the Common Shares, then the
shareholder would own, under the applicable attribution rules of the Code, 13%
of the outstanding Common Shares (one-half of the 8% owned by the corporation,
plus the 9% owned by the shareholder). Shareholders should consult their own tax
advisers concerning the application of the attribution rules of the Code in
their particular circumstances.
Under the Code, rental income received by a REIT from persons in which
the REIT is treated, under the applicable attribution rules of the Code, as
owning a 10% or greater interest does not constitute qualifying income for
purposes of the income requirements that REITs must satisfy. See "Federal Income
Tax Considerations - Federal Income Taxation of the Company - Income Tests." For
these purposes, a REIT is treated as owning any stock owned, under the
applicable attribution rules of the Code, by a person that owns 10% or more of
the value of the outstanding shares of the REIT. Therefore, in order to ensure
that rental income of the Company will not be treated as nonqualifying income
under the rule described above, and thus to ensure that there will not be an
inadvertent loss of REIT status as a result of the ownership of Common Shares by
a tenant, or a person that holds an interest in a tenant, the Declaration of
Trust also contains Constructive Ownership Limitations that restrict, with
certain exceptions, shareholders from owning, under the applicable attribution
rules of the Code (which are different from those applicable
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with respect to the Beneficial Ownership Limitations), more than 9.9% of the
outstanding Common Shares, in number or value, either in the aggregate or of any
class. Subject to certain exceptions, the Declaration of Trust also contains
restrictions that are designed to ensure that the shareholders who own, under
the applicable attribution rules of the Code, Common Shares in excess of the
Constructive Ownership Limitations will not, in the aggregate, own an interest
in a tenant or subtenant of the REIT of sufficient magnitude to cause rental
income received, directly or indirectly, by the REIT from such tenant or
subtenant to be treated as nonqualifying income for purposes of the income
requirements that REITs must satisfy.
Shareholders should be aware that events other than a purchase or other
transfer of Common Shares can result in ownership, under the applicable
attribution rules of the Code, of Common Shares in excess of the Constructive
Ownership Limitation. As the attribution rules that apply with respect to the
Constructive Ownership Limitations differ from those that apply with respect to
the Beneficial Ownership Limitations, the events other than a purchase or other
transfer of Common Shares which can result in Common Share ownership in excess
of the Constructive Ownership Limitations can differ from those which can result
in Common Share ownership in excess of the Beneficial Ownership Limitations.
Shareholders should consult their own tax advisers concerning the application of
the attribution rules of the Code in their particular circumstances.
For purposes of calculating the Common Shares owned by a shareholder to
determine the applicability of the Beneficial Ownership Limitations and the
Constructive Ownership Limitations, the beneficial ownership rules contained in
Regulation 13D promulgated under the Securities Exchange Act of 1934, as
amended, will be applied. Accordingly, all rights to acquire Common Shares and
all securities convertible into Common Shares will be deemed to have been
exercised or converted, as the case may be.
The Trustees may waive the Beneficial Ownership Limitations or the
Constructive Ownership Limitations, including the limitations applicable to
holders who own in excess of 9.9% either in the aggregate or of the Common
Shares of any class, if evidence satisfactory to the Trustees and the Company's
tax counsel is presented showing that such waiver will not jeopardize the
Company's status as a REIT under the Code and will not otherwise adversely
affect the Company. As a condition of such waiver, an intended transferee must
give written notice to the Company and must furnish such opinions of counsel,
affidavits, undertakings, agreements and information as may be required by the
Trustees. If, in the opinion of management, the requested waiver raises
significant issues which could adversely affect the status of the Company as a
REIT for federal income tax purposes, then the Trustees will require an opinion
of counsel with respect to such issues prior to granting the waiver. The
foregoing restrictions on transferability and ownership will not apply if the
Trustees determine that it is no longer in the best interests of the Company to
attempt to qualify, or to continue to qualify, as a REIT. Any transfer of Common
Shares or any security convertible into Common Shares that would (i) create a
direct or indirect ownership of Common Shares in excess of the Beneficial
Ownership Limitations or the Constructive Ownership Limitations, (ii) result in
the Common Shares being owned by fewer than 100 persons or (iii) result in the
Company being "closely held" within the meaning of Section 856(h) of the Code,
shall be null and void, and the intended transferee will acquire no rights to
the Common Shares.
The Declaration of Trust provides that the Company, by notice to the
holder thereof, may purchase any or all Excess Shares resulting from any
transfer or other event. The price at which the Company may purchase such Excess
Shares shall be equal to the lesser of (i) in the case of Excess Shares
resulting from a purported transfer for value, the price per share in the
purported transfer that caused the automatic exchange for such Excess Shares or,
in the case of Excess Shares resulting from some other event, the market price
of such Common Shares on the date of the automatic conversion into Excess
Shares, or (ii) the market price of such Common Shares on the date the Company
accepts the offer to purchase such Excess Shares. Any dividend or distribution
paid to a proposed transferee on Excess Shares prior to the discovery
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by the Company that such Common Shares have been transferred in violation of the
provisions of the Company's Declaration of Trust shall be repaid to the Company
upon demand. If the foregoing transfer restrictions are determined to be void or
invalid by virtue of any legal decision, statute, rule or regulation, then the
intended transferee or holder of any Excess Shares may be deemed, at the option
of the Company, to have acted as an agent on behalf of the Company in acquiring
such Excess Shares and to hold such Excess Shares on behalf of the Company.
All persons who own, directly or by virtue of the attribution
provisions of the Code, more than 9.9% in number or value either in the
aggregate or of any class of the outstanding Common Shares must give a written
notice to the Company containing the information specified in the Declaration of
Trust by January 30 of each year. In addition, each shareholder shall upon
demand be required to disclose to the Company in writing such information with
respect to the direct, indirect and constructive ownership of beneficial
interests as the Trustees deem necessary to comply with the provisions of the
Code applicable to a REIT, to comply with the requirements of any taxing
authority or governmental agency or to determine any such compliance.
To maintain its qualification as a REIT for federal income tax
purposes, the outstanding shares of a REIT may not be held by fewer than 100
persons. In addition, the REIT must not be "closely held" within the meaning of
Section 856(h) of the Code. In order to ensure compliance with these conditions,
the Declaration of Trust provides that any purported Prohibited Transfer which
would result in the Common Shares being held by less than 100 persons, or would
result in the Company being "closely held", will be void and have no force or
effect. Consequently, the transferor will retain all rights to such Common
Shares notwithstanding any purported assignment or transfer on the books of the
Company. As a result, the original transferor will be entitled to receive from
any purported transferee dividends and distributions paid by the Company in
respect of such Common Shares.
The Ownership Restrictions may have the effect of precluding
acquisition of control of the Company unless the Trustees determine that
maintenance of REIT status is no longer in the best interests of the Company.
CERTAIN PROVISIONS OF MARYLAND LAW AND OF
THE COMPANY'S DECLARATION OF TRUST AND BYLAWS
The following discussion summarizes certain provisions of Maryland law
and the Company's Declaration of Trust and Bylaws. This summary does not purport
to be complete and reference is made to Maryland law and the Company's
Declaration of Trust and Bylaws for complete information.
Board of Trustees
The Company's Declaration of Trust provides that the number of trustees
of the Company cannot be less than three nor more than 15. The Declaration of
Trust and Bylaws provide that an annual meeting of shareholders be held to elect
the Trustees who will serve for the ensuing year and until their successors are
duly elected and qualify. Any vacancy (including a vacancy created by an
increase in the number of trustees) will be filled, at any regular meeting or at
any special meeting called for that purpose, by a majority of the Trustees. The
Trustees will each serve for a term of one year (except that an individual who
has been elected to fill a vacancy will hold office only for the unexpired term
of the trustee he is replacing); provided, however, under the terms of the
Company's Declaration of Trust, the Trustees may, at any time and from time to
time, provide that in any subsequent election the Board of Trustees shall be
divided into
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classes, so long as the term of office of a Trustee shall be not more than three
years and the term of office of at least one class shall expire each year.
Business Combinations
Under the Maryland General Corporations Law ("MGCL"), certain "business
combinations" (including a merger, consolidation, share exchange, or, in certain
circumstances, an asset transfer or issuance or reclassification of equity
securities) between a Maryland corporation and any person who beneficially owns
10% or more of the voting power of its stock (an "Interested Shareholder") must
be (a) recommended by the directors of such corporation and (b) approved by the
affirmative vote of at least (i) 80% of the votes entitled to be cast by holders
of outstanding shares of voting stock of the corporation and (ii) two-thirds of
the votes entitled to be cast by holders of outstanding shares of voting stock
other than stock held by the Interested Shareholder with whom the business
combination is to be effected, unless, among other things, the corporation's
common shareholders receive a minimum price (as defined in the statute) for
their shares and the consideration is received in cash or in the same form as
previously paid by the Interested Shareholder for his shares. In addition, an
Interested Shareholder or any affiliate thereof may not engage in a "business
combination" with the corporation for a period of five years following the date
he becomes an Interested Shareholder. These provisions of Maryland law do not
apply, however, to business combinations that are approved or exempted by the
board of directors of the corporation prior to the time that the Interested
Shareholder becomes an Interested Shareholder. The foregoing provisions of the
Maryland General Corporations Law apply to Maryland REITs.
Amendment to the Declaration of Trust
The Trustees, by a two-thirds vote, may amend the provisions of the
Company's Declaration of Trust from time to time to qualify the Company as a
REIT. Except as set forth in the preceding sentence, the Company's Declaration
of Trust, other than provisions therein relating to (i) removal of Trustees,
(ii) restrictions on transfers, and (iii) certain reorganization transactions of
the Company, may be amended only by the affirmative vote or written consent of
the holders of not less than a majority of the Common Shares then outstanding
and entitled to vote thereon. The provisions described in clauses (i) through
(iii) in the preceding sentence may be amended only by the affirmative vote or
written consent of the holders of not less than two-thirds of the Common Shares
then outstanding.
Dissolution of the Company and Termination of REIT Status
The Company's Declaration of Trust permits the termination of the
Company and the discontinuance of the operations of the Company by (i) the
affirmative vote of the holders of not less than a majority of the outstanding
Common Shares at a meeting of shareholders called for that purpose or (ii) the
Trustees, without any vote, action or consent by the shareholders, if they
determine that such action is in the best interests of the Company and its
shareholders. In addition, the Company's Declaration of Trust permits the
Trustees to terminate the status of the Company as a REIT at any time.
Control Share Acquisitions
The MGCL provides that "control shares" of a Maryland corporation
acquired in a "control share acquisition" have no voting rights except to the
extent approved by a vote of two-thirds of the votes entitled to be cast on the
matter, excluding shares of stock owned by the acquiror, by officers or by
directors who are employees of the corporation. "Control shares" are voting
shares of stock which, if aggregated with all other such shares of stock
previously acquired by such person, or in respect of which such person is able
to exercise or direct the exercise of voting power, would entitle the acquiror
to exercise voting power in
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electing directors within one of the following ranges of voting power: (i)
one-fifth or more but less than one-third, (ii) one-third or more but less than
a majority, or (iii) a majority. Control shares do not include shares the
acquiring person is then entitled to vote as a result of having previously
obtained stockholder approval. A "control share acquisition" means the
acquisition of control shares, subject to certain exceptions.
A person who has made or proposes to make a control share acquisition,
upon satisfaction of certain conditions (including an undertaking to pay
expenses), may compel a board of directors to call a special meeting of
stockholders to be held within 50 days of demand to consider the voting rights
of the shares. If no request for a meeting is made, the corporation may itself
present the question at any stockholders meeting.
Unless the Declaration of Trust or Bylaws provide otherwise, if voting
rights are not approved at the meeting or if the acquiring person does not
deliver an acquiring person statement within 10 days following a control share
acquisition, then, subject to certain conditions and limitations, the Company
may redeem any or all of the control shares (except those for which voting
rights have previously been approved) for fair value determined, without regard
to the absence of voting rights for control shares, as of the date of the last
control share acquisition or of any meeting of stockholders at which the voting
rights of such shares are considered and not approved. Moreover, unless the
Declaration of Trust or Bylaws provide otherwise, if voting rights for control
shares are approved at a stockholders' meeting and the acquiror becomes entitled
to vote a majority of the shares entitled to vote, all other stockholders may
exercise appraisal rights. The fair value of the shares as determined for
purposes of such appraisal rights may not be less than the highest price per
share paid by the acquiring person in the control share acquisition, and certain
limitations and restrictions otherwise applicable to the exercise of dissenters'
rights do not apply in the context of a control share acquisition.
FEDERAL INCOME TAX CONSIDERATIONS
The Company believes that it has qualified and intends to remain
qualified to be taxed as a REIT for federal income tax purposes under Sections
856 through 860 of the Code, commencing with the Company's taxable year ended
December 31, 1993. The following discussion addresses the material tax
considerations relevant to the taxation of the Company and summarizes certain
federal income tax consequences that may be relevant to certain shareholders.
However, the actual tax consequences of holding particular securities being
issued by the Company may vary in light of a prospective securities holder's
particular facts and circumstances. Certain holders, such as tax-exempt
entities, insurance companies and financial institutions, are generally subject
to special rules. In addition, the following discussion does not discuss issues
under any foreign, state or local tax laws. The tax treatment of a holder of any
of the securities offered by Prospectus Supplements will vary depending upon the
terms of the specific securities acquired by such holder, as well as his
particular situation, and this discussion does not attempt to address aspects of
federal income taxation relating to holders of particular securities. Certain
federal income tax considerations relevant to holders of the particular
securities will be provided in the applicable Prospectus Supplement relating
thereto. Gordon, Feinblatt, Rothman, Hoffberger & Hollander, LLC has acted as
tax counsel to the Company in connection with the filing of this Prospectus.
This summary is qualified in its entirety by the applicable Code provisions,
rules and regulations promulgated thereunder, and administrative and judicial
interpretations thereof. No rulings have been obtained or are expected to be
obtained from the IRS concerning any of the matters discussed herein. It should
be noted that the Code, rules, regulations, and administrative and judicial
interpretations are all subject to change (possibly on a retroactive basis).
EACH INVESTOR IS ADVISED TO CONSULT THE APPLICABLE PROSPECTUS
SUPPLEMENT, AS WELL AS WITH HIS OWN TAX ADVISOR, REGARDING THE TAX
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CONSEQUENCES TO HIM OF THE ACQUISITION, OWNERSHIP AND SALE OF THE OFFERED
SECURITIES, INCLUDING THE FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX
CONSEQUENCES OF SUCH ACQUISITION, OWNERSHIP AND SALE AND OF POTENTIAL CHANGES IN
APPLICABLE TAX LAWS.
It is the opinion of Gordon, Feinblatt, Rothman, Hoffberger &
Hollander, LLC that the Company is organized and is operating in conformity with
the requirements for qualification and taxation as a REIT commencing with the
Company's taxable year ended December 31, 1993, and its method of operation will
enable it to continue to meet the requirements for qualification and taxation as
a REIT under the Code. It must be emphasized that this opinion is based on
various assumptions and is conditioned upon certain representations made by the
Company as to factual matters including, but not limited to, those set forth
below in this discussion of "Federal Income Tax Considerations" and those
concerning its business and properties as set forth in this Prospectus and in
any Prospectus Supplement. Moreover, such qualification and taxation as a REIT
depends upon the Company's ability to meet, through actual annual (and with
respect to certain tests quarterly) operating results, the various income,
asset, distribution, stock ownership and other tests discussed below, the
results of which will not be reviewed by Gordon, Feinblatt, Rothman, Hoffberger
& Hollander, LLC. Accordingly, no assurance can be given that the actual results
of the Company's operations for any one taxable year (or quarter) will satisfy
such requirements.
If the Company initially failed to elect or qualify for taxation as a
REIT or ceases to qualify as a REIT, and the relief provisions do not apply, the
Company's income that is distributed to shareholders would be subject to the
"double taxation" on earnings (once at the corporate level and again at the
shareholder level) that generally results from investment in a corporation.
Failure to qualify and to maintain qualification as a REIT would force the
Company to reduce significantly its distributions and possibly incur substantial
indebtedness or liquidate substantial investments in order to pay the resulting
corporate taxes. In addition, the Company, once having obtained REIT status and
having lost such status, would not be eligible to elect REIT status for the four
subsequent taxable years, unless its failure to maintain its qualification was
due to reasonable cause and not willful neglect, and certain other requirements
were satisfied. In order to elect to again be taxed as a REIT, just as with the
original election, the Company would be required to distribute all of its
earnings and profits accumulated in any non-REIT taxable year.
Federal Income Taxation of the Company
General. If the Company qualifies for tax treatment as a REIT pursuant
to Code Sections 856 through 860, it will generally not be subject to Federal
corporate taxation on its net income to the extent currently distributed to its
shareholders. This substantially eliminates the "double taxation" that typically
results from the use of corporate investment vehicles.
The Company will be subject to federal income tax, however, as follows:
First, the Company will be taxed at regular corporate rates on its undistributed
REIT taxable income, including undistributed net capital gains. Second, under
certain circumstances, the Company may be subject to the "alternative minimum
tax" on its items of tax preference to the extent that tax exceeds its regular
tax. Third, if the Company has net income from the sale or other disposition of
"foreclosure property" that is held primarily for sale to customers in the
ordinary course of business or other nonqualifying income from foreclosure
property, it will be subject to tax at the highest corporate rate on such
income. Fourth, any net income that the Company has from prohibited transactions
(which are, in general, certain sales or other dispositions of property other
than foreclosure property held primarily for sale to customers in the ordinary
course of business) will be subject to a 100% tax. Fifth, if the Company should
fail to satisfy either the 75% or 95% gross income tests (as discussed below),
and has nonetheless maintained its qualification as a REIT because certain other
requirements have been met, it will be subject to a 100% tax on the net income
attributable
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to the greater of the amount by which the Company fails the 75% or 95% test,
multiplied by a fraction intended to reflect the Company's profitability. Sixth,
if the Company fails to distribute during each year at least the sum of (i) 85%
of its REIT ordinary income for such year, (ii) 95% of its REIT capital gain net
income for such year, and (iii) any undistributed taxable income from preceding
periods, the Company will be subject to a nondeductible 4% excise tax on the
excess of such required distribution over the amounts actually distributed.
Seventh, if (a) during the 10-year period commencing on the first day of the
first taxable year that the Company qualifies as a REIT, the Company recognizes
a gain from the disposition of an asset held by the Company at the beginning of
such period, or (b) during the 10-year period commencing on the date the Company
acquires appreciated property from a Subchapter C corporation in a transaction
in which the Company inherits the tax basis in such asset from the Subchapter C
corporation and the Company recognizes a gain from the disposition of such
asset, then the Company will be subject to tax at the highest regular corporate
rate on the lesser of (i) the recognized gain or (ii) the excess, if any, of the
fair market value over the adjusted basis of any such asset as of the beginning
of such 10-year period (the "Built-In-Gain"). Moreover, the aggregate
Built-In-Gain during the 10-year period cannot exceed the total net
Built-In-Gain of all assets at the beginning of the 10-year period. Subject to
certain limitations, the Company may, to the extent available, utilize any
pre-REIT net operating loss (NOL) carryforwards to offset recognized gains.
Code Section 856(a) defines a Real Estate Investment Trust as a
corporation, trust or association (i) managed by one or more trustees or
directors; (ii) the beneficial ownership of which is evidenced by transferable
shares, or by transferable certificates of beneficial interest; (iii) which
(except for the provisions of Sections 856 through 860 of the Code) would be
taxable as a domestic corporation; (iv) is neither a financial institution nor
an insurance company pursuant to certain provisions of the Code; (v) the
beneficial ownership of which is held by 100 or more persons; (vi) during the
last half of each taxable year, not more than 50% in number or value of the
outstanding shares are owned, directly or indirectly, by five or fewer
individuals (as defined in the Code to include certain entities); and (vii)
meets certain other tests, described below, regarding its income and assets. The
requirements and conditions set forth in (i) through (iv), inclusive, must be
met during each day of the taxable year. The requirements set forth in (v) must
be met during at least 335 days of a taxable year of 12 months, or during the
proportionate part of a taxable year of less than 12 months.
The Company is owned by more than 100 persons and management has
represented that not more than 50% in number or value of the outstanding stock
of the Company is owned by five or fewer individuals. Moreover, the Declaration
of Trust provides for restrictions regarding ownership of the Common Shares,
which will assist the Company in continuing to satisfy the beneficial ownership
requirements described above. See "Description of Capital Stock - Restrictions
on Ownership and Transfer."
The Company owns and operates a number of properties through
wholly-owned subsidiaries. Code section 856(i) provides that a corporation which
is a "qualified REIT subsidiary" shall not be treated as a separate corporation,
and all assets, liabilities and items of income, deduction and credit of a
qualified REIT subsidiary shall be treated as assets, liabilities, and such
items (as the case may be) of the REIT. Thus, in applying the requirements
described herein, the Company's qualified REIT subsidiaries will be ignored, and
all assets, liabilities and items of income, deduction and credit of its
wholly-owned subsidiaries will be treated as assets, liabilities and items of
the Company. In addition, the Company will be deemed to own its proportionate
share of the assets and liabilities of any partnership in which it is a partner.
Income Tests. There are three percentage tests relating to the sources
of the Company's gross income. First, at least 75% of the Company's gross income
(excluding gross income from prohibited transactions) must be directly or
indirectly derived each taxable year from investments relating to real
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property or mortgages on real property or certain temporary investments. Second,
at least 95% of the Company's gross income (excluding gross income from
prohibited transactions) must be directly or indirectly derived each taxable
year from any of the sources qualifying for the 75% test or from dividends,
interest, and gain from the sale or disposition of stock or securities. Third,
in each taxable year short-term gains from sales of stock or securities, gains
from prohibited transactions and gains from the sale or other taxable
disposition of real property held for less than four years (other than from
involuntary conversions and foreclosure property) must represent less than 30%
of the Company's gross income. In applying these tests, if the Company invests
in a partnership, the Company will be treated as realizing its share of the
gross income of the partnership, and the character of such income, as well as
other partnership items, will be determined at the partnership level.
The term "prohibited transaction" means a sale or other distribution of
property which would constitute stock in trade of the taxpayer, property which
would properly be included in inventory of the taxpayer or property held by the
taxpayer primarily for sale to customers in the ordinary course of his trade or
business, which is not foreclosure property. However, a prohibited transaction
does not include a sale of property which is a real estate asset as defined
below if all of the following conditions are satisfied: (i) the REIT has held
the property for at least four years; (ii) aggregate expenditures made by the
REIT, or any partner of the REIT, during the four year period preceding the date
of sale which are includable in the basis of the property do not exceed 30% of
the net selling price of the property; (iii) (I) during a taxable year the REIT
does not make more than seven sales of property (other than foreclosure
property), or (II) the aggregate adjusted basis (as determined for purposes of
computing earnings and profits) of properties (other than foreclosure property)
sold during the taxable year does not exceed 10% of the aggregate basis (as so
determined) of all of the assets of the REIT as of the beginning of the taxable
year; (iv) in the case of property, which consists of land or improvements, not
acquired through foreclosure or deed in lieu of foreclosure, or lease
termination, the REIT has held the property for not less than four years for
production of rental income; and (v) if the requirement of clause (iii)(I) is
not satisfied, substantially all of the marketing and development expenditures
with respect to the property were made through an independent contractor (as
defined in Code section 856(b)(3)) from whom the REIT itself does not derive or
receive any income.
Rents received by the Company qualify as "rents from real property" for
purposes of satisfying the gross income tests for a REIT only if several
conditions are met. First, the amount of rent must not be based in whole or in
part on the income or profits of any person, although rents generally will not
be excluded merely because they are based on a fixed percentage of receipts or
sales. Second, rents received from a tenant will not qualify as "rents from real
property" if the REIT, or an owner of 10% or more of the REIT, also directly or
constructively owns 10% or more of such tenant. Third, if rent attributable to
personal property leased in connection with a lease of real property is greater
than 15% of the total rent received under the lease, then the portion of rent
attributable to such personal property will not qualify as "rents from real
property." Fourth, for rents to qualify as "rents from real property," the REIT
generally must not operate or manage the property or furnish or render services
to the tenants of such property, other than through an independent contractor
from whom the REIT derives no income; provided, however, the Company may
directly perform certain services other than services which are considered
rendered to the occupant of the Property. The Company has represented that it
does not charge rent for any property that is based in whole or in part on the
income or profits of any person other than rent based on a percentage of
receipts or sales, as described above, and that it does not rent any property to
a related party tenant as described above. The Constructive Ownership
restrictions described above will assist the Company in satisfying this
requirement. See "Description of Capital Stock - Restrictions on Ownership and
Transfer." Finally, the Company directly performs services under certain of its
leases.
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The term "interest" generally does not include any amount if the
determination of such amount depends in whole or in part on the income or
profits of any person, although an amount generally will not be excluded from
the term "interest" solely by reason of being based on a fixed percentage of
receipts or sales.
If the Company fails to satisfy one or both of the 75% or 95% gross
income tests for any taxable year, it may nevertheless qualify as a REIT for
such year if it is eligible for relief under certain provisions of the Code.
These relief provisions will be generally available if the Company's failure to
meet such tests was due to reasonable cause and not due to willful neglect. If
the Company attaches a schedule of the sources of its income to its return, and
any incorrect information on the schedule was not due to fraud with intent to
evade tax, it is not now possible to determine the circumstances under which the
Company may be entitled to the benefit of these relief provisions. If these
relief provisions apply, a special tax is imposed on the greater of the amount
by which the Company failed the 75% test or the 95% test.
Asset Tests. At the close of each quarter of its taxable year, the
Company must also satisfy several tests relating to the nature and
diversification of its assets. First, at least 75% of the value of the Company's
total assets must be represented by real estate assets, cash, cash items
(including receivables arising in the ordinary course of the Company's
operation) and government securities. For these purposes, a REIT's assets
include its allocable share of assets held by partnerships in which the REIT
owns an interest and is held by qualified REIT subsidiaries of the REIT. It also
includes stock or debt instruments held for not more than one year which were
purchased with the proceeds of a stock offering or long-term (at least five
years) debt offering of the REIT. In addition, not more than 25% of the
Company's total assets may be represented by securities other than those
includable in the 75% asset class. Moreover, of the investments included in the
25% asset class, the value of any one issuer's securities owned by the Company
may not exceed 5% of the Company's total assets. Finally, of the investments
included in the 25% asset class, the Company may not own more than 10% of any
one issuer's outstanding voting securities.
If the Company inadvertently fails to satisfy one or more of the asset
tests at the end of the calendar quarter, the Company would still not lose its
REIT status, provided that (i) it satisfied all of the asset tests at the close
of the preceding quarter, and (ii) the discrepancy between the value of the
Company's assets and the standards imposed by the asset tests either did not
exist immediately after the acquisition of any particular asset or was not
wholly or partly caused by such an acquisition. Even if the provisions of clause
(ii) are not met, the Company could avoid disqualification by eliminating any
discrepancy within 30 days after the close of the calendar quarter in which such
discrepancy arose.
The Company has numerous wholly owned subsidiaries. All of the
Company's current subsidiaries should be treated as "qualified REIT
subsidiaries." As noted above, such subsidiaries will not be treated as separate
corporations for United States federal income tax purposes pursuant to the
provisions of Code Section 856(i). Thus, for these purposes, the Company will
not own more than 10% of the outstanding securities of any one issuer as a
result of the ownership of its subsidiaries.
Dividend Requirements
Annual Distribution Requirements. The Company, in order to qualify as a
REIT, is required to make distributions (other than capital gain dividends) to
its shareholders in an amount at least equal to (A) the sum of (i) 95% of the
Company's "REIT taxable income" (computed without regard to the dividends paid
deduction and the Company's net capital gain) and (ii) 95% of the after tax net
income, if any, from foreclosure property, minus (B) the sum of certain items of
non-cash income. In addition, the Company will be required to distribute at
least 95% of any Built-in Gain (after tax ) it may recognize during the 10- year
period commencing on the date it acquires assets with a built-in gain from a
Subchapter C corporation
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in a carryover basis transaction. Such distributions must be paid in the taxable
year to which they relate, or in the following taxable year if declared before
the Company timely files its tax return for such year and if paid on or before
the first regular distribution payment after such declaration. To the extent
that the Company does not distribute all of its net capital gain or distributes
at least 95%, but less than 100%, of its "REIT taxable income," as adjusted, it
will be subject to tax thereon at regular corporate tax rates. Finally, as
discussed above, the Company may be subjected to an excise tax if it fails to
meet certain other distribution requirements.
It is possible that the Company, from time to time, may not have
sufficient cash or other liquid assets to meet the 95% distribution requirement
due to timing differences between (i) the actual receipt of income and actual
payment of deductible expenses and (ii) the inclusion of such income and
deduction of such expenses in arriving at taxable income of the Company. In the
event that such timing differences occur, the Company may find it necessary to
arrange for borrowings or pay taxable stock dividends in order to meet the 95%
requirement.
Under certain circumstances the Company may be able to rectify a
failure to meet the distribution requirement for a year by paying "deficiency
dividends" to shareholders in a later year, which may be included in the
Company's deduction for distributions paid for the earlier year. Thus, although
the Company may be able to avoid being taxed on amounts distributed as
deficiency distributions, it will be required to pay interest based upon the
amount of any deduction taken for deficiency distributions.
Failure to Qualify as a Real Estate Investment Trust
The Company's election to be treated as a REIT will be automatically
terminated if the Company fails to meet the requirements described above. In
that event, the Company will be subject to tax (including any applicable
alternative minimum tax) on its taxable income at regular corporate rates, and
distributions to shareholders will not be deductible by the Company. All
distributions to shareholders will be taxable as ordinary income to the extent
of current and accumulated earnings and profits and will be eligible for the 70%
dividends received deduction for corporations. The Company will not be eligible
again to elect REIT status until the fifth taxable year which begins after the
year for which the Company's election was terminated unless the Company did not
willfully fail to file a timely return with respect to the termination taxable
year, inclusion of incorrect information in such return was not due to fraud
with intent to evade tax, and the Company establishes that failure to meet the
requirement was due to reasonable cause and not willful neglect. Failure to
qualify for even one year could result in the Company incurring substantial
indebtedness (to the extent borrowings are feasible) or liquidating substantial
investments in order to pay the resulting taxes.
Federal Income Taxation of Shareholders
General. As long as the Company qualifies for taxation as a REIT,
distributions made to the Company's shareholders out of current or accumulated
earnings and profits (and not designated as capital gain dividends) will be
includable by the shareholders as ordinary income for federal income tax
purposes. None of these distributions will be eligible for the dividends
received deduction for corporate shareholders. 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 his
shares. Corporate shareholders, however, may be required 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.
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Shareholders will be required to reduce the tax basis of their Common Shares by
the amount of such distributions until such basis has been reduced to zero,
after which such distributions will be taxable at capital gain rates (except
with respect to a shareholder who holds his Common Shares as a dealer). The tax
basis as so reduced will be used in computing the capital gain or loss, if any,
realized upon the sale of the Common Shares. Shareholders may not include in
their individual federal income tax returns any net operating losses or capital
losses of the Company. In addition, any distribution declared by the REIT in
October, November or December of any year payable to a shareholder of record on
a specified date in any such month shall be treated as both paid by the REIT and
received by the shareholder on December 31 of such year, provided that the
dividend is actually paid by the REIT no later than January 31 of the following
year. The REIT may be required to withhold a portion of capital gain
distributions to any shareholders who fail to certify their non-foreign status
to the REIT.
Foreign Shareholders. In general, each foreign corporation, partnership
and nonresident alien individual that does not hold its, his or her REIT shares
in connection with the conduct of a United States trade or business, will be
subject to a 30% tax (or lesser amount, as provided by an applicable income tax
treaty) on all ordinary dividends paid with respect to such REIT shares. The
REIT itself will be required to withhold and pay over such tax. If a foreign
shareholder holds such shareholder's REIT shares in connection with the conduct
of a Untied States trade or business, and provides the REIT with a properly
executed Form 4224, such shareholder will be subject to tax on ordinary
dividends in the same manner as a United States person and the REIT will not
withhold any distributions to such shareholder. 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 they do not exceed the adjusted basis of
the shareholder's Common Shares. Rather, such distributions will reduce the
adjusted basis of such Common Shares, but not below zero. 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-US shareholder would
otherwise be subject to tax on any gain from the sale or disposition of the
Common Shares in the Company as described below. If, at the time the
distribution was made, it cannot be determined whether the distribution will be
in excess of current and accumulated earnings and profits, the distributions
will be subject to withholding at the same rate as a dividend. However, such
amounts would be refundable if it is subsequently determined that such
distribution was in excess of current and accumulated earnings and profits of
the Company.
To the extent a foreign shareholder receives REIT distributions
attributable to the sale or exchange of United States real property interests
held by the REIT, each foreign shareholder will be treated as having engaged in
a United States trade or business and, therefore, will be subject to United
States federal income tax in the same manner as a United States person on such
distributions. The REIT (or the United States nominees of a foreign shareholder)
must withhold 34% of all distributions to a foreign shareholder attributable to
the disposition of United States real property interests which are designated as
capital gain dividends, unless the foreign shareholder has provided the REIT (or
its United States nominee) with a statement claiming a withholding exemption
from the Internal Revenue Service. A foreign shareholder will be entitled to a
credit against his United States income tax equal to the amount so withheld.
Generally, a foreign person will not be subject to United States income
tax on any gain recognized upon a sale or exchange of such person's REIT shares.
However, if the REIT does not qualify as a "domestically controlled REIT", a
non-U.S. shareholder will be subject to tax on gain recognized upon the sale of
the shares. A domestically controlled REIT is defined as a REIT in which at all
times during a specified testing period less than 50% in number or value of the
shares are held directly or indirectly by foreign persons. It is anticipated
that the Company will qualify as a domestically controlled REIT. Non- U.S.
shareholders will also be taxed on gain recognized from the sale of their shares
in the REIT if (i) the investment in such shares is effectively connected with
the non-U.S. shareholder's United States trade or business, in which case a
shareholder will be subject to the same treatment as U.S. shareholders with
respect
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to such gain, or (ii) the non-U.S. shareholder is a non-resident alien who is
present in the United States for 183 days or more during the taxable year and
has a tax home in the United States, in which case the non-resident alien will
be subject to a 30% tax on the individual's capital gain.
Foreign persons contemplating an investment in REIT shares should
consult their home country tax advisors concerning the tax treatment of such
investment under their home country laws, including their ability, if any, to
obtain a tax credit for any United States taxes paid.
Backup Withholding. The REIT will report to its shareholders and the
IRS the amount of distributions paid during each calendar year, and the amount
of tax withheld, if any. Under the backup withholding rules, a shareholder may
be subject to backup withholding at the rate of 20%, which rate will increase to
31% for amounts paid after December 31, 1993, with respect to distributions paid
unless such holder (a) is a corporation or comes within certain other exempt
categories and, when required, demonstrates this fact, or (b) has provided a
correct taxpayer identification number, certifies as to no loss of exemption
from backup withholding, and otherwise complies with applicable requirements of
the backup withholding rules. A shareholder that does not provide the REIT with
a correct taxpayer identification number may also be subject to penalties
imposed by the IRS. Any amount paid as backup withholding will be creditable
against the shareholder's income tax liability.
Tax-Exempt Shareholders. The IRS has ruled that amounts distributed as
distributions by a REIT to a certain tax exempt pension trust did not constitute
unrelated business taxable income ("UBTI"). Although rulings are merely
interpretations of law by the IRS and may be revoked or modified, based on this
analysis, indebtedness incurred by the REIT in connection with the acquisition
of an investment should not cause any income derived from the investment to be
treated as UBTI to a Tax Exempt Entity. A Tax Exempt Entity that incurs
indebtedness to finance its purchase of shares, however, will have UBTI by
virtue of the acquisition indebtedness rules.
Tax exempt organizations contemplating an investment in REIT shares
should consult their individual tax advisors concerning the tax treatment of
such investment.
State and Local Taxation
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. Consequently, prospective shareholders should
consult their own tax advisors regarding the effect of state and local tax laws
on an investment in the Company.
PLAN OF DISTRIBUTION
The Company may sell the Offered Securities to one or more underwriters
for public offering and sale by them or may sell the Offered Securities to
investors directly or through agents. Any such underwriter or agent involved in
the offer and sale of the Offered Securities will be named in the applicable
Prospectus Supplement.
Underwriters may offer and sell the Offered 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 also may, from time to
time, authorize underwriters acting as the Company's agents to offer and sell
the Offered Securities upon the terms and conditions as are set forth in the
applicable Prospectus Supplement. In connection with the sale of the Offered
Securities, underwriters may be deemed to have
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received compensation from the Company in the form of underwriting discounts or
commissions and may also receive commissions from purchasers of the Offered
Securities for whom they may act as agent. Underwriters may sell the Offered
Securities to or through dealers, and such dealers may receive compensation in
the form of discounts, concessions or commissions from the underwriters and/or
commissions from the purchasers for whom they may act as agent.
Any underwriting compensation paid by the Company to underwriters or
agents in connection with the Offered Securities, and any discounts, concessions
or commissions allowed by underwriters to participating dealers will be set
forth in the applicable Prospectus Supplement. Underwriters, dealers and agents
participating in the distribution of the Offered Securities may be deemed to be
underwriters, and any discounts and commissions received by them and any profit
realized by them on resale of the Offered Securities may be deemed to be
underwriting discounts and commissions under the Securities Act. Underwriters,
dealers and agents may be entitled, under agreements entered into with the
Company, to indemnification against and contribution toward certain civil
liabilities, including liabilities under the Securities Act. Underwriters,
dealers and agents may engage in transactions with, or perform services for, or
be customers of, the Company in the ordinary course of business.
If so indicated in the applicable Prospectus Supplement, the Company
will authorize dealers acting as the Company's agents to solicit offers by
certain institutions to purchase the Offered Securities from the Company at the
public offering price set forth in such Prospectus Supplement pursuant to
Delayed Delivery Contracts ("Contracts") providing for payment and delivery on
the date or dates stated in such Prospectus Supplement. Each Contract will be
for an amount not less than, and the aggregate amount of the Offered Securities
sold pursuant to Contracts shall be not less nor more than, the respective
amounts stated in the applicable Prospectus Supplement. Institutions with whom
Contracts, when authorized, may be made include commercial and savings banks,
insurance companies, pension funds, investment companies, educational and
charitable institutions, and other institutions but will in all cases be subject
to the approval of the Company. Contracts will not be subject to any conditions
except (i) the purchase by an institution of the Offered Securities covered by
its Contracts 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 Offered Securities are being sold to underwriters, the Company shall
have sold to such underwriters the total amount of the Offered Securities less
the amount thereof covered by the 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.
LEGAL MATTERS
Certain legal matters will be passed upon for the Company by Gordon,
Feinblatt, Rothman, Hoffberger & Hollander, LLC, Baltimore, Maryland. Marc P.
Blum, a trustee of the Company, and LeRoy E. Hoffberger, Chairman of the Board
of Trustees of the Company, are of counsel to such firm.
EXPERTS
The consolidated financial statements of the Company and its
Predecessor, respectively, incorporated herein by reference, are incorporated by
reference in reliance upon the report of KPMG Peat Marwick LLP, independent
certified public accountants, incorporated herein by reference and the authority
of that 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 payable by the Company in
connection with the issuance and distribution of the securities registered
hereby:
SEC Registration Fee $ 45,455
AMEX Listing Fees 17,500
Accounting fees and expenses 3,000
Legal fees and expenses 25,000
Blue Sky fees and expenses 10,000
Printing and engraving 5,000
Miscellaneous 13,000
-----------
Total $ 118,955
===========
Item 15. Indemnification of Trustees and Officers.
Under Maryland law, a Maryland real estate investment trust is
permitted to limit, by provision in its declaration of trust, the liability of
trustees and officers so that no trustee or officer shall be liable to the trust
or to any shareholder for money damages except (i) for and to the extent of
actual receipt of an improper personal benefit in money, property or services,
or (ii) for active and deliberate dishonesty established by a final judgment as
being material to the cause of action. The Registrant's Declaration of Trust has
incorporated these provisions.
The Registrant's Declaration of Trust and Bylaws require the Registrant
to indemnify its Trustees and officers to the fullest extent permitted under
Maryland law. As a result, the Registrant is required to indemnify any present
or former Trustee or officer against any claim or liability, including all
judgments, penalties, fines, settlements and expenses, unless it is established
that (i) his act or omission was committed in bad faith or was the result of
active and deliberate dishonesty, (ii) he actually received an improper personal
benefit in money, property or services or (iii) in the case of a criminal
proceeding, he had reasonable cause to believe that his act or omission was
unlawful. In addition, the Registrant is required to pay or reimburse, in
advance of final disposition of a proceeding, reasonable expenses incurred by
such person provided that the Registrant shall have received (i) a written
affirmation by the Trustee or officer of his good faith belief that he has met
the standard of conduct necessary for indemnification by the Registrant, and
(ii) a written undertaking by or on his behalf to repay the amount paid or
reimbursed by the Registrant if it shall ultimately be determined that the
standard of conduct was not met. The Registrant's Declaration of Trust and
Bylaws also require the Registrant to provide indemnification, payment or
reimbursement of expenses to a present or former director or officer who served
a predecessor of the Registrant in such capacity, and to any employee or agent
of the Registrant or a predecessor of the Registrant, and permit the Registrant
to provide such other and further indemnification or payment or reimbursement of
expenses as may be permitted by Section 2-418 of the Maryland General
Corporation Law for directors of a Maryland corporation.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to Trustees and officers of the Registrant pursuant
to the foregoing provisions or otherwise, the Registrant
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has been advised that, although the validity and scope of the governing statute
has not been tested in court, in the opinion of the SEC, such indemnification is
against public policy as expressed in such Act and is, therefore, unenforceable.
In addition, indemnification may be limited by state securities laws.
Item 16. Exhibits.
4.1 Specimen of certificate for Common Shares of Beneficial Interest*
4.2 Form of Indenture***
5.1 Opinion of Gordon, Feinblatt, Rothman, Hoffberger & Hollander, LLC
regarding the legality of securities**
8.1 Opinion of Gordon, Feinblatt, Rothman, Hoffberger & Hollander, LLC
regarding certain tax matters**
12.1 Computation of Ratio of Earnings to Fixed Charges**
23.1 Consent of KPMG Peat Marwick LLP**
24.1 Power of Attorney (included on signature page)
- ---------------------------
* Incorporated by reference to Exhibit 4(a) to the Company's Registration
Statement on Form S-11 (Registration No. 33-66396)
** Filed herewith
*** To be filed by amendment and incorporated by reference in connection
with the offering of the Offered Securities
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 the registration statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in
the registration statement or any material change to
such information in the registration statement;
Provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if
the information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant pursuant to
section 13 or section 15(d) of the Exchange Act of 1934 that are incorporated by
reference in the registration statement.
(2) That, for purposes of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities
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offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act of 1934 (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
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 foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification against such liabilities (other than the payment
by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Linthicum, Maryland on this 29th day of January, 1997.
MID-ATLANTIC REALTY TRUST
By: /s/ F. Patrick Hughes
---------------------
F. Patrick Hughes
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned, whose
signature appears below constitutes and appoints F. Patrick Hughes and Paul
Robinson as his or her true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for him or her and in his or her name,
place and stead, in any and all capacities, to sign any and all amendments or
post-effective amendments to this Registration Statement, and to file the same,
with all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto each of said attorneys-in-fact
and agents full power and authority to do and perform each and every act and
thing necessary or advisable to be done in connection therewith, as fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents, or their substitutes,
may lawfully do or cause to be done by virtue thereof. This power of attorney
may be executed in counterparts.
In accordance with the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C> <C> <C> <C> <C>
/s/ LeRoy E. Hoffberger Trustee, Chairman of the January 29, 1997
- ------------------------------------ Board of Trustees
LeRoy E. Hoffberger
/s/ F. Patrick Hughes Trustee, President, Principal January 29, 1997
- -------------------------------------------- Executive Officer
F. Patrick Hughes
/s/ Paul G. Bollinger Vice President, Controller, January 29, 1997
- -------------------------------------------- Principal Financial Officer
Paul G. Bollinger
/s/ Eugene Grady Treasurer January 29, 1997
- --------------------------------------------
Eugene Grady
[SIGNATURES CONTINUED ON NEXT PAGE]
II-4
<PAGE>
/s/ David F. Benson Trustee January 29, 1997
- --------------------------------------------
David F. Benson
/s/ Marc P. Blum Trustee January 29, 1997
- ------------------------------------
Marc P. Blum
/s/ Robert A. Frank Trustee January 29, 1997
- --------------------------------------------
Robert A. Frank
/s/ M. Ronald Lipman Trustee January 29, 1997
- --------------------------------------------
M. Ronald Lipman
/s/ Stanley J. Moss Trustee January 29, 1997
- --------------------------------------------
Stanley J. Moss
/s/ Daniel S. Stone Trustee January 29, 1997
- --------------------------------------------
Daniel S. Stone
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description Page No.
- ------ ----------- --------
4.1 Specimen of certificate for Common Shares of Beneficial
Ownership*
4.2 Form of Indenture
5.1 Opinion of Gordon, Feinblatt, Rothman, Hoffberger & Hollander,
LLC regarding the legality of securities*
8.1 Opinion of Gordon, Feinblatt, Rothman, Hoffberger & Hollander,
LLC regarding certain tax matters*
12.1 Computation of Ratio of Earnings to Fixed Charges*
23.1 Consent of KPMG Peat Marwick LLP*
24.1 Power of Attorney (included on signature page)
- ----------------
* Filed herewith
<PAGE>
EXHIBIT 4.1
<PAGE>
Exhibit 4.1
Number Shares
- ------ ------
Cusip No: This Certificate may be presented for
transfer in the City of New York, NY
MID-ATLANTIC REALTY TRUST
a Maryland Real Estate Investment Trust
Common Shares of Beneficial Interest
Par Value $.01 Per Share
See reverse side for certain
definitions
THIS CERTIFIES THAT
is the owner of
fully paid and non-assessable common shares of beneficial interest, par value
$01 per share, of
Mid-Atlantic Realty Trust, a real estate investment trust formed under the laws
of the State of Maryland. This Certificate and the shares represented hereby are
transferable on the books of the Trust only by the registered holder hereof in
person or by attorney duly authorized in writing upon surrender of this
Certificate properly endorsed. This Certificate and the shares represented
hereby are issued and shall be subject to all provisions of the Declaration of
Trust of the Trust and any amendments thereto. This Certificate is not valid
until countersigned and registered by the Transfer Agent and the Registrar.
Witness the facsimile seal and the facsimile signatures of the duly
authorized officers of the Trust.
Dated:
Countersigned and Registered:
Continental Stock Transfer and Trust Secretary
New York, New York
Transfer Agent and Registrar
By:
Authorized Signature President
(SEAL)
<PAGE>
[REVERSE SIDE OF CERTIFICATE]
MID-ATLANTIC REALTY TRUST
The Shares represented by this certificate are subject to restrictions
on ownership and transfer for the purpose of the Trust's maintenance of its
status as a real estate investment trust under the Internal Revenue Code of
1986, as amended (the "Code"). No Person may Beneficially Own or Constructively
Own Shares in excess of 9.9% of the outstanding Shares of the Trust, either in
the aggregate or of any class. Any Person who attempts to Beneficially Own or
Constructively Own Shares in excess of the above limitations must immediately
notify the Trust. All capitalized terms used in this legend have the meanings
set forth in the Declaration of Trust, a copy of which, including the
restrictions on ownership and transfer, will be sent without charge to each
stockholder who so requests in writing. If the restrictions on ownership and
transfer are violated, the Shares represented hereby will be deemed Excess
Shares and will be automatically transferred to and be held in a special trust
by the Trust.
The Trust will furnish to any shareholder upon request and without
charge a full statement of the designations, preferences, limitations, and
relative rights of the shares of each class authorized to be issued and, with
respect to the classes of shares which may be issued in series, the variations
in the relative rights and preferences between the shares of each such series,
so far as the same have been fixed and determined, and the authority of the
Board of Trustees to fix and determine the relative rights and preferences of
subsequent series. Such request may be made to the Secretary of the Trust at its
principal office or to the Transfer Agent.
KEEP THIS CERTIFICATE IN A SAFE PLACE. IF IT IS LOST
STOLEN OR DESTROYED, THE TRUST WILL REQUIRE A BOND OF
INDEMNITY AS A CONDITION TO THE ISSUANCE OF
A REPLACEMENT CERTIFICATE.
The following abbreviations, when used in the inscription on the face
of this Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and not
as tenants in common
UNIF GIFT MIN ACT - _______________ Custodian _______________
(Cust) (Minor)
under Uniform Gifts to Minors Act
---------------------------------------
(State)
<PAGE>
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, __________ HEREBY SELL, ASSIGN AND TRANSFER UNTO
(Please Print or Type Name and Address, including Zip Code, of Assignee)
Please insert Social Security or
Other Identifying Number of Assignee shares
of the shares represented by the within Certificate, and do hereby irrevocably
constitute and appoint Attorney
to transfer the said shares on the books of the within named Trust with full
power of substitution in the premises.
Dated:
-------------------------------------
NOTICE: The Signature To This Assignment Must
Correspond With The Name As Written Upon
The Face Of The Certificate In Every Particular,
Without Alteration Or Enlargement Or Any
Change Whatever
<PAGE>
EXHIBIT 5.1
<PAGE>
LAW OFFICES
GORDON, FEINBLATT, ROTHMAN, HOFFBERGER & HOLLANDER, LLC
THE GARRETT BUILDING
233 EAST REDWOOD STREET
BALTIMORE, MARYLAND 21202-3332
410-576-4000
Telex 908041 BAL
Fax 410-576-4246
Exhibit 5.1
January 29, 1997
Mid-Atlantic Realty Trust
1302 Concourse Drive, Suite 204
Linthicum, MD 21090
Re: Mid-Atlantic Realty Trust
Registration Statement on Form S-3
Ladies and Gentlemen:
We have acted as counsel to Mid-Atlantic Realty Trust (the "Company"),
a Maryland real estate investment trust, in connection with the issuance by the
Company of up to $150,000,000 of the Company's common shares of beneficial
interest, par value $.01 per share (the "Common Shares"), and debt securities
("Debt Securities"), to be issued pursuant to a Registration Statement on Form
S-3 (the "Registration Statement") filed by the Company with the Securities and
Exchange Commission under the Securities Act of 1933, as amended (the "Act").
We have examined copies of (i) the Declaration of Trust of the Company,
certified by the State Department of Assessments and Taxation of Maryland, (ii)
the Bylaws of the Company, (iii) the Registration Statement, and (iv)
resolutions adopted by the Board of Trustees of the Company relating to the
matters referred to herein (collectively referred to as the "Documents").
Based upon the foregoing, it is our opinion that the Common Shares and
the Debt Securities have been duly and validly authorized and, upon completion
of the offering or offerings described in the Registration Statement and upon
payment therefor by the purchasers thereof, the Debt Securities will be duly and
validly issued, and the Common Shares will be duly and validly issued and fully
paid and nonassessable.
The foregoing opinion is limited to the laws of the State of Maryland
and the United States of America and we do not express any opinion herein
concerning any other law. 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. The
opinion may be relied upon exclusively by you and not by any other person
without our prior written consent.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of the name of our Firm therein. In giving
this opinion, we do not admit that we are within the category of persons whose
consent is required by Section 7 of the Securities Act of 1933, as amended.
Very truly yours,
/s/ GORDON, FEINBLATT, ROTHMAN,
HOFFBERGER & HOLLANDER, LLC
<PAGE>
EXHIBIT 8.1
<PAGE>
LAW OFFICES
GORDON, FEINBLATT, ROTHMAN, HOFFBERGER & HOLLANDER, LLC
THE GARRETT BUILDING
233 EAST REDWOOD STREET
BALTIMORE, MARYLAND 21202-3332
410-576-4000
Telex 908041 BAL
Fax 410-576-4246
Exhibit 8.1
January 29, 1997
Mid-Atlantic Realty Trust
1302 Concourse Drive, Suite 202
Linthicum, Maryland 21090
Re: Mid-Atlantic Realty Trust
Registration Statement on Form S-3
Ladies and Gentlemen:
We have acted as counsel to Mid-Atlantic Realty Trust (the "Company"),
a Maryland real estate investment trust, in connection with the registration by
the Company of up to $150,000,000 of the Company's common shares of beneficial
interest, par value $.01 per share, and debt securities, to be issued pursuant
to a Registration Statement on Form S-3 (the "Registration Statement") filed by
the Company with the Securities and Exchange Commission under the Securities Act
of 1933, as amended (the "Act").
We hereby confirm to you our opinion set forth under the caption
"Federal Income Tax Considerations" in the Registration Statement.
We hereby consent to the filing with the Securities and Exchange
Commission of this letter as an exhibit to the Registration Statement of which
the Prospectus is a part and the reference to us in the Prospectus under the
caption "Federal Income Tax Considerations." In giving such consent, we do not
thereby admit that we are within the category of person whose consent is
required under Section 7 of the Securities Act.
Very truly yours,
/s/ GORDON, FEINBLATT, ROTHMAN,
HOFFBERGER & HOLLANDER, LLC
<PAGE>
EXHIBIT 12.1
<PAGE>
Exhibit 12.1
MID-ATLANTIC REALTY TRUST & SUBSIDIARIES &
BTR REALTY, INC. & SUBSIDIARIES (PREDECESSOR)
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (1)
(AMOUNTS IN THOUSANDS, EXCEPT FOR RATIO INFORMATION)
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Years ended December 31,
------------- ------------------------
1996 1995 1995 1994 1993 1992 1991
-------- -------- -------- -------- --------- --------- ------
<S> <C> <C> <C> <C> <C> <C>
Earnings (loss) from operations(2)...... $ 2,017 $ 1,855 $ 2,444 $ 1,713 $ (2,030) $ (2,820) $(5,593)
Less: sales of residential property, net
of cost of residential property sold.... -- -- -- -- (24) (53) (230)
Add:
Interest expense (3).................. 9,449 8,799 11,928 10,876 12,691 14,308 14,695
Interest portion of rentals (4)....... 172 74 113 97 84 68 68
-------- -------- -------- --------- -------- -------- -------
Earnings available for fixed charges.... $11,638 $10,728 $14,485 $12,686 $10,721 $11,503 $ 8,940
======= ======= ======= ======= ======= ======= =======
Fixed Charges:
Interest expenses (3)................. $ 9,449 $ 8,798 $11,928 $ 10,876 $12,691 $14,308 $14,695
Interest capitalized.................. 97 397 565 31 -- -- 814
Interest portion of rentals (4)....... 172 74 113 97 84 68 68
-------- -------- -------- --------- -------- -------- -------
Fixed Charges........................... $ 9,718 $ 9,269 $12,606 $ 11,004 $12,775 $14,376 $15,577
======== ======== ======= ========= ======== ======== =======
Ratio of earnings to fixed charges...... 1.20 1.16 1.15 1.15 -- -- --
Excess of Fixed Charges
over Earnings........................... -- -- -- -- $2,054 $2,873 $6,637
There were no preferred shares outstanding during any of the periods above, and
therefore the ratio of earnings to combined
fixed charges and preferred shares dividend requirements would have been the
same as the ratio of earnings to fixed charges for the periods indicated.
- ----------------------------------------
<FN>
(1) Mid-Atlantic Realty Trust, the "Company", is the successor to the operations
of BTR Realty, Inc., the predecessor company. The computations above use the
Consolidated Financial Statements of Mid-Atlantic Realty Trust for the nine
months ended September 30, 1996 and 1995, the years ended December 31, 1995, and
1994 and the period September 11, 1993 (commencement of operations) through
December 31, 1993, and also include the Consolidated Financial Statements of BTR
Realty, Inc. for the periods January 1, 1993 through September 10, 1993, and for
the years ended December 31, 1992, and 1991.
(2) Effective January 1, 1996, the Company changed its reporting of gains or
losses on sales of properties held for sale. During the year ended December 31,
1995, and previously, gains or losses on sales of properties held for sale had
been included in revenues in the consolidated statement of operations and were
therefore included in earnings from operations. The Company is not in the
business of buying land for resale. Therefore, management believes gains or
losses on sales of properties held for sale should not be included in earnings
or losses from operations, and should be an adjustment to earnings from
operations to arrive at net earnings. The comparative prior year earnings
(losses) from operations have been reclassified to reflect this change.
(3) Effective January 1, 1996, the Company changed its reporting of amortization
of deferred financing costs. During the year ended December 31, 1995, and
previously, the annual amortization of deferred financing costs was reported in
the depreciation and amortization of property and improvements expense line in
the consolidated statements of operations. In 1996, the Company began reporting
the amortization of deferred financing costs in the interest expense line in the
consolidated statement of operations. The comparative prior year interest
expense amounts above have been reclassified to reflect this change.
(4) Amounts reflect a one-third portion of rentals, the portion deemed
representative of the interest factor.
</FN>
</TABLE>
<PAGE>
EXHIBIT 23.1
<PAGE>
Exhibit 23.1
Consent of KPMG Peat Marwick LLP
The Board of Trustees
Mid-Atlantic Realty Trust:
We consent to the use of our report incorporated herein by reference
and to the reference to our firm under the heading "Experts" in the Prospectus.
/s/ KPMG Peat Marwick LLP
Baltimore, Maryland
January 29, 1997
<PAGE>
