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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 5, 1999
REGISTRATION NO. 333-47041
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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CBL & ASSOCIATES PROPERTIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 62-1545718
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Suite 300
6148 Lee Highway
Chattanooga, Tennessee 37421-6511
(423) 855-0001
(Address, including zip code and telephone number, including area code,
of registrant's principal executive offices)
Charles B. Lebovitz
Chairman, President and Chief Executive Officer
Suite 300
6148 Lee Highway
Chattanooga, Tennessee 37421-6511
(423) 855-0001
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
--------------------------
with copies to:
Yaacov M. Gross, Esq. Jeffrey V. Curry, Esq.
Willkie Farr & Gallagher Shumacker & Thompson, P.C.
787 Seventh Avenue Suite 103
New York, New York 10019 6148 Lee Highway
(212) 728-8225 Chattanooga, Tennessee 37421
(423) 855-1814
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED
SALE TO THE PUBLIC: From time to time after the
Registration Statement becomes effective.
--------------------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, 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. [ ]
CALCULATION OF REGISTRATION FEE
- --------------------------- -------------------------------------------------
Title of Each Class of
Securities to be Registered Proposed Maximum Aggregate Offering Price(1)
- --------------------------- -------------------------------------------------
Common Stock, par value
$.01 per share $8,742,620.60
- --------------------------- -------------------------------------------------
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(c) for the purpose of computing the amount of
registration fee based upon the average of the high and low prices of the Common
Stock as reported on the New York Stock Exchange on November 1, 1999.
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
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The information in this prospectus is not complete and may be changed.
We may not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell the securities and it is not soliciting an offer to buy these securities
in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED NOVEMBER 5, 1999
PROSPECTUS
- ----------
388,022 SHARES
CBL & ASSOCIATES PROPERTIES, INC.
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
This Prospectus relates to 388,022 shares of our common stock that may
be sold from time to time by the selling stockholder in accordance with the plan
of distribution described in this Prospectus.
Our common stock is listed on the New York Stock Exchange and traded
under the symbol "CBL". The last reported sale price of our common stock on the
New York Stock Exchange on November 1, 1999, was $22.5625 per share.
Our principal executive offices are located at Suite 300, 6148 Lee
Highway, Chattanooga, Tennessee 37421-6511 and our telephone number is (423)
855-0001.
Investing in our Common Stock involves certain risks. See "Risk Factors"
commencing on page 4.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined
if this prospectus is truthful or complete. Any representation to the
contrary is a criminal offense.
--------------------------
The date of this Prospectus is November 5, 1999.
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YOU SHOULD RELY ONLY ON INFORMATION CONTAINED IN OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS. NEITHER WE NOR THE SELLING STOCKHOLDER HAS
AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT INFORMATION. WE ARE NOT MAKING
AN OFFER OF THESE SECURITIES IN ANY STATE WHERE THE OFFER IS NOT PERMITTED. YOU
SHOULD NOT ASSUME THAT THE INFORMATION PROVIDED BY THE PROSPECTUS IS ACCURATE AS
OF ANY DATE OTHER THAN THE DATE ON THE FRONT OF THIS PROSPECTUS.
--------------------------
TABLE OF CONTENTS
WHERE TO FIND MORE INFORMATION...............................................2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.. ...........................3
RISK FACTORS.................................................................4
CBL & ASSOCIATES PROPERTIES, INC............................................11
USE OF PROCEEDS.............................................................12
SELLING STOCKHOLDER.........................................................13
PLAN OF DISTRIBUTION........................................................13
FEDERAL INCOME TAX CONSIDERATIONS...........................................15
STATE, LOCAL AND FOREIGN TAX CONSIDERATIONS.................................23
LEGAL MATTERS...............................................................24
EXPERTS.....................................................................24
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WHERE TO FIND MORE INFORMATION
We have filed with the Commission a Registration Statement on Form S-3
(the "Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"),
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relating to the shares of Common Stock. This Prospectus is a part of the
Registration Statement, but the Registration Statement also contains additional
information and exhibits.
We are subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Accordingly, we file
annual, quarterly and current reports with the Securities and Exchange
Commission (the "Commission"). You can read and copy the Registration Statement
and the reports that the Company files with the Commission at the Commission's
public reference rooms at 450 Fifth Street, N.W., Room 1024, Washington, D.C.
20549, 7 World Trade Center, Suite 1300, New York, New York 10048 and 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can
also be obtained from the Public Reference Section of the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. Our filings with the
commission are also available from the Commission's Web Site at
http://www.sec.gov. Please call the Commission's toll-free telephone number at
1-800-SEC-0330 if you need further information about the operation of the
commission's public reference rooms. Our common stock is listed on the New York
Stock Exchange ("NYSE") and our reports can also be inspected at the offices of
the NYSE, 20 Broad Street, 17th Floor, New York, New York 10005.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
We file annual, quarterly and special reports, proxy statements and
other information with the Commission. The Commission allows us to "incorporate
by reference" the information we file with it, which means that we can disclose
important information to you by referring to those documents. The information
incorporated by reference is an important part of this Prospectus. Any statement
contained in a document which is incorporated by reference in this Prospectus is
automatically updated and superseded if information contained in this
Prospectus, or information that we later file with the Commission, modifies or
replaces this information. All documents we subsequently file pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act, prior to the termination
of this offering shall be deemed to be incorporated by reference into this
prospectus. We incorporate by reference the following documents:
1. Our Annual Report on Form 10-K for the year ended December 31,
1998, dated March 30, 1999 (the "Company 10-K");
2. Our Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1999, dated May 14, 1999, and June 30, 1999, dated August 13,
1999;
3. Our Current Reports on Form 8-K dated February 4, 1999, April 29,
1999, May 4, 1999, July 29, 1999, October 27, 1999 and;
4. The portions of our Proxy Statement filed on March 26, 1999
for our 1999 Annual Meeting of Stockholders that have been incorporated
by reference into our Annual Report on Form 10-K.
5. The description of our Common Stock contained in our
Registration Statement on Form 8-A dated October 25, 1993.
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To receive a free copy of any of the documents incorporated by reference in this
Prospectus (other than exhibits) call or write CBL & Associates Properties,
Inc., Suite 300, 6148 Lee Highway, Chattanooga, Tennessee 37421-6511, Attention:
Director of Investor Relations, Telephone (423) 855-0001.
RISK FACTORS
This Prospectus and those documents incorporated by reference herein
may include certain "forward-looking information statements" within the meaning
of Section 27A of the Securities Act and Section 21E of the Exchange Act,
including (without limitation) statements with respect to anticipated future
operating and financial performance, growth and acquisition opportunities and
other similar forecasts and statements of expectation. Words such as "expects,"
"estimates," "plans," "anticipates," "predicts," "intends," "believes," "seeks,"
and "should" and other similar expressions and variations of these expressions
are intended to identify these forward-looking statements. Forward-looking
statements made by us are based on our estimates, projections, beliefs and
assumptions at the time of the statements and are not guarantees of future
performance. We disclaim any obligation to update or revise any forward-looking
statement based on the occurrence of future events, the receipt of new
information or otherwise.
Actual future performance, outcomes and results may differ materially
from those expressed in forward-looking statements made by us as a result of a
number of risks, uncertainties and assumptions. Representative examples of these
factors include (without limitation) general industry and economic conditions,
interest rate trends, costs of capital and capital requirements, availability of
real estate properties, competition from other companies and venues for the
sale/distribution of goods and services, shifts in customer demands, tenant
bankruptcies, changes in operating expenses, including employee wages, benefits
and training, governmental and public policy changes, changes in applicable
laws, rules and regulations (including changes in tax laws), the ability to
obtain suitable equity and/or debt financing, and the continued availability of
financing in the amounts and on the terms necessary to support our future
business.
Risks of Expansion and Development Activities
We intend to pursue development and expansion activities as
opportunities arise. In connection with any development or expansion, we will
incur various risks including the risk that development or expansion
opportunities explored by us may be abandoned and the risk that construction
costs of a project may exceed original estimates, possibly making the project
not profitable. Other risks include the risk that we may not be able to
refinance construction loans which are generally with full recourse to us, the
risk that occupancy rates and rents at a completed project will not meet
projections and will be insufficient to make the project profitable; and the
need for anchor, mortgage lender and property partner approvals for certain
expansion activities. In the event of an unsuccessful development project, our
loss could exceed our investment in the project.
We have in the past elected not to proceed with certain development
projects and anticipate that we will do so again from time to time in the
future. If we elect not to proceed with a development opportunity, the
development costs ordinarily will be charged against income for
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the then-current period. Any such charge could have a material adverse effect
on our results of operations for the period in which the charge is taken.
General Factors Affecting Investments in Shopping Center Properties; Effect of
Economic and Real Estate Conditions
A shopping center's revenues and value may be adversely affected by a
number of factors, including:
o The national and regional economic climates
o Local real estate conditions (such as an oversupply of
retail space)
o Perceptions by retailers or shoppers of the safety, convenience
and attractiveness of the shopping center
o The willingness and ability of the shopping center's owner to
provide capable management and maintenance services.
In addition, other factors may adversely affect a shopping center's
value without affecting its current revenues, including:
o Changes in governmental regulations, zoning or tax laws
o Potential environmental or other legal liabilities
o Availability of financing
o Changes in interest rate levels
There are numerous shopping facilities that compete with our properties
in attracting retailers to lease space. In addition, retailers at our properties
face continued competition from:
o Discount shopping centers
o Outlet malls
o Wholesale clubs
o Direct mail
o Telemarketing
o Television shopping networks
o Shopping via the Internet
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Competition could adversely affect revenues and funds available for
distribution.
Geographic Concentration
Our properties are located principally in the southeastern United
States in:
o Alabama
o Florida
o Georgia
o Kentucky
o Mississippi
o North Carolina
o South Carolina
o Tennessee
o Virginia
Twenty malls, fourteen associated centers, sixty-three community
centers, five properties under construction and our office building are located
in these states. Our results of operations and funds available for distribution
to stockholders therefore will be subject generally to economic conditions in
the southeastern United States. As of June 30, 1999, the Properties located in
the southeastern United States accounted for 67% of our total assets, and such
properties provided 64.7% of our total revenues for the six-month period ended
June 30, 1999.
Third-Party Interests in Certain Properties
We own partial interests in seven malls, five associated centers, one
community center and our office building. The Operating Partnership, CBL &
Associates Limited Partnership, or an affiliate of ours is the managing general
partner of the partnerships that own many of properties, except for Governor's
Square Mall and its associated center, Governor's Plaza, in which affiliates of
a subsidiary of ours are non-managing general partners.
The Operating Partnership is a Delaware limited partnership and a
68%-owned indirect subsidiary. Where the Operating Partnership serves as
managing general partner of the partnerships that own our properties, it may
have certain fiduciary responsibilities to the other partners in those
partnerships. In certain cases, the approval or consent of the other partners is
required before the Operating Partnership may sell, finance, expand or make
other significant changes in the operations of such properties. To the extent
such approvals or consents are required, the Operating Partnership may
experience difficulty in, or may be prevented from,
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implementing its plans with respect to expansion, development, financing or
other similar transactions with respect to such properties.
With respect to Governor's Square and Governor's Plaza, the Operating
Partnership does not have day-to-day operational control or control over certain
major decisions. These include the timing and amount of distributions and
decisions relating to sales, expansions and financings. This could result in
decisions by the managing general partner that do not fully reflect our
interests. This includes decisions relating to the requirements that we must
satisfy in order to maintain our status as a real estate investment trust for
tax purposes.
We have on occasion agreed not to sell an acquired property for a
number of years if such sale would trigger adverse tax consequences for the
seller.
Dependence on Significant Properties
Hickory Hollow Mall and Meridian Mall accounted for approximately 6.9%
and 6.6%, respectively, of our total revenues for the six-month period ended
June 30, 1999. Our financial position and results of operations will therefore
be disproportionately affected by the results experienced at these properties.
Dependence on Key Tenants
The Limited Stores Inc. (including Intimate Brands) maintains 127
stores in our malls and in the six-month period ended June 30, 1999 accounted
for approximately 7.6% of total revenues of CBL.
Food Lion (including Hannaford Brothers) serves as an anchor tenant in
40 of our community centers and in the six-month period ended June 30, 1999
accounted for approximately 3.2% of our total revenues. Food Lion is a publicly
traded North Carolina-based operator of supermarkets.
The loss or bankruptcy of any of these or other key tenants could
negatively affect our financial position and results from operations.
Dependence on Management
Certain of the Operating Partnership's lines of credit are conditioned
upon the Operating Partnership continuing to be managed by certain members of
its current senior management and by such members of senior management
continuing to own a significant direct or indirect equity interest in the
Operating Partnership (including any ownership interests such members of senior
management may hold in us).
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Conflict of Interest: Retained Property Interests
Members of our senior management own interests in certain real estate
properties which were retained by them at the time of our initial public
offering. These consist primarily of (i) outparcels at certain of the our
properties, which are being offered for sale through CBL & Associates
Management, Inc. and (ii) one anchor store at an associated center, which we
have a fixed-price option to acquire.
Conflict of Interest: Tax Consequences of Sales of Properties
Since certain of our properties had unrealized gain attributable to the
difference between the fair market value and adjusted tax basis in such
properties immediately prior to their contribution to the Operating Partnership,
the sale of any such properties will cause adverse tax consequences to the
members of our senior management who owned interests in our predecessor
entities. In addition, a significant reduction in the debt of our properties
could cause adverse tax consequences to such members of senior management. As a
result, members of our senior management might not favor a sale of a property or
a significant reduction in debt even though such a sale or reduction could be
beneficial to us and the Operating Partnership. Our Bylaws (as defined below)
provide that any decision relating to the potential sale of any property that
would result in a disproportionately higher taxable income for members of our
senior management than for us and our stockholders, or that would result in a
significant reduction in such property's debt, must be made by a majority of the
independent directors of the Board of Directors. The Operating Partnership is
required, in the case of such a sale, to distribute to its partners, at a
minimum, all of the net cash proceeds from such sale up to an amount reasonably
believed necessary to enable members of our senior management to pay any income
tax liability arising from such sale.
Conflicts of Interest: Policies of Board of Directors
Certain entities owned in whole or in part by members of our senior
management, including the construction company which built most of our
properties, may continue to perform services for, or transact business with, us
and the Operating Partnership. Additionally, members of our senior management
own a significant minority interest in this construction company. Furthermore,
certain property tenants are affiliated with members of our senior management.
The Bylaws provide that any contract or transaction between us or the Operating
Partnership and one or more directors or officers of ours, or between us or the
Partnership and any other entity in which one or more of our directors or
officers are directors or officers, or have a financial interest, must be
approved by our disinterested directors or stockholders after the material facts
as to the relationship or interest and as to the contract or transaction are
disclosed or are known to them.
Federal Tax Consequences: REIT Classification
We intend to continue to operate so as to qualify as a real estate
investment trust under the tax code. Although we believe that we are organized
and operate in such a manner, no
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assurance can be given that we qualified or will continue to qualify as a real
estate investment trust. Such qualification involves the application of highly
technical and complex tax code provisions for which there are only limited
judicial or administrative interpretations. The determination of various factual
matters and circumstances not entirely within our control may affect our ability
to qualify. In addition, no assurance can be given that legislation, new
regulations, administrative interpretations or court decisions will not
significantly change the tax laws with respect to qualification or its
corresponding federal income tax consequences. We have received an opinion from
our counsel, Willkie Farr & Gallagher, that we have been organized and operated
in conformity with the requirements to qualify as a real estate investment trust
and that our proposed method of operation will enable us to continue to meet
such requirements. Such legal opinion, however, is not binding on the Internal
Revenue Service. See "Federal Income Tax Considerations."
If in any taxable year we were to fail to qualify as a real estate
investment trust, we would not be allowed a deduction for distributions to
stockholders in computing our taxable income and we would be subject to federal
income tax on our taxable income at regular corporate rates. Unless entitled to
relief under certain statutory provisions, we also would be disqualified from
treatment as a real estate investment trust for the four taxable years following
the year during which qualification was lost. As a result, the funds available
for distribution to our stockholders would be reduced for each of the years
involved. We currently intend to operate in a manner designed to qualify.
However, it is possible that future economic, market, legal, tax or other
considerations may cause the Company's Board of Directors, with the consent of a
majority of our stockholders, to revoke the real estate investment trust
election. See "Federal Income Tax Considerations."
Federal Tax Consequences: Limits on Ownership Necessary to
Maintain REIT Qualification
To maintain our status as a real estate investment trust under the tax
code, not more than 50% in value of our outstanding capital stock may be owned,
directly or indirectly, by five or fewer individuals (as defined in the tax code
to include certain entities) during the last half of a taxable year. Our
Certificate of Incorporation generally prohibits ownership of more than 6% of
the outstanding shares of capital stock of the Company by any single stockholder
determined by vote, value or number of shares (other than Charles Lebovitz,
James Wolford and their affiliates under the tax code's attribution rules).
Federal Tax Consequences: Effect of Distribution Requirements
To maintain our status as a real estate investment trust under the tax
code, we generally will be required each year to distribute to our stockholders
at least 95% of our taxable income after certain adjustments. In addition, we
will be subject to a 4% nondeductible excise tax on the amount, if any, by which
certain distributions paid by us during each calendar year are less than the sum
of 85% of our ordinary income for such calendar year, 95% of our capital gain
net income for the calendar year and any amount of such income that was not
distributed in prior years.
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Environmental Matters
Under various federal, state and local laws, ordinances and
regulations, a current or previous owner or operator of real estate may be
liable for the costs of removal or remediation of petroleum, certain hazardous
or toxic substances on, under or in such real estate. Such laws typically impose
such liability without regard to whether the owner or operator knew of, or was
responsible for, the presence of such substances. The costs of remediation or
removal of such substances may be substantial. The presence of such substances,
or the failure to promptly remediate such substances, may adversely affect the
owner's or operator's ability to sell such real estate or to borrow using such
real estate as collateral. Persons who arrange for the disposal or treatment of
hazardous or toxic substances may also be liable for the costs of removal or
remediation of such substances at the disposal or treatment facility, regardless
of whether such facility is owned or operated by such person. Certain laws also
impose requirements on conditions and activities that may affect the environment
or the impact of the environment on human health. Failure to comply with such
requirements could result in the imposition of monetary penalties (in addition
to the costs to achieve compliance) and potential liabilities to third parties.
Among other things, certain laws require abatement or removal of friable and
certain non-friable asbestos-containing materials in the event of demolition or
certain renovations or remodeling. Certain laws regarding asbestos-containing
materials require building owners and lessees, among other things, to notify and
train certain employees working in areas known or presumed to contain
asbestos-containing materials. Certain laws also impose liability for release of
asbestos-containing materials into the air and third parties may seek recovery
from owners or operators of real properties for personal injury or property
damage associated with asbestos-containing materials. In connection with the
ownership and operation of properties, we, the Operating Partnership, or the
relevant property's partnership, as the case may be, may be potentially liable
for such costs or claims.
All of our properties (but not properties for which we hold an option
to purchase but do not yet own) have been subject to Phase I environmental
assessments or updates of existing Phase I environmental assessments within
approximately the last six years. Such assessments generally consisted of a
visual inspection of the properties, review of federal and state environmental
databases and certain information regarding historic uses of the property and
adjacent areas and the preparation and issuance of written reports. Some of the
properties contain, or contained, underground storage tanks used for storing
petroleum products or wastes typically associated with automobile service or
other operations conducted at the properties. Certain properties contain, or
contained, dry-cleaning establishments utilizing solvents. Where believed to be
warranted, samplings of building materials or subsurface investigations were
undertaken. At certain properties, where warranted by the conditions, we have
developed and implemented an operations and maintenance program that establishes
operating procedures with respect to asbestos-containing materials. The costs
associated with the development and implementation for such programs were not
material.
The Company believes that its properties are in compliance in all
material respects with all federal, state and local ordinances and regulations
regarding the handling, discharge and emission
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of hazardous or toxic substances. However, certain environmental conditions are
being evaluated at Parkway Place in Huntsville, Alabama. There appears to be a
high potential for adverse environmental conditions, specifically Total
Petroleum Hydrocarbons, in the vicinity of an auto service center which had
underground storage tanks. We have ordered additional engineering studies and as
part of the redevelopment will correct the environmental conditions at the site.
We have not been notified by any governmental authority, and are not otherwise
aware, of any material noncompliance, liability or claim relating to hazardous
or toxic substances in connection with any of our present or former properties.
We have not recorded in our financial statements any material liability in
connection with environmental matters. Nevertheless, it is possible that the
environmental assessments available to us do not reveal all potential
environmental liabilities. It is also possible that subsequent investigations
will identify material contamination, that adverse environmental conditions have
arisen subsequent to the performance of the environmental assessments, or that
there are material environmental liabilities of which management is unaware.
Moreover, no assurances can be given that (i) future laws, ordinances or
regulations will not impose any material environmental liability or (ii) the
current environmental condition of the properties has not been or will not be
affected by tenants and occupants of the properties, by the condition of
properties in the vicinity of the properties or by third parties unrelated to
us, the Operating Partnership or the relevant property's partnership. The
existence of any such environmental liability could have an adverse effect on
our results of operations, cash flow and the funds available to us to pay
dividends.
CBL & ASSOCIATES PROPERTIES, INC.
We are CBL & Associates Properties, Inc., a self-managed,
self-administered, fully integrated real estate investment trust. We are engaged
in the ownership, acquisition, leasing, management and development of regional
malls and community shopping centers. We were incorporated on July 13, 1993
under the laws of the State of Delaware to acquire substantially all of the real
estate properties owned by our predecessor company, CBL & Associates, Inc., and
its affiliates. Our predecessor company was owned by Charles B. Lebovitz, our
Chairman of the Board and Chief Executive Officer, and his associates, who today
are officers or retired officers of our company. We have elected to be taxed as
a real estate investment trust for federal income tax purposes, commencing with
our taxable year ended December 31, 1993.
We conduct substantially all of our business through our Operating
Partnership, which is a Delaware limited partnership. A subsidiary of our
company is the sole general partner of the Operating Partnership and we own an
indirect 68% interest in the Operating Partnership. To comply with certain
technical requirements of the Internal Revenue Code of 1986, as amended, which
are applicable to REITs, a Management Company carries out certain activities
REITs cannot perform themselves. The Operating Partnership owns 100% of the
preferred stock of the Management Company, which entitles the Operating
Partnership to 95% of the Management Company's earnings, and also owns 5% of its
common stock. Several of our officers hold the remaining 95% of the Management
Company's common stock.
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Our Business
We own interests in a portfolio of properties, consisting of 30
enclosed regional malls, 15 associated centers, each of which is part of a
regional shopping mall complex, and 82 independent community and neighborhood
shopping centers.
Additionally, we own one regional mall, one associated center, three
community centers and two centers undergoing expansion, all of which are
currently under construction. We also own options to acquire certain shopping
center development sites.
We also hold mortgages on community and neighborhood shopping centers
owned by certain of our affiliates. The mortgages were granted in connection
with certain property sales by our predecessor company. We also own an interest
in a three-story office building in Chattanooga, Tennessee, a portion of which
serves as our headquarters.
We have qualified as a REIT for federal income tax purposes. In order
to maintain this qualification, we must distribute at least 95% of our REIT
taxable income, computed without regard to net capital gains or the
dividends-paid deduction, and of our after-tax net income from foreclosure
property each year.
In this Prospectus, references to "we," "us" or "our" include those
entities which we own or control, including the Operating Partnership, unless
the context indicates otherwise.
Our Strategy
Charles B. Lebovitz, our Chairman of the Board and Chief Executive
Officer, has been involved in the acquisition, leasing, management and
development of shopping centers for approximately 37 years. John N. Foy, our
Vice Chairman and Chief Financial Officer, has been involved in these activities
for approximately 29 years. Stephen D. Lebovitz, our President, has been
involved in these activities for approximately 11 years, and was responsible for
the establishment of our New England office and operations. We have assembled a
management team that together possesses the skill and sophistication necessary
to execute its strategy. New senior management appointments include experienced
professionals in development, finance, human resources, leasing, legal and
marketing.
We believe that our management team and a number of other factors
provide us with strategic advantages over other operators and developers in our
market areas. These factors include our team approach to property management,
our ability to develop high quality and innovative shopping centers on a cost
effective basis, our established relationships with national and regional
tenants and our extensive experience in understanding the needs of local
tenants.
USE OF PROCEEDS
We will not receive any proceeds from the sale by the Selling
Stockholder, HRE Nashland, Inc., of any of the shares of Common Stock covered by
this Prospectus.
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SELLING STOCKHOLDER
This prospectus covers the 388,022 shares of Common Stock owned by HRE
Nashland, Inc., which represent the Selling Stockholder's entire beneficial
shareholding in our company. After the offering, assuming all of the shares
being offered have been sold, the Selling Stockholder will beneficially own no
shares in our company. The number of Shares to be sold by the Selling
Stockholder at any time or from time to time cannot currently be determined. The
Selling Stockholder acquired its shareholding in connection with a sale of
properties to the Operating Partnership.
PLAN OF DISTRIBUTION
We are registering the Shares on behalf of the Selling Stockholder
pursuant to a Registration Rights Agreement with HRE Nashland, Inc., dated as of
July 1, 1998. The Shares may be offered and sold by the Selling Stockholder, or
by purchasers, transferees, donees, pledgees or other successors in interest,
directly or through brokers, dealers, agents or underwriters who may receive
compensation in the form of discounts, commissions or similar selling expenses
paid by the Selling Stockholder or by a purchaser of the Shares on whose behalf
such broker-dealer may act as agent. Sales and transfers of the Shares may be
effected from time to time in one or more transactions, in private or public
transactions, on the NYSE, in the over-the-counter market, in negotiated
transactions or otherwise, at a fixed price or prices that may be changed, at
market prices prevailing at the time of sale, at negotiated prices, without
consideration or by any other legally available means. Any or all of the Shares
may be sold from time to time by means of:
(a) a block trade, in which a broker or dealer attempts to sell the
Shares as agent but may position and resell a portion of the Shares as principal
to facilitate the transaction;
(b) purchases by a broker or dealer as principal and the subsequent
sale by such broker or dealer for its account pursuant to this Prospectus;
(c) ordinary brokerage transactions (which may include long or short
sales) and transactions in which the broker solicits purchasers;
(d) the writing (sale) of put or call options on the Shares;
(e) the pledging of the Shares as collateral to secure loans, credit or
other financing arrangements and subsequent foreclosure, the disposition of the
Shares by the Lender thereunder; and
(f) any other legally available means.
To the extent required with respect to a particular offer or sale of
the Shares, a Prospectus Supplement will be filed pursuant to Section 424(b)(3)
of the Securities Act, and will accompany this Prospectus, to disclose:
(a) the number of Shares to be sold;
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(b) the purchase price;
(c) the name of any broker, dealer or agent effecting the sale or
transfer and the amount of any applicable discounts, commissions or similar
selling expenses; and
(d) any other relevant information.
The Selling Stockholder may transfer the Shares by means of gifts,
donations and contributions. This Prospectus may be used by the recipients of
such gifts, donations and contributions to offer and sell the Shares received by
them, directly or through brokers, dealers or agents and in private or public
transactions; however, if sales pursuant to this Prospectus by any such
recipient could exceed 500 Shares, we may be required to file a Prospectus
Supplement pursuant to Section 424(b)(3) of the Securities Act to identify the
recipient as another Selling Stockholder and disclose any other relevant
information. Such Prospectus Supplement would be delivered together with this
Prospectus to any purchaser of such Shares.
In connection with distributions of the Shares or otherwise, the
Selling Stockholder may enter into hedging transactions with brokers, dealers or
other financial institutions. In connection with such transactions, brokers,
dealers or other financial institutions may engage in short sales of our Common
Stock in the course of hedging the positions they assume with the Selling
Stockholder. To the extent permitted by applicable law, the Selling Stockholder
also may sell the Shares short and redeliver the Shares to close out such short
positions.
The Selling Stockholder and any broker-dealers who participate in the
distribution of the Shares may be deemed to be "underwriters" within the meaning
of Section 2(11) of the Securities Act and any discounts, commissions or similar
selling expenses they receive and any profit on the resale of the Shares
purchased by them may be deemed to be underwriting commissions or discounts
under the Securities Act. As a result, we have informed the Selling Stockholder
that Regulation M, promulgated under the Exchange Act, may apply to sales by the
Selling Stockholder in the market. The Selling Stockholder may agree to
indemnify any broker, dealer or agent that participates in transactions
involving the sale of the Shares against certain liabilities, including
liabilities arising under the Securities Act.
The aggregate net proceeds to the Selling Stockholder from the sale of
the Shares will be the purchase price of such Shares less any discounts,
concessions or commissions. We will not receive any proceeds from the sale of
any Shares by the Selling Stockholder. We will pay all expenses incurred in
connection with this offering, other than brokerage fees or underwriting
commissions in connection with the resale of Shares, attorney fees and expenses
for attorneys retained by a holder of the Shares in connection with their
resale, or transfer taxes related to the sale or disposition of Shares.
The Selling Stockholder is acting independently of us in making
decisions with respect to the timing, price, manner and size of each sale. We
have not engaged any broker, dealer or agent in connection with the sale of the
Shares, and there is no assurance that the Selling Stockholder will sell any or
all of the Shares. In connection with the offer and sale of the Shares, we have
agreed to make available to the Selling Stockholder copies of this Prospectus
and any applicable
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Prospectus Supplement and have informed the Selling Stockholder of the need to
deliver copies of this Prospectus and any applicable Prospectus Supplement to
purchasers prior to any sale to them.
The Shares covered by this Prospectus may qualify for sale under
Section 4(1) of the Securities Act or Rule 144 promulgated thereunder, and may
be sold pursuant to such provisions rather than pursuant to this Prospectus.
FEDERAL INCOME TAX CONSIDERATIONS
This section is a summary of certain federal income tax matters of
general application pertaining to REITs and their stockholders under the
Internal Revenue Code of 1986, as amended (the "Code"). The discussion is based
on current law and does not purport to deal with all aspects of federal income
taxation that may be relevant to investors subject to special treatment under
federal income tax laws, such as investors subject to the Employee Retirement
Income Security Act of 1974, as amended, tax exempt investors, insurance
companies, financial institutions, dealers in securities or foreign persons. The
provisions of the Code pertaining to REITs are highly technical and complex and
sometimes involve mixed questions of fact and law. In addition, this section
does not discuss foreign, state or local taxation.
The statements and opinions in this discussion are based on current
provisions of the Code and its legislative history, existing, temporary and
currently proposed Treasury Regulations under the Code, existing administrative
rulings and practices of the Internal Revenue Service ("IRS") and judicial
decisions. We cannot assure you that legislative, judicial or administrative
changes will not affect the accuracy of any statements contained herein.
This discussion is not intended as a substitute for careful tax
planning. You are urged to consult with your own tax advisor regarding the
application of specific tax consequences of ownership of our capital stock.
TAXATION OF THE COMPANY
We elected to be taxed as a REIT under the Code commencing with our
taxable year ended December 31, 1993.
In the opinion of Willkie Farr & Gallagher, our tax counsel, we have
been organized and operated in a manner that has enabled us to qualify as a REIT
under Sections 856 through 859 of the Code, and our proposed method of operation
will enable us to continue to so qualify. No assurance can be given, however,
that we will so qualify or continue to so qualify. Our ability to qualify as a
REIT under the requirements of the Code and the Treasury Regulations promulgated
thereunder is dependent upon actual operating results. An opinion of counsel is
not binding on the IRS or the courts and, accordingly, no assurance can be given
that the statements set forth in this section will not be challenged by the IRS
or sustained by the courts if so challenged.
Willkie Farr & Gallagher's opinion is based on certain factual
representations and assumptions and methods of operations which are beyond its
control and which it will not monitor on an ongoing basis. Such factual
assumptions and representations are set forth below. In
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particular, this opinion is based upon the factual representations by us
concerning our business and properties and of Shumacker & Thompson, P.C. as to
certain factual representations and legal conclusions. Moreover, such
qualification and taxation as a REIT depends upon the our ability to meet,
through actual annual operating results, certain distribution levels, a
specified diversity of stock ownership, and the various other qualification
tests imposed under the Code as discussed below. The annual operating results
will not be reviewed by Willkie Farr & Gallagher. Accordingly, no assurance can
be given that the actual results of the Company's operation for any particular
taxable year will satisfy such requirements. Further, the anticipated income tax
treatment described in this Prospectus may be changed, perhaps retroactively, by
legislative, administrative or judicial action at any time.
Provided we qualify for taxation as a REIT, we generally will not be
subject to federal corporate income tax on our net income that is currently
distributed to our shareholders. This treatment substantially eliminates the
"double taxation" at the corporate and shareholder levels that generally results
from an investment in a corporation.
To qualify as a REIT under the Code for a taxable year, we must meet
certain organizational and operational requirements, which generally require us
to be a passive investor in operating real estate and to avoid excessive
concentration of ownership of our stock. First, our principal activities must be
real estate related and we are required to meet various asset and income
qualification tests on a periodic basis. There are three asset tests. First, at
least 75% of the value of our total assets at the end of each calendar quarter
generally must consist of real estate assets, cash or U.S. government
securities. Second, not more than 25% of our total assets may be represented by
securities other than those in the 75% asset class. Finally, of the investments
included in the 25% asset class, the value of any one corporation's securities
owned by us may not exceed 5% of the total value of our assets and may not own
more than 10% of the outstanding voting securities of any issuer; shares of
qualified REITs and of certain wholly owned subsidiaries (of which we own three)
are exempt from this prohibition.
For each taxable year, at least 75% of a our gross income must be
derived from specified real estate sources and 95% must be derived from such
real estate sources plus certain other permitted sources. Real estate income for
purposes of these requirements includes gains from the sale of real property not
held primarily for sale to customers in the ordinary course of business,
dividends on REIT shares, interest on loans secured by mortgages on real
property, certain rents from real property and income from foreclosure property.
For rents to qualify, they may not be based on the income or profits of any
person, except that they may be based on a percentage or percentages of gross
income or receipts, and, subject to certain limited exceptions (including a 1%
safe harbor), we generally may not furnish services (other than usual and
customary services) to tenants. Rents received from a certain related-party
tenants are not qualifying rents. Finally, if rents attributable to personal
property leased in connection with the real property exceeds 15% of the total
rent, then the amount in excess of 15% will not qualify as rent for purposes of
the 75% and 95% income tests.
For us to remain qualified as a REIT, no more than 50% in value of our
outstanding capital stock, including in some circumstances stock into which
outstanding securities might be converted, may be owned actually or
constructively by five or fewer individuals (as defined in the
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Code to include certain entities) at any time during the last half of our
taxable year. Accordingly, our Certificate of Incorporation, as amended,
contains provisions restricting the acquisition of shares of our capital stock.
In addition, shares of our capital stock must be held by a minimum of 100
persons for at least 335 days of our taxable year or during a proportionate part
of a taxable year of less than 12 months. To monitor our compliance with these
share ownership requirements, we are required to maintain records regarding
ownership. Moreover, we are required to demand written statements of ownership
from certain stockholders and to maintain a record of the responses. A
stockholder who refuses to or fails to comply with this demand must submit a
statement with its tax return disclosing actual ownership of the capital stock
and certain other information.
So long as we qualify for taxation as a REIT and distribute at least
95% of the sum of (a) our REIT taxable income (as computed without regard to net
capital gains and the dividends-paid deduction) and (b) our net income (after
tax) from foreclosure property for our taxable year to our stockholders
annually, we will not be subject to federal income tax on that portion of such
income distributed to our stockholders. We will be taxed at regular corporate
rates on all income not distributed to our stockholders. Our policy is to
distribute at least 95% of the sum of our REIT taxable income and net income
from foreclosure property. We may also incur taxes, however, for certain other
activities or to the extent distributions do not satisfy certain other
requirements. These taxes include a corporate alternative minimum tax and an
excise tax on undistributed income. Finally, if we fail to meet the distribution
requirement, we may, in some cases, be able to rectify the failure by paying
"deficiency dividends" to our shareholders in a later year.
Pursuant to recently enacted legislation and if we so elect, we may
retain, rather than distribute, our net long-term capital gains and pay the tax
on such gains. In such a case, our stockholders would include their
proportionate share of the undistributed long-term capital gains in income.
However, our stockholders would then be deemed to have paid their share of the
tax, which would be credited or refunded to them. In addition, our stockholders
would be able to increase the basis of our shares by the amount of the
undistributed long-term capital gains (less the amount of capital gains tax paid
by us) included in the stockholder's long-term capital gains.
In the case of a REIT which is a partner in a partnership, such as us,
Treasury Regulations provide that the REIT will be deemed to own its
proportionate share of the assets of the partnership and will be deemed to earn
the income of the partnership attributable to such share. In addition, for
purposes of satisfying the asset and income tests described above, the character
of the gross income and assets in the hands of the partnership remains the same
when allocated to the REIT. Accordingly, our proportionate share of the assets,
liabilities and items of income of the Operating Partnership will be treated as
our assets, liabilities, and items of income for purposes of qualifying as a
REIT.
Under the Code and Treasury Regulations, items of income, gain, loss
and deduction attributable to appreciated or depreciated property contributed to
a partnership in exchange for a partnership interest must be allocated in a
manner such that the contributing partner is charged with, or benefits from,
respectively, the unrealized gain or loss associated with the property at the
time of contribution. These allocations are solely for income tax purposes and
do not affect the
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economic or legal arrangements among the partners. As a result of these rules,
certain limited partners in the Operating Partnership (and other partnerships in
which we own an interest) may be allocated lower depreciation and other
deductions or greater amounts of taxable income. This may cause us to recognize
income in excess of cash proceeds, which in turn may affect our ability to
comply with the REIT distribution requirements.
Our failure to qualify during any taxable year as a REIT could, unless
certain relief provisions were available, have a material adverse effect upon
investors. If disqualified for taxation as a REIT for a taxable year, we would
also be disqualified for taxation as a REIT for the next four taxable years,
unless the failure was due to reasonable cause rather than willful neglect and
certain other conditions are met. We would be subject to federal income tax at
corporate rates on all of our taxable income and would not be able to deduct the
dividends paid, which could result in a discontinuation of or substantial
reduction in dividends to stockholders. Dividends would also be subject to the
regular tax rules applicable to dividends received by stockholders of
corporations. Should the failure to qualify be determined to have occurred
retroactively in one of our earlier tax years, the imposition of a substantial
federal income tax liability on us attributable to such nonqualifying tax years
may adversely affect our ability to pay dividends. In the event that we fail to
meet certain income tests of the tax law, we may, generally, nonetheless retain
our qualification as a REIT if we pay a 100% tax on the amount by which we
failed to meet the income tests so long as our failure was due to reasonable
cause and not willful neglect. Any such taxes would adversely affect our ability
to pay dividends.
TAXATION OF TAXABLE U.S. STOCKHOLDERS
As used herein, the term "U.S. Stockholder" means a holder of our stock
who, for United States federal income tax purposes is (i) a citizen or resident
of the United States, (ii) a corporation created or organized in or under the
laws of the United States or of any political subdivision thereof, (iii) an
estate the income of which is subject to United States federal income taxation
regardless of its source, or (iv) a trust if a court within the United States is
able to exercise primary supervision over the administration of such trust and
one or more United States persons as defined in section 7701(a)(30) of the Code,
have the authority to control all the substantial decisions of such trust.
As long as we qualify as a REIT, distributions made to our U.S.
Stockholders out of current or accumulated earnings and profits (and not
designated as capital gain dividends) will be taxable to such U.S. Stockholders
as ordinary income. Corporate U.S. Stockholders will not be entitled to the
dividends-received deduction with respect to distributions by us. Distributions
that are designated as capital gain dividends will be taxable to U.S.
stockholders as long-term capital gains (to the extent they do not exceed our
actual net capital gain for the taxable year) without regard to the period for
which the U.S. Stockholder has held its stock. Subject to certain limitations,
such capital gains dividends received by an individual U.S. Stockholder may be
eligible for the 20% or 25% capital gains rates of tax. However, corporate U.S.
Stockholders may be required to treat up to 20% of certain capital gain
dividends as ordinary income. Distributions by us in excess of our current and
accumulated earnings and profits will not be taxable to a U.S. Stockholder to
the extent that such distributions do not exceed the adjusted basis of the
U.S. Stockholder's shares, but rather will be a nontaxable reduction in a U.S.
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Stockholder's adjusted basis in such shares to the extent thereof and thereafter
will be taxed as capital gain.
Any dividend declared by us in October, November or December of any
year payable to a U.S. Stockholder of record on a specified date in any such
month will be treated as both paid by us and received by the U.S. Stockholder on
December 31 of such year, provided that the dividend is actually paid by us
during January of the following calendar year.
U.S. Stockholders holding capital stock at the close of our taxable
year will be required to include, in computing their long-term capital gains for
the taxable year in which the last day of our taxable year falls, such amount as
we may designate in a written notice mailed to our stockholders. We may not
designate amounts in excess of our undistributed net capital gain for the
taxable year. Each U.S. Stockholder required to include such a designated amount
in determining such stockholder's long-term capital gains will be deemed to have
paid, in the taxable year of the inclusion, the tax paid by us in respect of
such undistributed net capital gains. U.S. Stockholders subject to these rules
will be allowed a credit or a refund, as the case may be, for the tax deemed to
have been paid by such stockholders. U.S. Stockholders will increase their basis
in their capital stock by the difference between the amount of such includible
gains and the tax deemed paid by the U.S. Stockholder in respect of such gains.
U.S. Stockholders may not include in their individual income tax
returns any of our net operating losses or capital losses. Instead, such losses
would be carried over by us for potential offset against our future income
(subject to certain limitations). Taxable distributions from us and gain from
the disposition of the capital stock will not be treated as passive activity
income and, therefore, U.S. Stockholders generally will not be able to apply any
"passive activity losses" (such as losses from certain types of limited
partnerships in which the U.S. Stockholder is a limited partner) against such
income. In addition, taxable distributions from us and gain from the disposition
of capital stock generally will be treated as investment income for purposes of
the investment interest limitations. We will notify the U.S. Stockholders after
the close of our taxable year as to the portions of the distributions
attributable to that year that constitute ordinary income, return of capital,
and capital gain. In general, any gain or loss realized upon a taxable
disposition of the capital stock by a U.S. Stockholder who is not a dealer in
securities will be treated as long-term capital gain if held for more than 12
months and otherwise as short-term capital gain or loss. Long-term capital gain
of an individual U.S. Stockholder with respect to the sale of stock is generally
subject to a maximum tax rate of 20%. However, any loss upon a sale or exchange
of capital stock by a U.S. Stockholder who has held such stock for six months or
less (after applying certain holding period rules) will be treated as long-term
capital loss to the extent of distributions from us required to be treated by
such U.S. Stockholder as long-term capital gain. All or a portion of any loss
realized upon a taxable disposition of the capital stock may be disallowed if
other shares of the capital stock are purchased within 30 days before or after
the disposition.
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BACKUP WITHHOLDING
We will report to our U.S. Stockholders and to the IRS the amount of
dividends paid during each calendar year, and the amount of tax withheld, if
any. Under the backup withholding rules, a U.S. Stockholder may be subject to
backup withholding at the rate of 31% with respect to dividends paid unless such
holder: (a) is a corporation or comes within certain other exempt categories and
when required demonstrates this fact, or (b) provides a taxpayer identification
number, certifies as to no loss of exemption from backup withholding, and
otherwise complies with applicable requirements of the backup withholding rules.
A U.S. Stockholder that does not provide us 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 U.S.
Stockholder's income tax liability. In addition, we may be required to withhold
a portion of capital gain distributions to any U.S. Stockholders that fail to
certify their non-foreign status to us. See " Taxation of Non-U.S. Stockholders
of the Company."
TAXATION OF PENSION TRUSTS
One of the requirements for us to qualify as a REIT for federal income
tax purposes is that during the last half of each taxable year, not more than
50% in value of our capital stock can be owned by five or fewer individuals (as
defined in the Code to include certain entities). For purposes of the "five or
fewer" test described above, beneficiaries of a domestic pension trust that owns
shares of our capital stock generally will be treated as owning such shares in
proportion to their actuarial interests in the trust. In addition, amounts
distributed by us to a tax-exempt pension trust generally do not constitute
unrelated business taxable income ("UBTI") to such trust unless the trust owns
more than ten percent of the capital stock, in which case a portion of such
amounts distributed may be treated as UBTI.
TAXATION OF NON-U.S. STOCKHOLDERS
The rules governing United States federal income taxation of the
ownership and disposition of capital stock by persons that are, for purposes of
such taxation, nonresident alien individuals, foreign corporations, foreign
partnerships or foreign estates or trusts (collectively, "Non-U.S.
Stockholders") are complex, and no attempt is made herein to provide more than a
brief summary of such rules. Accordingly, the discussion does not address all
aspects of United States federal income tax and does not address state, local or
foreign tax consequences that may be relevant to a Non-U.S. Stockholder in light
of its particular circumstances. In addition, this discussion is based on
current law, which is subject to change, and assumes that we qualify for
taxation as a REIT. Prospective Non-U.S. Stockholders should consult with their
own tax advisers to determine the impact of federal, state, local and foreign
income tax laws with regard to an investment in capital stock, including any
reporting requirements.
Distributions by us to a Non-U.S. Stockholder that are neither
attributable to gain from sales or exchanges by us of United States real
property interests nor designated by us as capital gains dividends will be
treated as dividends of ordinary income to the extent that they are made out of
our current or accumulated earnings and profits. Such distributions ordinarily
will be subject to withholding of United States federal income tax on a gross
basis (that is, without
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allowance of deductions) at a 30% rate or such lower rate as may be specified by
an applicable income tax treaty, unless the dividends are treated as effectively
connected with the conduct by the Non-U.S. Stockholder of a United States trade
or business. Dividends that are effectively connected with such a trade or
business will be subject to tax on a net basis (that is, after allowance of
deductions) at graduated rates, in the same manner as U.S. Stockholders are
taxed with respect to such dividends, and are generally not subject to
withholding. Any such dividends received by a Non-U.S. Stockholder that is a
corporation may also be subject to an additional branch profits tax at a 30%
rate or such lower rate as may be specified by an applicable income tax treaty.
We expect to withhold United States income tax at the rate of 30% on the gross
amount of any such distributions made to a Non-U.S. Stockholder unless (i) a
lower treaty rate applies and any required form or certification evidencing
eligibility for that reduced rate is filed with the Company or (ii) the Non-U.S.
Stockholder files an IRS Form 4224 (or successor form) with us claiming that the
distribution is effectively connected income.
Distributions in excess of our current or accumulated earnings and
profits will not be taxable to a Non-U.S. Stockholder to the extent that they do
not exceed the adjusted basis of the stockholder's capital stock, but rather
will reduce the adjusted basis of such capital stock. To the extent that such
distributions exceed the adjusted basis of a Non-U.S. Stockholder's capital
stock, they will give rise to gain from the sale or exchange of its capital
stock, the tax treatment of which is described below. As a result of a recent
legislative change made to the Code, it appears that we will be required to
withhold 10% of any distribution in excess of our current and accumulated
earnings and profits. Consequently, although we intend to withhold at a rate of
30% on the entire amount of any distribution (or a lower applicable treaty
rate), to the extent that we do not do so, any portion of a distribution not
subject to withholding at a rate of 30% (or a lower applicable treaty rate) will
be subject to withholding at a rate of 10%. However, the Non-U.S. Stockholder
may seek a refund of such amounts from the IRS if it subsequently determined
that such distribution was, in fact, in excess of our current or accumulated
earnings and profits, and the amount withheld exceeded the Non-U.S.
Stockholder's United States tax liability, if any, with respect to the
distribution.
Distributions to a Non-U.S. Stockholder that are designated by us at
the time of distribution as capital gains dividends (other than those arising
from the disposition of a United States real property interest) generally will
not be subject to United States federal income taxation, unless (i) the
investment in the capital stock is effectively connected with the Non-U.S.
Stockholder's United States trade or business, in which case the Non-U.S.
Stockholder will be subject to the same treatment as U.S. Stockholders with
respect to such gain (except that a stockholder that is a foreign corporation
may also be subject to the 30% branch profits tax, as discussed above), or (ii)
the Non-U.S. Stockholder is a nonresident alien individual 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 nonresident alien individual will be
subject to a 30% tax on the individual's capital gains.
Under the Foreign Investment in Real Property Tax Act ("FIRPTA"),
distributions to a Non-U.S. Stockholder that are attributable to gain from sales
or exchanges by us of United States real property interests (whether or not
designated as a capital gain dividend) will cause the Non-U.S. Stockholder to be
treated as recognizing such gain as income effectively connected with a
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United States trade or business. Non-U.S. Stockholders would thus generally be
taxed at the same rates applicable to U.S. Stockholders (subject to a special
alternative minimum tax in the case of nonresident alien individuals). Also,
such gain may be subject to a 30% branch profits tax in the hands of a Non-U.S.
Stockholder that is a corporation, as discussed above. We are required to
withhold 35% of any such distribution. That amount is creditable against the
Non-U.S. Stockholder's United States federal income tax liability.
Although the law is not entirely clear on the matter, it appears that
amounts designated by us as undistributed capital gains in respect of
stockholders' shares would be treated with respect to Non-U.S. Stockholders in
the manner outlined in the preceding two paragraphs for actual distributions by
us of capital gain dividends. Under that approach, the Non-U.S. Stockholders
would be able to offset as a credit against their United States federal income
tax liability resulting therefrom their proportionate share of the tax paid by
us on such undistributed capital gains (and to receive from the IRS a refund to
the extent their proportionate share of such tax paid by us were to exceed their
actual United States federal income tax liability).
Gain recognized by a Non-U.S. Stockholder upon the sale or exchange of
capital stock generally will not be subject to United States taxation unless
such shares constitute a "United States real property interest" within the
meaning of FIRPTA. The capital stock will not constitute a "United States real
property interest" so long as we are a "domestically controlled REIT." A
"domestically controlled REIT" is a REIT in which at all times during the
specified testing period less than 50% in value of its stock is held directly or
indirectly by Non-U.S. Stockholders. Notwithstanding the foregoing, gain from
the sale or exchange of capital stock not otherwise subject to FIRPTA will be
taxable to a Non-U.S. Stockholder if the Non-U.S. Stockholder is a nonresident
alien individual 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 such case, the
nonresident alien individual will be subject to a 30% United States withholding
tax on the amount of such individual's gain.
We believe that we are and will continue to be a "domestically
controlled REIT," and therefore that the sale of capital stock will not be
subject to taxation under FIRPTA. However, because the capital stock is publicly
traded, no assurance can be given that we will continue to be a "domestically
controlled REIT." If we fail to qualify as a "domestically controlled REIT,"
gain arising from the sale or exchange by a Non-U.S. Stockholder of capital
stock still would not be subject to United States taxation under FIRPTA as a
sale of a "United States real property interest," if (i) the capital stock (as
applicable) is "regularly traded" (as defined by applicable Treasury
Regulations) on an established securities market (e.g., the NYSE) and (ii) the
selling Non-U.S. Stockholder held 5% or less of the value of the outstanding
class or series of shares being sold at all times during a specified testing
period. If gain on the sale or exchange of capital stock were subject to
taxation under FIRPTA, the Non-U.S. Stockholder would be subject to regular
United States income tax with respect to such gain in the same manner as a U.S.
Stockholder (subject to any applicable alternative minimum tax and a special
alternative minimum tax in the case of nonresident alien individuals), and the
purchaser of the capital-stock would be required to withhold and remit to the
IRS 10% of the purchase price.
22
<PAGE>
Backup withholding tax and information reporting will generally not
apply to distributions paid to Non-U.S. Stockholders outside the United States
that are treated as (i) dividends subject to the 30% (or lower treaty rate)
withholding tax discussed above, (ii) capital gains dividends or (iii)
distributions attributable to gain from the sale or exchange by us of United
States real property interests. As a general matter, backup withholding and
information reporting will not apply to a payment of the proceeds of a sale of
capital stock by or through a foreign office of a foreign broker. Information
reporting (but not backup withholding) will apply, however, to a payment of the
proceeds of sale of capital stock by a foreign office of a broker that (a) is a
United States person, (b) derives 50% or more of its gross income for certain
periods from the conduct of a trade or business in the United States or (c) is a
"controlled foreign corporation" (generally, a foreign corporation controlled by
U.S. Stockholders) for United States tax purposes, unless the broker has
documentary evidence in its records that the holder is a Non-U.S. Stockholder
and certain other conditions are met, or the stockholder otherwise establishes
an exemption. Payment to or through a United States office of a broker of the
proceeds of a sale of capital stock is subject to both backup withholding and
information reporting unless the stockholder certifies under penalty of perjury
that the stockholder is a Non-U.S. Stockholder, or otherwise establishes an
exemption. A Non-U.S. Stockholder may obtain a refund of any amounts withheld
under the backup withholding rules by filing the appropriate claim for refund
with the IRS.
The United States Treasury Department has issued final regulations
regarding the withholding and information reporting rules discussed above. In
general, these regulations do not alter the substantive withholding and
information reporting requirements but unify certification procedures and forms
and clarify and modify reliance standards. These regulations generally are
effective for payments made after December 31, 2000, subject to certain
transition rules. A Non-U.S. Stockholder should consult its own advisor
regarding the effect of the new Treasury Regulations.
POSSIBLE LEGISLATIVE OR OTHER ACTIONS AFFECTING REITS.
The rules dealing with federal income taxation are constantly under
review by persons involved in the legislative process and by the IRS and the
U.S. Treasury Department. Changes to the tax law, which may have retroactive
application, could adversely affect us and our investors. It cannot be predicted
whether, when, in what forms, or with what effective dates, the tax law
applicable to us or our investors will be changed.
STATE, LOCAL AND FOREIGN TAX CONSIDERATIONS
We may be required to pay state, local and foreign taxes in various
state, local and foreign jurisdictions, including those in which we transact
business or make investments. For example, the State of Tennessee has recently
enacted legislation that would extend franchise and excise taxes to limited
partnerships for tax years ending in 2000. In addition, our state, local and
foreign tax treatment may not conform to the federal income tax consequences
summarized above.
Likewise, you may be required to pay state, local and foreign taxes in
various state, local and foreign jurisdictions, including those in which you
reside. In addition, your state, local and foreign tax treatment may not conform
to the federal income tax consequences summarized
23
<PAGE>
above. Consequently, you should consult your tax advisor regarding the effect of
state, local and foreign tax laws on an investment in our securities.
LEGAL MATTERS
Certain legal matters with respect to the Shares will be passed upon
for us by Willkie Farr & Gallagher, New York, New York. Certain other matters
will be passed upon for us by Shumacker & Thompson, P.C., Chattanooga,
Tennessee. Certain members of Shumacker & Thompson, P.C. are assistant
secretaries of the Company.
EXPERTS
The financial statements and schedules incorporated by reference in CBL
& Associates Properties, Inc.'s Form 10-K and incorporated by reference in this
Registration Statement have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their reports with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in giving
said reports.
24
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses in connection with
the sale and distribution of securities being registered, other than discounts,
concessions and brokerage commissions.
SEC registration fee............................................ $2,431
Blue sky fees and expenses...................................... 500*
Legal fees and expenses......................................... 20,000*
Accounting fees and expenses.................................... 5,000*
Miscellaneous (including NYSE listing fees)..................... 1,500*
--------
Total.................................................. $29,431*
- --------------------
* Estimated
The Company will bear all of the foregoing expenses.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company is a Delaware corporation. In its Certificate of
Incorporation, as amended, the Company generally agrees to indemnify each person
who is a director or officer of the Company, or serves at the request of a
director or officer as a director, officer, employee or agent of another
company, in accordance with the Company's by-laws, to the fullest extent
permissible by the Delaware General Corporation Law or other applicable laws. No
director of the Company will be personally liable to the Company or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to the
Company or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii)
pursuant to Section 174 of the Delaware General Corporation Law or (iv) for any
transaction from which the director derived an improper personal benefit.
The Company has entered into indemnification agreements with each of
its officers and directors. The indemnification agreements, among other things,
require the indemnification of the Company's officers and directors to the
fullest extent permitted by law, and require that the Company advance to the
officers and directors all related expenses, subject to reimbursement if it is
subsequently determined that indemnification is not permitted. Such
indemnification agreements also provide for the indemnification and advance of
all expenses incurred by officers and directors seeking to enforce their rights
under the indemnification agreements, and require the Company to cover officers
and directors under the Company's directors' and officers' liability insurance.
25
<PAGE>
Although the indemnification agreements offer substantially the same
scope of coverage afforded by provisions in the Certificate and the Bylaws, such
agreements provide greater assurance to directors and officers that
indemnification will be available, because, as a contract, it cannot be modified
unilaterally in the future by the Board of Directors or by the stockholders to
eliminate the rights they provide.
ITEM 16. EXHIBITS.
5.1 Opinion of Willkie Farr & Gallagher, counsel for the Company.
8.1 Tax opinion of Willkie Farr & Gallagher, counsel for the Company.
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Willkie Farr & Gallagher (included in Exhibit 5.1 and
Exhibit 8.1).
24.1 Powers of Attorney of certain officers and directors of the
Company (included on signature page).
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of the securities offered would not exceed that which
was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
a 20 percent change in the maximum aggregate offering price set forth
in the "Calculation of Registration Fee" table in the effective
registration statement; and
(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;
26
<PAGE>
provided however, that subparagraphs (1)(i) and (ii) above do
not apply if the Registration Statement is on Form S-3, and
the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports
filed with or furnished to the Commission by the registrant
pursuant to Section 13 or Section 15(d) of he Securities
Exchange Act of 1934 that are incorporated by reference in
this registration statement.
(2) That, for the purpose of determining any liability under
the Securities Act, each such post-effective amendment shall be deemed
to be a new Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(b) The undersigned registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act, each filing of
the registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
Registration Statement shall be deemed to be a new Registration Statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act 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 is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than insurance payments and the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of 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.
27
<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 the City of Chattanooga, State of Tennessee, as of November 5,
1999.
CBL & ASSOCIATES PROPERTIES, INC.
(Registrant)
By: /s/ CHARLES B. LEBOVITZ
--------------------------------
Charles B. Lebovitz
Chairman and Chief Executive Officer
Each of the undersigned officers and directors of CBL & Associates
Properties, Inc., hereby severally constitutes and appoints Charles B. Lebovitz,
John N. Foy and Stephen D. Lebovitz and each of them as the attorneys-in-fact
for the undersigned, in any and all capacities, with full power of substitution,
to sign any and all pre- or post-effective amendments to this Registration
Statement, any subsequent Registration Statement for the same offering which may
be filed under Rule 462(b) under the Securities Act of 1933 and any and all pre-
or post-effective amendments thereto, and to file the same with exhibits thereto
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that each said attorney-in-fact, or either of them, may lawfully do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below as of November 5, 1999, by the
following persons in the capacities indicated:
Signature Title
/s/ CHARLES B. LEBOVITZ Chairman and Chief Executive Officer
- ------------------------
Charles B. Lebovitz
/s/ JOHN N. FOY Director, Vice Chairman, Treasurer, and
- ------------------------ Chief Financial Officer (Principal Financial
John N. Foy Officer and Principal Accounting Officer)
/s/ STEPHEN D. LEBOVITZ Director, President and Secretary
- -------------------------
Stephen D. Lebovitz
/s/ CLAUDE M. BALLARD Director
- -------------------------
Claude M. Ballard
<PAGE>
/s/ WILLIAM J. POORVU Director
- ---------------------------
William J. Poorvu
/s/ LEO FIELDS Director
- ---------------------------
Leo Fields
/s/ WINSTON W. WALKER Director
- ---------------------------
Winston W. Walker
<PAGE>
EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION
- ---------- -------------
5.1 Opinion of Willkie Farr & Gallagher, counsel for the Company.
8.1 Tax Opinion of Willkie Farr & Gallagher, counsel for the Company.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Willkie Farr & Gallagher (included in Exhibit 5.1 and
Exhibit 8.1).
24.1 Powers of Attorney of certain officers and directors of the company
(included on signature page).
<PAGE>
EXHIBIT 5.1
Willkie Farr & Gallagher
787 Seventh Avenue
New York, New York 10019
(212) 728-8000
November 5, 1999
CBL & Associates Properties, Inc.
6148 Lee Highway, Suite 300
Chattanooga, Tennessee 37421-6511
Re: Registration Statement on Form S-3
Gentlemen:
We have acted as counsel to CBL & Associates Properties, Inc., a
Delaware corporation (the "Company"), in connection with the registration under
the Securities Act of 1933, as amended, of an aggregate of 388,022 shares of its
common stock, par value $.01 per share (the "Shares"), which may be sold from
time to time by the selling stockholder identified in the Company's Registration
Statement on Form S-3 (the "Registration Statement") to be filed with the
Securities and Exchange Commission on November 5, 1999.
As such counsel, we have examined such documents and certificates of
officers of the Company as we deemed relevant and necessary as the basis for the
opinion hereafter expressed. In such examinations, we have assumed the
genuineness of all signatures and the authenticity of all documents submitted to
us as originals and the conformity to original documents of all documents
submitted to us as conformed or photostatic copies.
Based upon the foregoing, we are of the opinion that the Shares which
are the subject of the Registration Statement have been duly and validly issued
and are fully paid and non-assessable.
The opinions expressed herein are limited to the laws of the State of
New York, the corporate laws of the State of Delaware, and the Federal
Securities Laws and we express no opinion with respect to the laws of any other
country, state or jurisdiction. With respect to matters of Tennessee law, we
have relied on the opinion, dated November 5, 1999 of Shumacker & Thompson,
P.C., general counsel to the Company. This opinion is furnished to you solely
for your information in connection with the Registration Statement and is not to
be used, circulated, quoted or otherwise referred to for any other purpose
without our express written permission.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the heading "Legal
Matters" in the Prospectus comprising a part of the Registration Statement.
Very truly yours,
/s/ Willkie Farr & Gallagher
<PAGE>
EXHIBIT 8.1
Willkie Farr & Gallagher
787 Seventh Avenue
New York, New York 10019
(212) 728-8000
November 5, 1999
CBL & Associates Properties, Inc.
Suite 300
6148 Lee Highway
Chattanooga, Tennessee 37421-6511
Gentlemen:
You have requested our opinions as special tax counsel to CBL
& Associates Properties, Inc. (the "Company") concerning certain of the federal
income tax consequences in connection with the registration statement on Form
S-3, No. 333-47041, filed with the Securities and Exchange Commission on
November 5, 1999, (which registration statement is hereinafter referred to as
the "Registration Statement"). These opinions are based on various assumptions
and is conditioned upon certain representations made by the Company as to
factual matters as set forth in the discussion of "Federal Income Tax
Considerations" in the Registration Statement; the factual representations of
the Company concerning its business and properties as set forth in the
Registration Statement; representations made to us by the Company in a letter
dated November 5, 1999; representations made to us by Shumacker & Thompson,
P.C., general counsel to the Company, in a letter dated November 5, 1999; and
certain other records, documents, agreements and instruments as we have deemed
necessary.
To the extent that we have examined and relied upon original
documents or copies thereof in rendering the opinions expressed below, we have
assumed (i) the authenticity of all documents submitted to us as originals, (ii)
the conformity to authentic original documents of all documents submitted to us
as copies, and (iii) the genuineness of all signatures.
Based on such facts, assumptions and representations and our
review of the Registration Statement, the exhibits thereto, and such other
documents and information as we believed appropriate, and subject to the
qualifications stated in the next paragraph below, as of the date hereof, we are
of the opinion that, for federal income tax purposes under current law:
1. Commencing with the Company's taxable year ending December 31, 1993,
the Company was organized and has operated in conformity with the
requirements for qualification as a real estate investment trust under
the Internal Revenue Code of 1986, as amended (the "Code"), and the
methods of operation of the Company, CBL & Associates Limited
Partnership (the "Operating Partnership") and the Property
Partnerships, as described in the Registration Statement and in the
Registration Statement on Form S-11, No. 33-67372, originally filed
with the Securities and Exchange Commission on August
<PAGE>
12, 1993, as subsequently amended (the "S-11 Registration"), and as
represented by the Company will permit the Company to continue to
qualify for its current and subsequent taxable years;
2. Each of the Operating Partnership and the Property Partnerships, as
described in the Registration Statement and in the S-11 Registration,
will be classified as a partnership and not as (a) an association
taxable as a corporation or (b) a "publicly traded partnership" within
the meaning of Section 7704(b) of the Code;
3. The description of federal income tax matters and consequences
described under "Federal Income Tax Considerations" in the Registration
Statement is an accurate general summary in all material aspects of the
information described therein; and
4. The conversion rights associated with interests in the Operating
Partnership will not cause the Company to fail the diversity of
ownership test of Section 856(a)(6) of the Code.
These opinions are given as of the date hereof and are based
on the Code and the Treasury Regulations promulgated thereunder and
interpretations thereof by the Internal Revenue Service and the courts having
jurisdiction over such matters, all of which are subject to change either
prospectively or retroactively. Further, any variation or difference in the
facts from those set forth in the Registration Statement, the Registration
Statement on Form S-11, the letters from the Company and Shumacker & Thompson,
P.C., or any other facts, assumptions or materials referred to above may affect
the conclusions stated herein. Moreover, the Company's qualification and
taxation as a real estate investment trust depend upon the Company's ability to
meet -- through actual annual operating and other results -- requirements under
the Code, among other things, regarding distribution levels, the gross income
and asset tests, and diversity of stock ownership. As Willkie Farr & Gallagher
will not review whether the Company has fulfilled those requirements, no
assurance can be given that the actual results of the Company's operation and
other activities for any one or more taxable years will satisfy the tests
necessary to qualify as or be taxed as a real estate investment trust under the
Code.
No opinion is expressed as to any matter not discussed herein
and we assume no obligation to advise you of any changes in the foregoing
subsequent to the date of this opinion, and we are not undertaking to update
this opinion letter after the date hereof.
This opinion is furnished to you solely for use in connection
with the Registration Statement. We hereby consent to the filing of this opinion
as an Exhibit to the Registration Statement and, specifically, to the use of our
name under the caption "Federal Income Tax Considerations," and, generally, to
the other references to this firm in the Registration Statement and the
prospectus included therein.
Very truly yours,
/s/ Willkie Farr & Gallagher
<PAGE>
Attachments: (1) CBL & Associates Properties, Inc. letter dated November 5,
1999 to Willkie Farr & Gallagher
(2) Shumacker & Thompson, P.C. letter dated November 5, 1999 to
Willkie Farr & Gallagher
<PAGE>
CBL & ASSOCIATES PROPERTIES, INC. LETTERHEAD
November 5, 1999
Willkie Farr & Gallagher
787 Seventh Avenue
New York, New York 10019-6099
Ladies and Gentlemen:
CBL & Associates Properties, Inc. (the "Company"), a Delaware
corporation and CBL & Associates Limited Partnership (the "Operating
Partnership") have requested your opinion with respect to certain federal income
tax consequences in connection with the registration statement on Form S-3, No.
333-47041, filed with the Securities and Exchange Commission on November 5, 1999
(which registration statement is hereinafter referred to as the "Registration
Statement"). Capitalized terms used herein and not otherwise defined have the
meanings set forth in the Registration Statement.
In connection with your opinion, the Company to the best of its
knowledge and belief makes the following representations to you in its own
capacity and its capacity as General Partner of the Operating Partnership.
Unless the context otherwise requires, representations made by the Company
herein as of November 5, 1999 shall be deemed to include representations by CBL
Holdings I, CBL Holdings II, CBL/North Haven (all as defined below), the
Operating Partnership and each of the Property Partnerships.
1. From their respective dates of formation, the Company and each
of its wholly-owned subsidiaries, CBL Holdings I, Inc., a Delaware corporation
("CBL Holdings I"), CBL Holdings II, Inc., a Delaware corporation ("CBL Holdings
II"), and CBL/North Haven Inc., a Connecticut corporation ("CBL/North Haven"),
have operated and will continue to operate in accordance with Delaware and/or
Connecticut law, their respective Certificates of Incorporation and their
respective by-laws.
2. From each respective date of formation, (i) the Operating
Partnership has operated, and will continue to operate, in accordance with
Delaware law and the Partnership Agreement, and (ii) each of the Property
Partnerships has operated, and will continue to operate, in accordance with its
respective partnership agreement and law applicable thereto.
3. The Company did duly and timely make the election specified in
Section 856(c)(1) of the Internal Revenue Code of 1986, as amended (the "Code")
to be a real estate investment trust
<PAGE>
under the Code with respect to its taxable year ending December 31, 1993, and
adopted a calendar year accounting period.
4. The Company is managed by its directors, and beneficial ownership in
the Company is evidenced by transferable shares.
5. The Company expects, and the Company will take all measures
within its control to ensure, that at no time during the last half of any
taxable year beginning after the 1993 calendar year will more than 50 percent in
value of the Company's outstanding shares be owned, directly or indirectly
(within the meaning of Section 544 of the Code), by or for five or fewer
individuals for purposes of Section 856(a)(6) of the Code. This expectation was
true for all calendar years beginning after the 1993 calendar year.
6. The Company expects, and the Company will take all measures
within its control to ensure, that at all times beginning after the 1993
calendar year, the beneficial ownership of the Company will be held by 100 or
more persons. This expectation was true for all calendar years beginning after
the 1993 calendar year.
7. The projections and analyses prepared by the Company and presented to
you with respect to the Company's qualification under the income and asset tests
set forth in Section 856 of the Code represent the Company's best estimate of
the gross income derived by the Operating Partnership and the assets to be held
by the Operating Partnership for the 1999 tax year.
8. The Company expects, and the Company will take all measures
within its control to ensure, that at least 95 percent of the gross income
derived by the Company (including through CBL Holdings I, CBL Holdings II, the
Operating Partnership and the Property Partnerships) in any taxable year will
consist of: (i) rents from real property derived by the Operating Partnership
from rental of the Properties or properties acquired in the future, including
rents attributable to personal property as described in representation (18)
below and including charges for services customarily furnished or rendered in
connection with the rental of real property, whether or not such charges are
separately stated, but excluding for such purposes rents received from related
parties as defined in Section 856(d)(2)(B) of the Code; (ii) interest on
unsecured obligations and interest on obligations secured by mortgages on real
property or on interests in real property; (iii) any gain realized on the sale
of all or a portion of the Properties or properties acquired in the future; (iv)
amounts held by the Operating Partnership in bank accounts or reserves; (v)
interest and dividends from CBL & Associates Management, Inc. (the "Management
Company"); and (vi) amounts described in Section 856(c)(2)(D)through (H) of the
Code. The expectation described herein was satisfied during the period beginning
October 26, 1993 and ending on the date hereof.
9. The Company expects, and the Company will take all measures
within its control to ensure, that at least 75 percent of the gross income
derived by the Company (including through CBL Holdings I, CBL Holdings II, the
Operating Partnership and the Property Partnerships) in any taxable year will
consist of: (i) amounts derived by the Operating Partnership from rental of the
Properties or properties acquired in the future, including rents attributable to
personal property as described in representation (18) below and including
charges for services customarily furnished or rendered in connection with the
rental of real property, whether or not such charges
<PAGE>
are separately stated, but excluding for such purposes rents received from
related parties as defined in Section 856(d)(2)(B) of the Code; (ii) interest on
obligations secured by mortgages on real property or on interests in real
property; (iii) any gain realized on the sale of all or a portion of the
Properties or properties acquired in the future; and (iv) amounts described in
Section 856(c)(3)(D) through (H) of the Code. The expectation described herein
was satisfied during the period beginning October 26, 1993 and ending on the
date hereof.
10. The Company expects, and it will take all measures within its
control to ensure, that no amount received or accrued, directly or indirectly,
by the Company or the Operating Partnership as interest is dependent in whole or
in part on the income or profits derived by any person, except amounts based on
a fixed percentage or percentages of receipts or sales and amounts received from
a debtor which derives substantially all of its gross income with respect to
such property from subleasing attributable to qualified rentals as defined in
Section 856(d)(6)(B). The expectation described herein was satisfied during the
period beginning October 26, 1993 and ending on the date hereof.
11. The Company expects, and it will take all measures within its
control to ensure, that no amount received or accrued, directly or indirectly,
by the Company or the Operating Partnership as interest on obligations secured
by mortgages on real property are or will be dependent in whole or in part on
the income or profits derived by any person (including amounts received or
accrued by the debtor the determination of which depends in whole or in part on
the income or profits of any person), except amounts based on a fixed percentage
or percentages of receipts or sales and amounts received from a debtor which
derives substantially all of its gross income with respect to such property from
subleasing attributable to qualified rentals as defined in Section 856(d)(6)(B).
The expectation described herein was satisfied during the period beginning
October 26, 1993 and ending on the date hereof.
12. The Company currently derives, expects to derive and will take all
measures within its control to ensure that it derives amounts with respect
to interest on obligations secured by mortgages on real property only where the
loan value of the real property is equal to or exceeds the amount of the loan,
so that the entire amount of interest earned is apportioned to the real
property. This representation was satisfied during the period beginning October
26, 1993 and ending on the date hereof.
13. As of the close of the third taxable year following the taxable year
in which the Company acquires any foreclosure property (as defined in the Code),
or within such period as the Company may obtain by extension, the Company will
sell such foreclosure property or will take such actions as are necessary to
ensure that income derived or accrued from such foreclosure property will
qualify for the REIT income and asset tests. Specifically, the Company will not
knowingly as to such foreclosed property: (i) enter into any lease which will
result in the receipt or accrual by the Company of any income that will not
qualify under the gross income tests; (ii) cause construction to take place on
such property unless such construction involves completion of a building or
improvement where more than 10 percent of the construction of such building or
improvement was completed before default became imminent; and (iii) within 90
days of acquisition of such property, use such property in a trade or business
conducted by the Company, other than through an independent contractor from whom
the Company derives no income. For the period beginning
<PAGE>
October 26, 1993 and ending on the date hereof, the Company did not acquire,
hold or sell any foreclosure property.
14. Prior to January 1, 1998, the Company took all measures within its
control to ensure, that in any taxable year less than 30 percent of the gross
income of the Company will be derived from the gains from sale or other
disposition of: (i) stock or securities held for less than one year; (ii)
property in a transaction which is a prohibited transaction, as defined in the
Code; and (iii) real property (including interests in mortgages on real
property) held for less than four years other than property compulsorily or
involuntarily converted within the meaning of Section 1033 of the Code and
property which is foreclosure property within the definition of Section 856(e)
of the Code. This representation was satisfied during the period beginning
October 26, 1993 and ending on December 31, 1997. Where rent is based on a fixed
percentage of gross receipts or revenues of a tenant, exclusions or reductions
from such gross receipts or revenues of the tenant conform to normal business
practices and are not used as a means of basing the rent on income or profits.
15. No amounts received or accrued, directly or indirectly, by the
Company or the Operating Partnership with respect to any real or personal
property have been, are, or will be, dependent in whole or in part on the income
or profits derived by any person from such property within the meaning of
Section 856(d)(2)(A) of the Code, except for percentage rentals permitted under
Sections 856(d)(4) and 856(d)(6) of the Code and those amounts described in the
"income tests" results provided to you by the Company in the enclosures to
letters from the Company dated October 28, 1999 and November, 1, 1999.
16. With the exception of amounts from those activities or arrangements
described in paragraph 21 the amounts from which are not expected to exceed $1
million and in no event will exceed the amounts allowed under REIT income tests
set forth herein, no amounts the determination of which depends in whole or part
on the income or profits of any person have been, are, or will be received or
accrued, directly or indirectly, by the Company or the Operating Partnership as
consideration for entering into agreements (i) to make loans secured by
mortgages on real property or on interests in real property or (ii) to purchase
or lease real property (including interests in real property and interests in
mortgages on real property), all within the meaning of Sections 856(c)(2)(G) and
856(c)(3)(G) of the Code.
17. Except for those items noted in the financials the amounts from which
are not expected to exceed $1 million and in no event will exceed the amounts
allowed under the REIT income tests set forth herein, the Company has no
knowledge of any amounts received or accrued by the Company or the Operating
Partnership as rent or otherwise pursuant to any lease or other arrangement with
respect to any real or personal property which are derived from a tenant which
receives or accrues, directly or indirectly, from subtenants any amount the
determination of which depends in whole or in part on the income or profits
derived by any person from such property within the meaning of Section 856(d)(4)
of the Code, except for qualified rentals permitted under Section 856(d)(6) of
the Code.
<PAGE>
18. With the exception of those amounts described in the "income
tests" results provided to you by the Company in the enclosures to letters from
the Company dated October 28, 1999 and November, 1, 1999, any amounts received
by the Company or the Operating Partnership that are attributable to personal
property leased under or in connection with a lease of the Company's real
property have not exceeded, do not and will not exceed 15 percent of the total
rent for any taxable year attributable to both the real and personal property
leased under or in connection with such leases, within the meaning of Section
856(d)(1)(C) of the Code. Any amounts received by the Company or the Operating
Partnership attributable to personal property that is leased with real property
have been, are currently and will continue to be an incidental amount of the
total rents received or accrued with respect to such real property determined at
the time the personal property is placed in service, within the meaning of
Section 512(b)(3) of the Code. All kiosks are owned outright by the respective
tenants. Amounts derived from the rental of certain pushcarts have been
described in the "income tests" results provided to you by the Company in the
enclosures to letters from the Company dated October 28, 1999 and November, 1,
1999.
19. All of the activities and services that the Company, the
Operating Partnership, the Property Partnerships or the Management Company
engage in or intend to engage in are those that are ordinary, necessary and
usual to the operation and management of the Company's, Operating Partnership's
and the Property Partnerships' rental properties. These activities and services
include only those customarily furnished or rendered in connection with the
rental of real property in the geographic areas in which the Company, Operating
Partnership and Property Partnerships rent property, including those properties
acquired by the Company, Operating Partnership and Property Partnerships in the
future. Services that constitute personal services rendered to particular
tenants are provided, and will be provided in the future, other than by the
Management Company and by third party independent contractors, as defined in
Section 856(d)(3) of the Code, from whom the Company does not derive or receive
any income within the meaning of Section 856(d)(2)(C) of the Code.
Specifically, no activity or service is performed by or on behalf of
the Company, the Operating Partnership, any Property Partnership or the
Management Company other than those that to our knowledge as of the date hereof,
are of the type customarily furnished or rendered in connection with the rental
of real property in the geographic areas in which the Company, Operating
Partnership and Property Partnerships rent property.
20. With the exception of certain amounts derived from current
leases with tenants that have been described in the "income tests" results
provided to you by the Company in the enclosures to letters from the Company
dated October 28, 1999 and November, 1, 1999, the Company will not receive or
accrue, directly or indirectly, any amount from a "Related Party Tenant,"
defined as follows: (i) if a corporation, one in which the Company owns stock
possessing 10 percent or more of the total combined voting power of all voting
classes or 10 percent or more of the total number of shares, or (ii) if not a
corporation, a person in which the Company owns an interest of 10 percent or
more in the assets or net profits. For purposes of this representation,
ownership will be determined by taking into account the attribution rules of
Section 318 of the Code (as modified by Section 856(d)(5) of the Code).
<PAGE>
21. The Company has disclosed to you all of its financial or other
economic arrangements that it, the Operating Partnership, the Property
Partnerships, CBL Holdings I, CBL Holdings II, or CBL/North Haven has entered
into, which are or could be characterized as lending, co-development or similar
activities, and all such arrangements satisfy the representations herein.
22. The Company expects, and the Company will take all measures within its
control to ensure, that at least 75 percent of the total value of the assets of
the Operating Partnership will at all times consist of real estate assets within
the meaning of Section 856(c)(5) of the Code, cash and cash items (including
receivables) and government securities, and not more than 25 percent of the
value of its assets will be represented by securities (other than government
securities). The expectation described herein was satisfied during the period
beginning October 26, 1993 and ending on the date hereof.
23. The Company hereby represents that the value of the stock in the
Management Company held by the Operating Partnership is not greater than
$5,000,000 as of the date hereof. Thus, the Company believes that the value of
its proportionate share of the Operating Partnership's ownership of 100 percent
of the Management Company's nonvoting preferred stock and five percent of the
Management Company's voting common stock will be substantially less than the
permitted five percent of the value of the Company's total assets.
24. The Operating Partnership has been and will be operated in
accordance with the terms and provisions of the Operating Partnership Agreement.
Further, each of the Property Partnerships has been and will be operated in
accordance with the terms and provisions of its Property Partnership Agreement.
The Operating Partnership Agreement and the Property Partnership Agreements have
been duly executed and the Certificates of Limited Partnership of the Operating
Partnership and the Property Partnerships and all amendments thereto have been
duly executed and filed. None of the above-described Partnerships has more than
100 partners directly (or indirectly through partnerships, grantor trusts, or S
corporations which are partners in such Partnerships) and all interests in such
partnerships were issued in a transaction or transactions that were not required
to be registered under the Securities Act of 1933 (15 U.S.C. 77a et seq.).
25. The Operating Partnership has not owned as of the date hereof
and will hereafter take all measures within its control not to own securities in
any one issuer, including the Management Company, having an aggregate value in
excess of five percent of the value of the total assets of the Operating
Partnership as determined in accordance with Treasury Regulation Section
1.856-2(d)(2).
26. The Company owns all of the outstanding stock of each of CBL
Holdings I, CBL Holdings II and CBL/North Haven and has owned all such stock of
CBL Holdings I, CBL Holdings II and CBL/North Haven since they were
incorporated. Other than shares of the Management Company held through the
Operating Partnership, the Company does not presently own shares in any other
corporation, either directly, through a partnership or through some other
arrangement. In addition, CBL Holdings I, CBL Holdings II and CBL/North Haven do
not own stock in any other corporation, either directly, through a partnership
or through some other arrangement. The Company, CBL Holdings I, CBL Holdings II
and CBL/North Haven have never, either collectively or individually, owned more
than ten percent (10%) of the voting
<PAGE>
securities of another corporation and have never had more than five percent (5%)
of their combined aggregate assets invested in shares of another corporation.
27. The Operating Partnership does not and will not own any securities of
the Management Company other than as described in the Registration Statement and
will not own securities in any other issuer representing in excess of 10 percent
of the outstanding voting securities of such issuer. In particular, the
Operating Partnership's ownership of 100 percent of the Management Company's
nonvoting preferred stock and five percent of the Management Company's voting
common stock will not exceed a 10 percent voting interest.
28. The Operating Partnership will at all times hold the Properties (and
all other assets of the Operating Partnership) for investment purposes and not
as (i) stock in trade or other property of a kind which would properly be
includible in inventory if on hand at the close of the taxable year, or (ii)
property held primarily for sale to customers in the ordinary course of the
trade or business of the Operating Partnership.
29. The Company's real estate activities that involve property
being held for sale in the ordinary course of business so as to qualify as a
"prohibited transaction" pursuant to Section 857(b)(6) of the Code will be
conducted solely through the Management Company.
30. The Company expects, and the Company will take all measures
within its control, to make timely distributions sufficient to satisfy the
annual distribution requirements of Sections 857 and 4981 of the Code. The
expectation described herein was satisfied during the period beginning October
26, 1993 and ending on the date hereof.
31. The Company will exercise ordinary business care and prudence
in attempting to comply with the 75 percent and 95 percent tests at the time of
each transaction entered into by the Company and to comply with the provisions
of Section 856(c)(6) of the Code and the Treasury Regulations thereunder.
32. The Company has as of the date hereof and will continue to
revalue its assets at the end of each quarter in which stock or other property
is acquired and will eliminate within 30 days after the end of such quarter any
discrepancy between the Code requirements and the value of its investments
attributable in whole or in part to an acquisition during such quarter. The
Company maintains sufficient records in accordance with general accounting
principles as to its investments so that it may show that it has complied with
the provisions of Section 856(c)(6) of the Code as required by Treasury
Regulation Section 1.856-2(d)(3).
33. The Company will mail to its shareholders by January 30 of
each year demands for written statements from its shareholders of record
relating to the previous taxable year and disclosing the actual owners of
Company shares in the following circumstances: (i) if the Company has between
201 and 2,000 shareholders of record of its shares on any dividend record date,
demands shall be made from each record holder of one percent or more of its
stock; and (ii) if the Company has more than 2,000 shareholders of record on any
dividend record date, demands shall be made from each record holder of five
percent or more of its shares. Such written statements will be mailed certified,
return receipt requested, in the U.S. mail; copies of such statements and U.S.
postal
<PAGE>
receipts showing the mailing date will be kept available for inspection in the
internal revenue district in which the Company is required to file its tax
return, will be maintained permanently, and will show the maximum number of
shares actually or constructively owned by each of the actual owners of any of
its shares at any time during the last half of the Company's taxable year.
Further, the written statements will inform the shareholder that if it
fails to supply the Company with the required information, it will be under a
duty to submit at the time its tax return is filed information relating to the
actual owner of REIT shares as follows: (i) in the case of any person holding
shares of stock in any REIT who is not the actual owner of such stock, the name
and address of each actual owner, the number of shares owned by each actual
owner at any time during such person's taxable year, and the amount of dividends
belonging to each actual owner; or (ii) in the case of an actual owner of shares
of stock in any REIT, (a) the name and address of each such REIT, the number of
shares actually owned by it at any and all times during its taxable year, and
the amount of dividends from each such REIT received during such shareholder's
taxable year, (b) if shares of any REIT were acquired or disposed of during such
person's taxable year, the name and address of the REIT, the number of shares
acquired or disposed of, the dates of acquisition or disposition, and the names
and addresses of the persons from whom such shares were acquired or to whom they
were transferred, (c) if any shares of REIT stock are also owned by any member
of such person's family or by any of its partners, the name and address of the
REIT, the name and address of such family member or partner and the number of
shares owned by each such family member or partner at any and all times during
such person's taxable year, and (d) the name and address of any corporation,
partnership, association, or trust in which such person had a beneficial
interest of 10 percent or more at any time during its taxable year.
The Company mailed these shareholder demand letters relating
to each of its taxable years by January 30 of each respective subsequent year.
The Company has maintained, as required by Treasury Regulations, a
permanent record of all persons failing or refusing to comply in whole or in
part with the Company's demand for the statements relating to actual ownership.
34. The Company will attach to its tax return for each fiscal year the
schedule described in Section 856(c)(6)(A) of the Code and will set forth
therein the nature and amount of each item of its gross income described in
Sections 856(c)(2) and (c)(3) of the Code.
35. Other than with respect to the York Galleries, all leases for all
properties acquired by the Company on or before the date hereof have been
reviewed by Shumacker & Thompson, P.C.
36. With the exception of that certain loan in the amount of $1.3 million
to Newnan Crossing Partnership, dated April 2, 1999, the Company has not
engaged in any lending activities from the period beginning January 1, 1998
through the date hereof.
<PAGE>
37. Representations herein as to the Properties will also be true
with respect to properties acquired by the Operating Partnership after the date
hereof.
Sincerely yours,
CBL & ASSOCIATES PROPERTIES, INC.
By: /s/ John N. Foy
-----------------------------------
Name: John N. Foy
Title: Director, Vice Chairman, Treasurer,
and Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
<PAGE>
SHUMACKER & THOMPSON LETTERHEAD
November 5, 1999
Willkie Farr & Gallagher
787 Seventh Avenue
New York, New York 10019-6099
Re: CBL REIT -- Shelf Registration
Due Diligence Opinion Letter
Ladies and Gentlemen:
CBL & Associates Properties, Inc. (the "Company"), a Delaware
corporation, CBL & Associates Limited Partnership (the "Operating Partnership")
and the persons on Exhibit A to the Willkie Farr & Gallagher opinion have
requested the opinion of Willkie Farr & Gallagher ("WF&G") with respect to
certain federal income tax matters in connection with the registration statement
on Form S-3, No. 333-47041, filed with the Securities and Exchange Commission
(which registration statement is hereinafter referred to as the "Registration
Statement").
In connection with WF&G's opinion, which we understand will rely in
part upon this letter, Shumacker & Thompson, P.C. ("S&T"), general counsel to
the Company and the Operating Partnership, makes the following statements to
you, which are true as of the date hereof.
1. As part of the joint efforts of S&T and WF&G relating to certain due
diligence with respect to the formation of the Company and its initial and
continued qualification as a real estate investment trust ("REIT") under Code
Section 856 et seq., S&T and WF&G jointly created a REIT Sensitive Lease Review
Form (a copy of which is attached hereto as Exhibit "A" and made a part hereof,
the "Lease Review Form"). S&T has reviewed substantially all of the leases that
to its knowledge are executed as to projects, any portion of which through
partnership interest transfers or transfers of assets, have become a part of the
Operating Partnership, including all leases and lease amendments entered into on
or after October 27, 1993 by the Company, but only as to properties acquired or
leases entered into on or before June 30, 1998. These reviews have been done
with strict reference to the Lease Review Form and any material deviations in
said leases from the standard lease form for the particular project have been
noted on the Lease Review Form for the particular lease in question. As the
lease reviews have been completed on each respective project, S&T has summarized
its findings in a Project Report Form. As of June 30, 1998, S&T delivered to
WF&G a Project Report Form (attached hereto as Exhibit "B") on
<PAGE>
each project involving new leases, lease amendments or modifications in any of
the Company's projects since October 27, 1993. WF&G has reviewed the Project
Report forms that S&T has provided. As of the date hereof, S&T has responded to
all inquiries it has received by WF&G as to the Lease Review Forms and Project
Report Forms.
2. All subleases and lease assignments entered into on or after
October 27, 1993 through June 30, 1998 by the Company have been identified to
you and the amounts involved under the pertinent leases correctly described to
you.
3. All leases entered into on or after October 27, 1993 through
June 30, 1998 by the Company with persons whose ownership of the tenant may be
attributed to the Company have been identified to you and the amounts involved
under the pertinent leases correctly described to you.
4. As of June 30, 1998, all kiosks were owned outright by the
respective tenants.
5. As of June 30, 1998, all pushcarts were been identified to you
and the amounts involved under the pertinent leases correctly described to you.
6. As of June 30, 1998, no separately stated fees for parking by
tenants or customers of the tenants were charged at any project.
7. With the exception of those amounts described in the "income
tests" results provided to you by the Company in the enclosures to a letter from
the Company dated June 30, 1998, all waivers requested by WF&G in connection
with certain percentage rent clauses have been obtained and are valid and
binding amendments of such leases.
8. The Company has had since October 27, 1993 through June 30,
1998, no interest in stock or securities in other issuers or ownership interests
in more than incidental personal property, other than partnership interests in
partnerships owning real estate.
9. In our opinion and based upon our review of the documents
provided by the Company evidencing that certain loan in the original principal
amount of $1,300,000 made by CBL & Associates Limited Partnership to Newnan
Crossing Partnership, a Georgia general partnership, dated April 2, 1999, and
secured by that certain Deed to Secure Debt and Security Agreement of even date
therewith in favor of CBL & Associates Limited Partnership as lender and
recorded at Book 1374, page 0093, Clerk of Superior Court, Coweta County,
Georgia on April 8, 1999 (the "Deed to Secure Debt") thereupon creating in CBL &
Associates Limited Partnership a first priority security interest in a tract of
real estate in Newnan, Coweta County, Georgia, was, as of the date the
referenced loan was made and, as of the date hereof, properly treated as debt
obligations for federal tax purposes and said loan was fully secured by the Deed
to Secure Debt encumbering the above-referenced tract of real estate.
<PAGE>
10. All written materials prepared by us and furnished by us to you as part
of our review of the leases and other matters relating to the income, assets and
operations of the properties in which the Company has an interest are true,
accurate and complete and do not omit any information material to such review.
Sincerely yours,
/s/ SHUMACKER & THOMPSON, P.C.
<PAGE>
EXHIBIT "A"
REIT SENSITIVE
LEASE CLASSIFICATION REVIEW
CBL Property # _______ Standard Form (Mail) ___________
Standard Form (Strip) ___________
Date of Lease Review / /
-----------
1. Lessee:
-------------------------------------------------------------------
(State relationship to Lessor if any: )
2. Premises:
-------------------------------------------------------------------
3. Use:
---------------------------------------------------------------------
4. Effective date and term:
---------------------------------------------------
5. Is personal property leased in connection with the real estate?
yes no
------ -----
If yes, please describe the associated personal property and provide
adjusted tax basis of the personal property and of related real estate.
6. Has lease been amended in a manner that affects the amount of the rental
payments?
yes no
------ ------
If yes, please staple the relevant amendment(s) to this form.
7. Please check the items below that are used to determine the amount of the
rental payments under the lease:
________ fixed amount
________ an amount based upon common area maintenance expenses, property taxes,
or insurance costs
________ an amount based upon a percentage of the Lessee's gross sales or
receipts with respect to the property (please staple to this form
the provision(s) of the lease setting forth the percentage --
including the definitions of any relevant defined terms, such as
"Gross Sales" and "Sales Base")
<PAGE>
________ an amount based upon any other factors (please staple to this form the
provision(s) setting forth those factors)
8. Services / Facilities Provided to Lessee:
A. Services that are permissible and require no further description
(check applicable items):
-----------------------------------------------------------------
___ Security for common areas ___ Heating
___ Air Conditioning ___ Lighting
___ Electricity ___ Gas
___ Maintenance of common areas - repairs, ___ Water
cleaning, painting, etc.
___ Janitorial services within common area ___ Sewer
___ Background music in common areas ___ Landscaping
___ Repair and maintenance of appliance ___ Pest control
accompanying leased premises
___ Supervisory services (in connection ___ Fire protection systems
improvements, future project development)
___ Trash removal
___ Snow removal
B. Services that may be problematic and should be descried (check
applicable items and attach additional pages, if necessary):
Security within tenant areas
- -----
Janitorial services within tenant areas
- -----
Parking: attendants; reserved spaces;
- ----- ------ -------
separate charge; shuttle bus;
------ -------
third party operator (if so, attach copy of contract)
------
Telephone service, receptionist, answering service or concierge
(describe the manner in which provided)
- -----
Laundry facilities (describe the manner in which provided)
- ------
Incidental storage space (describe below)
- ------
Aid to merchants' association* (specify form of aid)
- ------
Marketing fund activity**
- ------
<PAGE>
Pool, tennis court, basketball court, playground or other
recreational facilities (list below any charges imposed for the
use of such facilities, the persons permitted to use the
facilities (describe generally; do not list by name; and describe
related services))
- -------
Building trades work (carpentry, plumbing,
electrical, painting)
- -------
Tenant interior work
- -------
Exit inspections
- -------
C. List any other services provided, which are not described in items
A or B above:
-------------------------------------------------------------------
9. If the lease expressly provides that a service is to be provided to the
lessee through a third party, please set forth below the service, the name
of the third party and whether the service is to be separately billed:
10. Describe any subleases, licenses and concession agreements made by the
owner's primary tenant.
- -----------------------------------------------------------------
* Some lessors of shopping centers require tenants to join a "merchants'
association" which is comprised of and operated by such tenants. Such
associations generally establish rules and regulations with respect to use
of the shopping center and promote special shopping center-wide activities.
Lessors (and this may not be specified in the lease) sometimes provide such
associations with office facilities and support staff services.
** In lieu of a merchants' association, some shopping center lessors require
(in the lease) that tenants pay amounts to a marketing fund. The resources
of the marketing fund are then used to market and promote the shopping
center.
<PAGE>
EXHIBIT "B"
PROJECT REPORT FORM
REIT SENSITIVE LEASE CLASSIFICATION
Date of Review / /
-------
CBL #_____
1. PROJECT NAME:
2. TOTAL RENT PAID FOR 1997:
3. NUMBER OF TENANTS:
4. NUMBER OF TENANTS' LEASES REVIEWED:
5. PROBLEMATIC SERVICES PROVIDED TO TENANTS [Describe each, identify Tenant]:
6. PROBLEMATIC NON-STANDARD % RENT CLAUSES [Describe each, identify Tenant,
state approximate amount paid under % rent clause for 1997]:
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Registration Statement of our reports dated February 3, 1999
incorporated by reference in CBL & Associates Properties, Inc.'s Form 10-K for
the year ended December 31, 1998 and to all references to our Firm included in
this Registration Statement.
/s/ Arthur Andersen LLP
------------------------
Arthur Andersen LLP
Chattanooga, Tennessee
November 2, 1999
