AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 29, 1997
REGISTRATION STATEMENT NO. 333-42543
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
Amendment No. 1 to
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
----------------------
CHELSEA GCA REALTY, INC.
(Exact name of registrant as specified in its charter)
MARYLAND 22-3251332
(State or other jurisdiction (I.R.S. employer
of incorporation or organization) identification number)
103 Eisenhower Parkway
Roseland, New Jersey 07068
(973) 228-6111
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
LESLIE T. CHAO, PRESIDENT
103 EISENHOWER PARKWAY
ROSELAND, NEW JERSEY 07068
(973) 228-6111
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
----------------------
COPIES TO:
MARTIN H. NEIDELL, ESQ. THOMAS R. SMITH JR., ESQ.
STROOCK & STROOCK & LAVAN LLP EDWARD F. PETROSKY, ESQ.
180 Maiden Lane BROWN & WOOD LLP
New York, New York 10038 One World Trade Center
New York, New York 10048
-------------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: From time to
time after this 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, please check the following box. /x/
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434 under
the Securities Act, please check the following box|_|
----------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY STATE.
<PAGE>
PROSPECTUS
SUBJECT TO COMPLETION, DATED DECEMBER 29, 1997
1,000,000 SHARES
CHELSEA GCA REALTY, INC.
8 3/8% Series A Cumulative Redeemable Preferred Stock
(Par Value $0.01 Per Share)
(Liquidation Preference Equivalent to $50.00 Per Share)
----------------------
The shares of 8 3/8% Series A Cumulative Redeemable Preferred Stock, $0.01
par value per share (the "Preferred Shares"), of Chelsea GCA Realty, Inc. (the
"Company") offered hereby were issued (the "Original Offering") on October 15,
1997 (the "Original Offering Date") to Merrill Lynch, Pierce, Fenner & Smith
Incorporated (the "Initial Purchaser") and were simultaneously sold by the
Initial Purchaser in compliance with Rule 144A under the Securities Act of 1933,
as amended (the "Securities Act"), to "qualified institutional buyers" (as
defined in Rule 144A).
The Preferred Shares may be offered and sold from time to time by the
holders named herein or in an accompanying supplement to this Prospectus (each,
a "Prospectus Supplement") or by their transferees, pledgees, donees or
successors pursuant to this Prospectus (collectively, "Selling Holders"). The
Preferred Shares may be sold by the Selling Holders from time to time directly
to purchasers or through agents, underwriters or dealers. See "Plan of
Distribution" and "Selling Holders." If required, the names of any such agents
or underwriters involved in the sale of the Preferred Shares and the applicable
agent's commission, dealer's purchase price or underwriter's discount, if any,
will be set forth in a Prospectus Supplement. The Selling Holders will receive
all of the net proceeds from the sale of the Preferred Shares and will pay all
underwriting discounts and selling commissions, if any, applicable to any such
sale. The Initial Purchaser is responsible for payment of certain other expenses
incident to the offer and sale of the Preferred Shares. The Selling Holders and
any dealers, agents or underwriters which participate in the distribution of the
Preferred Shares may be deemed to be "underwriters" within the meaning of the
Securities Act, and any commission received by them and any profit on the resale
of the Preferred Shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act. See "Plan of Distribution"
for a description of indemnification arrangements.
Dividends on the Preferred Shares will be cumulative from the Original
Offering Date and will be payable quarterly on the 15th day of January, April,
July and October of each year, commencing January 15, 1998, at the rate of
8.375% of the liquidation preference per annum (equivalent to $4.1875 per share
per annum).
The Preferred Shares are not redeemable prior to October 15, 2027. On and
after October 15, 2027, the Preferred Shares may be redeemed for cash at the
option of the Company, in whole or in part, at a redemption price of $50.00 per
share, plus accumulated and unpaid dividends, if any, thereon. The redemption
price (other than the portion thereof consisting of accumulated and unpaid
dividends) is payable solely out of the sale proceeds of other capital stock of
the Company, which may include other series of preferred stock, and from no
other source. The Preferred Shares have no stated maturity and will not be
subject to any sinking fund or mandatory redemption and will not be convertible
into any other securities of the Company. See "Description of Preferred Shares -
Redemption." In order to maintain its qualification as a real estate investment
trust for federal income tax purposes, the Company's Articles of Incorporation
impose limitations on the number of shares of capital stock, including Preferred
Shares, that may be owned by any stockholder. See "Description of Preferred
Shares - Restrictions on Transfer."
----------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR CERTAIN INFORMATION
RELEVANT TO AN INVESTMENT IN THE PREFERRED SHARES
----------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
----------------------
The date of this Prospectus is ___________________.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the offices of
the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, as well as the following regional offices of the
Commission: Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, IL 60661; and 7 World Trade Center, Suite 1300, New York, NY 10048.
Copies of such material can be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates
or from the Commission's Web site which contains reports, proxy and information
statements and other information regarding registrants that file electronically
at http://www.sec.gov. Such materials can also be inspected at the office of the
New York Stock Exchange, Inc. on which exchange the Company's Common Stock is
listed.
The Company has filed with the Commission a Registration Statement on Form
S-3 (herein, together with all amendments and exhibits thereto, called the
"Registration Statement") under the Securities Act with respect to the
securities offered by this Prospectus. This Prospectus does not contain all of
the information set forth or incorporated by reference in the Registration
Statement and the exhibits and schedules relating thereto, certain portions of
which have been omitted as permitted by the Rules and Regulations of the
Commission. For further information with respect to the Company and the
securities offered by this Prospectus, reference is made to the Registration
Statement and the exhibits filed or incorporated as a part thereof, which are on
file at the offices of the Commission and may be obtained upon payment of the
fee prescribed by the Commission, or may be examined without charge at the
offices of the Commission or on the Commission's Web site. Statements contained
in this Prospectus as to the contents of any documents referred to are not
necessarily complete; with respect to any such document filed as an exhibit to
the Registration Statement, reference is made to such exhibit for a more
complete description of the matter involved, and each such statement shall be
deemed qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed with the Commission and are
incorporated herein by reference:
(a) The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996;
(b) Quarterly Reports on Form 10-Q for the quarters ended March
31, 1997, June 30, 1997 and September 30, 1997;
(c) Current Report on Form 8-K dated April 11, 1997; and
(d) The information contained in the section "Policies With
Respect to Certain Activities" contained in the Registration
Statement on Form S-11 (File No. 33-67870) filed on August 25,
1993, as amended.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering of the Preferred Shares offered hereby shall be
deemed to be incorporated by reference herein and to be a part hereof from the
date of filing such documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon the request of such person, a copy of any or all
of the foregoing documents incorporated herein by reference, other than exhibits
to such documents (unless such exhibits are specifically incorporated by
reference into such documents). Requests for such documents should be directed
to Investor Relations, Chelsea GCA Realty, Inc., 103 Eisenhower Parkway,
Roseland, New Jersey 07068, Telephone (973) 228-6111.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain of the matters discussed under the caption "Risk Factors" and
elsewhere in this Prospectus or in the information incorporated by reference
herein may constitute forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995 (the "Reform Act") and as such
may involve known and unknown risks, uncertainties and other factors that may
cause the actual results, performance or achievements of the Company to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Some of the factors
that may cause such material differences are set forth herein under the caption
"Risk Factors."
<PAGE>
PROSPECTUS SUMMARY
The following summary does not purport to be complete and is qualified in
its entirety by the detailed information appearing elsewhere in this Prospectus
or incorporated by reference herein. All references to the Company in this
Prospectus include the Operating Partnership (as defined herein), those entities
owned or controlled by the Operating Partnership and predecessors of the
Operating Partnership, unless the context indicates otherwise.
THE COMPANY
Chelsea GCA Realty, Inc. (the "Company") is a self-administered and
self-managed real estate investment trust ("REIT") that specializes in the
development, leasing, marketing, management and long-term ownership of upscale
and fashion-oriented manufacturers' outlet centers. As of September 30, 1997,
the Company owned and operated 19 centers (the "Properties"), containing
approximately 4.1 million square feet of gross leasable space ("GLA"), in eleven
states. The Properties generally are located near densely populated, high-income
metropolitan areas or at or near major tourist destinations. The Company's
existing portfolio includes properties in or near New York City, Los Angeles,
San Francisco, Sacramento, Portland (Oregon), Kansas City, Atlanta, Cleveland,
Honolulu, the Napa Valley, Palm Springs and the Monterey Peninsula. In October
1997, the Company opened the 227,000 square foot first phase of Wrentham Village
Premium Outlets (Wrentham, Massachusetts), located near the junction of
Interstates 95 and 495 between Boston and Providence. The Company also has
properties under development, an expansion of Woodbury Common (Central Valley,
New York), its largest center, and expansions of other existing centers. As of
September 30, 1997, the Company's portfolio was 99% leased and contained
approximately 1,100 stores with approximately 350 different tenants.
Between the Company's initial public offering of Common Stock and the
formation transactions in November 1993 ("IPO") and September 30, 1997, the
Company developed, acquired and opened approximately 2.4 million square feet of
new GLA, contained in seven new centers, one acquired center and the expansions
of twelve existing centers. In March 1997, the Company acquired Waikele Factory
Outlets, a manufacturers' outlet center near Honolulu, Hawaii with 214,000
square feet of GLA. The Company is in the process of entitling sites and
planning development for 1998 and beyond.
All of the Company's interests in the Properties are held by, and all of
its operations relating to the Properties are conducted through, Chelsea GCA
Realty Partnership, L.P., a Delaware limited partnership (the "Operating
Partnership"), which is 81.6% owned and managed by the Company (exclusive of the
Series A Preferred Units (as defined herein)).
The Company is organized under the laws of the State of Maryland. Its
principal executive office is located at 103 Eisenhower Parkway, Roseland, New
Jersey 07068, telephone (973) 228-6111.
<PAGE>
THE OFFERING
The Issuer........................ Chelsea GCA Realty, Inc., a
self-administered and self-managed real
estate investment trust.
Securities Offered............... 1,000,000 shares of 8 3/8% Series A
Cumulative Redeemable Preferred Stock.
Selling Holders.................. The Preferred Shares were originally issued
by the Company and sold by the Initial
Purchaser in compliance with Rule 144A under
the Securities Act to "qualified
institutional buyers." These purchasers or
their transferees, pledgees, donees, or
successors may from time to time offer and
sell, pursuant to this Prospectus, any or
all of the Preferred Shares. See "Selling
Holders."
Ranking.......................... With respect to the payment of dividends and
amounts upon liquidation, the Preferred
Shares will rank on a parity with all other
shares of preferred stock of the Company
which are not by their terms junior to the
Preferred Shares and will rank senior to the
Common Stock and all other shares of capital
stock of the Company which, by their terms,
rank junior to the Preferred Shares. See
"Description of Preferred Shares --Rank."
Dividends........................ Dividends on the Preferred Shares are
cumulative from the Original Offering Date
and are payable quarterly on the 15th day of
January, April, July and October of each
year, commencing on January 15, 1998, at the
rate of 8.375% of the liquidation preference
per annum (equivalent to $4.1875 per share
per annum). Dividends on the Preferred
Shares will accumulate whether or not the
Company has earnings, whether or not there
are funds legally available for the payment
of such dividends and whether or not such
dividends are declared. See "Description of
Preferred Shares-- Dividends."
Liquidation Preference............ The Preferred Shares will have a liquidation
preference of $50.00 per share, plus an
amount equal to accumulated and unpaid
dividends, if any, thereon. See "Description
of Preferred Shares--Liquidation
Preference."
Redemption........................ The Preferred Shares are not redeemable
prior to October 15, 2027. On and after
October 15, 2027, the Preferred Shares will
be redeemable for cash at the option of the
Company, in whole or in part, at $50.00 per
share, plus accumulated and unpaid
dividends, if any, thereon. The redemption
price (other than the portion thereof
consisting of accumulated and unpaid
dividends) is payable solely out of the sale
proceeds of other capital stock of the
Company, which may include other series of
preferred stock, and from no other source.
See "Description of Preferred
Shares--Redemption."
Voting Rights..................... If dividends on the Preferred Shares are in
arrears for six or more quarterly periods,
whether or not such quarterly periods are
consecutive, holders of the Preferred Shares
(voting separately as a class with all other
series of preferred stock upon which like
voting rights have been conferred and are
exercisable) will be entitled to vote for
the election of two additional directors to
serve on the Board of Directors of the
Company until all dividend arrearages have
been paid. See "Description of Preferred
Shares--Voting Rights."
Conversion........................ The Preferred Shares are not convertible or
exchangeable for any other property or
securities of the Company.
Ownership Limits.................. The Preferred Shares are subject to certain
restrictions on transfer intended to
preserve the Company's status as a REIT for
federal income tax purposes. In general,
under such restrictions, a holder may not
acquire or own Preferred Shares to the
extent that such ownership causes a person
to own more than 7% of the value of the
outstanding series of Preferred Shares,
taking into account applicable constructive
ownership rules of the Internal Revenue Code
of 1986, as amended (the "Code"). Under
these rules, Preferred Shares held by
entities such as corporations, mutual funds,
insurance companies and pension trusts would
be treated as owned by their ultimate
individual beneficial owners for purposes of
applying the 7% ownership limit. See
"Description of Preferred
Shares--Restrictions on Transfer."
Registration Rights............... Pursuant to a Registration Rights Agreement
(the "Registration Rights Agreement") among
the Company, the Operating Partnership and
the Initial Purchaser, the Company agreed to
use its best efforts to keep the
Registration Statement effective until two
years after the Original Offering Date or
such shorter period ending when all the
Preferred Shares have been sold thereunder.
Liquidated Damages will be payable under
certain circumstances if the Company is not
in compliance with its obligations under the
Registration Rights Agreement. See
"Registration Rights."
Form.............................. The Preferred Shares will be represented by
a single fully-registered certificate in
book-entry form registered in the name of
the nominee of DTC, except under the limited
circumstances described herein.
Absence of Market for the
Preferred Shares.................. The Preferred Shares are a new issue of
securities with no established trading
market. Although the Initial Purchaser has
informed the Company that it currently
intends to make a market in the Preferred
Shares, the Initial Purchaser is not
obligated to do so, and any such market
making may be discontinued at any time
without notice. Accordingly, there can be no
assurance as to the development or liquidity
of any market for the Preferred Shares. See
"Plan of Distribution."
Use of Proceeds................... The Selling Holders will receive all of the
proceeds from the sale of the Preferred
Shares offered hereby. The Company will not
receive any proceeds from the sale of such
Preferred Shares.
<PAGE>
RISK FACTORS
PROSPECTIVE PURCHASERS OF PREFERRED SHARES SHOULD CAREFULLY REVIEW THE
INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS AND SHOULD PARTICULARLY
CONSIDER THE FOLLOWING MATTERS. CERTAIN STATEMENTS SET FORTH BELOW UNDER THIS
CAPTION CONSTITUTE "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE REFORM
ACT. SEE "SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS" FOR ADDITIONAL
FACTORS RELATING TO SUCH STATEMENTS.
CONCENTRATION OF COMPANY'S REVENUE
Approximately 38% and 34% of the Company's revenues for the year ended
December 31, 1996 and the nine-month period ended September 30, 1997,
respectively, were derived from the Company's two centers with the highest
revenues, Woodbury Common Premium Outlets and Desert Hills Premium Outlets. The
loss of either of these centers or a material decrease in the revenues received
from either of such centers for any reason could have a material adverse effect
on the Company. In addition, approximately 44% and 39% of the Company's revenues
for the year ended December 31, 1996 and the nine-month period ended September
30, 1997, respectively, were derived from the Company's nine centers in
California.
LIMITATIONS ON ACQUISITION AND CHANGE IN CONTROL
OWNERSHIP LIMIT. The Company's Articles of Incorporation (the "Articles of
Incorporation") prohibit ownership of more than 7% of the outstanding Common
Stock by any person. Such restriction is likely to have the effect of precluding
acquisition of control of the Company by a third party without consent of the
Board of Directors even if a change in control were in the interest of
stockholders.
REQUIRED CONSENT OF THE OPERATING PARTNERSHIP FOR MERGER OR OTHER
SIGNIFICANT CORPORATE ACTION. So long as the limited partners own at least 10%
of the capital of the Operating Partnership, the Operating Partnership may not
merge, consolidate or engage in any combination with another person or sell all
or substantially all of its assets unless approved by the holders of a majority
of the limited partnership Units.
STAGGERED BOARD. The Board of Directors of the Company has three classes of
directors, the terms of which will expire in 1998, 1999 and 2000. Directors for
each class will be chosen for a three-year term. The staggered terms for
directors may affect the stockholders' ability to change control of the Company
even if a change in control were in the stockholders' interest.
DISTRIBUTIONS TO STOCKHOLDERS
To obtain the favorable tax treatment associated with REITs, the Company
generally will be required each year to distribute to its stockholders at least
95% of its net taxable income. The ability of the Company to make such
distributions is dependent upon the receipt of distributions or other payments
from the Operating Partnership.
ADVERSE IMPACT ON DISTRIBUTIONS OF FAILURE TO QUALIFY AS A REIT
The Company and the Operating Partnership intend to operate in a manner so
as to permit the Company to qualify as a REIT under the Code. Although the
Company believes that it will operate in such a manner, no assurance can be
given that the Company will qualify or remain qualified as a REIT. If in any
taxable year the Company were to fail to qualify as a REIT, the Company would
not be allowed a deduction for distributions to stockholders in computing
taxable income and would be subject to federal income tax (including any
applicable alternative minimum tax) on its taxable income at regular corporate
rates.
RISKS RELATED TO THE MANUFACTURERS' OUTLET CENTER INDUSTRY
COMPETITION FROM OTHER MANUFACTURERS' OUTLET CENTERS. Numerous developers
and real estate companies are engaged in the development or ownership of
manufacturers' outlet centers and other commercial properties and compete with
the Company in seeking tenants for outlet centers. This results in competition
for the acquisition of prime properties and for tenants who will lease space in
the manufacturers' outlet centers that the Company and its competitors own or
operate.
THE RELATIVELY SHORT HISTORY OF MANUFACTURERS' OUTLET CENTERS MAY NOT
BE INDICATIVE OF FUTURE PERIODS. Although the manufacturers' outlet center
industry has grown over the last several years, the industry represents a
relatively new and rapidly growing segment of the retailing industry and,
therefore, the long-term performance of these centers may not be comparable to,
and cash flows may not be as predictable as, traditional retail malls.
GENERAL REAL ESTATE INVESTMENT RISKS
ECONOMIC PERFORMANCE AND VALUE OF CENTERS DEPENDENT ON MANY FACTORS. Real
property investments are subject to varying degrees of risk. The economic
performance and values of real estate can be affected by many factors, including
changes in the national, regional and local economic climate, local conditions
such as an oversupply of space or a reduction in demand for real estate in the
area, the attractiveness of the properties to tenants, competition from other
available space, the ability of the owner to provide adequate maintenance and
insurance and increased operating costs.
RISKS OF DEVELOPMENT ACTIVITIES. The Company intends to actively pursue
manufacturers' outlet center development projects, including the expansion of
existing centers. Such projects generally require expenditure of capital as well
as various forms of government and other approvals, the receipt of which cannot
be assured.
DEPENDENCE ON RENTAL INCOME FROM REAL PROPERTY. Since substantially all of
the Company's income is derived from rental income from real property, the
Company's income and funds for distribution would be adversely affected if a
significant number of the Company's tenants were unable to meet their
obligations to the Company or if the Company were unable to lease a significant
amount of space in the Properties on economically favorable lease terms. In
addition, the terms of manufacturers' outlet store tenant leases traditionally
have been significantly shorter than in traditional segments of retailing. There
can be no assurance that any tenant whose lease expires in the future will renew
such lease or that the Company will be able to re-lease space on economically
advantageous terms.
ENVIRONMENTAL RISKS. Under various federal, state and local laws,
ordinances and regulations, each of the Company and the Operating Partnership
may be considered an owner or operator of real property or may have arranged for
the disposal or treatment of hazardous or toxic substances and, therefore, may
become liable for the costs of removal or remediation of certain hazardous
substances released on or in its property or disposed of by it, as well as
certain other potential costs which could relate to hazardous or toxic
substances (including governmental fines and injuries to persons and property).
Such liability may be imposed whether or not the Company knew of, or was
responsible for, the presence of such hazardous or toxic substances.
ABSENCE OF A PUBLIC MARKET
There is no established trading market for the Preferred Shares and there
can be no assurance as to the development or liquidity of any market for the
Preferred Shares, the ability of the holders to sell their Preferred Shares or
as to the price at which holders of the Preferred Shares may be able to sell
their Preferred Shares. Future trading prices of the Preferred Shares will
depend on many factors, including, among other things, prevailing interest
rates, the Company's operating results and the market for similar securities.
The Initial Purchaser has informed the Company that the Initial Purchaser
intends to make a market in the Preferred Shares. However, the Initial Purchaser
is not obligated to do so, and any such market making activity may be
discontinued at any time without notice to the holders of Preferred Shares.
RATIOS OF EARNINGS TO COMBINED FIXED CHARGES AND
PREFERRED STOCK DIVIDENDS
The following table sets forth the Company's and the Operating
Partnership's consolidated ratios of earnings to combined fixed charges and
preferred stock dividends for the periods shown:
NINE MONTHS Year Ended December 31,
ENDED ---------------------------------------------------------
SEPTEMBER 30, 1997 1996 1995 1994 1993 1992
- ----------------------------------------------------------------------------
2.21x 2.84x 3.59x 10.40x 1.45x 1.20x
The ratios of earnings to combined fixed charges and preferred stock
dividends were computed by dividing earnings by the sum of fixed charges and
preferred stock dividends. For this purpose, earnings consist of income from
continuing operations before minority interest and fixed charges, exclusive of
interest capitalized and amortization of loan costs capitalized. Fixed charges
consist of interest expense (including interest costs capitalized), the portion
of rent expense representative of interest and total amortization of debt
issuance costs (expensed and capitalized). No preferred stock dividends were
paid by the Company during the periods shown above.
THE COMPANY
The Company is a self-administered and self-managed REIT that specializes
in the development, leasing, marketing, management and long-term ownership of
upscale and fashion-oriented manufacturers' outlet centers. As of September 30,
1997, the Company owned and operated 19 centers (the "Properties") containing
approximately 4.1 million square feet of GLA, in eleven states. The Properties
generally are located near densely populated, high-income metropolitan areas or
at or near major tourist destinations. The Company's existing portfolio includes
properties in or near New York City, Los Angeles, San Francisco, Sacramento,
Portland (Oregon), Kansas City, Atlanta, Cleveland, Honolulu, the Napa Valley,
Palm Springs and the Monterey Peninsula. In October 1997, the Company opened the
227,000 square foot first phase of Wrentham Village Premium Outlets (Wrentham,
Massachusetts), located near the junction of Interstates 95 and 495 between
Boston and Providence. The Company also has properties under development, an
expansion of Woodbury Common (Central Valley, New York), its largest center, and
expansions of other existing centers. As of September 30, 1997, the Company's
portfolio was 99% leased and contained approximately 1,100 stores with
approximately 350 different tenants.
Between the IPO and September 30, 1997, the Company developed, acquired and
opened approximately 2.4 million square feet of new GLA, contained in seven new
centers, one acquired center and the expansions of twelve existing centers. In
March 1997, the Company acquired Waikele Factory Outlets, a manufacturers'
outlet center near Honolulu, Hawaii with 214,000 square feet of GLA. The Company
is in the process of entitling sites and planning development for 1998 and
beyond.
All of the Company's interests in the Properties are held by, and all of
its operations relating to the Properties are conducted through, the Operating
Partnership, which is 81.6% owned and managed by the Company (exclusive of the
Series A Preferred Units). It is the Company's policy that it shall not incur
indebtedness other than short-term trade, employee compensation, dividends
payable or similar indebtedness that will be paid in the ordinary course of
business, and that indebtedness shall instead be incurred by the Operating
Partnership to the extent necessary to fund the business activities conducted by
the Operating Partnership and its subsidiaries.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale by the Selling
Holders of the Preferred Shares. The net proceeds to the Company from the sale
of the Preferred Shares on the Original Offering Date was approximately $48.4
million. Such net proceeds were used to repay outstanding indebtedness under the
Company's unsecured bank credit facilities.
DESCRIPTION OF PREFERRED SHARES
GENERAL
The Company is authorized to issue up to 5,000,000 shares of preferred
stock, $0.01 par value per share, in one or more series, with such designations,
powers, preferences and rights of the shares of such series and the
qualifications, limitations or restrictions thereon, including, but not limited
to, the fixing of the dividend rights, dividend rate or rates, conversion
rights, voting rights and terms of redemption (including sinking fund
provisions), the redemption price or prices, and the liquidation preferences, in
each case, if any, as the Board of Directors of the Company may determine by
adoption of an applicable supplementary articles (a "Designating Amendment") to
the Articles of Incorporation, without any further vote or action by the
shareholders.
On October 7, 1997, a form of Designating Amendment was adopted determining
the terms of a series of preferred stock consisting of 1,000,000 shares,
designated 8 3/8% Series A Cumulative Redeemable Preferred Stock. The following
summary of the terms and provisions of the Preferred Shares does not purport to
be complete and is qualified in its entirety by reference to the pertinent
sections of the Articles of Incorporation and the Designating Amendment
designating the Preferred Shares.
The Company contributed or otherwise transferred the net proceeds of the
sale of the Preferred Shares to the Operating Partnership in exchange for 8 3/8%
Series A Preferred Units (the "Series A Preferred Units") in the Operating
Partnership, the economic terms of which are substantially identical to the
Preferred Shares. The Operating Partnership will be required to make all
required distributions on the Series A Preferred Units (which will mirror the
payments of dividends, including accumulated and unpaid dividends upon
redemption, and the amount of the liquidation preference applicable to the
Preferred Shares) prior to any distribution of cash or assets to the holders of
the Units or to the holders of any other interests in the Operating Partnership,
except for any other series of preference units ranking on a parity with the
Series A Preferred Units as to distributions and/or liquidation rights and
except for distributions required to enable the Company to maintain its
qualification as a REIT.
The Company's Credit Facilities include covenants that restrict the ability
of the Operating Partnership to make distributions in excess of stated amounts,
which in turn restrict the discretion of the Company to declare and pay
dividends. In general, during any fiscal year the Operating Partnership may only
distribute the lesser of (i) 90% of funds from operations for any fiscal year or
(ii) 100% of funds from operations for any two consecutive fiscal quarters. Each
Credit Facility contains exceptions to these limitations to allow the Operating
Partnership to make distributions necessary to allow the Company to maintain its
status as a REIT. The Company does not believe that these covenants will
adversely affect the ability of the Operating Partnership to make distributions
in an amount sufficient to permit the Company to pay dividends with respect to
the Preferred Shares.
The Preferred Shares have been validly issued and are fully paid and
nonassessable and are not subject to any preemptive or similar rights.
The registrar, transfer agent and dividends disbursing agent for the
Preferred Shares is Boston EquiServe, L.P., Boston, Massachusetts.
RANK
The Preferred Shares, with respect to dividend rights and rights upon
liquidation, dissolution or winding up of the affairs of the Company, rank (i)
senior to the Common Stock and to all other shares of capital stock of the
Company which, by their terms, rank junior to the Preferred Shares and (ii) on a
parity with all other shares of preferred stock of the Company which are not by
their terms junior to the Preferred Shares.
DIVIDENDS
Holders of the Preferred Shares are entitled to receive, when and as
authorized by the Board of Directors of the Company, out of funds legally
available for the payment of dividends, cumulative cash dividends at the rate of
8.375% of the liquidation preference per annum (equivalent to $4.1875 per share
per annum). Such dividends shall accumulate from the Original Offering Date and
shall be payable quarterly in arrears on the 15th day of each January, April,
July and October or, if not a business day, the succeeding business day (each, a
"Dividend Payment Date"). The first dividend on the Preferred Shares will be
paid on January 15, 1998. Any dividend payable on the Preferred Shares for any
partial dividend period will be computed on the basis of a 360-day year
consisting of twelve 30-day months. Dividends will be payable to holders of
record as they appear in the share records of the Company at the close of
business on the applicable record date, which shall be the 1st day of the
calendar month in which the applicable Dividend Payment Date falls or such other
date designated by the Board of Directors of the Company for the payment of
dividends that is not more than 30 nor less than 10 days prior to such Dividend
Payment Date (each, a "Dividend Record Date").
No dividends on the Preferred Shares shall be authorized by the Board of
Directors of the Company or be paid or set apart for payment by the Company at
such time as the terms and provisions of any agreement of the Company (or the
Operating Partnership, as to the Series A Preferred Units), including any
agreement relating to its indebtedness, prohibits such authorization, payment or
setting apart for payment or provides that such authorization, payment or
setting apart for payment would constitute a breach thereof or a default
thereunder, or if such authorization or payment shall be restricted or
prohibited by law.
Notwithstanding the foregoing, dividends on the Preferred Shares will
accumulate whether or not the Company has earnings, whether or not there are
funds legally available for the payment of such dividends and whether or not
such dividends are authorized. Accumulated but unpaid dividends on the Preferred
Shares do not bear interest and holders of the Preferred Shares are not entitled
to any dividends in excess of full cumulative dividends as described above.
No dividends will be declared or paid or set apart for payment on any
capital stock of the Company ranking, as to dividends, on a parity with or
junior to the Preferred Shares for any period unless full cumulative dividends
have been or contemporaneously are declared and paid or declared and a sum
sufficient for the payment therefor set apart for such payment on the Preferred
Shares for all past dividend periods and the then current dividend period. When
dividends are not paid in full (or a sum sufficient for such full payment is not
so set apart) upon the Preferred Shares and the shares of each other series of
preferred stock ranking on a parity as to dividends with the Preferred Shares,
all dividends declared on the Preferred Shares and any other series of preferred
stock ranking on a parity as to dividends with the Preferred Shares shall be
declared pro rata so that the amount of dividends declared per Preferred Share
and such other series of preferred stock shall in all cases bear to each other
the same ratio that accumulated dividends per Preferred Share and such other
series of preferred stock bear to each other.
Except as provided in the immediately preceding paragraph, unless full
cumulative dividends on the Preferred Shares have been or contemporaneously are
declared and paid or declared and a sum sufficient for the payment therefor set
apart for such payment on the Preferred Shares for all past dividend periods and
the then current dividend period, no dividends (other than in shares of Common
Stock or other capital stock ranking junior to the Preferred Shares as to
dividends and upon liquidation) shall be declared or paid or set aside for
payment nor shall any other distribution be declared or made upon the Common
Stock or any other capital stock of the Company ranking junior to or on a parity
with the Preferred Shares as to dividends or upon liquidation, nor shall any
shares of Common Stock or any other capital stock of the Company ranking junior
to or on a parity with the Preferred Shares as to dividends or upon liquidation
be redeemed, purchased or otherwise acquired for any consideration (or any
moneys be paid or made available for a sinking fund for the redemption of such
shares) by the Company (except by conversion into or exchange for other capital
stock of the Company ranking junior to the Preferred Shares as to dividends and
upon liquidation).
Any dividend payment made on the Preferred Shares shall first be credited
against the earliest accumulated but unpaid dividend due with respect to such
shares which remains payable.
LIQUIDATION PREFERENCE
In the event of any liquidation, dissolution or winding up of the affairs
of the Company (generally referred to herein as a "liquidation"), the holders of
the Preferred Shares will be entitled to be paid out of the assets of the
Company legally available for distribution to its shareholders liquidating
distributions in cash or property at its fair market value as determined by the
Company's Board of Directors in the amount of a liquidation preference of $50.00
per share, plus an amount equal to any accumulated and unpaid dividends, if any,
thereon to the date of such liquidation, dissolution or winding up, before any
distribution of assets is made to holders of Common Stock or any other capital
stock ranking junior to the Preferred Shares as to liquidation rights. After
payment of the full amount of the liquidating distributions to which they are
entitled, the holders of Preferred Shares will have no right or claim to any of
the remaining assets of the Company.
In the event that, upon any such voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Company, the legally available
assets of the Company are insufficient to pay the amount of the liquidating
distributions on the Preferred Shares and the corresponding amounts payable on
the shares of each other series of preferred stock of the Company ranking on a
parity with the Preferred Shares in the distribution of assets upon liquidation,
then the holders of the Preferred Shares and any other series of preferred stock
of the Company ranking on a parity with the Preferred Shares in the distribution
of assets upon liquidation shall share ratably in any such distribution of
assets in proportion to the full liquidating distributions to which they would
otherwise be respectively entitled.
The consolidation or merger of the Company with or into any other entity or
the sale, lease, transfer or conveyance of all or substantially all of the
property or business of the Company shall not be deemed to constitute a
liquidation, dissolution or winding up of the affairs of the Company.
REDEMPTION
The Preferred Shares are not redeemable prior to October 15, 2027. On and
after October 15, 2027, the Company, at its option upon not less than 30 nor
more than 60 days' written notice, may redeem the Preferred Shares, in whole or
in part at any time or from time to time, in cash at a redemption price of
$50.00 per share, plus accumulated and unpaid dividends, if any, thereon to the
date fixed for redemption (except as provided below), without interest, to the
extent the Company will have funds legally available therefor. The redemption
price of the Preferred Shares (other than any portion thereof consisting of
accumulated and unpaid dividends) shall be paid solely from the sale proceeds of
other capital stock of the Company and not from any other source. For purposes
of the preceding sentence, "capital stock" means any common stock, preferred
stock, depositary shares, interests, participation, or other ownership interests
(however designated) and any rights (other than debt securities convertible into
or exchangeable for equity securities) or options to purchase any of the
foregoing. Holders of Preferred Shares to be redeemed shall surrender such
Preferred Shares at the place designated in the notice of redemption and shall
be entitled to the redemption price upon such surrender. If notice of redemption
of any Preferred Shares has been given and if the funds necessary for such
redemption have been irrevocably set aside by the Company in trust for the
benefit of the holders of any Preferred Shares so called for redemption, then
from and after the redemption date dividends will cease to accumulate on such
Preferred Shares, such shares shall no longer be deemed outstanding and all
rights of the holders of such Preferred Shares will terminate, except the right
to receive the redemption price. If fewer than all of the outstanding Preferred
Shares are to be redeemed, the Preferred Shares to be redeemed shall be selected
pro rata (as nearly as may be practicable without creating fractional Preferred
Shares) or by any other equitable method determined by the Company.
Notwithstanding the foregoing, unless full cumulative dividends on the
Preferred Shares shall have been or contemporaneously are declared and paid or
declared and a sum sufficient for the payment therefor set apart for such
payment on the Preferred Shares for all past dividend periods and the then
current dividend period, no Preferred Shares shall be redeemed unless all
outstanding Preferred Shares are simultaneously redeemed; PROVIDED, HOWEVER,
that the foregoing shall not prevent the purchase or acquisition of Preferred
Shares to preserve the REIT status of the Company or pursuant to a purchase or
exchange offer made on the same terms to holders of all outstanding Preferred
Shares. In addition, unless full cumulative dividends on the Preferred Shares
shall have been or contemporaneously are declared and paid or declared and a sum
sufficient for the payment therefor set apart for such payment on the Preferred
Shares for all past dividend periods and the then current dividend period, the
Company shall not purchase or otherwise acquire, directly or indirectly, any
Preferred Shares; PROVIDED, HOWEVER, that the foregoing shall not prevent the
purchase or acquisition of Preferred Shares to preserve the REIT status of the
Company or pursuant to a purchase or exchange offer made on the same terms to
holders of all outstanding Preferred Shares.
Notice of redemption will be given by publication in a newspaper of general
circulation in The City of New York, such publication to be made once a week for
two successive weeks commencing not less than 30 nor more than 60 days prior to
the redemption date. A similar notice furnished by the Company will be mailed by
the registrar, postage prepaid, not less than 30 nor more than 60 days prior to
the redemption date, addressed to the respective holders of record of the
Preferred Shares to be redeemed at their respective addresses as they appear on
the share transfer records of the registrar. No failure to give such notice or
any defect thereto or in the mailing thereof shall affect the validity of the
proceedings for the redemption of any Preferred Shares except as to the holder
to whom notice was defective or not given. Each notice shall state: (i) the
redemption date; (ii) the redemption price; (iii) the number of Preferred Shares
to be redeemed; (iv) the place or places where the Preferred Shares are to be
surrendered for payment of the redemption price; and (v) that dividends on the
Preferred Shares to be redeemed will cease to accumulate on such redemption
date. If fewer than all the Preferred Shares held by any holder are to be
redeemed, the notice mailed to such holder shall also specify the number of
Preferred Shares to be redeemed from such holder.
The holders of Preferred Shares at the close of business on a Dividend
Record Date will be entitled to receive the dividend payable with respect to the
Preferred Shares on the corresponding Dividend Payment Date notwithstanding the
redemption thereof between such Dividend Record Date and the corresponding
Dividend Payment Date or the Company's default in the payment of the dividend
due. Except as provided above, the Company will make no payment or allowance for
unpaid dividends, whether or not in arrears, on Preferred Shares to be redeemed.
The Preferred Shares do not have a stated maturity and are not subject to
any sinking fund or mandatory redemption provisions (except as provided under
"--Restrictions on Transfer" below).
VOTING RIGHTS
Except as indicated below or except as otherwise from time to time required
by applicable law, the holders of Preferred Shares will have no voting rights.
On any matter on which the Preferred Shares are entitled to vote (as
expressly provided herein or as may be required by law), including any action by
written consent, each Preferred Share shall be entitled to one vote. With
respect to each Preferred Share, the holder thereof may designate a proxy, with
each such proxy having the right to vote on behalf of such holder.
If dividends on the Preferred Shares are in arrears for six or more
quarterly periods, whether or not such quarterly periods are consecutive,
holders of the Preferred Shares (voting separately as a class with all other
series of preferred stock of the Company upon which like voting rights have been
conferred and are exercisable) will be entitled to vote for the election of two
additional directors to serve on the Board of Directors of the Company at a
special meeting called by the holders of record of at least ten percent of the
Preferred Shares (unless such request is received less than 90 days before the
date fixed for the next annual or special meeting of the stockholders) or at the
next annual meeting of the stockholders, and at each subsequent annual meeting
until all dividends accumulated on the Preferred Shares for the past dividend
periods and the then current dividend period shall have been fully paid or
declared and a sum sufficient for payment thereof set aside for payment. In such
case, the entire Board of Directors of the Company will be increased by two
directors.
So long as any Preferred Shares remain outstanding, the Company will not,
without the affirmative vote or consent of the holders of at least two-thirds of
the Preferred Shares outstanding at the time, given in person or by proxy,
either in writing or at a meeting (voting separately as a class), (i) authorize
or create, or increase the authorized or issued amount of, any class or series
of capital stock ranking senior to the Preferred Shares with respect to the
payment of dividends or the distribution of assets upon liquidation, dissolution
or winding up of the affairs of the Company or reclassify any authorized capital
stock of the Company into such capital stock, or create, authorize or issue any
obligation or security convertible into or evidencing the right to purchase any
such capital stock; or (ii) amend, alter or repeal the provisions of the
Articles of Incorporation or the Designating Amendment, whether by merger,
consolidation or otherwise (an "Event"), so as to materially and adversely
affect any right, preference, privilege or voting power of the Preferred Shares
or the holders thereof; PROVIDED, HOWEVER, with respect to the occurrence of any
of the Events set forth in (ii) above, so long as the Preferred Shares remain
outstanding with the terms thereof materially unchanged, taking into account
that upon the occurrence of an Event, the Company may not be the surviving
entity, the occurrence of any such Event shall not be deemed to materially and
adversely affect such rights, preferences, privileges or voting powers of
holders of Preferred Shares; and PROVIDED, FURTHER, that (x) any increase in the
amount of the authorized preferred stock of the Company or the creation or the
issuance of any other series of preferred stock, or (y) any increase in the
amount of authorized Preferred Shares, in each case ranking on a parity with or
junior to the Preferred Shares with respect to the payment of dividends and the
distribution of assets upon liquidation, dissolution or winding up, shall not be
deemed to materially and adversely affect such rights, preferences, privileges
or voting powers.
The foregoing voting provisions will not apply if, at or prior to the time
when the act with respect to such vote or consent would otherwise be required
shall be effected, all outstanding Preferred Shares shall have been redeemed or
called for redemption and sufficient funds shall have been deposited in trust to
effect such redemption.
CONVERSION
The Preferred Shares are not convertible into or exchangeable for any other
property or securities of the Company.
SHAREHOLDER LIABILITY
Applicable Maryland law provides that no shareholder, including holders of
Preferred Shares, shall be personally liable for the acts and obligations of the
Company and that the funds and property of the Company shall be the only
recourse for such acts or obligations.
RESTRICTIONS ON TRANSFER
The Designating Amendment contains certain restrictions on the number of
Preferred Shares that a single shareholder may own. For the Company to qualify
as a REIT under the Code, no more than 50% in value of its outstanding Preferred
Shares and Common Stock may be owned, actually and constructively under the
applicable constructive ownership provisions of the Code, by five or fewer
individuals (as are defined in the Code to include certain entities) during the
last half of a taxable year (other than the first year) or during a
proportionate part of a shorter taxable year. The Preferred Shares and Common
Stock must also be beneficially owned by 100 or more persons during at least 335
days of a taxable year (other than the first year) or during a proportionate
part of a shorter taxable year. Because the Company has elected to be treated as
a REIT, the Articles of Incorporation and the Designating Amendment of the
Company contain restrictions on the acquisition of Preferred Shares and Common
Stock intended to ensure compliance with these requirements.
Subject to certain exceptions specified in the Designating Amendment, no
person may own, after taking account the applicable constructive ownership
provisions of the Code, more than 7% (the "Ownership Limit") of the outstanding
Preferred Shares. Under the constructive ownership rules, Preferred Shares owned
by an entity, including a corporation, life insurance company, mutual fund or
pension trust, are treated as owned by the ultimate individual beneficial owners
of the entity. In addition, a holder is prohibited from acquiring any Preferred
Shares if such acquisition would cause five individuals to own (actually and
constructively under the applicable constructive ownership of the Code) in the
aggregate more than 50% in value of the outstanding Preferred Shares and Common
Stock.
If any shareholder purports to transfer shares to a person and either the
transfer would result in the Company failing to qualify as a REIT, or the
shareholder knows that such transfer would cause the transferee to hold more
than the applicable Ownership Limit, the purported transfer will be null and
void as to that number of shares the transfer of which would cause a violation
of the applicable limit, and the intended transferee (the "Purported
Transferee") shall not acquire any rights in the shares and those shares will be
transferred by operation of law to the Company, as trustee of a charitable trust
(the "Charitable Trust") created for the exclusive benefit of The American
Cancer Society, a designated charity. The Company, as trustee of the Charitable
Trust, may transfer the shares held in trust to a person (the "Permitted
Transferee") whose ownership would not violate the Company's ownership
restrictions. Upon a transfer by the Charitable Trust, the Purported Transferee
would receive the lesser of (i) the price paid by him for the shares, or if no
value is given for the shares, the market price of the shares on the day of the
event causing the shares to be held in trust, and (ii) the price per share
received by the Company, as trustee, from the sale of the shares held in trust.
Any proceeds in excess of the amount payable to the Purported Transferee will be
paid to the designated charity.
The Purported Transferee will not be entitled to designate a Permitted
Transferee, vote any shares it attempts to acquire or receive any dividends or
distributions. Any dividends or distributions paid to the Purported Transferee
must be repaid to the Company and held in trust for the designated charity. If a
Purported Transferee votes, any stockholder vote will be rescinded if the
stockholder vote would have been decided differently had the Purported
Transferee's vote not been counted. Any shares held in the Charitable Trust will
be deemed to have been offered for sale to the Company or its designee, for a
90-day period, at the lesser of the price paid by the Purported Transferee and
the market price on the date the Company accepts the offer.
The foregoing provisions are designed to provide that the Purported
Transferee will not receive any economic benefit from the attempted transfer.
All certificates representing Preferred Shares will bear a legend referring
to the restrictions described above.
The Designating Amendment provides that each shareholder shall upon demand
be required to disclose to the Company in writing such information as the
Company may request in good faith in order to determine the Company's status as
a REIT.
BOOK-ENTRY SYSTEM
The Preferred Shares will be represented by a single fully-registered
certificate in book-entry form (the "Global Certificate") which will be
deposited with, or on behalf of, The Depository Trust Company ("DTC") and
registered in the name of DTC's nominee. Except as set forth below, the Global
Certificate may not be transferred except as a whole by DTC to a nominee of DTC
or by a nominee of DTC to DTC or another nominee of DTC or by DTC or any such
nominee to a successor of DTC or a nominee of such successor.
So long as DTC or its nominee is the registered owner of the Global
Certificate, DTC or its nominee, as the case may be, will be considered the sole
recordholder of the Preferred Shares represented by the Global Certificate.
Except as provided below, owners of beneficial interests in the Global
Certificate will not be entitled to have Preferred Shares represented by the
Global Certificate registered in their names, will not receive or be entitled to
receive physical delivery of Preferred Shares in certificated form and will not
be considered the recordholders thereof. The laws of some states require that
certain purchasers of securities take physical delivery of securities in
certificated form; accordingly, such laws may limit the transferability of
beneficial interests in the Global Certificate.
The following is based on information furnished by DTC:
DTC will act as securities depository for the Preferred Shares. The
Preferred Shares will be issued as fully registered securities registered in the
name of Cede & Co. (DTC's partnership nominee). Initially, one fully registered
Preferred Share certificate will be issued to represent the Preferred Shares.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its participants ("Participants") deposit with DTC. DTC
also facilitates the settlement among Participants of securities transactions,
such as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in Participants' accounts, thereby eliminating
the need for physical movement of securities certificates. Direct Participants
include securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations ("Direct Participants"). DTC is
owned by a number of its Direct Participants and by The New York Stock Exchange,
the American Stock Exchange and the National Association of Securities Dealers,
Inc. Access to the DTC system is also available to others such as securities
brokers and dealers, banks and trust companies that clear through or maintain a
custodial relationship with a Direct Participant, either directly or indirectly
("Indirect Participants"). The rules applicable to DTC and its Participants are
on file with the Commission.
Purchases of Preferred Shares under the DTC system must be made by or
through Direct Participants, which will receive a credit for the Preferred
Shares on DTC's records. The ownership interest of each actual purchaser of each
Preferred Share ("Beneficial Owner") is in turn recorded on the Direct and
Indirect Participants' records. A Beneficial Owner does not receive written
confirmation from DTC of its purchase, but such Beneficial Owner is expected to
receive a written confirmation providing details of the transaction, as well as
periodic statements of its holdings, from the Direct or Indirect Participant
through which such Beneficial Owner entered into the transaction. Transfers of
ownership interests in Preferred Shares are accomplished by entries made on the
books of Participants acting on behalf of Beneficial Owners. Beneficial Owners
do not receive certificates representing their ownership interests in Preferred
Shares, except in the event that use of the book-entry system for the Preferred
Shares is discontinued.
To facilitate subsequent transfers, all Preferred Shares deposited by
Participants with DTC are registered in the name of DTC's partnership nominee,
Cede & Co. The deposit of Preferred Shares with DTC and their registration in
the name of Cede & Co. effect no change in beneficial ownership. DTC has no
knowledge of the actual Beneficial Owners of the Preferred Shares; DTC records
reflect only the identity of the Direct Participants to whose accounts Preferred
Shares are credited, which may or may not be the Beneficial Owners. The
Participants remain responsible for keeping account of their holdings on behalf
of their customers.
Delivery of notices and other communications by DTC to Direct Participants,
by Direct Participants to Indirect Participants, and by Direct and Indirect
Participants to Beneficial Owners are governed by arrangements among them,
subject to any statutory or regulatory requirements as may be in effect from
time to time.
Redemption notices shall be sent to Cede & Co. If less than all of the
Preferred Shares represented by the Global Certificate are to be redeemed, DTC's
practice is to determine by lot the amount of the interest of each Direct
Participants to be redeemed.
Neither DTC nor Cede & Co. will consent or vote with respect to the
Preferred Shares. Under its usual procedures, DTC mails a proxy (an "Omnibus
Proxy") to the issuer as soon as possible after the record date. The Omnibus
Proxy assigns Cede & Co.'s consenting or voting rights to those Direct
Participants to whose accounts the Preferred Shares are credited on the record
date (identified on a list attached to the Omnibus Proxy).
Dividend payments, redemption proceeds and other distributions in respect
of the Preferred Shares will be made in immediately available funds by the
Company or the Company's agent to DTC. DTC's practice is to credit Direct
Participant's accounts, upon receipt of funds and corresponding detail
information from the Company or the Company's agent, on the payable date in
accordance with their respective holdings as shown on DTC's records. Payments by
Participants to Beneficial Owners will be governed by standing instructions and
customary practices, as is the case with securities held for the accounts of
customers in bearer form or registered in "street name", and will be the
responsibility of such Participant and not of DTC, the Company or the Company's
agent, subject to any statutory or regulatory requirements as may be in effect
from time to time. Payments in respect of the Preferred Shares to DTC are the
responsibility of the Company or the Company's agent, disbursement of such
payments to Direct Participants is the responsibility of DTC, and disbursement
of such payments to the Beneficial Owners is the responsibility of Direct and
Indirect Participants.
DTC may discontinue providing its services as securities depository with
respect to the Preferred Shares at any time by giving reasonable notice to the
Company or the Company's agent. Under such circumstances, in the event that a
successor securities depository is not appointed, Preferred Share certificates
are required to be printed and delivered.
The Company may decide to discontinue use of the system of book-entry
transfers through DTC (or a successor securities depository). In that event,
Preferred Share certificates will be printed and delivered.
None of the Company, the Company's agent or the Initial Purchaser will have
any responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial interests in the Global Certificate, or
for maintaining, supervising or reviewing any records relating to such
beneficial interests.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following summary of certain federal income tax considerations is based
on current law, is for general information only, and is not tax advice. This
discussion does not purport to deal with all aspects of taxation that may be
relevant to particular shareholders in light of their personal investment or tax
circumstances, or to certain types of shareholders (including insurance
companies, tax-exempt organizations, financial institutions or broker dealers,
foreign corporations and persons who are not citizens or residents of the United
States) subject to special treatment under the federal income tax laws. In
addition, this section does not discuss foreign, state, or local taxation.
Prospective investors should consult, and must depend on, their own tax advisors
regarding the state, local, foreign and other tax consequences of holding and
disposing of Preferred Shares.
DIVIDENDS AND OTHER DISTRIBUTIONS. As long as the Company qualifies as a
REIT, distributions made to the Company's taxable U.S. stockholders out of
current or accumulated earnings and profits (and not designated as capital gain
dividends) will be taken into account by such U.S. stockholders as ordinary
income and will not be eligible for the dividends received deduction generally
available to corporations. As used herein, the term "U.S. stockholder" means a
holder of Preferred Shares that for U.S. federal income tax purposes is (i) a
citizen or resident of the United States, (ii) a corporation, partnership, or
other entity created or organized in or under the laws of the United States or
of any political subdivision thereof, (iii) an estate whose income from sources
without the United States is includible in gross income for United States
federal income tax purposes regardless of its connection with the conduct of a
trade or business within the United States, or (iv) any trust with respect to
which (A) a United States court is able to exercise primary supervision over the
administration of such trust and (B) one or more United States persons have the
authority to control all substantial decisions of the trust. Distributions that
are designated as capital gain dividends will be taxed as gain from the sale of
a capital asset held for more than one year (to the extent they do not exceed
the Company's actual net capital gain for the taxable year) without regard to
the period for which the U.S. stockholder has held his stock. U.S. stockholders
that are corporations may, however, be required to treat up to 20% of certain
capital gain dividends as ordinary income. Stockholders' bases in their shares
will be increased by undistributed long-term capital gains so designated by the
Company less the taxes thereon paid by the Company and credits to stockholders.
Distributions in excess of current and accumulated earnings and profits will not
be taxable to a U.S. stockholder to the extent that they do not exceed the
adjusted basis of the U.S. stockholder's stock, but rather will reduce the
adjusted basis of such stock. To the extent that such distributions in excess of
current and accumulated earnings and profits exceed the adjusted basis of a
stockholder's stock, such distributions will be included in income as long-term
capital gain (or short-term capital gain if the Preferred Shares had been held
for one year or less), assuming the Preferred Shares are a capital asset in the
hands of the U.S. stockholder.
If the Company elects to retain, rather than distribute as a capital gain
dividend, its net long-term capital gains, the Company would pay tax on such
retained net long-term capital gains. In addition, for tax years of the Company
beginning on or after January 1, 1998, to the extent timely designated by the
Company, a U.S. stockholder generally would (i) include its proportionate share
of such undistributed long-term capital gains in computing its long-term capital
gains in its return for its taxable year in which the last day of the Company's
taxable year falls (subject to certain limitations as to the amount so
includable), (ii) be deemed to have paid the capital gains tax imposed on the
Company on the designated amounts included in such U.S. stockholder's long-term
capital gains, (iii) receive a credit or refund for such amount or of tax deemed
paid by it, (iv) increase the adjusted basis of its Preferred Shares by the
difference between the amount of such includable gains and the tax deemed to
have been paid by it, and (v) in the case of a U.S. stockholder that is a
corporation, appropriately adjust its earnings and profits for the retained
capital gains in accordance with Treasury Regulations to be prescribed by the
Internal Revenue Service.
U.S. stockholders may not include in their individual income tax returns
any net operating losses or capital losses of the Company. Instead, such losses
would be carried over by the Company for potential offset against its future
income (subject to certain limitations). Taxable distributions from the Company
and gain from the disposition of the Preferred Shares will not be treated as
passive activity income and, therefore, stockholders generally will not be able
to apply any "passive activity losses" (such as losses from certain types of
limited partnerships in which a U.S. stockholder is a limited partner) against
such income. In addition, taxable distributions from the Company generally will
be treated as investment income for purposes of the investment interest
limitations. Capital gains from the disposition of Preferred Shares (or
distributions treated as such), however, will be treated as investment income
only if the U.S. stockholder so elects, in which case such capital gains will be
taxed at ordinary income rates. The Company will notify U.S. stockholders after
the close of the Company's taxable year as to the portions of the distributions
attributable to that year that constitute ordinary income or capital gain
dividends.
In determining the extent to which a distribution on the Preferred Shares
constitutes a dividend for tax purposes, the earnings and profits of the Company
will be allocated first to distributions with respect to the Preferred Shares
and then to distributions with respect to the Common Stock.
INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING. The Company will
report to its U.S. stockholders and to the Internal Revenue Service the amount
of distributions paid during each calendar year, and the amount of tax withheld,
if any. Under the backup withholding rules, a stockholder may be subject to
backup withholding at the rate of 31% with respect to distributions paid unless
such holder (i) is a corporation or comes within certain other exempt categories
and when required, demonstrates this fact or (ii) provides a taxpayer
identification number, certifies as to no loss of exemption from backup
withholding, and otherwise complies with the applicable requirements of the
backup withholding rules. A stockholder who does not provide the Company with
his correct taxpayer identification number also may be subject to penalties
imposed by the Internal Revenue Service. Any amount paid as backup withholding
will be creditable against the stockholder's income tax liability. In addition,
the Company may be required to withhold a portion of capital gain distributions
to any stockholders who fail to certify their nonforeign status to the Company.
The Treasury Department has issued regulations regarding the backup withholding
rules as applied to non-U.S. stockholders that unify current certification
procedures and forms and unify reliance standards but generally do not
substantially alter the current system of backup withholding compliance. These
regulations will be generally effective with respect to distributions made after
December 31, 1998, subject to certain transition rules.
SALE OR EXCHANGE OF PREFERRED SHARES. Upon the sale or exchange of
Preferred Shares to a party other than the Company, a holder of Preferred Shares
will realize a capital gain or loss (provided the Preferred Shares are held as a
capital asset) measured by the difference between the amount realized on the
sale or other disposition and the holder's adjusted tax basis in the Preferred
Shares. In general, such gain or loss will be a long-term capital gain or loss
if the holder's holding period with respect to the Preferred Shares is more than
one year at the time of the sale or exchange. Lower capital gains rates will
apply to individuals who have held such Preferred Shares for more than 18
months. Further, any loss on a sale of Preferred Shares which were held by the
holder for six months or less and with respect to which a capital gain dividend
was received will be treated as a long term capital loss, up to the amount of
the capital gain dividend received with respect to such shares.
REDEMPTION OF PREFERRED SHARES. The treatment to be accorded to any
redemption by the Company of Preferred Shares can only be determined on the
basis of particular facts as to each holder of Preferred Shares at the time of
redemption. In general, a holder of Preferred Shares will recognize capital gain
or loss (provided the Preferred Shares are held as a capital asset) measured by
the difference between the amount realized by the holder upon the redemption and
such holder's adjusted tax basis in the Preferred Shares redeemed if such
redemption (i) results in a "complete termination" of the holder's interest in
all classes of shares of the Company under Section 302(b) (3) of the Code, (ii)
is "substantially disproportionate" with respect to the holder's interest in the
Company under Section 302(b)(2) of the Code (which will not be the case if only
Preferred Shares are redeemed, since they generally do not have voting rights)
or (iii) is "not essentially equivalent to a dividend" with respect to the
holder of Preferred Shares under Section 302(b)(1) of the Code. In determining
whether any of these tests have been met, shares considered to be owned by the
holder by reason of certain constructive ownership rules set forth in the Code,
as well as shares actually owned, generally must be taken into account. Because
the determination as to whether any of the alternative tests of Section 302(b)
of the Code will be satisfied with respect to any particular holder of Preferred
Shares depends upon the facts and circumstances at the time when the
determination must be made, prospective investors are advised to consult their
own tax advisors to determine such tax treatment.
REGISTRATION RIGHTS
The Company and the Operating Partnership entered into a registration
rights agreement with the Initial Purchaser (the "Registration Rights
Agreement") for the benefit of the holders of the Preferred Shares wherein the
Company agreed, for the benefit of the holders of the Preferred Shares, to use
its best efforts to keep the Registration Statement effective until the earlier
of October 15, 1999 or such time as all of the Preferred Shares have been sold
thereunder or otherwise cease to be registrable securities within the meaning of
the Registration Rights Agreement.
The Company will provide to each holder of Preferred Shares copies of this
Prospectus, notify each such holder when the Registration Statement for the
Preferred Shares has become effective and take certain other actions as are
required to permit, subject to the foregoing, unrestricted resales of the
Preferred Shares. Pursuant to the Registration Rights Agreement, the Initial
Purchaser shall pay all expenses of the registration of the Preferred Shares, up
to a maximum amount of $100,000. The Company is not obligated under the
Registration Rights Agreement to pay certain costs and expenses such as in
connection with opinions of counsel of such Selling Holders or accountants'
"cold comfort" letters and the officers and directors of the Company are not
obligated under the Registration Rights Agreement to participate in marketing
efforts on behalf of such Selling Holders.
Each Preferred Share certificate contains a legend to the effect that the
holder thereof, by its acceptance thereof, is deemed to have agreed to be bound
by the provisions of the Registration Rights Agreement. In that regard, each
holder will be deemed to have agreed that, upon receipt of notice from the
Company of the occurrence of any event which makes such statement in this
Prospectus untrue in any material respect or which requires the making of any
changes in this Prospectus in order to make the statements therein not
misleading or of certain other events specified in the Registration Rights
Agreement, such holder will suspend the sale of Preferred Shares pursuant to
this Prospectus until the Company has amended or supplemented this Prospectus to
correct such misstatement or omission and has furnished copies of the amended or
supplemented prospectus to such holder or the Company has given notice that the
sale of the Preferred Shares may be resumed. The Company will be permitted to
suspend use of this Prospectus for a period not to exceed 30 days in any
three-month period or two periods not to exceed an aggregate of 45 days (whether
or not consecutive) in any twelve-month period under certain circumstances
relating to pending corporate developments, public filings with the Commission
and similar events.
If the Company shall give such notice to suspend the sale of the Preferred
Shares, it shall extend the relevant period referred to above during which the
Company is required to keep effective the Registration Statement by the number
of days during the period from and including the date of the giving of such
notice to and including the date when holders shall have received copies of the
supplemented or amended prospectus necessary to permit resales of the Preferred
Shares or to and including the date on which the Company has given notice that
the sale of Preferred Shares may be resumed, as the case may be.
If the Registration Statement ceases to remain effective or be available
for use by holders of the Preferred Shares at any time prior to October 15, 1999
(other than after such time as all Preferred Shares have been disposed of
thereunder or otherwise cease to be registrable securities within the meaning of
the Registration Rights Agreement), except as permitted in the second preceding
paragraph with respect to suspensions of the use of this Prospectus, then an
additional amount ("Liquidated Damages") shall be payable at a rate of 0.50% per
annum of the liquidation preference of the Preferred Shares commencing on the
day the Registration Statement ceases to remain effective or be available or on
the 31st day in any three-month period or 46th day in any twelve-month period
following the day the Registration Statement ceases to remain effective or be
available, as the case may be; PROVIDED, however, that the Liquidated Damages
may not exceed in the aggregate 0.50% per annum of the liquidation preference of
the Preferred Shares; PROVIDED, FURTHER, HOWEVER, that upon the effectiveness or
availability of the Registration Statement which had ceased to remain effective
or be available, Liquidated Damages on the Preferred Shares shall cease to be
payable.
Any amounts of Liquidated Damages due pursuant to the preceding paragraph
will be payable in cash on the next succeeding Dividend Payment Date to the
holders of record at the close of business on the Dividend Record Date
immediately preceding such date.
The Registration Rights Agreement is governed by, and construed in
accordance with, the laws of the State of New York. The summary herein of
certain provisions of the Registration Rights Agreement does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
all the provisions of the Registration Rights Agreement, a copy of which is
filed as an exhibit to the Registration Statement.
SELLING HOLDERS
The Preferred Shares were originally issued by the Company and sold by the
Initial Purchaser in compliance with Rule 144A under the Securities Act to
"qualified institutional buyers" (as defined in Rule 144A of the Securities
Act). These purchasers or their transferees, pledgees, donees or successors (the
"Selling Holders") may from time to time offer and sell pursuant to this
Prospectus any or all of the Preferred Shares. Although none of the Selling
Holders have advised the Company that they currently intend to sell all or any
of the Preferred Shares pursuant to this Prospectus, the Selling Holders may
choose to sell the Preferred Shares from time to time upon notice to the
Company. See "Plan of Distribution."
Except as otherwise indicated, the table below sets forth certain
information with respect to the Preferred Shares as of December 22, 1997. To the
knowledge of the Company and based on certain representations made by the
Selling Holders, except as indicated below and other than as a result of the
ownership of the Preferred Shares indicated below, none of the Selling Holders
has had any material relationship with the Company or any of its affiliates
within the past three years.
Number of
Name of Selling Holder Preferred Shares
That May be Sold
Merrill Lynch, 800,000
Pierce, Fenner & Smith Incorporated
Colorado Public 200,000
Employee Retirement System
The preceding table has been prepared based on information furnished to the
Company by the Initial Purchaser and by or on behalf of the Selling Holders.
With respect to each Selling Holder, the number of Preferred Shares set forth
may have increased or decreased since the information was furnished, and there
may be additional Selling Holders of which the Company is unaware.
In view of the fact that Selling Holders may offer all or a portion of the
Preferred Shares held by them pursuant to this offering, and because this
offering is not being underwritten on a firm commitment basis, no estimate can
be given as to the number of Preferred Shares that will be held by the Selling
Holders after completion of this offering. In addition, the Selling Holders
identified above may have sold, transferred or otherwise disposed of all or a
portion of their Preferred Shares since the date on which they provided
information regarding their Preferred Shares in transactions exempt from the
registration requirements of the Securities Act.
Information concerning the Selling Holders may change from time to time and
any such changed information that the Company becomes aware of will be set forth
in supplements to this Prospectus if and when necessary. Accordingly, the number
of Preferred Shares offered hereby may increase or decrease.
In the ordinary course of business, Merrill Lynch, Pierce, Fenner & Smith
Incorporated and its affiliates have provided, and may in the future provide,
investment banking, financial advisory and other services to the Company.
Merrill Lynch, Pierce, Fenner & Smith Incorporated was the Initial Purchaser.
PLAN OF DISTRIBUTION
The Preferred Shares may be sold from time to time to purchasers directly
by the Selling Holders. Alternatively, the Selling Holders may from time to time
offer the Preferred Shares to or through underwriters, dealers or agents, who
may receive compensation in the form of underwriting discounts, concessions or
commissions from the Selling Holders or the purchasers of such securities for
whom they may act as agents. The Selling Holders and any underwriters, dealers
or agents that participate in the distribution of Preferred Shares may be deemed
to be "underwriters" within the meaning of the Securities Act and any profit on
the sale of such securities and any discounts, commissions, concessions or other
compensation received by any such underwriter, dealer or agent may be deemed to
be underwriting discounts and commissions under the Securities Act.
The Preferred Shares may be sold from time to time in one or more
transactions at a fixed offering price, which may be changed, at prices related
to the then current market price at the time of sale, at varying prices
determined at the time of sale or at negotiated prices. The sale of the
Preferred Shares may be effectuated in transactions (which may involve crosses
or block transactions) (i) on any national securities exchange or quotation
service on which the Preferred Shares may be listed or quoted at the time of
sale, (ii) in the over-the-counter market, (iii) in transactions otherwise than
on such exchanges or in the over-the-counter market, or (iv) through the writing
and exercise of options. At the time a particular offering of the Preferred
Shares is made, a Prospectus Supplement will be distributed which will set forth
the aggregate amount of the Preferred Shares being offered and the terms of the
offering, including the name or names of any underwriters, dealers or agents,
any discounts, commissions and other terms constituting compensation from the
Selling Holders and any discounts, commissions or concessions allowed or
reallowed to be paid to dealers. The Prospectus Supplement and, if necessary, a
post-effective amendment to the Registration Statement, will be filed with the
Commission to reflect the disclosure of additional information with respect to
the distribution of the Preferred Shares. In addition, the Preferred Shares
covered by this Prospectus may be sold in private transactions or under Rule 144
rather than pursuant to this Prospectus. To comply with the securities laws of
certain jurisdictions, if applicable, the Preferred Shares will be offered or
sold in such jurisdictions only through registered or licensed brokers or
dealers. In addition, in certain jurisdictions the Preferred Shares may not be
offered or sold unless they have been registered or qualified for sale in such
jurisdictions or any exemption from registration or qualification is available
and is complied with.
The Selling Holders will be subject to applicable provisions of the
Exchange Act and rules and regulations thereunder, which provisions may limit
the timing of purchases and sales of any of the Preferred Shares by the Selling
Holders. The foregoing may affect the marketability of such securities.
Pursuant to the Registration Rights Agreement, the Initial Purchaser shall
pay all expenses of the registration of the Preferred Shares, including, without
limitation, Commission filing fees and expenses of compliance with state
securities or "blue sky" laws, up to a maximum amount of $100,000; provided,
however, that the Selling Holders will pay all underwriting discounts and
selling commissions, if any. The Selling Holders will be indemnified by the
Company against certain civil liabilities, including certain liabilities under
the Securities Act, or will be entitled to contribution in connection therewith.
LEGAL MATTERS
The validity of the Preferred Shares and certain United States federal
income taxation matters will be passed upon for the Company by Stroock & Stroock
& Lavan LLP, New York, New York, and for any underwriters, dealers or agents by
Brown & Wood LLP, New York, New York.
EXPERTS
The consolidated financial statements and schedule of the Company at
December 31, 1996 and 1995, and for each of the three years in the period ended
December 31, 1996, appearing in the Company's Annual Report on Form 10-K for the
year ended December 31, 1996, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon included therein and
incorporated herein by reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
The statement of revenues and certain expenses of Waikele Factory Outlet
Stores for the year ended December 31, 1996, appearing in the Company's Current
Report on Form 8-K dated April 11, 1997, has been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon included therein and
incorporated herein by reference. Such financial statement is incorporated
herein by reference in reliance upon such report given upon the authority of
such firm as experts in accounting and auditing.
<PAGE>
PART II.
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The estimated expenses in connection with the distribution of the Preferred
Shares (all of which shall be paid by the Initial Purchaser) being registered
hereunder (other than underwriting discounts) are set forth in the following
table (all amounts except the SEC registration fee are estimated):
Securities and Exchange Commission Registration Fee.... $ 14,750
Accounting Fees and Expenses........................... $ 10,000
Legal Fees and Expenses................................ $ 25,000
Printing Expenses...................................... $ 10,000
Miscellaneous.......................................... $ 250
----------
Total........................................... $ 60,000
==========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company is a Maryland corporation. The Company's Articles of
Incorporation contain a provision limiting the liability of the directors and
officers to the fullest extent permitted by Section 5-349 of the Courts and
Judicial Proceedings Code of Maryland. The Company's Articles of Incorporation
also contain a provision permitted under Maryland General Corporation Law
eliminating (with limited exceptions) each director's personal liability for
monetary damages for breach of any duty as a director. In addition, the
Company's Articles of Incorporation and Bylaws provide for the Company's
indemnification of its directors and officers from certain liabilities and
expenses, as well as advancement of costs, expenses and attorneys' fees, to the
fullest extent permitted under Maryland General Corporation Law. Such rights are
contract rights fully enforceable by each beneficiary thereof, and are in
addition to, and not exclusive of, any other right to indemnification.
ITEM 16. EXHIBITS.
4.1 -- Registration Rights Agreement dated October 7,
1997 by and among the Company, the Operating
Partnership and the Initial Purchaser. (1)
4.2 -- Form of Preferred Stock Certificate. (1)
5.1 -- Opinion of Stroock & Stroock & Lavan LLP as to
the legality of the Preferred Shares. (1)
8.1 -- Opinion of Stroock & Stroock & Lavan LLP as to
certain tax matters (included in Exhibit 5.1).
12 -- Calculation of Ratios of Earnings to Fixed
Charges and Preferred Stock Dividends. (1)
23.1 -- Consent of Stroock & Stroock & Lavan LLP
(included in Exhibit 5.1).
23.2 -- Consent of Ernst & Young LLP. (1)
24 -- Power of Attorney. (1)
- ---------------
(1) Previously Filed
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 the Registration Statement:
(i) To include any prospectus required by
Section 10(a)(3) of the Securities Act;
(ii) To reflect in the prospectus any facts or
events arising after the effective date of the Registration Statement (or the
most recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing, any increase or decrease
in volume of securities offered (if the total dollar value of securities offered
would not exceed that which was registered) and any deviation from the low or
high 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% change
in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) To include any material information with
respect to the plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the Registration
Statement.
Provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
Registration Statement is on Form S-3 or Form S-8 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 the Exchange Act that are
incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Exchange Act) that is incorporated by
reference in the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(c) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(d) 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 Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
(e) The undersigned Registrant hereby undertakes (1) to use its best
efforts to distribute prior to the opening of bids, to prospective bidders,
underwriters, and dealers, a reasonable number of copies of a prospectus which
at that time meets the requirements of Section 10(a) of the Securities Act, and
relating to the securities offered at competitive bidding, as contained in the
Registration Statement, together with any supplements thereto, and (2) to file
an amendment to the Registration Statement reflecting the results of bidding,
the terms of the reoffering and related matters to the extent required by the
applicable form, not later than the first use, authorized by the Registrant
after the opening of bids, of a prospectus relating to the securities offered at
competitive bidding, unless no further public offering of such securities by the
Registrant and no reoffering of such securities by the purchasers is proposed to
be made.
<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 amendment to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Roseland, State of New Jersey , on December 29,
1997.
CHELSEA GCA REALTY, INC.
BY: /S/ Michael J. Clarke
Michael J. Clarke
Vice President Finance
Pursuant to the requirements of the Securities Act of 1933, this amendment
to the Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
<PAGE>
Signature TITLE DATE
* Chairman of the Board of Directors and December 29, 1997
- ------------------ Chief Executive
David C. Bloom (Principal Executive Officer)
* Director and Chairman of December 29, 1997
- --------------------- the Executive Committee
Barry M. Ginsburg
* President and Chief Financial Officer December 29, 1997
- ------------------ (Principal Financial Officer)
Leslie T. Chao
/s/ Michael J. Clarke Vice President-Finance December 29, 1997
- ------------------ (Principal Accounting Officer)
Michael J. Clarke
*
- ------------------- Director December 29, 1997
William D. Bloom
*
- -------------------- Director December 29, 1997
Brendan T. Byrne
*
- -------------------- Director December 29, 1997
Robert Frommer
*
- -------------------------- Director December 29, 1997
Philip D. Kaltenbacher
*
- ----------------------- Director December 29, 1997
Reuben S. Leibowitz
* By: /s/ Michael J. Clarke
Michael J. Clarke
Attorney-in-Fact
<PAGE>
EXHIBIT INDEX
EXHIBITS DESCRIPTION PAGE NO.
4.1 -- Registration Rights Agreement dated October 7,
1997 by and among the Company, the Operating
Partnership and the Initial Purchaser. (1)
4.2 -- Form of Preferred Stock Certificate. (1)
5.1 -- Opinion of Stroock & Stroock & Lavan LLP as to
the legality of the Preferred Shares. (1)
8.1 -- Opinion of Stroock & Stroock & Lavan LLP as to
certain tax matters (included in Exhibit 5.1).
12 -- Calculation of Ratios of Earnings to Fixed
Charges and Preferred Stock Dividends. (1)
23.1 -- Consent of Stroock & Stroock & Lavan LLP
(included in Exhibit 5.1).
23.2 -- Consent of Ernst & Young LLP. (1)
24 -- Power of Attorney (1)
- ----------
(1) Previously Filed
