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As filed with the Securities and Exchange Commission on February 13, 1997
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
SPIEKER PROPERTIES, INC.
(Exact Name of Registrant as Specified in Its Charter)
MARYLAND 94-3185802
(State or Other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)
2180 Sand Hill Road
Menlo Park, California 94025
(415) 854-5600
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrar's Principal Executive Offices)
Craig G. Vought
Executive Vice President and Chief Financial Officer
2180 Sand Hill Road
Menlo Park, California 94025
(415) 854-5600
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
COPIES TO:
Stephen J. Schrader, Esq.
Justin L. Bastian, Esq.
Morrison & Foerster LLP
755 Page Mill Road
Palo Alto, California 94304
(415) 813-5600
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
<TABLE>
<CAPTION>
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CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF SHARES TO BE AMOUNT TO BE AGGREGATE PRICE PER AGGREGATE OFFERING REGISTRATION FEE
REGISTERED REGISTERED SHARE PRICE
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<S> <C> <C> <C> <C> <C>
Common Stock, $.0001
par value . . . . . 577,800 shares $35.375 (1) $20,439,675(1) $6,193.84
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</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
in accordance with Rule 457(c) based on the average of the high and
low reported sales prices on the New York Stock Exchange on February
6, 1997.
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 AN 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.
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Information contained herein is subject to completion or amendment. These
securities may not be sold nor may offers to buy them be accepted prior to the
time the registration statement becomes effective. A registration statement
relating to these securities has been filed with the Securities and Exchange
Commission. This prospectus shall not constitute an offer to sell or a
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration, or qualification under the securities laws of any such State.
Subject to Completion
Preliminary Prospectus dated February 13, 1997
PROSPECTUS
577,800 SHARES
SPIEKER PROPERTIES, INC.
COMMON STOCK
This Prospectus relates to the offer and sale from time to time by the
holders of up to 577,800 shares (the "Shares") of common stock, par value
$.0001 per share ("Common Stock"), that may be issued by Spieker Properties,
Inc. (the "Company") to certain holders of up to 577,800 units of limited
partnership interest (the "Units") in Spieker Properties, L.P. (the "Operating
Partnership"), of which the Company is the sole general partner and owns a
controlling interest, if and to the extent that such holders tender such Units
for exchange into shares of Common Stock (the "Selling Stockholders). Of such
577,800 shares being registered hereby, the Company is registering 505,000
Shares issuable upon conversion of 505,000 Units pursuant to the terms of an
Investor Rights Agreement dated November 18, 1993 by and among the Company and
certain holders of Units, and is registering 72,800 Shares issuable upon
conversion of 72,800 Units gifted or to be gifted by certain holders of Units
to charitable organizations, to provide the holders of Units with freely
tradable securities. The registration of the Shares does not necessarily mean
that any of the Shares will be issued by the Company, unless required by the
holders, or will be offered and sold by the holders thereof. See "Use of
Proceeds" and "Registration Rights."
The Common Stock is listed on the New York Stock Exchange (the "NYSE") under
the symbol "SPK." To ensure that the Company maintains its qualification as a
REIT, ownership by any person is limited to 9.9% of the value of the
outstanding capital stock of the Company, with certain limited exceptions. See
"Description of Capital Stock -- Restrictions on Transfer."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED THE
MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE
CONTRARY IS UNLAWFUL.
The Selling Stockholders from time to time may offer and sell the Shares held
by them directly or through agents or broker-dealers on terms to be determined
at the time of sale. To the extent required, the names of any agent or
broker-dealer and applicable commissions or discounts and any other required
information with respect to any particular offer will be set forth in an
accompanying Prospectus Supplement. See "Plan of Distribution." Each of the
Selling Stockholders reserves the sole right to accept or reject, in whole or
in part, any proposed purchase of the Shares to be made directly or through
agents.
The Company will not receive any of the proceeds from the issuance of the
Shares or the sale of Shares by the Selling Stockholders but has agreed to bear
certain expenses of registration of the Shares under Federal and state
securities laws. The Company will acquire one Unit in the Operating
Partnership in exchange for each Share that the Company may issue to Unit
holders.
The Selling Stockholders and any agents or broker-dealers that participate
with the Selling Stockholders in the distribution of Shares may be deemed to be
"underwriters" within the meaning of the Securities Act of 1933, as amended
(the "Securities Act"), and any commissions received by them and any profit on
the resale of the Shares may be deemed to be underwriting commissions or
discounts under the Securities Act. See "Registration Rights" for
indemnification arrangements between the Company and the Selling Stockholders.
The date of this Prospectus is February , 1997
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith the Company files, reports, proxy statements and other information
with the Securities and Exchange Commission (the "Commission"). Such reports,
proxy statements and other information filed can be inspected and copied at the
Commission's Public Reference Section, 450 Fifth Street, N.W., Washington,
D.C., 20549, and at the following regional offices of the Commission: Seven
World Trade Center, 13th Floor, New York, New York 10048 and 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such material can
be obtained from the Public Reference Section of the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. The Commission
maintains a web site (http://www.sec.gov) containing reports, proxy statements
and other information of registrants, including the Company, that file
electronically with the Commission. In addition, the Common Stock is listed on
the New York Stock Exchange and similar information concerning the Company can
be inspected and copied at the offices of the New York Stock Exchange, Inc., 20
Broad Street, New York, New York 10005.
The Company has filed with the Commission a registration statement on Form
S-3 (the "Registration Statement") (of which this Prospectus is a part) under
the Securities Act of 1933, as amended (the "Securities Act"), with respect to
the Offered Securities. This Prospectus does not contain all of the information
set forth in the Registration Statement, certain portions of which have been
omitted as permitted by the rules and regulations of the Commission. Statements
contained in this Prospectus as to the contents of any contract or other
documents are not necessarily complete, and in each instance reference is made
to the copy of such contract or other document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference and the exhibits and schedules thereto. For further information
regarding the Company and the Shares, reference is hereby made to the
Registration Statement and such exhibits and schedules which may be obtained
from the Commission at its principal office in Washington, D.C. upon payment of
the fees prescribed by the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The documents listed below have been filed by the Company under the Exchange
Act with the Commission and are incorporated herein by reference:
a. The Company's Annual Report on Form 10-K for the year ended December 31,
1995, and the Company's Annual Report on Form 10-K/A (Amendment No. 1) filed
with the Commission on June 20, 1996;
b. The Company's Quarterly Reports on Forms 10-Q for the quarters ended
March 31, 1996, June 30, 1996 and September 30, 1996;
c. The Company's four Current Reports on Form 8-K dated June 19, 1996, July
15, 1996, December 4, 1996 and February 3, 1997, respectively;
d. The description of the Company's Common Stock contained in the Company's
Registration Statement on Form 8-A (File No. 1-12528); and
e. The description of the Company's Series B Preferred Stock contained in
the Company's Registration Statement on Form 8-A (File No. 1- 12528).
Each document filed by the Company pursuant to Sections 13(a), 13(c), 14 and
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of the offering made hereby shall be
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deemed to be incorporated by reference in this Prospectus and to be part hereof
from the date of filing such documents.
Any statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
(or in the applicable Prospectus Supplement) 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 such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
Copies of all documents which are incorporated herein by reference (not
including the exhibits to such information, unless such exhibits are
specifically incorporated by reference in such information) will be provided
without charge to each person, including any beneficial owner, to whom this
Prospectus is delivered upon written or oral request. Requests should be
directed to the Investor Relations Coordinator, Spieker Properties, Inc., 2180
Sand Hill Road, Menlo Park, California 94025, telephone number: (415) 854-5600.
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All references to the "Company" include Spieker Properties, Inc., those
entities owned or controlled by Spieker Properties, Inc. and predecessors of
Spieker Properties, Inc., unless the context indicates otherwise.
THE COMPANY
Spieker Properties, Inc. is a real estate investment trust ("REIT") that
acquires, develops and operates suburban office and industrial properties in
California and Washington, Oregon and Idaho (the "Pacific Northwest"). As of
December 31, 1996, the Company owned and operated 156 income-producing
properties (the "Properties," and each a "Property"), aggregating approximately
21.4 million rentable square feet and comprised of 85 industrial Properties, 60
office Properties and 11 retail Properties. The Company's strategic focus is
to invest in California and the Pacific Northwest because of the area's growth
prospects arising from its Pacific Rim location, quality of life,
well-developed transportation infrastructure, high technology industries,
well-educated employee base and excellent universities.
All of the Company's interests in the Properties are held directly or
indirectly by, and substantially all of its operations relating to the
Properties are conducted through, Spieker Properties, L.P. (the "Operating
Partnership"). The Company controls the Operating Partnership as the sole
general partner and, as of February 6, 1997, owned approximately 86.9% of the
partnership interests (the "Units") in the Operating Partnership.
The Company's common stock, par value $.0001 per share (the "Common Stock")
is listed on the New York Stock Exchange under the Symbol "SPK." The Company is
a Maryland corporation and the Operating Partnership is a California limited
partnership. The Company's and the Operating Partnership's executive offices
are located at 2180 Sand Hill Road, Menlo Park, California 94025 and telephone
number is (415) 854-5600.
TAX STATUS OF THE COMPANY
The Company has elected to be taxed as a REIT under Sections 856 through 860
of the Internal Revenue Code of 1986, as amended (the "Code"). As a REIT, the
Company generally is not subject to Federal income tax on net income that it
distributes to its stockholders. REITs are subject to a number of
organizational and operational requirements, including a requirement that they
distribute at least 95% of their annual taxable income. See "Federal Income
Tax Considerations."
SECURITIES TO BE OFFERED
This Prospectus relates to the offer and sale from time to time by the
holders of up to 577,800 shares of Common Stock (the "Shares") that may be
issued by the Company to certain holders of up to 577,800 Units in the
Operating Partnership, of which the Company is the sole general partner and
owns a controlling interest, if and to the extent that such holders tender such
Units for exchange into shares of Common Stock. Of the 577,800 shares being
registered hereby, the Company is registering 505,000 Shares issuable upon
exchange of 505,000 Units pursuant to the terms of the Investor Rights
Agreement dated November 18, 1993 by and among the Company and certain holders
of Units and 72,800 Shares issuable upon conversion of 72,800 Units gifted or
to be gifted by certain holders of Units to charitable organization, to provide
the holders of such Units with freely tradable securities. The Registration of
the Shares does not necessarily mean that any of such Shares will be issued by
the Company, unless required by the holders, or will be offered and sold by the
holders thereof.
USE OF PROCEEDS
The Company will not receive any of the proceeds from the issuance of the
Shares or the sale of Shares by the Selling Stockholders but has agreed to bear
certain expenses of registration of the Shares under Federal and
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state securities laws. The Company will acquire one Unit in exchange for each
Share that the Company may issue to Unit holders.
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SPECIAL CONSIDERATIONS
Prospective investors should carefully consider the following information in
conjunction with the other information contained in this Prospectus and the
applicable Prospectus Supplement before purchasing the Shares offered hereby.
GENERAL REAL ESTATE INVESTMENT RISKS
Real property investments are subject to varying degrees of risk. The yields
available from investments in real estate depend on the amount of income and
capital appreciation generated by the related properties. If the Properties do
not generate sufficient income to meet operating expenses, including debt
service, ground lease payments, tenant improvements, third-party leasing
commissions and other capital expenditures, the Company's income and ability to
make distributions to its stockholders will be adversely affected. The
performance of the economy in each of the regions in which the Properties are
located affects occupancy, market rental rates and expenses and, consequently,
has an impact on the income from the Properties and their underlying values.
The financial results of major local employers also may have an impact on the
cash flow and value of certain Properties. In terms of rentable square feet,
over 44% of the Properties as of September 30, 1996, were located in the San
Francisco Bay Area. As a result of this geographic concentration, the
performance of the San Francisco Bay Area commercial real estate market will
affect the value of the Properties in that area and, in turn, the value of the
Company.
Income from the Properties may be further adversely affected by the general
economic climate, local economic conditions in which the Properties are
located, such as oversupply of space or a reduction in demand for rental space,
the attractiveness of the Properties to tenants, competition from other
available space, the ability of the Company to provide for adequate maintenance
and insurance and increased operating expenses. There is also the risk that as
leases on the Properties expire, tenants will enter into new leases on terms
that are less favorable to the Company. Income and real estate values may also
be adversely affected by such factors as applicable laws (e.g., ADA and tax
laws), interest rate levels and the availability of financing. In addition,
real estate investments are relatively illiquid and, therefore, will tend to
limit the ability of the Company to vary its portfolio promptly in response to
changes in economic or other conditions.
COMPETITION
Numerous industrial, office and retail properties compete with the Properties
in attracting tenants to lease space. Some of these competing properties are
newer, better located or better capitalized than the Company's Properties. The
number of competitive commercial properties in a particular area could have a
material effect on the Company's ability to lease space in the Properties or at
newly developed or acquired properties and on the rents charged.
ACQUISITION AND DEVELOPMENT ACTIVITIES
The Company intends to acquire existing commercial properties to the extent
that they can be acquired on advantageous terms and meet the Company's
investment criteria. Acquisitions of commercial properties entail general
investment risks associated with any real estate investment, including the risk
that investments will fail to perform as expected or that estimates of the cost
of improvements to bring an acquired property up to standards established for
the intended market position may prove inaccurate.
The Company intends to pursue commercial property development projects and to
develop certain landholdings as to which it has certain options. Such projects
generally require various governmental and other approvals, the receipt of
which cannot be assured. The Company's development activities will entail
certain risks, including the expenditure of funds on and devotion of
management's time to projects which may not come to fruition; the risk that
construction costs of a project may exceed original estimates, possibly making
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the project uneconomic; the risk that occupancy rates and rents at a completed
project will be less than anticipated; and the risk that expenses at a
completed development will be higher than anticipated. These risks may result
in a reduction in the funds available for distribution.
DEBT FINANCING
The Company will be subject to the risks normally associated with debt
financing, including the risk that the Company's cash flow will be insufficient
to meet required payments of principal and interest, the risk that existing
indebtedness on the Properties cannot be refinanced or that the terms of such
refinancing will not be as favorable as the terms of existing indebtedness.
ENVIRONMENTAL MATTERS
Under various Federal, state and local laws, ordinances and regulations, an
owner or operator of real estate is liable for the costs of removal or
remediation of certain hazardous or toxic substances on or in such property.
Such laws often impose such liability without regard to whether the owner or
operator knew of, or was responsible for, the presence of such hazardous or
toxic substances. The presence of such substances, or the failure to properly
remediate such substances, may adversely affect the owner's or operator's
ability to sell or rent such property or to borrow using such property as
collateral. Persons who arrange for the disposal or treatment of hazardous or
toxic substances may also be liable for the costs of removal or remediation of
such substances at a disposal or treatment facility, whether or not such
facility is owned or operated by such person. Certain environmental laws impose
liability for release of asbestos-containing materials into the air, and third
parties may seek recovery from owners or operators of real properties for
personal injuries associated with asbestos-containing materials. In connection
with the ownership (direct or indirect), operation, management and development
of real properties, the Company may be considered an owner or operator of such
properties or as having arranged for the disposal or treatment of hazardous or
toxic substances and, therefore, may be potentially liable for removal or
remediation costs, as well as certain other costs, including governmental fines
and injuries to persons and property.
The Company is not aware of any environmental liability with respect to the
Properties that would have a material adverse effect on the Company's business,
assets or results of operations. There can be no assurance that such a material
environmental liability does not exist. The existence of any such material
environmental liability would have an adverse effect on the Company's results
of operations and cash flow.
GENERAL UNINSURED LOSSES/SEISMIC ACTIVITY
The Company carries comprehensive liability, fire, flood, extended coverage
and rental loss insurance with policy specifications, limits and deductibles
customarily carried for similar properties. There are, however, certain types
of extraordinary losses which may be either uninsurable, or not economically
insurable. Further, a substantial number of the Properties are located in
areas that are subject to earthquake activity. Although the Company has
obtained certain limited earthquake insurance policies, should a Property
sustain damage as a result of an earthquake, the Company may incur substantial
losses due to insurance deductibles, co-payments on insured losses or uninsured
losses. Additionally, earthquake insurance may not be available for certain of
the Company's Properties, or if available, may not be available on terms
acceptable to the Company. Should an uninsured loss occur, the Company could
lose its investment in, and anticipated profits and cash flows from, a number
of Properties.
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DESCRIPTION OF COMMON STOCK
GENERAL
As of February 6, 1997, the total number of shares of all classes of capital
stock that the Company had authority to issue was 1,000,000,000 shares,
consisting of (i) 660,500,000 shares of Common Stock, par value $0.0001 per
share, (ii) 1,000,000 shares of Series A Preferred Stock, par value $0.0001 per
share, (iii) 5,000,000 shares of Series B Cumulative Redeemable Preferred Stock
("Series B Preferred Stock"), par value $0.0001 per share, (iv) 2,000,000
shares of Class B Common Stock, par value $0.0001 per share, (v) 1,500,000
shares of Class C Common Stock, par value $0.0001 per share and (vi)
330,000,000 shares of excess stock (the "Excess Stock").
As of February 6, 1997, there were (i) 43,358,499 shares of Common Stock
issued and outstanding, (ii) 1,000,000 shares of Series A Preferred Stock
issued and outstanding, (iii) 4,250,000 shares of Series B Preferred Stock,
issued and outstanding (iv) 2,000,000 shares of Class B Common Stock issued and
outstanding and (v) 1,176,470 shares of Class C Common Stock issued and
outstanding. At any given time, there are reserved for issuance under the
Spieker Properties, Inc. 1993 Stock Incentive Plan (the "Plan") shares of the
Company's Common Stock equal to 9.9% of the number of shares of the Company's
stock outstanding (including shares of Common Stock issuable upon conversion of
partnership units in the Operating Partnership, Series A Preferred Stock, Class
B Common Stock and Class C Common Stock, and all classes of convertible
securities of the Company that may be issued in the future) as of the last day
of the immediately preceding quarter reduced by the number of shares of Common
Stock reserved for issuance under other stock compensation plans of the
Company. As of May 22, 1996, the Company had reserved for issuance under the
Plan 3,450,000 shares of the Company s Common Stock and 150,000 shares of
Common Stock was reserved for issuance under the Spieker Properties, Inc. 1993
Directors Stock Option Plan. In addition, 1,219,512 shares of Common Stock have
been reserved for issuance upon the conversion of the Series A Preferred Stock,
2,531,646 shares of Common Stock have been reserved for issuance upon the
conversion of Class B Common Stock and 1,176,470 shares of Common Stock have
been reserved for issuance upon the conversion of Class C Common Stock.
Further, 6,549,819 shares of Common Stock have been reserved for issuance upon
the conversion of limited partnership units in the Operating Partnership.
COMMON STOCK
The following description of the Common Stock sets forth certain general
terms and provisions of the Common Stock to which any Prospectus Supplement may
relate, including a Prospectus Supplement providing that Common Stock will be
issuable upon conversion of Preferred Stock or Depositary Shares or upon the
exercise of Warrants issued by the Company. This description is in all respects
subject to and qualified in its entirety by reference to the applicable
provisions of the Company's Articles of Incorporation and Articles
Supplementary (collectively, the "Charter") and its Bylaws. The Common Stock is
listed on the New York Stock Exchange under the symbol "SPK." The Bank of New
York is the Company's transfer agent.
The holders of the outstanding Common Stock are entitled to one vote per
share on all matters voted on by stockholders, including elections of
directors. The Charter does not provide for cumulative voting in the election
of directors.
The shares of Common Stock offered hereby will, when issued, be fully paid
and nonassessable and will not be subject to preemptive or similar rights.
Subject to the preferential rights of the Series A Preferred Stock, Series B
Preferred Stock and any preferential rights of any other outstanding series of
capital stock, the holders of Common Stock are entitled to such distributions
as may be declared from time to time by the Board of Directors from funds
available for distribution to such holders. The Company currently pays regular
quarterly dividends to holders of Common Stock.
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In the event of a liquidation, dissolution or winding up of the Company, the
holders of Common Stock are entitled to receive ratably the assets remaining
after satisfaction of all liabilities and payment of liquidation preferences
and accrued dividends, if any, on Series A Preferred Stock, Series B Preferred
Stock, Class B Common Stock and Class C Common Stock and any other series of
capital stock that has a liquidation preference. The rights of holders of
Common Stock are subject to the rights and preferences established by the Board
of Directors for any capital stock that may subsequently be issued by the
Company.
Subject to limitations prescribed by Maryland law and the Company's Charter,
the Board of Directors is authorized to reclassify any unissued portion of the
authorized shares of capital stock to provide for the issuance of shares in
other classes or series, including other classes or series of Common Stock, to
establish the number of shares in each class or series and to fix the
designation and any preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications and terms and
conditions of redemption of such class or series. The rights, preferences,
privileges and restrictions of such class or series will be fixed by the
articles supplementary relating to such class or series. A Prospectus
Supplement will specify the terms of such class or series.
RESTRICTIONS ON TRANSFER
For the Company to qualify as a REIT under the Internal Revenue Code of 1986,
as amended (the "Code"), not more than 50% in value of its outstanding stock
may be owned, directly or indirectly, by five or fewer individuals (as defined
in the Code) during the last half of a taxable year, the stock must be
beneficially owned by 100 or more persons during at least 335 days of a taxable
year of 12 months or during a proportionate part of a shorter taxable year and
certain percentages of the Company's gross income must be from particular
activities (see "Federal Income Tax Considerations -- Requirements for
Qualification -- Gross Income Tests"). To enable the Company to continue to
qualify as a REIT, the Charter restricts the acquisition of shares of common
stock and preferred stock.
The Charter provides that, subject to certain exceptions specified in the
Charter, no stockholder may own, or be deemed to own by virtue of the
attribution provisions of the Code, more than 9.9% of the value of the
outstanding common stock and preferred stock (the "Ownership Limit"). The Board
of Directors may waive the Ownership Limit in certain limited situations if
evidence satisfactory to the Board of Directors and the Company's tax counsel
is presented that such ownership will not jeopardize the Company's status as a
REIT. As a condition to such waiver, the Board of Directors may require
opinions of counsel satisfactory to it and/or an undertaking from the applicant
with respect to preserving the REIT status of the Company. The Ownership Limit
will not apply if the Board of Directors and the stockholders of the Company
determine that it is no longer in the best interests of the Company to attempt
to qualify, or to continue to qualify, as a REIT. If the issuance or transfer
of shares of common stock or preferred stock to any person would cause such
person to exceed the Ownership Limit (unless a waiver of the Board of Directors
has been obtained), would cause the Company to be beneficially owned by fewer
than 100 persons or cause the Company to become "closely held" under Section
856(h) of the Code, such issuance or transfer shall be null and void and the
intended transferee will acquire no rights to such shares.
The Charter also provides that shares involved in a transfer or change in
capital structure that results in a person owning in excess of the Ownership
Limit (unless a waiver of the Board of Directors has been obtained), would
cause the Company to be beneficially owned by fewer than persons, or would
cause the Company to become "closely held" within the meaning of Section 856(h)
of the Code will automatically be exchanged for Excess Stock. All Excess Stock
will be transferred, without action by the stockholder, to the Company as
trustee of a trust for the exclusive benefit of the transferee or transferees
to whom the Excess Stock is ultimately transferred. While the Excess Stock is
held in trust, it will not be entitled to vote, it will not be considered for
purposes of any stockholder vote or the determination of a quorum for such vote
and it will not be entitled to participate in any distributions made by the
Company, except upon liquidation. The Company
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would have the right, for a period of 90 days during the time the Excess Stock
is held by the Company in trust, to purchase all or any portion of the Excess
Stock from the intended transferee at the lesser of the price paid for the
stock by the intended transferee and the closing market price for the stock on
the date the Company exercises its option to purchase.
The Ownership Limit provision of the Charter will not be automatically
removed even if the real estate investment trust provisions of the Code are
changed so as to no longer contain any ownership concentration limitation or if
the ownership concentration limitation is increased. Except as otherwise
described above, any change in the Ownership Limit would require an amendment
to the Charter. Such amendments to the Charter require the affirmative vote of
holders owning a majority of the total number of shares of all classes of stock
outstanding and entitled to vote thereon. In addition to preserving the
Company's status as a real estate investment trust, the Ownership Limit may
have the effect of precluding an acquisition of control of the Company.
All certificates representing shares of common stock and preferred stock will
bear a legend referring to the restrictions described above.
All persons who own of record, more than 5% of the outstanding common stock
and preferred stock (or 1% if there are more than 200 but fewer than 2,000
stockholders or one-half of 1% if there are 200 or less stockholders of record)
must file an affidavit with the Company containing the information specified in
the Charter within 30 days after January 1 of each year. In addition, each
stockholder shall upon demand be required to disclose to the Company in writing
such information with respect to the direct, indirect and constructive
ownership of shares as the Board of Directors deems necessary to determine the
Company's status as a real estate investment trust and to ensure compliance
with the Ownership Limit.
DESCRIPTION OF CLASS B COMMON STOCK, CLASS C COMMON STOCK,
SERIES A PREFERRED STOCK AND SERIES B PREFERRED STOCK
CLASS B COMMON STOCK
The following description of the Company's Class B Common Stock is in all
respects subject to and qualified in its entirety by reference to the
applicable provisions of the Company's Charter, including the Articles
Supplementary applicable to the Class B Common Stock, and Bylaws. The Company
has issued 2,000,000 shares of Class B Common Stock, par value $0.0001 per
share, all of which were outstanding as of February 6, 1997.
The Class B Common Stock ranks on a parity with the Company's Common Stock
with respect to dividends. The Class B Common Stock was sold in May 1995 to an
institutional investor at a price per share of $25.00. The initial per share
dividend of the Class B Common Stock was set at $2.19, which was at a rate that
was equal to the dividend yield on shares of Common Stock sold concurrently
with the Class B Common Stock plus 0.25%. The dividend per share on the Class B
Common stock is increased or decreased by the same dollar amount as any
increase or decrease in the dividend distributions made to the holders of
Common Stock. The Company currently pays regular dividends to holders of Class
B Common Stock.
In the event of any liquidation, dissolution or winding up of the Company,
the holders of Class B Common Stock are entitled to receive, on a parity with
the holders of Class C Common Stock and prior and in preference to the holders
of Common Stock, an amount per share of Class B Common Stock equal to all
declared but unpaid dividends for each share of Class B Common Stock. The Class
B Common Stock has not been registered under the Securities Act. The
institutional investor who purchased the shares of Class B Common Stock has
certain demand registration rights for eight years following the May 1995 sale
of such shares to register in each instance Common Stock having a market value
of $1.0 million or more. Subject to certain limitations, the Class B Common
Stock may be converted into Common Stock three years after the May 1995
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<PAGE> 12
sale or earlier upon the occurrence of certain events including a change in
management. The holder of Class B Common Stock is not entitled to vote on
matters voted on by stockholders of the Company.
CLASS C COMMON STOCK
The following description of the Company's Class C Common Stock is in all
respects subject to and qualified in its entirety by reference to the
applicable provisions of the Company's Charter, including the Articles
Supplementary applicable to the Class C Common Stock, and Bylaws. The Company
has issued 1,176,470 shares of Class C Common Stock, par value $0.0001 per
share, all of which were outstanding as of February 6, 1997.
The Class C Common Stock ranks on a parity with the Company's Common Stock
and Class B Common Stock with respect to dividends. The Class C Common Stock
was sold in March 1996 to an institutional investor at a price per share of
$25.50. The initial per share dividend of the Class C Common Stock was set at
$1.73. The dividend per share on the Class C Common Stock is increased or
decreased by the same dollar amount as any increase or decrease in the dividend
distributions made to the holders of Common Stock. The Company currently pays
regular dividends to the holder of Class C Common Stock.
In the event of any liquidation, dissolution or winding up of the Company,
the holders of Class C Common Stock are entitled to receive, on a parity with
the holders of Class B Common Stock and prior and in preference to the holders
of Common Stock, an amount per share of Class C Common Stock equal to all
declared but unpaid dividends for each share of Class C Common Stock. The Class
C Common Stock has not been registered under the Securities Act. The
institutional investor who purchased the shares of Class C Common Stock has
certain demand registration rights for eight years following the March 1996
sale of such shares to register in each instance Common Stock having a market
value of $1.0 million or more. Subject to certain limitations, the Class C
Common Stock may be converted into Common Stock three years after the March
1996 sale or earlier upon the occurrence of certain events including a change
in management. The holders of Class C Common Stock are not entitled to vote on
matters voted on by stockholders of the Company.
SERIES A PREFERRED STOCK
The following description of the Company's Series A Preferred Stock is in all
respects subject to and qualified in its entirety by reference to the
applicable provisions of the Company's Charter, including the Articles
Supplementary applicable to the Series A Preferred Stock, and Bylaws. The
Company is authorized to issue 1,000,000 shares of Series A Preferred Stock,
all of which were issued and outstanding as of February 6, 1997 and held of
record by one private investor. The Series A Preferred Stock ranks senior to
the Company's Common Stock, Class B Common Stock and Class C Common Stock as to
dividends and liquidation amounts. The dividend per share on the Series A
Preferred Stock is equal to the dividend per share on the Common Stock as
multiplied by the number of shares of Common Stock into which each share of
Series A Preferred Stock is convertible, provided that the dividend rate on the
Series A Preferred Stock may not be less than the initial dividend rate
thereof. The dividends on the Series A Preferred Stock are cumulative. The
Company currently pays regular dividends to holders of Series A Preferred
Stock.
In the event of any liquidation, dissolution or winding up of the Company,
the holders of Series A Preferred Stock are entitled to receive on a parity
with the holders of Series B Preferred Stock, prior and in preference to any
distribution to the holders of Common Stock, Class B Common Stock and Class C
Common Stock, an amount per share of Series A Preferred Stock equal to the sum
of $25.00 and any accrued but unpaid dividends with respect thereto. The
Company may redeem, subject to certain exceptions, from any source of funds
legally available therefor, on or at any time after May 13, 1999, any or all
outstanding shares of Series A Preferred Stock at the option of the Company by
paying in cash therefor an amount per share equal to the sum of $25.00 and any
accrued but unpaid dividends with respect thereto.
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<PAGE> 13
Each share of Series A Preferred Stock is convertible, at the option of the
holder thereof at any time prior to a redemption date, into shares of Common
Stock based on a certain formula. Under such formula, the 1,000,000 outstanding
shares of Series A Preferred Stock are convertible into 1,219,512 shares of
Common Stock. The holder of each share of Series A Preferred Stock has the
right to one vote for each share of Common Stock into which such Series A
Preferred Stock can be converted, and with respect to such vote, such holder
has the voting rights and powers of the holders of each share of Common Stock,
and is entitled to notice of any shareholders' meeting in accordance with the
bylaws of the Company, and is entitled to vote, together with holders of Common
Stock, with respect to any question upon which holders of Common Stock have the
right to vote.
SERIES B PREFERRED STOCK
The following description of the Company s Series B Preferred Stock is in all
respects subject to and qualified in its entirety by reference to the
applicable provisions of the Charter, including the Company s Articles
Supplementary applicable to the Series B Preferred Stock, and Bylaws. The
Company is authorized to issue 5,000,000 shares of Series B Preferred Stock, of
which 4,250,000 shares were issued and outstanding as of September 30, 1996.
The holders of the Series B Preferred Stock are entitled to receive cumulative,
preferential cash dividends, when and as declared by the Board of Directors, of
$2.3625 per share. The Company currently pays regular dividends to holders of
Series B Preferred Stock.
In the event of any liquidation, dissolution or winding up of the Company,
the holders of Series B Preferred Stock are entitled to receive on a parity
with the holders of Series A Preferred Stock, prior and in preference to any
distribution to the holders of Common Stock, Class B Common Stock and Class C
Common Stock, an amount per share of Series B Preferred Stock equal to the sum
of $25.00 and any accrued but unpaid dividends with respect thereto. The
Company may redeem, subject to certain exceptions, from any source of funds
legally available therefor, on or at any time after December 11, 2000, any or
all outstanding shares of Series B Preferred Stock at the option of the Company
by paying in cash therefor an amount per share equal to the sum of $25.00 and
any accrued but unpaid dividends with respect thereto, without interest.
The Series B Preferred Stock is not convertible into or exchangeable for any
other property or securities of the Company at the option of the holder.
However, in order to preserve the Company's status as a REIT for federal income
tax purposes, the Series B Preferred Stock may be exchanged for Excess Stock.
See "Description of Common Stock -- General." The holders of shares of Series B
Preferred Stock have no voting rights with respect to matters voted upon by the
holders of shares of Common Stock.
DESCRIPTION OF PARTNERSHIP UNITS
Substantially all of the Company's assets are held by, and all of its
operations are conducted through, the Operating Partnership. The Company is
the sole general partner of the Operating Partnership and as of February 6,
1997 held approximately 86.9% of the Units therein. The remaining Units are
held by persons (or their successors) who contributed interests in the
Properties to the Operating Partnership in exchange for Units. The following
sets forth a description of certain terms and provisions of the Units and does
not purport to be complete and is subject to and qualified in its entirety by
reference to applicable provisions of California law and the First Amended and
Restated Agreement of Limited Partnership of Spieker Properties, L.P., as
amended (the "Partnership Agreement").
Holders of Units (other than the Company) hold limited partnership interests
in the Operating Partnership, and all holders of Units (including the Company
in its capacity as general partner) are entitled to share in cash distributions
from, and in the profits and losses of, the Operating Partnership. The Company
holds its entire interest in the Operating Partnership in the form of a general
partnership interest.
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<PAGE> 14
Holders of Units have the rights to which limited partners are entitled under
the Partnership Agreement and the California Revised Uniform Limited
Partnership Act. The Units have not been registered pursuant to the federal or
state securities laws and have not been listed on any exchange or quoted on any
national market system.
Subject to certain limitations, Limited Partners may require that the
Operating Partnership convert a portion of their Units in the Operating
Partnership into shares of Common Stock issued by the Company (the "Conversion
Component") and to sell to the Company for cash the remainder of their Units in
the Operating Partnership (the "Sale Component"). The Conversion Component
enables a Limited Partner to convert his or her Units in the Operating
Partnership into shares of Common Stock until he or she owns up to 9.9% of the
outstanding Common Stock. The Sale Component, which can only be exercised if
the Limited Partner already owns 9.9% or more of the outstanding Common Stock,
enables the Limited Partner to sell all or a portion of his or her remaining
interests in the Operating Partnership to the Company for cash or Common Stock,
or a combination thereof, at the Company's election.
SHARES AVAILABLE FOR FUTURE SALE
As of February 6, 1997, there were (i) 43,358,499 shares of Common Stock
issued and outstanding, (ii) 1,000,000 shares of Series A Preferred Stock
issued and outstanding, (iii) 4,250,000 shares of Series B Preferred Stock,
issued and outstanding (iv) 2,000,000 shares of Class B Common Stock issued and
outstanding and (v) 1,176,470 shares of Class C Common Stock issued and
outstanding. At any given time, there are reserved for issuance under the
Spieker Properties, Inc. 1993 Stock Incentive Plan (the "Plan") shares of the
Company's Common Stock equal to 9.9% of the number of shares of the Company's
stock outstanding (including shares of Common Stock issuable upon conversion of
partnership units in the Operating Partnership, Series A Preferred Stock, Class
B Common Stock and Class C Common Stock, and all classes of convertible
securities of the Company that may be issued in the future) as of the last day
of the immediately preceding quarter reduced by the number of shares of Common
Stock reserved for issuance under other stock compensation plans of the
Company. As of January 31, 1997, the Company had reserved for issuance under
the Plan 3,450,000 shares of the Company s Common Stock and 150,000 shares of
Common Stock was reserved for issuance under the Spieker Properties, Inc. 1993
Directors' Stock Option Plan (the "Directors' Stock Option Plan"). In addition,
1,219,512 shares of Common Stock have been reserved for issuance upon the
conversion of the Series A Preferred Stock, 2,531,646 shares of Common Stock
have been reserved for issuance upon the conversion of Class B Common Stock and
1,176,470 shares of Common Stock have been reserved for issuance upon the
conversion of Class C Common Stock. Further, 6,549,819 shares of Common Stock
have been reserved for issuance upon the conversion of limited partnership
units in the Operating Partnership.
In certain circumstances, holders of Shares may elect to sell their shares in
accordance with the exemptions provided by Rule 144 under the Securities Act
rather than pursuant to this Prospectus. In general, under Rule 144 as
currently in effect, a person (or persons whose shares are aggregated in
accordance with the Rule) who has beneficially owned his or her shares for at
least two years, as well as any persons who may be deemed "affiliates" of the
Company (as defined in the Securities Act), would be entitled to sell within
any three month period a number of shares of Common Stock that does not exceed
the greater of 1% of the then outstanding number of shares or the average
weekly trading volume of the shares during the four calendar weeks preceding
each such sale. After shares are held for three years, a person who is not
deemed an "affiliate" of the Company is entitled to sell such shares under Rule
144 without regard to the volume limitations. As defined in Rule 144, an
"affiliate" of an issuer is a person that directly or indirectly, through the
use of one or more intermediaries, controls, or is controlled by, or is under
common control with, such issuer.
In addition, pursuant to registration statement on Form S-3 (No. 333-20127)
that the Company and the Operating Partnership have filed as co- registrants
(the "Company's Shelf Registration Statements"), the
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<PAGE> 15
Company may offer and sell shares of Common Stock (or securities convertible
into or exercisable for shares of Common Stock), together or separately, and in
amounts, at prices and on terms to be determined at the time of sale, up to an
aggregate initial offering price not to exceed approximately $500,000,000.
Shares of Common Stock offered and sold pursuant to the Company's Shelf
Registration Statement may be tradable without restriction under the Securities
Act (subject to the Ownership Limit).
As of September 30, 1996, pursuant to the Option Plan, options to purchase
1,799,500 shares of Common Stock have been granted or authorized to be granted
to the Company's officers and certain key employees and 3,450,000 additional
shares of Common Stock were reserved for future issuance under the Option Plan.
Also, as of September 30, 1996, pursuant to the Directors' Stock Option Plan,
options to purchase 14,000 shares of Common Stock have been granted or
authorized to be granted to the Company's directors and 150,000 shares of
Common Stock were reserved for future issuance under the Directors' Stock
Option Plan.
No prediction can be made as to the effect, if any, that future sales of
shares of Common Stock, or the availability of shares for future sale, will
have on the market price prevailing from time to time. Sales of substantial
amounts of shares of Common Stock (including shares issued upon the redemption
of Units or the exercise of options), or the perception that such sales could
occur, could adversely affect prevailing market price of the shares.
REGISTRATION RIGHTS
The Company has filed the Registration Statement of which this Prospectus is
a part in part pursuant to its obligations under the Investor Rights Agreement
dated November 18, 1993 by and among the Company and certain holders of Units
(the "Limited Partners' Investors' Rights Agreement"). The following summary
does not purport to be complete and is qualified in its entirety by reference
to the Limited Partners' Investors' Rights Agreement.
Under the Limited Partners' Investors' Rights Agreement, the Company agreed
to pay all expenses of effecting the registration of the Shares (other than
underwriting discounts and commissions, fees and disbursements of counsel
retained by Limited Partners, and transfer taxes, if any) pursuant to the
Registration Statement. Pursuant to the Registration Rights Agreements, the
Company also agreed to indemnify each holder of Shares and any person who
controls any holder against certain losses, claims, damages and expenses
arising under the securities laws. In addition, each holder of Shares agreed
to indemnify the Company and the other holders of Shares, and the directors and
officers of the Company (including each director and officer of the Company who
signed the Registration Statement), and any person who controls the Company or
any holder against certain other losses, claims damages and expenses arising
under the securities laws with respect to written information furnished to the
Company by such holder.
The Company has no obligation under the Registration Rights Agreements to
retain any underwriter to effect the sale of the shares covered thereby.
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<PAGE> 16
SELLING STOCKHOLDERS
The following table provides the names of and the number and percentage of
shares of Common Stock beneficially owned by each Selling Stockholder and
number and percentage of shares of Common Stock beneficially owned by each
Selling Stockholder upon completion of the offering, assuming each Selling
Stockholder exchanges and converts all of his or her Units for shares of Common
Stock and sells all of his or her Shares pursuant to this Prospectus. Since
the Selling Stockholders may sell all, or some or none of their Shares, no
estimate can be made of the aggregate number of Shares that are to be offered
hereby or that will be owned by each Selling Stockholder upon completion of the
offering to which this Prospectus relates. The number of Shares in the
following table represents the number of shares of Common Stock the person
holds (if any) plus the number of Shares into which Units held by the person
may be exchanged or converted, and the extent to which the person holds Units
as opposed to shares of Common Stock is set forth in the notes to the following
table.
The Shares offered by this Prospectus may be offered from time to time by the
Selling Stockholders named below:
<TABLE>
<CAPTION>
Beneficial Ownership Beneficial Ownership
Prior to Offering After the Offering
------------------------------ -----------------------------
Percentage of Percentage of
Number of Shares Number of Shares Number of Shares
Shares (1) Outstanding(2) Offered Hereby Shares(1) Outstanding(1)
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Bruce E. Hosford (3) . . . 774,753 1.8% 300,000 474,753 1.1%
Warren E. Spieker, Jr. (4) 2,634,323 5.7 150,000 2,484,323 5.4
The University of California
at Berkeley (5) . . . . . 41,292 * 41,292 0 *
James C. Eddy (6) . . . . . 194,616 * 30,000 164,616 *
Donald S. Jefferson (7) . . 287,877 * 25,000 262,877 *
The Seattle Foundation (8) 15,000 * 15,000 0 *
Menlo School (9) . . . . . 8,254 * 8,254 0 *
St. Joseph's Elementary/
Sacred Heart Preparatory
School(10) . . . . . . . 8,254 * 8,254 0 *
- --------------
</TABLE>
*less than 1%
(1) Assumes exchange of all Units for shares of Common Stock.
(2) Assumes the exchange of only the partnership units in the Operating
Partnership owned by such owner into shares of Common Stock and the exercise of
only the options for Common Stock held by such owner and exercisable within 60
days of January 31, 1997. The total number of shares of Common Stock
outstanding used in calculating percentages assumes that none of the
partnership units in the Operating Partnership held by other unit holders,
shares of Class B Common Stock, Class C Common Stock or Series A Preferred
Stock have been exchanged for, or converted into, as the case may be, shares of
Common Stock, and that none of the options held by other persons has been
exercised.
(3) Mr. Hosford is Executive Vice President. Includes 692,378 shares of
Common Stock that may be issued upon the exchange of all of Mr. Hosford's
partnership units in the Operating Partnership for Common Stock, 71,875 shares
of Common Stock subject to options that are exercisable within 60 days of
January 31, 1997, 9,500 shares of Common Stock, and 1,000 shares of Common
Stock held by Mr. Hosford as custodian for his children, of which Mr. Hosford
may be deemed to have beneficial ownership.
(4) Mr. Spieker is Chairman of the Board and Chief Executive Officer.
Includes 2,436,998 shares of Common Stock that may be issued upon the exchange
of all of Mr. Spieker's partnership units in the Operating Partnership, 91,875
shares of Common Stock subject to options that are exercisable within 60 days
of January 31, 1997, 100,000 shares of Common Stock, 4,000 shares of restricted
Common Stock, and 1,450 shares of Common Stock owned by Mr. Spieker's wife and
children as custodian for his children and deemed to be beneficially owned by
Mr. Spieker.
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<PAGE> 17
(5) Represents up to 41,292 shares of Common Stock that may be issued upon the
exchange of up to 41,292 Units in the Operating Partnership, that are to be
gifted in 1997 to The University of California at Berkeley from Mr. Spieker.
(6) Mr. Eddy is Regional Senior Vice President - Oregon. Mr. Eddy
beneficially owns 147,741 shares of Common Stock that may be issued upon the
exchange of all of Mr. Eddy's partnership units in the Operating Partnership
for Common Stock and 46,875 shares of Common Stock subject to options that are
exercisable within 60 days of January 31, 1997.
(7) Mr. Jefferson is Regional Senior Vice President - Washington/Idaho.
Includes 231,857 shares of Common Stock that may be issued upon exchange of all
of Mr. Jefferson's partnership units in the Operating Partnership, 1,179 shares
of Common Stock, and 46,875 shares of Common Stock subject to options that are
exercisable within 60 days of January 31, 1997, 7,386 shares of Common Stock
held in the name of the Jefferson Family Trust, of which Mr. Jefferson is
co-trustee. Includes 580 shares of Common Stock held by Mr. Jefferson as
custodian for Alexandra Jefferson. Mr. Jefferson may be deemed to have
beneficial ownership of such 580 shares.
(8) Represents 15,000 shares of Common Stock that may be issued upon the
exchange of all of The Seattle Foundation's partnership Units in the Operating
Partnership for Common Stock.
(9) Represents up to 8,254 shares of Common Stock that may be issued upon the
exchange of up to 8,254 Units in the Operating Partnership, that are to be
gifted in 1997 to Menlo School from Mr. Spieker.
(10) Represents up to 8,254 shares of Common Stock that may be issued upon the
exchange of all of St. Joseph's Elementary School/Sacred Heart Preparatory
School's Units in the Operating Partnership, that are to be gifted in 1997 to
St. Joseph's Elementary School/Sacred Heart Preparatory School from Mr.
Spieker.
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<PAGE> 18
CERTAIN PROVISIONS OF THE COMPANY'S CHARTER AND BYLAWS
Certain provisions of the Company's Charter and Bylaws might discourage
certain types of transactions that involve an actual or threatened change of
control of the Company. The Ownership Limit may delay or impede a transaction
or a change in control of the Company that might involve a premium price for
the Company's capital stock or otherwise be in the best interest of the
stockholders. See "Description of Common Stock -- Restrictions on Transfer."
Pursuant to the Company's Charter and Bylaws, the Company's Board of Directors
is divided into three classes of directors, each class serving staggered
three-year terms. The staggered terms of directors may reduce the possibility
of a tender offer or an attempt to change control of the Company. The issuance
of preferred stock by the Board of Directors may also have the effect of
delaying, deferring or preventing a change in control of the Company.
FEDERAL INCOME TAX CONSIDERATIONS
The following summary of material federal income tax considerations is based
on current law and does not purport to deal with all aspects of taxation that
may be relevant to particular stockholders in light of their personal
investment or tax circumstances, or to certain types of stockholders (including
insurance companies, financial institutions and broker-dealers) subject to
special treatment under the federal income tax laws.
EACH PROSPECTIVE PURCHASER IS ADVISED TO CONSULT HIS OWN TAX ADVISOR
REGARDING THE SPECIFIC TAX CONSEQUENCES TO HIM OF THE PURCHASE, OWNERSHIP AND
SALE OF THE SHARES.
GENERAL
The Company believes that since its formation it has operated in a manner
that permits it to satisfy the requirements for taxation as a REIT under the
applicable provisions of the Code. The Company intends to continue to operate
to satisfy such requirement. No assurance can be given, however, that such
requirements will be met.
The sections of the Code relating to qualification and operation as a REIT
are highly technical and complex. The following sets forth the material aspects
of the Code sections that govern the federal income tax treatment of a REIT and
its stockholders. This summary is qualified in its entirety by the applicable
Code provisions, rules and regulations thereunder, and administrative and
judicial interpretations thereof. Morrison & Foerster LLP has acted as tax
counsel to the Company in connection with the Company's election to be taxed as
a REIT.
In the opinion of Morrison & Foerster LLP, commencing with the Company's
taxable year ended December 31, 1993, the Company has been organized in
conformity with the requirements for qualification as a REIT, and its method of
operation has and will enable it to continue to meet the requirements for
qualification and taxation as a REIT under the Code. It must be emphasized that
this opinion is based on various assumptions and is conditioned upon certain
representations made by the Company as to factual matters. Moreover, such
qualification and taxation as a REIT depends upon the Company's ability to
meet, through actual annual operating results, distribution levels and
diversity of stock ownership, the various qualification tests imposed under the
Code discussed below, the results of which will not be reviewed by Morrison &
Foerster LLP. Accordingly, no assurance can be given that the actual results
of the Company's operations for any particular taxable year will satisfy such
requirements. See " -- Failure to Qualify."
In brief, if certain detailed conditions imposed by the REIT provisions of
the Code are satisfied, entities, such as the Company, that invest primarily in
real estate and that otherwise would be treated for federal income tax purposes
as corporations, are generally not taxed at the corporate level on their "REIT
taxable income" that is currently distributed to stockholders. This treatment
substantially eliminates the "double taxation" (i.e.,
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<PAGE> 19
taxation at both the corporate and stockholder levels) that generally results
from the use of corporate investment vehicles.
If the Company fails to qualify as a REIT in any year, however, it will be
subject to federal income tax as if it were a domestic corporation, and its
stockholders will be taxed in the same manner as stockholders of ordinary
corporations. In this event, the Company could be subject to potentially
significant tax liabilities and the amount of cash available for distribution
to its stockholders could be reduced.
TAXATION OF THE COMPANY
In any year in which the Company qualifies as a REIT, it will not be subject
to federal income tax on that portion of its net income that it distributes to
stockholders. This treatment substantially eliminates the "double taxation" on
income at the corporate and stockholder levels that generally results from
investment in a corporation. However, the REIT will be subject to federal
income tax as follows. First, the REIT will be taxed at regular corporate
rates on any undistributed real estate investment trust taxable income,
including undistributed net capital gains. Second, under certain circumstances,
the REIT may be subject to the "alternative minimum tax" on its items of tax
preference. Third, if the REIT has (i) net income from the sale or other
disposition of "foreclosure property" which is held primarily for sale to
customers in the ordinary course of business or (ii) other nonqualifying income
from foreclosure property, it will be subject to tax at the highest corporate
rate on such income. Fourth, if the REIT has net income from prohibited
transactions (which are, in general, certain sales or other dispositions of
property held primarily for sale to customers in the ordinary course of
business other than foreclosure property), such income will be subject to a
100% tax. Fifth, if the REIT should fail to satisfy the 75% gross income test
or the 95% gross income test (as discussed below), and has nonetheless
maintained its qualification as a real estate investment trust because certain
other requirements have been satisfied, it will be subject to a 100% tax on the
net income attributable to the greater of the amount by which the REIT fails
the 75% or 95% test. Sixth, if the REIT should fail to distribute during each
calendar year at least the sum of (i) 85% of its real estate investment trust
ordinary income for such year, (ii) 95% of its real estate investment trust
capital gain net income for such year, and (iii) any undistributed taxable
income from prior periods, the REIT would be subject to a 4% excise tax on the
excess of such required distribution over the amounts actually distributed.
Seventh, if the REIT acquires any asset from a C corporation (i.e., generally a
corporation subject to full corporate- level tax) in a transaction in which the
basis of the asset in the REIT's hands is determined by reference to the basis
of the asset (or any other property) in the hands of the C corporation, and the
REIT recognizes gain on the disposition of such asset during the 10 year period
beginning on the date on which such asset was acquired by the REIT, then, to
the extent of any built-in gain at the time of acquisition, such gain will be
subject to tax at the highest regular corporate rate, assuming the REIT makes
an election pursuant to IRS Notice 88-19.
REQUIREMENTS FOR QUALIFICATION
The Code defines a real estate investment trust as a corporation, trust or
association (1) which is managed by one or more trustees or directors; (2) the
beneficial ownership of which is evidenced by transferable shares, or by
transferable certificates of beneficial interest; (3) which would be taxable as
a domestic corporation, but for Sections 856 through 860 of the Code; (4) which
is neither a financial institution nor an insurance company subject to certain
provisions of the Code; (5) the beneficial ownership of which is held by 100 or
more persons; (6) not more than 50% in value of the outstanding stock of which
is owned, directly or indirectly, by five or fewer individuals (as defined in
the Code) at any time during the last half of each taxable year; and (7) which
meets certain other tests, described below, regarding the nature of income and
assets. The Code provides that conditions (1) to (4), inclusive, must be met
during the entire taxable year and that condition (5) must be met during at
least 335 days of a taxable year of 12 months, or during a proportionate part
of a taxable year of less than 12 months. Conditions (5) and (6) will not apply
until after the first taxable year for which an election is made by the Company
to be taxed as a REIT.
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In order to ensure compliance with the ownership tests described above, the
Company has placed certain restrictions on the transfer of the common stock and
preferred stock to prevent concentration of stock ownership. Moreover, to
evidence compliance with these requirements, the Company must maintain records
which disclose the actual ownership of its outstanding common stock and
preferred stock. In fulfilling its obligations to maintain records, the Company
must and will demand written statements each year from the record holders of
designated percentages of its common stock and preferred stock disclosing the
actual owners of such common stock and preferred stock. A list of those persons
failing or refusing to comply with such demand must be maintained as part of
the Company's records. A stockholder failing or refusing to comply with the
Company's written demand must submit with his tax returns a similar statement
disclosing the actual ownership of common stock and preferred stock and certain
other information. In addition, the Company's Charter provides restrictions
regarding the transfer of its shares that are intended to assist the Company in
continuing to satisfy the share ownership requirements. See "Description of
Common Stock -- Restrictions on Transfer."
In the case of a REIT that is a partner in a partnership, Treasury
Regulations provide that the REIT will be deemed to own its proportionate share
of the assets of the partnership and will be deemed to be entitled to the
income of the partnership attributable to such share. In addition, the
character of the assets and gross income of the partnership shall retain the
same character in the hands of the REIT for purposes of Section 856 of the
Code, including satisfying the gross income tests and the asset tests,
described below. Thus, the Company's proportionate share of the assets,
liabilities and items of income of the Operating Partnership will be treated as
assets, liabilities and items of income of the Company for purposes of applying
the requirements described below.
ASSET TESTS
At the close of each quarter of the Company's taxable year, the Company must
satisfy two tests relating to the nature of its assets. First, at least 75% of
the value of the Company's total assets must be represented by interests in
real property, interests in mortgages on real property, shares in other REITs,
cash, cash items and government securities (as well as certain temporary
investments in stock or debt instruments purchased with the proceeds of new
capital raised by the Company). Second, although the remaining 25% of the
Company's assets generally may be invested without restriction, securities in
this class may not exceed either (i) 5% of the value of the Company's total
assets as to any one nongovernment issuer, or (ii) 10% of the outstanding
voting securities of any one issuer. The Company's investment in the Properties
through its interest in the Operating Partnership constitutes qualified assets
for purposes of the 75% asset test. In addition, the Company may own 100% of
"qualified REIT subsidiaries" as defined in the Code. All assets, liabilities,
and items of income, deduction, and credit of a qualified REIT subsidiary will
be treated as owned and realized directly by the Company. The Company's
investment in Spieker Northwest, Inc. is not a qualifying asset for purposes of
the 75% test. The Company expects, however, that such investment will continue
to represent less than 5% of the Company's total assets and, together with any
other nonqualifying assets, will continue to represent less than 25% of the
Company's total assets.
GROSS INCOME TESTS
There are three separate percentage tests relating to the sources of the
Company's gross income which must be satisfied for each taxable year. For
purposes of these tests, where the Company invests in a partnership, the
Company will be treated as receiving its share of the income and loss of the
partnership, and the gross income of the partnership will retain the same
character in the hands of the Company as it has in the hands of the
partnership. See "-- Tax Aspects of the Company's Investment in the Operating
Partnerships -- General."
The 75% Test. At least 75% of the Company's gross income for the taxable year
must be "qualifying income." Qualifying income generally includes (i) rents
from real property (except as modified below); (ii)
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interest on obligations collateralized by mortgages on, or interests in, real
property; (iii) gains from the sale or other disposition of interests in real
property and real estate mortgages, other than gain from property held
primarily for sale to customers in the ordinary course of the Company's trade
or business ("dealer property"); (iv) dividends or other distributions on
shares in other REITs, as well as gain from the sale of such shares; (v)
abatements and refunds of real property taxes; (vi) income from the operation,
and gain from the sale, of property acquired at or in lieu of a foreclosure of
the mortgage collateralized by such property ("foreclosure property"); and
(vii) commitment fees received for agreeing to make loans collateralized by
mortgages on real property or to purchase or lease real property.
Rents received from a tenant will not, however, qualify as rents from real
property in satisfying the 75% test (or the 95% gross income test described
below) if the Company, or an owner of 10% or more of the Company, directly or
constructively owns 10% or more of such tenant (a "related party tenant"). In
addition, if rent attributable to personal property, leased in connection with
a lease of real property, is greater than 15% of the total rent received under
the lease, then the portion of rent attributable to such personal property will
not qualify as rents from real property. Moreover, an amount received or
accrued generally will not qualify as rents from real property (or as interest
income) for purposes of the 75% and 95% gross income tests if it is based in
whole or in part on the income or profits of any person. Rent or interest will
not be disqualified, however, solely by reason of being based on a fixed
percentage or percentages of receipts or sales. Finally, for rents received to
qualify as rents from real property, the Company generally must not operate or
manage the property or furnish or render services to tenants, other than
through an "independent contractor" from whom the Company derives no revenue.
The "independent contractor" requirement, however, does not apply to the extent
that the services provided by the Company are "usually or customarily rendered"
in connection with the rental of space for occupancy only, and are not
otherwise considered "rendered to the occupant."
The Company, through the Operating Partnership (which will not be an
independent contractor), will provide certain services with respect to the
Properties and any newly acquired Properties. The Company believes that the
services provided by the Operating Partnership are usually or customarily
rendered in connection with the rental of space of occupancy only, and
therefore that the provision of such services will not cause the rents received
with respect to the Properties to fail to qualify as rents from real property
for purposes of the 75% and 95% gross income tests. The Company does not intend
to rent to related party tenants or to charge rents that would not qualify as
rents from real property because the rents are based on the income or profits
of any person (other than rents that are based on a fixed percentage or
percentages of receipts or sales).
The 95% Test. In addition to deriving 75% of its gross income from the
sources listed above, at least 95% of the Company's gross income for the
taxable year must be derived from the above-described qualifying income, or
from dividends, interest or gains from the sale or disposition of stock or
other securities that are not dealer property. Dividends and interest on any
obligation not collateralized by an interest on real property are included for
purposes of the 95% test, but not for purposes of the 75% test. For purposes of
determining whether the Company complies with the 75% and 95% income tests,
gross income does not include income from prohibited transactions. A
"prohibited transaction" is a sale of dealer property, excluding certain
property held by the Company for at least four years and foreclosure property.
See "-- Taxation of the Company" and "-- Tax Aspects of the Company's
Investment in the Operating Partnership -- Sale of the Properties."
The Company believes that it and the Operating Partnership has held and
managed the Properties in a manner that has given rise to rental income
qualifying under the 75% and 95% gross income tests. Gains on sales of the
Properties will generally qualify under the 75% and 95% gross income tests.
Even if the Company fails to satisfy one or both of the 75% or 95% gross
income tests for any taxable year, it may still qualify as a REIT for such year
if it is entitled to relief under certain provisions of the Code. These relief
provisions will generally be available if: (i) the Company's failure to comply
was due to reasonable cause and not to willful neglect; (ii) the Company
reports the nature and amount of each item of its income included
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in the 75% and 95% gross income tests on a schedule attached to its tax return;
and (iii) any incorrect information on this schedule is not due to fraud with
intent to evade tax. It is not possible, however, to state whether in all
circumstances the Company would be entitled to the benefit of these relief
provisions. If these relief provisions apply, the Company will, however, still
be subject to a special tax upon the greater of the amount by which it fails
either the 75% or 95% gross income test for that year.
The 30% Test. The Company must derive less than 30% of its gross income for
each taxable year from the sale or other disposition of (i) real property held
for less than four years (other than foreclosure property and involuntary
conversions), (ii) stock or securities held for less than one year, and (iii)
property in a prohibited transaction. The Company does not anticipate that it
will have any substantial difficulty in complying with this test.
ANNUAL DISTRIBUTION REQUIREMENTS
The Company, in order to qualify as a REIT, is required to distribute
dividends (other than capital gain dividends) to its stockholders each year in
an amount at least equal to (A) the sum of (i) 95% of the Company's REIT
taxable income (computed without regard to the dividends paid deduction and the
REIT's net capital gain) and (ii) 95% of the net income (after tax), if any,
from foreclosure property, minus (B) the sum of certain items of non-cash
income. Such distributions must be paid in the taxable year to which they
relate, or in the following taxable year if declared before the Company timely
files its tax return for such year and if paid on or before the first regular
dividend payment after such declaration. In addition, distributions declared
in October, November or December of a taxable year and paid by January 31 of
the following year are deemed to be paid in the initial taxable year. To the
extent that the Company does not distribute all of its net capital gain or
distributes at least 95%, but less than 100%, of its REIT taxable income, as
adjusted, it will be subject to tax on the undistributed amount at regular
capital gains or ordinary corporate tax rates, as the case may be. Furthermore,
if the REIT should fail to distribute during each calendar year at least the
sum of (i) 85% of its REIT ordinary income for such year, (ii) 95% of its REIT
capital gain income for such year, and (iii) any undistributed taxable income
from prior periods, the REIT would be subject to a 4% excise tax on the excess
of such required distribution over the amounts actually distributed.
The Company believes that it has made timely distributions sufficient to
satisfy the annual distribution requirements. In this regard, the partnership
agreement of the Operating Partnership authorizes the Company, as general
partner, to take such steps as may be necessary to cause the Operating
Partnership to distribute to its partners an amount sufficient to permit the
Company to meet these distribution requirements. It is possible that in the
future the Company may not have sufficient cash or other liquid assets to meet
the 95% distribution requirement, due to timing differences between the actual
receipt of income and actual payment of expenses on the one hand, and the
inclusion of such income and deduction of such expenses in computing the
Company's REIT taxable income on the other hand. Further, as described below,
it is possible that, from time to time, the Company may be allocated a share of
net capital gain attributable to the sale of depreciated property that exceeds
its allocable share of cash attributable to that sale. To avoid any problem
with the 95% distribution requirement, the Company will closely monitor the
relationship between its REIT taxable income and cash flow and, if necessary,
will borrow funds (or cause the Operating Partnership or other affiliates to
borrow funds) in order to satisfy the distribution requirement. The Company
(through the Operating Partnership) may be required to borrow funds at times
when market conditions are not favorable.
If the Company fails to meet the 95% distribution requirement as a result of
an adjustment to the Company's tax return by the Service, the Company may
retroactively cure the failure by paying a "deficiency dividend" (plus
applicable penalties and interest) within a specified period.
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FAILURE TO QUALIFY
If the Company fails to qualify for taxation as a REIT in any taxable year
and the relief provisions do not apply, the Company will be subject to tax
(including any applicable alternative minimum tax) on its taxable income at
regular corporate rates. Distributions to stockholders in any year in which the
Company fails to qualify will not be deductible by the Company, nor will they
be required to be made. In such event, to the extent of the Company's current
and accumulated earnings and profits, all distributions to stockholders will be
taxable as ordinary income, and, subject to certain limitations in the Code,
corporate distributees may be eligible for the dividends received deduction.
Unless entitled to relief under specific statutory provisions, the Company also
will be disqualified from taxation as a REIT for the four taxable years
following the year during which qualification was lost. It is not possible to
state whether the Company would be entitled to such statutory relief.
TAX ASPECTS OF THE COMPANY'S INVESTMENT IN THE OPERATING PARTNERSHIP
The following discussion summarizes certain federal income tax considerations
applicable solely to the Company's investment in the Operating Partnership. The
discussion does not cover state or local tax laws or any federal tax laws other
than income tax laws.
GENERAL
The Company holds a direct ownership interest in the Operating Partnership.
In general, partnerships are "pass-through" entities which are not subject to
federal income tax. Rather, partners are allocated their proportionate shares
of the items of income, gain, loss, deduction and credit of a partnership, and
are potentially subject to tax thereon, without regard to whether the partners
receive a distribution from the partnership. The Company includes its
proportionate share of the foregoing Operating Partnership items for purposes
of the various REIT income tests and in the computation of its REIT taxable
income. See "-- Taxation of the Company" and "-- Requirements for Qualification
- -- Gross Income Tests." Any resultant increase in the Company's REIT taxable
income increases its distribution requirements (see "-- Requirements for
Qualification -- Annual Distribution Requirements"), but is not subject to
federal income tax in the hands of the Company provided that such income is
distributed by the Company to its stockholders. Moreover, for purposes of the
REIT asset tests (see "-- Requirements for Qualification -- Asset Tests"), the
Company includes its proportionate share of assets held by the Operating
Partnership.
TAX ALLOCATIONS WITH RESPECT TO THE PROPERTIES
Pursuant to Section 704(c) of the Code, income, gain, loss and deduction
attributable to appreciated or depreciated property that is contributed to a
partnership in exchange for an interest in the partnership (such as certain of
the Properties), must be allocated in a manner such that the contributing
partner is charged with, or benefits from, respectively, the unrealized gain or
unrealized loss associated with the property at the time of the contribution.
The amount of such unrealized gain or unrealized loss is generally equal to the
difference between the fair market value of contributed property at the time of
contribution, and the adjusted tax basis of such property at the time of
contribution (a "Book-Tax Difference"). Such allocations are solely for federal
income tax purposes and do not affect the book capital accounts or other
economic or legal arrangements among the partners. The Operating Partnership
was formed by way of contributions of appreciated property (including certain
of the Properties). Consequently, the partnership agreement of the Operating
Partnership requires such allocations to be made in a manner consistent with
Section 704(c) of the Code.
In general, the limited partners of the Operating Partnership will be
allocated lower amounts of depreciation deductions for tax purposes and
increased taxable income and gain on sale by the Operating Partnership of the
contributed assets (including certain of the Properties). This will tend to
eliminate the Book-Tax Difference over the life of the Operating Partnership.
However, the special allocation rules under Section 704(c) do not
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always entirely rectify the Book-Tax Difference on an annual basis or with
respect to a specific taxable transaction such as a sale. Thus, the carryover
basis of the contributed assets in the hands of the Operating Partnership may
cause the company to be allocated lower depreciation and other deductions, and
possibly greater amounts of taxable income in the event of a sale of such
contributed assets in excess of the economic or book income allocated to it as
a result of such sale. This may cause the Company to recognize taxable income
in excess of cash proceeds, which might adversely affect the Company's ability
to comply with the REIT distribution requirements. See "-- Requirements for
Qualification -- Annual Distribution Requirements." In addition, the
application of Section 704(c) to the Operating Partnership is not entirely
clear and may be affected by authority that may be promulgated in the future.
SALE OF THE PROPERTIES
Generally, any gain realized by the Operating Partnership on the sale of
property held by the Operating Partnership for more than one year will be
long-term capital gain, except for any portion of such gain that is treated as
certain depreciation or cost recovery recapture. The Company's share of any
gain realized by the Operating Partnership on the sale of any dealer property
generally will be treated as income from a prohibited transaction that is
subject to a 100% penalty tax. See "Taxation of the Company" and "--
Requirements for Qualification -- Gross Income Tests -- The 95% Test." Under
existing law, whether property is dealer property is a question of fact that
depends on all the facts and circumstances with respect to the particular
transaction. The Operating Partnership intends to hold the Properties for
investment with a view to long-term appreciation, to engage in the business of
acquiring, developing, owning and operating the Properties, and to make such
occasional sales of the Properties as are consistent with the Company's
investment objectives. Based upon such investment objectives, the Company
believes that in general the Properties should not be considered dealer
property and that the amount of income from prohibited transactions, if any,
will not be material.
TAXATION OF STOCKHOLDERS
TAXATION OF TAXABLE DOMESTIC STOCKHOLDERS
As long as the Company qualifies as a REIT, distributions made to the
Company's taxable domestic stockholders out of current or accumulated earnings
and profits (and not designated as capital gain dividends) will be taken into
account by them as ordinary income. Stockholders that are corporations will not
be entitled to a dividends received deduction. Distributions that are
designated as capital gain dividends will be taxed as long-term capital gains
(to the extent they do not exceed the Company's actual net capital gain for the
taxable year) without regard to the period for which the stockholder has held
his stock. However, corporate stockholders may be required to treat up to 20%
of certain capital gain dividends as ordinary income. To the extent that the
Company makes distributions in excess of current and accumulated earnings and
profits, these distributions are treated first as a tax-free return of capital
to the stockholder, reducing the tax basis of a stockholder's Common Stock by
the amount of such distribution (but not below zero), with distributions in
excess of the stockholders tax basis taxable as capital gains (if the Common
Stock is held as a capital asset). In addition, any distribution declared by
the Company in October, November or December of any year and payable to a
stockholder of record on a specific date in any such month shall be treated as
both paid by the Company and received by the stockholder on December 31 of such
year, provided that the distribution is actually paid by the Company during
January of the following calendar year. Stockholders may not include in their
individual income tax returns any net operating losses or capital losses of the
Company.
In general, any loss upon a sale or exchange of Common Stock by a stockholder
who has held such stock for six months or less (after applying certain holding
period rules) will be treated as a long-term capital loss, to the extent of
distributions from the Company required to be treated by such stockholder as
long-term capital gains.
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BACKUP WITHHOLDING
The Company will report to its domestic stockholders and to the Service the
amount of dividends paid during each calendar year, and the amount of tax
withheld, if any, with respect thereto. Under the backup withholding rules, a
stockholder may be subject to backup withholding at the rate of 31% with
respect to dividends paid unless such stockholder (a) is a corporation or comes
within certain other exempt categories and, when required, demonstrates this
fact, or (b) provides a taxpayer identification number, certifies as to no loss
of exemption from backup withholding, and otherwise complies with applicable
requirements of the backup withholding rules. A stockholder that does not
provide the Company with its correct taxpayer identification number may also be
subject to penalties imposed by the Service. Any amount paid as backup
withholding will be creditable against the stockholder's income tax liability.
TAXATION OF TAX-EXEMPT STOCKHOLDERS
Based upon a published ruling by the IRS, distribution by the Company to a
stockholder that is a tax-exempt entity will not constitute "unrelated business
taxable income" ("UBTI") provided that the tax-exempt entity has not financed
the acquisition of its shares with "acquisition indebtedness" within the
meaning of the Code and the shares are not otherwise used in an unrelated trade
or business of the tax-exempt entity.
Notwithstanding the preceding paragraph, however, a portion of the dividends
paid by the Company may be treated as UBTI to certain domestic private pension
trusts if the Company is treated as a "pension-held REIT." The Company
believes that it is not, and does not expect to become a "pension-held REIT."
If the Company were to become a pension-held REIT, these rules generally would
only apply to certain pension trusts that hold more than 10% by value of the
Company's stock.
TAXATION OF FOREIGN STOCKHOLDERS
The following is a discussion of certain anticipated U.S. federal income
consequences of the ownership and disposition of the Company's stock applicable
to Non-U.S. Holders of such stock. A "Non-U.S. Holder" is any person other
than (i) a citizen or resident of the United States, (ii) a corporation or
partnership created or organized in the United States or under the laws of the
United States or of any state thereof, or (iii) an estate or trust whose income
is includable in gross income for U.S. federal income tax purposes regardless
of its source. The discussion is based on current law and is for general
information only. The discussion addresses only certain and not all aspects of
U.S. federal income taxation.
DISTRIBUTIONS FROM THE COMPANY
1. Ordinary Dividends. The portion of dividends received by Non-U.S.
Holders payable out of the Company's earnings and profits which are not
attributable to capital gains of the Company and which are not effectively
connected with a U.S. trade or business of the Non-U.S. Holder will be subject
to U.S. withholding tax at the rate of 30% (unless reduced by applicable
treaty). In general, Non-U.S. Holders will not be considered engaged in a U.S.
trade or business solely as a result of their ownership of stock of the
Company. In cases where the dividend income from a Non-U.S. Holder's
investment in stock of the company is (or is treated as) effectively connected
with the Non-U.S. Holder's conduct of a U.S. trade or business, the Non-U.S.
Holder generally will be subject to U.S. tax at graduated rates, in the same
manner as U.S. stockholders are taxed with respect to such dividends (and may
also be subject to the 30% branch profits tax in the case of a Non-U.S. Holder
that is a foreign corporation).
2. Non-Dividend Distributions. Unless the Company's stock constitutes a
USRPI (as defined below), distributions by the Company which are not dividends
out of the earnings and profits of the company will not be subject to U.S.
income or withholding tax. If it cannot be determined at the time a
distribution is made whether or not such distribution will be in excess of
current and accumulated earnings and profits, the
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distribution will be subject to withholding at the rate applicable to
dividends. However, the Non-U.S. Holder may seek a refund of such amounts from
the Service if it is subsequently determined that such distribution was, in
fact, in excess of current and accumulated earnings and profits of the Company.
If the Company's stock constitutes a USRPI, such distribution shall be subject
to 10% withholding tax and may be subject to additional taxation under FIRPTA
(as defined below).
3. Capital Gain Dividends. Under the Foreign Investment in Real Property
Tax Act of 1980 ("FIRPTA"), a distribution made by the Company to a Non-US.
Holder, to the extent attributable to gains from dispositions of United States
Real Property Interests ("USRPIs") such as the properties beneficially owned by
the Company ("USRPI Capital Gains"), will be considered effectively connected
with a U.S. trade or business of the Non-U.S. Holder and subject to U.S. income
tax at the rate applicable to U.S. individuals or corporations, without regard
to whether such distribution is designated as a capital gain dividend. In
addition, the Company will be required to withhold tax equal to 35% of the
amount of dividends to the extent such dividends constitute USRPI Capital
Gains. Distributions subject to FIRPTA, in limited circumstances, may also be
subject to a 30% branch profits in tax in the hands of a foreign corporate
stockholder that is not entitled to treaty exemption.
Disposition of Stock of the Company. Unless the Company's stock constitutes
a USRPI, a sale of such stock by a Non-U.S. Holder generally will not be
subject to U.S. taxation under FIRPTA. The stock will not constitute a USRPI
if the Company is a "domestically controlled REIT." A domestically controlled
REIT is a REIT in which, at all times during a specified testing period, less
than 50% in value of its shares is held directly or indirectly by Non-U.S.
Holders. The Company believes that it is, and it expects to continue to be a
domestically controlled REIT, and therefore that the sale of the Company's
stock will not be subject to taxation under FIRPTA. Because the Company's
stock will be publicly traded, however, no assurance can be given the Company
will continue to be a domestically controlled REIT.
If the Company does not constitute a domestically controlled REIT, a Non-U.S.
Holder's sale of stock generally will still not be subject to tax under FIRPTA
as a sale of a USRPI provided that (i) the stock is "regularly traded" (as
defined by applicable Treasury Regulations) on an established securities market
and (ii) the selling Non-U.S. Holder held 5% or less of the Company's
outstanding stock at all times during a specified testing period.
If gain on the sale of stock of the Company were subject to taxation under
FIRPTA, the Non-U.S. Holder would be subject to the same treatment as a U.S.
stockholder with respect to such gain (subject to applicable alternative
minimum tax and a special alternative minimum tax in the case of nonresident
alien individuals) and the purchaser of the stock could be required to withhold
10% of the purchase price and remit such amount to the Service.
OTHER TAX CONSIDERATIONS
DIVIDEND REINVESTMENT PROGRAM
Under the Company's dividend reinvestment program, stockholders participating
in the program will be deemed to have received the gross amount of any cash
distributions which would have been paid by the Company to such stockholders
had they not elected to participate. These deemed distributions will be treated
as actual distributions from the Company to the participating stockholders and
will retain the character and tax effect applicable to distributions from the
Company generally. See "Federal Income Tax Considerations -- Taxation of
Stockholders." Participants in the dividend reinvestment program are subject to
federal income tax on the amount of the deemed distributions to the extent that
such distributions represent dividends or gains, even though they receive no
cash. Shares of Common Stock received under the program will have a holding
period beginning with the day after purchase, and a tax basis equal to their
cost (which is the gross amount of the deemed distribution).
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STATE AND LOCAL TAXES
The Company and its stockholders may be subject to state or local taxation in
various jurisdictions, including those in which it or they transact business or
reside. The state and local tax treatment of the Company and its stockholders
may not conform to the federal income tax consequences discussed above.
Consequently, prospective stockholders should consult their own tax advisers
regarding the effect of state and local tax laws on an investment in the Common
Stock of the Company.
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PLAN OF DISTRIBUTION
This Prospectus relates to the offer and sale from time to time by the
holders thereof of up to 577,800 shares of Common Stock that may be issued by
the Company to the holders of up to 577,800 Units in the Operating Partnership,
if and to the extent such holders tender such Units for exchange into shares of
Common Stock. The Company has registered the Shares for sale pursuant to
certain registration rights agreements, but registration of such Shares does
not necessarily mean that any of such Shares will be issued by the Company,
unless required by the holders, or offered or sold by the holders thereof.
The Company will not receive any proceeds from the offering by the Selling
Stockholders or from the issuance of the Shares to holders of Units. The
Shares may be sold from time to time to purchasers directly by any of the
Selling Stockholders. Alternatively, the Selling Stockholders may from time to
time offer the Shares through dealers or agents, who may receive compensation
in the form of commissions from the Selling Stockholders and/or the purchasers
of Shares for whom they may act as agent. The Selling Stockholders and any
dealers or agents that participate in the distribution of Shares may be deemed
to be "underwriters" within the meaning of the Securities Act and any profit on
the sale of Shares by them and any commissions received by any such dealers or
agents might be deemed to be underwriting commissions under the Securities Act.
The distribution of the Shares also may be effected from time to time in one
or more underwritten transactions at a fixed price or prices, which may be
changed, or at market prices prevailing at the time of sale, at prices related
to such prevailing market prices or at negotiated prices. Any such
underwritten offering may be on a "best efforts" or a "firm commitment" basis.
In connection with any such underwritten offering, underwriters or agents may
receive compensation in the form of discounts, concessions or commissions from
the Selling Stockholders or from purchasers of Shares for whom they may act as
agents. Underwriters may sell Shares to or through dealers, and such dealers
may receive compensation in the form of discounts, concessions or commissions
from the underwriters and/or commissions from the purchasers for whom they may
act as agents.
At a time a particular offer of Shares is made, a Prospectus Supplement, if
required, will be distributed that will set forth the name and names of any
dealers or agents and any commissions and other terms constituting compensation
from the Selling Stockholders and any other required information. The Shares
may be sold from time to time at varying prices determined at the time of sale
or at negotiated prices.
In order to comply with the securities laws of certain states, if applicable,
the Shares may be sold only through registered or licensed brokers or dealers.
In addition, in certain states, the Shares may not be sold unless they have
been registered or qualified for sale in such state or an exemption from such
registration or qualification requirement is available and is complied with.
The Shares may also be sold in one or more of the following transactions:
(a) block transactions (which may involve crosses) in which a broker-dealer may
sell all or a portion of such stock as agent but may position and resell all or
a portion of the block as principal to facilitate the transaction; (b)
purchases by any such broker-dealer as principal and resale by such
broker-dealer for its own account pursuant to a Prospectus Supplement; (c) a
special offering, an exchange distribution or a secondary distribution in
accordance with applicable NYSE or other stock exchange rules; (d) ordinary
brokerage transactions and transactions in which any such broker-dealer
solicits purchasers; (e) sales "at the market" to or through a market maker or
into an existing trading market, on an exchange or otherwise, for such shares;
and (f) sales in other ways not involving market makers or established trading
markets, including direct sales to purchasers. In effecting sales, broker-
dealers engaged by the Selling Stockholders may arrange for other
broker-dealers to participate.
The Company may from time to time issue up to 577,800 Shares upon the
acquisition of Units tendered for exchange. The Company will acquire the
exchanging holder's Unit in exchange for each Share that the
28
<PAGE> 29
Company issues in connection with such exchange. Consequently, with each
exchange, the Company's interest in the Operating Partnership will increase.
EXPERTS
The consolidated financial statements and related financial statement
schedules of the Company and the Operating Partnership included in the
Company's and the Operating Partnership's respective Annual Reports on Form
10-K for the year ended December 31, 1995, and Amendment No. 1 to the Operating
Partnership's Annual Report on Form 10-K/A filed with the Commission on June
20, 1996, incorporated by reference herein, the reports, each dated June 14,
1996, on the combined statement of revenues and certain expenses of the Six
Acquired Properties and Two Investments Mortgage included in the Company's and
the Operating Partnership's respective Current Reports on Form 8-K each dated
June 18, 1996, incorporated by reference herein, the reports, each dated July
11, 1996, on the combined statement of revenue and certain expenses of the City
Portfolio included in the Company's and the Operating Partnership's respective
Current Report on Form 8-K each dated July 15, 1996 and incorporated by
reference herein, and the reports, each dated October 29, 1996, on the combined
statement of revenue and certain expenses of The Three Acquired Properties
included in the Company's and the Operating Partnership's respective Current
Reports on Form 8-K each dated December 4, 1996, and incorporated by reference
herein, have been audited by Arthur Andersen LLP, independent public
accountants, to the extent and for the periods indicated in their reports and
have been incorporated herein in reliance on such reports given on the
authority of that firm as experts in accounting and auditing.
LEGAL MATTERS
The validity of the issuance of the shares of Common Stock offered pursuant
to this Prospectus will be passed upon for the Company by Morrison & Foerster
LLP, Palo Alto, California.
29
<PAGE> 30
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated fees and expenses payable by the
Company in connection with the issuance and distribution of the Common Stock
registered hereby. All of such fees and expenses are estimates, except the
Securities Act registration fee.
<TABLE>
<S> <C>
Securities Act Registration Fee . . . . . . . . . . . . . . . . . . . . . . . $ 6,134
Printing and duplicating fees . . . . . . . . . . . . . . . . . . . . . . . . 1,500
Legal fees and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000
Accounting fees and expenses . . . . . . . . . . . . . . . . . . . . . . . . 3,000
Miscellaneous expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,366
-----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 35,000
===========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article EIGHTH, Section 6 of the Charter of the Company limits the liability
of a director or officer to the Company or its stockholders for money damages
to the full extent permitted by Maryland law. No amendment of the Charter of
the Company shall limit or eliminate the right to this limitation of liability
with respect to acts or omissions occurring prior to such amendment or repeal.
Section 2-405.2 of the Corporations and Associations Article and Section 5-349
of the Courts and Judicial Proceedings Article of the Annotated Code of
Maryland permits the Company to limit the liability of a director or officer to
the Company or its stockholders for money damages, with certain limitations.
Article EIGHTH, Section 5 of the Charter of the Company provides
indemnification for a director or officer of the Company to the full extent
permitted by Maryland law. No amendment of the Charter of the Company shall
limit or eliminate the right to this indemnification with respect to acts or
omissions occurring prior to such amendment or repeal. Article IX of the
Bylaws of the Company contains provisions which implement the indemnification
provisions of the Charter. Section 2-418 of the Corporations and Associations
Article of the Annotated Code of Maryland permits (and in part requires) the
Company to provide information to a director or officer, with certain
limitations.
The Company has entered into indemnification agreements with each of the
directors and executive officers of the Company to provide them with
indemnification to the full extent permitted by the Charter and Bylaws of the
Company.
The Company has obtained an insurance policy to provide liability coverage
for directors and officers of the Company.
II-1
<PAGE> 31
ITEM 16. EXHIBITS
3.1 -- Articles of Incorporation of Spieker
Properties, Inc. (incorporated by reference to
Exhibit 3.1 to Spieker Properties, Inc.'s
Registration Statement on Form S-11 (File No.
33-67906))
3.2 -- Articles of Amendment of Spieker Properties,
Inc. (incorporated by reference to Exhibit 3.2
to the Spieker Properties, Inc.'s shelf
registration statement filed with the
Commission on August 2, 1996)
3.3 -- Articles Supplementary of Spieker Properties,
Inc. for Series A Preferred Stock
(incorporated by reference to Exhibit 4.2 to
Spieker Properties, Inc.'s Report on Form 10-Q
for the quarter ended March 31, 1994)
3.4 -- Articles Supplementary of Spieker Properties,
Inc. for Class B Common Stock (incorporated by
reference to Exhibit 4.2 to Spieker
Properties, Inc.'s Report on Form 10-Q for the
quarter ended March 31, 1995)
3.5 -- Articles Supplementary of Spieker Properties,
Inc. for Series B Preferred Stock
(incorporated by reference to Exhibit 3.5 to
Spieker Properties, Inc.'s Annual Report on
Form 10-K for the year ended December 31,
1995)
3.6 -- Articles Supplementary of Spieker Properties,
Inc. for Class C Common Stock (incorporated by
reference to Exhibit 3.6 to Spieker
Properties, Inc.'s Annual Report on Form 10-K
for the year ended December 31, 1996)
3.7 -- Bylaws of Spieker Properties, Inc.
(incorporated by reference to Exhibit 3.2 to
Spieker Properties Inc.'s Registration
Statement on Form S-11 (File No. 33-67906))
5.1 -- Opinion of Morrison & Foerster LLP
8.1 -- Opinion of Morrison & Foerster LLP relating to
certain tax matters
23.1 -- Consent of Arthur Andersen LLP
23.2 -- Consent of Morrison & Foerster LLP (included
in Exhibit 5.1)
24.1 -- Power of Attorney (included on page II-4)
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required in Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in this
registration statement. 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) any deviation
from the low or high and of the estimated maximum offering price may be
reflected in the form of prospectus filed with the Commission pursuant to
Rule 424(b) if, in the aggregate changes in volume and price represent no
more than 20 percent change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in the effective
registration statement; and
II-2
<PAGE> 32
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in this registration statement or any
material change to such information in this registration statement;
provided, however, that subparagraphs (i) and (ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in the periodic reports filed by the Registrant
pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934
that are incorporated by reference in this registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered herein, 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 these securities being registered which remain unsold at the termination of
the offering.
The undersigned Registrant hereby further undertakes that, for the purposes
of determining any liability under the Securities Act of 1933, each filing of
the Registrant's annual reports pursuant to Section 13(a) or Section 15(d) of
the Securities Exchange Act of 1934 that is incorporated by reference to this
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
The undersigned Registrant hereby further undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
registration statement in reliance under Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act of 1933 shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under Item 15 of this
registration statement, or otherwise (other than insurance), the Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in such 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 such Act and will be governed by the
final adjudication of such issue.
II-3
<PAGE> 33
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that is has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Menlo Park, State of California, on the 13th day of
February, 1997.
SPIEKER PROPERTIES, INC.
By: /s/ Craig G. Vought
-------------------------------
Craig G. Vought
Executive Vice President and
Chief Financial Officer
POWER OF ATTORNEY
We, the undersigned officers and directors of Spieker Properties, Inc., do
hereby constitute and appoint Warren E. Spieker, Jr., Dennis E. Singleton,
Craig G. Vought and Sara H. Reynolds, and each of them, our true and lawful
attorneys-in-fact and agents, each with full power of substitution and
resubstitution, for each of us and in each of our names, places and stead, in
any and all capacities, to sign any and all amendments to this Registration
Statement, and to file the same, with exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite or necessary
to be done in and about the premises, as fully to all intents and purposes as
each of us might or could do in person, hereby ratifying and confirming all
that each of said attorneys-in-fact and agents, or his/her substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- -------------------------- ----------------------------------------------- --------------------
<S> <C> <C>
/s/ Warren E. Spieker, Jr. Chairman of the Board, Director and Chief February 13, 1997
- -------------------------- Executive Officer (Principal Executive Officer)
Warren E. Spieker, Jr.
/s/ John K. French Director, Executive Vice President and Chief February 13, 1997
- -------------------------- Operating Officer
John K. French
</TABLE>
II-4
<PAGE> 34
<TABLE>
<S> <C> <C> <C>
SIGNATURE TITLE DATE
---------------------------------- ----------------------------------------------- --------------------
Director, Executive Vice President and Chief February , 1997
---------------------------------- Investment Officer
Dennis E. Singleton
Vice President and Principal Accounting Officer February , 1997
---------------------------------- (Principal Accounting Officer)
Elke Strunka
Executive Vice President and Chief Financial February , 1997
---------------------------------- Officer (Principal Financial Officer)
Craig G. Vought
Director February , 1997
----------------------------------
Richard J. Bertero
/s/ Harold M. Messmer Director February 13, 1997
----------------------------------
Harold M. Messmer
/s/ David M. Petrone Director February 13, 1997
----------------------------------
David M. Petrone
/s/ William S. Thompson, Jr. Director February 13, 1997
----------------------------------
William S. Thompson, Jr.
</TABLE>
II-5
<PAGE> 35
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the reference to our
firm under the caption "Experts" in this Registration Statement on Form S-3
(the "Registration Statement") and related Prospectus (the "Prospectus") of
Spieker Properties, Inc. (the "Company") for the registration of shares of the
Company's common stock which may be issued upon conversion of certain units of
interest in Spieker Properties, L.P. and sold from time to time by the holders
of such shares.
We also hereby consent to the incorporation by reference in this Registration
Statement and Prospectus of our report, dated January 25, 1996, relating to the
consolidated financial statements and schedule of the Company, which report is
included in the Annual Report on Form 10-K for the year ended December 31, 1995
of the Company, incorporated by reference in the Registration Statement and
Prospectus.
We also hereby consent to the incorporation by reference in the Registration
Statement and Prospectus of our report, dated January 25, 1996, relating to the
consolidated financial statements of the Company, which report is included in
the Amendment No. 1 to the Annual Report on Form 10-K/A, dated June 20, 1996,
of the Company, incorporated by reference in the Registration Statement and
Prospectus.
We also hereby consent to the incorporation by reference in the Registration
Statement and Prospectus of our report, dated June 14, 1996, on the combined
statement of revenues and certain expenses of the Six Acquired Properties and
Two Investments Mortgages, which report is included in the Current Report on
Form 8-K, dated June 18, 1996 of the Company, incorporated by reference in the
Registration Statement and Prospectus.
We also hereby consent to the incorporation by reference in the Registration
Statement and Prospectus of our report, dated July 11, 1996, on the combined
statement of revenues and certain expenses of The City Portfolio, which report
is included in the respective Current Report on Form 8-K, dated July 15, 1996
of the Company, incorporated by reference in the Registration Statement and
Prospectus.
We also hereby consent to the incorporation by reference in the Registration
Statement and Prospectus of our report, dated October 29, 1996, on the combined
statement of revenues and certain expenses of The Three Property Acquisitions,
which report is included in the Current Report on Form 8-K, dated December 4,
1996 of the Company, incorporated by reference in the Registration Statement
and Prospectus.
San Francisco, California ARTHUR ANDERSEN LLP
February 5, 1997
II-6
<PAGE> 36
EXHIBIT INDEX
Exhibit
Number Description
------- -----------
3.1 -- Articles of Incorporation of Spieker Properties, Inc.
(incorporated by reference to Exhibit 3.1 to Spieker
Properties, Inc.'s Registration Statement on Form S-11
(File No. 33-67906))
3.2 -- Articles of Amendment of Spieker Properties, Inc.
(incorporated by reference to Exhibit 3.2 to the
Spieker Properties, Inc.'s shelf registration statement
filed with the Commission on August 2, 1996)
3.3 -- Articles Supplementary of Spieker Properties, Inc. for
Series A Preferred Stock (incorporated by reference to
Exhibit 4.2 to Spieker Properties, Inc.'s Report on
Form 10-Q for the quarter ended March 31, 1994)
3.4 -- Articles Supplementary of Spieker Properties, Inc. for
Class B Common Stock (incorporated by reference to
Exhibit 4.2 to Spieker Properties, Inc.'s Report on
Form 10-Q for the quarter ended March 31, 1995)
3.5 -- Articles Supplementary of Spieker Properties, Inc. for
Series B Preferred Stock (incorporated by reference to
exhibit 3.5 to Spieker Properties, Inc.'s Annual Report
on Form 10-K for the year ended December 31, 1995)
3.6 -- Articles Supplementary of Spieker Properties, Inc. for
class C Common Stock (incorporated by reference to
Exhibit 3.6 to Spieker Properties, Inc.'s Annual Report
on Form 10-K for the year ended December 31, 1996)
3.7 -- Bylaws of Spieker Properties, Inc. (incorporated by
reference to Exhibit 3.2 to Spieker Properties Inc.'s
Registration Statement on Form S-11 (File No.
33-67906))
5.1 -- Opinion of Morrison & Foerster LLP
8.1 -- Opinion of Morrison & Foerster LLP relating to certain
tax matters
23.1 -- Consent of Arthur Andersen LLP (included on page II-6)
23.2 -- Consent of Morrison & Foerster LLP (included in Exhibit
5.1)
24.1 -- Power of Attorney (included on page II-4)
<PAGE> 1
EXHIBIT 5.1
February 13, 1997
Spieker Properties, Inc.
2180 Sand Hill Road, Suite 200
Menlo Park, California 94025
Ladies and Gentlemen:
We are acting as counsel to Spieker Properties, Inc., a
Maryland corporation (the "Company"), in connection with the offer and sale
from time to time by the holders of up to 577,800 shares of common stock (the
"Shares") of the Company, par value $.0001 per share ("Common Stock"), that may
be issued by Spieker Properties, Inc. to certain holders of units of limited
partnership interest (the "Units") in Spieker Properties, L.P. (the "Operating
Partnership"), if and to the extent that such holders tender such Units for
exchange into shares of Common Stock. The Shares are the subject of a
Registration Statement (the "Registration Statement") filed by the Company on
Form S-3 under the Securities Act of 1933, as amended.
In our capacity as your counsel in connection with such
registration, we are familiar with the proceedings taken and proposed to be
taken by the Company in connection with the authorization and issuance of the
Shares and for the purposes of this opinion, have assumed such proceedings will
be timely completed in the manner presently proposed. In addition, we have
made such legal and factual examinations and inquiries, including an
examination of originals or copies certified or otherwise identified to our
satisfaction of such documents, corporate records and instruments, as we have
deemed necessary or appropriate for purposes of this opinion.
Based upon and subject to the foregoing and to the
assumptions, limitations and conditions set forth herein, we are of the opinion
that upon the issuance of the Shares as described in the Registration
Statement, the Shares will be validly issued, fully paid and non-assessable.
<PAGE> 2
Spieker Properties, Inc.
February 13, 1997
Page 2
We consent to the use of this opinion as an exhibit to the
Registration Statement and further consent to the reference to us under the
heading "Legal Matters" in the Registration Statement, the Prospectus
constituting a part thereof and any amendments thereto.
Very truly yours,
Morrison & Foerster LLP
<PAGE> 1
EXHIBIT 8.1
February 13, 1997
Spieker Properties, Inc.
2180 Sand Hill Road, Suite 200
Menlo Park, California 94025
Ladies and Gentlemen:
We are acting as counsel to Spieker Properties, Inc. (the
"Company"), a Maryland corporation (the "Company") in connection with the offer
and sale from time to time by the holders of up to 577,800 shares of common
stock (the "Shares") to the Company, par value $.0001 per share ("Common
Stock"), that may be issued by Spieker Properties, Inc. to certain holders of
units of limited partnership interest (the "Units") in Spieker Properties, L.P.
(the "Operating Partnership"), if and to the extent that such holders tender
such Units for exchange into shares of Common Stock. The Shares are the
subject of a Registration Statement (the "Registration Statement") filed by the
Company on Form S-3 under the Securities Act of 1933, as amended (the "Act").
We have been requested to provide you with our opinion as to whether the
Company currently qualifies as a real estate investment trust ("REIT"), within
the meaning of Section 856(a) of the Internal Revenue Code of 1986, as amended
(the "Code"), and has so qualified for each of the past four taxable years.
Capitalized terms not otherwise defined herein shall have the meaning given to
them in the Registration Statement.
For purposes of the opinion set forth below, we have relied,
with your consent, upon the accuracy and completeness of the statements and
representations (which statements and representations we have neither
investigated nor verified) contained in the certificate of the Company dated
January 20, 1997(the "Certificate"). We have also relied upon the accuracy of
the Registration Statement.
Based upon such statements, representations and assumptions,
and subject to the next two succeeding paragraphs, we are of the opinion that,
as of the date hereof and for its taxable years ended December 31, 1993,
December 31, 1994, December 31, 1995, and
<PAGE> 2
Spieker Properties, Inc.
February 13, 1997
Page 2
December 31, 1996, the Company has operated in a manner that has qualified it
as a REIT under the Code, and if it continues to operate in the same manner, it
will continue to so qualify.
Our opinion is based upon the documents referred to above and
the current provisions of the Code, Treasury Regulations promulgated
thereunder, published pronouncements of the Internal Revenue Service and case
law, any of which may be changed at any time, possibly with retroactive effect.
You should also be aware that opinions of counsel are not binding upon the
Internal Revenue Service or the courts. Any change in applicable law, or any
inaccuracy in the statements, representations and assumptions on which we have
relied may affect the continuing validity of the opinion set forth herein.
This opinion addresses only the operation of the Company in a
manner that qualifies it as a REIT as of the date hereof and during each of the
past three taxable years. We undertake no obligation to update this opinion,
or to ascertain after the date hereof whether circumstances occurring after
such date may affect the conclusions set forth herein.
We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement. In giving this consent, we do not thereby admit
that we are in the category of persons whose consent is required under Section
7 of the Act.
Very truly yours,
Morrison & Foerster LLP
