<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 21, 1998
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------
Amendment No. 1
to
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------
SPIEKER PROPERTIES, INC.
(Exact Name of Registrant As Specified in its Charter)
<TABLE>
<S> <C>
MARYLAND 94-3185802
(State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification Number)
</TABLE>
--------------------
2180 SAND HILL ROAD
MENLO PARK, CALIFORNIA 94025
(650) 854-5600
(Address, including zip code, and
telephone number,
including area code, of
registrant's principal
executive offices)
------------------------
CRAIG G. VOUGHT
EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
SPIEKER PROPERTIES, INC.
2180 SAND HILL ROAD, SUITE 200
MENLO PARK, CALIFORNIA 94025
(650) 854-5600
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------
WITH COPIES TO:
ALISON S. RESSLER, ESQ.
SULLIVAN & CROMWELL
444 SOUTH FLOWER STREET
LOS ANGELES, CALIFORNIA 90071
(213) 955-8000
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APPROXIMATE DATE OF COMMENCEMENT OF
PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of this
Registration Statement.
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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. / /
-------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===================================================================================================================================
PROPOSED MAXIMUM
AMOUNT TO BE AGGREGATE PRICE PROPOSED MAXIMUM AMOUNT OF
TITLE OF SHARES TO BE REGISTERED REGISTERED(1) PER SHARE(2) AGGREGATE OFFERING PRICE REGISTRATION FEE(1)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMON STOCK, .0001 PAR VALUE 1,760,025 SHARES $42.03125 $73,976,051 $21,822.94
===================================================================================================================================
</TABLE>
(1) 2,103,152 SHARES PREVIOUSLY REGISTERED WITH THE COMMISSION PURSUANT TO
REGISTRATION STATEMENTS NOS. 333-346 (1,356,914 SHARES), 333-9425
(50,000 SHARES), 333-14325 (191,238 SHARES) AND 333-21709 (505,000
SHARES), FILED FEBRUARY 28, 1996, AUGUST 2, 1996, OCTOBER 17, 1996 AND
FEBRUARY 13, 1997, RESPECTIVELY, ARE BEING CARRIED FORWARD IN THE
PROSPECTUS INCLUDED IN THIS REGISTRATION STATEMENT. REGISTRATION FEES OF
$11,551.57, $486.04, $1,713.17 AND $5,413.45 WERE PREVIOUSLY PAID ON
SUCH SHARES.
(2) 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 DECEMBER 29,
1997.
PURSUANT TO RULE 429 UNDER THE SECURITIES ACT OF 1933, THE PROSPECTUS
INCLUDED IN THIS REGISTRATION STATEMENT IS A COMBINED PROSPECTUS AND RELATES TO
REGISTRATION STATEMENTS NOS. 333-346, 33-9425, 333-14325 AND 333-21709
PREVIOUSLY FILED BY THE REGISTRANT ON FORM S-3 WITH THE COMMISSION ON FEBRUARY
28, 1996, AUGUST 2, 1996, OCTOBER 17, 1996 AND FEBRUARY 13, 1997, RESPECTIVELY.
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
THEREINAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES
ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH
DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
================================================================================
<PAGE> 2
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there by any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
Subject to Completion
Preliminary Prospectus dated January 5, 1998
PROSPECTUS
3,863,177 SHARES
SPIEKER PROPERTIES, INC.
COMMON STOCK
This Prospectus relates to the offer and sale from time to time by the
holders thereof of up to (i) 1,219,512 shares of common stock, par value $.0001
per share ("Common Stock"), that may be issued by Spieker Properties, Inc. (the
"Company") to the holder of 1,000,000 shares of the Company's Series A Preferred
Stock, par value $.0001 per share ("Series A Preferred Stock"), if and to the
extent that such holder exchanges shares of Series A Preferred Stock for shares
of Common Stock (the "Conversion Shares") and (ii) 2,643,665 shares of Common
Stock (the "Exchange Shares" and, together with the Conversion Shares, the
"Shares") that may be issued by the Company to holders of up to 2,643,665 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 (such persons, together with the
holder of the Conversion Shares, the "Selling Stockholders"). The Company is
registering the Shares issuable upon conversion of shares of Series A Preferred
Stock pursuant to the terms of the Investor's Rights Agreement dated May 5, 1994
between the Company and the holder of such Series A Preferred Stock, and is
registering the Shares issuable upon conversion of the Units pursuant to the
terms of an Amended and Restated Investor Rights Agreement dated December 4,
1997, as amended, by and among the Company and certain holders of Units to
provide the holder of the shares of Series A Preferred Stock and 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 ("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 COM-
MISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CON-
TRARY IS A CRIMINAL OFFENSE.
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 pursuant
to the Registration Statement of which this Prospectus is part.
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 commission 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 January 5, 1998
<PAGE> 3
AVAILABLE INFORMATION
The Company and the Operating Partnership are subject to the
informational requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and in accordance therewith the Company and the Operating
Partnership file 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 also maintains
a World Wide Web site that contains reports, proxy and information statements
and other information regarding registrants, such as the Company and the
Operating Partnership, that file electronically with the Commission. The address
of the Commission's site is http://www.sec.gov. In addition, the Company's
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 Shares. 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, the Operating Partnership 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, 1996;
b. The Company's Quarterly Reports on Forms 10-Q for the quarters
ended March 31, 1997, June 30, 1997 and September 30, 1997;
c. The Company's Current Reports on Form 8-K dated February 3,
1997, June 27,1997, September 22, 1997 and November 26, 1997 and the
Current Report on Form 8-K/A dated October 10, 1997.
d. The description of the Company's Common 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 of all Shares to which this Prospectus
relates shall be 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
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<PAGE> 4
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: (650) 854-5600.
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 AND THE OPERATING PARTNERSHIP
Spieker Properties, Inc. (the "Company") is a self-administered and
self-managed equity real estate investment trust ("REIT") that specializes in
the acquisition, development and management of suburban office and industrial
properties. As of September 30, 1997, the Company owned and operated 185
income-producing properties (the "Properties"), aggregating approximately 29.1
million rentable square feet, primarily located in California, and in
Washington, Oregon and Idaho.
The Company conducts substantially all of its activities through Spieker
Properties, L.P. (the "Operating Partnership") in which it owns an approximate
87.0% general partnership interest, as of September 30, 1997. An approximate
13.0% limited partnership interest in the Operating Partnership is owned by
senior members of the Company's management and certain outside investors, as of
September 30, 1997. As the sole general partner of the Operating Partnership,
the Company has control over the management of the Operating Partnership and
over each of the Properties.
The Company's 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 and the Operating
Partnership were formed in 1993. 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 (650) 854-5600.
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 currently
distribute at least 95% of their 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 thereof of up to (i) 1,219,512 shares of Common Stock that may be issued
by the Company to the holder of 1,000,000 shares of the Company's Series A
Preferred Stock, par value $.0001 per share ("Series A Preferred Stock"), if and
to the extent that such holder exchanges shares of Series A Preferred Stock for
shares of Common Stock (the "Conversion Shares") and (ii) 2,643,665 shares (the
"Exchange Shares" and, together with the Conversion Shares, the "Shares") of
Common Stock that may be issued by the Company to the holders of up to 2,643,665
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. The Company is
registering the Shares issuable upon exchange of the Units pursuant to the terms
of the Amended and Restated Investor Rights Agreement dated December 4, 1997 by
and among the Company and certain holders of Units (the "Limited Partners'
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<PAGE> 5
Investors' Rights Agreement") and is registering the Shares issuable upon
conversion of the Series A Preferred Stock pursuant to the terms of the
Investor's Rights Agreement dated May 5, 1994 between the Company and the holder
of the Series A Preferred Stock (the "Series A Investor's Rights Agreement" and
together with the Limited Partners' Investors' Rights Agreement, the
"Registration Rights Agreements"), to provide the holders of such Units and
shares of Series A Preferred Stock 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 of 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 exchange for each Share
that the Company may issue to Unit Holders.
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 and the Operating Partnership's ability
to make payments of any interest and principal on any debt securities 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, approximately 44.5% of the Properties as of September 30,
1997, 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 and office 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
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<PAGE> 6
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
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.
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<PAGE> 7
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.
LACK OF MANAGING UNDERWRITER
The Selling Stockholders may from time to time offer the Shares through
underwriters, dealers or agents. Alternatively, the Shares may be sold from time
to time by any of the Selling Stockholders directly to purchasers thereof. See
"Plan of Distribution." If the sales of the Shares by the Selling Stockholders
are not coordinated or controlled by a managing underwriter, the Company cannot
be certain that the market for the Shares will be free from practices prohibited
by Regulation M under the Exchange Act. In addition, certain Selling
Stockholders may be deemed to be underwriters, as such term is defined by the
Securities Act, and may therefore be subject to the restrictions on and
liabilities of underwriters pursuant to the Securities Act. The holder of the
shares of Series A Preferred Stock does not presently intend that he will sell
the shares in a manner such that he would be deemed to be an underwriter.
Selling Stockholders will, during any distribution period, also be subject to
the restrictions on their purchases and sales of Shares as set forth in
Regulation M under the Exchange Act.
DESCRIPTION OF CAPITAL STOCK
GENERAL
As of December 29, 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) 654,500,000 shares of Common Stock, par value $0.0001 per
share, (ii) 2,000,000 shares of Class B Common Stock, par value $0.0001 per
share, (iii) 1,500,000 shares of Class C Common Stock, par value $0.0001 per
share, (iv) 1,000,000 shares of Series A Preferred Stock, par value $0.0001 per
share, (v) 5,000,000 shares of Series B Cumulative Redeemable Preferred Stock
("Series B Preferred Stock"), par value $0.0001 per share, (vi) 6,000,000 shares
of Series C Cumulative Redeemable Preferred Stock ("Series C Preferred Stock")
and (vii) 330,000,000 shares of excess stock (the "Excess Stock").
As of December 29, 1997, there were (i) 55,760,132 shares of Common
Stock issued and outstanding, (ii) 2,000,000 shares of Class B Common Stock
issued and outstanding, (iii) 1,176,470 shares of Class C Common Stock issued
and outstanding, (iv) 1,000,000 shares of Series A Preferred Stock issued and
outstanding, (v) 4,250,000 shares of Series B Preferred Stock issued and
outstanding, and (vi) 6,000,000 shares of Series C Preferred Stock issued and
outstanding. At any given time, there are reserved for issuance under the
Spieker Properties, Inc. 1993 Stock Incentive Plan (the "Option 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 December 29, 1997, the Company had reserved for
issuance under the Plan 5,363,555 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 Plan"). In
addition, 2,531,645 shares of Common Stock have been reserved for issuance upon
the conversion of Class B Common Stock, 1,176,470 shares of Common Stock have
been reserved for issuance upon the conversion of Class C Common
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<PAGE> 8
Stock and 1,219,512 shares of Common Stock have been reserved for issuance upon
the conversion of the Series A Preferred Stock. Further, as of December 29,
1997, 7,328,912 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. 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, as amended and restated
to date, 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 for each director being elected and on all other matters voted on by
stockholders. 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, Series C 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.
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, Series C 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.
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 December 29, 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
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<PAGE> 9
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 based on a certain formula three years
after the May 1995 sale or earlier upon the occurrence of certain events
including a change in management. Under such formula, 2,000,000 outstanding
shares of Class B Common Stock are currently convertible into 2,531,645 shares
of Common Stock. 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 December 29, 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 on a one-for-one basis 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 December 29, 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
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<PAGE> 10
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 and Series C 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.
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 stockholders' 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 December 29, 1997. 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 and Series C 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." Except in limited circumstances,
the holders of shares of Series B Preferred Stock have no voting rights.
SERIES C PREFERRED STOCK
The following description of the Company's Series C 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 C Preferred Stock, and Bylaws. The
Company is authorized to issue 6,000,000 shares of Series C Preferred Stock, of
which 6,000,000 shares were issued and outstanding as of December 29, 1997. The
holders of the Series C Preferred Stock are
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<PAGE> 11
entitled to receive cumulative, preferential cash dividends, when and as
declared by the Board of Directors, of $1.96875 per share. The Company currently
pays regular dividends to holders of Series C Preferred Stock.
In the event of any liquidation, dissolution or winding up of the
Company, the holders of Series C Preferred Stock are entitled to receive on a
parity with the holders of Series A Preferred Stock and 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 C 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 October 10, 2002, any or all outstanding shares of Series C 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 C 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 C Preferred Stock may be exchanged for Excess Stock.
See "Description of Common Stock -- General." Except in limited circumstances,
the holders of shares of Series C Preferred Stock have no voting rights.
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 the
Board receives a ruling of the Internal Revenue Service (the "IRS") or an
opinion of counsel to the effect 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 representations and undertakings 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 would have the right, for a period of 90 days during
the time the
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<PAGE> 12
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 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 September 30, 1997
held approximately 87% of the Units therein. The remaining Units are held by
persons (or their successors) who contributed interests in the Properties to the
Company in connection with, or subsequent to, the formation of the Operating
Partnership. 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").
GENERAL
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.
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. The Partnership Agreement restricts the transfer of
Units, as described below.
RESTRICTIONS ON TRANSFER OF UNITS BY LIMITED PARTNERS
Subject to compliance with certain requirements set forth in the
Partnership Agreement, each Limited Partner has the right to transfer all or a
portion of its Units without restriction.
-11-
<PAGE> 13
EXCHANGE OF UNITS
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 December 29, 1997, there were (i) 55,760,132 shares of Common
Stock issued and outstanding, (ii) 2,000,000 shares of Class B Common Stock
issued and outstanding, (iii) 1,176,470 shares of Class C Common Stock issued
and outstanding, (iv) 1,000,000 shares of Series A Preferred Stock issued and
outstanding, (v) 4,250,000 shares of Series B Preferred Stock issued and
outstanding and (vi) 6,000,000 shares of Series C Preferred Stock issued and
outstanding. In addition, 5,363,555 shares of Common Stock have been reserved
for issuance under the Option Plan and 150,000 shares of Common Stock was
reserved for issuance under the Directors Plan. In addition, 1,219,512 shares of
Common Stock have been reserved for issuance upon the conversion of the Series A
Preferred Stock, 2,531,645 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 reversed for issuance upon the conversion of Class C
Common Stock. Further, as of December 29, 1997, 7,328,912 shares of Common Stock
have been reserved for issuance upon the exchange of 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 who shares are aggregated in
accordance with the Rule) who has beneficially owned his or her shares for at
least one year, 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 two 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 a registration statement on Form S-3 (No.
333-35997) that the Company has filed (the "Company's Shelf Registration
Statement"), the 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 $378.9 million. Shares of Common Stock offered and sold pursuant
to the Company's Shelf Registration Statement may be tradeable without
restriction under the Securities Act (subject to the Ownership Limit).
As of September 30, 1997, pursuant to the Option Plan, options to
purchase 4,427,500 shares of Common Stock and 33,913 shares of restricted Common
Stock have been granted or authorized to be granted to the Company's officers
and certain key employees.
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
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<PAGE> 14
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 pursuant to its obligations under the Registration Rights
Agreements. The following summary does not purport to be complete and is
qualified in its entirety by reference to the Registration Rights Agreements.
Under the Series A Investor's Rights Agreement, the Company agreed to
pay all expenses other than underwriting discounts and commissions relating to
the securities being registered incurred in connection with registrations,
filings or qualifications pursuant to Company Registrations (as defined in the
Series A Investor's Rights Agreement), including this Registration Statement.
The expenses that the Company has agreed to pay pursuant to the Series A
Investor's Rights Agreement include (without limitation) all registration,
filing and qualification fees, printers' and accounting fees, fees and
disbursements of counsel for the Company, and the reasonable fees and
disbursements of one counsel for the selling holder of the Series A Preferred
Stock selected by him. 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.
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 or Series A Preferred
Stock for shares of Common Stock and sells all of his or her Shares pursuant to
this Prospectus. The number of Shares in the following table represents the
number of shares of Common Stock the person holds plus the number of options to
purchase Common Stock which are exercisable within 60 days of December 22, 1997
plus the number of Shares into which Units or shares of Series A Preferred Stock
held by the person may be exchanged or converted, each as of December 22, 1997,
and the extent to which the person holds Units or shares of Series A Preferred
Stock as opposed to shares of Common Stock (if known) is set forth in the notes
to the following table. The Selling Shareholders named below may have sold,
transferred or otherwise disposed of all or a portion of their Shares, Units or
Series A Preferred Stock since the date on which they provided the information
regarding their Shares, Units or Series A Preferred Stock in transactions exempt
from the registration requirements of the Securities Act.
The Shares offered by this Prospectus may be offered from time to time
by the Selling Stockholders named below and other Selling Stockholders named in
supplements to this Prospectus:
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<PAGE> 15
<TABLE>
<CAPTION>
Beneficial Ownership Beneficial Ownership
Prior to Offering(1) After the Offering(1)
-------------------- ---------------------
Percentage Number of
of Shares Shares Number Percentage of
Number of Outstanding Offered of Shares
Shares(1) (1) Hereby Shares(1) Outstanding(1)
------------- ----------- ------------- ------------ --------------
<S> <C> <C> <C> <C> <C>
Frank L. Alexander(2).................. 39,836 * 5,714 34,122 *
Annenberg Trust (3).................... 1,219,512 2.1% 1,219,512 0 --
Joel Benoliel(4)....................... 66,798 * 66,798 0 --
The Blake Family Trust(5).............. 151,050 * 75,000 76,050 *
Gregg R. Daugherty(6).................. 36,755 * 35,604 1,151 --
John G. Davenport(7)................... 226,983 * 25,000 201,983 *
James C. Eddy(8)....................... 217,125 * 100,000 117,125 *
John A. Foster(9)...................... 228,904 * 140,000 88,904 *
John K. French(10)..................... 653,605 1.2% 17,500 636,105 1.1%
Adrian J. Gordon(11)................... 11,138 * 10,738 400 *
Bruce E. Hosford(12)................... 792,850 1.4% 387,500 405,350 *
Donald S. Jefferson(13)................ 301,387 * 185,000 116,387 *
Richard T. Leider(14).................. 23,435 * 4,286 19,149 *
The Meier Family Trust(15)............. 550,000 1.0% 550,000 0 --
The Meier Group II, L.P.(16)........... 23,662 * 23,662 0 --
Vincent D. Mulroy(17).................. 166,993 * 124,493 42,500 *
President and Fellows of Harvard
College(18).......................... 7,500 * 7,500 0 --
Richard L. Romney(19).................. 176,271 * 50,000 126,271 *
Stuart A. Rothstein(20)................ 16,377 * 6,877 9,500 *
Peter H. Schnugg(21)................... 285,117 * 202,667 82,450 *
Joshua N. Smith(22).................... 34,171 * 4,020 30,151 *
John B. Souther, Jr.(23)............... 102,406 * 35,000 67,406 *
Warren E. Spieker, Jr.(24)............. 2,798,912 4.8% 548,000 2,250,912 3.7%
Dennis E. Singleton(25)................ 845,085 1.5% 30,000 815,085 1.4%
Peter C. Thompson(26).................. 36,433 * 8,306 28,127 *
</TABLE>
- ----------
* Less than 1%.
(1) Assumes exchange of all Units for shares of Common Stock and the
conversion of all shares of Series A Preferred Stock into shares of
Common Stock. Beneficial ownership has been calculated according to Rule
13d-3 under the Exchange Act.
(2) Mr. Alexander is Vice President - Northern Bay Area and beneficially
owns 5,714 Units, 4,622 shares of Common Stock and 65,000 options to
purchase Common Stock, 29,500 of which are exercisable within 60 days of
December 22, 1997.
(3) Represents shares of Common Stock issuable upon conversion of 1,000,000
shares of the Company's Series A Preferred Stock held by Walter H.
Annenberg, as Trustee under the Will of M.L. Annenberg.
(4) Mr. Benoliel beneficially owns 66,798 Units.
(5) The Blake Family Trust beneficially owns 106,050 Units and Mr. Blake
beneficially owns 45,000 options to purchase Common Stock, all of which
are exercisable within 60 days of December 22, 1997. Bradley N. Blake
was the Company's Regional Senior Vice President - Retail until March
20, 1997.
(6) Until April 1995, Mr. Daugherty was the Company's Senior Vice President
- Seattle. Mr. Daugherty beneficially owns 36,655 Units and 100 shares
of Common Stock.
(7) Mr. Davenport is Regional Senior Vice President - Southern California
and beneficially owns 154,228 Units, 3,755 shares of restricted Common
Stock and 192,500 options to purchase Common Stock, 69,000 of which are
exercisable within 60 days of December 22, 1997.
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<PAGE> 16
(8) Mr. Eddy is Regional Senior Vice President - Oregon. Mr. Eddy
beneficially owns 147,735 Units, 1,190 shares of restricted Common Stock
and options to purchase 118,500 shares of Common Stock, 68,200 of which
are exercisable within 60 days of December 22, 1997.
(9) Mr. Foster is Regional Senior Vice President - South Bay. Mr. Foster
beneficially owns 145,210 Units, 14,294 shares of restricted Common
Stock and options to purchase 194,500 shares of Common Stock, 69,400 of
which are exercisable within 60 days of December 22, 1997.
(10) Mr. French is Executive Vice President and Chief Operating Officer. Mr.
French beneficially owns 527,905 Units, 4,700 shares of Common Stock and
402,000 options to purchase Common Stock, 121,000 of which are
exercisable within 60 days of December 22, 1997.
(11) Until July 1996, Mr. Gordon was the Company's General Counsel and Vice
President. Mr. Gordon beneficially owns 10,738 Units, 300 shares of
Common Stock and 100 shares of Common Stock owned by Mr. Gordon's
spouse, of which Mr. Gordon may be deemed to have beneficial ownership.
(12) Mr. Hosford is Executive Vice President. Mr. Hosford beneficially owns
679,850 Units, 9,500 shares of Common Stock, 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, and 122,500 options
to purchase Common Stock, 102,500 of which are exercisable within 60
days of December 22, 1997.
(13) Mr. Jefferson is Regional Senior Vice President - Washington/Idaho. Mr.
Jefferson beneficially owns 231,848 Units, 1,450 shares of restricted
Common Stock, 9,489 shares of Common Stock, and options to purchase
105,500 shares of Common Stock, 58,600 of which are exercisable within
60 days of December 22, 1997.
(14) Mr. Leider is Vice President - Seattle. Mr. Leider beneficially owns
4,286 Units, 4,000 shares of Common Stock, 649 shares of restricted
Common Stock and 45,000 options to purchase Common Stock, 14,500 of
which are exercisable within 60 days of December 22, 1997.
(15) The Meier Family Trust beneficially owns 550,000 Units.
(16) The Meier Group II, L.P. beneficially owns 23,662 Units.
(17) Mr. Mulroy is Senior Vice President - Northern Bay Area. Mr. Mulroy
beneficially owns 124,493 Units and 42,500 options to purchase Common
Stock, all of which are exercisable within 60 days of December 22, 1997.
(18) President and Fellows of Harvard College beneficially owns 7,500 Units.
(19) Mr. Romney is Senior Vice President - San Diego. Mr. Romney beneficially
owns 120,121 Units and 94,500 options to purchase Common Stock, 56,150
of which are exercisable within 60 days of December 22, 1997.
(20) Mr. Rothstein is Vice President - Finance. Mr. Rothstein beneficially
owns 6,877 Units and 50,000 options to purchase Common Stock, 9,500 of
which are exercisable within 60 days of December 22, 1997.
(21) Mr. Schnugg is Regional Senior Vice President - Northeast
Bay/Sacramento. Mr. Schnugg beneficially owns 205,475 Units, 10,642
shares of restricted Common Stock and 167,500 options to purchase Common
Stock, 69,000 of which are exercisable within 60 days of December 22,
1997.
(22) Mr. Smith was Vice President - Retail until March 20, 1997. Mr. Smith
beneficially owns 4,020 Units, 5,151 shares of Common Stock through the
Company's Dividend Reinvestment Plan and 25,000 options to purchase
Common Stock, all of which are exercisable within 60 days of December
22, 1997.
(23) Mr. Souther is Senior Vice President - Portland. Mr. Souther
beneficially owns 86,595 Units, 48 shares of Common Stock, 13 shares of
Common Stock held in his wife's IRA, of which Mr. Souther may be deemed
to have beneficial ownership, and 47,500 options to purchase Common
Stock, of which 15,750 are exercisable within 60 days of December 22,
1997.
(24) Mr. Spieker is Chairman of the Board and Chief Executive Officer. Mr.
Spieker beneficially owns 2,474,962 Units, 4,000 shares of restricted
Common Stock, 100,000 shares of Common Stock, 1,450 shares of Common
Stock held by his wife and children, of which Mr. Spieker may be deemed
to have beneficial ownership, and 662,500 options to purchase Common
Stock, of which 218,500 are exercisable within 60 days of December 22,
1997.
(25) Mr. Singleton is Executive Vice President and Chief Investment Officer.
Mr. Singleton beneficially owns 696,185 Units, 9,500 shares of Common
Stock, 900 shares of Common Stock held by Mr. Singleton as custodian for
his children for which Mr. Singleton may be deemed to have beneficial
ownership and 302,500 options to purchase Common Stock, of which 138,500
are exercisable within 60 days of December 22, 1997.
(26) Mr. Thompson is Vice President - Sacramento. Mr. Thompson beneficially
owns 8,306 Units, 1,127 shares of restricted Common Stock, and 65,000
options to purchase Common Stock, of which 27,000 are exercisable within
60 days of December 22, 1997.
Information concerning the Selling Stockholders may change from time to
time and any such changed information will be set forth in supplements to this
Prospectus if and when necessary.
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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. In addition, directors may only be removed for cause and with
the vote of 80% of the shares eligible to vote. These provisions 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.
See "Description of Capital Stock."
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. Certain federal income tax
considerations relevant to holders of the Shares will be provided in the
applicable Prospectus Supplement relating thereto.
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 laws 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
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"REIT taxable income" that is currently distributed to stockholders. This
treatment substantially eliminates the "double taxation" (i.e., taxation at both
the corporate and stockholder levels) that generally results from investing in
corporations.
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, in general it will
not be subject to federal income tax on that portion of its net income that it
distributes to stockholders. However, the Company will be subject to federal
income tax as follows: First, the Company will be taxed at regular corporate
rates on any undistributed real estate investment trust taxable income,
including undistributed net capital gains. (However, beginning in 1998, a REIT
can elect to "pass through" any of its taxes paid on its undistributed net
capital gains income to its stockholders on a pro rata basis.) Second, under
certain circumstances, the Company may be subject to the "alternative minimum
tax" on its items of tax preference. Third, if the Company 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 Company 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 property held for at least four years,
foreclosure property, and, beginning in 1998, property involuntarily converted),
such income will be subject to a 100% tax. Fifth, if the Company should fail to
satisfy the 75% or the 95% tests (as discussed below), and has nonetheless
maintained its qualification as a REIT 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 Company 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
Company would be subject to a 4% excise tax on the excess of such required
distribution over the amounts actually distributed. Seventh, if the Company
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 Company'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 Company 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.
REQUIREMENTS FOR QUALIFICATION
The Code defines a REIT 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.
Beginning in 1998, a REIT's failure to satisfy condition (6) during a taxable
year will not result in its disqualification as REIT under the Code for such
taxable year as long as (i) the REIT satisfies the
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stockholder demand statement requirements described in the succeeding paragraph
and (ii) the REIT did not know, and exercising due diligence, would not have
known, whether it had failed condition (6).
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 further 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."
Although the Company intends to satisfy the stockholder demand statement
requirements described in the preceding paragraph, beginning in 1998, its
failure to satisfy these requirements will not result in its disqualification as
a REIT under the Code but may result in the imposition of penalties against the
Company.
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 a partnership shall retain the same character in the
hands a partner qualifying as a 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," which are, in general, 100% owned, corporate
subsidiaries of a REIT. All assets, liabilities, and items of income, deduction,
and credit of such 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% asset 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 (two beginning in
1998)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 Partnership -- General."
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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) 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% 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% 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." For both the related party tenant rules and
determining whether an entity qualifies as an independent contractor of a REIT,
certain attribution rules of the Code apply, pursuant to which shares of a REIT
held by one entity are deemed held by another.
Under current law, if a REIT provides impermissible services to its
tenants, all of the rent from those tenants can be disqualified from satisfying
the 75% test and 95% test (described below). Beginning in 1998, however, rents
will not be disqualified if a REIT provides de minimis, impermissible services.
For this purpose, services provided to tenants of a property are considered de
minimis where income derived from the services rendered equals 1% or less of all
income derived from the property (threshold determined on a property-by-property
basis).
The Company, through the Operating Partnership (which is not an
independent contractor of the Company), 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% 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% 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."
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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% tests. Gains on sales of the Properties will
generally qualify under the 75% and 95% tests.
Even if the Company fails to satisfy one or both of the 75% or 95% 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 in the 75% and 95% 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% 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. The 30% test
has been repealed, effective for tax years beginning after December 31, 1997.
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. 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. (However, beginning in 1998, a REIT can elect to "pass through" any of its
taxes paid on its undistributed net capital gains income to its stockholders on
a pro rata basis.) Furthermore, if the REIT should fail to distribute during
each calendar year at least the sum of (i) 85% of its ordinary income for such
year, (ii) 95% of its net 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.
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If the Company fails to meet the 95% distribution requirement as a
result of an adjustment to the Company's tax return by the IRS, the Company may
retroactively cure the failure by paying a "deficiency dividend" (plus
applicable penalties and interest) within a specified period.
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
initially 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
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eliminate the Book-Tax Difference over the life of the Operating Partnership.
However, the special allocation rules under Section 704(c) of the Code do not
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) of the Code 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 will be 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. 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 dividend 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 dividend 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, distributions which are designed by the Company as capital
gain dividends will be taxed to stockholders as gain from the sale of assets
held for greater than 1 year, or "long-term term capital gain," without regard
to the period for which a stockholder has held his stock upon which the capital
gain dividend is paid. However, corporate stockholders may be required to treat
up to 20% of certain capital gain dividends as ordinary income.
The Taxpayer Relief Act of 1997 (the "1997 Act") created several new
categories of capital gains applicable to noncorporate taxpayers. Under prior
law, noncorporate taxpayers were generally taxed at a maximum rate of 28% on net
capital gain (generally, the excess of net long-term capital gain over net
short-term capital loss). Noncorporate taxpayers are now generally taxed at a
maximum rate of 20% on net capital gain attributable to gains realized on the
sale of property held for greater than 18 months, and
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<PAGE> 24
a maximum rate of 28% on net capital gain attributable to gain realized on the
sale of property held for greater than 1 year and 18 months or less. In
addition, a 25% rate now applies to noncorporate taxpayers on certain gains
realized on the sale of real property. The 1997 Act retains the treatment of
short-term capital gain and did not affect the taxation of corporate taxpayers.
The Treasury is authorized to issue regulations for application of the
reduced capital gains tax rates enacted under the 1997 Act to pass-through
entities, including REITs and partnerships (such as the Operating Partnership).
The Internal Revenue Service (the "IRS") recently issued Notice 97-64 which
generally provides that such regulations, when issued, will permit (but not
require) the Company to designate the portion of its capital gains dividends, if
any, to which the 28%, 25% and 20% rates (described in the preceding paragraph)
apply, based on the net amount of each class of capital gain realized by the
Company, determined as if the Company were an individual subject to a marginal
tax rate of at least 28%.
Beginning in 1998, an election will be available under which a REIT may
retain its capital gains and pay tax thereon. If the Company makes this
election, stockholders will be deemed to have received their pro rata share of
the capital gains and paid their pro rata share of the tax. Any tax deemed paid
by stockholders pursuant to this election will be creditable against their
federal income tax liability. Stockholders may also increase the basis in their
shares of the REIT's stock by the difference between their share of the capital
gains and the tax.
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 gain.
BACKUP WITHHOLDING
The Company will report to its domestic stockholders and to the IRS 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 and redemption proceeds 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. The
Company may nevertheless institute backup withholding with respect to a
stockholder if instructed to do so by the IRS. A stockholder that does not
provide the Company with its correct taxpayer identification number may also be
subject to penalties imposed by the IRS. Any amount paid as backup withholding
will be creditable against the 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 held more than 10% of the Company's
stock.
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<PAGE> 25
TAXATION OF FOREIGN STOCKHOLDERS
The following is a discussion of certain anticipated U.S. federal income
tax 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 current and accumulated 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 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 paid out of the current and accumulated 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
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 IRS 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 ("USRPI Capital Gains") from
dispositions of United States Real Property Interests ("USRPIs"), which includes
the properties beneficially owned by the Company, will be considered effectively
connected with a U.S. trade or business of the Non-U.S. Holder and therefore
will be 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 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.
New Treasury Regulations. Under new Treasury Regulations, not effective
until January 1, 1999, the gross amount of any distribution by the Company to a
Non-U.S. Holder will generally be subject to withholding tax at a 30% or lower
treaty rate, unless the distribution is designated as a capital gain dividend or
a return of basis or is effectively connected with the Non-U.S. Holder's conduct
of a U.S. trade or business. Any tax withheld in excess of the Non-U.S. Holder's
U.S. federal income tax liability may be refundable. These Treasury Regulations
will also require, beginning in 1999, that a Non-U.S. Holder satisfy certain
certification and other requirements when claiming the benefit of an applicable
treaty with respect to withholding on the Company's distributions. (Under
current law, distributions paid to an address in a foreign country are generally
presumed to be paid to a resident of such country for purposes of determining
withholding and the applicability of a treaty tax rate.)
-24-
<PAGE> 26
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 IRS.
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).
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.
PLAN OF DISTRIBUTION
This Prospectus relates to the offer and sale from time to time by the
holders thereof of up to 3,863,177 shares of Common Stock that may be issued by
the Company to holders of 1,000,000 shares of Series A Preferred Stock and up to
2,643,665 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
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<PAGE> 27
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 7,328,912 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 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 included in the Company's Annual Report on Form 10-K
for the year ended December 31, 1996, the reports on the combined statements of
revenues and certain expenses of the Pasadena Portfolio, Metro Plaza and the
Three Property Transactions, dated April 29, 1997, April 29, 1997, and December
20, 1996, respectively, included in the Company's Current Report on Form 8-K
dated June 27, 1997, the report on the statement of revenues and certain
expenses of the Kennedy Portfolio, dated September 9, 1997, included in the
Company's Current Report on Form 8-K dated September 22, 1997, the report on the
statement of revenues and certain expenses of the WCB Portfolio, dated September
26, 1997, included in the Company's Current Report on Form 8-K/A dated October
10, 1997, and the report on the statement of revenues and certain expenses of
U.S. Bank/Plaza Center, dated October 21, 1997,
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<PAGE> 28
included in the Company's Current Report on Form 8-K dated November 26, 1997,
each of which are 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.
VALIDITY OF SHARES
The validity of the Shares will be passed upon for the Company by
Sullivan & Cromwell, Los Angeles, California. Sullivan & Cromwell will rely as
to all matters of Maryland law upon the opinion of Piper & Marbury LLP. The
description of the Company's qualification and taxation as a REIT under the Code
contained in this Prospectus under the caption entitled "Federal Income Tax
Considerations -- General" is based upon the opinion of Morrison & Foerster LLP.
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<PAGE> 29
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.................. $21,822.94
Printing fees and duplicating fees .............. 1,500.00
Legal fees and expenses.......................... 20,000.00
Accounting fees and expenses..................... 3,000.00
Miscellaneous expenses........................... 3,677.06
-------
Total.................................. $50,000.00
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article EIGHTH, Section (a)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 (a)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 indemnification 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.
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 Supplementary of Spieker Properties, Inc. for the Series A
Preferred Stock (incorporated by reference to Exhibit 4.2 to Spieker
Properties, Inc.'s Quarterly Report on Form 10-Q for the quarter
ended March 31, 1994)
3.3 - Articles Supplementary of Spieker Properties, Inc. for the Class B
Common Stock (incorporated by reference to Exhibit 4.2 to Spieker
Properties, Inc.'s Quarterly Report on Form 10-Q for the quarter
ended March 31, 1995)
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<PAGE> 30
3.4 - Articles Supplementary of Spieker Properties, Inc. for the 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)
3.5 - Articles Supplementary of Spieker Properties, Inc. for the 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, 1995)
3.6 - Articles Supplementary of Spieker Properties, Inc. for the Series C
Preferred Stock (incorporated by reference to Exhibit B to Spieker
Properties, Inc.'s Registration Statement on Form 8-A, dated October
9, 1997)
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 Sullivan & Cromwell
23.2 - Consent of Sullivan & Cromwell (included in Exhibit 5.1)
24.1 - Power of Attorney*
- ------------
*Previously filed.
ITEM 17. UNDERTAKINGS
Each of the undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in this registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high 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, the
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
(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
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<PAGE> 31
Registrant pursuant to Section 13 or Section 15(d) of the Exchange Act 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 the 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 Exchange Act that is incorporated by reference in 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.
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<PAGE> 32
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Amendment No. 1 to 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 21st day of January, 1998.
SPIEKER PROPERTIES, INC.
By: /s/ CRAIG G. VOUGHT
----------------------------------
Craig G. Vought
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 1 to 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>
*
- ------------------------------- Chairman of the Board, Director January 21, 1998
Warren E. Spieker, Jr. and Chief Executive Officer
(Principal Executive Officer)
*
- ------------------------------- Director, Executive Vice President January 21, 1998
John K. French and Chief Operating Officer
*
- ------------------------------- Director, Executive Vice President January 21, 1998
Dennis E. Singleton and Chief Investment Officer
*
- ------------------------------- Vice President and Principal January 21, 1998
Elke Strunka Accounting Officer (Principal
Accounting Officer)
/s/ CRAIG G. VOUGHT
- ------------------------------- Executive Vice President and January 21, 1998
Craig G. Vought Chief Financial Officer
(Principal Financial Officer)
</TABLE>
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<PAGE> 33
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
*
- ------------------------------- Director January 21, 1998
Richard J. Bertero
*
- ------------------------------- Director January 21, 1998
Harold M. Messmer
*
- ------------------------------- Director January 21, 1998
David M. Petrone
*
- ------------------------------- Director January 21, 1998
William S. Thompson, Jr.
*By /s/ CRAIG G. VOUGHT
- -------------------------------
Craig G. Vought
Attorney-in-Fact
</TABLE>
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<PAGE> 34
EXHIBIT INDEX
Exhibit Sequentially Numbered
Number Description Pages
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 Supplementary of Spieker Properties, Inc. for the Series A
Preferred Stock (incorporated by reference to Exhibit 4.2 to Spieker
Properties, Inc.'s Quarterly Report on Form 10-Q for the quarter
ended March 31, 1994)
3.3 - Articles Supplementary of Spieker Properties, Inc. for the Class B
Common Stock (incorporated by reference to Exhibit 4.2 to Spieker
Properties, Inc.'s Quarterly Report on Form 10-Q for the quarter
ended March 31, 1995)
3.4 - Articles Supplementary of Spieker Properties, Inc. for the 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)
3.5 - Articles Supplementary of Spieker Properties, Inc. for the 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, 1995)
3.6 - Articles Supplementary of Spieker Properties, Inc. for the Series C
Preferred Stock (incorporated by reference to Exhibit B to Spieker
Properties, Inc.'s Registration Statement on Form 8-A, dated October
9, 1997)
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 Sullivan & Cromwell
23.2 - Consent of Sullivan & Cromwell (included in Exhibit 5.1)
24.1 - Power of Attorney*
- ------------
*Previously filed.
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EXHIBIT 5.1
[LETTERHEAD OF SULLIVAN & CROMWELL]
January 5, 1998
Spieker Properties, Inc.,
2180 Sand Hill Road,
Menlo Park, California 94025.
Ladies and Gentlemen:
In connection with the registration under the Securities Act of 1933 (the
"Act") of 1,760,025 shares (the "Securities") of Common Stock, par value $.0001
per share, of Spieker Properties, Inc., a Maryland corporation, we, as your
special counsel, have examined such corporate records, certificates and other
documents, and such questions of law, as we have considered necessary or
appropriate for the purposes of this opinion. Upon the basis of such
examination, we advise you that, in our opinion:
When the registration statement relating to the Securities has become
effective under the Act, the terms of the sale of the Securities have been duly
established in conformity with the Company's articles of incorporation so as not
to violate any applicable law or result in a default under or breach of any
agreement or instrument binding upon the Company and so as to comply with any
requirement or restriction imposed by any court or governmental body having
jurisdiction over the Company, and the Securities have been duly issued and sold
as contemplated by the Registration Statement, the Securities will be validly
issued, fully paid and nonassessable.
The foregoing opinion is limited to the Federal laws of the United States
and the laws of the State of Maryland, and we are expressing no opinion as to
the effect of the laws of any other jurisdiction. With respect to all matters of
Maryland law, we have relied upon the opinion, dated January 2, 1998, of Piper &
Marbury, and our opinion is subject to the same assumptions, qualifications and
limitations with respect to such matters as are contained in such opinion of
Piper & Marbury.
Also, we have relied as to certain matters on information obtained from
public officials, officers of the Company and other sources believed by us to be
responsible.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us under the heading "Validity of
Shares" in the Prospectus. In giving such 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,
/s/ Sullivan & Cromwell
