As filed with the Securities and Exchange Commission on July 2, 1997
Registration No. 333-27183
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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
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Amendment No. 1
to
Form S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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IRVINE APARTMENT COMMUNITIES, INC.
(Exact name of registrant as specified in its charter)
MARYLAND 33-0698698
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
550 Newport Center Drive, Suite 300, Newport Beach,
California 92660 (714) 720-5500
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
JAMES E. MEAD
Senior Vice President, Chief Financial Officer and Secretary
IRVINE APARTMENT COMMUNITIES, INC.
550 Newport Center Drive
Suite 300
Newport Beach, CA 92660
(714) 720-5500
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
with a copy to:
JEFFREY SMALL
DAVIS POLK & WARDWELL
450 Lexington Avenue
New York, New York 10017
Telephone (212) 450-4000
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Approximate date of commencement of proposed sale to the public: From
time to time after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, check the following box:
[ ]
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box: [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
Pursuant to Rule 429 under the Securities Act of 1933, the
Prospectus included in this Registration Statement also relates to securities
registered and remaining unissued under Registration Statement No. 33-92036
previously filed by the Registrant.
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SUBJECT TO COMPLETION
PROSPECTUS
$350,000,000
IRVINE APARTMENT COMMUNITIES, INC.
Debt Securities, Preferred Stock, Common Stock
and
Warrants to Purchase the Above Securities
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Irvine Apartment Communities, Inc. (the "Company") may offer
and issue from time to time (i) its debt securities (the "Debt Securities"),
(ii) shares of its Preferred Stock, par value $1.00 per share (the "Preferred
Stock"), (iii) shares of its Common Stock, par value $.01 per share (the
"Common Stock"), or (iv) warrants to purchase Debt Securities, Preferred Stock
or Common Stock (the "Warrants"). The Debt Securities, Preferred Stock,
Common Stock and Warrants are herein collectively referred to as the
"Securities". The Securities may be offered in one or more separate classes
or series, in amounts, at prices and on terms to be determined by market
conditions at the time of sale and to be set forth in a supplement or
supplements to this Prospectus (a "Prospectus Supplement"). Any Securities
may be offered with other Securities or separately. Debt Securities or
Preferred Stock may be convertible into shares of Common Stock. The aggregate
offering price of the Securities will not exceed $350,000,000.
Certain terms of any Debt Securities in respect of which this
Prospectus is being delivered will be set forth in the accompanying
Prospectus Supplement including, without limitation, the specific designation
(including whether such Debt Securities are senior or subordinated and whether
such Debt Securities are convertible), aggregate principal amount, purchase
price, maturity, interest rate (which may be fixed or variable) and time of
payment of interest (if any), terms (if any) for the subordination, redemption
or conversion thereof, listing (if any) on a securities exchange and any other
specific terms of the Debt Securities. Certain terms of any Preferred Stock
in respect of which this Prospectus is being delivered will be set forth in
the accompanying Prospectus Supplement including, without limitation, the
designation, number of shares, liquidation preference, purchase price,
dividends, voting, redemption and conversion provisions and any listing on a
securities exchange. Certain terms of any Warrants in respect of which this
Prospectus is being delivered will be set forth in the accompanying Prospectus
Supplement, including the specific designation, number, duration, purchase
price and terms thereof, any listing of the Warrants or the underlying
securities on a securities exchange and any other terms in connection with the
offering, sale and exercise of the Warrants, as well as the terms on which and
the securities for which such Warrants may be exercised. In addition, terms
of the Securities may include limitations on direct and beneficial ownership
and restrictions on transfer of the Securities, in each case as may be
appropriate to preserve the status of the Company as a real estate investment
trust for federal income tax purposes.
To ensure that the Company maintains its qualification as a
real estate investment trust ("REIT"), ownership of Common Stock by any person
(other than The Irvine Company and certain related persons) is, with certain
exceptions, limited to 7.4% of the outstanding shares. The Common Stock is
listed on the New York Stock Exchange and the Pacific Stock Exchange under the
trading symbol IAC.
See "Risk Factors" in the Prospectus Supplement for a
description of certain factors that should be considered by purchasers of the
Securities offered hereby.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED ON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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The Securities may be sold on a negotiated or competitive bid
basis to or through underwriters or dealers designated from time to time or to
other purchasers directly or through agents designated from time to time.
Certain terms of the offering and sale of the Securities, including, where
applicable, the names of the underwriters, dealers or agents, if any, the
principal amount or number of shares or Warrants to be purchased, the purchase
price of the Securities and the proceeds to the Company from such sale, and
any applicable commissions, discounts and other items constituting
compensation of such underwriters, dealers or agents, will also be set forth
in the accompanying Prospectus Supplement.
The date of this Prospectus is July 2, 1997.
IN CONNECTION WITH AN OFFERING, CERTAIN PERSONS PARTICIPATING
IN SUCH OFFERING MAY ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN, OR
OTHERWISE AFFECT THE PRICE OF THE SECURITIES. SPECIFICALLY, THE UNDERWRITERS
FOR SUCH OFFERING MAY OVERALLOT IN CONNECTION WITH SUCH OFFERING, AND MAY BID
FOR, AND PURCHASE, THE SECURITIES IN THE OPEN MARKET. FOR A DESCRIPTION OF
THESE ACTIVITIES, SEE "PLAN OF DISTRIBUTION."
No dealer, salesman or other person has been authorized to give
any information or to make any representation not contained or incorporated by
reference in this Prospectus or any Prospectus Supplement, and, if given or
made, such information or representation must not be relied upon as having
been authorized by the Company or by any underwriter, agent or dealer. This
Prospectus and any Prospectus Supplement shall not constitute an offer to sell
or a solicitation of an offer to buy any of the Securities offered hereby in
any jurisdiction to any person to whom it is unlawful to make such offer or
solicitation in such jurisdiction. Neither the delivery of this Prospectus
and any Prospectus Supplement nor any sale made thereunder shall, under any
circumstances, create any implication that the information therein is correct
as of any time subsequent to the date thereof.
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports and other information with the Securities
and Exchange Commission (the "Commission"). Reports, proxy statements and
other information filed by the Company with the Commission can be inspected
and copied at the public reference facilities maintained by the Commission at
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 or at its Regional
Offices located at Suite 1400, Northwestern Atrium Center, 500 West Madison
Street, Chicago, Illinois 60661 and at Seven World Trade Center, 13th Floor,
New York, New York 10048, and 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 Company's Common Stock is
listed on the New York Stock Exchange, Inc. (the "New York Stock Exchange")
and the Pacific Stock Exchange, Inc. (the "Pacific Stock Exchange"). In
addition, reports, proxy statements and other information concerning the
Company can be inspected at the offices of the New York Stock Exchange, 20
Broad Street, New York, New York 10005 and at the offices of the Pacific Stock
Exchange at 301 Pine Street, San Francisco, California 94104. Such material
may also be accessed electronically by means of the Commission's home page on
the Internet at http://www.sec.gov.
This Prospectus constitutes a part of a Registration Statement
on Form S-3 (together with all amendments and exhibits thereto, the
"Registration Statement") filed with the Commission under the Securities Act
of 1933, as amended (the "Securities Act"). This Prospectus omits certain of
the information set forth in such Registration Statement in accordance with
the rules and regulations of the Commission. Reference is hereby made to such
Registration Statement and to the exhibits relating thereto for further
information with respect to the Company and the Securities. Any statements
contained herein concerning the provisions of any document are not necessarily
complete, and in each instance reference is made to the copy of such document
filed as an exhibit to the Registration Statement or otherwise filed with the
Commission for a more complete description of the matter involved. Each such
statement is qualified in its entirety by such reference.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents, which have been filed with the
Commission, are hereby incorporated by reference:
1. Annual Report on Form 10-K of the Company for the year ended December
31, 1996;
2. Current Report on Form 8-K of the Company dated February 18, 1997;
3. Quarterly Report on Form 10-Q of the Company for the quarter ended
March 31, 1997; and
4. Description of the Company's Common Stock contained in a Registration
Statement of the Company on Form 8-B dated April 30, 1996 and
declared effective as of May 2, 1996.
All documents filed by the Company after the date of this
Prospectus pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange
Act, prior to the termination of the offering of the Securities offered
hereby, shall be deemed to be incorporated herein by reference and to be a
part hereof from the date of filing of such documents. Any statement
contained in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein (or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein) modifies or supersedes such statement. Any statements so
modified or superseded shall be deemed to constitute a part of this Prospectus,
except as so modified or superseded.
The Company will provide without charge to each person,
including any beneficial owner, to whom a copy of this Prospectus is
delivered, upon written or oral request of such person, a copy of any or all
of the documents referred to above which have been or may be incorporated by
reference in this Prospectus (other than certain exhibits to such documents).
Requests for such documents should be directed to Irvine Apartment
Communities, Inc., 550 Newport Center Drive, Suite 300, Newport Beach,
California 92660, Attention: Investor Relations (Telephone: (714) 720-5500).
THE COMPANY
The Company is a self-administered equity real estate
investment trust engaged in the development and operation of apartment
communities on the Irvine Ranch in Orange County, California and, beginning in
1997, in other locations in California. The Company was formed in December
1993 to continue and expand the apartment community business of The Irvine
Company, a real estate and community development company. At March 31, 1997
the Company had a 45.1% general partnership interest in Irvine Apartment
Communities, L.P. (the "Operating Partnership") and was its sole managing
general partner. At such date, the limited partners of the Operating
Partnership had a 54.9% interest in the Operating Partnership, with The Irvine
Company and certain of its affiliates owning a 54.7% limited partnership
interest in the Operating Partnership. The Operating Partnership's
management and operating decisions are under the unilateral control of the
Company.
At March 31, 1997, the Company owned and operated 13,843
units in 53 apartment communities on the Irvine Ranch. Within its
portfolio of properties stabilized for more than two years are 43 apartment
communities. These properties had an average physical occupancy of 95.1%
for the quarter ended March 31, 1997. Within its portfolio of properties
stabilized for less than two years are 5 apartment communities. These
properties had an average physical occupancy of 94.0% for the quarter ended
March 31, 1997. The Operating Partnership also had 1,295 units in 5
additional apartment communities under construction or lease-up, with 302
units completed at March 31, 1997 (together with completed communities, the
"Properties"). Additionally, the Operating Partnership recently acquired
an apartment community site located in Northern California's Silicon
Valley. All of the Properties, excluding the Northern California site, are
located on the Irvine Ranch. Until July 31, 2020, the Company has the
exclusive right, but not the obligation, to acquire land from The Irvine
Company for development of additional apartment communities on the Irvine
Ranch. The developed portion of the Irvine Ranch, which borders
approximately six miles of the Pacific Ocean, includes significant parts of
the cities of Irvine, Newport Beach and Tustin. The Irvine Ranch has been
developed over the past 30 years in accordance with an original master plan
and is now one of the major commercial, industrial, retail and residential
centers in Southern California.
The Company has recently commenced an "off-Ranch" expansion
program. In February 1997, the Company acquired the right to purchase
three apartment community development sites located in Northern
California's Silicon Valley. The Company has exercised its right with
respect to one of these sites and began construction on in May 1997. On
June 30, 1997, the Company purchased, for approximately $127 million in
cash, The Villas of Renaissance, a 923-unit apartment community in La
Jolla, California, just north of San Diego. The Company's intent is to
create new market positions in the Silicon Valley and Northern San Diego
County, which possess strong rental demographics and economic growth
prospects similar to those on the Irvine Ranch.
On June 27, 1997, the Operating Partnership entered into a
new $250 million three-year revolving line of credit, which replaced its
former line of credit, due to expire December 1997. The Company used
borrowings under this line of credit to finance the La Jolla acquisition
referred to above, and in the future intends to use the line of credit for
its ongoing rental property development program, for potential acquisitions
and for general working capital needs.
The Company, a Maryland corporation, is the successor to a
Delaware corporation originally incorporated in 1993. The Company's
executive offices are located at 550 Newport Center Drive, Newport Beach,
California 92660 and its telephone number is (714) 720-5500.
USE OF PROCEEDS
Unless otherwise set forth in the applicable Prospectus
Supplement, proceeds from the sale of the Securities will be used by the
Company for general corporate purposes, including the repayment of
indebtedness, ongoing development activities and acquisitions of additional
properties. Proceeds from the sale of Securities initially may be
temporarily invested in short-term securities.
CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth the consolidated ratios of
earnings to fixed charges for the Company and for the predecessor to the
Company prior to December 8, 1993.
<TABLE>
<CAPTION>
Quarter Ended March 31, Year Ended December 31,
---------------------- ------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
----- ----- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges...... 2.44x 1.86x 2.07x 1.44x 1.25x .99x .96x
</TABLE>
For the purpose of calculating the ratio of earnings to fixed
charges, earnings consist of net earnings before income taxes, extraordinary
items, minority/predecessor interest in income and fixed charges. Fixed
charges consist of interest expense, capitalized interest and amortization
of deferred financing costs.
Prior to completion of the Company's initial public offering in
December 1993, the predecessor of the Company operated in a highly leveraged
manner. As a result, although the Company and the predecessor have
historically generated positive net cash flow, the financial statements of the
predecessor show net losses for the periods prior to December 8, 1993.
Consequently, the computation of the ratio of earnings to fixed charges for
such periods indicate that earnings were inadequate to cover fixed charges by
approximately $0.6 million and $2.2 million for the years ended December 31,
1993 and 1992, respectively.
DESCRIPTION OF THE DEBT SECURITIES
The following sets forth certain general terms and provisions
of the indentures under which the Debt Securities are to be issued. The
particular terms of the Debt Securities will be set forth in a Prospectus
Supplement relating to such Debt Securities.
The Debt Securities will represent unsecured general
obligations of the Company, unless otherwise provided in the Prospectus
Supplement. As indicated in the applicable Prospectus Supplement, the Debt
Securities will either be senior debt, senior to all future subordinated
indebtedness of the Company and pari passu with other current and future
unsecured, unsubordinated indebtedness of the Company or, in the alternative,
subordinated debt, subordinate in right of payment to current and future
senior debt and pari passu with other future subordinated indebtedness of the
Company. The Debt Securities will be issued under one or more indentures to
be executed by the Company and one or more trustees (each a "Trustee"). The
Indentures will be in the form that has been filed as an exhibit to the
Registration Statement of which this Prospectus is a part, subject to such
amendments or supplements as are adopted from time to time (each an
"Indenture" and collectively, the "Indentures"). The following summary of
certain provisions of the Indentures does not purport to be complete and is
subject to, and qualified in its entirety by reference to, all the provisions
of the Indentures, including the definitions therein of certain terms.
Wherever particular sections or defined terms of the Indentures are referred
to, it is intended that such sections or defined terms shall be incorporated
herein by reference.
General
The Indentures will not limit the amount of Debt Securities
which may be issued thereunder. Reference is made to the Prospectus
Supplement for the following terms of the Debt Securities offered pursuant
thereto: (i) designation (including whether they are senior debt or
subordinated debt and whether such debt is convertible), aggregate principal
amount, purchase price and denomination; (ii) the date of maturity; (iii)
interest rate or rates (or method by which such rate will be determined), if
any; (iv) the dates on which any such interest will be payable; (v) the place
or places where the principal of and interest, if any, on the Debt Securities
will be payable; (vi) any redemption or sinking fund provisions; (vii) any
rights of the holders of Debt Securities (each a "Holder") to convert the Debt
Securities into other securities or property of the Company; (viii) the terms,
if any, on which such Debt Securities will be subordinate to other debt of the
Company; (ix) if other than the principal amount thereof, the portion of the
principal amount of the Debt Securities which will be payable upon declaration
of acceleration of the maturity thereof or provable in bankruptcy; (x) any
Events of Default in addition to or in lieu of those described herein and
remedies therefor; (xi) any trustees, authenticating or paying agents,
transfer agents or registrars or any other agents with respect to the Debt
Securities; (xii) listing (if any) on a securities exchange; (xiii) whether
such Debt Securities will be certificated or in book-entry form; and (xiv) any
other specific terms of the Debt Securities, including any additional events
of default or covenants provided for with respect to the Debt Securities, and
any terms which may be required by or advisable under United States laws or
regulations.
Debt Securities may be presented for exchange or transfer in
the manner, at the places and subject to the restrictions set forth in the
Debt Securities and the Prospectus Supplement. Such services will be provided
without charge, other than any tax or other governmental charge payable in
connection therewith, but subject to the limitations provided in the
Indentures.
Debt Securities will bear interest at a fixed rate or a
floating rate. Debt Securities bearing no interest or interest at a rate
which, at the time of issuance, is below the prevailing market rate, will be
sold at a discount below its stated principal amount. Special United States
federal income tax considerations applicable to any such discounted Debt
Securities or to any Debt Securities issued at par which is treated as having
been issued at a discount for United States income tax purposes will be
described in the relevant Prospectus Supplement.
The Indentures will not contain any covenant or other specific
provision affording protection to Holders of the Debt Securities in the event
of a highly leveraged transaction or a change in control of the Company,
except to the limited extent described under "Consolidation, Merger and Sale
of Assets". Restrictions on ownership and transfers of the Company's Common
Stock are designed to preserve the Company's status as a REIT and, therefore,
may act to prevent or hinder a change of control. The Company's articles of
incorporation and by-laws also contain other provisions which may prevent or
limit a change of control. See, "Description of the Capital Stock".
Modification and Waiver
Each Indenture will provide that modifications and amendments
of such Indenture may be made by the Company and the applicable Trustee, with
the consent of the Holders of a majority in aggregate principal amount of the
outstanding Debt Securities issued under such Indenture which are affected by
the modification or amendment voting as one class; provided that no such
modification or amendment may, without the consent of the Holder of each such
Debt Security affected thereby, among other things: (a) extend the final
maturity of such Debt Securities, or reduce the principal amount thereof, or
reduce the rate or extend the time of payment of interest thereon, or reduce
any amount payable on redemption thereof, or reduce the amount of the
principal of Debt Securities issued with original issue discount that would be
due and payable upon an acceleration of the maturity thereof or the amount
thereof provable in bankruptcy, or extend the time or reduce the amount of any
payment to any sinking fund or analogous obligation relating to such Debt
Securities, or materially and adversely affect any right to convert such Debt
Securities in accordance with such Indenture or impair or affect the right of
any Holder of Debt Securities to institute suit for the payment thereof or, if
such Debt Securities provide therefor, any right of repayment at the option of
the Holder, (b) reduce the aforesaid percentage of such Debt Securities of any
series, the consent of the Holders of which is required for any such
supplemental indenture, or (c) reduce the percentage of such Debt Securities
of any series necessary to consent to waive any past default under such
Indenture to less than a majority, or (d) modify any of the provisions of the
sections of such Indenture relating to supplemental indentures with the
consent of the Holders, except to increase any such percentage or to provide
that certain other provisions of such Indenture cannot be modified or waived
without the consent of each Holder affected thereby, provided, however, that
this clause shall not be deemed to require the consent of any Holder with
respect to changes in the references to "the Trustee" and concomitant changes
in such section or the deletion of this proviso. (Indenture Section 7.2)
Each Indenture will provide that a supplemental indenture which
changes or eliminates any covenant or other provision of such Indenture which
has expressly been included solely for the benefit of one or more particular
series of Debt Securities, or which modifies the rights of the Holders of such
series with respect to such covenant or other provision, shall be deemed not
to affect the rights under such Indenture of the Holders of Debt Securities of
any other series. (Indenture Section 7.2)
Each Indenture will provide that modifications and amendments
of such Indenture may be made by the Company and the applicable Trustee,
without the consent of the Holders of any series of Debt Securities issued
thereunder: (1) to secure any Debt Securities issued thereunder; (2) to
evidence the succession of another corporation to the Company and the
assumption by any such successor of the covenants, agreements and obligations
of the Company, in such Indenture and in the Debt Securities issued
thereunder; (3) to add to the covenants of the Company or to add any
additional events of default; (4) to cure any ambiguity, to correct or
supplement any provision in such Indenture that may be inconsistent with any
other provision of such Indenture or to make any other provisions with respect
to matters or questions arising under such Indenture, provided that such
action shall not adversely affect the interests of the Holders of any series
of Debt Securities issued thereunder in any material respect; (5) to establish
the form and terms of Debt Securities issued thereunder; (6) to evidence and
provide for a successor trustee under such Indenture with respect to one or
more series of Debt Securities issued thereunder or to provide for or
facilitate the administration of the trusts under such Indenture by more than
one trustee; (7) to permit or facilitate the issuance of Debt Securities in
global form or bearer form or to provide for uncertificated Debt Securities to
be issued thereunder; (8) to change or eliminate any provision of such
Indenture, provided that any such change or elimination shall become effective
only when there are no Debt Securities outstanding of any series created prior
to the execution of such supplemental indenture which are entitled to the
benefit of such provision; or (9) to amend or supplement any provision
contained in such Indenture, which was required to be contained in the
Indenture in order for the Indenture to be qualified under the Trust Indenture
Act of 1939, if the Trust Indenture Act of 1939 or regulations thereunder
change what is so required to be included in qualified indentures, in any
manner not inconsistent with what then may be required for such qualification.
(Indenture Section 7.1)
Events of Default
The following will be events of default under each Indenture
with respect to each series of Debt Securities issued thereunder: (a) failure
to pay principal (or premium, if any) on such series of the Debt Securities
outstanding under such Indenture when due; (b) failure to pay any interest on
such series of the Debt Securities outstanding under such Indenture when due,
continued for 30 days; (c) default in the payment, if any, of any sinking fund
installment when due, payable by the terms of such series of Debt Securities;
(d) failure to perform any other covenant or warranty of the Company contained
in such Indenture or such Debt Securities continued for 90 days after written
notice; and (e) certain events of bankruptcy, insolvency or reorganization of
the Company. In case an event of default described in (a), (b) or (c) above
shall occur and be continuing with respect to any series of such Debt
Securities, the applicable Trustee or the Holders of not less than 25% in
aggregate principal amount of the Debt Securities of such series then
outstanding (each such series acting as a separate class) may declare the
principal (or, in the case of discounted Debt Securities, the amount specified
in the terms thereof) of such series to be due and payable. In case an event
of default described in (d) above shall occur and be continuing, the
applicable Trustee or the Holders of not less than 25% in aggregate principal
amount of all Debt Securities of each affected series then outstanding under
such Indenture (treated as one class) may declare the principal (or, in the
case of discounted Debt Securities, the amount specified in the terms thereof)
of all Debt Securities of all such series to be due and payable. If an event
of default described in (e) above shall occur and be continuing then the
principal amount (or, in the case of discounted Debt Securities, the amount
specified in the terms thereof) of all the Debt Securities outstanding shall
be and become due and payable immediately, without notice or other action by
any Holder or the applicable Trustee, to the full extent permitted by law.
Any event of default with respect to particular series of Debt Securities
under such Indenture may be waived by the Holders of a majority in aggregate
principal amount of the outstanding Debt Securities of such series (voting as
a class), except in each case a failure to pay principal of or premium, if
any, or interest on such Debt Securities or a default in respect of a covenant
or provision which cannot be modified or amended without the consent of each
Holder affected thereby. (Indenture Sections 4.1, 4.10)
Each Indenture will provide that the applicable Trustee may
withhold notice to the Holders of any default with respect to any series of
Debt Securities (except in payment of principal of or interest or premium on,
or sinking fund payment in respect of, the Debt Securities) if the applicable
Trustee considers it in the interest of Holders to do so. (Indenture Section
4.11)
The Company will be required to furnish to each Trustee
annually a statement as to its compliance with all conditions and covenants in
the applicable Indenture. (Indenture Section 3.5)
Each Indenture will contain a provision entitling the
applicable Trustee to be indemnified by the Holders before proceeding to
exercise any trust or power under such Indenture at the request of such
Holders (Indenture Section 5.2). Each Indenture will provide that the
Holders of a majority in aggregate principal amount of the then outstanding
Debt Securities of any series may direct the time, method and place of
conducting any proceedings for any remedy available to the applicable Trustee
or of exercising any trust or power conferred upon the applicable Trustee with
respect to the Debt Securities of such series, provided, however, that the
applicable Trustee may decline to follow any such direction if, among other
reasons, the applicable Trustee, determines in good faith that the actions or
proceedings as directed may not lawfully be taken, would involve the
applicable Trustee in personal liability or would be unduly prejudicial to the
Holders of the Debt Securities of such series not joining in such direction
(Indenture Section 4.9). The right of a Holder to institute a proceeding
with respect to the applicable Indenture will be subject to certain conditions
precedent including, without limitation, that the Holders of not less than 25%
in aggregate principal amount of the Debt Securities of such series then
outstanding under such Indenture make a written request upon the applicable
Trustee to exercise its powers under such Indenture, indemnify the applicable
Trustee and afford the applicable Trustee reasonable opportunity to act, but
the Holder has an absolute right to receipt of the principal of, premium, if
any, and interest when due on the Debt Securities, to require conversion of
Debt Securities if such Indenture provides for convertibility at the option of
the Holder and to institute suit for the enforcement thereof (Indenture
Sections 4.6, 4.7).
Consolidation, Merger and Sale of Assets
Each Indenture will provide that the Company may not
consolidate with, merge into or sell, convey or lease all or substantially all
of its assets to any Person unless the Company is the surviving corporation or
the successor Person is a corporation organized under the laws of any domestic
jurisdiction and assumes the Company's obligations on the Debt Securities
issued thereunder, and under such Indenture, and after giving effect thereto
no event of default, and no event which, after notice or lapse of time or
both, would become an event of default shall have occurred and be continuing,
and that certain other conditions are met. (Indenture Sections 8.1,
8.2 )
Conversion Rights
The terms and conditions, if any, upon which the Debt
Securities are convertible into Common Stock will be set forth in the
applicable Prospectus Supplement relating thereto. Such terms will include
the conversion price (or manner of calculation thereof), the conversion
period, provisions as to whether conversion will be at the option of the
Holders or the Company, the events requiring an adjustment of the conversion
price and provisions affecting conversion in the event of redemption of such
Debt Securities and any restrictions on conversion, including restrictions
directed at maintaining the Company's REIT status.
Discharge, Defeasance and Covenant Defeasance
Each Indenture will provide with respect to each series of Debt
Securities issued thereunder that the Company may terminate its obligations
under such Debt Securities of a series and such Indenture with respect to Debt
Securities of such series if: (i) all Debt Securities of such series
previously authenticated and delivered, with certain exceptions, have been
delivered to the applicable Trustee for cancellation and the Company has paid
all sums payable by it under the Indenture; or (ii) (A) the Debt Securities of
such series mature within one year or all of them are to be called for
redemption within one year under arrangements satisfactory to the applicable
Trustee for giving the notice of redemption, (B) the Company irrevocably
deposits in trust with the applicable Trustee, as trust funds solely for the
benefit of the Holders of such Debt Securities, for that purpose, money or
U.S. Government Obligations or a combination thereof sufficient (unless such
funds consist solely of money, in the opinion of a nationally recognized firm
of independent public accountants expressed in a written certification thereof
delivered to the applicable Trustee), without consideration of any
reinvestment, to pay principal of and interest on the Debt Securities of such
series to maturity or redemption, as the case may be, and to pay all other
sums payable by it under such Indenture, and (C) the Company delivers to the
applicable Trustee an officers' certificate and an opinion of counsel, in each
case stating that all conditions precedent provided for in such Indenture
relating to the satisfaction and discharge of such Indenture with respect to
the Debt Securities of such series have been complied with. With respect to
the foregoing clause (i), only the Company's obligations to compensate and
indemnify the applicable Trustee under the Indenture shall survive. With
respect to the foregoing clause (ii) only the Company's obligations to execute
and deliver Debt Securities of such series for authentication, to maintain an
office or agency in respect of the Debt Securities of such series, to have
moneys held for payment in trust, to register the transfer or exchange of Debt
Securities of such series, to deliver Debt Securities of such series for
replacement or to be cancelled, to compensate and indemnify the applicable
Trustee and to appoint a successor trustee, and its right to recover excess
money held by the applicable Trustee shall survive until such Debt Securities
are no longer outstanding. Thereafter, only the Company's obligations to
compensate and indemnify the applicable Trustee, and its right to recover
excess money held by the applicable Trustee shall survive. (Indenture
Section 9.1)
Each Indenture will provide that the Company (i) will be deemed
to have paid and will be discharged from any and all obligations in respect of
the Debt Securities issued thereunder of any series, and the provisions of
such Indenture will, except as noted below, no longer be in effect with
respect to the Debt Securities of such series ("legal defeasance") and (ii)
may omit to comply with any term, provision, covenant or condition of such
Indenture, and such omission shall be deemed not to be an Event of Default
under clause (d) of the first paragraph of "--Events of Default" with respect
to the outstanding Debt Securities of such series ("covenant defeasance");
provided that the following conditions shall have been satisfied: (A) the
Company has irrevocably deposited in trust with the applicable Trustee as
trust funds solely for the benefit of the Holders of the Debt Securities of
such series, for payment of the principal of and interest of the Debt
Securities of such series, money or U.S. Government Obligations or a
combination thereof sufficient (unless such funds consist solely of money, in
the opinion of a nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the applicable
Trustee) without consideration of any reinvestment and after payment of all
federal, state and local taxes or other charges and assessments in respect
thereof payable by the applicable Trustee, to pay and discharge the principal
of and accrued interest on the outstanding Debt Securities of such series to
maturity or earlier redemption (irrevocably provided for under arrangements
satisfactory to the applicable Trustee), as the case may be; (B) such deposit
will not result in a breach or violation of, or constitute a default under,
such Indenture or any other material agreement or instrument to which the
Company is a party or by which it is bound; (C) no default with respect to
such Debt Securities of such series shall have occurred and be continuing on
the date of such deposit; (D) the Company shall have delivered to such Trustee
an opinion of counsel that (1) the Holders of the Debt Securities of such
series will not recognize income, gain or loss for federal income tax purposes
as a result of the Company's exercise of its option under this provision of
such Indenture and will be subject to federal income tax on the same amount
and in the same manner and at the same times as would have been the case if
such deposit and defeasance had not occurred and (2) the Holders of the Debt
Securities of such series have a valid security interest in the trust funds
subject to no prior liens under the Uniform Commercial Code, and (E) the
Company has delivered to the applicable Trustee an officers' certificate and
an opinion of counsel, in each case stating that all conditions precedent
provided for in such Indenture relating to the defeasance contemplated have
been complied with. In the case of legal defeasance under clause (i) above,
the opinion of counsel referred to in clause (D)(1) above may be replaced by a
ruling directed to the applicable Trustee received from the Internal Revenue
Service to the same effect. Subsequent to a legal defeasance under clause (i)
above, the Company's obligations to execute and deliver Debt Securities of
such series for authentication, to maintain an office or agency in respect of
the Debt Securities of such series, to have moneys held for payment in trust,
to register the transfer or exchange of Debt Securities of such series, to
deliver Debt Securities of such series for replacement or to be cancelled, to
compensate and indemnify the applicable Trustee and to appoint a successor
trustee, and its right to recover excess money held by the applicable Trustee
shall survive until such Debt Securities are no longer outstanding. After
such Debt Securities are no longer outstanding, in the case of legal
defeasance under clause (i) above, only the Company's obligations to
compensate and indemnity the applicable Trustee and its right to recover
excess money held by the applicable Trustee shall survive. (Indenture
Sections 9.2 and 9.3)
Applicable Law
The Indentures will provide that the Debt Securities and the
Indentures will be governed by and construed in accordance with the laws of
the State of New York. (Indenture Section 10.8)
DESCRIPTION OF THE CAPITAL STOCK
The authorized capital stock of the Company consists of
150,000,000 shares of common stock, par value $0.01 per share ("Common
Stock"), 10,000,000 shares of preferred stock, par value $1.00 per share
("Preferred Stock") and 160,000,000 shares of excess stock, par value $0.01
per share ("Excess Stock"), of which 150,000,000 shares are designated Excess
Common Stock and 10,000,000 shares are designated Excess Preferred Stock. As
of March 31, 1997, there were issued and outstanding 19,783,121 shares of
Common Stock and the Company had no Preferred Stock or Excess Stock
outstanding.
The following summary does not purport to be complete and is
qualified in its entirety by reference to the applicable provisions of
Maryland law and the Company's Articles of Amendment and Restatement (the
"Articles of Incorporation") and Amended By-Laws (the "By-Laws").
Common Stock
Subject to such preferential rights as may be granted by the
Board of Directors of the Company (the "Board of Directors") in connection
with the future issuance of Preferred Stock (and any related series of Excess
Preferred Stock as described under "Preferred Stock" below), holders of shares
of Common Stock are entitled to one vote per share on all matters to be voted
on by shareholders and are entitled to receive ratably such dividends as may
be declared on the Common Stock by the Board of Directors in its discretion
from funds legally available therefor. In the event of the liquidation,
dissolution or winding up of the Company, after payment of all debts and other
liabilities and any liquidation preference of the holders of Preferred Stock
(and any related series of Excess Preferred Stock as described under
"Preferred Stock" below), each holder of shares of Common Stock is entitled to
receive, ratably with each other holder of Common Stock, $1.00 per share out
of the net assets of the Company available for distribution to its
stockholders, and after such payment, holders of shares of Common Stock are
entitled to share ratably with holders of Excess Common Stock (see
"Restrictions on Ownership and Transfer" below) in all remaining assets of the
Company available for distribution to its stockholders increased in the case
of the Common Stock by any amounts that result from the limitation of the
liquidation rights of Excess Common Stock. See "Restrictions on Ownership and
Transfer -- Ownership Limit Provisions." Holders of Common Stock have no
subscription, redemption, conversion or preemptive rights. See "Participation
Rights." Matters submitted for shareholder approval generally require a
majority vote of the shares of Common Stock present and voting thereon. The
outstanding shares of Common Stock are fully paid and nonassessable.
Preferred Stock
The Board of Directors is empowered by the Company's Articles
of Incorporation to designate and issue from time to time, without stockholder
approval, Preferred Stock in one or more series. The Board of Directors may
affix and determine the relative rights, preferences and privileges of each
series of Preferred Stock so issued, including, but not limited to ownership
limit restrictions. Because the Board of Directors has the power to establish
the preferences and rights of each series of Preferred Stock, it may afford
the holders in any series of Preferred Stock preferences, powers and rights,
voting or otherwise, senior to the rights of holders of Common Stock and
Excess Common Stock. The issuance of Preferred Stock could have the effect of
delaying or preventing a change in control of the Company. At such time as
the Board of Directors authorizes a series of Preferred Stock, without any
further or separate action of the Board of Directors, there shall be deemed to
be authorized a series of Excess Preferred Stock consisting of the number of
shares included in the series of Preferred Stock and having terms, rights,
restrictions and qualifications identical thereto, except to the extent that
the Articles of Incorporation require different terms.
The applicable Prospectus Supplement will describe the
following terms of any Preferred Stock in respect of which this Prospectus is
being delivered (to the extent applicable to such Preferred Stock): (1) the
specific designation, number of shares, seniority and purchase price; (2) any
liquidation preference per share; (3) any date of maturity; (4) any
redemption, repayment or sinking fund provisions; (5) any dividend rate or
rates and the dates on which any such dividends will be payable (or the method
by which such rates or dates will be determined); (6) any voting rights; (7)
whether the Preferred Stock is convertible and, if so, the securities or
rights into which such Preferred Stock is convertible (which may include other
Preferred Stock) and the terms and conditions upon which such conversions will
be effected including the initial conversion prices or rates, the conversion
period and any other related provisions; (8) the place or places where
dividends and other payments on the Preferred Stock will be payable; (9) any
ownership limit restrictions applicable to such Preferred Stock; and (10) any
additional voting, dividend, liquidation, redemption and other rights,
preferences, privileges, limitations and restrictions, including restrictions
directed at maintaining the Company's REIT status. The shares of Preferred
Stock offered hereby will, when issued, be fully paid and nonassessable.
Charter and Bylaw Provisions
Certain provisions of the Articles of Incorporation and the
Bylaws which are summarized below, may make it more difficult to change the
composition of the Board of Directors and may discourage or make more
difficult any attempt by a person or group to obtain control of the Company.
Staggered Board of Directors. The Articles of Incorporation
and Bylaws provide that the Board of Directors is divided into three classes
of directors serving staggered terms. Each class holds office until the third
annual meeting for election of directors following the election of such class.
Number of Directors; Removal; Filling Vacancies. The Articles
of Incorporation provide that, subject to any rights of holders of Preferred
Stock (and any related series of Excess Preferred Stock) to elect additional
directors under specified circumstances, the number of directors will be fixed
by the Board of Directors, but must consist of not more than ten nor less than
three directors. The Articles of Incorporation provide that all vacancies on
the Board of Directors resulting from death or resignation may be filled
solely by a majority of the directors then in office. In accordance with the
Maryland General Corporation Law (the "MGCL"), the Articles of Incorporation
provide that vacancies resulting from removal by the stockholders may be
filled by such stockholders and vacancies resulting from an increase in the
number of directors may be filled by a majority of the entire Board of
Directors. If a director is elected by the Board of Directors to fill a
vacancy, such director shall serve only until the next annual meeting of the
stockholders. The Articles of Incorporation and Bylaws do not provide for a
stockholder vote to fill vacancies unless a vacancy results from the removal
of a director. The Articles of Incorporation provide that, subject to the
rights of holders of Preferred Stock (and any related series of Excess
Preferred Stock) to elect additional directors under specified circumstances,
directors may not be removed by the stockholders except for cause with the
affirmative vote of holders of not less than 66 2/3% of the total voting power
of all outstanding securities then entitled to vote generally for the election
of directors, voting together as a single class.
Pursuant to the Company's Articles of Incorporation and Bylaws,
a majority of the directors of the Company must be persons who are not (i)
affiliates, or an officer, director or employee, of The Irvine Company or (ii)
the spouse, ancestor or lineal descendant or brother or sister of Mr. Donald
Bren, the sole stockholder of The Irvine Company and the Chairman of the Board
of Directors, Chief Executive Officer and President of the Company.
Board Quorum and Special Voting Requirements. The Articles of
Incorporation provide that a majority of the entire Board of Directors of the
Company, including at least one director who was nominated for election as a
director by The Irvine Company (see "Provisions of the Miscellaneous Rights
Agreement Included in Bylaws" below) shall constitute a quorum for the
transaction of business at any annual or special meeting of the Board of
Directors and, except as provided below, that the affirmative vote of a
majority of the directors present at a meeting at which a quorum is present
shall be the act of the Board of Directors. Notwithstanding the foregoing,
the approval of more than 75% of the entire Board of Directors (the "Required
Directors") shall be required to approve the following: (i) a Change of
Control (as defined below) of the Company or the Operating Partnership, (ii)
any amendment to the Company's Articles of Incorporation or Bylaws, or any
amendment to the agreement of limited partnership of the Operating Partnership
(the "Partnership Agreement"); (iii) any waiver or modification of any
applicable Ownership Limit Provision (as defined under "Restrictions on
Ownership and Transfer -- Ownership Limit Provisions"); (iv) any merger,
consolidation, statutory share exchange or sale of all or substantially all of
the assets of the Company or the Operating Partnership; (v) the issuance of
any equity securities of the Company or any securities convertible into, or
exchangeable or exercisable for, any equity securities of the Company,
provided that the affirmative vote of the Required Directors shall not be
required with respect to the issuance of equity securities (excluding for
purposes of this proviso, equity securities (other than Common Stock) having
any voting rights other than voting rights required under Maryland law or by
the rules of the New York Stock Exchange or the Pacific Stock Exchange) (a)
pursuant to any stock incentive plan adopted by the Company, (b) in connection
with The Irvine Company's exercise of the Exchange Rights or the Cash Tender
Rights (each as defined below) provided for in the Partnership Agreement, (c)
in connection with the acquisition of certain land sites on the Irvine Ranch
for Common Stock pursuant to the land rights and non-competition agreement
between the Company, the Operating Partnership, The Irvine Company and Donald
Bren (the "Land Rights Agreement") or (d) in a bona fide underwritten public
offering managed by one or more nationally recognized investment banking
firms; (vi) for the Company to take title to assets (other than temporarily in
connection with an acquisition prior to contributing such assets to the
Operating Partnership) or to conduct business other than through the Operating
Partnership, or for the Company or the Operating Partnership to engage in any
business other than the ownership, construction, development and operation of
multifamily rental apartment communities; (vii) for the Company or the
Operating Partnership to make a general assignment for the benefit of
creditors or to institute any proceedings in bankruptcy or for the
liquidation, dissolution, reorganization or winding up of the Company or the
Operating Partnership or to consent to the taking of any such action against
the Company or the Operating Partnership; and (viii) to terminate the
Company's status as a real estate investment trust for federal income tax
purposes. A Change of Control of the Company or the Operating Partnership
will generally be deemed to have occurred if any person or group acquires 20%
or more of the combined voting power of the Company or the Operating
Partnership, as the case may be.
Special Meetings of Stockholders. Under the Bylaws, a special
meeting of stockholders may be called by the Chairman of the Board or the
President or by a majority of the Board of Directors, and by the holders of
shares entitled to cast such percentage of all votes entitled to be cast at
the meeting which represents the maximum percentage as may be permitted for
such purpose under the MGCL, as amended from time to time; however, a special
meeting need not be held to consider any matter which is substantially the
same as a matter voted upon at a special meeting within the last 12 months
unless requested by a majority of the shares entitled to vote at such special
meeting.
Action by Written Consent of Stockholders. The MGCL provides
that any action that may be taken at a stockholders meeting may be taken
without a meeting only if (i) a unanimous written consent setting forth the
matter is signed by each stockholder entitled to vote on the matter and (ii) a
written waiver of any right to dissent is signed by each stockholder entitled
to notice of the meeting but not entitled to vote at it.
Advance Notice of Director Nominations and New Business. The
Bylaws provide that with respect to an annual meeting of stockholders, the
proposal of business to be considered by stockholders may be made only (i) by
or at the direction of the Board of Directors, or (ii) by a stockholder who is
entitled to vote at the meeting and has complied with the advance notice
procedures set forth in the Bylaws. In addition, with respect to any meeting
of stockholders, nominations of persons for election to the Board of Directors
may be made only (i) by or at the direction of the Board of Directors or (ii)
by any stockholder of the Company who is entitled to vote at the meeting and
has complied with the advance notice provisions. The advance notice
provisions are not applicable to The Irvine Company.
The advance notice provisions of the Bylaws could have the
effect of discouraging a takeover or other transaction in which holders of
some, or a majority, of the shares of Common Stock might receive a premium for
their shares over the then prevailing market price or which such holders might
believe to be otherwise in their best interests.
Provisions of the Miscellaneous Rights Agreement Included in
Bylaws. The Bylaws provide that the provisions of the Miscellaneous Rights
Agreement (the "Miscellaneous Rights Agreement") among the Company, the
Operating Partnership and The Irvine Company with respect to matters relating
to the governance of the Company (including the right to designate nominees
for election as a director, to designate persons to fill vacancies on the
Board of Directors and limitations on increasing or decreasing the size of the
Board of Directors) (the "Miscellaneous Rights") will have the same effect as
bylaws of the Company. This provision of the Bylaws further provides that in
the event of any inconsistency between any Miscellaneous Right and any other
provision of the Bylaws, the Miscellaneous Right shall control (except with
respect to any Bylaw adopted by stockholder vote prior to the execution and
delivery of any amendment to the Miscellaneous Rights Agreement creating such
Miscellaneous Right). This Bylaw provision is intended to enhance The Irvine
Company's ability to enforce the Miscellaneous Rights and to ensure that the
general public is aware of the existence of the Miscellaneous Rights.
Pursuant to the Miscellaneous Rights Agreement, The Irvine
Company has the right, and will continue to have the right so long as it, its
shareholders or its affiliates beneficially own at least 20% of the
outstanding Common Stock (including for this purpose Common Stock issuable
upon exchange of its limited partnership interests ("L.P. Units") in the
Operating Partnership), to nominate three persons for election to the Board of
Directors of the Company. In the event this ownership falls below 20% but is
at least 15%, The Irvine Company will have the right to nominate two persons
for election to the Board of Directors; and if this ownership falls below 15%
but is at least 10%, The Irvine Company will have the right to nominate one
person for election to the Board of Directors.
Maryland Business Combination Law
Under the MGCL, certain "business combinations" (including a
merger, consolidation, share exchange or, in certain circumstances, an asset
transfer or issuance or reclassification of equity securities) between a
Maryland corporation and an "Interested Stockholder" or an affiliate thereof
are prohibited for five years after the most recent date on which the
Interested Stockholder becomes an Interested Stockholder. An Interested
Stockholder is any person who beneficially owns 10% or more of the voting
power of the corporation's shares or an affiliate or associate of the
corporation who, at any time within the two-year period prior to the date in
question, was the beneficial owner of 10% or more of the voting power of the
then-outstanding voting stock of the corporation. After the five year period,
any such business combination must be recommended by the board of directors of
the corporation and approved by the affirmative vote of at least (i) 80% of
the votes entitled to be cast by holders of outstanding voting shares of the
corporation and (ii) two-thirds of the votes entitled to be cast by holders of
outstanding voting shares of the corporation other than shares held by the
Interested Stockholder with whom (or with whose affiliate) the business
combination is to be effected, unless, among other conditions, the
corporation's common stockholders receive a minimum price (as defined in the
MGCL) for their shares and the consideration is received in cash or in the
same form as previously paid by the Interested Stockholder for its shares.
These provisions of Maryland law do not apply, however, to business
combinations that are approved or exempted by the board of directors of the
corporation prior to the time that the Interested Stockholder becomes an
Interested Stockholder. The Articles of Incorporation and resolutions adopted
by the Board of Directors have exempted from these provisions of the MGCL any
business combination with The Irvine Company, or any affiliates of The Irvine
Company or Mr. Bren, or any members of the immediate family of Mr. Bren and
any other person acting in concert or as a group with any of the foregoing.
All other stockholders are subject to the business combination statute.
Business Combinations
The Articles of Incorporation require that, except in certain
circumstances, Business Combinations involving the Company be approved by the
affirmative vote of the holders of at least 66 2/3% of the outstanding voting
stock of the Company. A Business Combination is defined in the Articles of
Incorporation as (i) any merger or consolidation or statutory share exchange
of the Company in which (a) the Company fails to survive that involves all or
any "Substantial Part" (as defined) of the assets of the Company or (b) more
than 20% of the voting control of the Company is transferred, (ii) any sale,
exchange, transfer or other disposition of all or substantially all of the
assets of the Company and (iii) the execution of any agreement, contract or
other arrangement providing for any of the transactions described in the
definition of Business Combination. The term "Substantial Part" means more
than 25% of the total market capitalization of the Company (including
outstanding shares of Common Stock and L.P. Units that are exchangeable for
shares of Common Stock plus total debt) as of the end of the most recent
quarter or fiscal year ending prior to the time the determination is being
made.
Control Share Acquisitions
The MGCL provides that "control shares" of a Maryland
corporation acquired in a "control share acquisition" have no voting rights
except to the extent approved by a vote of two-thirds of the votes entitled to
be cast on the matter, excluding shares of stock owned by the acquiror or by
officers or directors who are employees of the corporation. "Control shares"
are voting shares of stock which, if aggregated with all other such shares of
stock previously acquired by the acquiror, or in respect of which the acquiror
is able to exercise or direct the exercise of voting power except solely by
virtue of a revocable proxy, would entitle the acquiror to exercise voting
power in electing directors within one of the following ranges of voting
power: (i) one-fifth or more but less than one-third; (ii) one-third or more
but less than a majority; or (iii) a majority of all voting power. Control
shares do not include shares the acquiring person is entitled to vote as a
result of having previously obtained stockholder approval. A "control share
acquisition" means the acquisition of control shares, subject to certain
exceptions.
A person who has made or proposes to make a control share
acquisition, upon satisfaction of certain conditions (including an undertaking
to pay expenses and delivery of an "acquiring person statement"), may compel
the corporation's board of directors to call a special meeting of stockholders
to be held within 50 days of demand to consider the voting rights of the
shares. If no request for a meeting is made, the corporation may itself
present the question at any stockholders' meeting.
Unless the corporation's articles of incorporation or bylaws
provide otherwise, if voting rights are not approved at the meeting or if the
acquiring person does not deliver an acquiring person statement within ten
(10) days following a control share acquisition then, subject to certain
conditions and limitations, the corporation may redeem any or all of the
control shares (except those for which voting rights have previously been
approved) for fair value determined, without regard to the absence of voting
rights for the control shares, as of the date of the last control share
acquisition or of any meeting of stockholders at which the voting rights of
such shares are considered and not approved. Moreover, unless the
corporation's articles of incorporation or bylaws provide otherwise, if voting
rights for control shares are approved at a stockholders' meeting and the
acquiror becomes entitled to exercise or direct the exercise of a majority or
more of all voting power other stockholders may exercise appraisal rights.
The fair value of the shares as determined for purposes of such appraisal
rights may not be less than the highest price per share paid by the acquiror
in the control share acquisition.
The control share acquisition statute does not apply to shares
acquired in a merger, consolidation or share exchange if the corporation is a
party to the transaction, or to acquisitions approved or exempted by the
articles of incorporation or bylaws of the corporation.
The Articles of Incorporation and resolutions adopted by the
Board of Directors have exempted control share acquisitions involving The
Irvine Company, or any affiliates of The Irvine Company or Mr. Bren, or any
members of the immediate family of Mr. Bren and any other person acting in
concert or as a group with any of the foregoing. All other stockholders are
subject to the control share acquisition statute.
Participation Rights
In the event that the Company issues (whether for cash or
property) any shares of Common Stock or securities convertible into, or
exchangeable or exercisable for, shares of Common Stock, The Irvine Company,
subject to certain limited exceptions, including the issuance of Common Stock
pursuant to any stock incentive plan adopted by the Company or pursuant to The
Irvine Company's exercise of the Exchange Rights or the Cash Tender Rights
described below under "Exchange Rights" and "Cash Tender Rights," will have
the right to purchase Common Stock, L.P. Units or such securities at a
purchase price equal to the purchase price in the transaction giving rise to
the participation rights in order to maintain its interest in the Company and
the Operating Partnership on a consolidated basis. However, other
stockholders of the Company would have no participation rights to purchase
shares of Common Stock or such securities and any such issuance might cause a
dilution of a stockholder's investment in the Company.
Limitation of Directors' and Officers' Liability; Indemnification
Pursuant to the MGCL and the Articles of Incorporation, the
liability of directors of the Company to the Company or to any stockholder of
the Company for money damages has been eliminated except (i) to the extent
that it is established that such directors actually received an improper
benefit or profit in money, property or services, for the amount of the
benefit or profit in money, property or services actually received and (ii) to
the extent that a judgment or other final adjudication adverse to such
directors is entered in a proceeding based on a finding in the proceeding that
such directors' action, or failure to act, was the result of active and
deliberate dishonesty and was material to the cause of action adjudicated in
the proceeding. Maryland law also extends the right to limit the liability
of officers of a corporation. The Articles of Incorporation utilize this
extension, limiting the liability of officers to the same extent directors'
liability is limited.
The Articles of Incorporation provide indemnification to
directors and officers, including the advance of legal expenses, to the full
extent authorized by applicable law and allow the Board of Directors to extend
such indemnification to other employees and agents as the Board of Directors
shall determine to be appropriate. Under the MGCL, a director of a
corporation may be indemnified (including in connection with a derivative
action so long as the director has not been found liable) unless it is
established that (a) the act or omission of the director was material to the
matter giving rise to the proceeding and either was committed in bad faith or
was the result of active and deliberate dishonesty; (b) the director actually
received an improper personal benefit in money, property, or services; or (c)
in the case of any criminal proceeding, the director had reasonable cause to
believe that the act or omission was unlawful. The Articles of Incorporation
extend this right of indemnification to officers and otherwise grant the Board
of Directors the authority to indemnify other employees and agents.
Restrictions on Ownership and Transfer
Ownership Limit Provisions. The Articles of Incorporation
contain certain restrictions on the number of shares of Common Stock that
individual shareholders may own. For the Company to qualify as a real estate
investment trust ("REIT") under the Internal Revenue Code of 1986, as amended
(the "Code"), no more than 50% in number of its outstanding shares of Common
Stock may be owned, directly or indirectly, by five or fewer individuals (as
defined in the Code to include certain entities) during the last half of a
taxable year (other than the first year) or during a proportionate share of a
shorter taxable year (the "Five or Fewer Test"). The Common Stock must also
be beneficially owned by 100 or more persons during at least 335 days of a
taxable year or during a proportionate part of a shorter taxable year.
Because the Company expects to continue to qualify as a REIT, the Articles of
Incorporation contain restrictions on the acquisition of Common Stock intended
to ensure compliance with these requirements.
Subject to certain exceptions specified in the Articles of
Incorporation, no holder other than The Irvine Company, certain related
parties and certain look-through entities may own, or be deemed to own by
virtue of the attribution provisions of the Code, more than 7.4% (the
"Ownership Limit") of the issued and outstanding shares of Common Stock. The
ownership limit for The Irvine Company and certain related persons will be 20%
of the issued and outstanding Common Stock in the aggregate (the "Related
Party Limit"). In addition, the ownership limit applicable to certain of the
types of entities that are looked-through for purposes of the Five or Fewer
Test under the Code will be 15% of the outstanding Common Stock (the
"Look-Through Ownership Limit" and, together with the Ownership Limit and the
Related Party Limit, the "Ownership Limit Provisions"). Generally, under the
Articles of Incorporation certain pension trusts qualifying under Section
401(a) of the Code and United States investment companies registered under the
Investment Act of 1940 will be subject to the Look-Through Ownership Limit.
Any shares held in excess of the Related Party Limit or Look-Through Ownership
Limit will be subject to all of the terms, conditions and restrictions under
the Articles of Incorporation on any shares held in excess of the Ownership
Limit. The Board of Directors may, with a ruling from the Internal Revenue
Service or an opinion of counsel satisfactory to it, waive the Ownership Limit
with respect to a holder if such holder's ownership will not then or in the
future jeopardize the Company's status as a REIT.
If shares of Common Stock in excess of the Ownership Limit,
Related Party Limit or Look-Through Ownership Limit are issued or transferred
to any person, or shares which would cause the Company to be beneficially
owned by fewer than 100 persons are transferred to any person, such issuance
or transfer shall be null and void and the intended transferee will acquire no
rights to the stock.
In addition, shares of Common Stock owned, or deemed to be
owned, or transferred to a stockholder in excess of the applicable Ownership
Limit Provision will automatically be exchanged for shares of Excess Common
Stock that shall be deemed to have been transferred to a person as trustee of
a trust for the exclusive benefit of one or more qualifying charitable
organizations designated by the Company. While shares of Excess Common Stock
are held in trust, the trustee of the trust will be deemed to hold the shares
of Excess Common Stock for the exclusive benefit of the charitable
beneficiary, the intended original transferee-stockholder will acquire no
rights to such stock, except as described below, and the trustee of the trust
will have all voting and dividend rights pertaining to the transferred shares.
Subject to such preferential rights as may be granted by the Board of
Directors in connection with the future issuance of Preferred Stock (and the
related series of Excess Preferred Stock) and the $1.00 preferential right of
the Common Stock referred to under "Common Stock" above, in liquidation, the
intended original transferee-stockholder of shares of Excess Common Stock
shall be entitled to share ratably with holders of Common Stock and Excess
Common Stock in all remaining assets of the Company available for distribution
to its stockholders, provided that the original transferee-stockholder's
ratable share of the Company's assets would be limited to the price paid by
the original transferee-stockholder for the Common Stock in the purported
transfer that resulted in the Excess Common Stock or, if no value was given, a
price per share equal to the closing market price on the date of the purported
transfer that resulted in the Excess Common Stock.
Excess Common Stock is not transferable except as hereinafter
described. The original transferee-stockholder may, at any time the shares of
Excess Common Stock are held in trust, transfer the Excess Common Stock to any
person whose ownership of such shares would be permitted under the Ownership
Limit Provisions, at a price per share not in excess of the lesser of (i) the
price per share paid by the original transferee-stockholder for the shares of
Common Stock in the purported transfer that resulted in the Excess Common
Stock or, if no value was given, the price per share equal to the closing
market price on the date of the purported transfer that resulted in the Excess
Common Stock or (ii) the price per share received by the original
transferee-stockholder in the transfer to the person whose ownership of such
shares would be permitted under the Ownership Limit Provisions. Immediately
upon transfer to such permitted transferee, the shares of Excess Common Stock
will automatically be exchanged for Common Stock. In addition, the Company
would have the right, for a period of 90 days during the time the Excess
Common Stock is held in trust, to purchase all or any portion of the Excess
Common Stock from the original transferee-stockholder at a price per share
equal to the lesser of (i) the price per share paid by the original
transferee-stockholder in the transaction that created such Excess Common
Stock (or, in the case of a devise or gift, the closing market price at the
time of such devise or gift) and (ii) the closing market price for the stock
on the date the Company exercises its option to purchase. The 90-day
period begins on the date of the violative transfer if the original
transferee-stockholder gives notice to the Company of the transfer or (if no
such notice is given) the date the Board of Directors determines that a
violative transfer has been made.
The Ownership Limit Provisions will not be automatically
removed even if the REIT provisions of the Code are changed so as to no longer
contain any ownership concentration limitation or if the ownership
concentration limitation is increased. In addition to preserving the
Company's status as a REIT, the effect of the Ownership Limit Provisions is to
prevent any person from acquiring unilateral control of the Company. Any
change in the Ownership Limit Provisions would require an amendment to the
Articles of Incorporation. Such an amendment to the Articles of Incorporation
would require the approval of the Required Directors and the affirmative vote
of holders owning not less than 66 2/3% of the outstanding Common Stock.
All certificates representing shares of Common Stock will bear
a legend referring to the restrictions described above.
All persons who own, directly or by virtue of the attribution
provisions of the Code, more than 0.5% (or such other percentage between 0.5%
and 5.0%, as determined by the Board of Directors) of the outstanding Common
Stock must file an affidavit with the Company containing the information
specified in the Articles of Incorporation 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 comply with the provisions of the Code applicable
to a REIT or to comply with the requirements of any taxing authority or
governmental agency.
If the Company authorizes the issuance of any series of
Preferred Stock in the future, the Board of Directors will at the time of
authorization establish ownership limits applicable to such series to ensure
compliance with the REIT qualification provisions of the Code. Such ownership
limit restrictions will be described in the applicable Prospectus Supplement.
Amendments to Articles of Incorporation and Bylaws; Termination of REIT Status
In general, the Articles of Incorporation may not be amended
without the affirmative vote of at least a majority of the total number of
shares of all classes outstanding and entitled to vote thereon. The
provisions of the Articles of Incorporation under the captions "Charter and
Bylaw Provisions -- Staggered Board of Directors"; "--Number of Directors;
Removal; Filling Vacancies"; "-- Board Quorum and Special Voting
Requirements"; "Business Combinations"; "Limitation of Directors' and
Officers' Liability; Indemnification"; and "Restrictions on Ownership and
Transfer" and the exclusion of The Irvine Company and certain other persons
from the provisions of the Maryland business combination statute and control
share acquisition statute as described under the captions "Maryland Business
Combination Law" and "Control Share Acquisitions," may be amended only upon
the vote of the holders of at least 66 2/3% of the capital stock entitled to
vote generally in the election of directors, voting as a single group. The
Bylaws may be amended by either the affirmative vote of holders of 66 2/3% of
all shares outstanding and entitled to vote generally in the election of
directors, voting as a single group, unless a greater percentage is specified
with respect to a specific Bylaw provision, or by an affirmative vote of the
Required Directors. In addition, the affirmative vote of holders of at least
66 2/3% of the capital stock entitled to vote generally in the election of
directors, voting as a single group, is required to terminate the Company's
status as a real estate investment trust for federal tax purposes.
Limitations on Changes in Control
The provisions of the Articles of Incorporation and the Bylaws
providing for ownership limitations, a staggered Board of Directors,
authorizing the Board of Directors to issue Preferred Stock without
stockholder approval, requiring the affirmative vote of 66 2/3% of the
Company's stockholders to engage in certain Business Combinations, and the
business combination and control share provisions of the MGCL could have the
effect of delaying, deferring or preventing a change in control of the Company
or the removal of existing management, and as a result could prevent the
stockholders of the Company from being paid a premium for their shares of
Common Stock.
Exchange Rights
The Irvine Company and certain related persons will have the
right (subject to the applicable Ownership Limit Provision), exercisable once
in each twelve-month period, to exchange up to one-third of the number of L.P.
Units owned by them for shares of Common Stock or if The Irvine Company and
certain related persons own 6,149,000 L.P. Units or less, then they may,
subject to the applicable Ownership Limit Provision, exchange all of their
L.P. Units for shares of Common Stock. As of March 31, 1997, The Irvine
Company and its affiliates owned 24,005,968 L.P. Units in the aggregate. The
exchange ratio shall be one share of Common Stock for each L.P. Unit, subject
to adjustment in certain events, including the Company paying a dividend or
making a distribution on the Common Stock in shares of Common Stock and
subdivisions and combinations of the Common Stock. L.P. Units that are
acquired by the Company pursuant to the exercise of Exchange Rights will be
converted automatically into units of general partnership interest in the
Operating Partnership.
The exercise of Exchange Rights is subject to (i) the
expiration or termination of the applicable waiting period, if any, under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, and (ii) the
satisfaction of the Ownership Limit or the Related Party Limit, as applicable,
after giving effect to the exchange. The Related Party Limit applicable to
The Irvine Company and certain related persons will be 20% of the issued and
outstanding shares of Common Stock in the aggregate; however, certain persons
who will have the right to exchange L.P. Units for Common Stock pursuant to
the Exchange Rights, will be subject to the 7.4% Ownership Limit. For
purposes of determining the number of L.P. Units which may be exchanged for
shares of Common Stock pursuant to the Exchange Rights at any point in time,
there shall be taken into account the number of issued and outstanding shares
of Common Stock which are beneficially owned by The Irvine Company and its
affiliates at such time. Accordingly, beneficial ownership of shares of Common
Stock reduces the number of L.P. Units which may be exchanged pursuant to the
Exchange Rights at any point in time.
Cash Tender Rights
The Irvine Company and certain related persons have the right,
exercisable once in any twelve-month period, subject to certain limitations,
to sell to the Company for cash up to one-third of the number of L.P. Units
owned by them or if The Irvine Company and certain related persons own
6,149,000 L.P. Units or less, then they may tender all of their L.P. Units to
the Company. L.P. Units that are acquired by the Company as a result of the
exercise of Cash Tender Rights will be converted automatically into units of
general partnership interest in the Operating Partnership.
The Company will have to pay for such L.P. Units solely out of
the proceeds of a registered offering of newly issued shares of Common Stock.
The price payable for an L.P. Unit tendered will be equal to the average of
the daily market prices for the Common Stock for the 10 consecutive trading
days immediately preceding the date of receipt by the Company of a notice of
cash tender (each L.P. Unit being equivalent to one share of Common Stock,
subject to adjustment as described above), except that the purchase price for
such L.P. Units will be reduced by any decrease in the price of the Common
Stock that occurs between the exercise date and the pricing of the Common
Stock being sold pursuant to the registered offering and underwriting
discounts and commissions. The Irvine Company will thus bear the risk of any
such reduction, subject to certain withdrawal rights. Any proceeds in excess
of the purchase price will be for the sole benefit of the Company. The
Company shall be required to promptly file with the Commission a registration
statement with respect to any registered offering.
After an exercise of Cash Tender Rights, The Irvine Company may
not exercise its Cash Tender Rights until 90 days after the completion of the
registered offering of shares of Common Stock, if applicable.
Registration Rights
The Company has granted certain "demand" and "piggyback"
registration rights with respect to shares of Common Stock owned by The Irvine
Company or any of its affiliates, whether acquired pursuant to the Exchange
Rights, in connection with the Land Rights Agreement, in the open market or
otherwise.
Transfer Agent
The transfer agent and registrar for the Company's Common Stock
is Boston Equiserve, L.P., a subsidiary of The First National Bank of Boston.
DESCRIPTION OF WARRANTS
The Company may issue warrants to purchase Debt Securities (the
"Debt Warrants"), Preferred Stock (the "Preferred Stock Warrants") or Common
Stock (the "Common Stock Warrants", collectively with the Debt Warrants and
the Preferred Stock Warrants the "Warrants"). Warrants may be issued
independently or together with any Securities and may be attached to or
separate from such Securities. The Warrants are to be issued under warrant
agreements (each a "Warrant Agreement") to be entered into between the Company
and a bank or trust company, as warrant agent (the "Warrant Agent"), all as
shall be set forth in the Prospectus Supplement relating to the Warrants being
offered pursuant thereto.
Debt Warrants
The applicable Prospectus Supplement will describe the terms of
Debt Warrants offered thereby, the Warrant Agreement relating to such Debt
Warrants and the debt warrant certificates representing such Debt Warrants,
including the following: (1) the title of such Debt Warrants; (2) the
aggregate number of such Debt Warrants; (3) the price or prices at which such
Debt Warrants will be issued; (4) the designation, aggregate principal amount
and terms of the Debt Securities purchasable upon exercise of such Debt
Warrants, and the procedures and conditions relating to the exercise of such
Debt Warrants; (5) the designation and terms of any related Debt Securities
with which such Debt Warrants are issued, and the number of such Debt Warrants
issued with each such security; (6) the date, if any, on and after which such
Debt Warrants and the related Debt Securities will be separately transferable;
(7) the principal amount of Debt Securities purchasable upon exercise of each
Debt Warrant, and the price at which such principal amount of Debt Securities
may be purchased upon such exercise; (8) the date on which the right to
exercise such Debt Warrants shall commence, and the date on which such right
shall expire; (9) the maximum or minimum number of such Debt Warrants which
may be exercised at any time; (10) a discussion of material federal income tax
considerations, if any; and (11) any other terms of such Debt Warrants and
terms, procedures and limitations relating to the exercise of such Debt
Warrants.
Debt Warrant certificates will be exchangeable for new Debt
Warrant certificates of different denominations, and Debt Warrants may be
exercised at the corporate trust office of the Warrant Agent or any other
office indicated in the Prospectus Supplement. Prior to the exercise of their
Debt Warrants, holders of Debt Warrants will not have any of the rights of
holders of the securities purchasable upon such exercise and will not be
entitled to payments of principal of (or premium, if any) or interest, if any,
on the securities purchasable upon such exercise.
Other Warrants
The applicable Prospectus Supplement will describe the
following terms of Preferred Stock Warrants and Common Stock Warrants in
respect of which this Prospectus is being delivered: (1) the title of such
Warrants; (2) the Securities for which such Warrants are exercisable; (3) the
price or prices at which such Warrants will be issued; (4) the number of such
Warrants issued with each share of Preferred Stock or Common Stock; (5) any
provisions for adjustment of the number or amount of shares of Preferred Stock
or Common Stock receivable upon exercise of such Warrants or the exercise
price of such Warrants; (6) if applicable, the date on and after which such
Warrants and the related Preferred Stock or Common Stock will be separately
transferable; (7) if applicable, a discussion of material federal income tax
considerations; (8) any other terms of such Warrants, including terms,
procedures and limitations relating to the exchange and exercise of such
Warrants; (9) the date on which the right to exercise such Warrants shall
commence, and the date on which such right shall expire; (10) the maximum or
minimum number of such Warrants which may be exercised at any time.
Exercise of Warrants
Each Warrant will entitle the holder of Warrants to purchase
for cash such principal amount of Debt Securities or shares of Preferred Stock
or Common Stock at such exercise price as shall in each case be set forth in,
or be determinable as set forth in, the Prospectus Supplement relating to the
Warrants offered thereby. Warrants may be exercised at any time up to the
close of business on the expiration date set forth in the Prospectus
Supplement relating to the Warrants offered thereby. After the close of
business on the expiration date, unexercised Warrants will become void.
Warrants may be exercised as set forth in the Prospectus
Supplement relating to the Warrants offered thereby. Upon receipt of payment
and the warrant certificate properly completed and duly executed at the
corporate trust office of the Warrant Agent or any other office indicated in
the Prospectus Supplement, the Company will, as soon as practicable, forward
the Debt Securities or shares of Preferred Stock or Common Stock purchasable
upon such exercise. If less than all of the Warrants represented by such
warrant certificate are exercised, a new warrant certificate will be issued
for the remaining Warrants.
FEDERAL INCOME TAX CONSIDERATIONS
The following is a brief and general summary of certain
provisions that currently govern the federal income tax treatment of the
Company and its stockholders.
The Company believes it has operated, and the Company intends
to continue to operate, in such a manner as to qualify as a REIT under the
Code, but no assurance can be given that it will at all times so qualify. The
provisions of the Code pertaining to REITs are highly technical and complex.
For the particular provisions that govern the federal income tax treatment of
the Company and its stockholders, reference is made to Sections 856 through
860 of the Code and the regulations thereunder. The following summary is
qualified in its entirety by such reference.
Under the Code, if certain requirements are met in a taxable
year, a REIT generally will not be subject to federal income tax with respect
to income that it distributes to its stockholders. If the Company fails to
qualify during any taxable year as a REIT, unless certain relief provisions
are available, it will be subject to tax (including any applicable alternative
minimum tax) on its taxable income at regular corporate rates, which could
have a material adverse effect upon its stockholders.
In any year in which the Company qualifies to be taxed as a
REIT, distributions made to its stockholders out of current or accumulated
earnings and profits will be taxed to stockholders as ordinary income except
that distributions of net capital gains designated by the Company as capital
gain dividends will be taxed as long-term capital gain income to the
stockholders. To the extent that distributions exceed current or accumulated
earnings and profits, they will constitute a return of capital, rather than
dividend or capital gain income, and will reduce the basis for the
stockholders' Securities with respect to which the distribution is paid and,
to the extent that they exceed such basis, will be taxed in the same manner as
gain from the sale of those Securities.
Investors are urged to consult their own tax advisors with
respect to the appropriateness of an investment in the Securities and with
respect to the tax consequences arising under federal law and the laws of any
state, municipality or other taxing jurisdiction, including tax consequences
resulting from such investor's own tax characteristics. In particular,
foreign investors should consult their own tax advisors concerning (i) income
taxes on effectively connected income, (ii) withholding taxes on dividends or
interest, (iii) branch profits taxes, (iv) taxes imposed under the Foreign
Investment in Real Property Tax Act, and (v) other tax consequences that may
arise under federal, state or local law.
PLAN OF DISTRIBUTION
The Securities may be sold (i) through agents, (ii) through
underwriters, (iii) through dealers or (iv) directly to purchasers (through a
specific bidding or auction process or otherwise). The distribution of
Securities may be effected from time to time in one or more transactions at a
fixed price or prices, which may be changed, or at market prices prevailing at
the time of sale, at prices relating to such prevailing market prices or at
negotiated prices.
Offers to purchase the Securities may be solicited by agents
designated by the Company from time to time. Any such agent involved in the
offer or sale of the Securities will be named, and any commissions payable by
the Company to such agent will be set forth in the Prospectus Supplement.
Unless otherwise indicated in the Prospectus Supplement, any such agent will
be acting on a best efforts basis for the period of its appointment. Any such
agent may be deemed to be an underwriter, as that term is defined in the
Securities Act, of the Securities so offered and sold.
If an underwriter or underwriters are utilized in the sale of
Securities, the Company will execute an underwriting agreement with such
underwriter or underwriters at the time an agreement for such sale is reached,
and the names of the specific managing underwriter or underwriters, as well as
any other underwriters, and the terms of the transactions, including
compensation of the underwriters and dealers, if any, will be set forth in the
Prospectus Supplement, which will be used by the underwriters to make resales
of the Securities.
If a dealer is utilized in the sale of the Securities, the
Company will sell such Securities to the dealer, as principal. The dealer may
then resell such Securities to the public at varying prices to be determined
by such dealer at the time of resale. The name of the dealer and the terms of
the transactions will be set forth in the Prospectus Supplement relating
thereto.
Offers to purchase the Securities may be solicited directly by
the Company and sales thereof may be made by the Company directly to
institutional investors or others. The terms of any such sales, including the
terms of any bidding or auction process, if utilized, will be described in the
Prospectus Supplement relating thereto. This Prospectus may also be used in
connection with grants of Common Stock by the Company.
Agents, underwriters and dealers may be entitled under
agreements which may be entered into with the Company to indemnification by
the Company against certain liabilities, including liabilities under the
Securities Act, and any such agents, underwriters or dealers, or their
affiliates may be customers of, engage in transactions with or perform
services for the Company in the ordinary course of business.
If so indicated in the Prospectus Supplement, the Company will
authorize agents and underwriters to solicit offers by certain institutions to
purchase Debt Securities from the Company at the public offering price set
forth in the Prospectus Supplement pursuant to Delayed Delivery Contracts
("Contracts") providing for payment and delivery on the date stated in the
Prospectus Supplement. Such Contracts will be subject to only those
conditions set forth in the Prospectus Supplement. A commission indicated in
the Prospectus Supplement will be paid to underwriters and agents soliciting
purchases of Debt Securities pursuant to Contracts accepted by the Company.
In connection with an offering, the Underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of the
Securities or other securities of the Company. Specifically, the Underwriters
may overallot such offering, creating a syndicate short position. In
addition, the Underwriters may bid for, and purchase, the Securities in the
open market to cover syndicate shorts or to stabilize the price of the
Securities. Finally, the underwriting syndicate may reclaim selling
concessions allowed for distributing the Securities in such offering, if the
syndicate repurchases previously distributed Securities in syndicate covering
transactions, in stabilization transactions or otherwise. Any of these
activities may stabilize or maintain the market price of the Securities above
independent market levels. The Underwriters are not required to engage in
these activities, and may end any of these activities at any time.
EXPERTS
The consolidated financial statements of the Company included
in the Annual Report on Form 10-K of the Company for the year ended December
31, 1996 have been audited by Ernst & Young LLP, independent auditors, as
stated in their report dated January 31, 1997 and are incorporated herein by
reference in reliance upon the report of such firm, which report is given upon
their authority as experts in accounting and auditing.
Any financial statements and schedules hereafter incorporated
by reference in the registration statement of which this prospectus is a part
that have been audited and are the subject of a report by independent auditors
will be incorporated herein by reference in reliance upon such reports and
upon the authority of such firms as experts in accounting and auditing to the
extent covered by consents filed with the Commission.
LEGAL MATTERS
The validity of the Securities offered hereby will be passed
upon for the Company by Davis Polk & Wardwell, New York, New York. Davis Polk
& Wardwell will rely as to matters of Maryland law on Piper & Marbury L.L.P.,
Baltimore, Maryland.
==============================================================================
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other expenses of Issuance and Distribution.
Registration fee........................... $ 76,029
Trustees' fees............................. 10,000
Printing and engraving expenses............ 100,000
Legal fees and expenses.................... 100,000
Accounting fees and expenses............... 75,000
Miscellaneous.............................. 68,971
-------
Total................................... $430,000
=======
All amounts estimated except for registration fees.
Item 15. Indemnification of Directors and Officers.
Section 2-418 of the Maryland General Corporation Law permits
the indemnification of directors, officers, employees and agents of Maryland
corporations. ARTICLE EIGHTH of the Company's Articles of Amendment and
Restatement (the "Articles") authorizes the indemnification of directors and
officers to the full extent required or permitted by the General Laws of the
State of Maryland, now or hereafter in force, whether such persons are serving
the Company or, at its request, any other entity, which indemnification shall
include the advance of expenses under the procedures and to the full extent
permitted by law. ARTICLE EIGHTH of the Articles further provides that the
foregoing rights of indemnification shall not be exclusive of any other rights
to which those seeking indemnification may be entitled and that no amendment
or repeal of ARTICLE EIGHTH shall apply to or have any effect on any right to
indemnification provided thereunder with respect to acts or omissions
occurring prior to such amendment or repeal. In addition, the Company's
officers and directors are covered by certain directors' and officers'
liability insurance policies maintained by the Company. Reference is made to
Section 2-418 of the Maryland General Corporation Law and ARTICLE EIGHTH of
the Articles which are incorporated herein by reference.
Item 16. List of Exhibits and Exhibit Index
Exhibit 1.1 - Form of Underwriting Agreement relating to the
Debt Securities (incorporated by reference to Exhibit 1.1 of
the Registration Statement on Form S-3 of the Company (File
No. 33-92036) (the "Predecessor Shelf"))
Exhibit 1.2 - Form of Underwriting Agreement relating to the capital stock
(incorporated by reference to Exhibit 1.2 of the Predecessor
Shelf)
Exhibit 4.1 - Form of Indenture (incorporated by reference to Exhibit 4.1 of
the Predecessor Shelf)
Exhibit 4.2 - Form of certificate for Common Stock (incorporated by reference
to Exhibit 4.2 of the Predecessor Shelf)
Exhibit 5.1 - Opinion of Davis Polk & Wardwell as to the legality of
Securities to be issued
Exhibit 5.2 - Opinion of Piper & Marbury L.L.P. as to the legality of
Securities to be issued
Exhibit 12 - Statement re: Computation of Consolidated Ratio of Earnings to
Fixed Charges of the Company
Exhibit 23.1 - Consent of Ernst & Young LLP
Exhibit 23.2 - Consent of Davis Polk & Wardwell (included in Exhibit 5.1)
Exhibit 23.3 - Consent of Piper & Marbury L.L.P. (included in Exhibit 5.2)
Exhibit 24 - Powers of Attorney (previously filed)
Exhibit 25 - Statement of Eligibility and Qualification of the Trustee
under the Trust Indenture Act (to be filed in accordance
with Section 305(b)(2) of the Trust Indenture Act of 1939)
Item 17. Undertakings. The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made of the securities registered hereby, 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 range may be reflected in the form
of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price
represent no more than 20 percent change in the maximum
aggregate offering price set forth in the "Calculation of
Registration Fee" table in this 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 the undertakings set forth in paragraph (i) and (ii)
above do not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in periodic reports
filed with or furnished to the Commission by the registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in this registration statement.
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered herein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
The undersigned registrant hereby further undertakes that, for
purposes of determining any liability under the Securities Act of 1933, each
filing of the registrant's annual report pursuant to Section 13(a) or Section
15(d) of the Securities Exchange Act of 1934 (and, where applicable, each
filing of an employee benefit plan's annual report pursuant to Section 15(d)
of the Securities Exchange Act of 1934) that is incorporated by reference in
this registration statement 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.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrants pursuant to the provisions set forth or described
in Item 15 of this Registration Statement, or otherwise, the registrant has
been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrants 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 registered hereby, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
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
upon Rule 430A and contained in a form of prospectus filed by the
registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the
Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the
Securities Act 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.
The undersigned registrant hereby undertakes to file an
application for the purpose of determining the eligibility of the trustee to
act under subsection (a) of Section 310 of the Trust Indenture Act in
accordance with the rules and regulations prescribed by the Commission under
Section 305(b)(2) of the Trust Indenture Act.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-3 and has duly caused
this Amendment No. 1 to the registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in Newport Beach,
California, on the 1st day of July, 1997.
IRVINE APARTMENT COMMUNITIES, INC.
By: /s/ Shawn Howie
------------------------
Shawn Howie
Vice President, Corporate Finance
and Controller
Pursuant to the requirements of the Securities Act of 1933,
this Amendment No. 1 to the registration statement has been signed by the
following persons in the capacities as Directors and Officers of Irvine
Apartment Communities, Inc. and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
- -------------------------------- --------------------------------------- ------------
<S> <C> <C>
* Chairman of the Board of Directors, July 1, 1997
-------------------------- President and Chief Executive Officer
Donald Bren (Principal Executive Officer)
* Director July 1, 1997
--------------------------
Anthony M. Frank
Director July 1, 1997
--------------------------
John F. Grundhofer
* Director July 1, 1997
--------------------------
Bowen H. McCoy
* Director July 1, 1997
--------------------------
Michael D. McKee
* Director July 1, 1997
--------------------------
William H. McFarland
* Director July 1, 1997
--------------------------
Jack W. Peltason
* Director July 1, 1997
--------------------------
John F. Seymour, Jr.
* Senior Vice President, July 1, 1997
-------------------------- Chief Financial Officer and
James E. Mead Secretary (Principal Financial Officer)
/s/ Shawn Howie Vice President, Corporate Finance and July 1, 1997
-------------------------- Controller (Principal Accounting Officer)
Shawn Howie
* Pursuant to Power of Attorney previoulsy filed with the Commission July 1, 1997
/s/ Shawn Howie Attorney-in-Fact
--------------------------
Shawn Howie
</TABLE>
Exhibit 5.1
[Opinion of Davis Polk & Wardwell]
July 1, 1997
Re: Registration Statement on Form S-3
(Registration No. 333-27183)
Irvine Apartment Communities, Inc.
550 Newport Center Drive
Suite 300
Newport Beach, California 92660
Dear Sirs:
We have acted as counsel for Irvine Apartment Communities,
Inc., a Maryland corporation (the "Company"), in connection with the Company's
Registration Statement on Form S-3 (No. 333-27183) (the "Registration
Statement"), filed with the Securities and Exchange Commission under the
Securities Act of 1933, as amended, for the registration of the sale by the
Company from time to time of up to $350 million maximum aggregate initial
offering price of (i) its debt securities ("Debt Securities"), (ii) shares of
its Preferred Stock, par value $1.00 per share (the "Preferred Stock"), (iii)
shares of its Common Stock, par value $.01 per share (the "Common Stock") or
(iv) Warrants to purchase Debt Securities, Preferred Stock or Common Stock
(the "Warrants"). The Debt Securities and Warrants are herein collectively
referred to as the "Securities". Debt Securities may be convertible for
Securities or other securities or rights. The Debt Securities will be issued
under one or more indentures, each in the form filed as an exhibit to the
Registration Statement (each an "Indenture"), between the Company and one or
more trustees (each a "Trustee").
We have examined originals or copies, certified or otherwise
identified to our satisfaction, of such documents, corporate records,
certificates of public officials and other instruments as we have deemed
necessary or advisable for purposes of this opinion.
Based upon the foregoing, we are of the opinion that:
1. When the Company and a Trustee execute and deliver an
Indenture and the specific terms of a particular Debt Security have been duly
authorized and established in accordance with such Indenture, and such Debt
Security has been duly authorized, executed, authenticated, issued and
delivered in accordance with such Indenture, against payment therefor or upon
exchange in accordance with the applicable underwriting or other agreement,
such Debt Security will constitute the valid and binding obligation of the
Company.
2. When the Company and a Warrant Agent execute and deliver a
Warrant Agreement and the specific terms of a particular Warrant have been
duly authorized and established in accordance with such Warrant Agreement, and
such Warrant has been duly authorized, executed, countersigned, issued and
delivered in accordance with such Warrant Agreement, against payment therefor
in accordance with the applicable underwriting or other agreement, such
Warrant will constitute the valid and binding obligation of the Company.
In connection with the opinions expressed above, we have
assumed that, at or prior to the time of the delivery of any such Security,
(i) the Board of Directors of the Company shall have duly established the
terms of such Security and duly authorized the issuance and sale of such
Security, in each case in accordance with Maryland law, and such authorization
shall not have been modified or rescinded; (ii) the Registration Statement
shall have been declared effective and such effectiveness shall not have been
terminated or rescinded; (iii) the applicable Indenture, if any, shall have
been duly authorized, executed and delivered by the Company in accordance with
Maryland law and the applicable Trustee and shall have been qualified under
the Trust Indenture Act of 1939, as amended; (iv) the applicable Warrant
Agreement, if any, shall have duly authorized, executed and delivered by the
Company in accordance with Maryland law and the applicable Warrant Agent; and
(v) there will not have occurred any change in law affecting the validity or
enforceability of such Security. We have also assumed that none of the terms
of any Security to be established subsequent to the date hereof, nor the
issuance and delivery of such Security, nor the compliance by the Company with
the terms of such Security will violate any applicable law or will result in a
violation of any provision of any instrument or agreement then binding upon
the Company, or any restriction imposed by any court or governmental body
having jurisdiction over the Company.
We are members of the Bar of the State of New York and the
foregoing opinion is limited to the laws of the State of New York and the
federal laws of the United States of America.
We hereby consent to the use of this opinion as Exhibit 5.1 to
the Registration Statement and to the reference to our name in the
Registration Statement and the related Prospectus.
Very truly yours,
/s/ Davis Polk & Wardwell
Exhibit 5.2
[Opinion of Piper & Marbury L.L.P.]
July 1, 1997
Irvine Apartment Communities, Inc.
550 Newport Center Drive
Suite 300
Newport Beach, California 92660
Re: Registration Statement on Form S-3
(Registration No. 333-27183)
Ladies and Gentlemen:
We have acted as Maryland counsel to Irvine Apartment
Communities, Inc., a Maryland corporation (the "Company"), in connection with
the Company's Registration Statement on Form S-3 (the "Registration Statement")
filed with the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
contemplated issuance by the Company from time to time of up to $350 million
maximum aggregate initial offering price of (i) unsecured senior or
subordinated debt securities (the "Debt Securities"), which will be issued
under one or more indentures, each in the form filed as an exhibit to the
Registration Statement (each an "Indenture") between the Company and one or
more Trustees (each a "Trustee"); (ii) shares of its preferred stock, par
value $1.00 per share (the "Preferred Stock"); (iii) shares of its common
stock, par value $.01 per share (the "Common Stock"); and (iv) warrants to
purchase Debt Securities, Preferred Stock, Common Stock (the "Warrants"). The
Debt Securities, Preferred Stock or Common Stock and Warrants are herein
collectively referred to as the "Securities". Debt Securities and Preferred
Stock may be convertible for Securities or other securities or rights.
We have examined originals or copies, certified or otherwise
identified to our satisfaction, of such documents, corporate records,
certificates of public officials and other instruments as we have deemed
necessary for the purpose of rendering this opinion.
In addition, this opinion is based on the assumption that the
Registration Statement has become effective under the Securities Act.
On the basis of the foregoing we are of the opinion that:
1. When (i) the applicable Indenture has been duly authorized,
executed and delivered; (ii) the terms of the Debt Securities and of their
issuance and sale have been duly established in conformity with the Indenture
relating to the Debt Securities 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 or regulatory body having jurisdiction
over the Company; and (iii) the Debt Securities have been duly authorized,
executed and authenticated in accordance with the Indenture relating to the
Debt Securities, and duly issued and sold as contemplated by the Registration
Statement and any prospectus supplement relating thereto, the Debt Securities
(including any Debt Securities duly issued (x) upon the exchange of any shares
of Preferred Stock that are exchangeable into Debt Securities or (y) upon
exercise of any Warrants exercisable for Debt Securities) will constitute
valid and legally binding obligations of the Company enforceable in accordance
with their terms, subject to (a) bankruptcy, insolvency, reorganization,
fraudulent transfer, moratorium and other similar laws now or hereafter in
effect relating to or affecting creditors' rights generally, and (b) general
principles of equity (regardless of whether considered in a proceeding at law
or in equity).
2. When (i) the Warrant Agreement relating to the Warrants (the
"Warrant Agreement") has been duly authorized, executed and delivered; (ii)
the terms of the Warrants and of their issuance and sale have been duly
established in conformity with the Warrant Agreement relating to such Warrants
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 or
regulatory body having jurisdiction over the Company; and (iii) the Warrants
have been duly authorized, executed and countersigned in accordance with the
Warrant Agreement relating to such Warrants, and issued and sold in the form
and in the manner contemplated in the Registration Statement and any
prospectus supplement relating thereto, such Warrants will constitute valid
and legally binding obligations of the Company enforceable in accordance with
their terms, subject to (a) bankruptcy, insolvency, reorganization, fraudulent
transfer, moratorium and other similar laws now or hereafter in effect
relating to or affecting creditors' rights generally, and (b) general
principles of equity (regardless of whether considered in a proceeding at law
or in equity).
3. When (i) the terms of the Preferred Stock have been duly and
properly authorized for issuance and Articles Supplementary to the Charter of
the Company classifying the Preferred Stock and setting forth the terms
thereof have been filed; and (ii) such shares of Preferred Stock have been
duly issued and paid for in the manner contemplated in the Registration
Statement and any prospectus supplement relating thereto, such shares of
Preferred Stock will be validly issued, fully paid and nonassessable.
4. When (i) the shares of Common Stock have been duly and
properly authorized for issuance; and (ii) the shares of Common Stock have
been duly issued, sold and delivered as contemplated in the Registration
Statement and any prospectus supplement relating thereto, the shares of Common
Stock (including any Common Stock duly issued (x) upon the exchange of any
shares of Preferred Stock that are exchangeable into Common Stock, (y) upon
the exercise of any Warrants exercisable for Common Stock or (z) upon the
conversion of any Debt Securities that are convertible or exchangeable into
Common Stock), will be validly issued, fully paid and nonassessable.
The foregoing opinion is limited to the laws of the State of
Maryland and the federal laws of the United Sates of America.
We hereby consent to the use of this opinion as an exhibit to
the Registration Statement and to the reference to our name under the heading
"Legal Matters." 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
Securities Act.
Very truly yours,
/s/ Piper & Marbury L.L.P.
<TABLE>
Exhibit 12
<CAPTION>
Irvine Apartment Communities, Inc.
Computation of Consolidated Ratio of Earnings to Fixed Charges
(in thousands, except ratios)
Quarter Ended
March 31, Year Ended December 31,
------------------- -----------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
- ----------------------------------------------------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings
Earnings (Loss) Before Extraordinary Item and
Minority/Predecessor Interest in Income (Loss)..... $ 13,519 $ 8,688 $ 41,192 $ 25,056 $ 12,279 $ (387) $ (1,600)
Add back:
Interest Expense..................................... 6,861 7,302 29,506 25,894 26,827 50,248 49,154
Amortization of Deferred Financing Costs............. 649 662 2,627 8,510 15,942 3,012 1,474
Portion of Rent Expense Deemed to Represent Interest. 40 29 115 89 68
------- ------- ------- ------- ------- ------- -------
Earnings Available for Fixed Charges................. 21,069 16,681 73,440 59,549 55,116 52,873 49,028
------- ------- ------- ------- ------- ------- -------
Fixed Charges
Interest Expense..................................... 6,861 7,302 29,506 25,894 26,827 50,248 49,154
Amortization of Deferred Financing Costs............. 649 662 2,627 8,510 15,942 3,012 1,474
Capitalized Interest................................. 1,098 965 3,151 6,779 1,261 233 640
Portion of Rent Expense Deemed to Represent Interest. 40 29 115 89 68
------- ------- ------- ------- ------- ------- -------
Fixed Charges........................................ $ 8,648 $ 8,958 $ 35,399 $ 41,272 $ 44,098 $ 53,493 $ 51,268
------- ------- ------- ------- ------- ------- -------
Ratio of Earnings to Fixed Charges................... 2.44x 1.86x 2.07x 1.44x 1.25x 0.99x 0.96x
Excess of Fixed Charges Over Earnings................ $ (620) $ (2,240)
- ----------
For the purpose of calculating the consolidated ratio of earnings to fixed
charges, earnings consist of earnings before income taxes, extraordinary
items, minority/predecessor interest in income (loss), and fixed charges.
Fixed charges consist of interest expense, capitalized interest, amortization
of deferred financing costs and that portion of rental expense representative
of the interest factor in leases.
</TABLE>
Exhibit 23.1
IRVINE APARTMENT COMMUNITIES, INC.
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in this
Registration Statement (Form S-3) and related Prospectus of Irvine Apartment
Communities, Inc. for the registration of up to $350,000,000 of debt
securities, preferred stock, common stock and warrants and to the
incorporation by reference therein of our reports dated January 31, 1997, with
respect to the consolidated financial statements of Irvine Apartment
Communities, Inc. incorporated by reference in its Annual Report (Form 10-K)
for the year ended December 31, 1996 and the related financial statement
schedule included therein, filed with the Securities and Exchange Commission.
ERNST & YOUNG LLP
Newport Beach, California
July 1, 1997
