<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 16, 1998
REGISTRATION NO. 333-43681
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
SIMON DEBARTOLO GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
MARYLAND 35-1901999
(STATE OR OTHER JURISDICTION OF INCORPORATION OR (IRS EMPLOYER IDENTIFICATION NO.)
ORGANIZATION)
</TABLE>
NATIONAL CITY CENTER
115 WEST WASHINGTON STREET, SUITE 15 EAST, INDIANAPOLIS, IN 46204, (317)
636-1600
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
DAVID SIMON
CHIEF EXECUTIVE OFFICER
SIMON DEBARTOLO GROUP, INC.
NATIONAL CITY CENTER
115 WEST WASHINGTON STREET, SUITE 15 EAST, INDIANAPOLIS, IN 46204, (317)
636-1600
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C>
DAVID C. WORRELL, ESQ. ROBERT E. KING, JR., ESQ.
BAKER & DANIELS ROGERS & WELLS
300 NORTH MERIDIAN STREET 200 PARK AVENUE
INDIANAPOLIS, INDIANA 46204 NEW YORK, NEW YORK 10166
(317) 237-0300 (212) 878-8000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time or at one time after the effective date of the Registration
Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [X]
------------------------
PURSUANT TO RULE 429 UNDER THE SECURITIES ACT OF 1933, THE PROSPECTUS
INCLUDED IN THIS REGISTRATION STATEMENT IS A COMBINED PROSPECTUS WHICH ALSO
RELATES TO REGISTRATION STATEMENT NO. 333-11431, PREVIOUSLY FILED BY THE
REGISTRANT ON FORM S-3 AND DECLARED EFFECTIVE ON SEPTEMBER 26, 1996. THIS NEW
REGISTRATION STATEMENT ALSO CONSTITUTES POST-EFFECTIVE AMENDMENT NO. 1 TO
REGISTRATION STATEMENT NO. 333-11431 AND SUCH POST-EFFECTIVE AMENDMENT NO. 1
SHALL HEREAFTER BECOME EFFECTIVE CONCURRENTLY WITH THE EFFECTIVENESS OF THIS NEW
REGISTRATION STATEMENT AND IN ACCORDANCE WITH SECTION 8(C) OF THE SECURITIES ACT
OF 1933.
THIS REGISTRATION STATEMENT SHALL HEREAFTER BECOME EFFECTIVE IN ACCORDANCE
WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 ON SUCH DATE AS THE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
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<PAGE> 2
EXPLANATORY NOTE
This Registration Statement relates to securities which may be offered from
time to time by Simon DeBartolo Group, Inc. (the "Company"). This Registration
Statement contains a form of basic prospectus (the "Basic Prospectus") which
will be used in connection with an offering of securities by the Company. The
specific terms of the securities to be offered will be set forth in a Prospectus
Supplement relating to such securities.
<PAGE> 3
PROSPECTUS
[SIMON DEBORTOLOG GROUP LOGO]
$950,000,000
SIMON DEBARTOLO GROUP, INC.
COMMON STOCK, PREFERRED STOCK, DEPOSITARY SHARES AND WARRANTS
------------------------
Simon DeBartolo Group, Inc. (the "Company") may from time to time offer (i)
shares of its common stock, par value $0.0001 per share ("Common Stock"), (ii)
in one or more series, shares of its preferred stock, par value $0.0001 per
share ("Preferred Stock"), (iii) in one or more series, its Preferred Stock
represented by depositary shares ("Depositary Shares") and (iv) warrants to
purchase Common Stock or Preferred Stock ("Warrants"), with an aggregate public
offering price of up to $950,000,000 (or its equivalent based on the exchange
rate at the time of sale) in amounts, at prices and on terms to be determined at
the time of offering. The Common Stock, Preferred Stock, Depositary Shares and
Warrants (collectively, the "Securities") may be offered, separately or
together, in amounts, at prices and on terms to be described in one or more
supplements to this Prospectus (each a "Prospectus Supplement").
The specific terms of the Securities in respect of which this Prospectus is
being delivered will be set forth in the applicable Prospectus Supplement and
will include, where applicable: (i) in the case of Common Stock, any initial
public offering price; (ii) in the case of Preferred Stock, the specific title
and stated value, any distribution, liquidation, redemption, conversion, voting
and other rights, and any initial public offering price; (iii) in the case of
Depositary Shares, the fractional Preferred Stock represented by each Depositary
Share; and (iv) in the case of Warrants, the duration, offering price, exercise
price and detachability. In addition, such specific terms may include
limitations on direct or beneficial ownership and restrictions on transfer of
the Securities, in each case as may be appropriate to assist in maintaining the
status of the Company as a real estate investment trust ("REIT") for federal
income tax purposes.
The applicable Prospectus Supplement also will contain information, where
applicable, about the material U.S. federal income tax considerations relating
to, and any listing on a securities exchange of, the Securities covered by such
Prospectus Supplement, not contained in this Prospectus.
The Securities may be offered directly or through agents designated from
time to time by the Company or to or through underwriters or dealers. If any
agents or underwriters are involved in the sale of any of the Securities, their
names, and any applicable purchase price, fee, commission or discount
arrangement between or among them, will be set forth, or will be calculable from
the information set forth, in an accompanying Prospectus Supplement. No
Securities may be sold by the Company through agents, underwriters or dealers
without delivery of a Prospectus Supplement describing the method and terms of
the offering of such Securities. Shares of Common Stock may also be issued
pursuant to this Prospectus to holders of units of limited partnership interest
("Units") in Simon DeBartolo Group, L.P. in exchange for their Units, which
Units may be exchanged for shares of Common Stock on a one-for-one basis or
cash, as selected by the Company, pursuant to the partnership agreement of such
partnership. See "Plan of Distribution."
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
THE DATE OF THIS PROSPECTUS IS JANUARY 16, 1998.
<PAGE> 4
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, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company can be inspected and
copied, at the prescribed rates, at the public reference facilities of the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the Commission's regional offices at 7 World Trade Center, Suite 1300, New York,
New York 10048, and Northwestern Atrium Center, 500 W. Madison Street, Chicago,
Illinois 60661. The Company's Common Stock is traded on the New York Stock
Exchange ("NYSE"). Reports and other information concerning the Company may be
inspected at the principal office of the NYSE at 20 Broad Street, New York, New
York 10005.
This Prospectus constitutes a part of a Registration Statement on Form S-3
(the "Registration Statement") filed by the Company with the Commission under
the Securities Act of 1933, as amended (the "Securities Act"). This Prospectus
omits certain of the information contained in the Registration Statement and the
exhibits and schedules thereto, in accordance with the rules and regulations of
the Commission. For further information concerning the Company and the
Securities offered hereby, reference is hereby made to the Registration
Statement and the exhibits and schedules filed therewith, which may be inspected
without charge at the office of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 and copies of which may be obtained from the Commission
at prescribed rates. The Commission maintains a World Wide Web Site
(http://www.sec.gov) that contains such material regarding issuers that file
electronically with the Commission. This Registration Statement has been so
filed and may be obtained at such site. 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.
Each such statement is qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents of the Company which have been filed with the
Commission are hereby incorporated by reference in this Prospectus.
1. The Company's Registration Statement on Form 8-A, dated November 24,
1993, which contains, among other things, a description of the Common Stock,
including any amendment or report filed for the purpose of updating such
description;
2. The Company's Proxy Statement dated March 31, 1997, relating to the
annual meeting of stockholders held on May 14, 1997;
3. The Company's Annual Report on Form 10-K for the year ended December 31,
1996;
4. The Company's Quarterly Reports on Form 10-Q for the calendar quarters
ended March 31, June 30, and September 30, 1997; and
5. The Company's Current Reports on Form 8-K filed on March 27, May 22,
July 8, July 23, August 15, September 15, September 17, October 14, November 21,
November 24, and December 23, 1997.
The Company's Exchange Act filing number is 1-12618.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14, or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the Securities offered hereby shall be deemed
to be incorporated by reference in this Prospectus and to be a part hereof from
the respective dates of filing such documents. Any statement or information
contained in a document incorporated or deemed to be incorporated by reference
herein shall be deemed modified or superseded for the purposes of this
Prospectus to the extent that a statement contained herein or in any
subsequently filed document which also is or is deemed to be incorporated herein
by reference modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
2
<PAGE> 5
The Company will provide without charge to any person to whom a Prospectus
is delivered, on written or oral request of such person, a copy of any or all of
the documents incorporated herein by reference (other than exhibits and
schedules to such documents). Requests should be directed to: James M. Barkley,
General Counsel, at National City Center, 115 West Washington Street, Suite 15
East, Indianapolis, IN 46204, Telephone (317) 636-1600.
THE COMPANY
The Company is a self-administered and self-managed real estate investment
trust ("REIT"). Through its subsidiary partnership, Simon DeBartolo Group, L.P.
(the "Operating Partnership"), the Company is engaged primarily in the
ownership, development, management, leasing, acquisition and expansion of income
producing properties, primarily regional malls and community shopping centers.
On August 9, 1996 (the "Merger Date"), the Company acquired the national
shopping center business of DeBartolo Realty Corporation ("DRC"), The Edward J.
DeBartolo Corporation ("EJDC") and their affiliates as the result of the merger
(the "Merger") of DRC with a subsidiary of the Company. As a result of the
Merger, the Company expanded its portfolio by 61 properties and combined the
management resources of the merged entities to create one of the most
experienced management teams in the shopping center business. Management
believes that the Company's portfolio, as measured in gross leasable area
("GLA"), is the largest and most geographically diverse portfolio of any
publicly traded REIT in North America and that the Company's market
capitalization is the largest of any publicly traded real estate company in
North America.
On September 29, 1997, the Operating Partnership completed a cash tender
offer for all of the outstanding shares of beneficial interest of The Retail
Property Trust, a Massachusetts business trust ("RPT"). RPT owned 98.8% of
Shopping Center Associates, a New York general partnership ("SCA"), which owned
or had interests in twelve regional malls and one community center comprising
approximately twelve million square feet of GLA in eight states. Following the
completion of the tender offer, the SCA portfolio was restructured. The
Operating Partnership exchanged its 50% interests in two SCA properties for
similar interests in two other SCA properties in which it had 50% interests,
with the result that SCA now owns interests in a total of eleven properties. In
addition, an affiliate of the Operating Partnership acquired the remaining 1.2%
interest in SCA. The total cost for the acquisition of RPT and related
transactions is estimated at $1.2 billion, which includes debt of SCA and SCA's
share of joint venture debt.
Management continues to actively review and evaluate a number of individual
property and portfolio acquisition opportunities. Certain of these opportunities
are the subject of active negotiations. Such acquisitions may, individually or
in the aggregate, be material to the results of operations or financial
condition of the Company.
In addition, the Company owns, through the Operating Partnership,
substantially all of the economic interest in affiliated companies (the
"Management Companies") which manage regional malls and community shopping
centers not wholly owned by the Operating Partnership and certain other
properties, engage in certain property development activities and provide
architectural, design, construction and other services to substantially all of
the Properties (as defined below) owned by the Operating Partnership, as well as
certain other regional malls and community shopping centers owned by third
parties.
As of September 30, 1997, the Operating Partnership owned or held interests
in a diversified portfolio of 200 income producing properties (the
"Properties"), including 124 super-regional and regional malls, 66 community
shopping centers, four specialty retail centers, five mixed-use properties and
one value-oriented super-regional mall located in 33 states. The Properties
contain an aggregate of approximately 128 million square feet of GLA, of which
approximately 75 million square feet is GLA owned by the Operating Partnership
("Owned GLA"). The Operating Partnership has interests in five properties under
construction aggregating an additional four million square feet of GLA, and own
seven parcels of land held for future development. The Operating Partnership,
together with the Management Companies, owns or manages approximately 144
million square feet of GLA of retail and mixed-use properties.
As of September 30, 1997, the Company, the Operating Partnership and its
affiliated Management Companies had an aggregate of approximately 5,900
employees.
Unless indicated otherwise, the information in this Prospectus is presented
as of September 30, 1997.
The Company's executive offices are located at National City Center, 115
West Washington Street, Indianapolis, Indiana 46204, and its telephone number is
(317) 636-1600.
3
<PAGE> 6
RECENT DEVELOPMENTS
On November 11, 1997, the Company issued 3,809,523 shares of Common Stock
upon the conversion of all of the outstanding shares of the Company's Series A
Preferred Stock, $.0001 par value per share.
On December 2, 1997, the Company issued 310,000 shares of Common Stock to
an institutional investor in a public offering. The Company contributed the net
proceeds of approximately $10.3 million to the Operating Partnership in exchange
for an equal number of Units of the Operating Partnership.
On December 8, 1997, the Operating Partnership acquired a 50% limited
partnership interest in a limited partnership that owns one of the SCA
properties, South Hills Village Shopping Center, a regional shopping center with
approximately 1.1 million square feet of GLA located in Pittsburgh,
Pennsylvania, for approximately $76.0 million. As a result, the Operating
Partnership now owns 100% of the property. A portion of the purchase price was
paid by issuing 1,534,330 shares of Common Stock valued at approximately $50.0
million.
On December 23, 1997, the Company issued and sold 301,887 shares of Common
Stock in an underwritten public offering. The Company received net proceeds,
after estimated expenses, of approximately $9.5 million which it contributed to
the Operating Partnership for an equal number of Units of the Operating
Partnership.
On December 29, 1997, the Company announced the formation of a joint
venture with The Macerich Company, a publicly-held REIT ("Macerich"), to acquire
a portfolio of twelve regional malls in eight states that comprise approximately
10.7 million square feet of GLA. The venture has agreed to pay $974.5 million
for the portfolio, including the assumption of debt. The Company and Macerich
would each own 50% of the joint venture and would manage one half of the
acquired properties. The transaction is expected to close in February 1998.
On December 31, 1997, Simon Property Group, L.P. ("SPG, LP"), a Delaware
limited partnership which was wholly-owned by the Company and the Operating
Partnership, merged with and into the Operating Partnership with the Operating
Partnership as the surviving entity. As a result, the Operating Partnership
succeeded to all of the assets and assumed all of the liabilities of SPG, LP.
On January 5, 1997, the Company announced the acquisition of The Fashion
Mall at Keystone at the Crossing, a 597,000 square foot GLA regional mall
located in Indianapolis, Indiana, an adjacent small community center and several
outparcels of real estate. The purchase price includes the assumption of
approximately $64.9 million in permanent financing.
USE OF PROCEEDS
Except as otherwise provided in the applicable Prospectus Supplement,
proceeds to the Company from any sale of the Securities offered hereby will be
added to the working capital of the Company and will be available for general
corporate purposes, which may include the repayment of indebtedness, the
financing of capital commitments and possible future acquisitions associated
with the continued expansion of the Operating Partnership's business.
4
<PAGE> 7
RATIO OF EARNINGS TO FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
The following table sets forth the historical consolidated ratio of
earnings to fixed charges and preferred stock dividends of the Company and its
predecessor for the periods indicated:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
- --------------- -------------------------------------------
1997 1996 1996 1995 1994 1993 1992
- ----- ----- ----- ----- ----- ---- ----
<S> <C> <C> <C> <C> <C> <C>
1.60x 1.43x 1.55x 1.66x 1.43x (1) (1)
</TABLE>
- ---------------
(1) From the commencement of operations on December 20, 1993 through December
31, 1993, the ratio of earnings to fixed charges and preferred stock
dividends was 3.36x. Prior to the commencement of business by the Company,
the predecessor of the Company maintained a different ownership and equity
structure. The predecessor's operating properties have historically
generated positive net cash flow. The financial statements of the
predecessor show net income for the period January 1, 1993 through December
19, 1993, and net losses for the year ended December 31, 1992. The ratio of
earnings to fixed charges and preferred stock dividends for the period
January 1, 1993 through December 19, 1993 was 1.11x. As a consequence of
the net losses for the year ended December 31, 1992, the computation of the
ratio of earnings to fixed charges and preferred stock dividends for that
year indicates that earnings were inadequate to cover fixed charges by
approximately $12.8 million.
For purposes of computing the ratio of earnings to fixed charges and
preferred stock dividends, earnings have been calculated by adding fixed
charges, excluding capitalized interest, to income (loss) from continuing
operations including income from minority interests which have fixed charges,
and including distributed operating income from unconsolidated joint ventures
instead of income from unconsolidated joint ventures. Fixed charges and
preferred stock dividends consist of interest costs, whether expensed or
capitalized, the interest component of rental expense and amortization of debt
issuance costs, plus any dividends on outstanding preferred stock.
DESCRIPTION OF THE SECURITIES
The following summary is a description of certain provisions of the Amended
and Restated Articles of Incorporation (the "Charter") and the Amended and
Restated By-laws (the "By-laws") of the Company, each as in effect on the date
hereof. This summary does not purport to be complete and is qualified by
reference to the Charter and By-laws, which have been filed as exhibits to the
Registration Statement of which this Prospectus is a part.
Under the Charter, the total number of shares of all classes of capital
stock that the Company has authority to issue is 650,000,000 shares, par value
$0.0001 per share, currently consisting of 371,796,000 shares of Common Stock,
12,000,000 shares of Class B Common Stock, par value $0.0001 per share (the
"Class B Common Stock"), 4,000 shares of Class C Common Stock, par value $0.0001
per share (the "Class C Common Stock"), 4,000,000 shares of Series A Preferred
Stock, par value $0.0001 per share (the "Series A Preferred Stock"), 9,200,000
shares of 8 3/4% Series B Cumulative Reedemable Preferred Stock, par value
$0.0001 per share (the "Series B Preferred Stock"), 3,000,000 shares of 7.89%
Series C Cumulative Step-Up Premium Rate Preferred Stock, par value $0.0001 per
share (the "Series C Preferred Stock"), and 250,000,000 shares of Excess Stock.
COMMON STOCK
Common Stock, Class B Common Stock and Class C Common Stock
As of January 2, 1998, the Company had 106,439,001 shares of its Common
Stock outstanding, 3,200,000 shares of its Class B Common Stock outstanding and
4,000 shares of its Class C Common Stock outstanding. All outstanding shares of
Common Stock, Class B Common Stock and Class C Common Stock are duly authorized,
fully paid and nonassessable. Holders of Common Stock, Class B Common Stock and
Class C Common Stock are entitled to one vote for each share held of record on
all matters submitted to a vote of the stockholders, other than the election of
directors elected exclusively by the holders of Class B Common Stock
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<PAGE> 8
and the election of directors elected exclusively by the holders of Class C
Common Stock. Holders of Common Stock, Class B Common Stock and Class C Common
Stock have no right to cumulative voting for the election of directors. Subject
to preferential rights of holders of Preferred Stock, the holders of Common
Stock, Class B Common Stock and Class C Common Stock are entitled to receive
ratably such dividends as may be declared by the Board of Directors of the
Company (the "Board of Directors") out of funds legally available therefor. If
the Company is liquidated, subject to the right of the holders of Preferred
Stock, (including any Excess Stock into which shares such series has been
converted) to receive preferential distributions, each outstanding share of
Common Stock, Class B Common Stock and Class C Common Stock, including shares of
Excess Stock, if any, will be entitled to participate pro rata in the assets
remaining after payment of, or adequate provision for, all known debts and
liabilities of the Company.
The holders of Class B Common Stock are entitled to elect four of the 13
directors of the Company, unless their portion of the aggregate equity interest
of the Company (including Common Stock, Class B Common Stock and Units
considered on an as-converted basis) decreases to less than 50% of the amount
that they owned as of the consummation of the Merger, in which case they will be
entitled to elect only two directors of the Company.
Shares of Class B Common Stock may be converted at the holder's option into
an equal number of shares of Common Stock. If the Simons' aggregate equity
interest in the Company on a fully diluted basis has been reduced to less than
5%, the outstanding shares of Class B Common Stock convert automatically into an
equal number of shares of Common Stock. Shares of Class B Common Stock also
convert automatically into an equal number of shares of Common Stock upon the
sale or transfer thereof to a person not affiliated with the Simons. Holders of
shares of Common Stock and Class B Common Stock have no sinking fund rights,
redemption rights or preemptive rights to subscribe for any securities of the
Company.
Four thousand shares of Class C Common Stock were authorized and issued to
EJDC in connection with the Merger to enable the estate of Edward J. DeBartolo,
Edward J. DeBartolo, Jr., M. Denise DeBartolo York, EJDC and certain of their
affiliates, including certain other DeBartolo family members and estates and
trusts established for their benefit (collectively, the "DeBartolos"), to elect
two members of the Board of Directors under the Charter. Except with respect to
the right to elect directors, as summarized below, each share of Class C Common
Stock has the same rights and restrictions as a share of Class B Common Stock.
The holders of Class C Common Stock are entitled to elect two of the 13
directors of the Company, unless their portion of the aggregate equity interest
of the Company (including Common Stock, Class C Common Stock and Units
considered on an as-converted basis) decreases to less than 50% of the amount
that they owned as of the closing of the Merger, in which case they will be
entitled to elect only one director of the Company.
Shares of Class C Common Stock may be converted at the holder's option into
an equal number of shares of Common Stock. If the DeBartolos' aggregate equity
interest in the Company on a fully diluted basis has been reduced to less than
5%, the outstanding shares of Class C Common Stock convert automatically into an
equal number of shares of Common Stock. Shares of Class C Common Stock will also
convert automatically into an equal number of shares of Common Stock upon the
sale or transfer thereof to a person not affiliated with the DeBartolos. Holders
of shares of Class C Common Stock have no sinking fund rights, redemption rights
or preemptive rights to subscribe for any securities of the Company.
Certain Provisions of the Partnership Agreement, the Charter and By-Laws and
Maryland Law
The partnership agreement of the Operating Partnership provides that the
Company may not merge, consolidate or engage in any combination with another
person or sell all or substantially all of its assets unless such transaction
includes the merger of the Operating Partnership, which merger requires the
approval of the holders of a majority of the Units. These voting requirements
might limit the possibility for acquisition or change in control of the Company,
even if some of the Company's stockholders deem such a change to be in the
Company's and their best interest.
The Charter and By-laws and certain Maryland statutes contain provisions
that may be deemed to have an anti-takeover effect and that may delay, defer or
prevent a tender offer or takeover attempt that a stockholder might consider in
its best interest, including an attempt that might result in a premium over the
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<PAGE> 9
market price for the shares held by stockholders. These provisions are expected
to discourage certain types of coercive takeover practices and inadequate
takeover bids and to encourage persons seeking to acquire control of the Company
to negotiate first with its Board of Directors. The Company's management
believes that the benefits of these provisions outweigh the potential
disadvantages of discouraging such proposals because, among other things,
negotiation of such proposals might result in an improvement of their terms.
Pursuant to the Maryland General Corporation Law (the "MGCL"), a
corporation generally cannot dissolve, merge, consolidate, sell all or
substantially all of its assets, engage in a share exchange or engage in similar
transactions outside the ordinary course of business unless approved by the
Board of Directors and by the affirmative vote of at least two-thirds of the
votes entitled to be cast on the matter.
Number of Directors; Filling Vacancies; Removal
The Charter currently fixes the number of directors of the Board of
Directors at 13. It provides that, subject to any separate rights of holders of
preferred stock (i) any vacancy created by the resignation, death or removal of
a director elected by the holders of Class B Common Stock will be filled by the
holders of the Class B Common Stock, (ii) any vacancy created by the
resignation, death or removal of a director elected by the holders of Class C
Common Stock will be filled by the holders of Class C Common Stock and (iii) any
vacancy created by the resignation, death or removal of any other director may
be filled by a majority of the remaining directors or by the stockholders at a
special meeting. If a vacancy within the circumstances of clause (iii) has not
been filled within 30 days after it occurs, a special meeting of the holders of
the Series A Preferred Stock, Common Stock, Class B Common Stock and Class C
Common Stock (all voting together as a single class) must be called to fill the
vacancy.
The Charter provides that, subject to the right of holders of any class
separately entitled to elect one or more directors, if any such right has been
granted, directors may be removed only for cause and only upon the affirmative
vote of holders of at least a majority of the voting power of all the then
outstanding shares entitled to vote generally in the election of directors,
voting together as a single class.
Advance Notice Provisions for Stockholder Nominations and Stockholder
Proposals
The By-laws establish an advance notice procedure for stockholders to make
nominations of candidates for election as directors or bring other business
before an annual meeting of stockholders of the Company. This procedure provides
that (i) only persons who are nominated by, or at the direction of, the Board of
Directors, or by a stockholder who has given timely written notice containing
specified information to the Secretary of the Company prior to the meeting at
which directors are to be elected, will be eligible for election as directors of
the Company, and (ii) at an annual meeting only such business may be conducted
as has been brought before the meeting by, or at the direction of, the Chairman
of the Board of Directors or by a stockholder who has given timely written
notice to the Secretary of the Company of such stockholder's intention to bring
such business before such meeting. In general, for notice of stockholder
nominations or business to be made at an annual meeting to be timely, such
notice must be received by the Company not less than 60 days nor more than 90
days prior to the first anniversary of the previous year's annual meeting. Such
notice must contain information concerning the person or persons to be nominated
or the matters to be brought before the meeting and concerning the stockholder
submitting the proposal.
The purpose of requiring stockholders to give the Company advance notice of
nominations and other business is to afford the Board of Directors a meaningful
opportunity to consider the qualifications of the proposed nominees or the
advisability of the other proposed business and, to the extent deemed necessary
or desirable by the Board of Directors, to inform stockholders and make
recommendations about such qualifications or business, as well as to provide a
more orderly procedure for conducting meetings of stockholders. Although the
By-laws do not give the Board of Directors any power to disapprove stockholder
nominations for the election of directors or proposals for action, they may have
the effect of precluding a contest for the election of directors or the
consideration of stockholder proposals if the proper procedures are not
followed, and of discouraging or deterring a third party from conducting a
solicitation of proxies to elect its own slate of directors or to approve its
own proposal, without regard to whether consideration of such nominees or
proposals might be harmful or beneficial to the Company and its stockholders.
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Director Action
The Charter, By-laws and MGCL generally require that a majority of a quorum
is necessary to approve any matter to come before the Board of Directors;
however, certain matters including sales of property, transactions with the
Simons or the DeBartolos and certain affiliates and certain other matters will
also require approval of the independent directors on the Board of Directors.
The By-laws require that at least six of such independent directors approve the
sale of any property owned by any partnership in which the Company acts as
general partner, and the Charter requires that a majority of such independent
directors approve any transaction between the Company and its subsidiaries on
the one hand and the Simons and/or the DeBartolos on the other hand.
PREFERRED STOCK
The following is a description of the preferences, rights and privileges of
each outstanding series of Preferred Stock and certain general terms and
provisions of any future series of Preferred Stock to which any Prospectus
Supplement may relate.
The Board of Directors is authorized to establish one or more classes and
series of capital stock, including series of Preferred Stock, from time to time
and to establish the number of shares in each class or series and to fix the
preferences, conversion and other rights, voting powers, restrictions,
limitations as to distributions, qualifications and terms and conditions of
redemption of such class or series, without any further vote or actions by the
stockholders unless such action is required by applicable law or the rules of
any stock exchange or automated quotation system on which the Company's
securities may be listed. Because the Board of Directors has the power to
establish the preferences and rights of each series of Preferred Stock, it may
afford the holder of any series of Preferred Stock preferences, powers and
rights, voting or otherwise, senior to the rights of holders of Common Stock.
The Preferred Stock will, when issued, be fully paid and nonassessable.
Series A Preferred Stock
As of September 30, 1997, the Company had 4,000,000 shares of Series A
Preferred Stock Outstanding. On November 11, 1997, all of the outstanding shares
of Series A Preferred Stock were converted into 3,809,523 shares of Common
Stock. The Company expects to reclassify the authorized shares of Series A
Preferred Stock into shares of Common Stock.
Series B Preferred Stock
The Company currently has outstanding 8,000,000 shares of Series B
Preferred Stock. Series B Preferred Stock ranks, with respect to dividends,
voting, preferences, qualifications, limitations, restrictions and the
distribution of assets upon liquidation, senior to Common Stock, Class B Common
Stock and Class C Common Stock and pari passu with the Series C Preferred Stock.
The approval of the holders of two-thirds of the outstanding Series B Preferred
Stock is required in order to authorize or increase any class or series of stock
senior to the Series B Preferred Stock with respect to distributions,
liquidation preference, dissolution or winding up. The Series B Preferred Stock
has no preemptive rights and is not subject to any sinking fund or other
obligation of the Company to purchase or redeem it.
The Series B Preferred Stock is not redeemable prior to September 29, 2006.
On and after September 29, 2006, the Series B Preferred Stock will be redeemable
for cash at the option of the Company, in whole or in part, at $25.00 per share,
plus distributions accrued and unpaid to the redemption date. The redemption
price (other than the portion thereof consisting of accrued and unpaid
distributions) is payable solely out of the sale proceeds of other capital stock
of the Company and from no other source.
Holders of Series B Preferred Stock are entitled to receive, when and as
authorized by the Board of Directors, cumulative cash dividends of 8 3/4% of the
liquidation preference per annum payable quarterly in arrears when and as
declared by the Board of Directors, out of funds legally available therefor, on
or about the last business day of each quarter. Dividends are cumulative from
the payment date of any such declaration and accrue whether or not the Company
has earnings, whether or not there are funds of the Company legally available
for the payment of such dividends and whether or not such distributions are
declared.
If, for any taxable year, the Company elects to designate as "capital gain
dividends" (as defined in Section 857 of the Code) a portion (the "Capital Gains
Amount") of the distributions paid or made available
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for the year to holders of all classes of shares of capital stock, including the
Preferred Stock (the "Total Distributions"), then the portion of the Capital
Gains Amount allocable to holders of the Series B Preferred Stock will be the
Capital Gains Amount multiplied by a fraction, the numerator of which will be
the distributions paid or made available to holders of the Series B Preferred
Stock for the year and the denominator of which will be the Total Distributions.
The Company may not declare or pay any dividend on shares ranking, as to
distributions, on parity with the Series B Preferred Stock or on the Junior
Stock for any period unless full cumulative distributions have been or
contemporaneously are declared and paid (or are declared and a sum sufficient
for the payment thereof is set apart for such payment) on shares of Series B
Preferred Stock for all past and current distribution periods. When
distributions are not paid in full (or a sum sufficient for such full payment is
not set apart) upon the shares of Series B Preferred Stock and the shares of any
other series of Preferred Stock ranking on parity as to distributions with
shares of Series B Preferred Stock, all distributions declared upon shares of
Series B Preferred Stock and the shares on parity shall be declared pro rata
based upon accrued distributions per share due to each. Except as provided in
the prior sentence, unless full cumulative distributions on shares of Series B
Preferred Stock have been or contemporaneously are declared and paid (or are
declared and a sum sufficient for the payment thereof set apart for such
payment), no distributions shall be declared (other than in shares of Junior
Stock), and the Company may not redeem, purchase or acquire any shares of Junior
Stock or shares on parity with the Series B Preferred Stock as to distributions
or upon liquidation.
In the event of a liquidation, whether voluntary or involuntary, the
holders of Series B Preferred Stock then outstanding shall be entitled to be
paid out of the assets of the Company, before any payment shall be made to the
holders of the Junior Stock, an amount equal to $25.00 per share, plus an amount
equal to any unpaid cumulative dividends on Series B Preferred Stock accrued to
the date when such payment shall be made available to the holders thereof.
Neither a consolidation or merger of the Company or a sale of all or
substantially all of its assets, nor a statutory share exchange in which
stockholders of the Company may participate shall be deemed to be a liquidation
of the Company.
If dividends on Series B Preferred Stock are in arrears for six or more
quarterly periods, whether or not such quarterly periods are consecutive, then
the holders of Series B Preferred Stock (voting separately as a class with all
other series of preferred shares upon which like rights have been conferred and
are exercisable) will be entitled to vote for the election of two directors to
serve on the Board of Directors of the Company until all distribution arrearages
have been paid. Under the Company's Charter, as long as any shares of Class B
Common Stock or Class C Common Stock are outstanding, the election of such
directors will eliminate a corresponding number of the directors elected by the
combined holders of the Series A Preferred Stock, Common Stock, Class B Common
Stock and Class C Common Stock. The approval of the holders of two-thirds of the
outstanding Series B Preferred Stock is required in order to amend any provision
of the relevant Articles Supplementary or Charter, whether by merger,
consolidation, or otherwise (an "Event"), so as to materially and adversely
affect the terms of the Series B Preferred Stock; however, an Event will not be
deemed to cause such an effect where the Event does not cause a material change
to the terms of Series B Preferred Stock or the Series B Preferred Stock is
converted into preferred stock of a surviving entity identical in all material
respects to Series B Preferred Stock.
Series C Preferred Stock
The Company currently has outstanding 3,000,000 shares of Series C
Preferred Stock. Series C Preferred Stock ranks, with respect to dividends,
voting, preferences, qualifications, limitations, restrictions and the
distribution of assets upon liquidation, senior to Common Stock, Class B Common
Stock and Class C Common Stock and pari passu with the Series B Preferred Stock.
The approval of the holders of two-thirds of the outstanding Series C Preferred
Stock is required in order to authorize or increase any class or series of stock
senior to the Series C Preferred Stock with respect to distributions,
liquidation preference, dissolution or winding up. The Series C Preferred Stock
has no preemptive rights and is not subject to any sinking fund or other
obligation of the Company to purchase or redeem it.
The Series C Preferred Stock is not redeemable prior to September 30, 2007.
On and after September 30, 2007, the Series C Preferred Stock will be redeemable
for cash at the option of the Company, in whole or in
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<PAGE> 12
part, at $50.00 per share, plus distributions accrued and unpaid to the
redemption date. The redemption price (other than the portion thereof consisting
of accrued and unpaid distributions) is payable solely out of the sale proceeds
of other capital stock of the Company and from no other source.
Holders of Series C Preferred Stock are entitled to receive, when and as
authorized by the Board of Directors, cumulative cash dividends of 7.89% of the
liquidation preference per annum through September 30, 2012 and at the rate of
9.89% of the liquidation preference per annum thereafter, payable quarterly in
arrears when and as declared by the Board of Directors, out of funds legally
available therefor, on or about the last business day of each quarter. Dividends
are cumulative from the payment date of any such declaration and accrue whether
or not the Company has earnings, whether or not there are funds of the Company
legally available for the payment of such dividends and whether or not such
distributions are declared.
If, for any taxable year, the Company elects to designate as "capital gain
dividends" (as defined in Section 857 of the Code) a portion (the "Capital Gains
Amount") of the distributions paid or made available for the year to holders of
all classes of shares of capital stock, including the Preferred Stock (the
"Total Distributions"), then the portion of the Capital Gains Amount allocable
to holders of the Series C Preferred Stock will be the Capital Gains Amount
multiplied by a fraction, the numerator of which will be the distributions paid
or made available to holders of the Series C Preferred Stock for the year and
the denominator of which will be the Total Distributions.
The Company may not declare or pay any dividend on shares ranking, as to
distributions, on parity with the Series C Preferred Stock or on the Junior
Stock for any period unless full cumulative distributions have been or
contemporaneously are declared and paid (or are declared and a sum sufficient
for the payment thereof set apart for such payment) on shares of Series C
Preferred Stock for all past and current distribution periods. When
distributions are not paid in full (or a sum sufficient for such full payment is
not set apart) upon the shares of Series C Preferred Stock and the shares of any
other series of Preferred Stock ranking on parity as to distributions with
shares of Series C Preferred Stock, all distributions declared upon shares of
Series C Preferred Stock and the shares on parity shall be declared pro rata
based upon accrued distributions per share due to each. Except as provided in
the prior sentence, unless full cumulative distributions on shares of Series C
Preferred Stock have been or contemporaneously are declared and paid (or are
declared and a sum sufficient for the payment thereof set apart for such
payment), no distributions shall be declared (other than in shares of Junior
Stock), and the Company may not redeem, purchase or acquire any shares of Junior
Stock or shares on parity with the Series C Preferred Stock as to distributions
or upon liquidation.
In the event of a liquidation, whether voluntary or involuntary, the
holders of Series C Preferred Stock then outstanding shall be entitled to be
paid out of the assets of the Company, before any payment shall be made to the
holders of the Junior Stock, an amount equal to $50.00 per share, plus an amount
equal to any unpaid cumulative dividends on Series C Preferred Stock accrued to
the date when such payment shall be made available to the holders thereof.
Neither a consolidation or merger of the Company or sale of all or substantially
all of its assets, nor a statutory share exchange in which stockholders of the
Company may participate shall be deemed to be a liquidation of the Company.
If the dividends on Series C Preferred Stock are in arrears for six or more
quarterly periods, whether or not such quarterly periods are consecutive, then
the holders of Series C Preferred Stock (voting separately as a class with all
other series of preferred shares upon which like rights have been conferred and
are exercisable) will be entitled to vote for the election of two directors to
serve on the Board of Directors of the Company until all distribution arrearages
have been paid. Under the Company's Charter, as long as any shares of Class B
Common Stock or Class C Common Stock are outstanding, the election of such
directors will eliminate a corresponding number of the directors elected by the
combined holders of the Series A Preferred Stock, Common Stock, Class B Common
Stock and Class C Common Stock. The approval of the holders of two-thirds of the
outstanding Series C Preferred Stock is required in order to amend any provision
of the relevant Articles Supplementary or Charter, whether by merger,
consolidation, or otherwise, so as to materially and adversely affect the terms
of the Series C Preferred Stock; however, an Event will not be deemed to cause
such an effect where the Event does not cause a material change to the terms of
Series C Preferred Stock or the Series C Preferred Stock is converted into
preferred stock of a surviving entity identical in all material respects to
Series C Preferred Stock.
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Other Series of Preferred Stock
General. The Prospectus Supplement relating to any Preferred Stock offered
thereby will contain the specific terms thereof, including without limitation:
(1) The title of such Preferred Stock;
(2) The number of shares of such Preferred Stock offered, the
liquidation preference per share and the offering price of such Preferred
Stock;
(3) The distribution rate(s), period(s) or payment date(s) or
method(s) of calculation thereof applicable to such Preferred Stock;
(4) The date from which distributions on such Preferred Stock shall
accumulate, if applicable;
(5) The procedures for any auction and remarketing, if any, for such
Preferred Stock;
(6) The provision for a sinking fund, if any, for such Preferred
Stock;
(7) The provision for redemption, if applicable, of such Preferred
Stock;
(8) Any listing of such Preferred Stock on any securities exchange;
(9) The terms and conditions, if applicable, upon which such Preferred
Stock will be convertible into Common Stock of the Company, including the
conversion price (or manner of calculation thereof);
(10) Whether interests in such Preferred Stock will be represented by
Depositary Shares;
(11) Any other specific terms, preferences, rights, limitations or
restrictions of such Preferred Stock;
(12) A discussion of all material federal income tax considerations,
if any, applicable to such Preferred Stock that are not discussed in this
Prospectus;
(13) The relative ranking and preferences of such Preferred Stock as
to distribution rights and rights upon liquidation, dissolution or winding
up of the affairs of the Company;
(14) Any limitations on issuance of any series of Preferred Stock
ranking senior to or on a parity with such series of Preferred Stock as to
distribution rights and rights upon liquidation, dissolution or winding up
of the affairs of the Company; and
(15) Any limitations on direct or beneficial ownership and
restrictions on transfer, in each case as may be appropriate to preserve
the status of the Company as a REIT.
Rank. Unless otherwise specified in the Prospectus Supplement, the
Preferred Stock will, with respect to distribution rights and rights upon
liquidation, dissolution or winding up of the Company, rank (i) senior to all
classes or series of Common Stock of the Company, and to all equity securities
ranking junior to such Preferred Stock; (ii) on a parity with all equity
securities issued by the Company the terms of which specifically provide that
such equity securities rank on a parity with the Preferred Stock; and (iii)
junior to all equity securities issued by the Company the terms of which
specifically provide that such equity securities rank senior to the Preferred
Stock. The term "equity securities" does not include convertible debt
securities.
Distributions. Holders of the Preferred Stock of each series will be
entitled to receive, when, as and if declared by the Board of Directors, out of
assets of the Company legally available for payment, cash distributions (or
distributions in kind or in other property if expressly permitted and described
in the applicable Prospectus Supplement) at such rates and on such dates as will
be set forth in the applicable Prospectus Supplement. Each such distribution
shall be payable to holders of record as they appear on the share transfer books
of the Company on such record dates as shall be fixed by the Board of Directors.
Redemption. If so provided in the applicable Prospectus Supplement, the
Preferred Stock will be subject to mandatory redemption or redemption at the
option of the Company, in whole or in part, in each case upon the terms, at the
times and at the redemption prices set forth in such Prospectus Supplement.
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The Prospectus Supplement relating to a series of Preferred Stock that is
subject to mandatory redemption will specify the number of shares of such
Preferred Stock that shall be redeemed by the Company in each year commencing
after a date to be specified, at a redemption price per share to be specified,
together with an amount equal to all accrued and unpaid distributions thereon
(which shall not, if such Preferred Stock does not have a cumulative
distribution, include any accumulation in respect of unpaid distributions for
prior distribution periods) to the date of redemption. The redemption price may
be payable in cash or other property, as specified in the applicable Prospectus
Supplement. If the redemption price for Preferred Stock of any series is payable
only from the net proceeds of the issuance of shares of capital stock of the
Company, the terms of such Preferred Stock may provide that, if no such shares
of capital stock shall have been issued or to the extent the net proceeds from
any issuance are insufficient to pay in full the aggregate redemption price then
due, such Preferred Stock shall automatically and mandatorily be converted into
the applicable shares of capital stock of the Company pursuant to conversion
provisions to be specified in the applicable Prospectus Supplement.
Notwithstanding the foregoing, unless (i) if such series of Preferred Stock
has a cumulative distribution, full cumulative distributions on all shares of
any series of Preferred Stock shall have been or contemporaneously are declared
and paid or declared and a sum sufficient for the payment thereof set apart for
payment for all past distribution periods and the then current distribution
period, and (ii) if such series of Preferred Stock does not have a cumulative
distribution, full distributions of the Preferred Stock of any series have been
or contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof set apart for payment for the then current distribution
period, no shares of any series of Preferred Stock shall be redeemed unless all
outstanding Preferred Stock of such series is simultaneously redeemed; provided,
however, that the foregoing shall not prevent the purchase or acquisition of
Preferred Stock of such series to preserve the REIT status of the Company or
pursuant to a purchase or exchange offer made on the same terms to holders of
all outstanding Preferred Stock of such series. In addition, unless (i) if such
series of Preferred Stock has a cumulative distribution, full cumulative
distributions on all outstanding shares of any series of Preferred Stock have
been or contemporaneously are declared and paid or declared and a sum sufficient
for the payment thereof set apart for payment for all past distribution periods
and the then current distribution period, and (ii) if such series of Preferred
Stock does not have a cumulative distribution, full distributions on the
Preferred Stock of any series have been or contemporaneously are declared and
paid or declared and a sum sufficient for the payment thereof set apart for
payment for the then current distribution period, the Company shall not purchase
or otherwise acquire directly or indirectly any shares of Preferred Stock of
such series (except by conversion into or exchange for shares of capital stock
of the Company ranking junior to the Preferred Stock of such series as to
distributions and upon liquidation); provided, however, that the foregoing shall
not prevent the purchase or acquisition of Preferred Stock of such series to
preserve the REIT status of the Company or pursuant to a purchase or exchange
offer made on the same terms to holders of all outstanding Preferred Stock of
such series.
If fewer than all of the outstanding shares of Preferred Stock of any
series are to be redeemed, the number of shares to be redeemed will be
determined by the Company and such shares may be redeemed pro rata from the
holders of record of such shares in proportion to the number of such shares held
or for which redemption is requested by such holder (with adjustments to avoid
redemption of fractional shares) or by lot in a manner determined by the
Company.
Notice of redemption will be mailed at least 30 days but not more than 60
days before the redemption date to each holder of record of Preferred Stock of
any series to be redeemed at the address shown on the share transfer books of
the Company. Each notice shall state: (i) the redemption date; (ii) the number
of shares and series of the Preferred Stock to be redeemed; (iii) the redemption
price; (iv) the place or places where certificates for such Preferred Stock are
to be surrendered for payment of the redemption price; (v) that distributions on
the shares to be redeemed will cease to accrue on such redemption date; and (vi)
the date upon which the holder's conversion rights, if any, as to such shares
shall terminate. If fewer than all the shares of Preferred Stock of any series
are to be redeemed, the notice mailed to each such holder thereof shall also
specify the number of shares of Preferred Stock to be redeemed from each such
holder. If notice of redemption of any Preferred Stock has been given and if the
funds necessary for such redemption have been
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set aside by the Company in trust for the benefit of the holders of any
Preferred Stock so called for redemption, then from and after the redemption
date distributions will cease to accrue on such Preferred Stock, and all rights
of the holders of such shares will terminate, except the right to receive the
redemption price.
Liquidation Preference. Upon any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Company, then, before any
distribution or payment shall be made to the holders of any Common Stock or any
other class or series of shares of capital stock of the Company ranking junior
to the Preferred Stock in the distribution of assets upon any liquidation,
dissolution or winding up of the Company, the holders of each series of
Preferred Stock shall be entitled to receive out of assets of the Company
legally available for distribution to stockholders liquidating distributions in
the amount of the liquidation preference per share of Preferred Stock (set forth
in the applicable Prospectus Supplement), plus an amount equal to all
distributions accrued and unpaid thereon (which shall not include any
accumulation in respect of unpaid distributions for prior distribution periods
if such Preferred Stock do not have a cumulative distribution). After payment of
the full amount of the liquidating distributions to which they are entitled, the
holders of Preferred Stock will have no right or claim to any of the remaining
assets of the Company. In the event that, upon any such voluntary or involuntary
liquidation, dissolution or winding up, the available assets of the Company are
insufficient to pay the amount of the liquidating distributions on all
outstanding Preferred Stock and the corresponding amounts payable on all shares
of other classes or series of shares of capital stock of the Company ranking on
parity with the Preferred Stock in the distribution of assets, then the holders
of the Preferred Stock and all other such classes or series of shares of capital
stock shall share ratably in any such distribution of assets in proportion to
the full liquidating distributions to which they would otherwise be respectively
entitled.
If liquidating distributions shall have been made in full to all holders of
Preferred Stock, the remaining assets of the Company shall be distributed among
the holders of any other classes or series of shares of capital stock ranking
junior to the Preferred Stock upon liquidation, dissolution or winding up,
according to their respective rights and preferences and in each case according
to their respective number of shares. For such purposes, the consolidation or
merger of the Company with or into any other corporation, trust or entity, or
the sale, lease or conveyance of all or substantially all of the property or
business of the Company, shall not be deemed to constitute a liquidation,
dissolution or winding up of the Company.
Voting Rights. Holders of Preferred Stock will not have any voting rights,
except as set forth below or as otherwise from time to time required by law or
as indicated in the applicable Prospectus Supplement.
Unless otherwise indicated in the applicable Prospectus Supplement,
whenever distributions on any shares of Preferred Stock shall be in arrears for
six or more quarterly periods, the holders of such shares of Preferred Stock
(voting separately as a class with all other series of preferred stock upon
which like voting rights have been conferred and are exercisable) will be
entitled to vote for the election of two directors of the Company at a special
meeting called by the holders of record of at least 10% of any series of
Preferred Stock so in arrears (unless such request is received less than 90 days
before the date fixed for the next annual or special meeting of the
stockholders) or at the next annual meeting of stockholders, and at each
subsequent annual meeting until (i) if such series of Preferred Stock has a
cumulative distribution, all distributions accumulated on such shares of
Preferred Stock for the past distribution periods and the then current
distribution period shall have been fully paid or declared and a sum sufficient
for the payment thereof set aside for payment or (ii) if such series of
Preferred Stock does not have a cumulative distribution, four consecutive
quarterly distributions shall have been fully paid or declared and a sum
sufficient for the payment thereof set aside for payment. Under the Company's
Charter, as long as any shares of Class B Common Stock or Class C Common Stock
are outstanding, the election of such directors will eliminate a corresponding
number of the directors elected by the combined holders of the Series A
Preferred Stock, Common Stock, Class B Common Stock and Class C Common Stock. If
no shares of Class B Common Stock or Class C Common Stock are outstanding, the
entire Board of Directors will be increased by two directors.
Unless otherwise provided for any series of Preferred Stock, so long as any
shares of Preferred Stock remain outstanding, the Company will not, without the
affirmative vote or consent of the holders of at least two-thirds of the shares
of each series of Preferred Stock outstanding at the time, given in person or by
proxy,
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either in writing or at a meeting (such series voting separately as a class),
(i) authorize or create, or increase the authorized or issued amount of, any
class or series of capital stock ranking prior to such series of Preferred Stock
with respect to payment of distributions or the distribution of assets upon
liquidation, dissolution or winding up or reclassify any authorized capital
stock of the Company into such shares, or create, authorize or issue any
obligation or security convertible into or evidencing the right to purchase any
such shares; or (ii) amend, alter or repeal the provisions of the Company's
Charter or the articles supplementary for such series of Preferred Stock,
whether by merger, consolidation or otherwise (an "Event"), so as to materially
and adversely affect any right, preference, privilege or voting power of such
series of Preferred Stock or the holders thereof; provided, however, with
respect to the occurrence of any of the Events set forth in (ii) above, so long
as the Preferred Stock remains outstanding with the terms thereof materially
unchanged, taking into account that upon the occurrence of an Event, the Company
may not be the surviving entity, the occurrence of any such Event shall not be
deemed to materially and adversely affect such rights, preferences, privileges
or voting power of holders of Preferred Stock and provided further that (x) any
increase in the amount of the authorized Preferred Stock or the creation or
issuance of any other series of Preferred Stock, or (y) any increase in the
amount of authorized shares of such series or any other series of Preferred
Stock, in each case ranking on a parity with or junior to the Preferred Stock of
such series with respect to payment of distributions or the distribution of
assets upon liquidation, dissolution or winding up, shall not be deemed to
materially and adversely affect such rights, preferences, privileges or voting
powers.
The foregoing voting provisions will not apply if, at or prior to the time
when the act with respect to which such vote would otherwise be required shall
be effected, all outstanding shares of such series of Preferred Stock shall have
been redeemed or called for redemption and sufficient funds shall have been
deposited in trust to effect such redemption.
Conversion Rights. The terms and conditions, if any, upon which any series
of Preferred Stock is convertible into Common Stock will be set forth in the
applicable Prospectus Supplement relating thereto. Such terms will include the
number of shares of Common Stock into which the Preferred Stock is convertible,
the conversion price (or manner of calculation thereof), the conversion period,
provisions as to whether conversion will be at the option of the holders of the
Preferred Stock or the Company, the events requiring an adjustment of the
conversion price and provisions affecting conversion in the event of the
redemption of such series of Preferred Stock.
Registrar and Transfer Agent. The registrar and transfer agent for each
series of Preferred Stock will be set forth in the applicable Prospectus
Supplement.
DEPOSITARY SHARES
General
The Company has no outstanding Depository Shares. The Company may issue
receipts ("Depositary Receipts") for Depositary Shares, each of which will
represent a fractional interest of a share of a particular series of Preferred
Stock, as specified in the applicable Prospectus Supplement. Shares of Preferred
Stock of each series represented by Depositary Shares will be deposited under a
separate Deposit Agreement (each, a "Deposit Agreement") among the Company, the
depositary named therein (the "Preferred Stock Depositary") and the holders from
time to time of the Depositary Receipts. Subject to the terms of the Deposit
Agreement, each owner of a Depositary Receipt will be entitled, in proportion to
the fractional interest of a share of a particular series of Preferred Stock
represented by the Depositary Shares evidenced by such Depositary Receipt, to
all the rights and preferences of the Preferred Stock represented by such
Depositary Shares (including distribution, voting, conversion, redemption and
liquidation rights).
The Depositary Shares will be evidenced by Depositary Receipts issued
pursuant to the applicable Deposit Agreement. Immediately following the issuance
and delivery of the Preferred Stock by the Company to the Preferred Stock
Depositary, the Company will cause the Preferred Stock Depositary to issue, on
behalf of the Company, the Depositary Receipts. Copies of the applicable form of
Deposit Agreement and Depositary Receipt may be obtained from the Company upon
request, and the following summary of the form
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thereof filed as an exhibit to the Registration Statement of which this
Prospectus is a part is qualified in its entirety by reference thereto.
Distributions
The Preferred Stock Depositary will distribute all cash distributions
received in respect of the Preferred Stock to the record holders of Depositary
Receipts evidencing the related Depositary Shares in proportion to the number of
such Depositary Receipts owned by such holders, subject to certain obligations
of holders to file proofs, certificates and other information and to pay certain
charges and expenses to the Preferred Stock Depositary.
In the event of a distribution other than in cash, the Preferred Stock
Depositary will distribute property received by it to the record holders of
Depositary Receipts entitled thereto, subject to certain obligations of holders
to file proofs, certificates and other information and to pay certain charges
and expenses to the Preferred Stock Depositary, unless the Preferred Stock
Depositary determines that it is not feasible to make such distribution, in
which case the Preferred Stock Depositary may, with the approval of the Company,
sell such property and distribute the net proceeds from such sale to such
holders.
No distribution will be made in respect of any Depositary Share to the
extent that it represents any Preferred Stock converted into Excess Stock.
Withdrawal of Preferred Stock
Upon surrender of the Depositary Receipts at the corporate trust office of
the Preferred Stock Depositary (unless the related Depositary Shares have
previously been called for redemption or converted into Excess Stock), the
holders thereof will be entitled to delivery at such office, to or upon such
holder's order, of the number of whole or fractional shares of Preferred Stock
and any money or other property represented by the Depositary Shares evidenced
by Depositary Receipts. Holders of Depositary Receipts will be entitled to
receive whole or fractional shares of the related Preferred Stock on the basis
of the proportion of the Preferred Stock represented by each Depositary Share as
specified in the applicable Prospectus Supplement, but holders of such Preferred
Stock will not thereafter be entitled to receive Depositary Shares therefor. If
the Depositary Receipts delivered by the holder evidence a number of Depositary
Shares in excess of the number of Depositary Shares representing the number of
shares of Preferred Stock to be withdrawn, the Preferred Stock Depositary will
deliver to such holder at the same time a new Depositary Receipt evidencing such
excess number of Depositary Shares.
Redemption of Depositary Shares
Whenever the Company redeems shares of Preferred Stock held by the
Preferred Stock Depositary, the Preferred Stock Depositary will redeem as of the
same redemption date the number of Depositary Shares representing shares of
Preferred Stock so redeemed, provided the Company shall have paid in full to the
Preferred Stock Depositary the redemption price of the Preferred Stock to be
redeemed plus an amount equal to any accrued and unpaid distributions thereon to
the date fixed for redemption. The redemption price per Depositary Share will be
equal to the redemption price and any other amounts per share payable with
respect to the Preferred Stock. If fewer than all the Depositary Shares are to
be redeemed, the Depositary Shares to be redeemed will be selected pro rata (as
nearly as may be practicable without creating fractional Depositary Shares) or
by any other equitable method determined by the Company that will not result in
the issuance of any Excess Stock.
From and after the date fixed for redemption, all distributions in respect
of the shares of Preferred Stock so called for redemption will cease to accrue,
the Depositary Shares so called for redemption will no longer be deemed to be
outstanding and all rights of the holders of the Depositary Receipts evidencing
the Depositary Shares so called for redemption will cease, except the right to
receive any monies payable upon such redemption and any money or other property
to which the holders of such Depositary Receipts were entitled upon such
redemption upon surrender thereof to the Preferred Stock Depositary.
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Voting of the Preferred Stock
Upon receipt of notice of any meeting at which the holders of the Preferred
Stock are entitled to vote, the Preferred Stock Depositary will mail the
information contained in such notice of meeting to the record holders of the
Depositary Receipts evidencing the Depositary Shares which represent such
Preferred Stock. Each record holder of Depositary Receipts evidencing Depositary
Shares on the record date (which will be the same date as the record date for
the Preferred Stock) will be entitled to instruct the Preferred Stock Depositary
as to the exercise of the voting rights pertaining to the amount of Preferred
Stock represented by such holder's Depositary Shares. The Preferred Stock
Depositary will vote the amount of Preferred Stock represented by such
Depositary Shares in accordance with such instructions, and the Company will
agree to take all reasonable action which may be deemed necessary by the
Preferred Stock Depositary in order to enable the Preferred Stock Depositary to
do so. The Preferred Stock Depositary will abstain from voting the amount of
Preferred Stock represented by such Depositary Shares to the extent it does not
receive specific instructions from the holders of Depositary Receipts evidencing
such Depositary Shares. The Preferred Stock Depositary shall not be responsible
for any failure to carry out any instruction to vote, or for the manner or
effect of any such vote made, as long as any such action or non-action is in
good faith and does not result from negligence or willful misconduct of the
Preferred Stock Depositary.
Liquidation Preference
In the event of the liquidation, dissolution or winding up of the Company,
whether voluntary or involuntary, the holders of each Depositary Receipt will be
entitled to the fraction of the liquidation preference accorded each share of
Preferred Stock represented by the Depositary Share evidenced by such Depositary
Receipt, as set forth in the applicable Prospectus Supplement.
Conversion of Preferred Stock
The Depositary Shares, as such, are not convertible into Common Stock or
any other securities or property of the Company, except in connection with
certain conversions in connection with the preservation of the Company's status
as a REIT. Nevertheless, if so specified in the applicable Prospectus Supplement
relating to an offering of Depositary Shares, the Depositary Receipts may be
surrendered by holders thereof to the Preferred Stock Depositary with written
instructions to the Preferred Stock Depositary to instruct the Company to cause
conversion of the Preferred Stock represented by the Depositary Shares evidenced
by such Depositary Receipts into whole shares of Common Stock, other shares of
Preferred Stock (including Excess Stock) of the Company or other shares of
capital stock, and the Company has agreed that upon receipt of such instructions
and any amounts payable in respect thereof, it will cause the conversion thereof
utilizing the same procedures as those provided for delivery of Preferred Stock
to effect such conversion. If the Depositary Shares evidenced by a Depositary
Receipt are to be converted in part only, a new Depositary Receipt or Receipts
will be issued for any Depositary Shares not to be converted. No fractional
shares of Common Stock will be issued upon conversion, and if such conversion
will result in a fractional share being issued, an amount will be paid in cash
by the Company equal to the value of the fractional interest based upon the
closing price of the Common Stock on the last business day prior to the
conversion.
Amendment and Termination of a Deposit Agreement
Any form of Depositary Receipt evidencing Depositary Shares which will
represent Preferred Stock and any provision of a Deposit Agreement will be
permitted at any time to be amended by agreement between the Company and the
applicable Preferred Stock Depositary. However, any amendment that materially
and adversely alters the rights of the holders of Depositary Receipts or that
would be materially and adversely inconsistent with the rights granted to the
holders of the related Preferred Stock will not be effective unless such
amendment has been approved by the existing holders of at least two-thirds of
the applicable Depositary Shares evidenced by the applicable Depositary Receipts
then outstanding. No amendment shall impair the right, subject to certain
anticipated exceptions in the Deposit Agreements, of any holder of Depositary
Receipts to surrender any Depositary Receipt with instructions to deliver to the
holder the related Preferred Stock and all money and other property, if any,
represented thereby, except in order to comply with law. Every
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holder of an outstanding Depositary Receipt at the time any such amendment
becomes effective shall be deemed, by continuing to hold such Depositary
Receipt, to consent and agree to such amendment and to be bound by the
applicable Deposit Agreement as amended thereby.
A Deposit Agreement will be permitted to be terminated by the Company upon
not less than 30 days prior written notice to the applicable Preferred Stock
Depositary if (i) such termination is necessary to preserve the Company's status
as a REIT or (ii) a majority of each series of Preferred Stock affected by such
termination consents to such termination, whereupon such Preferred Stock
Depositary will be required to deliver or make available to each holder of
Depositary Receipts, upon surrender of the Depositary Receipts held by such
holder, such number of whole or fractional shares of Preferred Stock as are
represented by the Depositary Shares evidenced by such Depositary Receipts
together with any other property held by such Preferred Stock Depositary with
respect to such Depositary Receipts. The Company will agree that if a Deposit
Agreement is terminated to preserve the Company's status as a REIT, then the
Company will use its best efforts to list the Preferred Stock issued upon
surrender of the related Depositary Shares on a national securities exchange. In
addition, a Deposit Agreement will automatically terminate if (i) all
outstanding Depositary Shares thereunder shall have been redeemed, (ii) there
shall have been a final distribution in respect of the related Preferred Stock
in connection with any liquidation, dissolution or winding up of the Company and
such distribution shall have been distributed to the holders of Depositary
Receipts evidencing the Depositary Shares representing such Preferred Stock or
(iii) each share of the related Preferred Stock shall have been converted into
stock of the Company not so represented by Depositary Shares.
Charges of a Preferred Stock Depositary
The Company will pay all transfer and other taxes and governmental charges
arising solely from the existence of a Deposit Agreement. In addition, the
Company will pay the fees and expenses of a Preferred Stock Depositary in
connection with the performance of its duties under a Deposit Agreement.
However, holders of Depositary Receipts will pay the fees and expenses of a
Preferred Stock Depositary for any duties requested by such holders to be
performed which are outside of those expressly provided for in the applicable
Deposit Agreement.
Resignation and Removal of Depositary
A Preferred Stock Depositary will be permitted to resign at any time by
delivering to the Company notice of its election to do so, and the Company will
be permitted at any time to remove a Preferred Stock Depositary, any such
resignation or removal to take effect upon the appointment of a successor
Preferred Stock Depositary. A successor Preferred Stock Depositary will be
required to be appointed within 60 days after delivery of the notice of
resignation or removal and will be required to be a bank or trust company having
its principal office in the United States and having a combined capital and
surplus of at least $50,000,000.
Miscellaneous
The Preferred Stock Depositary will forward to holders of Depositary
Receipts any reports and communications from the Company which are received by
the Preferred Stock Depositary with respect to the related Preferred Stock.
Neither the Preferred Stock Depositary nor the Company will be liable if it
is prevented from or delayed in, by law or any circumstances beyond its control,
performing its obligations under the Deposit Agreement. The obligations of the
Company and the Preferred Stock Depositary under the Deposit Agreement will be
limited to performing their duties thereunder in good faith and without
negligence (in the case of any action or inaction in the voting of Preferred
Stock represented by the Depositary Shares), gross negligence or willful
misconduct, and the Company and the Preferred Stock Depositary will not be
obligated to prosecute or defend any legal proceeding in respect of any
Depositary Receipts, Depositary Shares or shares of Preferred Stock represented
thereby unless satisfactory indemnity is furnished. The Company and the
Preferred Stock Depositary may rely on written advice of counsel or accountants,
or information provided by persons presenting shares of Preferred Stock
represented thereby for deposit, holders of Depositary Receipts or other
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persons believed in good faith to be competent to give such information, and on
documents believed in good faith to be genuine and signed by a proper party.
In the event the Preferred Stock Depositary shall receive conflicting
claims, requests or instructions from any holders of Depositary Receipts, on the
one hand, and the Company, on the other hand, the Preferred Stock Depositary
shall be entitled to act on such claims, requests or instructions received from
the Company.
WARRANTS
The Company has no Warrants outstanding (other than options issued under
the Company's employee stock option plan). The Company may issue Warrants for
the purchase of shares of Preferred Stock or Common Stock. Warrants may be
issued independently or together with any other Securities offered by any
Prospectus Supplement and may be attached to or separate from such Securities.
Each series of Warrants will be issued under a separate warrant agreement (each,
a "Warrant Agreement") to be entered into between the Company and a warrant
agent specified in the applicable Prospectus Supplement (the "Warrant Agent").
The Warrant Agent will act solely as an agent of the Company in connection with
the Warrants of such series and will not assume any obligation or relationship
of agency or trust for or with holders or beneficial owners of Warrants. The
following sets forth certain general terms and any provisions of the Warrants
offered hereby. Further terms of the Warrants and the applicable Warrant
Agreements will be set forth in the applicable Prospectus Supplement.
The applicable Prospectus Supplement will describe the terms of the
Warrants in respect of which this Prospectus is being delivered, including,
where applicable, the following:
(1) the title of such Warrants;
(2) the aggregate number of such Warrants;
(3) the price or prices at which such Warrants will be issued;
(4) the designation, terms and number of shares of Common Stock or
Preferred Stock purchasable upon exercise of such Warrants;
(5) the designation and terms of the Securities, if any, with which
such Warrants are issued and the number of such Warrants issued with each
such Security;
(6) the date, if any, on and after which such Warrants and the related
shares of Common Stock or Preferred Stock will be separately transferable;
(7) the price at which each share of Common Stock or Preferred Stock
purchasable upon exercise of such Warrants may be purchased;
(8) the date on which the right to exercise such Warrants shall
commence and the date on which such right shall expire;
(9) the minimum or maximum amount of such Warrants which may be
exercised at any one time;
(10) information with respect to book-entry procedures, if any;
(11) a discussion of certain federal income tax considerations; and
(12) any other terms of such Warrants, including terms, procedures and
limitations relating to the exchange and exercise of such Warrants.
RESTRICTIONS ON TRANSFER
The Charter contains certain restrictions on the number of shares of
capital stock of the Company (including the Common Stock, Class B Common Stock,
Class C Common Stock, Series B Preferred Stock, Series C Preferred Stock and any
other series of Preferred Stock) that individual stockholders may own. For the
Company to qualify as a REIT under the Code, in addition to other requirements
discussed in "Federal
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Income Tax Considerations" not more than 50% in value of the outstanding capital
stock of the Company 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) and the capital stock also
must be beneficially owned by 100 or more persons during at least 335 days of a
taxable year of 12 months or during a proportionate part of a shorter taxable
year. Because the management of the Company currently believes it is essential
for the Company to maintain its status as a REIT, the provisions of the Charter
with respect to Excess Stock contain restrictions on the acquisition of its
capital stock intended to ensure compliance with these requirements.
The Charter provides that, subject to certain specified exceptions, no
stockholder may own, or be deemed to own by virtue of the attribution provisions
of the Code, more than the ownership limit (the "Ownership Limit"), which is
equal to 6% (24% in the case of the Simons) of any class of capital stock of the
Company (calculated based on the lower of outstanding shares, voting power or
value). In the event of a purported transfer or other event that would, if
effective, result in the ownership of shares of stock in violation of the
Ownership Limit, such transfer or other event with respect to that number of
shares that would be owned by the transferee in excess of the Ownership Limit
would be deemed void ab initio and the intended transferee would acquire no
rights in such shares of stock. Such shares of stock would automatically be
converted into shares of Excess Stock, according to rules set forth in the
Charter, to the extent necessary to ensure that the purported transfer or other
event does not result in ownership of shares of stock in violation of the
Ownership Limit. The Board of Directors may exempt a person from the Ownership
Limit if they receive a ruling from the IRS or an opinion of tax counsel that
such ownership will not jeopardize the Company's status as a REIT.
Upon a purported transfer or other event that results in Excess Stock, the
Excess Stock will be deemed to have been transferred to a trustee to be held in
trust for the exclusive benefit of a qualifying charitable organization
designated by the Company. Such Excess Stock will be issued and outstanding
stock of the Company, and it will be entitled to dividends equal to any
dividends which are declared and paid. Any dividend or distribution paid prior
to the discovery by the Company that stock has been converted into Excess Stock
is to be repaid upon demand. The recipient of such dividend will be personally
liable to the trust. Any dividend or distribution declared but unpaid will be
rescinded as void ab initio with respect to such shares of stock and will
automatically be deemed to have been declared and paid with respect to the
shares of Excess Stock into which such shares were converted. Such Excess Stock
will also be entitled to such voting rights as are ascribed to the stock from
which such shares of Excess Stock were converted. Any voting rights exercised
prior to discovery by the Company that shares of stock were converted to Excess
Stock will be rescinded and recast as determined by the trustee.
While Excess Stock is held in trust, an interest in that trust may be
transferred by the purported transferee, or other purported holder with respect
to such Excess Stock only to a person whose ownership of the shares of stock
would not violate the Ownership Limit, at which time the Excess Stock will be
automatically exchanged for the same number of shares of stock of the same type
and class as the shares of stock for which the Excess Stock was originally
exchanged.
The Charter contains provisions that are designed to ensure that the
purported transferee or other purported holder of the Excess Stock may not
receive in return for such a transfer an amount that reflects any appreciation
in the shares of stock for which such Excess Stock was exchanged during the
period that such Excess Stock was outstanding. Any amount received by a
purported transferee or other purported holder in excess of the amount permitted
to be received must be paid over to the trust. If the foregoing restrictions are
determined to be void or invalid by virtue of any legal decision, statute, rule
or regulation, then the intended transferee or holder of any Excess Stock may be
deemed, at the option of the Company, to have acted as an agent on behalf of the
trust in acquiring or holding such Excess Stock and to hold such Excess Stock on
behalf of the trust.
The Charter further provides that the Company may purchase, for a period of
90 days during the time the Excess Stock is held by the trustee in trust, all or
any portion of the Excess Stock from the original transferee-stockholder at the
lesser of the price paid for the stock by the purported transferee (or if no
notice of such purchase price is given, at a price to be determined by the Board
of Directors, in its sole discretion, but no
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lower than the lowest market price of such stock at any time prior to the date
the Company exercises its purchase option) and 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 or other event if the
original transferee-stockholder gives notice to the Company of the transfer or
(if no notice is given) the date the Board of Directors determines that a
violative transfer or other event has been made.
The Charter further provides that in the event of a purported issuance or
transfer that would, if effective, result in the Company being beneficially
owned by fewer than 100 persons, such issuance or transfer would be deemed null
and void ab initio, and the intended transferee would acquire no rights to the
stock.
All certificates representing shares of any class of stock of the Company
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 5% (or such other percentage as may be required by the Code
or regulations promulgated thereunder) of the outstanding stock must file an
affidavit with the Company containing the information specified in the Charter
before January 30 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 Charter
or the Code applicable to a REIT.
The Excess Stock provision will not be removed automatically 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
Ownership Limit may have the effect of precluding an acquisition of control of
the Company without the approval of the Board of Directors.
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FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of material federal income tax considerations
that may be relevant to a prospective purchaser of Securities. The following is
based upon current law, and is not tax advice. This discussion does not address
all aspects of taxation that may be relevant to particular stockholders in light
of their personal investment or tax circumstances, or to certain types of
stockholders (including insurance companies, tax exempt organizations, financial
institutions, broker-dealers, foreign corporations and persons who are not
citizens or residents of the United States) subject to special treatment under
the federal income tax laws, nor does it give a detailed discussion of any
state, local or foreign tax considerations.
This discussion was prepared by Baker & Daniels, counsel to the Company,
and is based on current provisions of the Code, existing, temporary, and
currently proposed Treasury Regulations under the Code, the legislative history
of the Code, existing administrative rulings and practices of the IRS, and
judicial decisions. No assurance can be given that legislative, judicial, or
administrative changes will not affect the accuracy of any statements in this
Prospectus with respect to transactions entered into or contemplated prior to
the effective date of such changes.
EACH PROSPECTIVE PURCHASER IS ENCOURAGED TO CONSULT ITS OWN TAX ADVISOR
REGARDING THE SPECIFIC TAX CONSEQUENCES TO IT OF THE PURCHASE, OWNERSHIP AND
SALE OF THE SECURITIES AND OF THE COMPANY'S ELECTION TO BE TAXED AS A REAL
ESTATE INVESTMENT TRUST, INCLUDING THE FEDERAL, STATE, LOCAL, FOREIGN AND OTHER
TAX CONSEQUENCES OF SUCH PURCHASE, OWNERSHIP, SALE AND ELECTION AND OF POTENTIAL
CHANGES IN APPLICABLE TAX LAWS.
Prospective purchasers should be aware that the recently enacted Taxpayer
Relief Act of 1997 (the "1997 Act") made numerous changes to the Code, including
reducing the maximum tax imposed on net capital gains from the sale of assets
held for more than 18 months by individuals, trust and estates. The 1997 Act
also makes certain changes to the requirements to qualify as a REIT and to the
taxation of REITs and their stockholders. See "-- Recent Legislation."
GENERAL
The Company, its subsidiary, SD Property Group, Inc. ("SD Property"), and
the Operating Partnership's subsidiary, RPT (together with the Company and SD
Property, the "Companies"), have made elections to be taxed as REITs under the
Code, and applicable Treasury Regulations relating to REIT qualification (the
"REIT Requirements"). Management believes that the Companies have been organized
and operate in such a manner as to qualify for taxation as REITs under the Code.
The Companies intend to continue to operate in such a manner, but no assurance
can be given that they have operated in a manner so as to qualify or will
operate in a manner so as to remain qualified.
The REIT Requirements, relating to the federal income tax treatment of
REITs and their stockholders, are highly technical and complex. The following
discussion sets forth only the material aspects of those requirements. This
summary is qualified in its entirety by the applicable Code provisions, rules
and regulations promulgated thereunder, and administrative and judicial
interpretations thereof.
OPINION OF COUNSEL
In the opinion of Baker & Daniels ("Counsel"), each of the Companies has
been organized and has operated in a manner so as to qualify for taxation as a
REIT and their methods of operation will enable them to continue to meet the
requirements for qualification and taxation as REITs under the Code. It must be
emphasized that Counsel's opinion is based on factual representations of the
Companies concerning their business and properties, and the business and
properties of affiliated entities, as set forth in this Prospectus and is also
based upon certain other factual representations made by the Companies.
Moreover, such qualification and taxation as a REIT depend upon each of the
Companies' ability to meet, through actual annual operating results,
distribution levels, diversity of stock ownership, and the various other
qualification tests imposed under the Code discussed below, the results of which
will not be reviewed by Counsel. Accordingly, no assurance can be given that the
actual results of the Companies' operation for any one taxable year will satisfy
such requirements. See "-- Failure to Qualify."
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TAXATION OF REITS
A REIT generally is not subject to federal corporate income taxes on that
portion of its ordinary income or capital gain that is distributed currently to
stockholders because the REIT provisions of the Code generally allow a REIT to
deduct dividends paid to its stockholders. This deduction for dividends paid to
stockholders substantially eliminates the federal "double taxation" on earnings
(once at the corporate level and once again at the stockholder level) that
generally results from investment in a corporation.
However, REITs are taxed at regular corporate rates on their ordinary
income and capital gain not distributed to its stockholders and may be subject
to federal income or excise tax in certain other circumstances, some of which
are as follows. First, a REIT may be subject to the "alternative minimum tax" on
its items of tax preference, if any. Second, if the REIT has net income from a
"prohibited transaction" (generally, a sale or other disposition of property
held primarily for sale to customers in the ordinary course of business, other
than foreclosure property), such income will be subject to a 100% tax. Third, if
the REIT should fail to satisfy the 75% gross income test or the 95% gross
income test (as discussed below), and has nonetheless maintained its
qualification as a REIT because certain other requirements have been met, it
will be subject to a 100% tax on the net income attributable to the greater of
the amount by which the REIT fails the 75% or 95% test, multiplied by a fraction
intended to reflect the REIT's profitability. Fourth, if the REIT should fail to
distribute with respect to each calendar year at least the sum of (i) 85% of its
REIT ordinary income for such year, (ii) 95% of its REIT capital gain net income
for such year, and (iii) any undistributed taxable income from prior periods,
the REIT will be subject to a 4% excise tax on the excess of such required
distribution over the amounts actually distributed.
REQUIREMENTS FOR QUALIFICATION
To qualify as a REIT, a corporation must elect to be so treated and must
meet the requirements discussed below, relating to its organization, sources of
income, nature of assets, and distributions of income to stockholders.
Organizational Requirements
The Code defines a REIT as a corporation, trust or association: (i) that is
managed by one or more trustees or directors; (ii) the beneficial ownership of
which is evidenced by transferable shares or by transferable certificates of
beneficial interest; (iii) that would be taxable as a domestic corporation but
for the REIT Requirements; (iv) that is neither a financial institution nor an
insurance company subject to certain provisions of the Code; (v) that has the
calendar year as its taxable year; (vi) the beneficial ownership of which is
held by 100 or more persons; and (vii) during the last half of each taxable year
not more than 50% in value of the outstanding capital stock of which is owned,
directly or indirectly through the application of certain attribution rules, by
five or fewer individuals (as defined in the Code to include certain entities).
In addition, certain other tests, described below, regarding the nature of a
REIT's income and assets must also be satisfied. The Code provides that
conditions (i) through (v), inclusive, must be met during the entire taxable
year and that condition (vi) must be met during at least 335 days of a taxable
year of 12 months, or during a proportionate part of a taxable year of less than
12 months. Conditions (vi) and (vii) do not apply until after the first taxable
year for which an election is made to be taxed as a REIT.
The Company has satisfied and will continue to satisfy the requirements set
forth in (i) through (vi) above and believes that it has satisfied and will
continue to satisfy the requirement set forth in (vii) above. In addition, the
Charter includes certain restrictions regarding transfer of the Common Stock
that are intended to assist the Company in continuing to satisfy the share
ownership requirements described in (vi) and (vii) above.
SD Property has satisfied and will continue to satisfy the requirements set
forth in (i) through (vi) above, and requirement (vii) has been satisfied and
will continue to be satisfied by virtue of the Company's owning 99.99% of SD
Property's outstanding stock.
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RPT has satisfied and will continue to satisfy the requirements set forth
in (i) through (vi) above, and requirement (vii) has been satisfied and will
continue to be satisfied by virtue of the Operating Partnership's owning 99.99%
of RPT's outstanding stock.
The Company currently has several "qualified REIT subsidiaries." Code
section 856(i) provides that a corporation that is a "qualified REIT subsidiary"
will not be treated as a separate corporation, and all assets, liabilities and
items of income, deduction, and credit of a "qualified REIT subsidiary" will be
treated as assets, liabilities, and such items (as the case may be) of the REIT.
In applying the requirements described herein, the Company's "qualified REIT
subsidiaries" will be ignored, and all assets, liabilities, and items of income,
deduction, and credit of such subsidiaries will be treated as assets,
liabilities and items of the Company.
In the case of a REIT which is a partner in a partnership, the REIT is
deemed to own its proportionate share of the assets of the partnership and is
deemed to receive the income of the partnership attributable to such share. In
addition, the character of the assets and gross income of the partnership shall
retain the same character in the hands of the REIT for purposes of the RElT
Requirements, including satisfying the income tests and asset tests. Thus, the
Company's and SD Property's proportionate share of the assets, liabilities and
items of income of the Operating Partnership and the partnerships in which the
Operating Partnership has an interest are treated as assets, liabilities and
items of income of the Company and SD Property for purposes of applying the
requirements described herein, provided that the Operating Partnership and the
other partnerships in which the Company or SD Property holds a direct or
indirect interest are treated as partnerships for federal income tax purposes.
RPT's proportionate share of the assets, liabilities and items of income of SCA
which is owned by RPT and another affiliate of the Operating Partnership, are
treated as assets, liabilities and items of income of RPT. SCA owns interests in
eleven properties. Dividends received by the Operating Partnership from RPT are
treated as income that satisfies the 75% gross income test and the 95% gross
income test discussed below and the stock of RPT owned by the Operating
Partnership is treated as a real estate asset for purposes of the asset test
described below. See "-- Effect of Tax Status of Operating Partnership and Other
Partnerships on REIT Qualification."
Income Tests
To maintain qualification as a REIT, there are three gross income
requirements that must be satisfied annually by each of the Companies. First, at
least 75% of each company's gross income (excluding gross income from prohibited
transactions) for each taxable year must be derived directly or indirectly from
investments relating to real property or mortgages on real property (including
"rents from real property", "dividends from qualified REITS" and, in certain
circumstances, interest) or from "qualified temporary investment income"
(described below). Second, at least 95% of each company's gross income
(excluding gross income from prohibited transactions) for each taxable year must
be derived from such real property investments and from dividends, interest, and
gain from the sale or disposition of stock or securities or from any combination
of the foregoing. Third, short-term gain from the sale or other disposition of
stock or securities, gain from prohibited transactions, and gain on the sale or
other disposition of real property held for less than four years (apart from
involuntary conversions and sales of foreclosure property) must represent less
than 30% of each company's gross income (including gross income from prohibited
transactions) for each taxable year; however, the 30% test has been repealed
effective for taxable years commencing after August 5, 1997. In applying these
tests, the Company and SD Property will each be treated as realizing its share
of the income and bearing its share of the loss of the Operating Partnership and
RPT will be treated as realizing its share of the income and bearing its share
of the loss of SCA. The character of such income or loss, as well as other
partnership items, will be determined at the partnership level.
Rents received by each company will qualify as "rents from real property"
only if several conditions are met. First, the amount of rent must not be based
in whole or in part on the income or profits of any person. However, an amount
received or accrued generally will not be excluded from the term "rents from
real property" solely by reason of being based on a fixed percentage or
percentages of receipts or sales. Second, the Code provides that rents received
from a tenant will not qualify as "rents from real property" if the REIT, or a
direct or indirect owner of 10% or more of the REIT, directly or constructively
owns 10% or more of such tenant (a "Related Party Tenant"). Third, if rent
attributable to personal property, leased in connection with a
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lease of real property, is greater than 15% of the total rent received under the
lease, then the portion of rent attributable to such personal property will not
qualify as "rents from real property." Finally, for rents received to qualify as
"rents from real property," the REIT generally must not operate or manage the
property or furnish or render services to the tenants of such property, other
than through an "independent contractor" who is adequately compensated and from
whom the REIT does not derive any income; provided, however, that the REIT may
directly perform certain customary services (e.g., furnishing water, heat, light
and air conditioning, and cleaning windows, public entrances and lobbies) other
than services which are considered rendered to the occupant of the property.
Interpretations of the law concerning the types of services that may be rendered
by a REIT to its tenants is constantly evolving and the consequences of
rendering impermissible services are somewhat uncertain.
None of the Companies charge, nor anticipate charging, more than a de
minimis amount of rent that is based in whole or in part on the income or
profits of any person (except by reason of being based on a percentage of
receipts or sales, as described above). Although management cannot be absolutely
certain whether all Related Party Tenants have been or will be identified
because of complex attribution rules, none of the Companies anticipate receiving
rents in excess of a de minimis amount from Related Party Tenants. No company
anticipates holding a lease on any property in which rents attributable to
personal property constitute greater than 15% of the total rents received under
the lease. The Company and SD Property, through the Operating Partnership, have
operated and managed and will continue to operate and manage the properties
wholly-owned by the Operating Partnership directly without using an "independent
contractor" and to perform all permitted development, construction and leasing
services for such properties. The Operating Partnership currently operates and
manages all but one of the eleven properties owned in whole or in part by SCA.
The remaining SCA property is operated and managed by an "independent
contractor". Prior to the Operating Partnership's acquisition of RPT, all of the
SCA properties were managed by "independent contractors". Based upon information
provided by the Company regarding services provided by the Operating Partnership
as well as services provided by landlords of comparable properties in the same
geographic areas as the Properties, Counsel believes that the services currently
provided to substantially all of the lessees of these properties are those
usually or customarily rendered in connection with the rental of space for
occupancy only. Management intends to continue to limit services to tenants to
such customary services. As noted above, this area of the law is somewhat
uncertain and no absolute assurance can be given that the IRS or a court will
concur with Counsel's analysis with respect to such services.
The Operating Partnership indirectly owns 5% of the voting common stock,
substantially all of the nonvoting common stock and all of the preferred stock
of M.S. Management Associates, Inc. (the "SPG Management Company"), a
corporation that is taxable as a regular corporation. The SPG Management Company
performs management, development, construction and leasing services for
properties and other real estate owned in whole or in part by third parties. The
income is earned by and taxed to the SPG Management Company and is received by
the Operating Partnership only indirectly as dividends and interest that qualify
under the 95% test. The Operating Partnership also owns 5% of the voting common
stock and all of the preferred stock of DeBartolo Properties Management, Inc.
(the "DRC Management Company"), a corporation that is also taxable as a regular
corporation. The SPG Management Company owns 95% of the voting common stock of
the DRC Management Company. The SPG Management Company and the DRC Management
Company (together with their respective subsidiaries, the "Management
Companies") perform management, development, construction and leasing services
for (i) all but one of the income-producing properties that are less than
wholly-owned, directly or indirectly, by the Operating Partnership and that are
not managed by the Operating Partnership or one of the subsidiary partnerships,
(ii) the properties that were not transferred to the Company or the SPG
Management Company in connection with the initial public offering of the Common
Stock consummated in December, 1993 in which members of the families of Melvin
Simon or Herbert Simon or their affiliates own an interest and (iii) other real
estate owned in whole or in part by third parties. The income that is earned by
and taxed to the Management Companies is received by the Operating Partnership
only indirectly as dividends and interest that qualify under the 95% test.
Income received by the Operating Partnership from the management of properties
that are not wholly-owned, directly or indirectly, by the Operating Partnership
qualifies for the 75% and 95% income tests to the extent of the Operating
Partnership's ownership of such properties. Based on the foregoing, it is
expected that substantially
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all of the Company's and SD Property's income is and will continue to be derived
from their interests in the Operating Partnership, and substantially all of the
income of RPT will be derived from its interest in SCA which income will, for
the most part, qualify as "rents from real property" for purposes of the 75% and
95% gross income tests.
If any of the Companies fails to satisfy one or both of the 75% or 95%
gross income tests for any taxable year, it may nevertheless qualify as a REIT
for such year if it is entitled to relief under certain provisions of the Code.
These relief provisions will be generally available if (i) the failure to meet
such tests was due to reasonable cause and not due to willful neglect, (ii) the
failing company attaches a schedule of the sources of its income to its return,
and (iii) any incorrect information on the schedule was not due to fraud with
intent to evade tax. It is not possible however, to state whether in all
circumstances a company would be entitled to the benefit of these relief
provisions. Even if these relief provisions apply, a tax would be imposed with
respect to the excess net income. No similar mitigation provision applies to
provide relief if the 30% income test is failed, and in such case, such company
would cease to qualify as a REIT. See "-- Failure to Qualify."
Asset Tests
In order for each of the Companies to maintain its qualification as a REIT,
at the close of each quarter of its taxable year it must also satisfy three
tests relating to the nature of its assets. First, at least 75% of the value of
each company's total assets must be represented by real estate assets (which for
this purpose include (i) its allocable share of real estate assets held by
partnerships in which such company or a "qualified REIT subsidiary" of such
company owns an interest (ii) stock or debt instruments purchased with the
proceeds of a stock offering or a long-term (at least five years) debt offering
of such company and held for not more than one year from the date such company
receives such proceeds), cash, cash items, and government securities and (iii)
stock of other REITs. Second, not more than 25% of each company's total assets
may be represented by securities other than those in the 75% asset class. Third,
of the investments included in the 25% asset class, the value of any one
issuer's securities owned by such company may not exceed 5% of the value of such
company's total assets, and such company may not own more than 10% of any one
issuer's outstanding voting securities (excluding securities of a qualified REIT
subsidiary or another REIT).
The Company and SD Property are deemed to hold directly their proportionate
shares of all real estate and other assets of the Operating Partnership and RPT
is deemed to hold directly its proportionate share of all real estate and other
assets of SCA. As a result, each company plans to hold more than 75% of its
assets as real estate assets. In addition, none of the Companies plan to hold
any securities representing more than 10% of any one issuer's voting securities,
other than any qualified REIT subsidiary or another REIT, nor securities of any
one issuer exceeding 5% of the value of such company's gross assets (determined
in accordance with generally accepted accounting principles). Securities of SD
Property or RPT held by the Company or the Operating Partnership will not
violate the asset test so long as SD Property and RPT each qualifies as a REIT.
If, however, either company fails to qualify as a REIT, then the Company would
fail this asset test because the Company would then hold more than 10% of the
securities of an issuer which is not a REIT.
The Operating Partnership indirectly owns 5% of the voting common stock,
substantially all of the nonvoting common stock and all of the participating
preferred stock of the SPG Management Company, which, in the aggregate, does not
exceed 10% of the voting securities of the SPG Management Company. The Operating
Partnership also owns 5% of the voting common stock and all of the nonvoting
preferred stock of the DRC Management Company, which, in the aggregate, does not
exceed 10% of the voting securities of the DRC Management Company. Management
believes that (a) neither the value of the securities of SPG Management Company
nor the value of the securities of DRC Management Company held by the Company
will exceed 5% of the value of the total assets of the Company and (b) neither
the value of the securities of SPG Management Company nor the value of DRC
Management Company held by SD Property will exceed 5% of the value of the total
assets of SD Property.
After initially meeting the asset tests at the close of any quarter, a
company will lose its status as a REIT for failure to satisfy the asset tests at
the end of a later quarter solely by reason of changes in asset values. If the
failure to satisfy the asset tests results from an acquisition of securities or
other property during a quarter,
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the failure can be cured by disposition of sufficient nonqualifying assets
within 30 days after the close of that quarter. The Companies maintain adequate
records of the value of its assets to ensure compliance with the asset tests,
and to take such other action within 30 days after the close of any quarter as
may be required to cure any noncompliance. However, there can be no assurance
that such other action will always be successful.
Annual Distribution Requirements
In order to be treated as a REIT, each of the Companies is required to
distribute dividends (other than capital gain dividends) to its stockholders in
an amount at least equal to (i) the sum of (a) 95% of its "REIT taxable income"
(computed without regard to the dividends paid deduction and such company's net
capital gain) and (b) 95% of its net income, if any, from foreclosure property
in excess of the special tax on income from foreclosure property, minus (ii) the
sum of certain items of noncash income.
To the extent that a company does not distribute all of its net capital
gain or distributes at least 95% (but less than 100%) of its REIT taxable
income, as adjusted, it will be subject to tax on the undistributed portion, at
regular ordinary and capital gains corporate tax rates. Furthermore, if a
company fails to distribute during each calendar year at least the sum of (a)
85% of its REIT ordinary income for such year, (b) 95% of its REIT capital gain
net income for such year, and (c) any undistributed taxable income from prior
periods, such company will be subject to a 4% excise tax on the excess of such
required distribution over the amounts actually distributed. Each of the
Companies has made and intends to continue to make timely distributions
sufficient to satisfy this annual distribution requirement.
It is expected that each of the Companies' taxable income will be less than
its cash flow, due to the allowance of depreciation and other noncash charges in
computing its taxable income. Accordingly, each of the Companies anticipates
that it will generally have sufficient cash or liquid assets to enable it to
satisfy the 95% distribution requirement.
It is possible that, from time to time, one or more of the Companies may
not have sufficient cash or other liquid assets to meet the 95% distribution
requirement due to timing differences between the actual receipt of income and
actual payment of deductible expenses and the inclusion of such income and
deduction of such expenses in arriving at taxable income of such company or if
the amount of nondeductible expenses such as principal amortization or capital
expenditures exceed the amount of noncash deductions. In the event that such
situation occurs, in order to meet the 95% distribution requirement, such
company may find it necessary to arrange for short-term, or possibly long-term,
borrowings or to pay dividends in the form of taxable share dividends. If the
amount of nondeductible expenses exceeds noncash deductions, such company may
refinance its indebtedness to reduce principal payments and borrow funds for
capital expenditures.
Under certain circumstances, a company may be able to rectify a failure to
meet the distribution requirement for a year by paying "deficiency dividends" to
stockholders in a later year, which may be included in such company's deduction
for dividends paid for the earlier year. Thus, a company may be able to avoid
being taxed on amounts distributed as deficiency dividends; however, such
company will be required to pay interest based upon the amount of any deduction
taken for deficiency dividends.
FAILURE TO QUALIFY
If any of the Companies fails to qualify for taxation as a REIT in any
taxable year, and the relief provisions do not apply, such company will be
subject to tax (including any applicable alternative minimum tax) on its taxable
income at regular corporate rates. The failure of either SD Property or RPT to
qualify as a REIT will also cause the Company to fail to qualify as a REIT and
subject the Company to such tax. Distributions to stockholders in any year in
which the Company fails to qualify will not be deductible by the Company nor
will they be required to be made. In such event, to the extent of current or
accumulated earnings and profits, all distributions to stockholders will be
taxable as ordinary income, and subject to certain limitations of the Code,
corporate distributees may be eligible for the dividends-received deduction.
Unless entitled to relief under specific statutory provisions, the Companies (if
any of them fails to qualify as a REIT) will also be disqualified from taxation
as a REIT for the four taxable years following the year during which
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qualification was lost. It is not possible to state whether in all circumstances
any of the Companies would be entitled to such statutory relief.
TAXATION OF U.S. STOCKHOLDERS
As used herein, the term "U.S. Stockholder" means a holder of shares of
Common Stock that (for United States federal income tax purposes) (i) is a
citizen or resident of the United States, (ii) is a corporation, partnership, or
other entity (other than a trust) created or organized in or under the laws of
the United States or of any political subdivision thereof, (iii) is an estate
the income of which is subject to United States federal income taxation
regardless of its source, or (iv) is a trust over which a court in the United
States is able to exercise primary supervision and over which one or more United
States fiduciaries have authority to control all substantive decisions. For any
taxable year for which the Company qualifies for taxation as a REIT, amounts
distributed to taxable U.S. Stockholders will be taxed as follows.
Distributions Generally
Distributions to U.S. Stockholders, other than capital gain dividends
discussed below, will be taxable as ordinary income to such holders up to the
amount of the Company's current or accumulated earnings and profits. Such
distributions are not eligible for the dividends-received deduction for
corporations. To the extent that the Company makes distributions in excess of
its current or accumulated earnings and profits, such distributions will first
be treated as a tax-free return of capital, reducing the tax basis in the U.S.
Stockholders' shares of Common Stock, and distributions in excess of the U.S.
Stockholders' tax basis in their respective shares of Common Stock are taxable
as gain realized from the sale of such shares. Dividends declared by the Company
in October, November, or December of any year payable to a stockholder of record
on a specified date in any such month will be treated as both paid by the
Company and received by the stockholder on December 31 of such year, provided
that the dividend is actually paid by the Company during January of the
following calendar year. Stockholders may not include on their own income tax
returns any tax losses of the Company.
The Company will be treated as having sufficient earnings and profits to
treat as a dividend any distribution by the Company up to the greater of its
current or accumulated earnings and profits. As a result, stockholders may be
required to treat certain distributions that would otherwise result in a tax
free return of capital as taxable dividends. Moreover, any "deficiency dividend"
will be treated as a "dividend" (an ordinary dividend or a capital gain
dividend, as the case may be), regardless of the Company's earnings and profits.
Capital Gain Dividends
Dividends to U.S. Stockholders that are properly designated by the Company
as capital gain dividends will be treated as long-term capital gain (to the
extent they do not exceed the Company's actual net capital gain) for the taxable
year without regard to the period for which the stockholder has held his stock.
Corporate stockholders, however, may be required to treat up to 20% of certain
capital gain dividends as ordinary income. Capital gain dividends are not
eligible for the dividends-received deduction for corporations. Beginning in
1998, the Company may elect to retain and pay income tax on some or all of its
undistributed net capital gains, in which case the Company's stockholders would
include such retained amount in their income. In that event the stockholders
would be entitled to a tax credit or refund in the amount of the tax paid by the
Company on the undistributed gain allocated to the stockholders and the
stockholders would be entitled to increase their tax basis by the amount of
undistributed capital gains allocated to such stockholders reduced by the amount
of the credit. See "-- Recent Legislation."
In addition, Notice 97-64 provides temporary guidance with respect to the
taxation of capital gain dividends. Pursuant to Notice 97-64, forthcoming
Temporary Regulations will provide that capital gains allocated to a stockholder
by the Company may be designated as a 20% rate gain distribution, an
unrecaptured Section 1250 gain distribution subject to a 25% rate, or a 28% rate
gain distribution. In determining the amounts which may be designated as each
class of capital gains dividends, a REIT must calculate its net capital gains as
if it were an individual subject to a marginal tax rate of 28%. Unless
specifically designated otherwise by the Company, a distribution designated as a
capital gain distribution is presumed to be a 28% rate
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gain distribution. In addition, if a capital gain dividend is received on or
after May 7, 1997, but is treated as being paid during a taxable year that ends
on or before that date, the dividend will be taxable as a 28% rate gain
distribution. If the Company elects to allocate any undistributed net long-term
capital gain to its stockholders, as discussed above, the undistributed
long-term capital gains are considered to be designated as capital gain
dividends for purposes of Notice 97-64.
Dispositions of Shares of Common Stock
A U.S. Stockholder will recognize gain or loss on the sale or exchange of
shares of Common Stock to the extent of the difference between the amount
realized on such sale or exchange and the holder's tax basis in such shares.
Such gain or loss generally will constitute long-term capital gain or loss if
the holder has held such shares for more than one year. A U.S. Stockholder that
is an individual, trust or estate and that holds shares of Common Stock for more
than 18 months will be subject to a maximum tax of 20% on gains from the sale or
disposition of such shares. See "-- Recent Legislation." Losses incurred on the
sale or exchange of shares of Common Stock held for six months or less (after
applying certain holding period rules), however, will generally be deemed
long-term capital loss to the extent of any long-term capital gain dividends
received by the U.S. Stockholder and undistributed capital gains allocated to
such U.S. Stockholder with respect to such shares.
Treatment of Tax-Exempt U.S. Stockholders
Most tax-exempt entities are not subject to federal income tax except to
the extent of their receipt of "unrelated business taxable income" as defined in
Section 512(a) of the Code ("UBTI"). Distributions by the Company to a
tax-exempt entity, generally, should not constitute UBTI, provided that the
tax-exempt entity has not financed its acquisition of Common Stock with
"acquisition indebtedness" within the meaning of the Code and the Common Stock
is not otherwise used in an unrelated trade or business of the tax-exempt
entity. In addition, certain pension trusts that own more than 10% of a
"pension-held REIT" must report a portion of the dividends that they received
from such a REIT as UBTI. The Company has not been and does not expect to be
treated as a pension-held REIT for purposes of this rule. However, because the
Company's stock is publicly traded, no assurance can be given that the Company
is not or will not become a pension-held REIT.
Additional Tax Consequences for Holders of Preferred Stock, Depositary Shares
and Warrants
If the Company offers one or more series of Preferred Stock, Depositary
Shares or Warrants, then there may be additional tax consequences for the
holders of such Preferred Stock, Depositary Shares or Warrants. For a discussion
of any such additional consequences, see the applicable Prospectus Supplement.
SPECIAL TAX CONSIDERATIONS FOR FOREIGN STOCKHOLDERS
The rules governing United States federal income taxation of non-resident
alien individuals, foreign corporations, foreign partnerships, and other
entities that do not qualify as U.S. Stockholders (collectively, "Non-U.S.
Stockholders") are complex, and the following discussion is intended only as a
summary of such rules. Prospective Non-U.S. Stockholders should consult with
their own tax advisors to determine the impact of federal, state, and local
income tax laws on an investment in the REIT, including any reporting
requirements, as well as the tax treatment of such an investment under tax
treaties and their home country laws.
In general, Non-U.S. Stockholders will be subject to regular United States
federal income tax with respect to their investment in the Company if such
investment is "effectively connected" with the Non-U.S. Stockholder's conduct of
a trade or business in the United States. A corporate Non-U.S. Stockholder that
receives income that is (or is treated as) effectively connected with a United
States trade or business may also be subject to the branch profits tax under
section 884 of the Code, which is payable in addition to regular United States
corporate income tax. The Company expects to withhold United States income tax,
as described below, on the gross amount of any distributions paid to a Non-U.S.
Stockholder unless (i) a lower treaty rate applies and the required form
evidencing eligibility for that reduced rate is filed with the Company, or (ii)
the
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Non-U.S. Stockholder files an IRS Form 4224 with the Company, claiming that the
distribution is "effectively connected" income.
A distribution by the Company that is not attributable to gain from the
sale or exchange by the Company of a United States real property interest and
that is not designated by the Company as a capital gain dividend will be treated
as an ordinary income dividend to the extent made out of current or accumulated
earnings and profits. Generally, an ordinary income dividend received by a
Non-U.S. Stockholder that is not "effectively connected" with such Non-U.S.
Stockholder's trade or business in the United States will be subject to a United
States withholding tax equal to 30% of the gross amount of the distribution
unless such tax is reduced or eliminated by an applicable tax treaty. A
distribution of cash in excess of the Company's earnings and profits will be
treated first as a return of capital that will reduce a Non-U.S. Stockholder's
basis in its shares of Common Stock (but not below zero) and then as gain from
the disposition of such shares, the tax treatment of which is described under
the rules discussed below with respect to dispositions of shares.
Distributions by the Company that are attributable to gain from the sale or
exchange of a United States real property interest will be taxed to a Non-U.S.
Stockholder under the Foreign Investment in Real Property Tax Act of 1980
("FIRPTA"). Under FIRPTA, such distributions are taxed to a Non-U.S. Stockholder
as if such distributions were gains "effectively connected" with a United States
trade or business. Accordingly, a Non-U.S. Stockholder will be taxed at the
capital gain rates applicable to a U.S. Stockholder (subject to any applicable
alternative minimum tax and a special alternative minimum tax in the case of
non-resident alien individuals). Distributions subject to FIRPTA may also be
subject to a 30% branch profits tax in the hands of a foreign corporate
stockholder that is not entitled to treaty exemption. The Company will be
required to withhold from distributions to Non-U.S. Stockholders, and remit to
the IRS, (i) 35% of designated capital gain dividends (or, if greater, 35% of
the amount of any distributions that could be designated as capital gain
dividends) and (ii) 30% of ordinary dividends paid out of earnings and profits.
The amount withheld is creditable against the Non-U.S. Stockholder's actual U.S.
tax liability.
A sale of shares of Common Stock by a Non-U.S. Stockholder generally will
not be subject to United States taxation unless such shares constitute a "United
States real property interest" within the meaning of FIRPTA or are effectively
connected with a U.S. trade or business. The shares of Common Stock of the
Company will not constitute a United States real property interest if the
Company is a "domestically controlled REIT." A domestically controlled REIT is a
REIT in which at all times during a specified testing period less than 50% in
value of its shares is held directly or indirectly by Non-U.S. Stockholders.
Currently, the Company is a domestically controlled REIT, and therefore the sale
of shares in the Company are not subject to taxation under FIRPTA. However,
because the shares of Common Stock are publicly traded, no assurance can be
given that the Company will continue to be a domestically controlled REIT. If
the Company, in the future, does not constitute a domestically controlled REIT,
whether a Non-U.S. Stockholder's sale of shares of Common Stock would be subject
to tax under FIRPTA as a sale of a United States real property interest would
depend on whether the shares were "regularly traded" (as defined by applicable
Treasury Regulations) on an established securities market (e.g., the New York
Stock Exchange, on which the shares of Common Stock will be listed) and on the
size of the selling stockholder's interest in the Company.
If the gain on the sale of the Company's shares were subject to taxation
under FIRPTA, the Non-U.S. Stockholder would be subject to the same treatment as
a U.S. Stockholder with respect to such gain (subject to applicable alternative
minimum tax and a special alternative minimum tax in the case of nonresident
alien individuals) and the purchaser of such shares may be required to withhold
10% of the purchase price and remit such amount to the IRS. Notwithstanding the
foregoing, capital gain not subject to FIRPTA will be taxable to a Non-U.S.
Stockholder if the Non-U.S. Stockholder is a nonresident alien individual who is
present in the United States for 183 days or more during the taxable year and
certain other conditions apply, in which case the nonresident alien individual
will be subject to a 30% tax on such individual's capital gains.
The United States Treasury has recently issued final regulations (the
"Final Regulations") which affect the rules applicable to payments to foreign
persons. In general, the Final Regulations do not alter the substantive
withholding and information reporting requirements but unify current
certification procedures and modify reliance standards. In addition, the Final
Regulations also address certain issues relating to
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intermediary certification procedures designed to simplify compliance by
withholding agents. The Final Regulations are generally effective for payments
made on or after January 1, 1999, subject to certain transition rules.
Prospective purchasers should consult their own tax advisors concerning the
adoption of the Final Regulations and the potential effect on their ownership of
Securities.
INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING TAX
The Company will report to its U.S. Stockholders and the IRS the amount of
distributions paid during each calendar year and the amount of tax withheld, if
any. U.S. Stockholders, other than certain exempt recipients, such as
corporations and tax-exempt organizations, may be subject to backup withholding
at a rate of 31% with respect to distributions paid unless such stockholder
complies with applicable requirements of backup withholding rules. U.S.
Stockholders should consult their own tax advisors regarding their
qualification for exemption from backup withholding and the procedure for
obtaining such an exemption. Any amount of backup withholding with respect to a
payment to a U.S. Stockholder will be allowed as a credit against such U.S.
Stockholder's United States federal income tax liability and may entitle such
U.S. Stockholder to a refund, provided that the required information is
furnished to the IRS.
Additional issues may arise pertaining to information reporting and backup
withholding with respect to Non-U.S. Stockholders. For example, the Company may
be required to withhold a portion of capital gain distributions to any
stockholders who fail to certify their non-foreign status to the Company.
Non-U.S. Stockholders should consult their tax advisors with respect to any such
information reporting and backup withholding requirements.
OTHER TAX CONSIDERATIONS
Effect of Tax Status of Operating Partnership and Other Partnerships on REIT
Qualification.
All of the Company's and SD Property's investments are through the
Operating Partnership and other partnerships in which the Company and SD
Property hold a direct or indirect interest. All of RPT's investments are
through SCA and the partnerships in which RPT holds an indirect interest.
Management believes that the Operating Partnership and SCA, and each other
partnership in which any of the Companies holds an interest, is properly treated
as a partnership for tax purposes (and not as an association taxable as a
corporation). If, however, the Operating Partnership were treated as an
association taxable as a corporation, both the Company and SD Property would
cease to qualify as a REIT and if SCA were treated as an association taxable as
a corporation all of the Companies would cease to qualify as REITS. If any of
the other partnerships were treated as an association taxable as a corporation
and the interest held by the Operating Partnership or SCA in such partnership
exceeded 10% of the partnership's voting interests or the value of such interest
exceeded 5% of the value of one of the Companies' assets, then such company
(and, in certain circumstances, all of the Companies) would cease to qualify as
a REIT. Furthermore, in such a situation, any partnership treated as a
corporation would be subject to corporate income taxes, and distributions from
any such partnership to the Company, SD Property or RPT, would be treated as
dividends, which are not taken into account in satisfying the 75% gross income
test described above and which therefore could make it more difficult for the
Company, SD Property or RPT to meet the 75% asset test described above. Finally,
in such a situation, the Company, SD Property or RPT would not be able to deduct
its share of any losses generated by any such partnership in computing its
taxable income.
Sale of Partnership Property
Generally, any gain realized by a partnership on the sale of property held
by the partnership for more than one year will be long-term capital gain, except
for any portion of such gain that is treated as depreciation or cost recovery
recapture. However, under the REIT Requirements, each of the Companies share as
partners of any gain from the sale of any property held as inventory or other
property held primarily for sale to customers in the ordinary course of a trade
or business will be treated as income from a prohibited transaction that is
subject to a 100% penalty tax. See "Taxation of the Company." Such prohibited
transaction income will also have an adverse effect upon the ability of such
company to satisfy the income tests for REIT status. See "-- Requirements for
Qualification -- Income Tests." Under existing law, whether property is held as
30
<PAGE> 33
inventory or primarily for sale to customers in the ordinary course of a trade
or business is a question of fact that depends on all the facts and
circumstances with respect to the particular transaction. A safe harbor to avoid
classification as a prohibited transaction exists as to real estate assets held
for the production of rental income by a REIT for at least four years where in
any taxable year the REIT has made no more than seven sales of property or, in
the alternative, the aggregate of the adjusted bases of all properties sold does
not exceed 10% of the adjusted bases of all of the REIT's properties during the
year and the expenditures includible in a property's basis made during the
four-year period prior to disposition must not exceed 30% of the property's net
sales price. The Operating Partnership and SCA hold the Properties for
investment with a view to long-term appreciation, to engage in the business of
acquiring, developing, owning, and operating and leasing the Properties and to
make such occasional sales of the Properties, including peripheral land, as are
consistent with the Operating Partnership's and SCA's investment objectives. No
assurance can be given, however, that every property sale will constitute a sale
of property held for investment.
There are additional consequences with respect to a sale or other taxable
disposition of any of the Properties (a "Covered Sale") listed in Exhibit C to
the Fifth Amended and Restated Limited Partnership Agreement of the Operating
Partnership (the "Amended Operating Partnership Agreement"). During the
five-year period beginning with the Merger Date, a limited partner of the
Operating Partnership (a "Limited Partner") who is allocated pre-contribution
gain under Section 704(c) of the Code on a Covered Sale is entitled to a
distribution, pro rata in accordance with the Units, of sufficient cash to pay
any tax liability incurred by reason of such allocation and distribution. In
addition, during the sixth through the eighth years after the Merger Date, a
Limited Partner that is a DeBartolo family member or an affiliate of the
DeBartolo family (including certain estates and trusts) who is allocated gain on
a Covered Sale can require the Operating Partnership to exchange such Limited
Partner's Units pursuant to the exchange rights under the Amended Operating
Partnership Agreement for cash to the extent of the tax due on such allocation
and exchange.
RECENT LEGISLATION
The 1997 Act contains significant changes to the taxation of capital gains
of individuals, trusts and estates and certain changes to the requirements for
qualification and the taxation of REITs. For gains realized after July 28, 1997,
and subject to certain exceptions, the maximum rate of tax on net capital gains
of individuals, trusts and estates from the sale or exchange of assets held for
more than 18 months has been reduced to 20%, and the maximum rate is reduced to
18% for assets acquired after December 31, 2000 and held for more than five
years. For taxpayers who would be subject to a maximum tax rate of 15%, the rate
on net capital gains is reduced to 10%, and effective for taxable years
commencing after December 31, 2000, the rate is reduced to 8% for assets held
for more than five years. The maximum rate for net capital gains attributable to
the sale of depreciable real property held for more than 18 months is 25% to the
extent of the deductions for depreciation with respect to such property.
Long-term capital gain allocated to a stockholder by the Company will be subject
to the 25% rate to the extent that the gain does not exceed depreciation on real
property sold by the Company. The maximum rate of capital gains tax for capital
assets held more than one year but not more than 18 months remains at 28%. The
taxation of capital gains of corporations was not changed by the 1997 Act.
The 1997 Act also includes several provisions that are intended to simplify
the taxation of REITs. These provisions are effective for taxable years
commencing after August 5, 1997. First, in determining whether a REIT satisfies
the income tests, a REIT's rental income from a property will not cease to
qualify as "rents from real property" merely because the REIT performs services
for a tenant other than permitted customary services if the amount that the REIT
is deemed to have received as a result of performing impermissible services does
not exceed one percent of all amounts received, directly or indirectly, by the
REIT with respect to such property. The amount that a REIT will be deemed to
have received for performing impermissible services is at least 150% of the
direct cost to the REIT of providing those services. Second, certain non-cash
income, including income from cancellation of indebtedness and original issue
discount in excess of actual payments received will be excluded from income in
determining the amount of dividends that a REIT is required to distribute.
Third, a REIT may elect to require its stockholders to include the REIT's
undistributed net capital gains in their income. If a REIT makes such an
election, the REIT's stockholders would receive a tax credit attributable to
their share of capital gains tax paid by a REIT on the undistributed net capital
gains that was included in the stockholders' income, and such stockholders will
receive an increase in the basis of
31
<PAGE> 34
their shares in the amount of undistributed net capital gain included in their
income reduced by the amount of the credit. Fourth, the 1997 Act repeals the
requirement that a REIT receive less than 30% of its gross income from the sale
or disposition of stock or securities held for less than one year, gain from
prohibited transactions, and gain from certain sales of real property held less
than four years. Finally, the 1997 Act contains a number of technical provisions
that reduce the risk that a REIT will inadvertently cease to qualify as a REIT.
STATE AND LOCAL TAXES
The Company and its stockholders may be, subject to state, local or other
taxation in various state, local or other jurisdictions, including those in
which they transact business or reside. The tax treatment in such jurisdictions
may differ from the federal income tax consequences discussed above.
Consequently, prospective stockholders should consult their own tax advisors
regarding the effect of state and local tax laws on their investment in the
Company.
POSSIBLE ADDITIONAL DEVELOPMENTS
In addition to the 1997 Act, the rules dealing with federal income taxation
are constantly under review by the IRS, the Treasury Department and Congress.
Additional new federal tax legislation may be enacted into law or new
interpretations, rulings or Treasury Regulations could be adopted, all of which
could affect the taxation of the Company or of its stockholders. No prediction
can be made as to the likelihood of passage of any new tax legislation or other
provisions either directly or indirectly affecting the Company or its
stockholders. Consequently, the tax treatment described herein may be modified
prospectively or retroactively by legislative, judicial or administrative
action.
PLAN OF DISTRIBUTION
The Company may sell the Securities to or through underwriters, and also
may sell the Securities directly to one or more other purchasers or through
agents. The distribution of the 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 related to such
prevailing market prices or at negotiated prices. Shares of Common Stock may
also be issued pursuant to this Prospectus to holders of Units in exchange for
their Units, which Units may be exchanged for shares of Common Stock on a
one-for-one basis or cash, as selected by the Company, pursuant to the
partnership agreement of the Operating Partnership.
The Prospectus Supplement will set forth terms of the offering of the
Securities, including where applicable, (i) the name or names of any
underwriters or agents with whom the Company has entered into arrangements with
respect to the sale or issuance of Securities, (ii) in the case of the Common
Stock, the initial public offering price, where applicable, (iii) in the case of
the Preferred Stock, the specific title and stated value, any distribution,
liquidation, redesignation, conversion, voting and other rights, and any initial
public offering price; (iv) in the case of Depositary Shares, the fractional
shares of Preferred Stock represented by each Depositary Share; (v) in the case
of Warrants, the duration, offering price, exercise price and detachability;
(vi) any underwriting discounts, commissions and other items constituting
underwriters compensation from the Company and any other discounts, concessions
or commissions allowed or reallowed or paid by any underwriters to other
dealers, (vii) any commissions paid to any agents and (viii) the net proceeds to
the Company. In connection with the sale of Securities, underwriters may receive
compensation from the Company or from purchasers of Securities, for whom they
may act as agents, in the form of discounts, concessions, or commissions.
Underwriters may sell Securities to or through dealers, and such dealers may
receive compensation in the form of discounts, concessions, or commissions from
the underwriters or commissions from the purchasers for whom they may act as
agents. Underwriters, dealers, and agents that participate in the distribution
of Securities may be deemed to be underwriters, and any discounts or commissions
they receive from the Company, and any profit on the resale of Securities they
realize, may be deemed to be underwriting discounts and commissions under the
Securities Act.
Under agreements the Company may enter into, underwriters, dealers and
agents who participate in the distribution of Securities may be entitled to
indemnification by the Company against certain liabilities, including
liabilities under the Securities Act.
32
<PAGE> 35
Underwriters, dealers and agents may engage in transactions with, or
perform services for, or be customers of, the Company in the ordinary course of
business.
Unless otherwise set forth in the Prospectus Supplement relating to the
issuance of Securities, the obligations of the underwriters to purchase such
Securities will be subject to certain conditions precedent and each of the
underwriters with respect to such Securities will be obligated to purchase all
of the Securities allocated to it if any such Securities are purchased. Any
initial public offering price and any discounts or concessions allowed or
reallowed or paid to dealers may be changed from time to time.
LEGAL MATTERS
The validity of the issuance of the Securities offered pursuant to this
Prospectus will be passed upon by Piper & Marbury L.L.P., Baltimore, Maryland on
behalf of the Company. Certain tax matters will be passed upon by Baker &
Daniels, Indianapolis, Indiana, and certain legal matters will be passed upon
for any underwriters, dealers or agents by Rogers & Wells, New York, New York.
EXPERTS
The audited financial statements and schedule incorporated by reference in
the Registration Statement of which this Prospectus is a part, have been audited
by Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are incorporated by reference herein in
reliance upon the authority of said firm as experts in giving said reports.
33
<PAGE> 36
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The expenses (not including underwriting commissions and fees) of issuance
and distribution of the securities are estimated to be:
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee............... $219,223
New York Stock Exchange Listing Fee............................... $ 50,000(1)
Accounting Fees and Expenses...................................... $ 25,000(1)
Attorneys' Fees and Expenses...................................... $125,000(1)
Miscellaneous Expenses............................................ $ 80,777(1)
--------
Total........................................................ $500,000(1)
</TABLE>
- ---------------
(1) Estimated
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's officers and directors are indemnified under Maryland law,
the Company's Charter and the partnership agreement of the Operating Partnership
against certain liabilities. The Company's Charter requires the Company to
indemnify its directors and officers to the fullest extent permitted from time
to time by the laws of Maryland. No amendment of the Company's Charter shall
limit or eliminate the right to indemnification provided with respect to acts or
omissions occurring prior to such amendment or repeal. The Company's By-Laws
contain provisions which implement the indemnification provisions of the
Company's Charter. The Maryland General Corporation Law (the "MGCL") permits a
corporation to indemnify its directors and officers, among others, against
judgments, penalties, fines, settlements and reasonable expenses actually
incurred by them in connection with any proceeding to which they may be made a
party by reason of their service in those or certain other capacities unless it
is established that the act or omission of the director or officer was material
to the matter giving rise to the proceeding and was committed in bad faith or
was the result of active and deliberate dishonesty, or the director or officer
actually received an improper personal benefit in money, property or services,
or in the case of any criminal proceeding, the director or officer had
reasonable cause to believe that the act or omission was unlawful. Maryland law
permits the Company to provide indemnification to an officer to the same extent
as a director, although additional indemnification may be provided if such
officer is not also a director.
The Company's Charter contains a provision limiting the liability of
directors and officers to the Company and its stockholders to the fullest extent
permitted from time to time by the laws of Maryland. The MGCL permits the
charter of a Maryland corporation to include a provision limiting the liability
of its directors and officers to the corporation and its stockholders for money
damages, subject to specified restrictions. Maryland law does not, however,
permit the liability of directors and officers to the corporation or its
stockholders to be limited to the extent that (1) it is proved that the person
actually received an improper benefit or profit in money, property or services
(to the extent such benefit or profit was received) or (2) a judgment or other
final adjudication adverse to such person is entered in a proceeding based on a
finding that the person's 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. No amendment of the Company's Charter shall limit or eliminate
the limitation of liability with respect to acts or omissions occurring prior to
such amendment or repeal.
The partnership agreement of the Operating Partnership also provides for
indemnification of the Company and its officers and directors to the same extent
indemnification is provided to officers and directors of the Company in its
Charter, and limits the liability of the Company and its officers and directors
to the Operating Partnership and its partners to the same extent liability of
officers and directors of the Company to the Company and its stockholders is
limited under the Company's Charter.
II-1
<PAGE> 37
The Company has entered into indemnification agreements with each of the
Company's directors and officers. The indemnification agreements require, among
other things, that the Company indemnify its directors and officers to the
fullest extent permitted by law, and advance to the directors and officers all
related expenses, subject to reimbursement if it is subsequently determined that
indemnification is not permitted. The Company also must indemnify and advance
all expenses incurred by directors and officers seeking to enforce their rights
under the indemnification agreements, and cover each director and officer if the
Company obtains directors' and officers' liability insurance.
ITEM 16. EXHIBITS.
The list of exhibits is incorporated by reference to the Exhibit Index
beginning on page E-1.
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in price of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if
the registration statement is on Form S-3 or Form S-8 and the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed by the registrant pursuant to section 13 or
section 15(d) of the Securities Exchange Act of 1934 that are incorporated by
reference in the 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
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the Offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act 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 the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) The undersigned registrant hereby undertakes to supplement the
prospectus, after the expiration of the subscription period, to set forth the
results of the subscription offer, the transactions by the underwriters
II-2
<PAGE> 38
during the subscription period, the amount of unsubscribed securities to be
purchased by the underwriters, and the terms of any subsequent reoffering
thereof. If any public offering by the underwriters is to be made on terms
differing from those set forth on the cover page of the prospectus, a
post-effective amendment will be filed to set forth the terms of such offering.
(d) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
(e) The undersigned registrant hereby 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.
II-3
<PAGE> 39
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this amendment to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Indianapolis, State of Indiana, on January 15, 1997.
SIMON DeBARTOLO GROUP, INC.
By: /s/ DAVID SIMON
------------------------------------
David Simon, Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this amendment
has been signed by the following persons in the capacities and on the date
indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------------------------- ---------------------------- -----------------
<C> <S> <C>
/s/ MELVIN SIMON* Co-Chairman of the Board of January 15, 1998
- ----------------------------------------------- Directors
Melvin Simon
/s/ HERBERT SIMON* Co-Chairman of the Board of January 15, 1998
- ----------------------------------------------- Directors
Herbert Simon
/s/ DAVID SIMON Chief Executive Officer and January 15, 1998
- ----------------------------------------------- Director (Principal
David Simon Executive Officer)
/s/ RICHARD S. SOKOLOV* President, Chief Operating January 15, 1998
- ----------------------------------------------- Officer and Director
Richard S. Sokolov
/s/ BIRCH BAYH* Director January 15, 1998
- -----------------------------------------------
Birch Bayh
Director January 15, 1998
- -----------------------------------------------
Edward J. DeBartolo, Jr.
/s/ WILLIAM T. DILLARD, II* Director January 15, 1998
- -----------------------------------------------
William T. Dillard, II
/s/ G. WILLIAM MILLER* Director January 15, 1998
- -----------------------------------------------
G. William Miller
/s/ FREDRICK W. PETRI* Director January 15, 1998
- -----------------------------------------------
Fredrick W. Petri
/s/ TERRY S. PRINDIVILLE* Director January 15, 1998
- -----------------------------------------------
Terry S. Prindiville
/s/ J. ALBERT SMITH, JR.* Director January 15, 1998
- -----------------------------------------------
J. Albert Smith, Jr.
</TABLE>
II-4
<PAGE> 40
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------------------------- ---------------------------- -----------------
<C> <S> <C>
/s/ PHILIP J. WARD* Director January 15, 1998
- -----------------------------------------------
Philip J. Ward
/s/ M. DENISE DEBARTOLO YORK* Director January 15, 1998
- -----------------------------------------------
M. Denise DeBartolo York
/s/ JAMES R. GIULIANO, III* Senior Vice President January 15, 1998
- ----------------------------------------------- (Principal Financial
James R. Giuliano, III Officer)
/s/ STEPHEN E. STERRETT Senior Vice President and January 15, 1998
- ----------------------------------------------- Treasurer (Principal
Stephen E. Sterrett Financial Officer)
/s/ JOHN DAHL Senior Vice President and January 15, 1998
- ----------------------------------------------- Chief Accounting Officer
John Dahl (Principal Accounting
Officer)
*By/s/ DAVID SIMON
- -----------------------------------------------
David Simon,
Attorney-in-fact
</TABLE>
II-5
<PAGE> 41
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------------------------------------------------------------------
<C> <S> <C>
4.1 Amended and Restated Articles of Incorporation, incorporated by
reference to Exhibit 3.1 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1996
4.2 Articles Supplementary with respect to the Series B Preferred Stock of
the Company, incorporated by reference to Exhibit 3.3 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1996
4.3 Articles Supplementary with respect to the Series C Preferred Stock of
the Company, incorporated by reference to Exhibit 4.1 to the Company's
Current Report on Form 8-K filed on July 8, 1997
4.4 Amended and Restated By-laws, incorporated by reference to Exhibit 3.2
to Post-Effective Amendment No. 1 to the Company's (as Simon Property
Group, Inc.) Registration Statement on Form S-4 (Registration No.
333-06933) filed on August 9, 1996
4.5 Form of Common Stock Certificate, incorporated by reference to the
Exhibit 4.1 to the Company's Registration Statement on Form S-3
(Registration
No. 333-11431)
4.6* Form of Common Stock Warrant Agreement
4.7* Form of Preferred Stock Certificate
4.8* Form of Deposit Agreement
4.9* Form of Preferred Stock Warrant Agreement
5 Opinion of Piper & Marbury L.L.P.
8 Opinion of Baker & Daniels
12.1* Computation of Ratio of Earnings to Fixed Charges and Preferred Stock
Dividends
23.1* Consent of Arthur Andersen LLP
23.2 Consent of Piper & Marbury L.L.P. is contained in its opinion filed as
Exhibit 5
23.3 Consent of Baker & Daniels is contained in its opinion filed as Exhibit
8
24* Power of Attorney (included in the signature page to the Registration
Statement)
</TABLE>
- ---------------
* Previously filed or to be incorporated by reference herein by a Current
Report on Form 8-K.
E-1
<PAGE> 1
EXHIBIT 5
PIPER & MARBURY L.L.P.
CHARLES CENTER SOUTH
36 SOUTH CHARLES STREET
BALTIMORE, MARYLAND 21021-3018
(410) 539-2530 (410) 539-0489 FAX
January 2, 1998
Simon DeBartolo Group, Inc.
115 West Washington Street
Indianapolis, Indiana 46204
Ladies and Gentlemen:
We have acted as Maryland counsel to Simon DeBartolo Group, Inc., a
Maryland corporation (the "Company"), in connection with the registration under
the Securities Act of 1933, as amended (the "Act"), pursuant to a Registration
Statement on Form S-3 of the Company (Registration Number 333-43681) (the
"Registration Statement") filed on January 2, 1998 with the Securities and
Exchange Commission (the "Commission"), including the prospectus included
therein at the time the Registration Statement is declared effective (the
"Prospectus"), which Prospectus also constitutes the prospectus for another
registration statement previously filed with the Commission by the Company
(Registration Number 33-11431) (the "Prior Registration Statement"). The
aggregate initial offering price of the Securities (defined below) is up to
$743,128,334, plus an amount available under the Prior Registration Statement.
This opinion is provided to you at the request of the Company for use in
connection with the filing of the Registration Statement.
The Company may offer from time to time, together or separately, (i)
shares of common stock, par value $0.0001 per share (the "Common Stock"); (ii)
shares of preferred stock, par value $0.0001 per share (the "Preferred Stock");
(iii) Preferred Stock represented by depositary shares (the "Depositary
Shares"); and (iv) warrants to purchase Common Stock or Preferred Stock (the
"Warrants"). The Common Stock, the Preferred Stock, the Depositary Shares, and
the Warrants are collectively referred to herein as the "Securities." The
Registration Statement provides that the Securities may be offered separately or
together, in separate series, in amounts, at prices, and on terms to be
determined at the time of the offering and set forth in one or more supplements
to the Prospectus (each, a "Prospectus Supplement").
In our capacity as Maryland counsel, we have reviewed the following:
(a) The Registration Statement;
(b) The Charter, certified by the Department of Assessments
and
<PAGE> 2
Taxation of the State of Maryland (the "Department"), and By-Laws, as
amended and restated and in effect on the date hereof, of the Company;
(c) The Preliminary Prospectus dated January 2, 1998 (the
"Preliminary Prospectus") relating to the issuance of the Securities,
which forms part of the Registration Statement;
(d) Short-form good standing certificates for the Company
dated December 16, 1997, issued by the Department;
(e) An Officer's Certificate (the "Certificate") of the
Company, dated the date hereof, as to certain factual matters; and
(f) Such other documents as we have considered necessary to
the rendering of the opinion expressed below.
In our examination of the aforesaid documents, we have assumed, without
independent investigation, the genuineness of all signatures, the legal capacity
of all individuals who have executed any of the aforesaid documents, the
authenticity of all documents submitted to us as originals, and the conformity
with originals of all documents submitted to us as copies (and the authenticity
of the originals of such copies), and that all public records reviewed are
accurate and complete. In making our examination of documents executed by
parties other than the Company, we have assumed that such parties had the power,
corporate or other, to enter into and perform all obligations thereunder, and we
have also assumed the due authorization by all requisite action, corporate or
other, and the valid execution and delivery by such parties of such documents
and the validity, binding effect and enforceability thereof with respect to such
parties. As to any facts material to this opinion which we did not independently
establish or verify, we have relied solely upon the Certificate.
We further assume that:
(a) The issuance, sale, amount, and terms of the Securities to
be offered from time to time by the Company will be authorized and
determined by proper action of the Board of Directors of the Company
(each, a "Board Action") in accordance with the Company's Charter and
By-Laws and applicable Maryland law, in each case so as not to 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.
(b) Prior to the issuance of any shares of the Common Stock or
the Preferred Stock (or of any Common Stock Warrants, Preferred Stock
Warrants, or Depositary Shares), there will exist, under the Charter of
the Company, the requisite number of authorized but unused shares of
the Common Stock or the Preferred Stock (and securities of any class
into which any Preferred Stock may
<PAGE> 3
be convertible), as the case may be, and that all actions necessary to
the creation and designation of any such Preferred Stock (and
securities of any class into which any Preferred Stock may be
convertible), whether by Charter amendment or by classification or
reclassification of existing capital stock and the filing of Articles
Supplementary, will have been taken.
(c) Appropriate certificates representing shares of the Common
Stock or the Preferred Stock will be executed and delivered upon
issuance and sale of any shares of the Common Stock or the Preferred
Stock, as the case may be, and will comply with the Company's Charter
and By-Laws and applicable Maryland law.
(d) Any Warrants will be issued under one or more valid and
legally binding warrant agreements (each, a "Warrant Agreement") that
conform to the description thereof set forth in the Prospectus or the
applicable Prospectus Supplement, and will comply with the Company's
Charter and By-Laws and applicable Maryland law.
(e) Any Depositary Shares will be issued under one or more
valid and legally binding deposit agreements (each, a "Deposit
Agreement") that conform to the description thereof set forth in the
Prospectus or the applicable Prospectus Supplement, and will comply
with the Company's Charter and By-Laws and applicable Maryland law.
(f) The underwriting agreements for offerings of the
Securities (each, an "Underwriting Agreement," and collectively, the
"Underwriting Agreements") will be valid and legally binding agreements
that conform to the description thereof set forth in the Prospectus or
the applicable Prospectus Supplement.
(g) To the extent that the obligations of the Company under
any Warrant Agreement may be dependent upon such matters, the financial
institution to be identified in such Warrant Agreement as warrant agent
(the "Warrant Agent") will be duly organized, validly existing, and in
good standing under the laws of its jurisdiction of organization; the
Warrant Agent will be duly qualified to engage in the activities
contemplated by such Warrant Agreement; such Warrant Agreement will
have been duly authorized, executed, and delivered by the Warrant Agent
and will constitute the legally valid and binding obligation of the
Warrant Agent enforceable against the Warrant Agent in accordance with
its terms; the Warrant Agent will be in compliance, generally, with
respect to acting as Warrant Agent under such Warrant Agreement, with
all applicable laws and regulations; and the Warrant Agent will have
the requisite organizational and legal power and authority to perform
its obligations under such Warrant Agreement.
(h) To the extent that the obligations of the Company under
any Deposit Agreement may be dependent upon such matters, the financial
institution to be identified in such Deposit Agreement as depositary
(the "Depositary") will be duly organized, validly existing, and in
good standing under the laws of its
<PAGE> 4
jurisdiction of organization; the Depositary will be duly qualified to
engage in the activities contemplated by such Deposit Agreement; such
Deposit Agreement will have been duly authorized, executed, and
delivered by the Depositary and will constitute the legally valid and
binding obligation of the Depositary enforceable against the Depositary
in accordance with its terms; the Depositary will be in compliance,
generally, with respect to acting as Depositary under such Deposit
Agreement, with all applicable laws and regulations; and the Depositary
will have the requisite organizational and legal power and authority to
perform its obligations under such Deposit Agreement.
Based upon and subject to the foregoing, we are of the opinion and
advise you that, as of the date hereof:
1. Upon due authorization by Board Action of an issuance of
Common Stock, and upon issuance and delivery of certificates for shares
of such Common Stock against payment therefor in accordance with the
terms and provisions of such Board Action, the Registration Statement
(as declared effective under the Act), the Prospectus, or the
applicable Prospectus Supplement and, if applicable, an Underwriting
Agreement, or upon issuance and delivery of certificates for shares of
such Common Stock pursuant to the exercise of one or more Common Stock
Warrants or the conversion of one or more series of Preferred Stock
convertible into Common Stock, the shares of Common Stock represented
by such certificates will be duly authorized, validly issued, fully
paid, and non-assessable.
2. When a series of the Preferred Stock, including any
Preferred Stock underlying Depositary Shares, (and securities of any
class into which any Preferred Stock may be convertible) has been duly
authorized and established in accordance with the applicable Board
Action, the terms of the Company's Charter and By-Laws, and applicable
Maryland law, and, upon issuance and delivery of certificates for
shares of such series of the Preferred Stock against payment therefor
in accordance with the terms and provisions of such Board Action, the
Registration Statement (as declared effective under the Act), the
Prospectus, or the applicable Prospectus Supplement and, if applicable,
an Underwriting Agreement, or upon issuance and delivery of
certificates for shares of such Preferred Stock pursuant to the
exercise of one or more Preferred Stock Warrants or the conversion of
one or more series of Preferred Stock convertible into another series
of Preferred Stock, the shares of the Preferred Stock represented by
such certificates will be duly authorized, validly issued, fully paid,
and non-assessable.
3. When the Warrants have been duly authorized and established
in accordance with the applicable Board Action, the terms of the
Company's Charter and By-Laws, and applicable Maryland law, and, upon
execution, issuance, and
<PAGE> 5
delivery of the Warrant Agreements against payment therefor in
accordance with the terms and provisions of such Board Action, the
Warrant Agreement, the Registration Statement (as declared effective
under the Act), the Prospectus, or the applicable Prospectus Supplement
and, if applicable, an Underwriting Agreement, the Warrant Agreements
will constitute valid and legally binding obligations of the Company.
4. When the Depositary Shares have been duly authorized and
established in accordance with the applicable Board Action, the action
contemplated in paragraph 2 above has been taken with respect to the
underlying Preferred Stock, and the Depositary Receipts in the form
contemplated and authorized by a Deposit Agreement have been duly
executed and delivered by the Depositary and delivered to and paid for
by the purchasers thereof in the manner contemplated by such Board
Action, the Registration Statement, the Prospectus or the applicable
Prospectus Supplement, and, if applicable, an underwriting agreement
relating to the issuance of such Depositary Shares, such Depositary
Shares will be validly issued and will entitle the holders thereof to
the rights specified in the Depositary Receipts and such Deposit
Agreement.
The opinion stated herein relating to the validity and binding nature
of obligations of the Company is subject to (i) the effect of any applicable
bankruptcy, insolvency (including, without limitation, all laws relating to
fraudulent transfers), reorganization, moratorium, or similar laws affecting
creditors' rights generally and (ii) the effect of general principles of equity
(regardless of whether considered in a proceeding in equity or at law).
The opinion expressed above is limited to the laws of the State of
Maryland, exclusive of the securities or "blue sky" laws of the State of
Maryland. The opinion is rendered as of the date hereof. We assume no obligation
to update the opinion to reflect any facts or circumstances which may hereafter
come to our attention or changes in the law which may hereafter occur. To the
extent that any documents referred to herein are governed by the law of a
jurisdiction other than Maryland, we have assumed that the laws of such
jurisdiction are the same as the law of Maryland. The opinion is limited to the
matters set forth herein, and no other opinion should be inferred beyond the
matters expressly stated.
We hereby consent to the filing of this opinion with the Commission as
Exhibit 5 to the Registration Statement and to the reference to our firm under
the heading "Legal Matters" in the Registration Statement. The opinions
expressed in this letter are limited to the matters set forth in this letter,
and no other opinion should be inferred beyond the matters expressly stated.
Very truly yours,
/s/ PIPER & MARBURY L.L.P.
<PAGE> 1
EXHIBIT 8
BAKER & DANIELS
300 NORTH MERIDIAN STREET
SUITE 2700
INDIANAPOLIS, INDIANA 46204-1782
(317) 237-0300 (317) 237-1000 FAX
January 15, 1998
Simon DeBartolo Group, Inc.
National City Center
Suite 15 East
115 West Washington Street
Indianapolis, Indiana 46204
Ladies and Gentlemen:
You have asked our opinion concerning the federal income tax matters
pertaining to Simon DeBartolo Group, Inc. (the "Company") and the Company's (i)
common stock, par value $0.0001 per share ("Common Stock"), (ii) preferred
stock, par value $0.0001 per share ("Preferred Stock"), (iii) Preferred Stock
represented by depositary shares, and (iv) warrants to purchase Common Stock or
Preferred Stock ((i)-(iv), collectively, "Securities").
In connection with the opinions expressed herein, we have reviewed the
Registration Statement on Form S-3, Registration No. 333-43681 (the
"Registration Statement"), and the Prospectus constituting a part thereof dated
January 16, 1998 (which Prospectus also constitutes the prospectus for another
registration statement previously filed with the Securities and Exchange
Commission, Registration No. 333-1143) relating to the offering from time to
time of Securities with an aggregate public offering price of up to
$950,000,000. All capitalized terms used herein and not otherwise defined have
the meanings given them in the Registration Statement.
We have also examined and, with your consent, relied upon the
following: (i) the Fifth Amended and Restated Agreement of Limited Partnership
of Simon DeBartolo Group, L.P. (the "Operating Partnership"); (ii) the Fourth
Amended and Restated Partnership Agreement of Shopping Center Associates as
amended by the First Amendment dated April 8, 1992, the Second Amendment dated
December 30, 1992, and the Third Amendment dated March 19, 1993; (iii) the
opinions of Willkie Farr & Gallagher, dated as of August 9, 1996, addressed to
Simon Property Group, Inc., the former name of the Company; and (iv) such other
documents, records and instruments as we have deemed necessary in order to
enable us to render the opinions expressed herein.
In our examination of documents, we have assumed, with your consent,
(i) that all documents submitted to us are authentic originals, or if submitted
as photocopies, that they faithfully reproduce the originals thereof; (ii) that
all such documents have been or will be duly
<PAGE> 2
executed to the extent required; (iii) that all representations and statements
set forth in such documents are true and correct; (iv) that any representation
or statement made as a belief or made "to the knowledge of," or similarly
qualified, is correct and accurate without such qualification; (v) that all
obligations imposed by any such documents on the parties thereto have been or
will be performed or satisfied in accordance with their terms; and (vi) that the
Company, SD Property, RPT, the Operating Partnership, SCA, the Management
Companies and partnerships in which the Company or SD Property have direct or
indirect interests ("Subsidiary Partnerships") at all times will be organized
and operated in accordance with the terms of such documents. We have further
assumed that, except for any exceptions set forth in the representation letter
described in the following paragraph, the statements and descriptions of the
Company's, SD Property's, RPT's, the Operating Partnership's, the Management
Companies' and the Subsidiary Partnerships' businesses, properties, and intended
activities as described in the Registration Statement and the documents
incorporated therein by reference are accurate and complete and that all actions
contemplated therein with respect to the organization of each of the Companies
have been or will be completed in a timely fashion.
For purposes of rendering the opinions expressed herein, we also have
assumed, with your consent, the accuracy of the representations contained in the
letter from the Company to us of even date herewith. These representations
relate to the classification and operation of each of the Company, SD Property,
and RPT (the "Companies") as a REIT and the organization and operation of the
Operating Partnership, the Subsidiary Partnerships and the Management Companies.
Based upon and subject to the foregoing, we are of the opinion that:
1. Each of the Companies has been organized and has operated in a
manner so as to qualify for taxation as a REIT and their
methods of operation will enable them to continue to meet the
requirements of qualification and taxation as REITs under the
Code.
2. The information in the Prospectus under the caption "Federal
Income Tax Considerations" fairly summarizes the federal
income tax considerations that are likely to be material to a
holder of Securities.
This opinion is given as of the date hereof and is based on various
statutory provisions, regulations promulgated thereunder and interpretations
thereof by the Internal Revenue Service and the courts having jurisdiction over
such matters, all of which are subject to change either prospectively or
retroactively. Further, any variation or difference in the facts from those set
forth in the Registration Statement may affect the conclusions stated herein.
Moreover, each of the Companies' qualification and taxation as a REIT depends
upon its ability to meet, through actual annual operating results, requirements
under the Code regarding income, assets, distributions and diversity of stock
ownership. Because each of the Companies' satisfaction of these requirements
will depend upon future events, no assurance can be given that the actual
results of its operations for any one taxable year will satisfy the tests
necessary to qualify as or be taxed as a REIT under the Code.
This opinion is furnished to you solely for use in connection with the
Registration
<PAGE> 3
Statement. We hereby consent to the filing of this opinion as Exhibit 8 to the
Registration Statement and to the references to our name under the captions
"Federal Income Tax Considerations" and "Legal Matters" in the Prospectus that
is a part of the Registration Statement. In giving this consent we do not
thereby admit that we come within the category of persons whose consent is
required under Section 7 of the 1933 Act or the rules and regulations of the
Securities and Exchange Commission thereunder.
We express no opinions as to any federal income tax issue or other
matter except those set forth or confirmed above.
Very truly yours,
/s/ BAKER & DANIELS
