As filed with the Securities and Exchange Commission on October 18, 1996
Registration No. 333-13809
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________
Amendment No. 1
to
Form S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
_____________________
WALDEN RESIDENTIAL PROPERTIES, INC.
(Exact name of Registrant as specified in its charter)
Maryland One Lincoln Centre 75-2506197
5400 LBJ Freeway
Suite 400
Dallas, Texas 75240
(972) 788-0510
(State or other (Address, including zip code, and (I.R.S.
jurisdiction of telephone number, Employer
incorporation or including area code, of Identification
organization) Registrant's Principal Executive No.)
Offices)
Don R. Daseke
Chairman of the Board of Directors
Walden Residential Properties, Inc.
One Lincoln Centre
5400 LBJ Freeway, Suite 400
Dallas, Texas 75240
(972) 788-0510
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
_____________________
Copies to:
Kenneth L. Betts, Esq.
Winstead Sechrest & Minick P.C.
1201 Elm Street, Suite 5400
Dallas, Texas 75270
_____________________
Approximate date of commencement of proposed sale to public:
From time to time following the effective date of this Registration
Statement as determined by market conditions.
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 the delivery of the prospectus is expected to be made
pursuant to Rule 434, please check the following box.
_____________________
The Registrant hereby amends this Registration Statement on such
date or dates as may be necessary to delay its effective date until
the Registrant shall file a further amendment which specifically
states that this Registration Statement shall thereafter become
effective in accordance with Section 8(a) of the Securities Act of
1933 or until this Registration Statement shall become effective on
such date as the Commission, acting pursuant to said Section 8(a),
may determine.
(Calculation of Registration Fee appears on next page.)
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
Proposed Proposed
Maximum Maximum
Title of Each Class Amount to Offering Aggregate Amount of
of Securities to be Price per Offering Registration
be Registered Registered Unit Price Fee
- ------------------- ---------- --------- --------- ------------
<S> <C> <C> <C> <C>
Common Stock, par (1) (2) (3) (1) (2) N/A
value $.01 per share
Preferred Stock, par (1) (4) (3) (1) (4) N/A
value $.01 per share
Securities Warrants (1) (5) (3) (1) (5) N/A
Total $150,000,000 (3) $150,000,000 $51,725 (6)
</TABLE>
<F1>
(1) In no event will the aggregate maximum offering price of all
securities issued pursuant to this Registration Statement
exceed $150,000,000. Any securities registered hereunder may
be sold separately or as units with other securities
registered hereunder.
</F1>
<F2>
(2) Subject to Footnote (1), there is being registered hereunder
an indeterminate number of shares of Common Stock, par value
$.01 per share, as may be sold, from time to time, by the
Registrant.
</F2>
<F3>
(3) The proposed maximum offering price per security will be
determined, from time to time, by the Registrant in connection
with the issuance by the Registrant of the securities
registered hereunder.
</F3>
<F4>
(4) Subject to Footnote (1), there is being registered hereunder
as indeterminate number of shares of Preferred Stock, par
value $.01 per share, as may be sold, from time to time, by
the Registrant.
</F4>
<F5>
(5) Subject to Footnote (1), there is being registered hereunder
an indeterminate number of Common Stock Warrants and Preferred
Stock Warrants representing rights to purchase shares of
Common Stock and shares of Preferred Stock, respectively
registered pursuant to this Regislation Statement.
</F5>
<F6>
(6) Previously paid.
</F6>
PROSPECTUS
WALDEN RESIDENTIAL PROPERTIES, INC.
$150,000,000
Common Stock, Preferred Stock and Securities Warrants
_____________________
Walden Residential Properties, Inc. (the "Company") may from
time to time offer and sell (i) shares of its common stock, par
value $.01 per share (the "Common Stock"), (ii) shares of its
preferred stock, par value $.01 per share (the "Preferred Stock,"),
and (iii) warrants to purchase shares of Common Stock (the "Common
Stock Warrants") and warrants to purchase shares of Preferred Stock
(the "Preferred Stock Warrants" and, together with the Common Stock
Warrants, the "Securities Warrants"), with an aggregate public
offering price not to exceed $150,000,000. The Common Stock,
Preferred Stock and Securities Warrants (collectively, the "Offered
Securities") may be offered separately or together, in separate
series, in amounts and at prices and terms to be set forth in a
supplement to this Prospectus (the "Prospectus Supplement").
The terms of the Preferred Stock, including the specific
designation and stated value per share, any dividend, liquidation,
redemption, conversion, voting and other rights, and all other
specific terms of the Preferred Stock, including the initial public
offering price, will be set forth in the applicable Prospectus
Supplement. The specific number of shares of Common Stock and
issuance price per share thereof will be set forth in the
applicable Prospectus Supplement. In the case of the Securities
Warrants, the duration, offering price, exercise price and
detachability thereof, if applicable will be set forth in the
applicable Prospectus Supplement. In addition, such specific terms
may include limitations on direct or beneficial ownership and
restrictions on transfer of the Offered Securities, in each case as
may be appropriate to preserve the status of the Company as a real
estate investment trust ("REIT") for Federal income tax purposes.
The applicable Prospectus Supplement will also contain
information, where applicable, about certain Federal income tax
considerations relating to, and any listing on a securities
exchange of, the Offered Securities covered by such Prospectus
Supplement.
The Offered Securities may be offered directly by the Company,
through agents designated from time to time by the Company or to or
through underwriters or dealers, or through a combination of the
foregoing. If any agents or underwriters are involved in the sale
of any of the Offered 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 the applicable Prospectus Supplement.
See "Plan of Distribution." No Offered Securities may be sold
without delivery of the applicable Prospectus Supplement describing
the method and terms of the offering of such Offered Securities.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT
PASSED ON OR ENDORSED THE MERITS OF THIS OFFERING. ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
_____________________
The date of this Prospectus is October __, 1996.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange
Commission (the "Commission") a Registration Statement (of which
this Prospectus is a part) on Form S-3 under the Securities Act of
1933, as amended (the "Securities Act"), with respect to the
securities offered hereby. This Prospectus does not contain all of
the information set forth in the Registration Statement, certain
portions of which have been omitted as permitted by the rules and
regulations of the Commission. Statements contained in this
Prospectus as to the content of any contract or other document are
not necessarily complete, and in each instance reference is made to
the copy of the contract or other document filed as an exhibit to
the Registration Statement, each statement being qualified in all
respects by that reference and the exhibits to the Registration
Statement. For further information regarding the Company and the
securities offered hereby, reference is hereby made to the
Registration Statement and the exhibits to the Registration
Statement which may be obtained from the Commission at its
principal office in Washington, D.C., upon payment of fees
prescribed by the Commission.
The Company is subject to the informational requirements of
the Securities Exchange Act of 1934, as amended ("Exchange Act"),
and, in accordance therewith, files reports, proxy statements and
other information with the Commission. Reports, proxy statements
and other information filed by the Company can be inspected and
copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549; and
at its Regional Offices located at Suite 1400, 500 West Madison
Street, Chicago, Illinois 60661; and 13th Floor, Seven World Trade
Center, New York, New York 10048. Copies of such material can be
obtained from the Public Reference Section of the Commission, 450
Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.
The Commission maintains a Web site that contains reports, proxy
and information statements and other information regarding
registrants that file electronically with the Commission. The
address of the Commission's Web site is: http://www.sec.gov. The
Common Stock and the Company's 9.16% Series B Convertible
Redeemable Preferred Stock are listed on the New York Stock
Exchange, Inc. (the "NYSE") and such reports, proxy statements and
other information concerning the Company can be inspected at the
offices of the NYSE, 20 Broad Street, New York, New York 10005.
The Company furnishes its stockholders with annual reports
containing financial statements audited by its independent auditors
and with quarterly reports containing unaudited summary financial
information for each of the first three quarters of each fiscal
year.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by the
Company pursuant to the Exchange Act are hereby incorporated by
reference in this Prospectus:
(a) The Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995 (the "Form 10-K").
(b) Amendment No. 1 on Form 10-K/A to the Form 10-K.
(c) Amendment No. 2 on Form 10-K/A to the Form 10-K.
(d) The Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1996.
(e) The Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1996.
(f) The Company's Current Report on Form 8-K dated April
23, 1996.
(g) The Company's Current Report on Form 8-K dated
August 21, 1996.
(h) The Company's Current Report on Form 8-K dated
October 1, 1996.
(i) Description of the Common Stock contained in the
Company's registration statement on Form 8-A filed November
19, 1993.
(j) Description of the Company's 9.16% Series B
Cumulative Redeemable Preferred Stock contained in the
Company's registration statement on Form 8-A filed June 3,
1996.
All documents filed by the Company pursuant to Sections 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 made
hereby shall be deemed to be incorporated by reference into this
Prospectus.
Any statement contained in a document all or a portion of
which is incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of
the Registration Statement and this Prospectus to the extent that
a statement contained in the Registration Statement, this
Prospectus or any other subsequently filed document that is also
incorporated by reference herein modifies or supersedes that
statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part
of this Prospectus.
The Company hereby undertakes to provide without charge to
each person, including any beneficial owner, to whom a Prospectus
is delivered, upon written or oral request of that person, a copy
of any document incorporated herein by reference (other than
exhibits to those documents unless the exhibits are specifically
incorporated by reference into the documents that this Prospectus
incorporates by reference). Requests should be directed to Deborah
B. Attner, Stockholder Relations, Walden Residential Properties,
Inc., One Lincoln Centre, 5400 LBJ Freeway, Suite 400, Dallas,
Texas 75240.
THE COMPANY
The Company is a self-administered, self-managed, fully
integrated REIT focused on middle income multifamily properties
located primarily in selected Southwestern and Southeastern
markets. The Company, a Maryland corporation with headquarters in
Dallas, Texas, was formed in September 1993 to continue and expand
the multifamily property ownership, management, acquisition and
marketing operations and related business objectives and strategies
of The Walden Group, Inc. and its subsidiaries and affiliates
(collectively, the "Walden Predecessors"). The Company currently
owns and operates 66 multifamily properties (the "Properties")
containing 20,123 apartment units. Approximately 89% of the
apartment units are located in the Dallas/Fort Worth, Oklahoma
City, Tampa, Jacksonville, Tulsa, Phoenix, Houston, San Antonio,
Austin and Salt Lake City areas, with the remaining Properties
primarily located in other areas in the Southwest and Southeast
regions of the United States. The Properties had a weighted
average occupancy rate of approximately 94.3% at October 14, 1996.
Through WDN Management Company, a corporation formed by the Company
to manage multifamily properties for third parties, the Company
manages on a fee basis eight additional multifamily properties
containing 2,298 apartment units.
Upon completion of its initial public offering in February
1994, the Company purchased the multifamily operations of the
Walden Predecessors, including 18 of the Properties containing
5,895 apartment units (of which a 299-unit property was sold in
April 1995, a 384-unit property was sold in April 1996 and a
144-unit property was sold in September 1996), and concurrently
purchased two additional Properties containing 448 apartment units,
one of which was owned by a third party and the other of which was
principally owned by the Walden Predecessors. Since the
consummation of its initial public offering, the Company has
acquired 51 of the Properties (of which a 242-unit property was
sold in December 1995 and a 304-unit property was sold in August
1996), containing an aggregate of 15,153 apartment units, for an
aggregate purchase price of approximately $487.3 million.
Management believes that these acquisitions are consistent with its
core acquisition strategy of acquiring well located garden
apartment properties at prices less than replacement costs, which
serve middle income residents and can benefit from the Company's
comprehensive management programs.
The Company is operated under the direction of Don R. Daseke,
Chairman of the Board and Chief Executive Officer of the Company,
and a management team substantially all of whom were formerly
employed by the Walden Predecessors. The Company's 19 officers
have an average tenure with the Company and the Walden Predecessors
of nine years and have an average of approximately 18 years
experience in the multifamily properties business. The Company is
fully integrated with operations that include multifamily property
acquisitions, property redevelopment, property management,
financing and leasing and asset management.
The Company's executive offices are located at One Lincoln
Centre, 5400 LBJ Freeway, Suite 400, Dallas, Texas 75240. The
telephone number is (972) 788-0510. The Company was incorporated
in Maryland on September 29, 1993 and the duration of its existence
is perpetual.
RECENT DEVELOPMENTS
On August 27, 1996, the Company completed a public offering of
1,525,000 shares of Common Stock, resulting in net proceeds to the
Company of approximately $29.8 million. On September 20, 1996, the
Company sold an additional 155,250 shares of Common Stock in
connection with the exercise of the underwriter's over-allotment
option relating to such public offering, resulting in net proceeds
to the Company of approximately $3.0 million. Since June 30, 1996,
the Company has acquired eight apartment communities, containing an
aggregate of 2,076 units, of which two are located in Jacksonville,
Florida, four are located in the Dallas/Fort Worth area, one is
located in Melbourne, Florida and one is located in Nashville,
Tennessee. The aggregate acquisition cost for these properties was
approximately $67.4 million which was funded from the Company's
credit facility, the proceeds from the Company's recent public
offering and funds held in escrow under a tax-free exchange. One
of these properties was purchased for $9.1 million from an
affiliate of the Company. All of such proceeds received from the
sale were used to retire all liabilities of the property, and
therefore, no proceeds from the sale of this property were retained
by such affiliate. In August 1996, the Company also sold the
Christiwood Apartments, a 304-unit property located in Corpus
Christi, Texas, for $9.2 million, and in September 1996 the Company
sold the Chimney Trace Apartments, a 144-unit property located in
Stone Mountain, Georgia, for $5.8 million.
The Company has entered into contracts to acquire four
additional apartment communities, with an aggregate of 860 units,
in Texas and Arizona, for approximately $31.7 million, including
the assumption of indebtedness existing on one of the properties in
the amount of $7.2 million (the "Acquisition Properties"). The
Company has completed its due diligence on one of the Acquisition
Properties (consisting of 290 apartment units) and expects to
acquire this property in November 1996. The Company anticipates
the completion of its due diligence review and closing of two of
the Acquisition Properties (with an aggregate of 362 units) in
December 1996 and anticipates purchasing the final Acquisition
Property in January 1997. Because of the ongoing due diligence
review of certain of these Acquisition Properties, as well as other
closing conditions, there can be no assurance that any of such
Acquisition Properties will ultimately be acquired.
RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
The Company's ratio of earnings to combined fixed charges and
preferred stock dividends for the six months ended June 30, 1996
and its fiscal year ended December 31, 1995 and the year ended
December 31, 1994 (which includes results of operations of the
Walden Predecessors for the period of January 1, 1994 through
February 8, 1994) and for the years ended December 31, 1993, 1992
and 1991 (which are based on the results of the Walden
Predecessors) was 1.65x, 1.52x, 1.68x, .63x, .57x and .49x,
respectively. The Company had no preferred dividend requirement in
any of such years prior to 1995; therefore, the ratio of earnings
to combined fixed charges and preferred stock dividends are the
same as the ratio of earnings to fixed charges for such years.
Earnings were calculated by adding certain fixed charges
(consisting of interest on indebtedness and amortization and
financing costs) to the Company's income before extraordinary
items. The Company's earnings (in thousands) were inadequate to
cover fixed charges by $45, $4,795, $5,209 and $6,352 for the
period from January 1, 1994 to February 8, 1994 and the years ended
December 31, 1993, 1992 and 1991, respectively, all of which were
prior to the Company's initial public offering in February of 1994.
USE OF PROCEEDS
Unless otherwise described in the Prospectus Supplement which
accompanies this Prospectus, the Company intends to use the net
proceeds from the sale of the Offered Securities for general
corporate purposes, which may include acquiring additional
multifamily residential garden apartment properties or interests in
entities owning multifamily residential garden apartment properties
as suitable opportunities arise, making improvements to properties,
repaying certain then-outstanding secured or unsecured indebtedness
and for working capital. Pending use for the foregoing purposes,
such proceeds may be invested in short-term, interest-bearing time
or demand deposits with financial institutions, cash items or
qualified government securities.
DESCRIPTION OF COMMON STOCK
The summary of the terms of the Common Stock set forth below
does not purport to be complete and is subject to, and qualified in
its entirety by, reference to the Company's Articles of
Incorporation, as amended and restated (the "Articles"), and the
Company's Bylaws.
The Articles authorize the Company to issue up to 50 million
shares of Common Stock, 10 million shares of Preferred Stock and 60
million shares of excess stock, par value $.01 per share (the
"Excess Stock"). At September 30, 1996, 15,753,781 shares of
Common Stock were issued and outstanding, all of which are fully
paid and nonassessable. Under the Maryland General Corporation Law
(the "MGCL"), stockholders generally are not liable for the
corporation's debts or obligations.
General
- -------
All shares of Common Stock offered pursuant to a Prospectus
Supplement will be duly authorized, fully paid and nonassessable.
Subject to the preferential rights of shares of the Preferred
Stock, including the Series A Preferred Stock and the Series B
Preferred Stock (as such terms are hereinafter defined), and any
other shares or series of stock hereinafter designated by the Board
of Directors of the Company (the "Board of Directors"), holders of
shares of Common Stock are entitled to receive dividends on the
stock if, as and when authorized and declared by the Board of
Directors out of assets legally available therefor and to share
ratably in the assets of the Company legally available for
distribution to its stockholders in the event of its liquidation,
dissolution or winding-up after payment of, or adequate provision
for payment of, all known debts and liabilities of the Company.
The Company has paid regular quarterly dividends to date and
intends to continue paying regular quarterly dividends.
Each outstanding share of Common Stock entitles the holder
thereof to one vote on all matters submitted to a vote of
stockholders, including the election of directors and, except as
otherwise required by law or except as provided with respect to any
other class or series of stock, the holders of shares of Common
Stock will possess the exclusive voting power. There is no
cumulative voting in the election of directors, which means that
the holders of a majority of the outstanding shares of Common Stock
can elect all of the directors then standing for election and the
holders of the remaining shares will not be able to elect any
directors. Holders of shares of Common Stock have no conversion,
sinking fund, redemption rights or preemptive rights to subscribe
for any securities of the Company.
Shares of Common Stock have equal dividend, distribution,
liquidation and other rights and will have no preference or
exchange rights.
Pursuant to the MGCL, a corporation generally cannot dissolve,
amend its charter, merge, sell all or substantially all of its
assets, engage in a share exchange or engage in similar
transactions unless approved by the holders of at least two-thirds
of the shares of stock entitled to vote on the matter unless a
lesser percentage (but not less than a majority of all of the votes
to be cast on the matter) is set forth in the corporation's
charter. The Articles provide for the vote of the holders of a
majority of the shares of stock outstanding and entitled to vote on
the matter to approve any of such actions, except for amendments to
the Articles relating to the number of directors and the
classification of the Board of Directors which require approval of
holders of at least two-thirds of the shares of stock entitled to
vote on the matter.
The transfer agent and registrar for the Common Stock is The
First National Bank of Boston.
Restrictions on Transfer
- ------------------------
For the Company to qualify as a REIT under the Internal
Revenue Code of 1986, as amended (the "Code"), shares of Common
Stock must be beneficially owned by 100 or more persons during at
least 335 days of a taxable year of twelve months (other than the
first year) or during a proportionate part of a shorter taxable
year. Further, not more than 50% of the value of the issued and
outstanding shares of capital stock of the Company may be owned,
directly or indirectly, by five or fewer individuals (as defined in
the Code to include, except in limited circumstances, certain
entities such as qualified private pension plans) during the last
half of a taxable year (other than the first year) or during a
proportionate part of a shorter taxable year.
Since the Board of Directors believes it is essential for the
Company to maintain its status as a REIT under the Code, the
Articles provide that no person, except Mr. Daseke, may own, or be
deemed to own by virtue of the attribution provisions of the Code,
more than 9.0% (the "Ownership Limit") of the aggregate value of
all outstanding shares of capital stock of the Company. Mr. Daseke
beneficially owns in the aggregate approximately 6.1% of the shares
of Common Stock and may acquire additional shares of Common Stock;
provided, however, that Mr. Daseke may not own, directly or
indirectly, more than 13.0% of the aggregate value of all
outstanding shares of capital stock of the Company (the "Existing
Holder Limit"). The Board of Directors, upon receipt of evidence
and assurances satisfactory to the Board of Directors, may also
exempt a proposed transferee from the Ownership Limit or Existing
Holder Limit. In connection therewith, the Board of Directors may
require opinions of counsel, affidavits, undertakings or agreements
as it may deem necessary or advisable in order to determine or
ensure the Company's status as a REIT. Any acquisition or transfer
of shares of Common Stock that would: (i) result in the shares of
Common Stock being owned by fewer than 100 persons or (ii) result
in the Company being "closely-held" within the meaning of Section
856(h) of the Code, shall be null and void, and the intended
transferee will acquire no rights to the shares of Common Stock.
The foregoing restrictions on transferability and ownership will
not apply if the Board of Directors determines that it is no longer
in the best interests of the Company to attempt to qualify, or to
continue to qualify, as a REIT and the Articles are amended
accordingly.
Any purported transfer of shares of capital stock that would
result in a person owning shares of capital stock in excess of the
Ownership Limit or Existing Holder Limit will result in the shares
subject to such purported transfer being automatically exchanged
for an equal number of shares of Excess Stock. Under the Articles,
Excess Stock shall be deemed to have been transferred to the
Company as trustee of a separate trust (the "Trust") for the
exclusive benefit of the person or persons to whom the interest in
the Trust can ultimately be transferred.
Excess Stock is not transferable. The purported transferee of
any shares of capital stock that are exchanged for Excess Stock may
designate a transferee of the interest in the Trust if the Excess
Stock held in the Trust and represented by such Trust interest to
be transferred would not be Excess Stock in the hands of the
designated transferee at a price not to exceed the price paid by
the purported transferee (or, if no consideration was paid, the
Market Price (as hereinafter defined) measured on the date of the
original attempted transfer) at which point such Excess Stock will
automatically be exchanged for the shares of Common Stock or
Preferred Stock to which the Excess Stock is attributable. In
addition, Excess Stock is subject to purchase by the Company at a
purchase price equal to the lesser of: (i) the price paid for the
shares of capital stock by the intended transferee (or, if no
consideration was paid, the Market Price of the shares of capital
stock the attempted transfer of which resulted in Excess Stock,
measured on the date of the transfer); or (ii) the Market Price of
the shares of capital stock the attempted transfer of which
resulted in Excess Stock measured on the date on which the Company
elects to purchase the Excess Stock. "Market Price" means the
average daily per share closing sales price of a share of capital
stock if such shares of capital stock are listed on a national
securities exchange or quoted on Nasdaq National Market or if not
then traded on any exchange or quotation system, the mean between
the average per share closing bid prices and the average per share
closing asked prices, in each case, during the 30 calendar day
period ending on the business day prior to the measurement date, or
if there have been no sales on a national securities exchange or
the Nasdaq National Market and no published bid and asked
quotations with respect to shares of such stock during such 30
calendar day period, then the market price of the shares of capital
stock on the relevant date shall be as determined in good faith by
the Board of Directors.
From and after the intended transfer to the purported
transferee of the shares of Excess Stock, the purported transferee
shall cease to be entitled to distributions (except upon
liquidation), voting rights and other benefits with respect to the
Excess Stock except the right to payment of the purchase price for
the applicable shares of underlying capital stock. Any dividend or
distribution paid to a purported transferee on Excess Stock prior
to the discovery by the Company that the shares have been
transferred in violation of the Articles shall be repaid to the
Company upon demand. If the foregoing transfer restrictions are
determined to be void or invalid by virtue of any legal decision,
statute, rule or regulation, then the intended transferee of any
Excess Stock may be deemed, at the option of the Company, to have
acted as an agent on behalf of the Company in acquiring the Excess
Stock and to hold the Excess Stock on behalf of the Company. All
certificates representing shares of capital stock will bear a
legend referring to the restrictions described above.
In addition, each stockholder shall, upon demand, be required
to disclose to the Company in writing all information regarding the
direct and indirect beneficial ownership of shares of capital stock
as the Board of Directors deems reasonably necessary to comply with
the provisions of the Code applicable to a REIT, to comply with the
requirements of any taxing authority or governmental agency or to
determine any such compliance.
These ownership limitations could have the effect of
discouraging a takeover or other transaction in which holders of
some, or a majority, of shares of capital stock might receive a
premium for their shares over the then-prevailing market price or
which these holders might believe to be otherwise in their best
interest.
DESCRIPTION OF PREFERRED STOCK
The following description of terms of the Preferred Stock sets
forth certain general terms and provisions of the Preferred Stock
to which any Prospectus Supplement may relate. Certain other terms
of any series of the Preferred Stock offered by any Prospectus
Supplement will be described in such Prospectus Supplement. The
description of certain provisions of the Preferred Stock set forth
below and in any Prospectus Supplement does not purport to be
complete and is subject to and qualified in its entirety by
reference to the Articles and the Board of Directors' resolution or
resolutions relating to each series of the Preferred Stock which
will be filed with the Commission and incorporated by reference as
an exhibit to the Registration Statement of which this Prospectus
is a part at or prior to the time of the issuance of such series of
Preferred Stock.
General
- -------
Subject to limitations prescribed by the MGCL and the
Articles, the Board of Directors is authorized to issue shares of
Preferred Stock in one or more series, to establish from time to
time the number of shares of Preferred Stock to be included in any
such series and to fix for any such series the designation and any
preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications and terms
and conditions of redemption. The Company is authorized to issue
10 million shares of Preferred Stock. At September 30, 1996,
78,700 shares of the Company's 9.16% Series A Convertible
Redeemable Preferred Stock (the "Series A Preferred Stock") and
1,707,300 shares of the Company's 9.16% Series B Convertible
Redeemable Preferred Stock (the "Series B Preferred Stock") were
outstanding. For purposes of the following description of the
Preferred Stock, the Series A Preferred Stock and the Series B
Preferred Stock will sometimes be collectively referred to as the
"Outstanding Preferred Stock."
The Preferred Stock shall have the dividend, liquidation,
redemption and voting rights set forth below unless otherwise
provided in a Prospectus Supplement relating to a particular series
of the Preferred Stock. Reference is made to the Prospectus
Supplement relating to the particular series of the Preferred Stock
offered thereby for specific terms, including: (i) the designation
and stated value per share of such Preferred Stock and the number
of shares offered; (ii) the amount of liquidation preference per
share; (iii) the initial public offering price at which such
Preferred Stock will be issued; (iv) the dividend rate (or method
of calculation), the dates on which dividends shall be payable and
the dates from which dividends shall commence to cumulate, if any;
(v) any redemption or sinking fund provisions; (vi) any conversion
right; (vii) any listing of the Preferred Stock on any securities
exchange; (viii) any additional voting, dividend, liquidation,
redemption, sinking fund and other rights, preferences, privileges,
limitations and restrictions not in conflict with the Articles or
the MGCL; (ix) a discussion of Federal income tax considerations
applicable to the Preferred Stock; (x) the relative ranking and
preferences of the Preferred Stock as to dividends and rights upon
liquidation; and (xi) any limitations on direct or beneficial
ownership and restrictions on transfer. The Preferred Stock will,
when issued for lawful consideration therefor, be fully paid and
nonassessable and will have no preemptive rights.
Unless otherwise indicated in a Prospectus Supplement relating
thereto, The First Bank of Boston will be the transfer agent and
registrar for shares of each series of Preferred Stock.
Rank
- ----
Unless otherwise specified in the Prospectus Supplement, the
Preferred Stock will, with respect to dividend rights upon
liquidation, dissolution or winding up of the Company, rank
(i) senior to all classes or series of Common Stock 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 rights of the holders of each series of Preferred Stock
will be subordinate to those of the Company's general creditors.
Dividends
- ---------
Holders of each series of Preferred Stock shall 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 dividends
at such rates and on such dates as will be set forth in the
applicable Prospectus Supplement. Such rate may be fixed or
variable or both. Each such dividend 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,
as specified in the Prospectus Supplement relating to such series
of Preferred Stock.
Dividends on any series of Preferred Stock may be cumulative
or non-cumulative, as provided in the applicable Prospectus
Supplement. Dividends, if cumulative, will be cumulative from and
after the date set forth in the applicable Prospectus Supplement.
If the Board of Directors fails to declare a dividend payable on a
dividend payment date on any series of Preferred Stock for which
dividends are noncumulative, then the holders of such series of
Preferred Stock will have no right to receive a dividend in respect
of the dividend period ending on such dividend payment date, and
the Company will have no obligation to pay the dividend accrued for
such period, whether or not dividends on such series are declared
payable on any future dividend payment date. Dividends on shares
of each series of Preferred Stock for which dividends are
cumulative will accrue from the date on which the Company initially
issues shares of such series.
So long as any series of Preferred Stock shall be outstanding,
unless (i) full dividends (including, if such dividends are
cumulative, dividends for prior dividend periods) shall have been
paid or declared and set apart for payment on all outstanding
shares of Preferred Stock of such series and all other classes and
series of Preferred Stock (other than Junior Stock, as hereinafter
defined) and (ii) the repurchase or other mandatory retirement of,
or with respect to any sinking or other analogous fund for, any
shares of Preferred Stock of such series or any other Preferred
Stock of any class or series (other than Junior Stock), the Company
may not declare any dividends on any Common Stock or any other
equity securities of the Company ranking as to dividends or
distributions of assets junior to such series of Preferred Stock
(the Common Stock and any such other equity securities being herein
referred to as "Junior Stock"), or make any payment on account of,
or set apart money for, the purchase, redemption or other
retirement of, or for a sinking or other analogous fund, for, any
Junior Stock or make any distribution in respect thereof, whether
in cash or property or in obligations or equity securities of the
Company, other than shares of Junior Stock which are neither
convertible into, nor exchangeable or exercisable for, any
securities of the Company other than shares of Junior Stock.
Any dividend payment made on a series of Preferred Stock shall
first be credited against the earliest accrued but unpaid dividend
due with respect to shares of such series which remains payable.
Redemption
- ----------
A series of Preferred Stock may be redeemable, in whole or
from time to time in part, at the option of the Company, and may be
subject to mandatory redemption pursuant to a sinking fund or
otherwise, in each case upon the terms, at the times and at the
redemption prices set forth in the Prospectus Supplement relating
to such series. Shares of Preferred Stock redeemed by the Company
will be restored to the status of authorized but unissued Preferred
Stock of the Company.
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 dividends thereon (which
shall not, if such Preferred Stock does not have a cumulative
dividend, include any accumulation in respect of unpaid dividends
for prior dividend 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 equity securities of the
Company, the terms of such series of Preferred Stock may provide
that, if no such equity securities 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 equity securities of the Company pursuant to conversion
provisions specified in the applicable Prospectus Supplement.
So long as any dividends on shares of any series of Preferred
Stock or any other series of Preferred Stock of the Company ranking
on a parity as to dividends and distribution of assets which such
series of Preferred Stock are in arrears, no shares of any such
series of Preferred Stock or such other series of Preferred Stock
of the Company will be redeemed (whether by mandatory or optional
redemption) unless all such shares are simultaneously redeemed, and
the Company will not purchase or otherwise acquire any such shares;
provided, however, that the foregoing will not prevent the purchase
or acquisition of such shares pursuant to a purchase or exchange
offer made on the same terms to holders of all such shares
outstanding.
In the event that fewer than all of the outstanding shares of
a series of Preferred Stock are to be redeemed, whether by
mandatory or optional redemption, the number of shares to be
redeemed will be determined by lot or pro rata (subject to rounding
to avoid fractional shares) as may be determined by the Company or
by any other method as may be determined by the Company in its sole
discretion to be equitable. From and after the redemption date
(unless default shall be made by the Company in providing for the
payment of the redemption price plus accumulated and unpaid
dividends, if any), dividends shall cease to accumulate on the
shares of Preferred Stock called for redemption and all rights of
the holders thereof (except the right to receive the redemption
price plus accumulated and unpaid dividends, if any) shall cease.
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 Junior
Stock, 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 (set forth in the
applicable Prospectus Supplement), plus an amount equal to all
dividends accrued and unpaid thereon (which shall not include any
accumulation in respect of unpaid dividends for prior dividend
periods if such Preferred Stock does not have a cumulative
dividend). 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 equity securities of the Company ranking on a 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
equity securities 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 shares of Junior Stock,
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, or the sale, lease or conveyance of all or
substantially all of the assets or business of the Company, shall
not be deemed to constitute a liquidation, dissolution or winding
up of the Company.
Voting Rights
- -------------
Except as indicated below or in a Prospectus Supplement
relating to a particular series of Preferred Stock, or except as
required by applicable law, holders of the Preferred Stock will not
be entitled to vote for any purpose. The following is a summary of
the voting rights applicable to the Outstanding Preferred Stock,
which, unless provided otherwise in the applicable Prospectus
Supplement, will apply to each series of Preferred Stock.
Subject to the provisions in the Articles regarding Excess
Stock, in any matter in which the Outstanding Preferred Stock may
vote, including any action by written consent, each share of
Outstanding Preferred Stock will be entitled to one vote. The
holders of each share of Outstanding Preferred Stock may separately
designate a proxy for the vote to which that share of Outstanding
Preferred Stock is entitled.
Whenever dividends on any shares of Series B Preferred Stock
have been in arrears for six or more quarterly periods (and, in the
case of the Series A Preferred Stock, for six or more consecutive
quarterly periods), the holders of such shares of Outstanding
Preferred Stock (voting separately as a class with all other series
of Preferred Stock upon which rights to vote on such matter with
the Outstanding Preferred Stock have been conferred and are then
exercisable) will be entitled to vote for the election of two
additional directors of the Company at a special meeting called by
the holders of record of at least 10% of the Outstanding Preferred
Stock and such other Preferred Stock, if any (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 all dividends accumulated on such shares of
Outstanding Preferred Stock for the past dividend periods and the
then current dividend period have been fully paid or declared and
a sum sufficient for the payment thereof set aside for payment. In
such event, the entire Board of Directors will be increased by two
directors. Each of such two directors will be elected to serve
until the earlier of (i) the election and qualification of such
director's successor or (ii) payment of the dividend arrearage for
the Outstanding Preferred Stock.
So long as any shares of Outstanding Preferred Stock remain
outstanding, the Company will not (i) without the affirmative vote
or consent of the holders of at least a majority of the shares of
Outstanding Preferred Stock outstanding at the time, given in
person or by proxy, either in writing or at a meeting (such series
voting separately as a class), authorize or create, or increase the
authorized or issued amount of, any class or series of capital
stock ranking senior to the Outstanding Preferred Stock with
respect to payment of dividends or the distribution of assets upon
liquidation, dissolution or winding up, or create, authorize or
issue any obligation or security convertible into or evidencing the
right to purchase any such shares; or (ii) without the affirmative
vote or consent of the holders of at least two-thirds of the shares
of Series B Preferred Stock outstanding at the time (and, in the
case of the Series A Preferred Stock, a majority of the shares of
Series A Preferred Stock then outstanding), given in person or by
proxy, either in writing or at a meeting (such series voting
separately as a class), amend, alter or repeal the provisions of
the Articles, whether by merger, consolidation or otherwise, so as
to materially and adversely affect any right, preference, privilege
or voting power of the Outstanding Preferred Stock or the holders
thereof; provided, however, that any increase in the amount of the
authorized Preferred Stock or the creation or issuance of any other
series of Preferred Stock, or any increase in the amount of
authorized shares of Outstanding Preferred Stock or any other
series of Preferred Stock, in each case ranking on a parity with or
junior to the Outstanding Preferred Stock with respect to payment
of dividends or the distribution of assets upon liquidation,
dissolution or winding up, will 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 is effected, all outstanding shares of
Outstanding Preferred Stock have been redeemed or called for
redemption upon proper notice and sufficient funds have been
deposited in trust to effect such redemption.
Conversion Rights
- -----------------
The terms and conditions, if any, upon which shares of any
series of Preferred Stock are 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, the
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 the provisions affecting
conversion.
Restrictions on Ownership
- -------------------------
See "Description of Common Stock Restrictions on Transfer" for
a discussion of the restrictions on transfer of shares of capital
stock necessary for the Company to qualify as a REIT under the
Code.
DESCRIPTION OF SECURITIES WARRANTS
General
- -------
The Company may issue Securities Warrants for the purchase of
shares of Preferred Stock or shares of Common Stock. Securities
Warrants may be issued independently or together with any other
Offered Securities offered by any Prospectus Supplement or through
a dividend or other distribution to the Company's stockholders and
may be attached to or separate from such Offered Securities. Each
series of Securities 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
Securities Warrants of such series and will not assume any
obligation or relationship of agency or trust for or with any
holders or beneficial owners of Securities Warrants. The following
summary of certain provisions of the Warrant Agreement and the
Securities Warrants does not purport to be complete and is subject
to, and is qualified in its entirety by reference to, all the
provisions of theWarrant Agreement and the Securities Warrant
certificates relating to each series of Securities Warrants which
will be filed with the Commission and incorporated by reference as
an exhibit to the Registration Statement of which this Prospectus
is a part at or prior to the time of the issuance of such series of
Securities Warrants.
If Securities Warrants for the purchase of shares of Preferred
Stock or shares of Common Stock are being offered, the applicable
Prospectus Supplement will describe the terms of such Securities
Warrants, including the following where applicable: (i) the title
of such Securities Warrants; (ii) the aggregate number of such
Securities Warrants; (iii) the offering price; (iv) the aggregate
number of shares purchasable upon exercise of such Securities
Warrants, the exercise price and, in the case of Securities
Warrants for shares of Preferred Stock, the designation, aggregate
number and terms of the series of Preferred Stock purchasable upon
exercise of such Securities Warrants; (v) the designation and terms
of any series of Preferred Stock with which such Securities
Warrants are being offered and the number of such Securities
Warrants being offered with such Preferred Shares; (vi) the date,
if any, on and after which such Securities Warrants and the related
series of Preferred Stock or shares of Common Stock will be
transferable separately; (vii) the date on which the right to
exercise such Securities Warrants shall commence and the expiration
date thereof; (viii) any special Federal income tax consequences;
and (ix) any other material terms of such Securities Warrants.
Securities Warrant certificates may be exchanged for new
Securities Warrant certificates of different denominations, may (if
in registered form) be presented for registration of transfer and
may be exercised at the corporate trust office of the Warrant Agent
or any other office indicated in the applicable Prospectus
Supplement. Prior to the exercise of any Securities Warrants to
purchase shares of Preferred Stock or shares of Common Stock,
holders of such Securities Warrants will not have any rights of
holders of such Preferred Stock or Common Stock, including the
right to receive payments of dividends, if any, on such Preferred
Stock or Common Stock, or to exercise any applicable right to vote.
Exercise of Securities Warrants
- -------------------------------
Each Securities Warrant will entitle the holder thereof to
purchase such number of shares of Preferred Stock or Common Stock,
as the case may be, at such exercise price as shall in each case be
set forth in, or calculable from, the Prospectus Supplement
relating to the offered Securities Warrants. After the close of
business on the expiration date of any Securities Warrant (or such
later date to which such expiration date may be extended by the
Company), unexercised Securities Warrants will become void.
Securities Warrants may be exercised by delivering to the
Warrant Agent payment as provided in the applicable Prospectus
Supplement of the amount required to purchase the shares of
Preferred Stock or Common Stock, as the case may be, purchasable
upon such exercise together with certain information set forth on
the reverse side of the Securities Warrant certificate. Securities
Warrants will be deemed to have been exercised upon receipt of
payment of the exercise price, subject to the receipt within five
(5) business days of the Securities Warrant certificate evidencing
such Securities Warrants. Upon receipt of such payment and the
Securities Warrant certificate properly completed and duly executed
at the corporate trust office of the Warrant Agent or any other
office indicated in the applicable Prospectus Supplement, the
Company will, as soon as practicable, issue and deliver the shares
of Preferred Stock or Common Stock, as the case may be, purchasable
upon such exercise. If fewer than all of the Securities Warrants
represented by such Securities Warrant certificate are exercised,
a new Securities Warrant certificate will be issued for the
remaining amount of Securities Warrants.
Amendments and Supplements to Warrant Agreement
- -----------------------------------------------
The Warrant Agreements may be amended or supplemented without
the consent of the holders of the Securities Warrants issued
thereunder to effect changes that are not inconsistent with the
provisions of the Securities Warrants and that do not adversely
affect the interests of the holders of the Securities Warrants.
Adjustments
- -----------
Unless otherwise indicated in the applicable Prospectus
Supplement, the exercise price of, and the number of shares of
Common Stock covered by, a Common Stock Warrant are subject to
adjustment in certain events, including (i) payment of a dividend
on the Common Stock payable in shares of capital stock and stock
splits, combinations or reclassification of the Common Stock; (ii)
issuance to all holders of Common Stock of rights or warrants to
subscribe for or purchase shares of Common Stock at less than their
current market price (as defined in the Warrant Agreement for such
series of Common Stock Warrants); and (iii) certain distributions
of evidences of indebtedness or assets (including securities but
excluding cash dividends or distributions paid out of consolidated
earnings or retained earnings or dividends payable in shares of
Common Stock) or of subscription rights and warrants (excluding
those referred to above).
No adjustment will be required unless such adjustment would
require a change of at least 1% in the exercise price then in
effect. Except as stated above, the exercise price of, and the
number of shares of Common Stock covered by, a Common Stock Warrant
will not be adjusted for the issuance of shares of Common Stock or
any securities convertible into or exchangeable for Common Stock,
or carrying the right or option to purchase or otherwise acquire
the foregoing, in exchange for cash, other property or services.
No adjustment in the exercise price of, and the number of shares of
Common Stock covered by, a Common Stock Warrant will be made for
regular quarterly or other periodic or recurring cash dividends or
distributions.
In the event of any (i) consolidation or merger of the Company
with or into any entity (other than a consolidation or a merger
that does not result in any reclassification, conversion, exchange
or cancellation of outstanding shares of Common Stock); (ii) sale,
transfer, lease or conveyance of all or substantially all of the
assets of the Company; or (iii) reclassification, capital
reorganization or change of the Common Stock (other than solely a
change in par value or from par value to no par value), then any
holder of a Common Stock Warrant will be entitled, on or after the
occurrence of any such event, to receive on exercise of such Common
Stock Warrant the kind and amount of shares of beneficial interest
or other securities, cash or other property (or any combination
thereof) that the holder would have received had such holder
exercised such holder's Common Stock Warrant immediately prior to
the occurrence of such event. If the consideration to be received
upon exercise of the Common Stock Warrant following any such event
consists of common shares of the surviving entity, then from and
after the occurrence of such event, the exercise price of such
Common Stock Warrant will be subject to the same anti-dilution and
other adjustments described in the second preceding paragraph,
applied as if such shares were shares of Common Stock.
FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of the material Federal income tax
considerations affecting the Company and its stockholders. This
discussion is directed principally at investors who are United
States citizens or residents or domestic corporations, and does not
address in all material respects considerations that might
adversely affect the treatment of investors who are subject to
special treatment under the tax laws (such as insurance companies,
cooperatives, financial institutions, broker-dealers, tax exempt
organizations or foreign investors). The discussion in this
section is based on existing provisions of the Code, existing and
proposed Treasury regulations, existing court decisions and
existing rulings and other administrative interpretations. There
can be no assurance that future Code provisions or other legal
authorities will not alter significantly the tax consequences
described below. No rulings have been obtained from the Internal
Revenue Service ("IRS") concerning any of the matters discussed in
this section. Because the following represents only a summary, it
is qualified in its entirety by the applicable provisions of the
Code, and regulations, court decisions and IRS rulings and other
IRS pronouncements.
Each prospective purchaser of shares of Common Stock and/or
Preferred Stock is advised to consult his or her own tax advisor
about the Federal, state, local, foreign and other tax consequences
of buying, holding and selling shares of Common Stock and/or
Preferred Stock, and of the Company's election to be taxed as a
REIT, particularly in light of that purchaser's specific
circumstances.
REIT Qualification
- ------------------
Entities like the Company that invest principally in real
estate and that otherwise would be taxed as regular corporations
may elect to be treated as REITs when they satisfy certain detailed
requirements imposed by the Code. If the Company qualifies for
taxation as a REIT, it generally will not be subject to corporate
income tax to the extent the Company currently distributes its REIT
taxable income to its stockholders. This treatment effectively
eliminates the "double taxation" (i.e., taxation at both the
corporate and stockholder levels) imposed on investments in most
regular corporations. A qualifying REIT, however, may be subject
to certain excise and other taxes, as well as to normal corporate
tax on taxable income that is not currently distributed to its
stockholders. See " Taxation of the Company as a REIT." In
addition, if the Company fails to qualify as a REIT in any taxable
year, it will be subject to Federal income tax at regular corporate
rates on all of its taxable income. The current maximum Federal
tax rate for corporations is 35%, but that rate may increase.
The Company has elected to be treated as a REIT for Federal
income tax purposes commencing with its taxable year ended
December 31, 1994, and for each subsequent taxable year. The
Company believes that, commencing with such taxable year, it has
been organized and has operated in such a manner as to qualify for
taxation as a REIT under the Code, commencing with such taxable
year, and the Company intends to continue to operate in such a
manner. Winstead Sechrest & Minick P.C., counsel to the Company,
is of the opinion that the Company is organized in conformity with
the requirements for qualification as a REIT, and its method of
operation will enable it to continue to meet the requirements for
qualification and taxation as a REIT under the Code. This opinion
is based on various assumptions and is conditioned upon such
assumptions and certain representations made by the Company as to
factual matters. The rules governing REITs are highly technical
and require ongoing compliance with a variety of tests that depend,
among other things, on future operating results. Winstead Sechrest
& Minick P.C. will not monitor the Company's compliance with these
requirements. While the Company expects to satisfy these tests,
and will use its best efforts to do so, no assurance can be given
that the Company will qualify as a REIT for any particular year, or
that the applicable law will not change and adversely affect the
Company and its stockholders. See " Failure to Qualify as a
REIT."
General Qualification Requirements. The Company must be
organized as an entity that would, if it does not maintain its REIT
status, be taxable as a regular corporation. It cannot be a
financial institution or an insurance company. The Company must be
managed by one or more directors. The Company currently meets and
expects to continue to meet, each of these requirements. The
Company also expects to satisfy the requirements that are
separately described below concerning share ownership and
reporting, the nature and amounts of the Company's income and
assets and the levels of required annual distributions.
Share Ownership; Reporting. Beneficial ownership of the
Company must be and is evidenced by transferable shares (or
transferable certificates of beneficial interest). The shares of
Common Stock must be held by at least 100 persons for approximately
92% of the days in each taxable year. Not more than 50% of the
value of the shares of capital stock may be held, directly or
indirectly, applying certain constructive ownership rules, by five
or fewer individuals at any time during the last half of each of
the Company's taxable years. The Company is not required to
satisfy these 100 person and 50% tests until its second taxable
year for which an election is made to be taxed as a REIT. The
Company believes that its shares of Common Stock are owned by a
sufficient number of investors and in appropriate proportions to
permit it to continue satisfying these requirements. To protect
against violations of these requirements, the Articles provide that
no person is permitted to own (applying certain constructive
ownership tests) more than the Ownership Limit. The Ownership
Limit does not apply to (i) acquisitions by any person that has
made a tender offer for all outstanding shares of Common Stock in
conformity with applicable securities laws; (ii) the acquisition of
shares of Common Stock by an underwriter in a public offering;
(iii) the acquisition of shares of Common Stock pursuant to the
exercise of employee share options; or (iv) acquisitions approved
by the Board. In addition, the Articles contain restrictions on
transfers of the Company's shares of Common Stock, as well as
provisions that automatically convert shares of Common Stock into
nonvoting, non-dividend paying Excess Stock to the extent that the
ownership otherwise might jeopardize the Company's REIT status.
See "Description of Common Stock Restrictions on Transfer."
Special rules for determining stock ownership apply to certain
qualified pension and profit sharing trusts. See " Taxation of
Tax Exempt Entities."
To monitor the Company's compliance with the share ownership
requirements, the Company is required to maintain records
disclosing the actual ownership of shares of Common Stock. To do
so, the Company must demand written statements each year from the
record holders of certain percentages of shares of Common Stock in
which the record holders are to disclose the actual owners of the
shares (i.e., the persons required to include in gross income the
REIT dividends). (A REIT with 2,000 or more record stockholders
must demand statements from record holders of 5% or more of its
shares, one with fewer than 2,000, but more than 200 record
stockholders must demand statements from record holders of 1% or
more of the shares, while a REIT with 200 or fewer record
stockholders must demand statements from record holders of 0.5% or
more of the shares.) A list of those persons failing or refusing
to comply with this demand must be maintained as part of the
Company's records. Stockholders who fail or refuse to comply with
the demand must submit a statement with their tax returns
disclosing the actual ownership of the shares of Common Stock and
certain other information.
Sources of Gross Income. In order to qualify as a REIT for a
particular year, the Company also must meet three tests governing
the sources of its income. These tests are designed to ensure that
a REIT derives its income principally from passive real estate
investments. The Company satisfied these three tests for its
taxable year ended December 31, 1995. In evaluating a REIT's
income, the REIT will be treated as receiving its proportionate
share of the income produced by any partnership in which the REIT
invests, and any such income will retain the character that it has
in the hands of the partnership. The Code allows the Company to
own and operate a number of its properties through wholly-owned
subsidiaries which are "qualified REIT subsidiaries." The Code
provides that a qualified REIT subsidiary is not treated as a
separate corporation, and all of its assets, liabilities and items
of income, deduction and credit are treated as assets, liabilities
and such items of the REIT.
75% Gross Income Test. At least 75% of a REIT's gross income
for each taxable year must be derived from specified classes of
income that principally are real estate related. The permitted
categories of principal importance to the Company are: (i) rents
from real property; (ii) interest on loans secured by real
property; (iii) gain from the sale of real property or loans
secured by real property (excluding gain from the sale of property
held primarily for sale to customers in the ordinary course of the
Company's trade or business, referred to below as "dealer
property"); (iv) income from the operation and gain from the sale
of certain property acquired in connection with the foreclosure of
a mortgage securing that property ("foreclosure property");
(v) distributions on, or gain from the sale of, shares of other
qualifying REITs; (vi) abatements and refunds of real property
taxes; and (vii) "qualified temporary investment income" (described
below). In evaluating the Company's compliance with the 75% income
test (as well as the 95% income test described below), gross income
does not include gross income from "prohibited transactions." A
prohibited transaction is one involving a sale of dealer property,
not including foreclosure property and certain dealer property held
by the Company for at least four years.
The Company expects that substantially all of its operating
gross income from the Properties will be considered rent from real
property. Rent from real property is qualifying income for
purposes of the 75% income test only if certain conditions are
satisfied. Rent from real property includes charges for services
customarily rendered to residents, and rent attributable to
personal property leased together with the real property so long as
the personal property rent is less than 15% of the total rent. The
Company does not expect to earn material amounts in these
categories. Rent from real property generally does not include
rent based on the income or profits derived from the property.
Also excluded is rent received from a person or corporation in
which the Company (or any of its 10% or greater owners) owns a 10%
or greater interest. The Company does not expect to earn income in
these two excluded categories. A third exclusion covers amounts
received with respect to real property if the Company furnishes
services to the residents or manages or operates the property,
other than through an "independent contractor" from whom the
Company does not derive any income. The obligation to operate
through an independent contractor generally does not apply,
however, if any services provided by the Company are "usually or
customarily rendered" in connection with the rental of space for
occupancy only and are not considered rendered primarily for the
convenience of the resident (applying standards that govern in
evaluating whether rent from real property would be unrelated
business taxable income when received by a tax exempt owner of the
property).
The Company will, in most instances, directly operate and
manage the Properties without using an "independent contractor."
The Company believes that the only material services to be provided
to the residents will be those usually or customarily rendered in
connection with the rental of space for occupancy only. The
Company will not provide services that might be considered rendered
primarily for the convenience of the residents, such as hotel,
health care or extensive recreational or social services.
Consequently, the Company believes that substantially all of its
rental income from the Properties will be qualifying income under
the 75% income test, and that the Company's provision of services
will not cause the rental income to fail to be included under that
test.
Upon the Company's ultimate sale of its Properties, any gains
realized also are expected to constitute qualifying income, as gain
from the sale of real property (not involving a prohibited
transaction).
95% Gross Income Test. In addition to earning 75% of its
gross income from the sources listed above, at least an additional
20% of the Company's gross income for each taxable year must come
either from those sources, or from dividends, interest or gains
from the sale or other disposition of stock or other securities
that do not constitute dealer property. This test permits a REIT
to earn a significant portion of its income from traditional
"passive" investment sources that are not necessarily real estate
related. The term "interest" (under both the 75% and 95% tests)
does not include amounts that are based on the income or profits of
any person, unless the computation is based only on a fixed
percentage of receipts or sales.
Failing the 75% or 95% Tests; Reasonable Cause. As a result
of the 75% and 95% tests, REITs generally are not permitted to earn
more than 5% of their gross income from active sources (such as
brokerage commissions or other fees for services rendered). This
type of income will not qualify for the 75% test or 95% test but is
not expected to be significant and such income and other
nonqualifying income are expected to be at all times less than 5%
of the Company's annual gross income. While the Company does not
anticipate that it will earn substantial amounts of nonqualifying
income, if nonqualifying income exceeds 5% of the Company's gross
income, the Company could lose its status as a REIT. WDN
Management, which provides management services with respect to
certain properties not owned by the Company, is not a qualified
REIT subsidiary. Therefore, WDN Management's gross income is not
included in the Company's gross income. However, dividends from
WDN Management to the Company are included in the Company's gross
income and qualify for the 95% income test.
If the Company fails to meet either the 75% or 95% income
tests during a taxable year, it may still qualify as a REIT for
that year if (i) it reports the source and nature of each item of
its gross income in its Federal income tax return for that year;
(ii) the inclusion of any incorrect information in its return is
not due to fraud with intent to evade tax; and (iii) the failure to
meet the tests is due to reasonable cause and not to willful
neglect. However, in that case the Company would be subject to a
100% tax based on the greater of the amount by which it fails
either the 75% or 95% income tests for such year. See " Taxation
of the Company as a REIT."
30% Income Test. The Company also must earn less than 30% of
its gross income from the sale or other disposition of: (i) real
property and loans secured by real property held for less than four
years (other than foreclosure property and involuntarily
conversions), (ii) stock or securities held by the Company for less
than one year and (iii) property in a prohibited transaction. The
30% income test does not have a reasonable cause exception as do
the 75% and 95% income tests. Consequently, a failure to meet the
30% income test would terminate the Company's status as a REIT
automatically. Because the Company expects to hold its Properties
for long-term investment and does not anticipate selling them
within four years, the Company expects to comply with this
requirement.
Character of Assets Owned. On the last day of each calendar
quarter, the Company also must meet two tests concerning the nature
of its investments. First, at least 75% of the value of the total
assets of the Company generally must consist of real estate assets,
cash, cash items (including receivables) and government securities.
For this purpose, "real estate assets" include interests in real
property, interests in loans secured by mortgages on real property
or by certain interests in real property, shares in other REITs and
certain options, but exclude mineral, oil or gas royalty interests.
The temporary investment of new capital in debt instruments also
qualifies under this 75% asset test, but only for the one-year
period beginning on the date the Company receives the new capital.
Second, although the balance of the Company's assets generally may
be invested without restriction, the Company will not be permitted
to own (i) securities of any one non-governmental issuer that
represent more than 5% of the value of the Company's total assets
or (ii) more than 10% of the outstanding voting securities of any
single issuer. A REIT, however, may own 100% of the stock of a
qualified REIT subsidiary, in which case the assets, liabilities
and items of income, deduction and credit of the subsidiary are
treated as those of the REIT. In evaluating a REIT's assets, if
the REIT invests in a partnership, it is deemed to own its
proportionate share of the assets of the partnership.
The Company's non-voting common stock of WDN Management does
not violate the prohibition against a REIT's ownership of more than
10% of the voting securities of any one issuer. If, however, the
value of the Company's non-voting common stock in WDN Management
were to exceed 5% of the total value of all of the Company's
assets, then the asset test would be violated. The Company
believes that the value of the securities of WDN Management held by
the Company is substantially less than 5% of the total value of the
Company's assets, and the Company does not expect that it will
exceed 5% in the future.
The Company anticipates that it complies with these asset
tests. While some portion of its assets initially was invested in
qualifying temporary debt investments, substantially all of the
Company's investments are in its Properties, which should represent
qualifying real estate assets.
Annual Distributions to Stockholders. To maintain REIT
status, the Company generally must distribute to its stockholders
in each taxable year at least 95% of its net ordinary income
(capital gain is not required to be distributed). More precisely,
the Company must distribute an amount equal to (i) 95% of the sum
of (a) its "REIT Taxable Income" before deduction of dividends paid
and excluding any net capital gain and (b) any net income from
foreclosure property less the tax on such income, minus (ii)
certain limited categories of "excess noncash income." REIT
Taxable Income is defined to be the taxable income of the REIT,
computed as if it were an ordinary corporation, with certain
modifications. For example, the deduction for dividends paid is
allowed, but neither net income from foreclosure property, nor net
income from prohibited transactions, is included. In addition, the
REIT may carry over, but not carry back, a net operating loss for
15 years following the year in which it was incurred. REITs also
are required to distribute at least 95% of any after-tax built-in
gain that is realized during the ten year recognition period
applicable to property transferred to the REIT in a corporate
nonrecognition transaction. The Company does not anticipate that
any such property will be transferred to it.
A REIT may satisfy the 95% distribution test with dividends
paid during the taxable year and with certain dividends paid after
the end of the taxable year. Dividends paid in January that were
declared during the last calendar quarter of the prior year and
were payable to stockholders of record on a date during the last
calendar quarter of that prior year are treated as paid on
December 31 of the prior year (for both the Company and its
stockholders). Other dividends declared before the due date of the
Company's tax return for the taxable year (including extensions)
also will be treated as paid in the prior year for the Company if
they are paid (i) within 12 months of the end of such taxable year
and (ii) no later than the Company's next regular distribution
payment. Dividends that are paid after the close of a taxable year
and do not qualify under the rule governing payments made in
January that is described above will be taxable to the stockholders
in the year paid, even though they may be taken into account by the
Company for a prior year. A nondeductible excise tax equal to 4%
will be imposed on the Company for each calendar year to the extent
that dividends declared and distributed or deemed distributed
before December 31 are less than the sum of (a) 85% of the
Company's "ordinary income" plus (b) 95% of the Company's capital
gain net income plus (c) income not distributed in earlier years
minus (d) distributions in excess of income in earlier years and
(e) any amount of REIT taxable income for such year.
The Company will be taxed at regular corporate rates to the
extent that it retains any portion of its taxable income (e.g., if
the Company distributes only the required 95% of its taxable
income, it would be taxed on the retained 5%). Under certain
circumstances the Company may not have sufficient cash or other
liquid assets to meet the distribution requirement. This could
arise because of competing demands for the Company's funds, or due
to timing differences between tax reporting and cash receipts and
disbursements (i.e., income may have to be reported before cash is
received, or expenses may have to be paid before a deduction is
allowed). Although the Company does not anticipate any difficulty
in meeting this requirement, no assurance can be given that
necessary funds will be available.
If the Company fails to meet the 95% distribution requirement
because of an adjustment to the Company's taxable income by the
IRS, the Company may be able to cure the failure retroactively by
paying a "deficiency dividend" (as well as applicable interest and
penalties) within a specified period.
Taxation of the Company as a REIT
- ---------------------------------
The Company has adopted the calendar year for Federal income
tax purposes, and uses the accrual method of accounting. For each
taxable year in which the Company qualifies as a REIT, it generally
will be taxed only on the portion of its taxable income that it
retains (which will include undistributed net capital gain),
because the Company will be entitled to a deduction for its
dividends paid to stockholders during the taxable year. A
dividends paid deduction is not available for dividends that are
considered preferential within any given class of shares or as
between classes except to the extent such class is entitled to such
preference. The Company does not anticipate that it will pay any
such preferential dividends. The Articles provide for the
automatic exchange of outstanding shares of Common Stock or
Preferred Stock for Excess Stock in circumstances in which the
Company's REIT status might otherwise be put into jeopardy (i.e.,
if a person attempts to acquire a block of shares that would be
sufficient to cause the Company to fail the requirement that five
or fewer individuals may not own more than 50% of the value of the
outstanding shares). Because Excess Stock will represent a
separate class of outstanding shares, the fact that those shares
will not be entitled to dividends should not adversely affect the
Company's ability to deduct its dividend payments.
The Company would be subject to tax on any income or gain from
foreclosure property at the highest corporate rate (currently 35%).
A confiscatory tax of 100% applies to any net income from
prohibited transactions. In addition, if the Company fails to meet
either the 75% or 95% source of income tests described above, but
still qualifies for REIT status under the reasonable cause
exception to those tests, a 100% tax would be imposed equal to the
amount obtained by multiplying (i) the greater of the amount, if
any, by which it failed either the 75% income test or the 95%
income test, times (ii) the ratio of the Company's REIT Taxable
Income to the Company's gross income (excluding capital gain and
certain other items). The Company also will be subject to the
minimum tax on items of tax preference (excluding items
specifically allocable to the Company's stockholders). Finally,
under regulations that are to be promulgated, the Company also may
be taxed at the highest regular corporate tax rate on any built-in
gain (i.e., the excess of value over adjusted tax basis)
attributable to assets that the Company acquires in certain
tax-free corporate transactions, to the extent the gain is
recognized during the first ten years after the Company acquires
such assets.
Failure to Qualify as a REIT
- ----------------------------
For any taxable year in which the Company fails to qualify as
a REIT, it would be taxed at the usual corporate rates on all of
its taxable income. Distributions to its stockholders would not be
deductible in computing that taxable income, and distributions
would no longer be required. Any corporate level taxes generally
would reduce the amount of cash available to the Company for
distribution to its stockholders and, because the stockholders
would continue to be taxed on the distributions they receive, the
net after tax yield to the stockholders from their investment in
the Company likely would be reduced substantially. As a result,
the Company's failure to qualify as a REIT during any taxable year
could have a material adverse effect upon the Company and its
stockholders. If the Company loses its REIT status, unless certain
relief provisions apply, the Company will not be eligible to elect
REIT status again until the fifth taxable year which begins after
the first year for which the Company's election was terminated.
If, after forfeiting its REIT status, the Company later
qualifies and elects to be taxed as a REIT again, the Company may
face significant adverse tax consequences. Prior to the end of the
year in which the Company sought to qualify again as a REIT, the
Company would be required to make distributions sufficient to
eliminate any earnings and profits accumulated during its period of
non-REIT status. Moreover, immediately prior to the effectiveness
of the election to return to REIT status, the Company would be
treated as having disposed of all of its assets in a taxable
transaction, triggering taxable gain with respect to the Company's
appreciated assets. In that event, however, the Company would be
permitted to elect an alternative treatment under which those gains
would be taken into account only as and when they actually are
recognized upon sales of the appreciated property occurring within
a ten-year period. The Company would be required to distribute at
least 95% of any such recognized gains, but it would not receive
the benefit of a dividends paid deduction to reduce those taxable
gains. Thus, any such gains on appreciated assets would be subject
to double taxation (i.e., at the corporate level as well as the
stockholder level).
Taxation of Stockholders
- ------------------------
Distributions generally will be taxable to stockholders as
ordinary income to the extent of the Company's earning and profits.
Dividends declared during the last quarter of a calendar year and
actually paid during January of the immediately following calendar
year are generally treated as if received by the stockholders on
December 31 of the calendar year during which they were declared.
Distributions paid to stockholders will not constitute passive
activity income, and as a result generally cannot be offset by
losses from passive activities of a stockholder who is subject to
the passive activity rules. Distributions designated by the
Company as capital gains dividends generally will be taxed as long
term capital gains to stockholders to the extent that the
distributions do not exceed the Company's actual net capital gain
for the taxable year. Corporate stockholders may be required to
treat up to 20% of any such capital gains dividends as ordinary
income. Distributions by the Company, whether characterized as
ordinary income or as capital gains, are not eligible for the 70%
dividends received deduction for corporations. Stockholders are
not permitted to deduct losses or loss carry-forwards of the
Company. Future regulations may require that the stockholders take
into account, for purposes of computing their individual
alternative minimum tax liability, certain tax preference items of
the Company.
The Company may generate cash in excess of its net earnings.
If the Company distributes cash to stockholders in excess of the
Company's current and accumulated earnings and profits (other than
as a capital gain dividend), the excess cash will be deemed to be
a return of capital to each stockholder to the extent of the
adjusted tax basis of the stockholder's shares of Common Stock.
Distributions in excess of the adjusted tax basis will be treated
as gain from the sale or exchange of the shares of Common Stock.
A stockholder who has received a distribution in excess of current
and accumulated earnings and profits of the Company may, upon the
sale of the shares of Common Stock, realize a higher taxable gain
or a smaller loss because the basis of the shares of Common Stock
as reduced will be used for purposes of computing the amount of the
gain or loss.
Generally, gain or loss realized by a stockholder upon the
sale of shares of Common Stock will be reportable as capital gain
or loss. If a stockholder receives a long-term capital gain
dividend from the Company and has held the shares of Common Stock
for six months or less, any loss incurred on the sale or exchange
of the shares of Common Stock is treated as a long-term capital
loss, to the extent of the corresponding long-term capital gain
dividend received.
In any year in which the Company fails to qualify as a REIT,
the stockholders generally will continue to be treated in the same
fashion described above, except that no Company dividends will be
eligible for treatment as capital gains dividends, corporate
stockholders will qualify for the dividends received deduction and
the stockholders will not be required to report any share of the
Company's tax preference items.
Backup Withholding
- ------------------
The Company will report to its stockholders and the IRS the
amount of dividends paid during each calendar year and the amount
of tax withheld, if any. If a stockholder is subject to backup
withholding, the Company will be required to deduct and withhold
from any dividends payable to that stockholder a tax of 31%. These
rules may apply (i) when a stockholder fails to supply a correct
taxpayer identification number, (ii) when the IRS notifies the
Company that the stockholder is subject to the rules or has
furnished an incorrect taxpayer identification number or (iii) in
the case of corporations or others within certain exempt
categories, when they fail to demonstrate that fact when required.
A stockholder that does not provide a correct taxpayer
identification number may also be subject to penalties imposed by
the IRS. Any amount withheld as backup withholding may be credited
against the stockholder's Federal income tax liability. The
Company also may be required to withhold a portion of capital gain
distributions made to stockholders who fail to certify their
non-foreign status to the Company.
Taxation of Tax Exempt Entities
- -------------------------------
In general, a tax exempt entity that is a stockholder of the
Company will not be subject to tax on distributions from the
Company or gain realized on the sale of shares of Common Stock. In
Revenue Ruling 66-106, the IRS specifically confirmed that a REIT's
distributions to a tax exempt employees' pension trust did not
constitute unrelated business taxable income. A tax exempt entity
may be subject to tax, however, to the extent that it has financed
the acquisition of its shares of Common Stock with "acquisition
indebtedness" within the meaning of the Code. The Revenue
Reconciliation Act of 1993 has modified the rules for tax exempt
employees' pension and profit sharing trusts which qualify under
Code Section 401(a) and are exempt from tax under Code
Section 501(a) ("qualified trusts") for tax years beginning after
December 31, 1993. Under the new rules, in determining the number
of stockholders a REIT has for purposes of the "50% test" described
above under " REIT Qualification Share Ownership; Reporting,"
generally, any stock held by a qualified trust will be treated as
held directly by its beneficiaries in proportion to their actuarial
interests in such trust and will not be treated as held by such
trust. (This general rule will not apply if certain persons
related to the qualified trust ("disqualified persons") hold in the
aggregate more than 5% of the value of the REIT and the REIT has
accumulated earnings and profits attributable to any period for
which it did not qualify as a REIT; this exception is not expected
to apply to the Company.)
A qualified trust owning more than 10% of a REIT must treat a
percentage of dividends from the REIT as unrelated business taxable
income. The percentage is determined by dividing the REIT's gross
income (less direct expenses related thereto) derived from an
unrelated trade or business for the year by the gross income of the
REIT for the year in which the dividends are paid. However, if
this percentage is less than 5%, dividends are not treated as
unrelated business taxable income. These unrelated business
taxable income rules apply only if the REIT qualifies as a REIT
because of the change in the 50% test discussed above and if the
trust is "predominantly held" by a qualified trust. A real estate
investment trust is predominantly held by qualified trusts if at
least one pension trust owns more than 25% of the value of the REIT
or a group of pension trusts individually holding more than 10% of
the value of the REIT collectively owns more than 50% of the value
of the REIT.
For social clubs, voluntary employee benefit associations,
supplemental unemployment benefit trusts and qualified group legal
services plans exempt from Federal income taxation under
Sections 501(c)(7), (c)(9), (c)(17) and (c)(20) of the Code,
respectively, income from an investment in the Company will
constitute unrelated business taxable income unless the
organization is able to deduct an amount properly set aside or
placed in reserve for certain purposes so as to offset the
unrelated business taxable income generated by the investment in
the Company. These prospective investors should consult their own
tax advisors concerning the "set aside" and reserve requirements.
Taxation of Foreign Investors
- -----------------------------
The rules governing Federal income taxation of nonresident
alien individuals, foreign corporations, foreign partnerships and
other foreign stockholders (collectively, "Non-U.S. Stockholders")
are complex and no attempt will be made herein to provide more than
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 with regard to an
investment in shares of Common Stock, including any reporting
requirements, as well as the tax treatment of such an investment
under the laws of their home country.
Dividends that are not attributable to gain from sales or
exchanges by the Company of United States real property interests
and not designated by the Company as capital gain dividends will be
treated as dividends of ordinary income to the extent that they are
made out of current or accumulated earnings and profits of the
Company. Such dividends ordinarily will be subject to a
withholding tax equal to 30% of the gross amount of the dividend
unless an applicable tax treaty reduces or eliminates that tax.
However, if income from the investment in the shares of Common
Stock is treated as effectively connected with the Non-U.S.
Stockholder's conduct of a United States trade or business, the
Non-U.S. Stockholder generally will be subject to a tax at
graduated rates, in the same manner as U.S. stockholders are taxed
with respect to such dividends (and may also be subject to the 30%
branch profits tax in the case of a stockholder that is a foreign
corporation). The Company expects to withhold United States income
tax at the rate of 30% on the gross amount of any such dividends
paid to a Non-U.S. Stockholder unless (i) the Non-U.S. Stockholder
files on IRS Form 1001 claiming that a lower treaty rate applies or
(ii) the Non-U.S. Stockholder files an IRS Form 4224 with the
Company claiming that the dividend is effectively connected income.
Dividends in excess of current and accumulated earnings and profits
of the Company will not be taxable to a stockholder to the extent
that they do not exceed the adjusted basis of the stockholder's
shares of Common Stock, but rather will reduce the adjusted basis
of such shares of Common Stock. To the extent that such dividends
exceed the adjusted basis of a Non-U.S. Stockholder's shares of
Common Stock, they will give rise to tax liability if the Non-U.S.
Stockholder would otherwise be subject to tax on any gain from the
sale or disposition of his shares of Common Stock, as described
below. If it cannot be determined at the time a dividend is paid
whether or not such dividend will be in excess of current and
accumulated earnings and profits, the dividends will be subject to
such withholding. The Company does not intend to make quarterly
estimates of that portion of the dividends that are in excess of
earnings and profits, and as a result, all dividends will be
subject to such withholding. However, the Non-U.S. Stockholder may
seek a refund of such amounts from the IRS.
For any year in which the Company qualifies as a REIT,
dividends that are attributable to gain from sales or exchanges by
the Company of United States real property interests will be taxed
to a Non-U.S. Stockholder under the provisions of the Foreign
Investment in Real Property Tax Act of 1980 ("FIRPTA"). Under
FIRPTA, those dividends are taxed to a Non-U.S. Stockholder as if
such gain were effectively connected with a United States business.
Non-U.S. Stockholders would thus be taxed at the normal capital
gain rates applicable to U.S. stockholders (subject to applicable
alternative minimum tax and a special alternative minimum tax in
the case of nonresident alien individuals). Also, dividends
subject to FIRPTA may be subject to a 30% branch profits tax in the
hands of a foreign corporate stockholder not entitled to treaty
exemption. The Company is required by the Code and applicable
Treasury Regulations to withhold 35% of any dividend that could be
designated by the Company as a capital gain dividend. This amount
is creditable against the Non-U.S. Stockholder's FIRPTA tax
liability.
Gain recognized by a Non-U.S. Stockholder upon a sale of
shares of Common Stock generally will not be taxed under FIRPTA if
the Company is a "domestically controlled REIT," defined generally
as a REIT in which at all times during a specified testing period
less than 50% in value of the stock was held directly or indirectly
by foreign persons. It is currently anticipated that the Company
will be a "domestically controlled REIT," and therefore the sale of
shares of Common Stock will not be subject to taxation under
FIRPTA. Because the Common Stock is publicly traded, however, no
assurance can be given that the Company will remain a "domestically
controlled REIT." However, gain not subject to FIRPTA will be
taxable to a Non-U.S. Stockholder if (i) investment in the shares
of Common Stock is effectively connected with the Non-U.S.
Stockholder's United States trade or business, in which case the
Non-U.S. Stockholder will be subject to the same treatment as U.S.
stockholders with respect to such gain (and may also be subject to
the 30% branch profits tax in the case of a stockholder that is a
foreign corporation), or (ii) the Non-U.S. Stockholder is a
nonresident alien individual who was present in the United States
for 183 days or more during the taxable year and has a "tax home"
in the United States, in which case the nonresident alien
individual will be subject to a 30% tax on the individual's capital
gains. If the gain on the sale of shares of Common Stock were to
be subject to taxation under FIRPTA, the Non-U.S. Stockholder will
be subject to the same treatment as U.S. stockholders 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 may also be subject to the 30% branch profits tax
in the case of a stockholder that is a foreign corporation).
Upon the death of a foreign individual stockholder, the
investor's shares will be treated as part of the investor's U.S.
estate for purposes of the U.S. estate tax, except as may be
otherwise provided in an applicable estate tax treaty.
Tax Aspects of Transferred Interests
- ------------------------------------
The following discussion summarizes certain Federal income tax
considerations applicable solely to the Company's interests in
distributions (assigned by Walden to the Company as part of the
formation of the Company) attributable to Walden's general
partnership interests in three partnerships which own multifamily
residential properties which were not acquired by the Company (the
"Transferred Interests") and partnerships to which they relate (the
"Acquired Partnerships").
Classification as a Partnership. The Company includes in its
income its distributive share of the Acquired Partnerships' income
and deducts its distributive share of the Acquired Partnerships'
losses only if the Acquired Partnerships are classified, for
Federal income tax purposes, (i) as partnerships rather than as
associations taxable as corporations and (ii) not as "publicly
traded partnerships." An organization formed as a partnership will
be treated as a partnership rather than as a corporation for
Federal income tax purposes only if it has no more than two of the
following four corporate characteristics: continuity of life,
centralization of management, limited liability and free
transferability of interests.
If for any reason the Acquired Partnerships were taxable as
corporations rather than as partnerships for Federal income tax
purposes, the Company may not be able to satisfy the income and
asset requirements for status as a REIT. Further, items of income
and deduction of the Acquired Partnerships would not pass through
to their partners; their partners would be treated as stockholders
for tax purposes. The Acquired Partnerships would be required to
pay income tax at regular corporate tax rates on their net income
and distributions to partners would constitute dividends to the
extent of the Acquired Partnerships' earnings and profits. In
addition, any change in the Acquired Partnerships' status for tax
purposes might be treated as a taxable event, in which case the
Company might incur taxable income without any related cash
distribution. The Company has not requested, and does not intend
to request, a ruling from the IRS that the Acquired Partnerships
will be treated as "partnerships" for Federal income tax purposes.
Partners, Not the Partnership, Subject to Tax. Partnerships
are not taxable entities for Federal income tax purposes. Rather,
the Company is required to take into account its allocable share of
the Acquired Partnerships' income, gains, losses, deductions and
credits for any taxable year of the partnerships ending within or
with the taxable year of the Company without regard to whether the
Company has received or will receive any cash distributions from
the Acquired Partnerships. For purposes of income tests and asset
tests which govern classification of the Company as a REIT, the
Company must include its proportionate share (based upon capital
interests) of the income and assets of any partnership in which it
has a direct or indirect interest.
Partnership Allocations. Although a partnership agreement
will generally determine the allocation of income and losses among
partners, the allocations provided in a partnership agreement will
be disregarded for tax purposes under Section 704(b) of the Code if
they do not comply with the provisions of such Section and the
Treasury Regulations promulgated thereunder. If an allocation is
not recognized for Federal income tax purposes, the item subject to
the allocation will be reallocated in accordance with the partners'
interests in the partnership, which will be determined by taking
into account all of the facts and circumstances relating to the
economic arrangement of the partners with respect to such item.
The Acquired Partnerships' allocations of taxable income and loss
are intended to comply with the requirements of Section 704(b) of
the Code and the Treasury Regulations promulgated thereunder.
Basis in Partnership Interests. The Company's adjusted tax
basis in a particular Transferred Interest generally (i) is equal
to the fair market value of the partnership interest as of the date
acquired; (ii) is increased by (a) its allocable share of the
partnership's income and (b) its allocable share of indebtedness of
the partnership on the date acquired and its allocable share of any
increases in such indebtedness thereafter; and (iii) is reduced,
but not below zero, by the Company's allocable share of (a) the
partnership's loss and (b) the amount of cash distributed to the
Company, the basis of property distributed to the Company and by
constructive distributions resulting from a reduction in the
Company's share of the indebtedness of the partnership thereafter.
If the allocation of the Company's distributive share of a
partnership's loss would reduce the adjusted tax basis of the
Company's partnership interest in the partnership below zero, the
recognition of such loss will be deferred until such time as the
recognition of such loss would not reduce the Company's adjusted
tax basis below zero. To the extent that a partnership
distribution or any decrease in the Company's share of the
indebtedness of a partnership (each such decrease being considered
a constructive cash distribution to the partners) would reduce the
Company's adjusted tax basis in the partnership below zero, such
distributions (including such constructive distributions) would
constitute taxable income to the Company. Such distributions and
constructive distributions normally will be characterized as a
capital gain, and if the Company's partnership interest in such
partnership has been held for longer than the long-term capital
gain holding period (currently one year), the distributions and
constructive distributions will constitute long-term capital gains.
State and Local Taxes
- ---------------------
The Company and its stockholders may be subject to state or
local taxation in various state or local jurisdictions, including
those in which it or they transact business or reside.
Consequently, prospective stockholders should consult their own tax
advisors regarding the effect of state and local tax laws on an
investment in the Company.
ERISA CONSIDERATIONS
A fiduciary of a pension, profit-sharing, retirement or other
employee benefit plan subject to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") (a "Plan"), should
consider the fiduciary standards under ERISA in the context of the
Plan's particular circumstances before authorizing an investment of
a portion of such Plan's assets in the shares of Common Stock. In
particular, such fiduciary should consider (i) whether the
investment satisfies the diversification requirements of Section
404(a)(1)(c) of ERISA, (ii) whether the investment is in accordance
with the documents and instruments governing the Plan as required
by Section 404(a)(1)(D) of ERISA, (iii) whether the investment is
for the exclusive purpose of providing benefits to participants in
the Plan and their beneficiaries or defraying reasonable
administrative expenses of the Plan, and (iv) whether the
investment is prudent under ERISA. In addition to the imposition of
general fiduciary standards of investment prudence and
diversification, ERISA, and the corresponding provisions of the
Code, prohibit a wide range of transactions involving the assets of
a Plan or an individual retirement account ("IRA") and persons who
have certain specified relationships to the Plan or an IRA
("parties in interest" within the meaning of ERISA, "disqualified
persons" within the meaning of the Code). Thus, a fiduciary of a
Plan or an IRA considering an investment in the shares of Common
Stock also should consider whether the acquisition or the continued
holding of the shares of Common Stock might constitute or give rise
to a direct or indirect prohibited transaction.
The Department of Labor (the "DOL") has issued final
regulations (the "Regulations") as to what constitutes assets of an
employee benefit plan under ERISA. Under the Regulations, if a Plan
or an IRA acquires an equity interest in an entity, which interest
is neither a "publicly offered security" nor a security issued by
an investment company registered under the Investment Company Act
of 1940, as amended, the Plan's and IRA's assets would include, for
purposes of the fiduciary responsibility provisions of ERISA and
the prohibited transaction provisions of ERISA and the Code, both
the equity interest and an undivided interest in each of the
entity's underlying assets unless certain specified exceptions
apply. The Regulations define a publicly-offered security as a
security that is "widely held," "freely transferable," and either
part of a class of securities registered under the Exchange Act, or
sold pursuant to an effective registration statement under the
Securities Act (provided the securities are registered under the
Exchange Act within 120 days after the end of the fiscal year of
the issuer during which the offering occurred). The Offered
Securities will be sold in an offering registered under the
Securities Act and are or will be registered under the Exchange
Act.
The Regulations provide that a security is "widely held" only
if it is part of a class of securities that is owned by 100 or more
investors independent of the issuer and of one another. A security
will not fail to be "widely held" because the number of independent
investors falls below 100 subsequent to the initial public offering
as a result of events beyond the issuer's control.
The Regulations provide that whether a security is "freely
transferable" is a factual question to be determined on the basis
of all relevant facts and circumstances. The DOL Regulations
further provide that when a security is part of an offering in
which the minimum investment is $10,000 or less certain
restrictions ordinarily will not, alone or in combination, affect
the finding that such securities are freely transferable. The
Company believes that the restrictions imposed under the Articles
on the transfer of the capital stock are limited to the
restrictions on transfer generally permitted under the Regulations
and are not likely to result in the failure of the capital stock to
be "freely transferable." The Company also believes that certain
restrictions that apply to the capital stock held by the Company or
which may be derived from contractual arrangements requested by the
underwriters in connection with Offered Securities offered pursuant
to an underwritten agreement are unlikely to result in the failure
of the capital stock to be "freely transferable." The Regulations
only establish a presumption in favor of the finding of free
transferability, and, therefore, no assurance can be given that the
DOL and the U.S. Treasury Department will not reach a contrary
conclusion.
Assuming that the Offered Securities will be "widely held,"
the Company believes that the Offered Securities will be publicly
offered securities for purposes of the Regulations and that the
assets of the Company will not be deemed to be "plan assets" of any
Plan or IRA that invests in the Offered Securities.
PLAN OF DISTRIBUTION
The Company may sell the Offered Securities to one or more
underwriters for public offering and sale by them or may sell the
Offered Securities to investors directly or through agents. Any
such underwriter or agent involved in the offer and sale of the
Offered Securities will be named in the applicable Prospectus
Supplement.
Underwriters may offer and sell the Offered Securities at a
fixed price or prices which may be changed, at prices related to
the prevailing market prices at the time of sale or at negotiated
prices. The Company also may, from time to time, authorize
underwriters acting as the Company's agents to offer and sell the
Offered Securities upon the terms and conditions as are set forth
in the applicable Prospectus Supplement. In connection with the
sale of the Offered Securities, underwriters may be deemed to have
received compensation from the Company in the form of underwriting
discounts or commissions and may also receive commissions from
purchasers of the Offered Securities for whom they may act as
agent. Underwriters may sell the Offered Securities to or through
dealers, and such dealers may receive compensation in the form of
discounts, concessions or commissions from the underwriters and/or
commissions from the purchasers for whom they may act as agent.
Any underwriting compensation paid by the Company to
underwriters or agents in connection with the offering of the
Offered Securities, and any discounts, concessions or commissions
allowed by underwriters to participating dealers, will be set forth
in the applicable Prospectus Supplement. Underwriters, dealers and
agents participating in the distribution of the Offered Securities
may be deemed to be underwriters, and any discounts and commissions
received by them and any profit realized by them on resale of the
Offered Securities may be deemed to be underwriting discounts and
commissions, under the Securities Act. Underwriters, dealers and
agents may be entitled, under agreements entered into with the
Company, to indemnification against and contribution toward certain
civil liabilities, including liabilities under the Securities Act.
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.
If so indicated in the applicable Prospectus Supplement, the
Company will authorize dealers acting as the Company's agents to
solicit offers by certain institutions to purchase the Offered
Securities from the Company at the public offering price set forth
in such Prospectus Supplement pursuant to Delayed Delivery
Contracts ("Contracts") providing for payment and delivery on the
date or dates stated in such Prospectus Supplement. Each Contract
will be for an amount not less than, and the aggregate amount of
the Offered Securities sold pursuant to Contracts shall be not less
nor more than, the respective amounts stated in the applicable
Prospectus Supplement. Institutions with whom Contracts, when
authorized, may be made include commercial and savings banks,
insurance companies, pension funds, investment companies,
educational and charitable institutions, and other institutions but
will in all cases be subject to the approval of the Company.
Contracts will not be subject to any conditions except (i) the
purchase by an institution of the Offered Securities covered by its
Contracts shall not at the time of delivery be prohibited under the
laws of any jurisdiction in the United States to which such
institution is subject; and (ii) if the Offered Securities are
being sold to underwriters, the Company shall have sold to such
underwriters the total amount of the Offered Securities less the
amount thereof covered by the Contracts.
Certain of the underwriters and their affiliates may be
customers of, engage in transactions with and perform services for
the Company and its subsidiaries in the ordinary course of
business.
LEGAL MATTERS
Certain legal matters in connection with the Offered
Securities, including the validity of the Offered Securities, will
be passed upon for the Company by Winstead Sechrest & Minick P.C.,
Dallas, Texas.
EXPERTS
The audited consolidated and combined financial statements for
Walden Residential Properties, Inc. and Walden Predecessors,
respectively, included in the Form 10-K referred to and
incorporated by reference in this Prospectus have been audited by
Deloitte & Touche LLP, independent certified public accountants, as
stated in their reports appearing therein and have been so included
in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The estimated expenses expected to be paid by the Company in
connection with the issuance and distribution of the securities
being registered are as follows:
SEC Registration Fee. . . . . . . . . $ 51,725
NYSE Filing Fee . . . . . . . . . . . 30,000
Legal Fees and Expenses . . . . . . . 125,000
Accountant's Fees and Expenses. . . . 50,000
Blue sky fees and expenses
(including legal fees) . . . . . . 30,000
Printing and engineering expenses . . 60,000
Miscellaneous Expenses. . . . . . . . 13,275
Total . . . . . . . . . . . . . . $360,000
Item 15. Indemnification of Directors and Officers.
The Company's Articles of Incorporation, as amended and
restated (the "Articles of Incorporation"), provide certain
limitations on the liability of the Company's directors and
officers for monetary damages to the Company. The Articles of
Incorporation obligate the Company to indemnify its directors and
officers, and permit the Company to indemnify its employees and
other agents, against certain liabilities incurred in connection
with their service in such capacities. These provisions could
reduce the legal remedies available to the Company and the
stockholders against these individuals. See "Certain Provisions of
Maryland Law and of the Company's Articles and Bylaws Limitation
of Liability and Indemnification."
The Articles of Incorporation require it to indemnify (a) the
Company's directors and officers whether serving the Company or at
its request any other entity who have been successful, on the
merits or otherwise, in the defense of a proceeding to which he was
made a party by reason of his service in that capacity against
reasonable expenses incurred by him in connection with the
proceeding unless it is established that (i) his act or omission
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, (ii) he actually received an improper personal benefit
in money, property or services, or (iii) in the case of a criminal
proceeding, he had reasonable cause to believe that his act or
omission was unlawful and (b) other employees and agents of the
Company to such extent as shall be authorized by the Board of
Directors or the Company's Bylaws and be permitted by law. In
addition, the Articles of Incorporation require the Company to pay
or reimburse, in advance of the final disposition of a proceeding,
reasonable expenses incurred by a director or officer who is a
party to a proceeding under procedures provided for under the
Maryland General Corporation Law (the "MGCL"). The Company's
Bylaws also permit the Company to provide such other and further
indemnification or payment or reimbursement of expenses as the
Board of Directors deems to be in the interest of the Company and
as may be permitted by the MGCL for directors, officers and
employees of Maryland corporations.
The Company has entered into indemnification agreements with
each of the Company's officers and directors. The indemnification
agreements require, among other things, that the Company indemnify
its officers and directors to the fullest extent permitted by law
and advance to the officers and directors all related expenses,
subject to reimbursement if it is subsequently determined that
indemnification is not permitted. The Company must also indemnify
and advance all expenses incurred by officers and directors seeking
to enforce their rights under the indemnification agreements and
cover officers and directors under the Company's directors' and
officers' liability insurance. Although the indemnification
agreements offer substantially the same scope of coverage afforded
by law, they provide assurance to directors and officers that
indemnification will be available because such contracts cannot be
modified unilaterally in the future by the Board of Directors or
the stockholders to eliminate the rights they provide.
Item 16. Exhibits
4.1 Specimen of certificate representing shares of Common Stock*
4.2 Form of certificate representing shares of 9.16% Series A
Convertible Redeemable Preferred Stock**
4.3 Form of certificate representing shares of 9.16% Series B
Convertible Redeemable Preferred Stock**
4.4 Form of certificate representing shares of Preferred
Stock***
4.5 Form of certificate representing Securities Warrants***
4.6 Form of Articles Supplementary relating to Preferred
Stock***
4.7 Form of Warrant Agreement***
5.1 Opinion of Winstead Sechrest & Minick P.C. regarding the
legality of the securities**
8.1 Opinion of Winstead Sechrest & Minick P.C. regarding
certain tax matters**
12.1 Computation of Ratio of Earnings to Combined Fixed Charges
and Preferred Stock Dividends**
23.1 Consent of Deloitte & Touche LLP****
23.2 Consent of Winstead Sechrest & Minick P.C. (included in
Exhibit 5.1)
23.3 Consent of Winstead Sechrest & Minick P.C. (included in
Exhibit 8.1)
24.1 Power of Attorney**
______________
* Incorporated by reference to Exhibit 4.1 to the Company's
Registration Statement on Form S-3 (Registration
No. 33-90138).
** Previously filed.
*** To be filed by amendment and incorporated by reference in
connection with the offering of the Offered Securities.
**** Filed herewith.
Item 17. Undertakings.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales
are being made, a post-effective amendment to this
registration statement:
(i) To include any prospectus required 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;
(iii) To include any material information with respect
to the plan of distribution not previously
disclosed in the registration statement or any
material change to such information in the
registration statement.
Provided, however, that paragraphs (1)(i) and (1)(ii) do not
apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in
periodic reports filed by the Company 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, 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.
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.
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.
SIGNATURES
Pursuant to the requirements of the Securities Act, the
Registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-3 and has
duly caused this Amendment No. 1 to the Registration Statement on
Form S-3 to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Dallas, State of Texas, on October
18, 1996.
WALDEN RESIDENTIAL PROPERTIES, INC.,
a Maryland corporation
By: /s/ Don R. Daseke
-----------------
Don R. Daseke
Chief Executive Officer and
Chairman of the Board of Directors
Pursuant to the requirements of the Securities Act, this
Amendment No. 1 to the Registration Statement on Form S-3 has been
signed by the following persons in the capacities and on the dates
indicated.
Signature Title Date
--------- ----- ----
/s/ Don R. Daseke Chairman of the October 18, 1996
- ----------------------------- Board of Directors, ----------------
Don R. Daseke Chief Executive Officer
and Director (Principal
Executive Officer)
/s/ Mark S. Dillinger Executive Vice October 18, 1996
- ----------------------------- President, Chief ----------------
Mark S. Dillinger Financial Officer and
Director (Principal
Financial and Accounting
Officer)
/s/ Marshall B. Edwards President, Chief October 18, 1996
- ----------------------------- Acquisitions Officer ----------------
Marshall B. Edwards and Director
/s/ Linda Walker Bynoe* Director October 18, 1996
- ----------------------------- ----------------
Linda Walker Bynoe
/s/ Francesco Galesi* Director October 18, 1996
- ----------------------------- ----------------
Francesco Galesi
/s/ Edward L. Hennessy, Jr.* Director October 18, 1996
- ----------------------------- ----------------
Edward L. Hennessy, Jr.
/s/ Arch K. Jacobson* Director October 18, 1996
- ----------------------------- ----------------
Arch K. Jacobson
/s/ Louis G. Munin* Director October 18, 1996
- ----------------------------- ----------------
Louis G. Munin
/s/ J. Otis Winters* Director October 18, 1996
- ----------------------------- ----------------
J. Otis Winters
/s/ Mark S. Dillinger Director October 18, 1996
- ----------------------------- ----------------
Mark S. Dillinger
Attorney-in Fact
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Amendment
No. 1 to the Registration Statement of Walden Residential
Properties, Inc. on Form S-3 of our report dated March 7, 1996,
with respect to the consolidated financial statements and schedule
of Walden Residential Properties, Inc. and our report dated March
3, 1995, with respect to the combined financial statements of
Walden Predecessors included in the Annual Report on Form 10-K of
Walden Residential Properties, Inc. for the year ended December 31,
1995 and to the reference to us under the heading "Experts" in the
Prospectus, which is part of this Registration Statement.
DELOITTE & TOUCHE LLP
Dallas, Texas
October 18, 1996
