As filed with the Securities and Exchange Commission on August 24, 1999
Registration No. 333-79667
- --------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1 TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
WESTFIELD AMERICA, INC.
(Exact name of Registrant as specified in its charter)
MISSOURI 43-0758627
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
11601 WILSHIRE BOULEVARD, 12TH FLOOR IRV HEPNER, SECRETARY
LOS ANGELES, CALIFORNIA 90025 11601 WILSHIRE BOULEVARD, 12TH FLOOR
(310) 478-4456 LOS ANGELES, CALIFORNIA 90025
(310) 478-4456
(Address, including zip code, and (Name, address, including zip code,
telephone number, including area and telephone number, including
code, of registrant's principal area code, of agent for service)
executive offices)
Copies to:
GREGG A. NOEL, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
300 SOUTH GRAND AVENUE
LOS ANGELES, CALIFORNIA 90071
(213) 687-5000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From
time to time after this Registration Statement becomes effective depending
upon market conditions and other factors.
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 registration statement number of the
earlier effective registration statement for the same offering. | |
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. | |
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. | |
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
Proposed Proposed Maximum
Title of Each Class of Amount to Maximum Aggregate Amount of
Securities to be Registered be Offering Price Offering Price Registration
Registered per Share (2) Fee (4)
(2)(3)
<S> <C> <C> <C> <C>
Series C Preferred Stock, par value 416,667 $180 $75,000,060 $20,851
$1.00 per share.....................
Series C-1 Preferred Stock, par 138,889 $180 $25,000,020 $6,950
value $1.00 per share...............
Series C-2 Preferred Stock, par 138,889 $180 $25,000,020 $6,950
value $1.00 per share...............
Common Stock, par value $0.01 per 6,944,450(1) -- -- --
share...............................
Total............................... 7,638,895 100% $125,000,100 $34,751
==================================== ========== =============== ================ ===============
</TABLE>
(1) Such shares of Common Stock are issuable upon the conversion of the
Series C Preferred Stock, Series C-1 Preferred Stock and Series C-2
Preferred Stock registered hereunder. Also being registered are such
indeterminate number of additional shares of Common Stock as may be
issuable upon or in connection with the exchange of Series C Preferred
Stock, Series C-1 Preferred Stock and Series C-2 Preferred Stock as a
consequence of adjustments to the rate at which Series C Preferred
Stock, Series C-1 Preferred Stock and Series C-2 Preferred Stock are
exchanged into shares of Common Stock.
(2) Estimated solely for the purpose of calculating the registration fee
in accordance with Rule 457(c) of the Securities Act.
(3) Exclusive of accrued interest and distributions, if any.
(4) The total registration fee was paid in connection with the
Registration Statement filed on May 28, 1999.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE
REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT
THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE
WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND
EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
SUBJECT TO COMPLETION, DATED AUGUST 24, 1999
[TEXT BOX CONTENTS: The information in this prospectus is not complete and
may be changed. The selling stockholder may not sell these securities
until the registration statement filed with the Securities and Exchange
Commission is effective. This prospectus is not an offer to sell these
securities and the selling stockholder is not soliciting an offer to buy
these securities in any state where such offer of sale is not
permitted.]PROSPECTUS
WESTFIELD AMERICA, INC.
11601 WILSHIRE BOULEVARD, 12TH FLOOR
LOS ANGELES, CALIFORNIA 90025
(310) 478-4456
416,667 SERIES C PREFERRED SHARES
(LIQUIDATION PREFERENCE $180 PER SERIES C PREFERRED SHARE)
138,889 SERIES C-1 PREFERRED SHARES
(LIQUIDATION PREFERENCE $180 PER SERIES C-1 PREFERRED SHARE)
138,889 SERIES C-2 PREFERRED SHARES
(LIQUIDATION PREFERENCE $180 PER SERIES C-2 PREFERRED SHARE)
6,944,450 COMMON SHARES
Security Capital Preferred Growth Incorporated, a stockholder of
Westfield America, Inc., may offer from time to time:
o 416,667 Series C Preferred Shares;
o 138,889 Series C-1 Preferred Shares; and
o 138,889 Series C-2 Preferred Shares.
Alternatively, Security Capital Preferred Growth Incorporated may
convert its Series C Preferred Shares, Series C-1 Preferred Shares and
Series C-2 Preferred Shares into our Common Shares, and may offer from time
to time 6,944,450, subject to adjustment, of our Common Shares under this
prospectus.
We will not receive any part of the proceeds from such sales.
Our Common Shares are listed on the New York Stock Exchange, Inc.
under the symbol "WEA." On August 23, 1999, the closing price of one
Common Share on the New York Stock Exchange was $14.94.
We urge you to read carefully this prospectus and any accompanying
prospectus supplement, which describes the specific terms of the securities
being offered to you, before you make your investment decision.
INVESTING IN THE SECURITIES INVOLVES RISKS, SEE "RISK FACTORS"
BEGINNING ON PAGE 3.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these securities or
passed upon the adequacy or accuracy of this prospectus. Any
representation to the contrary is a criminal offense.
The date of this prospectus is , 1999.
TABLE OF CONTENTS
PAGE PAGE
Risk Factors . . . . . . . . . 3 Provisions of our Articles of
Incorporation and By-laws and
Special Note Regarding Forward- of Missouri Law . . . . . . . . 41
looking Statements . . . . . . 21
Provisions of the Partnership
Agreement for the
The Company . . . . . . . . . . 22 Operating Partnership . . . . . 45
Use of Proceeds . . . . . . . . 23 Federal Income Tax Considerations 51
Ratio of Earnings to Combined Plan of Distribution . . . . . 63
Fixed Charges and Preferred
Stock Dividends . . . . . . . . 23 Legal Matters . . . . . . . . . 65
Selling Shareholder . . . . . . 24 Experts . . . . . . . . . . . . 65
Description of Capital Stock . 25 Where You Can Find More
Information . . . . . . . . . . 65
RISK FACTORS
You should carefully consider the following risks as well as the other
information contained or incorporated by reference in this prospectus
before purchasing the securities.
WE MAY HAVE CONFLICTS OF INTEREST
Controlling ownership interest of affiliates allows affiliates to
exercise significant influence on us
As of June 30, 1999, some of our affiliates owned shares of our common
stock, par value $.01 per share (the "Common Shares") as follows:
o Westfield America Trust, an Australian public property
trust, owned 56.1% of the Common Shares outstanding.
o Westfield Holdings Limited, an Australian public company,
through wholly-owned subsidiaries, directly owned 19.2% of
the Common Shares outstanding and, through the ownership of
an equity interest in Westfield America Trust, had an
interest in approximately 23.8% of the Common Shares held by
Westfield America Trust, which is an additional 13.3% of the
Common Shares.
In addition, on May 29, 1998, we entered into a stock subscription
agreement with Westfield America Trust pursuant to which we have the right
to sell and Westfield America Trust has the obligation to purchase from us
A$465 million, which was approximately US$307.7 million as of June 30,
1999, of Common Shares at a 5% discount to the then prevailing market price
of our Common Shares.
Westfield America Trust may also purchase, at its option, an
additional 8,335,648 Common Shares pursuant to warrants that it may
exercise in whole or in part at any time prior to May 21, 2017. See
"Possible future sales of shares by affiliates could adversely affect the
market price of our common shares."
To maintain our qualification as a real estate investment trust
("REIT"), generally no individual, other than Frank P. Lowy and the
members of his family, who are subject to a higher ownership threshold, may
directly or indirectly hold more than 5.5%, by value, of our capital stock.
As of December 31, 1998, the Lowy family, or interests associated with
it, owned approximately 35.2% of Westfield Holdings' ordinary shares and
7.6% of the outstanding equity of Westfield America Trust. Additionally,
members of the Lowy family act both as our officers and directors and as
officers and directors of Westfield Holdings. By virtue of these positions
and their ownership interests in Westfield Holdings and Westfield America
Trust, the Lowy family is in position to exercise significant influence on
us, Westfield Holdings and Westfield America Trust.
In addition to its ownership of Common Shares, Westfield Holdings and
its subsidiaries manage Westfield America Trust. With respect to the
election of our directors, Westfield America Trust's trustee may only vote
its Common Shares as directed by a majority of holders of equity of
Westfield America Trust. With respect to all other matters, Westfield
America Trust's trustee votes all of its Common Shares as recommended by
Westfield Holdings and its subsidiaries. Westfield America Trust's
substantial ownership of Common Shares and Westfield Holdings' ownership of
Common Shares and equity of Westfield America Trust allows Westfield
America Trust and Westfield Holdings to elect all of our directors and to
control the vote on all matters submitted to our shareholders for a vote.
Matters that could be submitted to our shareholders for a vote include
approval of mergers, sales of all or substantially all of our assets,
issuance of substantial additional equity and "going private" transactions.
Additionally, Westfield America Trust and Westfield Holdings, by virtue of
their ownership of Common Shares, have significant influence over our
affairs, which influence might not be consistent with the interests of
other shareholders.
We rely on Westfield Holdings and its subsidiaries for our management
and the management of our properties; we lack control over the day-
to-day management of our properties
We have no employees. We rely entirely on Westfield Holdings and its
subsidiaries for our management and the management of our properties. We
are not currently able to operate without Westfield Holdings and its
subsidiaries. Since we cannot elect the directors of the Westfield
Holdings subsidiaries that provide the services listed below, our day-to-
day control of their actions is limited.
We have entered into the following types of contracts with Westfield
Holdings and its subsidiaries:
o Management contracts, pursuant to which Westfield Holdings
and its subsidiaries provide management services for all of
our properties.
o An advisory agreement, pursuant to which Westfield Holdings
and its subsidiaries provide us with corporate strategic
planning, administrative and other asset management
services.
o A master development framework agreement, pursuant to which
Westfield Holdings and its subsidiaries provide planning and
predevelopment work, to determine whether particular
projects are feasible and economically viable, and
development services.
We negotiated the terms and understandings relating to these
agreements with Westfield Holdings and its subsidiaries; however, we
believe that they reflect market terms.
We do, however, have approval rights over aspects of management and
development as follows:
o We set budgets and leasing guidelines in accordance with
company policy that Westfield Holdings and its subsidiaries
must follow in connection with managing our properties.
o Our board of directors, including at least 75% of the
independent directors, must approve all development projects
in connection with plans, feasibility and costs, including
fees to be paid to Westfield Holdings and its subsidiaries.
o o Independent directors are those members of our
board of directors who:
o o o are not, and have not for the last 12
months been, directors, officers or
employees of Westfield Holdings or
Westfield America Trust;
o o o are not affiliates of Westfield Holdings
or Westfield America Trust or officers
or employees of such affiliates;
o o o are not members of the immediate family
of any natural person described above;
and
o o o are free from any relationship that
would interfere with the exercise of
independent judgment as a director.
o We generally may terminate any management contract or the
advisory agreement after May 2000 if at least 75% of the
independent directors and the trustee of Westfield America
Trust, so long as Westfield America Trust holds at least 10%
of our capital stock, determine not to renew the contract in
question because of unsatisfactory performance by the
applicable Westfield Holdings subsidiary that is materially
detrimental to us or because the fees provided for under the
particular contract are not fair.
Westfield Holdings' interests may conflict with the interests of
unaffiliated purchasers or holders
Our contracts with Westfield Holdings' subsidiaries for property
management, asset management and property development and Westfield
Holdings' substantial beneficial ownership of Common Shares give Westfield
Holdings interests that may conflict with the interests of unaffiliated
purchasers of Common Shares or holders of Common Shares. In addition,
implementation of our key growth strategies will result in increased
payments of management, advisory and development fees by us to Westfield
Holdings' subsidiaries. The conflicts of interest include the disparate
tax treatment between our U.S. shareholders, on the one hand, and
Westfield Holdings and all other foreign shareholders, including Westfield
America Trust, on the other hand, resulting from the capital gain
attributable to the sale of a U.S. property.
Westfield Holdings has agreed that so long as it is managing our
assets, neither it nor its subsidiaries will acquire any ownership interest
in properties in the United States. Each of Westfield Holdings' management
and development subsidiaries has agreed that so long as it is managing our
properties or providing us with development services, as applicable, it
will not manage or develop, as applicable, a shopping center property in
competition with a property that we own. These agreements are subject to
exceptions for Westfield Holdings' acquisition of entities that do not have
any ownership interest in shopping centers in the United States but are
then managing or developing a competitive center, in addition to other
properties. This non-competition agreement does not apply to any activity
by Westfield Holdings with respect to airport projects. We also have
agreements with Frank P. Lowy, David Lowy, Peter Lowy and Steven Lowy
precluding each of them from acquiring any ownership interest in shopping
center properties in the United States for so long as:
o Westfield Holdings serves as our asset manager and property
manager; and
o interests associated with the Lowy Family have significant
ownership and management interests in Westfield Holdings.
We have overlapping officers and directors with some of our affiliates
Some of the officers and directors of Westfield Holdings and the
subsidiary of Westfield Holdings which manages Westfield America Trust are
also our officers and/or directors. Moreover, all of our executive
officers are also employed by and provide services to Westfield Holdings
and its subsidiaries and properties Westfield Holdings and its subsidiaries
manage. All of our executive officers, other than Frank P. Lowy,
currently devote substantially all of their time to our business. In the
future, however, services performed for Westfield Holdings and its
subsidiaries and properties managed by Westfield Holdings and its
subsidiaries may require any particular officer, or officers, to devote
less than a majority of their time to our business.
We have a creditor relationship with Westfield Holdings and its
subsidiaries; our interests may not align with the interests of
Westfield Holdings and its subsidiaries for the term of the loan
Since May 1997, we have been a creditor of two wholly-owned indirect
subsidiaries of Westfield Holdings. Specifically, we lent $145.0 million
dollars at an 8.5% annual interest rate. The loan is non-recourse, and is
secured by a pledge of Westfield Holdings' 50% partnership interest in a
limited partnership that owns a super-regional shopping center in New
Jersey. We also receive a participating interest payment based upon an
adjustable percentage of the cash flow of the shopping center. Total
interest payments on the loan are capped at 11% per year. The loan will
mature on May 21, 2007, but may be prepaid after May 21, 2000, upon the
sale of Westfield Holdings' interest in the shopping center to an
unaffiliated third party, subject to the payment of a yield maintenance
premium based upon the highest possible participating interest payments.
By its terms, the loan may be prepaid after May 21, 2002 without the
payment of a yield maintenance premium. In the event of a default under
the loan, we will be entitled to accelerate payment of the principal and
accrued interest, and if prior to May 21, 2002, the yield maintenance
premium, and may terminate our contracts with Westfield Holdings and its
subsidiaries for property and asset management and property development.
In May 1997, the board of directors of Westfield Holdings represented
that other than in the case of a sale of its interest in the shopping
center property, it will not prepay the loan until May 20, 2004 without
payment of the yield maintenance premium. We received approximately $7.7
million in interest from the loan for the six months ended June 30, 1999,
which represents a return of 10.7% of invested capital on an annualized
basis. Westfield Holdings' interests with respect to the loan may not
align with our interests for the duration of the loan.
OUR ABILITY TO MAKE DISTRIBUTIONS IS DEPENDENT ON OUR OPERATING
PARTNERSHIP'S ABILITY TO MAKE DISTRIBUTIONS
We have transferred most of our assets to Westfield America Limited
Partnership, our operating partnership, of which we are the sole general
partner. Our ability to make distributions and other payments on the
Common Shares is dependent upon the operating partnership making
distributions and other payments to its partners. If the operating
partnership does not make distributions or other payments to its partners,
for any reason, it is expected that we would likely not be able to pay
dividends, other distributions or other payments on the Common Shares.
COVENANT RESTRICTIONS CONTAINED IN SOME OF THE LOAN AGREEMENTS OF OUR
SUBSIDIARIES MAY LIMIT OUR ABILITY TO MAKE PAYMENTS TO OUR SHAREHOLDERS
In some cases, our indirect subsidiaries are subject to loan agreement
provisions that restrict their ability to make distributions or other
payments to their security holders unless specified financial tests or
other criteria are satisfied. These provisions may restrict our indirect
subsidiaries' ability to make distributions to the operating partnership,
which in turn would be paid to us. We are limited by our corporate credit
facility from making annual dividend distributions in excess of our Funds
from Operations.
Funds from Operations means net income (loss), computed in accordance
with generally accepted accounting principles, excluding gains (or losses)
from debt restructurings and sales of property, plus real estate related
depreciation and amortization and after adjustments for unconsolidated
affiliates and joint ventures. This definition is in accordance with
standards established by the White Paper on Funds from Operations approved
by the Board of Governors of the National Association of Real Estate
Investment Trusts in March 1995.
SHAREHOLDERS ARE LIMITED IN THEIR ABILITY TO CHANGE CONTROL OF US
There are significant limitations on the ability of shareholders to
change control of us. The following may prevent a change in control,
tender offers for Common Shares and attempts to assemble a block of Common
Shares through purchases of Common Shares from shareholders at a premium to
the prevailing market price:
o provisions of our Restated Articles of Incorporation;
o provisions of our Second Amended and Restated By-Laws;
o provisions of the First Amended and Restated Agreement of
Limited Partnership of Westfield America Limited
Partnership, dated as of August 3, 1998, as amended;
o Westfield Holdings' and Westfield America Trust's ownership
of a substantial amount of Common Shares; and/or
o provisions of Missouri law.
The above listed items provide for, among other things:
o a restriction on the constructive ownership of more than
5.5% of our capital stock by any individual (other than the
Lowy family);
o the availability of capital stock for issuance from time to
time at the discretion of our board of directors;
o a classified board of directors;
o the inability of shareholders to take action by written
consent unless such consent is unanimous;
o prohibitions against shareholders calling a special meeting
of shareholders;
o requirements for advance notice for raising business or
making nominations at shareholders' meetings; and
o additional requirements for some business combination
transactions.
THERE ARE RISKS ASSOCIATED WITH INVESTMENTS IN REAL ESTATE
Adverse economic and real estate conditions could adversely affect our
centers
Our ability to make payments to our shareholders depends on our
ability to generate Funds from Operations in excess of required debt
payments and capital expenditure requirements.
Funds from Operations may be adversely affected by factors that are
beyond our control, including:
o the national and regional economic climate, which may be
affected by industry slowdowns, plant closings and other
factors;
o local real estate conditions, for example, a surplus of
retail space;
o retailers' and shoppers' perceptions of the safety,
convenience and attractiveness of our shopping centers;
o trends in the retail industry;
o competition for tenants;
o high vacancy rates;
o changes in market rental rates;
o the inability to collect rent due to bankruptcy or
insolvency of tenants or otherwise;
o the need to periodically renovate, repair and relet space;
and
o increased operating costs.
These factors could also influence the price a purchaser would be
willing to pay for any of our properties if we elect to sell a property.
In the case of vacant space, we may not get full credit for the income that
can be earned from such vacant space in determining the sale price. In
addition, other factors may adversely affect a property's value, including:
o changes in governmental regulations, zoning or tax laws;
o potential environmental or other legal liabilities;
o changes in interest rate levels;
o civil disorder; and
o acts of God, such as floods and earthquakes.
The geographic concentration of our centers could adversely affect us
As of June 30, 1999, 19 of our 37 shopping center properties were
located in California (representing approximately 52% of our shopping
centers' total gross leasable area), 6 are located in Missouri
(representing approximately 16% of the total gross leasable area) and 4 are
located in Connecticut (representing approximately 10% of the total gross
leasable area). To the extent that general economic or other relevant
conditions in these regions decline and result in decreased consumer demand
in these regions, our financial performance may be adversely affected. The
markets for some of these centers are also significantly dependent on the
financial results of major local employers and on industry concentrations.
For example, the sales growth of the shopping center properties located in
California was negatively affected by the California economic recession
from 1990 to 1993.
Risks associated with our expansion and redevelopment activities could
adversely affect us
Our redevelopment and expansion of shopping center properties subjects
us to a variety of risks. In the case of an unsuccessful expansion or
redevelopment project, we may fail to recoup our investment in the project.
These redevelopment and expansion risks include:
o abandonment of explored redevelopment opportunities after
the payment of funds;
o failure to obtain required permits, licenses or approvals
for a project;
o expenditure of funds for construction costs beyond original
estimates, possibly making a project uneconomical;
o temporary disruption of income from a property;
o failure to maintain occupancy rates and rents at a level
sufficient to make a completed project profitable; and
o loss of customers due to inconvenience caused by
construction.
Risks associated with our acquisition activities could adversely
affect us
We intend to continue to acquire shopping centers to the extent they
can be acquired on advantageous terms and meet our investment criteria.
However, we may not be able to complete transactions in the future. When
we develop or expand properties, we are subject to the risks that:
o costs may exceed original estimates;
o projected occupancy and rental rates at the property may not
be realized;
o financing may not be available on favorable terms;
o construction and lease-up may not be completed on schedule;
and
o we may experience difficulty or delays in obtaining
necessary zoning, land-use, building occupancy, and other
governmental permits and authorizations.
There is a potential dilutive effect of financing future acquisitions
with equity
We anticipate that we will finance future acquisitions, at least
partly by additional borrowing, or through the issuance of interests in the
operating partnership ("OP Units") by the operating partnership, or by the
issuance of additional equity. The use of equity financing, rather than
debt, for future developments or acquisitions could have a dilutive effect
on the interest of our existing shareholders.
We may have difficulty managing our rapid growth
We have grown rapidly. Since our initial public offering in May 1997,
we have completed numerous acquisition transactions, expanding our
portfolio of properties from 22 properties with total gross leasable area
of 19.2 million square feet to 37 properties with total gross leasable area
of 34.6 million square feet as of June 30, 1999. Our recent acquisition
from TrizecHahn Centers, Inc. is our largest acquisition so far. If we
fail to successfully integrate such businesses or properties, our results
of operations could be adversely affected.
Our ability to successfully integrate acquired businesses and
properties depends on our ability to:
o maintain uniform standards, controls, procedures and
policies;
o maintain adequate management, accounting and information
systems; and
o integrate the acquired properties into our overall business
plan.
We may not be able to accomplish these goals and successfully
integrate any acquired businesses or properties.
Our reliance on some tenants and anchors could adversely affect us
The bankruptcy or insolvency, or a downturn in the business, of any of
our anchor tenants or an anchor-owned store, or the failure of any anchor
tenant to renew its lease when it expires could adversely affect our income
and Funds from Operations because anchor tenants play an important part in
generating customer traffic and making centers desirable locations. Most
anchor tenants have a clause in their leases which allows the anchor
tenants to cease operating, reduce their rent, or terminate their lease if
other anchor stores or a percentage of non-anchor tenants at the same
property are not occupied and operating. Also, some of the tenant leases
permit the tenants to terminate their leases or reduce their rent if a
certain number of anchor stores or a percentage of non-anchor stores cease
to operate at such properties for a specified period of time. Further,
these actions could adversely affect our ability to relet the space that is
vacated.
The leases of some of our anchor tenants, and the reciprocal easement
agreements to which some of the anchor-owned stores are parties, may permit
one of our anchors to transfer its interest in a shopping center to another
retailer. The transfer to a new anchor tenant could adversely affect
customer traffic in a shopping center and thereby reduce the income
generated by that center and could also allow some other anchors and other
tenants to make reduced rental payments or to terminate their leases at
that center. Each of these developments could adversely affect our Funds
from Operations and ability to make expected distributions to shareholders.
As of December 31, 1998, anchors occupied 57.7% of the total gross
leasable area of our shopping centers. As of the same date, the May
Company leased 14.3%, J.C. Penney leased 10.4%, Macy's leased 10.4% and
Sears leased 9.4% of our total gross leasable area. No other anchor leased
more than 3.9% of our total gross leasable area.
As of December 31, 1998, tenants whose parent company is The Limited
Stores collectively occupied approximately 960,000 square feet, or 6.6% of
our aggregate gross leasable area for stores smaller than anchors, kiosks
permanently located within the corridors of the shopping centers and free
standing buildings generally located along the perimeter of a center's
parking area. These tenants include Bath & Body Works, Express, Lane
Bryant, Lerner's, The Limited, Structure and Victoria's Secret, among
others. While each of these tenants is operated as an independent
subsidiary, an unexpected negative change in the financial strength of the
parent company, The Limited Stores, could result in a substantial decrease
in our revenues from leases with these tenants.
In addition to being an anchor at many of our shopping centers, the
May Department Stores Company leases 12 department store properties from
us. A negative change in the financial condition of the May Department
Stores Company could result in a substantial decrease in the revenues these
leases provide to us.
Our inability to relet short term spaces could adversely affect us
We have established a temporary leasing program pursuant to which we
lease some shopping mall space on a short-term basis, usually for a term of
between 30 days to eleven months, pending our ability to secure suitable
long-term tenants. We may be unable to relet any such space upon
expiration of a short-term lease.
Competition with other shopping centers could adversely affect us
All of our shopping centers are located in developed retail and
commercial areas, many of which compete with other malls or neighborhood
shopping centers within their primary trade area. The amount of rentable
space in the relevant primary trade area, the quality of facilities and the
nature of stores at such competing shopping centers could each have a
material adverse effect on our ability to lease space and on the level of
rents we can obtain. In addition, retailers at our shopping centers face
increasing competition from other forms of retailing, such as discount
shopping centers and clubs, outlet malls, catalogues, video and home
shopping networks, and direct mail, telemarketing and internet retailing.
Other real estate investors, including other REITs, compete for acquisition
of new retail shopping centers.
Although we believe our shopping centers can compete effectively
within these trade areas, we compete with other owners, managers and
developers of shopping centers. Those competitors that are not REITs may
be at an advantage to the extent they can utilize operating cash flows to
finance projects, while we, and our competitors that are REITs, are
required to distribute significant amounts of cash from operations to
shareholders. Likewise, our competitors may have greater resources
available for expansion, redevelopment and acquisition purposes. If we
should require funds, we may have to borrow when the cost of capital is
high. If the price of shopping center properties declines, our REIT
distribution requirements may place us at a disadvantage with respect to
potential acquisitions compared to companies that distribute a smaller
percentage of their net taxable income. Competition levels could increase
and might adversely affect our revenues and Funds from Operations.
Illiquidity of our assets could adversely affect our ability to make
distributions to our shareholders
Limitations on our ability to sell our investments could adversely
affect our ability to make distributions to our shareholders. Equity real
estate investments are relatively illiquid and tend to limit our ability to
vary our portfolio promptly in response to changes in economic or other
conditions. Additionally, if we sell some assets that we owned, or assets
which Westland Properties, Inc., now wholly owned by us, owned, on the
first day of the first taxable year for which we, or Westland Properties,
as applicable, qualified as a REIT, within 10 years of the relevant date, a
corporate level tax upon some built-in gains would be levied on us, in turn
adversely affecting distributions to our shareholders.
Also, we acquired some of our properties from persons to whom we
issued OP Units as part of the purchase price. In connection with the
acquisition of these properties, in order to preserve such persons' tax
deferral, we contractually agreed, in general, not to sell or otherwise
transfer the properties for a specified period of time, or in certain
instances, not to sell or otherwise transfer the properties without
compensating the sellers of the properties for their loss of the tax
deferral.
In addition, interests of Westfield Holdings and all other foreign
shareholders, including Westfield America Trust, regarding the sale of a
U.S. property may be inconsistent with the interests of our other
shareholders. See "We may have conflicts of interest - Westfield Holdings'
interests may conflict with the interests of unaffiliated purchasers."
Bankruptcy of our tenants could adversely affect our ability to make
distributions to our shareholders
Virtually all of our income consists of rental income paid by retail
tenants at our properties. Our cash flow and our ability to make
distributions to shareholders will be adversely affected if we are unable
to lease a significant amount of space in the centers, or if a significant
number of tenants are unable to pay their rent or other occupancy costs.
If a tenant defaults in its obligations to us, we may experience
substantial costs and suffer significant delays connected with renovating
and reletting the property.
In times of recession or other economic downturn, there is an
increased risk that retail tenants will be unable to meet their obligations
to us, otherwise default under their leases, or become debtors in cases
under the United States Bankruptcy Code. If any of our tenants becomes a
debtor in a case under the Bankruptcy Code, we would not be permitted to
evict the tenant solely because of its bankruptcy, but the bankruptcy court
could authorize the tenant to reject and terminate its lease with us. A
statutory cap could substantially decrease our claim against such a tenant
for unpaid and future rent below the remaining rent actually owed under the
lease. In any event, our claim for unpaid rent (as capped) would likely
not be paid in full.
Bankruptcy of any of our anchor tenants could have an especially
adverse effect on a property. The resulting deprivation to us of the rent
due from the anchor and the reduction of foot traffic at the center could
impair the performance of the remaining tenants and their ability to meet
their obligations to us.
Lack of updated title insurance for many of our properties could have
an adverse affect on us
We do not have recent policies of title insurance for many of our
properties. We have determined that the substantial cost of new owner's
title insurance policies for the full market value of our properties is not
warranted based on the following:
o our review of the existing owner's and/or mortgagee's title
insurance policies;
o updated title reports that we obtained for some of our
properties; and
o our absence of any knowledge of material title defects
regarding any of our properties since Westfield Holdings
acquired an interest in us.
We have purchased title insurance on the properties in which we have
acquired an interest from TrizecHahn Centers, Inc.
Adverse changes in laws affecting real estate investments could
adversely affect our ability to make distributions to shareholders
We generally pass costs resulting from changes in real estate tax laws
or real estate tax rates through to our tenants, thereby minimizing their
effect on us. Changes in laws increasing the potential liability for
environmental conditions existing at our properties, increasing the
restrictions on discharges or other hazardous waste conditions, or
increasing building code or similar local law requirements may result in
significant unanticipated expenditures which might not be payable by our
tenants and which would adversely affect our Funds from Operations and
ability to make distributions to our shareholders.
Laws benefitting disabled persons could adversely affect our business
A number of Federal, state and local laws, including the Americans
with Disabilities Act of 1990, and regulations exist that may require
modifications to existing buildings on our properties or restrict some
renovations by requiring improved access to such buildings by disabled
persons. Additional legislation or regulations may impose further burdens
or restrictions on owners with respect to improved access by disabled
persons. The costs of compliance with such laws and regulations may be
substantial, and limits or restrictions on completion of some renovations
may limit implementation of our investment strategy in some instances or
reduce overall returns on all investments. Although management has
concluded, based on its review to date, that we will not suffer a material
adverse effect due to the costs of compliance with such current laws and
regulations, no assurance can be given in this regard.
THERE ARE RISKS ASSOCIATED WITH DEBT FINANCING
Inability to refinance balloon payments on debt could have an adverse
effect on us
We do not expect to have sufficient Funds from Operations to be able
to make all of the balloon payments of principal on our debt, and the debt
of some joint ventures in which we have an interest, that becomes due in
the period from 1999 through 2001. An inability to make balloon payments
when due could cause a mortgage lender to foreclose on the properties
securing the loans on which the defaulted balloon payments are due. The
resulting foreclosures could have a material adverse effect on us.
As of June 30, 1999, the aggregate principal amount of consolidated
and unconsolidated debt outstanding (including amounts allocable to our
joint venture partners who are unaffiliated with us or Westfield Holdings)
was $2,673 million. We intend to refinance such debt at or before
maturity, to obtain funds either through financings secured by currently
unencumbered properties or through unsecured financings. Interest rates on
any debt incurred to refinance mortgage debt or debt facilities may be
higher than the rates on the current mortgages or debt facilities or at
floating rates. We may also issue equity or debt securities in order to
obtain funds. Any equity issuance may dilute existing shareholders. We or
our unaffiliated joint venture partners may be unable to refinance
indebtedness or to otherwise obtain funds on commercially reasonable terms,
or at all.
We have no limitation on the amount of our debt
Our charter and by-laws do not limit the amount of debt that we may
enter into, our debt to equity ratio or the aggregate leverage ratio of our
properties.
As of June 30, 1999, we had an aggregate of $2,328 million of
consolidated debt, including $167 million of fixed rate debt with The
Prudential Insurance Company of America, at an average interest rate of
6.51% per annum, secured by three of our wholly-owned shopping centers and
$70.6 million of fixed rate debt, at an average interest rate of 7.13% per
annum, secured by the properties leased to the May Department Stores
Company.
At June 30, 1999, the consolidated debt also includes debt assumed and
issued in conjunction with the shopping centers acquired in 1998 as
follows:
o mortgages assumed in conjunction with the acquisition of
four of the properties purchased in 1998 totaling $237.7
million. These fixed rate mortgages bear interest per annum
at 7.0%;
o borrowings totaling $754.1 million under a secured loan
facility from the Capital Company of America LLC. The loan
bears interest per annum at LIBOR + 0.53% and is secured by
twelve of the properties owned by us with a maturity date of
December 2001. In connection with the borrowings made under
this loan, we entered into an interest rate swap agreement
which effectively fixed the variable rate of the loan at
6.38% per annum.
As of June 30, 1999, our pro-rata share of debt-to-total market
capitalization based on the Common Share price on June 30, 1999, was 54.6%,
excluding $301.1 million of notes issued to Australian investors from the
numerator, and our balance of cash and cash equivalents was $13.0 million,
not including our proportionate share of cash held by unconsolidated real
estate affiliates. In addition, we have a $600 million unsecured revolving
credit facility with National Australia Bank Limited, Australia and New
Zealand Banking Group Limited, Commonwealth Bank of Australia and Union
Bank of Switzerland. As of June 30, 1999, we had unused capacity under our
unsecured revolving credit facility totaling approximately $120.0 million
which will be used to finance future redevelopments, acquisitions and/or
for working capital.
Risks of our debt financing could adversely affect us
We have a substantial amount of debt. As a result, we are subject to
the following risks:
o the risk that our cash flow from operations will be
insufficient to meet required payments of principal and
interest;
o the risk that we will not be able to refinance our existing
indebtedness on favorable terms, or at all; and
o the risk that we will be unable to obtain financing for
necessary capital expenditures on favorable terms, or at
all.
Restrictions in our debt instruments limiting our ability to incur
additional indebtedness, including for the purpose of refurbishing our
properties, constructing new improvements or attracting new tenants, may
adversely affect the cash flow received from the properties proposed to be
improved. If we are unable to meet mortgage payments for a mortgage that
is secured by one of our properties, that property could be transferred to
the lender, or other third parties. As a result, we would lose the income
generated by that property and the property's asset value. Additionally,
such a transfer could result in corporate level tax if built-in gain is
recognized.
The loan from the Prudential Insurance Company of America contains
cross-default and cross-collateralization provisions with respect to three
of our shopping center properties that are collateral for the loan. The
loan from The Capital Company of America LLC contains cross-default and
cross-collateralization provisions with respect to twelve of our shopping
center properties that are collateral for that loan. A default with
respect to any mortgage included in either loan constitutes a default with
respect to all such mortgages included in such loan. If a default were to
occur, the lender could accelerate the indebtedness due under each of the
mortgages in the loan package. Moreover, the excess value of a property
securing a mortgage over the amount of that mortgage's indebtedness serves
as additional collateral for the entire loan package. A default with
respect to any property securing either loan could result in the transfer
of all properties securing such loan away from us.
Risks of our interest rate hedging arrangements could adversely affect
us
From time to time, in anticipation of refinancing debt, we enter into
agreements to reduce the risks associated with increases in interest rates.
Although these agreements provide us with some protection against rising
interest rates, these agreements also reduce the benefits to us when
interest rates decline. These agreements involve the following risks:
o interest rate movements during the term of any of our
agreements may result in a gain or loss to us;
o we may be exposed to losses if the hedge is not indexed to
the same rate as the debt anticipated to be incurred; and
o we may incur a loss if the counterparty to any of our
agreements fails to pay.
THERE ARE RISKS ASSOCIATED WITH BEING A REIT
Consequences of our failure to qualify as a REIT could adversely
affect us
If we fail to qualify as a REIT, we will not be allowed a deduction
for distributions to shareholders in computing our taxable income and will
be subject to Federal income tax at regular corporate rates. We also could
be subject to the Federal alternative minimum tax. As a result of the
additional tax liability, we might need to borrow funds or liquidate some
investments in order to pay the applicable tax. Unless we are entitled to
relief under specific statutory provisions, we could not elect to be taxed
as a REIT for four taxable years following the year during which we were
disqualified. Therefore, if we lose our REIT status, the funds available
for distribution to holders of our capital stock would be reduced
substantially for each of the years involved. Moreover, we would no longer
be required to make any distributions. Although we intend to operate as a
REIT, future economic, market, legal, tax or other considerations may cause
us to fail to qualify as a REIT or may cause our board of directors, with
the consent of a majority of the holders of our capital stock to revoke the
REIT election. In addition, tax legislation currently being considered by
Congress contains language which, due to the extent of Westfield America
Trust's ownership interest in us, may prevent us from re-electing REIT
status in the event that our REIT election is terminated. Moreover, a
recent Federal budget proposal contains language which, if enacted in its
present form, would result in the immediate taxation of all gain inherent
in a C corporation's assets upon an election by such corporation to become
a REIT, and this proposal, if enacted, could also effectively preclude us
from re-electing REIT status in the event that our REIT election is
terminated.
We believe that we operate in a manner that enables us to meet the
requirements for qualification as a REIT for Federal income tax purposes.
We have not requested, and do not plan to request, a ruling from the
Internal Revenue Service that we qualify as a REIT. We have, however,
previously received an opinion from the law firm of Skadden, Arps, Slate,
Meagher & Flom LLP, our tax counsel, that commencing with the taxable year
ended December 31, 1994, we were organized in conformity with the
requirements for qualification as a REIT and that our actual method of
operation has enabled, and our proposed method of operation will enable us
to, meet the requirements for qualification and taxation as a REIT.
You should be aware that opinions of counsel are not binding on the
Internal Revenue Service or any court. In rendering its opinion, Skadden,
Arps, Slate, Meagher & Flom LLP relied on assumptions, representations and
covenants made by us as of the date thereof regarding factual matters and
on opinions of local counsel with respect to matters of local law. The
opinion is expressed based upon facts, representations and assumptions as
of the date thereof and Skadden, Arps, Slate, Meagher & Flom LLP does not
have any obligation to advise anyone of any subsequent change in the
matters stated, represented or assumed or any subsequent change in
applicable law. We may not have met the requirements for treatment as a
REIT or may not continue to meet these requirements in the future.
Possible adverse consequences due to limits on the ownership of our
capital stock
In order to comply with the requirements for qualification as a REIT
specified by the Internal Revenue Code, our Restated Articles of
Incorporation place limits on ownership of shares. No individual, other
than members of the Lowy family, may own directly or constructively more
than 5.5%, by value, of our capital stock. The Lowy family is limited to
an aggregate ownership of 26% of our capital stock. The Internal Revenue
Code's rules regarding constructive ownership are broad and complex and may
cause shares owned directly or constructively by a group of related
entities to be constructively owned by one entity.
In the event of a transfer of our capital stock, including the shares
covered by this prospectus, that would violate the ownership restrictions,
we may:
o treat the transfer as void; and/or
o transfer the shares to a trust for the benefit of one or
more charitable organizations.
We also may transfer the shares to a charitable trust and, if we do
so, the original intended purchaser would have a right to share in the
proceeds of a sale by the trust of the shares involved, but only to the
extent of their purchase price for such shares. The intended purchaser
would have no other rights with respect to such shares.
We may be liable for a corporate-level tax if we sell property that we
owned prior to our conversion to REIT status.
Pursuant to an election made by us under Internal Revenue Service
Notice 88-19, we may become liable for a Federal income tax imposed at the
highest corporate rate upon the sale within 10 years of any property that
we owned on the first day of the first taxable year for which we qualified
as a REIT -- February 12, 1994 (or January 1, 1996, in the case of property
held by our subsidiary, Westland Properties). Such property also includes
property that we owned on that date indirectly through partnerships, and a
sale of such property by such a partnership would be considered to be a
sale by us. Upon such a sale, we will be liable for a Federal income tax
on the portion of the gain that was in existence on February 12, 1994.
Although we have no present intention to dispose of any property in a
manner that would trigger such tax consequences, there can be no assurance
that such dispositions will not occur. Among other reasons, such
dispositions could occur in the case of properties held by us through
partnerships and with respect to which we may not have full control over
disposition decisions.
Our obligation to make distributions to shareholders may cause us to
borrow
To qualify as a REIT under the Internal Revenue Code, we are required
each year to distribute at least 95% of our net taxable income, excluding
any net capital gain designated as a capital gain distribution, to our
shareholders. We cannot make any distributions on our Common Shares unless
we have paid the full dividends on all classes of our outstanding preferred
shares.
Our future distributions may not allow us to satisfy all of our
working capital needs using only cash flow from operations. We may need to
seek periodic debt or equity financings to cover such items as:
o allowances associated with the renewal or replacement of
tenants as their leases expire; and
o the retirement of our debt when it becomes due.
Additionally, differences in timing between calculation of our net
taxable income and the payment of required debt amortization payments could
require us to borrow funds on a short term basis in order to satisfy our
REIT distribution requirements. In that case, we may be forced to borrow
funds even if we believe that prevailing market conditions are not
favorable or that a loan would not be advisable in the absence of tax
considerations.
Possible legislative or other actions affecting REITs could adversely
affect us
You should be aware that legislative, judicial or administrative
action may change the Federal income tax treatment of us at any time, and
that any such action may affect investments and commitments previously
made. The rules dealing with Federal income taxation of REITs are
constantly under review by persons involved in the legislative process and
by the IRS and the U.S. Treasury Department, resulting in revisions of
regulations and revised interpretations of established concepts as well as
statutory changes. For example, tax legislation currently being considered
by Congress contains language which, due to the extent of Westfield America
Trust's ownership interest in us, may prevent us from re-electing REIT
status in the event that our REIT election is terminated. In addition, a
recent Federal budget proposal contains language which, if enacted in its
present form, would result in the immediate taxation of all gain inherent
in a C corporation's assets upon an election by the corporation to become a
REIT, and this proposal, if enacted, could also effectively preclude us
from re-electing REIT status in the event that our REIT election is
terminated.
We may be subject to state or local taxes
We may be subject to state or local income and other taxation in
various state or local jurisdictions. The state and local tax treatment
may not conform to the Federal income tax consequences discussed in this
prospectus. Any such taxes would reduce our operating cash flow.
Consequently, you should consult your own tax advisors regarding the effect
of state and local tax laws.
We may have conflicts of interest with unrelated third parties in
jointly owned properties
We do not own the full interest in some of the limited partnerships
and limited liability companies that own our properties, including nine of
the properties owned as of June 30, 1999. Rather, we own a partial
interest in joint ventures with unaffiliated third party equity interests.
Our interests do not always align with those of a third party equity
interest. We serve in a general partner or managing member capacity and/or
Westfield Holdings serves in a management capacity with respect to some of
these joint ventures and their related properties. In such instances, we
and/or Westfield Holdings may have fiduciary responsibilities to the third
party equity interests of a particular joint venture that must be
considered when making decisions regarding their respective properties.
Some major transactions, such as refinancing, encumbering, expanding
or selling a property may require the consent of the third party equity
interests in the jointly owned property. We may not be able to obtain such
consents as needed, or may be able to do so only by compensating the third
party equity interests from whom we seek the consent, financially or
otherwise.
Some of the jointly owned properties are subject to buy-sell
provisions, rights of first refusal and/or rights of first offer. These
provisions could force us to make decisions regarding buying or selling
interests in particular jointly owned properties at times when we do not
desire to do so. A buy-sell provision could force us to sell our interest
in a jointly owned property because we do not have cash available with
which to purchase a third party's equity interest. Likewise, these and
other provisions in the agreements governing these jointly owned properties
could prevent us from selling interests in the jointly owned properties at
the most advantageous time.
Third party equity interests could cause property ownership actions
regarding particular properties that would have an adverse affect on our
ability to satisfy our requirements for treatment as a REIT.
THE BANKRUPTCY OF UNAFFILIATED PARTNERS COULD CAUSE DELAYS
The bankruptcy of an unaffiliated partner could adversely affect the
operation of any property in which the unaffiliated partner held an
interest. Any action that requires approval of an unaffiliated partner in
bankruptcy and is arguably not an "ordinary course" matter may be subject
to delay and uncertainty while the unaffiliated partner seeks bankruptcy
court approval. Moreover, the unaffiliated partner may not be able to
obtain such approval.
The discharge in bankruptcy of an unaffiliated partner might subject
us to ultimate liability for a greater portion of that partnership's
obligations than we would otherwise bear. In addition, even if the
unaffiliated partner, or its estate, was not completely relieved of
liability for such obligations, we might be required to satisfy such
obligations and then rely upon a claim against the unaffiliated partner, or
its estate, for reimbursement.
THE EFFECT ON FUNDS FROM OPERATIONS OF UNINSURED LOSSES ON PROPERTIES COULD
ADVERSELY AFFECT US
We, our subsidiaries and the joint ventures in which we have an
interest carry comprehensive liability, fire, extended coverage and rental
loss insurance covering their respective properties, with policy
specifications and insured limits customarily carried for similar
properties. We do not insure against losses that are generally either not
insured, not insured at full replacement cost or insured subject to larger
deductibles (such as from wars, floods and earthquakes). Should an
uninsured loss or a loss in excess of insured limits occur, some or all of
the capital invested in a property, as well as the anticipated future
revenues from the property, could be lost. The property owner, however,
would remain obligated for any mortgage indebtedness or other financial
obligations related to the property. We could suffer material adverse
effects from any such loss. Many of our properties are located in areas
where the risk of earthquakes is greater than in other parts of the
country. We currently carry earthquake insurance on all properties managed
by Westfield Holdings and its subsidiaries. Those policies are subject to
a deductible on each building within a property equal to 5% of the insured
value of each building and are further subject to a combined annual
aggregate loss limit of $200 million.
In addition, in some cases, tenants may be permitted to terminate
their leases following the occurrence of a casualty event.
POSSIBLE ENVIRONMENTAL LIABILITIES COULD ADVERSELY AFFECT US
Various Federal, state and local environmental laws subject property
owners and operators to liability for the costs of removal of some
hazardous substances released on property, or for the costs of remediation
of hazardous conditions on a property. These laws often impose liability
regardless of whether the owner or operator knew of, or was responsible
for, the release of the hazardous substances. The presence of hazardous
substances, or the failure to properly remediate conditions caused by
hazardous substances, may adversely affect the owner's ability to sell a
property or to borrow using the property as collateral. The presence of
hazardous substances, or the failure to properly remediate conditions
caused by hazardous substances, may also cause the owner to incur
substantial cleanup costs. Entities who arrange for the disposal or
treatment of hazardous substances may also be liable for the costs of
removal or remediation at the facility to which they sent the substances.
Other laws regulate the management of, and may impose liability for,
personal injuries associated with exposure to asbestos-containing materials
or other regulated materials. If we renovate or demolish any of our
properties, we may incur substantial costs for the removal and disposal of
asbestos-containing materials.
In connection with our ownership and operation of our currently and
formerly-owned properties, we and the joint ventures in which we have an
interest may be potentially liable for removal or remediation costs, as
well as other costs (including governmental fines and costs related to
injuries to persons and property) resulting from environmental conditions
at these properties.
An independent consultant has reviewed existing environmental reports
to identify environmental conditions at our properties, including some
properties that we formerly owned. A majority of the reports were prepared
for entities other than us. In some cases, we commissioned additional or
follow-up investigations by various outside consultants. There can be no
assurance, however:
o that circumstances have not changed since any investigations were
completed;
o that they reveal all potential environmental liabilities;
o that they are accurate; or
o that prior owners or operators of the properties have not created
a potential environmental liability unknown to us.
Based on these investigations and our knowledge of the operation of
our properties, we believe that many of our properties, including
properties that we formerly owned, contain, or have contained, petroleum
storage tanks and automobile service operations. These tanks and
operations have, or may have, resulted in soil or ground water
contamination. Further, we are aware of asbestos-containing materials in
each of our shopping centers and in at least some of the properties we
formerly owned.
We have received environmental reports prepared by independent
consultants with respect to each of the properties in which we have
acquired an interest from TrizecHahn Centers, Inc. All of these
environmental reports were prepared in 1998.
Although there can be no assurances, we do not believe that
environmental conditions at any of our properties will have a material
adverse effect on our business, financial condition or results of
operations. We cannot be sure that environmental laws will not become more
stringent in the future or that the environmental conditions on or near our
properties will not have a material adverse effect on individual properties
or on us as a whole in the future.
POSSIBLE FUTURE SALES OF SHARES COULD ADVERSELY AFFECT THE MARKET PRICE OF
OUR COMMON SHARES
We have entered into agreements and issued warrants pursuant to which
Westfield America Trust may in the future purchase a large number of Common
Shares. As of June 30, 1999, we had 73,345,137 Common Shares outstanding.
Westfield America Trust may purchase Common Shares:
o by exercising a warrant entitling it to purchase up to
6,246,096 Common Shares from time to time prior to July 1,
2016 for $16.01 per share in cash, adjusted for stock
splits, capital reconstructions or similar matters;
o by exercising a warrant entitling it to purchase up to
2,089,552 Common Shares from time to time prior to May 21,
2017 for $15.00 per share in cash, adjusted for stock
splits, capital reconstructions or similar matters; and
o pursuant to a subscription agreement we entered into on May
29, 1998, providing for Westfield America Trust's purchase
of A$465 million, which was approximately US$307.7 million
as of June 30, 1999, of Common Shares in three equal
installments at a 5% discount to the then prevailing market
price of our Common Shares on June 29, 2001, June 28, 2002
and June 30, 2003.
Additionally, Westfield Holdings and its subsidiaries have demand
registration rights, beginning on May 21, 2000. At that time they may
require us to register the sale by Westfield Holdings and its subsidiaries
of up to 10,930,672 Common Shares. Those Common Shares may not be sold by
Westfield Holdings and its subsidiaries until May 21, 2000. Westfield
Holdings and its subsidiaries also have currently exercisable demand
registration rights with respect to other Common Shares. Further,
Westfield Holdings, its subsidiaries, Westfield America Trust and other
affiliated shareholders may sell Common Shares in the open market subject
to compliance with Rule 144 promulgated under the Securities Act of 1933,
as amended.
In addition, Westfield America Trust owns shares of our preferred
stock, which are immediately convertible into 10,333,340 Common Shares,
subject to anti-dilution adjustments. Furthermore, a wholly-owned
subsidiary of Westfield Holdings owns shares of our preferred stock, which
are immediately convertible into 2,777,780 Common Shares, subject to anti-
dilution adjustments.
We have also issued to unaffiliated purchasers:
o 2,164,235 OP Units that are exchangeable into cash, subject to
our prior and independent right to acquire such partnership
interests for an equivalent number of Common Shares, subject to
adjustment as provided in the partnership agreement for the
operating partnership;
o 909,143 partnership interests in our affiliated partnerships that
are exchangeable into (1) an equivalent number of OP Units or
(2) cash, subject to our prior and independent right to acquire
such partnership interests for an equivalent number of Common
Shares, subject to adjustment as provided in the governing
partnership agreement; and
o a liquidity option to receive our Common Shares which, based on a
formula using pro forma numbers for the previous four calendar
quarters, would be equal to approximately 5,700,000 Common
Shares. The liquidity option is not exercisable for several
years and therefore, when it is exercised, if at all, the number
of Common Shares to be issued could be substantially different.
All of the Common Shares mentioned above will be available for sale in
the public markets either immediately upon issuance or from time to time
pursuant to exemptions from registration or upon registration. We cannot
predict the effect, if any, that future sales of Common Shares, the
availability of Common Shares for future sale, or the issuance of Common
Shares in the future will have on the market price of the Common Shares.
Such events, however, or the perception that they might occur, could
adversely affect the prevailing market price for the Common Shares. A
reduction in the market price of the Common Shares could in turn adversely
affect our ability to raise additional capital through the issuance of
equity.
CHANGES IN POLICY MAY BE IMPLEMENTED WITHOUT SHAREHOLDER APPROVAL WHICH MAY
NOT SERVE THE INTERESTS OF ALL SHAREHOLDERS
Our major policies, including policies with respect to acquisitions,
financing, growth, investments, debt capitalization, distributions and
operations, will be determined by our board of directors. The board of
directors may amend or rescind these and other policies from time to time
without a vote of our shareholders. Accordingly, shareholders will have no
control over changes in our policies. Changes in our policies may not
fully serve the interests of all shareholders.
FUTURE ISSUANCES OF OUR SHARES WILL LIKELY HAVE A DILUTIVE EFFECT
We expect that Westfield America Trust and Westfield Holdings will
participate in our proposed dividend reinvestment plan. Shareholders who
do not participate will suffer dilution of their interest in us.
We also expect that we will issue additional equity from time to time
to refinance existing debt, make acquisitions or for other corporate
purposes. Any future issuance of additional equity will most likely result
in dilution of some shareholders' interests. See "There are risks
associated with investments in real estate - There is a potential dilutive
effect of financing future acquisitions with equity," "There are risks
associated with debt financing - Inability to refinance balloon payments on
debt could have an adverse effect on us" and "Possible future sales of
shares by affiliates could adversely affect the market price for our
shares."
OUR BUSINESS MAY BE DISRUPTED AS A RESULT OF THE YEAR 2000 ISSUE
The "Year 2000 Issue" is the result of computer programs being written
using two digits rather than four to define the applicable year. Any of
our computer programs that have time-sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000. This could
result in a system failure or miscalculations causing disruptions of
operations, including, among other things, a temporary inability to process
transactions, send invoices, or engage in similar normal business
activities.
The Westfield Holdings subsidiary that manages most of our properties,
has conducted a company wide assessment of our exposure to Year 2000 Issue
related business disruptions. The assessment examined our internal
systems, including computer hardware and software systems and fire, life
and safety systems at our properties, and the systems of customers and
suppliers critical to our operations.
The Westfield Holdings subsidiary has substantially completed a
program of replacing and upgrading all computer hardware and software
systems as of October 31, 1998 and is currently testing the computer system
for Year 2000 compliance. The assessment also revealed that the fire, life
and safety systems and heating, ventilating and air conditioning systems at
most of the properties have manual overrides available as alternatives to
existing automated controls for these systems. We have completed an
assessment of all electronic and mechanical control systems at our
properties and we are currently in the process of upgrading or replacing
any systems that are not Year 2000 compliant prior to September 30, 1999.
We also rely on our customers to make the necessary preparations for
Year 2000 so that they are able to honor their financial commitments. We
have notified all of our tenants that their responsibilities under their
leases will continue, notwithstanding any Year 2000 Issue difficulties they
may experience. Additionally, we have identified approximately 10 anchor
stores that have lease payments high enough to warrant inquiry as to their
Year 2000 preparation and have made appropriate inquiries. In addition, we
have contacted our third party suppliers in order to assess and, to the
extent possible, minimize potential exposure to Year 2000 Issue related
disruptions. We have identified, to the extent possible, alternative
suppliers who are Year 2000 compliant. We also have determined that
developing redundant systems adequate to provide alternative sources of
utility services to a broad spectrum of our properties is not a financially
viable option.
The worst case scenario could be an extended loss of utility service
resulting from interruptions at the point of power generation, line
transmission or local distribution to our properties. Such an interruption
could result in an inability to provide tenants with access to their
spaces, thereby affecting our ability to collect rent and pay our
obligations which could result in a material adverse effect on us. The
effects could be as insignificant as a minor interruption in services
provided to tenants resulting from unanticipated problems encountered by us
or any of the significant third parties with whom we do business. The
pervasiveness of the Year 2000 Issue makes it likely that previously
unidentified issues will require remediation during the normal course of
business. In such a case, we anticipate that automated procedures could be
replaced by manual procedures while systems are repaired, and that such
interruptions would have a minor effect on our operations.
Although we believe that our efforts to minimize business disruptions
resulting from the Year 2000 Issue are adequate, we can give no assurance
that such efforts, and those of our customers and suppliers, will be
adequate to prevent a material adverse affect on us.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus and the information incorporated by reference includes
forward-looking statements within the meaning of Section 27A of the
Securities Act and Section 21E of the Securities Exchange Act of 1934, as
amended. Some of the forward-looking statements can be identified by the
use of forward-looking words such as "believes," "expects," "may," "will,"
"anticipates," "intends," "plans," "estimates," "proposes," "continue,"
"scheduled" or other similar expressions. Forward-looking statements
involve inherent risks and uncertainties. A number of important factors
could cause actual results to differ materially from those in the forward-
looking statements. For a discussion of factors that could cause actual
results to differ, please see the discussion under "Risk Factors" in this
prospectus, in any prospectus supplement, and in the other information
contained in our publicly available SEC filings. We undertake no
obligation to publicly update or revise any forward-looking statements,
whether as a result of new information, future events, or otherwise.
Readers are cautioned not to rely too heavily on these forward-looking
statements. The forward-looking statements by their nature are not
intended to be definitive predictions of future events. There is no
general duty for us to update forward-looking statements. There is,
however, a duty for us to correct information contained in this prospectus
when a disclosure is misleading when made or when a statement that was
accurate when made becomes misleading due to subsequent events.
THE COMPANY
Westfield America, Inc. is a REIT for U.S. Federal income tax
purposes.
We are primarily in the business of owning, operating, leasing,
developing, redeveloping and acquiring shopping centers located in major
markets in the east coast, midwest and west coast.
We currently own interests in a portfolio of 37 shopping centers, 12
separate department store properties and other real estate investments.
The centers are located in eight states in the east coast, midwest and west
coast regions of the United States.
We have transferred substantially all of our assets to Westfield
America Limited Partnership, our operating partnership. We are the general
partner of the operating partnership and conduct substantially all of our
operations through the operating partnership.
We have engaged a property management company to provide property
management services, an asset management company to provide advisory
services and a development company to provide development services. These
companies provide their services to us under agreements that expire in May
2000 and are renewable annually thereafter. Each of these companies is an
affiliate of Westfield Holdings.
In order to satisfy requirements of the Internal Revenue Code
applicable to REITs, we must distribute to our shareholders 95% of our REIT
taxable income and meet other requirements. We will make, at a minimum,
distributions to our shareholders sufficient to satisfy the distribution
requirements of the Internal Revenue Code.
Our common stock is listed on the New York Stock Exchange under the
symbol "WEA". Our principal executive offices are located at 11601
Wilshire Boulevard, 12th Floor, Los Angeles, California 90025; (310) 478-
4456.
USE OF PROCEEDS
All net proceeds from the sale of the securities covered by this
prospectus will go to Security Capital Preferred Growth Incorporated, the
selling shareholder. Accordingly, we will not receive any of the proceeds
from the sale of such securities.
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
The following table sets forth our ratio of earnings to combined fixed
charges and preferred stock dividends for the periods indicated:
<TABLE>
<CAPTION>
FOR THE SIX YEAR ENDED PERIOD
MONTHS ENDED DECEMBER 31, FEBRUARY 12, 1994
JUNE 30, THROUGH
1999 1998 1997 1996 1995 DECEMBER 31, 1994
---- ---- ---- ---- ---- -----------------
<S> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to
Combined Fixed
Charges and Preferred 1.03X 1.33X 1.61X 1.60X 2.25X 2.89X
</TABLE>
For purposes of calculating the ratio of earnings to combined fixed
charges and preferred stock dividends, earnings consist of income before
minority interest, gains or losses on sale of investments, fixed charges
(excluding capitalized interest and preferred stock dividends) and includes
distributed operating income from unconsolidated affiliates and joint ventures
instead of income from unconsolidated affiliates and joint ventures.
Combined fixed charges and preferred stock dividends consist of interest
expense, whether expensed or capitalized, and amortization of debt expense and
dividends on preferred stock.
SELLING SHAREHOLDER
For purpose of this prospectus, the term "Series C Preferred Shares"
means all shares of our Series C cumulative convertible redeemable
preferred stock, the term "Series C-1 Preferred Shares" means all shares of
our Series C-1 cumulative convertible redeemable preferred stock, the term
"Series C-2 Preferred Shares" means all shares of our Series C-2 cumulative
convertible redeemable preferred stock and the term "Series C Shares" means
the Series C Preferred Shares, the Series C-1 Preferred Shares and the
Series C-2 Preferred Shares, collectively. All Series C Shares or Common
Shares issuable upon conversion of the Series C Shares offered under this
prospectus are being offered and sold by Security Capital Preferred Growth.
As of the date of this prospectus, Security Capital Preferred Growth:
o owns 416,667 of the Series C Preferred Shares, 138,889 of the
Series C-1 Preferred Shares and 138,889 of the Series C-2
Preferred Shares, constituting 100% of the issued and outstanding
Series C Shares; and
o would own upon conversion of the Series C Shares, 6,944,450 of
our Common Shares, constituting approximately 9.5 % of the issued
and outstanding Common Shares.
Under a registration rights agreement dated as of August 12, 1998, as
amended on December 24, 1998, between us and Security Capital Preferred
Growth, we agreed to register the Series C Shares issued to Security
Capital Preferred Growth and the Common Shares into which the Series C
Shares could be converted. We have also agreed to use our best efforts to
keep the registration statement effective until August 12, 2001, or until
all of the Series C Shares or Common Shares are sold under the registration
statement or in accordance with Rule 144 of the Securities Act or may be
sold in accordance with Rule 144(k) of the Securities Act, whichever comes
first. Our registration of the Series C Shares and the Common Shares does
not necessarily mean that Security Capital Preferred Growth will sell all
or any of such shares. Merrill Lynch International Private Finance
Limited, as a pledgee of the Series C Shares, may offer Series C Shares and
Common Shares by this prospectus. In addition, donees and pledgees of
Series C Shares, or Common Shares received from Security Capital Preferred
Growth after the date of this prospectus may offer Series C Shares and
Common Shares by this prospectus.
In 1998, we paid fees of $1,250,000 to Security Capital Markets Group
Incorporated in connection with the private placements of the Series C
Shares with Security Capital Preferred Growth. Security Capital Markets
Group Incorporated is an indirect, wholly-owned subsidiary of Security
Capital Group Incorporated, and a registered broker-dealer and member of
the National Association of Securities Dealers, Inc. As of March 31, 1999,
Security Capital Group Incorporated owned 9.74% of Security Capital
Preferred Growth through SC Realty Incorporated, a wholly-owned subsidiary
of Security Capital Group Incorporated. Security Capital Group
Incorporated also owns 100% of Security Capital Preferred Growth's adviser,
Security Capital Global Capital Management Group Incorporated.
DESCRIPTION OF CAPITAL STOCK
The following is a description of the material terms of our capital
stock and of some provisions of Missouri law. You should also read our
Restated Articles of Incorporation, as amended, including the Certificate
of Designation setting forth "Resolution of the Board of Directors of
Westfield America, Inc. Designating Series B Preferred Shares and Fixing
Preferences and Rights Thereof," the Certificate of Designation setting
forth "Resolution Designating Series C Preferred Shares and Fixing
Preferences and Rights Thereof," as amended (the "Series C Certificate of
Designation"), the Certificate of Designation setting forth "Resolution of
the Board of Directors of Westfield America, Inc. Designating Series C-1
Preferred Shares and Fixing Preferences and Rights Thereof," the
Certificate of Designation setting forth "Resolution of the Board of
Directors of Westfield America, Inc. Designating Series C-2 Preferred
Shares and Fixing Preferences and Rights Thereof," the Certificate of
Designation setting forth "Resolution Designating Series D Preferred Shares
and Fixing Preferences and Rights Thereof " (the "Series D Certificate of
Designation"), the Certificate of Designation setting forth "Resolution of
the Board of Directors of Westfield America, Inc. Designating Series D-1
Preferred Shares and Fixing Preferences and Rights Thereof" and the
Certificate of Designation setting forth "Resolution of the Board of
Directors of Westfield America, Inc. Designating Series E Preferred Shares
and Fixing Preferences and Rights Thereof" ("Articles of Incorporation"),
Second Amended and Restated By-Laws, as amended (the "By-Laws"), and
provisions of the General Business and Corporation Law of Missouri (the
"GBCL"). We have filed copies of our Articles of Incorporation and By-Laws
with the SEC and have incorporated by reference such documents as exhibits
to the registration statement of which this prospectus is a part.
As of the date of this prospectus, our authorized capital consisted of
410,000,200 shares, designated as follows:
o 200 shares of non-voting senior preferred stock (the "Senior
Preferred Shares"), par value $1.00 per share
o 5,000,000 shares of preferred stock (the "Preferred
Shares"), par value $1.00 per share, designated as follows:
o o 940,000 shares of Series A cumulative redeemable
preferred stock (the "Series A Preferred Shares")
o o 400,000 shares of Series B cumulative redeemable
preferred stock (the "Series B Preferred Shares")
o o 416,667 Series C Preferred Shares
o o 138,889 Series C-1 Preferred Shares
o o 138,889 Series C-2 Preferred Shares
o o 694,445 shares of Series D cumulative convertible
redeemable preferred stock (the "Series D
Preferred Shares")
o o 138,889 shares of Series D-1 cumulative
convertible redeemable preferred stock (the
"Series D-1 Preferred Shares")
o o 477,778 shares of Series E cumulative convertible
redeemable preferred stock (the "Series E
Preferred Shares")
o o 1,654,443 Preferred Shares which have not been
designated
o 200,000,000 Common Shares
o 205,000,000 excess shares, par value $.01 per share (the
"Excess Shares")
As of August 20, 1999, our outstanding capital consisted of:
o 2,737,779 Preferred Shares, with the following amounts
outstanding:
o o 940,000 Series A Preferred Shares
o o 270,000 Series B Preferred Shares
o o 416,667 Series C Preferred Shares
o o 138,889 Series C-1 Preferred Shares
o o 138,889 Series C-2 Preferred Shares
o o 694,445 Series D Preferred Shares
o o 138,889 Series D-1 Preferred Shares
o o 477,778 Series E Preferred Shares
o 73,345,137 Common Shares
o o warrants to purchase up to 8,335,648 Common Shares
o o the right to sell A$465 million, which was
approximately US$307.7 million as of June 30,
1999, of Common Shares
o o 2,164,235 OP Units that are exchangeable into
cash, subject to our prior and independent right
to acquire such partnership interests for an
equivalent number of Common Shares, which number
is subject to adjustment as provided in the
partnership agreement for the operating
partnership
o o 909,143 partnership interests in our affiliated
partnerships that are exchangeable into (1) an
equivalent number of OP Units or (2) cash, subject
to our prior and independent right to acquire such
partnership interests for an equivalent number of
Common Shares, which number is subject to
adjustment as provided in the governing
partnership agreement
o o a liquidity option to receive our Common Shares
which, based on a formula using pro forma numbers
for the previous four calendar quarters, would be
equal to approximately 5,700,000 Common Shares.
The liquidity option is not exercisable for
several years and therefore, when it is exercised,
if at all, the number of Common Shares to be
issued could be substantially different. For a
description of the formula, see "--Liquidity
Option"
SENIOR PREFERRED SHARES
Any holders of Senior Preferred Shares are entitled to receive, when
and as declared by our board of directors, a cash dividend at the annual
rate of $35.00 per share, if such funds are legally available, and no
more. This dividend is payable quarterly. We will not pay any dividend on
any Preferred Shares or Common Shares unless the full dividend has been
paid on Senior Preferred Shares. Upon our liquidation, dissolution or
winding up, any holders of Senior Preferred Shares are entitled to be paid
in full an amount equal to $550.00 per share, together with the full
dividend on each share for the then current quarterly-yearly dividend
period before any dividend or payment is made to the holders of any
Preferred Shares or Common Shares. Except as required by applicable law,
any holders of Senior Preferred Shares do not have any voting rights in us.
As of the date of this prospectus, there are no outstanding Senior
Preferred Shares.
PREFERRED SHARES
We may issue Preferred Shares from time to time in one or more series
as our board of directors authorizes us to do. Before we issue a new
series of Preferred Shares, our board of directors must pass a resolution
designating the series, which serves to distinguish the new series from
other series and classes of stock. The resolution also sets forth the
number of shares to be included in the new series and establishes the
terms, rights, restrictions and qualifications of the shares of the new
series. These may include any preferences, voting powers, dividend rights
and redemption, sinking fund and conversion rights. Prior to issuing the
shares in a series, and subject to the express terms of any other
outstanding series of Preferred Shares, our board of directors can increase
or decrease the number of shares in a series, alter the designation of a
series or classify or reclassify any unissued shares of a series by fixing
or altering any terms, rights, restrictions and qualifications of the
shares in that series.
Series A Preferred Shares
Dividends. The holders of Series A Preferred Shares are entitled to
receive, when and as declared by our board of directors, cumulative cash
dividends per share equal to the greater of:
o $8.50 per year; and
o an amount currently equal to 6.2461 times the dividend
declared on Common Shares for such period, adjusted for
stock splits and similar matters, if such funds are legally
available.
Holders of Series A Preferred Shares are entitled to dividends before we
can distribute dividends to holders of Common Shares.
Liquidation. Upon our liquidation, dissolution or winding up, the
holders of Series A Preferred Shares are entitled to be paid in full an
amount equal to the sum of the following:
o $100.00 per share
o all accrued and unpaid dividends through the last day of the
most recently completed calendar quarter prior to the date
of liquidation, dissolution or winding up
the actual number of days elapsed from the
last day of the most recently completed
o $2.125 X calendar quarter to the liquidation date
------------------------------------------
90 days
Redemption. From July 1, 2003 on, we may, at the option of our board
of directors, with approval by a majority of independent directors, redeem
in whole, or in part, the outstanding Series A Preferred Shares at a
redemption price equal to the sum of the following:
o $100.00 per share
o all accrued and unpaid dividends through the last day of the
most recently completed calendar quarter prior to the
redemption date
the actual number of days elapsed from the
last day of the most recently completed
o $2.125 X calendar quarter to the liquidation date
------------------------------------------
90 days
o the right to receive on the payment date for dividends
declared on the Common Shares for the calendar quarter
during which the Series A Preferred Shares are redeemed, an
amount equal to the proportionate additional amount, if any,
of dividends that the holder of the Series A Preferred Share
would have been entitled to receive if it held the Series A
Preferred Share on the record date for the Common Share
dividend.
Voting Rights. The holders of Series A Preferred Shares do not have
any voting rights, other than as required by law, except that:
o if our board of directors does not declare a dividend
payable to holders of Series A Preferred Shares or payable
to holders of any other series of Preferred Shares
authorized with the consent of the holders of Series A
Preferred Shares and ranking equally with the Series A
Preferred Shares (an "Equal Series") for four quarterly
dividend periods, then there shall be one additional member
on the board of directors, and the holders of a majority of
the Series A Preferred Shares and shares of any Equal
Series, voting together as a class, shall have the exclusive
right to elect that director;
o o Once all dividends in arrears are made current and
paid in full, the director elected by the majority
of the holders of the Series A Preferred Shares
and the shareholders of the Equal Series shall
cease to be a director and the number of directors
on the board shall be reduced by one.
o o Currently, there are no Equal Series outstanding.
o a majority of the holders of the Series A Preferred Shares,
voting together as a class, must approve any amendment to
the Articles of Incorporation that materially and adversely
affects their rights, preferences or powers;
o o If an amendment would adversely affect the rights,
preferences or powers of shareholders of any
Equal Series in addition to the rights of holders
of Series A Preferred Shares, then a majority of
the holders of the Series A Preferred Shares and
the shareholders of any Equal Series, voting
together as a class, must approve such amendment.
o the holders of the Series A Preferred Shares must
unanimously approve any amendment to the Articles of
Incorporation that would:
o o decrease the rate or change the time of payment of
any dividend on the Series A Preferred Shares;
o o decrease the amount payable upon redemption of the
Series A Preferred Shares or upon our liquidation;
o o move forward the date on which we may redeem the
Series A Preferred Shares; or
o o amend the number of Series A Preferred Shares
required to amend the Articles of Incorporation.
o a majority of the holders of the Series A Preferred Shares
and the shareholders of any Equal Series, voting together as
a class, must approve any merger or consolidation we are
involved in, if we do not survive such merger or
consolidation and the holders of the Series A Preferred
Shares and shareholders of any Equal Series do not receive
shares of the surviving corporation with substantially
similar rights, preferences and powers in the surviving
corporation as their Series A Preferred Shares and shares of
the Equal Series; and
o a majority of the holders of the Series A Preferred Shares
and the shareholders of any Equal Series, voting together as
a class, must approve any voluntary action by our board of
directors to cause us to cease to have REIT status.
Series B Preferred Shares
The holders of Series B Preferred Shares have substantially the same
dividend, liquidation, redemption and voting rights as the holders of the
Series A Preferred Shares, except that the amount of cumulative cash
dividends is equal to the greater of:
o $8.50 per year; and
o an amount currently equal to 6.6667 times the dividend
declared on Common Shares for such period, adjusted for
stock splits and similar matters, if such funds are legally
available.
In addition, we may not redeem the Series B Preferred Shares until May
21, 2004, or later. Currently, there are no series of Preferred Shares
which have been authorized with the consent of the holders of the Series B
Preferred Shares and ranking equally with the Series B Preferred Shares.
Series C Preferred Shares
Dividends. The holders of Series C Preferred Shares are entitled to
receive, when and as declared by our board of directors, cumulative
dividends per share equal to the greater of:
o $15.30 per year; and
o an amount currently equal to 10.0 times the dividend declared on
Common Shares for such period adjusted for stock splits and
similar matters that affect conversion rates, if such funds are
legally available.
In addition, if we do not have earnings 40% greater than our
consolidated fixed charges, as defined in the Series C Certificate of
Designation, we must pay a dividend 20% greater than that we would normally
be required to pay. Holders of Series C Preferred Shares are entitled to
dividends before we can distribute dividends to holders of Common Shares.
For a description of events that affect conversion rates, see "Conversion
Rights -- Conversion Price Adjustments."
Furthermore, we must pay a dividend 2.5 times greater than the
dividend we would normally be required to pay if:
o we file a Federal income tax return for any taxable year on
which we do not compute our income as a REIT;
o our shareholders approve a proposal for us to cease to
qualify as a REIT;
o our board of directors determines, based on the advice of
counsel, that we have ceased to qualify as a REIT; or
o a "determination" is made within the meaning of Section
1313(a) of the Internal Revenue Code that we have ceased to
qualify as a REIT.
Liquidation. Upon our liquidation, dissolution or winding up, the
holders of Series C Preferred Shares are entitled to be paid in full an
amount equal to the sum of the following:
o $180.00 per share
o all accrued and unpaid dividends through the date of
liquidation.
Redemption. From August 12, 2008 on, we may, at the option of our
board of directors, with the approval by a majority of independent
directors, redeem, in whole, or in part, the outstanding Series C Preferred
Shares at a redemption price equal to the sum of:
o $180.00 per share
o all accrued and unpaid dividends through the call date
specified in the notice to holders regarding the redemption.
If the redemption date occurs after a dividend record date, but prior
to the dividend payment date, the dividend payable on such dividend payment
date on the shares called for redemption shall be payable to the holders of
Series C Preferred Shares of record at the close of business on such
dividend record date, and shall not be payable as part of the redemption
price for such shares. If we have not declared and paid, or declared and
set apart for payment, full cumulative dividends on all outstanding Series
C Preferred Shares and shares of any series ranking equally with the Series
C Preferred Shares, including the Series A Preferred Shares, the Series B
Preferred Shares, the Series C-1 Preferred Shares, the Series C-2 Preferred
Shares, the Series D Preferred Shares, the Series D-1 Preferred Shares and
the Series E Preferred Shares, we cannot redeem any Series C Preferred
Shares and we cannot purchase or acquire any Series C Preferred Shares
except in a purchase or exchange offer made on the same terms to all
holders of Series C Preferred Shares.
If there is a change in our control, the holders of the Series C
Preferred Shares can require us, if we have funds legally available to do
so, to redeem their Series C Preferred Shares at a cost of $189.00, plus
accrued and unpaid dividends, if any, to the date that we repurchase the
shares. For purposes of the Series C Preferred Shares, a change in our
control may occur upon:
o the first acquisition, directly or indirectly, by any
individual or entity or "group" of "beneficial ownership" of
more than 25% of our or Westfield America Trust's
outstanding equity securities with voting power to elect our
directors;
o o For purposes of the Series C Preferred Shares and
the definition of change of control, "group" has
the meaning set forth in Section 13(d)(3) of the
Exchange Act, and "beneficial ownership" has the
meaning set forth in Rule 13d-3 under the Exchange
Act (except that such individual or entity shall
be deemed to have beneficial ownership of all
shares that any such individual or entity has the
right to acquire, whether such right is
exercisable immediately or only after a passage of
time).
o during any period of two consecutive years, the individuals
who at the beginning of such period constituted our board of
directors cease for any reason to constitute a majority of
our board of directors then in office;
o o For purposes of this provision, the directors do
not include any directors designated, appointed or
elected by the holders of any series of Preferred
Shares.
o any of us or Westfield America Trust consolidating with or
merging into another entity or conveying, transferring or
leasing all or substantially all of our assets to any
individual or entity pursuant to a transaction in which our
outstanding voting securities or Westfield America Trust's
outstanding voting securities are reclassified or changed
into or exchanged for cash, securities or other property;
and
o any entity consolidating with or merging into any of us or
Westfield America Trust pursuant to a transaction in which
our outstanding voting securities or Westfield America
Trust's outstanding voting securities are reclassified or
changed into or exchanged for cash, securities or other
property.
o o Each of the last two events above will not
constitute a "change of control" if the sole
purpose of such event is for us or Westfield
America Trust to seek to change its domicile or
convert from a corporation to a trust or vice
versa.
o o Each of the last two events above will not
constitute a "change of control" if, immediately
after such transaction, the holders of the
exchanged securities of us or Westfield America
Trust beneficially own at least a majority of the
securities of the merged or consolidated entity
normally entitled to vote in elections of our or
Westfield America Trust's directors.
In addition, none of the events listed above will constitute a "change
of control" if:
o any of Westfield Holdings or its wholly-owned subsidiaries
remains as manager of our properties and as our adviser, in
each case, as such functions are currently performed; or
o the change of control results solely from the purchase or
other acquisition of equity securities by Westfield
Holdings, Westfield America Trust, the Lowy family or the
initial holder of the Series C Preferred Shares.
Also, we have agreed that so long as the initial holder of the Series
C Preferred Shares holds any of the Series C Preferred Shares, if we fail
to continue to be taxed as a REIT, the initial holder of the Series C
Preferred Shares will have the right to require us, if we have funds
legally available to do so, to repurchase any or all of the Series C
Preferred Shares held by the initial holder of the Series C Preferred
Shares at a repurchase price of $207.00 per share, payable in cash plus
accrued and unpaid dividends whether or not declared, if any, to the date
of repurchase or the date payment is made available.
In addition, after August 12, 2008, the holders of the Series C
Preferred Shares have the right to require us to redeem their Series C
Preferred Shares either for cash or for Common Shares, at our option, as
long as the current market price of the Common Shares is less than $18.00,
adjusted for events that affect the conversion rate as described below.
Conversion Rights--General. The holders of Series C Preferred Shares
have additional rights that neither the holders of Series A Preferred
Shares nor the holders of Series B Preferred Shares have. The holders of
Series C Preferred Shares can convert at any time all or any portion of
their shares into Common Shares, with all of the same rights of Common
Shares as described below. Series C Preferred Shares can be converted into
Common Shares at an initial rate obtained by dividing the aggregate
liquidation preference ($180.00 per share) of such shares plus accrued but
unpaid dividends by a conversion price that is currently $18.00. The
liquidation preference is the amount that the holder of Series C Preferred
Shares will receive if we are terminated and our assets are distributed to
our shareholders. Holders of Series C Preferred Shares are entitled to
receive this amount before any payments or distributions are made to
holders of the Common Shares. The conversion price is subject to
adjustment and is described below under "--Conversion Price Adjustments --
General." The right to convert Series C Preferred Shares called for
redemption will terminate on the fifth business day prior to the date on
which such shares have been called for redemption. There are 416,667
outstanding Series C Preferred Shares and each Series C Preferred Share is
currently convertible into 10 Common Shares. The Series C Preferred Shares
can be converted into shares of Common Stock in the manner described below.
The terms of the Series C Preferred Shares provide that a holder of a
Series C Preferred Share wishing to exercise its conversion right must
surrender such Series C Preferred Share, together with a written
irrevocable conversion notice, to the transfer agent. In addition, unless
the shares of Common Stock issuable on conversion of Series C Preferred
Shares are to be issued in the same name as the name in which such Series C
Preferred Shares are registered, each share surrendered must be accompanied
by instruments of transfer, in form to our satisfaction, duly executed by
the holder or such holder's duly authorized attorney and an amount
sufficient to pay any transfer or similar tax (or evidence reasonably
satisfactory to us demonstrating that such taxes have been paid).
We will pay dividends on Series C Preferred Shares to holders of
Series C Preferred Shares as of a dividend record date notwithstanding the
subsequent conversion of such shares following such dividend record date
and prior to the dividend payment date. However, Series C Preferred Shares
surrendered for conversion during the period between the close of business
on any dividend record date and the opening of business on the
corresponding dividend payment date must be accompanied by payment of an
amount equal to the dividend payable on such shares on such dividend
payment date. This does not apply to shares converted after we issue a
notice of redemption in connection with the redemption of shares during the
period between a dividend record date and the corresponding dividend
payment date, as those shares would be entitled to a dividend on the
dividend payment date. If a holder of Series C Preferred Shares as of a
dividend record date tenders such shares for conversion into shares of
Common Stock on a dividend payment date, such holder will receive the
dividend payable on such shares and will not need to include payment of the
amount of such dividend upon surrender of the Series C Preferred Shares for
conversion. Except as provided above, we will not make any payment or
allowance for unpaid dividends, whether or not in arrears, on converted
shares or for dividends on the Common Shares issued upon such conversion.
We will not issue any fractional shares or scrip representing
fractions of Common Shares upon conversion of Series C Preferred Shares.
If a holder of Series C Preferred Shares makes a conversion that results in
such holder's having a fractional interest in a Common Share, we will pay
to the holder of such shares a cash amount based on the current market
price of the Common Shares on the trading day immediately prior to the
conversion, instead of issuing a fractional Common Share.
Conversion Rights--Conversion Price Adjustments--General. The initial
conversion price of $18.00 per Common Share is subject to adjustment, under
formulae set forth in the Series C Certificate of Designation including as
set forth below:
o the issuance of Common Shares as a dividend or a
distribution on the Common Shares;
o some subdivisions and combinations of our Common Shares;
o the issuance of any shares of stock by reclassification of
our Common Shares;
o the issuance to all holders of our Common Shares of some
rights, options or warrants entitling them to subscribe for
or purchase Common Shares at a price per share less than 95%
(100% if a stand-by underwriter is used and charges us a
commission) of the fair market value per Common Share on the
record date for determination of shareholders entitled to
receive such rights, options or warrants;
o the distribution to all holders of our Common Shares of any
of our securities, other than Common Shares, or evidence of
our indebtedness or assets, excluding cumulative cash
dividends or distributions paid on the Common Shares after
December 31, 1997 which are not in excess of the sum of:
o o our cumulative undistributed funds from
operations, as determined by our board of
directors, at December 31, 1997, plus
o o the cumulative amount of funds from operations, as
determined by our board of directors, after
December 31, 1997, minus
o o the cumulative amount of dividends accrued or paid
on the Series C Preferred Shares or any other
class or series of Preferred Shares.
o the distribution to all holders of our Common Shares of
rights, options or warrants to subscribe for or purchase any
of our securities (excluding those rights, options or
warrants issued to all holders of Common Shares described in
the fourth single bullet point above); and
o o The adjustments referred to in the fifth and
sixth single bullet points above will not be made,
however, if such a distribution is made not only
to holders of Common Shares, but also to each
holder of Series C Preferred Shares converting
such shares into Common Shares after the
determination date for such
distribution, provided, that if such holder of
Series C Preferred Shares is no longer entitled to
receive such distribution with the Common Shares
upon conversion, then the adjustment to the
conversion price will be made.
o o The adjustments referred to in the fifth and sixth
single bullet points above will not be required in
connection with rights or warrants distributed by
us to all holders of Common Shares to subscribe
for or purchase shares of our capital stock, which
rights or warrants, until the occurrence of a
specified event or events:
o o o are deemed to be transferred with such
Common Shares;
o o o are not exercisable; and
o o o are also issued in connection with
future issuances of Common Shares, until
the occurrence of the earliest of such
event.
o payment to holders of Common Shares in connection with a
tender or exchange offer by us or any of our subsidiaries or
controlled affiliates (which does not include open market
repurchases by us) for all or any portion of the Common
Shares for the amount that the value of any consideration
per Common Share has a fair market value, as determined in
good faith by our board of directors, that exceeds the
current market price per Common Share on the trading day
next succeeding the last date on which tenders or exchanges
may be made in accordance with such tender or exchange
offer.
We are allowed, if permitted by law, to make reductions in the
conversion price, in addition to those reductions we are required to make
as a result of the occurrence of an event described above, as we determine
in our discretion to be advisable in order that any share dividends,
subdivision of shares, reclassification or combination of shares,
distribution of rights or warrants to purchase shares or securities, or
distribution of other assets, other than cash distributions, that we may
make to our shareholders shall not be taxable. In addition, we may, from
time to time, if permitted by law, reduce the conversion price by any
amount for any period of at least 20 days if such reduction is irrevocable
during the period and our board of directors determines that such reduction
is in our best interest.
No adjustment in the conversion price will be required unless such
adjustment would require a cumulative change of at least one percent (1%)
in the conversion price then in effect; provided, however, that any
adjustment that would not be required to be made shall be carried forward
and taken into account in any subsequent adjustment until made.
Furthermore, any adjustment that is required must be made not later than
such time as may be required in order to preserve the tax-free nature of a
distribution to the holders of Common Shares. Notwithstanding the
foregoing, we are not required to make any adjustment to the conversion
price as a result of the issuance of any Common Shares under any plan
providing for the reinvestment of dividends or interest payable on our
securities and the investment of additional optional amounts in Common
Shares under such plan.
Conversion Rights--Conversion Price Adjustments--Merger, Consolidation
or Sale of our Assets. If any transaction shall occur including without
limitation:
o any merger or consolidation;
o statutory share exchange;
o self tender offer for 40% or more of our Common Shares;
o sale of all or substantially all of our assets; or
o recapitalization of our Common Shares (other than the
issuance of Common Shares as a dividend or a distribution on
the Common Shares, some subdivisions and combinations of our
Common Shares or the issuance of any shares of stock by
reclassification of our Common Shares);
in which substantially all of the Common Shares are converted into the
right to receive different securities, cash or other property, then each
Series C Preferred Share that is not redeemed or converted into the right
to receive different securities, cash or other property prior to such
transaction shall be convertible into the kind and amount of the different
securities, cash or other property that would have been receivable upon the
consummation of such transaction by a holder of that number of Common
Shares issuable upon conversion of such Series C Preferred Share
immediately prior to such transaction. The foregoing provision does not
apply if such holder of Common Shares:
o is a person that we consolidated with or into which we
merged or which merged into us or to which we made such a
sale or transfer or an affiliate of such; and
o failed to exercise his rights of election, if any, as to the
kind or amount of shares, securities and other property
receivable upon such transaction.
We will not be a party to any such transaction unless the terms of such
transaction are consistent with the foregoing provisions, and we will not
consent or agree to the occurrence of any such transaction until we have
entered into an agreement with the successor or purchasing entity, as the
case may be, for the benefit of the holders of Series C Preferred Shares
that will contain provisions enabling the holders of Series C Preferred
Shares that remain outstanding after such transaction to convert into the
consideration received by holders of Common Shares at the conversion price
in effect immediately prior to such transaction. These provisions will
similarly apply to successive transactions.
Except as stated above under "--General" and "--Merger, Consolidation
or Sale of our Assets," the conversion price will not be adjusted for the
issuance of any of our stock in a reorganization, acquisition or other
similar transaction. In addition, if any action or transaction would
require adjustment of the conversion price in accordance with the
provisions described above in both "--General" and "--Merger, Consolidation
or Sale of our Assets," we will make only one adjustment and such
adjustment will be the amount of adjustment that has the highest absolute
value. Furthermore, if we shall take any action other than actions
described above under "--General" and "--Merger, Consolidation or Sale of
our Assets," that in the opinion of our board of directors would materially
and adversely affect the conversion rights of the holders of Series C
Preferred Shares, the conversion price for the Series C Preferred Shares
may be adjusted, to the amount permitted by law, in such manner, if and at
such time, as our board of directors, in its sole discretion, may determine
to be equitable in the circumstances.
We will pay the documentary stamp or similar issue or transfer taxes
payable on the issue or delivery of Common Shares or other securities or
property on conversion of the Series C Preferred Shares, but we will not be
required to pay any tax that may be payable on any transfer involved in the
issue or delivery of Common Shares or other securities or property in a
name other than that of the holder of Series C Preferred Shares to be
converted, and no such issue or delivery will be made until the person
requesting such issue or delivery has paid to us the amount of the tax or
established, to our reasonable satisfaction, that the tax has been paid.
Registration Rights. The holders of the Series C Preferred Shares
also have registration rights which enable them to require us to register
their Series C Preferred Shares and the Common Shares that they may receive
upon conversion of their Series C Preferred Shares. The Series C Preferred
Shares' registration rights are governed by a Registration Rights Agreement
that specifies our rights and obligations to register the Series C
Preferred Shares. We are filing the registration statement of which this
prospectus is a part in response to a request by Security Capital Preferred
Growth under the Registration Rights Agreement for registration of its
Series C Shares and Common Shares into which the Series C Shares are
convertible.
Voting Rights. The holders of Series C Preferred Shares do not have
any voting rights, other than as required by law, except that:
o if we do not pay a full dividend to any holders of the
Series C Shares for two consecutive quarterly dividend
periods, then the holders of Series C Shares, voting
together as a single class, will have the exclusive right to
elect two additional directors to our board of directors;
o if we do not pay a dividend of at least $0.32 per share,
adjusted for events that affect the conversion rate as
described above, to holders of Common Shares for two
consecutive quarterly dividend periods, then the holders of
the Series C Shares, voting together as a single class, will
have the exclusive right to elect one additional director to
our board of directors;
o o Once all dividends in arrears are made current and
paid in full, and once we pay dividends on Common
Shares of at least $0.32 per share, then the
directors elected by the holders of the Series C
Shares shall cease to be directors and the number
of directors shall be reduced accordingly.
o they can vote on any matter involving any transaction
between us and one of our affiliates which is brought to a
vote by the holders of Common Shares;
o o The holders of the Series C Preferred Shares would
vote on such matters with the holders of Common
Shares, together as a class.
o o The number of votes each holder of the Series C
Preferred Shares would have would be 10 adjusted
for events that affect the conversion rate as
described above.
o a majority of the holders of the Series C Preferred Shares,
voting together as a class, must approve any amendment,
alteration or repeal of the Articles of Incorporation or the
Series C Certificate of Designation that materially and
adversely affects their voting powers, rights or
preferences;
o o The holders of the Series C Preferred Shares will
not be entitled to vote on such a matter if we
redeem the Series C Preferred Shares before any
amendment, alteration or repeal takes effect.
o a majority of the holders of the Series C Preferred Shares,
voting together as a class, must approve any merger or
consolidation we are involved in, if we do not survive such
merger or consolidation and the holders of the Series C
Preferred Shares do not receive shares of the surviving
corporation with substantially similar rights, preferences
and powers in the surviving corporation as their Series C
Preferred Shares;
o o The holders of the Series C Preferred Shares will
not be entitled to vote on such a matter if we
redeem the Series C Preferred Shares prior to the
issuance of such shares in the surviving
corporation.
Right to Participate in Future Offerings. The initial holder of the
Series C Preferred Shares has the right to purchase or subscribe for up to
15% of the number of shares or aggregate amount (whichever is greater) of
any "new securities" that we may issue and sell, so long as such initial
holder continues to hold at least 33% of the aggregate number of issued and
outstanding Series C Shares at the time that we give notice of a proposed
issuance of new securities. For purposes of our Series C Shares, "new
securities" means any of our capital stock (including common stock and
preferred stock), whether now authorized or not, and rights, options or
warrants to purchase our capital stock, and our securities of any type
whatsoever that are convertible into our capital stock or that carry any
rights to purchase our capital stock. For purposes of our Series C Shares,
"new securities" do not include:
o securities issued pursuant to any acquisition of any
property or assets or of another corporation, partnership,
limited liability company or other entity;
o securities issuable upon the exercise of any option,
warrant, subscription or conversion rights outstanding on
June 25, 1998 for the Series C Preferred Shares and December
17, 1998 for the Series C-1 Preferred Shares and the Series
C-2 Preferred Shares;
o securities issuable pursuant to any dividend reinvestment
plan;
o securities issued to employees, officers, consultants or
directors of us pursuant to any stock option plan or stock
purchase or stock bonus or compensation arrangement; or
o securities issued upon conversion of units held in the
operating partnership.
Series C-1 Preferred Shares
The holders of Series C-1 Preferred Shares have substantially the same
dividend, liquidation, redemption, conversion, registration and voting
rights as the holders of the Series C Preferred Shares, as well as the
right to participate in future offerings. There are 138,889 outstanding
Series C-1 Preferred Shares and each Series C-1 Preferred Share is
currently convertible into 10 Common Shares, adjusted in the same manner as
adjustments of the conversion price for the Series C Preferred Shares
described above.
Series C-2 Preferred Shares
The holders of Series C-2 Preferred Shares have substantially the same
dividend, liquidation, redemption, conversion, registration and voting
rights as the holders of the Series C-1 Preferred Shares, as well as the
right to participate in future offerings. There are 138,889 outstanding
Series C-2 Preferred Shares and each Series C-2 Preferred Share is
currently convertible into 10 Common Shares, adjusted in the same manner as
adjustments of the conversion price for the Series C Preferred Shares
described above.
Series D Preferred Shares
General. The holders of Series D Preferred Shares have substantially
the same dividend, liquidation, redemption and conversion rights as the
holders of the Series C Preferred Shares. There are 694,445 outstanding
Series D Preferred Shares and each Series D Preferred Share is currently
convertible into 10 Common Shares, adjusted in the same manner as
adjustments of the conversion price for the Series C Preferred Shares
described above. The holders of the Series D Preferred Shares do not have
any registration rights, nor do they have the right to participate in
future offerings.
Voting Rights. The holders of Series D Preferred Shares do not have
any voting rights, other than as required by law, except that:
o a majority of the holders of the Series D Preferred Shares,
voting together as a class, must approve any amendment,
alteration or repeal of the Articles of Incorporation or the
Series D Certificate of Designation that materially and
adversely affects their voting powers, rights or
preferences;
o o The holders of the Series D Preferred Shares will
not be entitled to vote on such a matter if we
redeem the Series D Preferred Shares before any
amendment, alteration or repeal is to take effect.
o a majority of the holders of the Series D Preferred Shares,
voting together as a class, must approve any merger or
consolidation we are involved in, if we do not survive such
merger or consolidation and the holders of the Series D
Preferred Shares do not receive shares of the surviving
corporation with substantially similar rights, preferences
and powers in the surviving corporation as their Series D
Preferred Shares;
o o The holders of Series D Preferred Shares will not
be entitled to vote on such a matter if we redeem
the Series D Preferred Shares prior to such a
merger or consolidation.
Series D-1 Preferred Shares
The holders of Series D-1 Preferred Shares have substantially the same
dividend, liquidation, redemption, conversion and voting rights as the
holders of Series D Preferred Shares. There are 138,889 outstanding Series
D-1 Preferred Shares and each Series D-1 Preferred Share is currently
convertible into 10 Common Shares, adjusted in the same manner as
adjustments of the conversion price for the Series C Preferred Shares
described above. The holders of the Series D-1 Preferred Shares do not
have any registration rights, nor do they have the right to participate in
future offerings.
Series E Preferred Shares
General. The holders of Series E Preferred Shares have substantially
the same dividend, liquidation and voting rights as the holders of the
Series D Preferred Shares. In addition, the holders of the Series E
Preferred Shares have substantially the same redemption rights as the
holders of the Series D Preferred Shares, except that we may not redeem the
Series E Preferred Shares until August 16, 2009 and the holders of the
Series E Preferred Shares may not require us to redeem their Series E
Preferred Shares until August 16, 2009. The holders of the Series E
Preferred Shares do not have any registration rights, nor do they have the
right to participate in future offerings.
Conversion Rights. The Series E Preferred Shares have conversion
rights and are convertible into Common Shares. However, in order for such
rights to be exercised, our shareholders must approve such conversion or
such shares must be transferred to an individual to whom we are permitted
to issue Common Shares without shareholder approval, in accordance with the
rules of the New York Stock Exchange, Inc. Subject to the foregoing, the
conversion rights of the Series E Preferred Shares are substantially the
same as the conversion rights of the Series D Preferred Shares and each
Series E Preferred Share is convertible into 10 Common Shares, adjusted in
the same manner as adjustments of the conversion price for the Series C
Preferred Shares described above.
COMMON SHARES
Dividend Rights
The holders of Common Shares are entitled to receive such dividends as
our board of directors may declare, if such funds are legally available.
In order for us to qualify as a REIT, we must distribute at least 95% of
our taxable income to our common and preferred shareholders. Under our
Articles of Incorporation, the preferred stock has a dividend preference
over Common Shares. We expect that we will declare regular quarterly
dividends for the three-month periods ending March 31, June 30, September
30 and December 31 each year. All dividends are at the discretion of our
board of directors and depend on our actual funds from operations, our
financial condition, the annual dividend requirements established for REITs
in the Internal Revenue Code and such other factors as our board of
directors deems relevant. All dividends to holders of the Common Shares
are subject to the prior payment of dividends on Preferred Shares.
Liquidation Rights
Upon our liquidation, dissolution or winding up, or upon any
distribution of our assets, holders of Common Shares are entitled to
receive our assets legally available for distribution, after payment of all
debts, other liabilities and any liquidation preferences of outstanding
preferred stock.
Voting Rights
At all of our shareholders' meetings, each holder of Common Shares is
entitled to one vote for each Common Share entitled to vote at such
meeting. A majority of the Common Shares voting together as a class, must
approve:
o an election to change our status as a REIT; and
o other matters as required by applicable law.
With respect to excess common shares, the trustee of any excess common
shares is entitled to vote such shares. See "-- Restrictions on Ownership
and Transfer."
Election and Removal of Directors
Our board of directors consists of three classes with the terms of
office of directors of each class ending in different years. The Class I
directors are to serve until the annual meeting of shareholders in 2001, or
until their successors are elected; the Class II directors are to serve
until the annual meeting of shareholders in 2002, or until their successors
are elected; the Class III directors are to serve until the annual meeting
of shareholders in 2000, or until their successors are elected. The
directors serve three-year terms, or until their successors are elected.
At a meeting at which a quorum is present, directors are elected by a
majority of the Common Shares entitled to vote for directors either in
person or by proxy. The rights of the holders of Common Shares to vote for
directors is subject to any rights of the holders of preferred stock to
elect directors. There are no cumulative voting rights. Directors may be
removed from office only for cause and with the vote of 66 2/3% of the
outstanding shares then entitled to vote at an election of directors.
Preemptive Rights
Holders of Common Shares do not have the right to subscribe for or
purchase, and they do not have any preemptive right in connection with any
part of any new or additional stock issuance of any class whatsoever, or of
securities convertible into any stock of any class whatsoever.
Redemption Rights
Common Shares are not redeemable.
Shareholder Liability
Under Missouri corporate law, none of our shareholders is personally
liable for any of our obligations solely as a result of being a
shareholder.
OUTSTANDING WARRANTS AND AGREEMENTS TO PURCHASE SHARES
We currently have two outstanding warrants. In 1996, we issued a
warrant to Westfield America Trust entitling it to purchase at any time,
and from time to time, in whole or in part, 6,246,096 Common Shares at an
exercise price of $16.01 per share in cash, adjusted for stock splits,
capital reconstructions and similar matters. This warrant expires on July
1, 2016. In May 1997, we issued a warrant to Westfield America Trust
entitling it to purchase at any time, and from time to time, in whole or in
part, 2,089,552 Common Shares at an exercise price of $15.00 per share in
cash, adjusted for stock splits, capital reconstructions and similar
matters. This warrant expires on May 21, 2017.
In addition, in May 1998, we entered into a stock subscription
agreement with Westfield America Trust pursuant to which we have the right
to sell, and Westfield America Trust has the obligation to purchase, A$465
million, which was approximately US$307.7 million as of June 30, 1999, of
Common Shares in three equal installments at a 5% discount to the then
prevailing market price of our Common Shares on June 29, 2001, June 28,
2002 and June 30, 2003.
OP UNITS AND OTHER PARTNERSHIP INTERESTS
The holders of 2,164,235 OP Units have redemption rights, which permit
them, in some circumstances, to exchange their OP Units for cash, subject
to our prior and independent right to acquire such OP Units for an
equivalent number of Common Shares, which number is subject to adjustment
as provided in the partnership agreement for the operating partnership. In
addition, the holders of 909,143 partnership interests in our affiliated
partnerships, may exchange such interests for:
o OP Units; or
o cash, subject to our prior and independent right to acquire
such partnership interests for an equivalent number of
Common Shares, which number is subject to adjustment as
provided in the governing partnership agreement.
LIQUIDITY OPTION
On June 23, 1999, we formed a joint venture with J.P. Morgan
Investment Management, Inc., acting for a group of pension trusts, which
effectively transferred a 50% interest in University Towne Centre and
Valley Fair. Concurrently, we sold a liquidity option to J.P. Morgan which
gives J.P. Morgan the right, under some circumstances, to exchange its
interest in the joint venture, or its interest in either center, for our
Common Shares. Upon exercise of the liquidity option, J.P. Morgan will
receive common shares equal to J.P. Morgan's share of the funds from
operations in the joint venture, or a center, as applicable, for the
preceding four calendar quarters divided by our per share funds from
operations for the same period. Using pro forma numbers for the previous
four calendar quarters, we could issue approximately 5,700,000 Common
Shares. The liquidity option is not exercisable for several years and
therefore, when it is exercised, if at all, the number of Common Shares to
be issued could be substantially different.
RESTRICTIONS ON OWNERSHIP AND TRANSFER
Because our board of directors believes that it is essential for us to
continue to qualify as a REIT, the board of directors has adopted, and our
shareholders have approved, provisions of the Articles of Incorporation
that restrict direct and indirect acquisition and ownership of our shares
of capital stock. See "Federal Income Tax Considerations -- Requirements
for Qualification."
Our Articles of Incorporation provide, subject to exceptions including
the higher limit applicable to the Lowy family, that individuals may not
own, or be deemed to own by virtue of various attribution and constructive
ownership provisions of the Internal Revenue Code, more than 5.5% of our
outstanding shares of capital stock, as measured by value. Our Articles of
Incorporation authorize the board of directors to increase the ownership
limit on a case-by-case basis if it receives satisfactory evidence based
upon the advice of our tax counsel or other evidence or undertakings
acceptable to it that such ownership will not then or in the future
jeopardize our status as a REIT. As a condition of increasing the
ownership limit in this way, the board of directors has the discretion to
require the applicant seeking to increase its ownership of our capital
stock to obtain opinions of counsel satisfactory to the board of directors,
or undertakings from the applicant concerning preserving our REIT status,
or both. The ownership restrictions will not apply if a majority of the
holders of our capital stock determine that it is no longer in our best
interest to attempt to qualify, or to continue to qualify, as a REIT.
Issuances or transfers that result in violations of the ownership
limit described above will be null and void to the intended transferee, and
the intended transferee will acquire no rights to the capital stock. In
addition, issuances or transfers that cause us to be beneficially owned by
fewer than 100 persons, or which would result in our being "closely held"
within the meaning of Section 856(h) of the Internal Revenue Code, or which
would otherwise result in our failing to qualify as a REIT, will be null
and void to the intended transferee, and the intended transferee will
acquire no rights to the capital stock. If shares of capital stock are
nevertheless transferred in violation of these rules or the ownership
limit, such shares will automatically be converted into Excess Shares and
transferred to one or more charitable trusts. In addition, if any other
event occurs which would result in any individual directly or indirectly
holding shares of capital stock in violation of the ownership limit, then
shares of capital stock directly or indirectly held by such individual
which result in the owner exceeding the ownership limit will be
automatically converted into Excess Shares and transferred to a charitable
trust. Shares transferred to a charitable trust will remain outstanding,
and the trustee of the trust will have all voting and dividend or
distribution rights pertaining to such Excess Shares. If we pay dividends
or distributions after violation of the ownership limit, but prior to
discovering such violation, the recipient of such dividend or distribution
must return the dividend or distribution to us and we will turn it over to
the trustee of the charitable trust. The trustee of such trust shall
transfer such Excess Shares to a person whose ownership of such Excess
Shares will not violate the ownership limit or other applicable
limitations. When the trustee sells such Excess Shares, the charitable
beneficiaries' interest terminates, the Excess Shares will automatically
convert into shares of capital stock of the same type and class as the
shares from which they were converted, and the sales proceeds will be paid,
first, to the original intended transferee. The sales proceeds received by
the original intended transferee will be the lesser of:
o such transferee's original purchase price (or the original
market value of such shares if the original transferee did not
give value for such shares); and
o the price received by the trustee.
Any remaining proceeds will be paid to the charitable beneficiary. In
addition, we may, for a 90-day period, designate the person to whom the
trustee will sell the capital stock held in the charitable trust. The 90-
day period commences on the date of the transfer that violated the
foregoing provisions and that gave rise to the issuance of Excess Shares,
or the date that we first become aware of such transfer, whichever is
later.
All certificates representing Common Shares bear a legend referring to
the restrictions described above.
We have the right to require each shareholder to disclose to us in
writing such information concerning the shareholder's direct, indirect and
constructive ownership of shares as our board of directors deems necessary
to comply with the provisions of the Internal Revenue Code applicable to a
REIT or to comply with the requirements of any taxing authority or
governmental agency.
The ownership limitations may have the effect of precluding
acquisition of control of us by a third party so long as our board of
directors and the shareholders determine that maintenance of REIT status is
in our best interest.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Shares is American
Stock Transfer & Trust Company.
LISTING
Our Common Shares are listed on the New York Stock Exchange under the
symbol "WEA."
PROVISIONS OF OUR
ARTICLES OF INCORPORATION AND BY-LAWS AND OF MISSOURI LAW
Provisions in our Articles of Incorporation and By-Laws and the GBCL,
as well as the substantial influence of Westfield America Trust and
Westfield Holdings, both principal shareholders of us, may delay or make
more difficult unsolicited acquisitions of us or changes in our control.
We believe that such provisions will enable us to develop our business in a
manner that will foster long-term growth without disruption caused by the
threat of a takeover that our board of directors does not consider to be in
our best interests and our shareholders' best interests. These provisions
could discourage third parties from making proposals involving an
unsolicited acquisition of us or change of our control, although
shareholders might consider such proposals, if made, desirable. Such
provisions may also make it more difficult for third parties to alter our
current management structure without the concurrence of our board of
directors. These provisions include, among others:
o the ownership limit;
o the availability of capital stock for issuance from time to
time at the discretion of our board of directors;
o a classified board of directors;
o the inability of the shareholders to take action by written
consent unless such consent is unanimous;
o prohibitions against shareholders calling a special meeting
of shareholders;
o requirements for advance notice for raising business or
making nominations at shareholders' meetings; and
o additional requirements for some business combination
transactions.
The following is a description of the material provisions of our
Articles of Incorporation, the By-Laws and the GBCL which may make an
unsolicited change of our control more difficult. You should also read the
Articles of Incorporation and By-Laws we have filed as exhibits to the
registration statement of which this prospectus is a part and the GBCL.
OWNERSHIP LIMIT
The Articles of Incorporation contain the ownership limit described
above which may discourage a change in our control, and may also deter
tender offers for our Common Shares that might otherwise be advantageous to
holders of the Common Shares. The ownership limit may limit the
opportunities of holders to receive a premium for their Common Shares that
might otherwise exist if an investor were attempting to assemble a block of
shares or otherwise effect a change in our control.
ADDITIONAL CLASSES AND SERIES OF PREFERRED STOCK
Our board of directors can issue additional authorized but unissued
Common Shares and establish one or more series of preferred stock. Our
board of directors can issue such Common Shares and preferred stock,
without any further vote or action by the shareholders, unless such action
is required by applicable law or the rules of any stock exchange or
automated quotation system on which our securities are listed. The
issuance of additional capital stock may delay, defer or prevent a change
in our control. The issuance of additional series of preferred stock with
voting or conversion rights may adversely affect the voting power of
holders of Common Shares. The ability of the board of directors to issue
additional capital stock, while providing flexibility in connection with
possible acquisitions and other corporate purposes, could make it more
difficult for a third party to acquire, or could discourage a third party
from acquiring, a majority of our outstanding voting stock.
SIZE OF BOARD, ELECTION OF DIRECTORS, CLASSIFIED BOARD, REMOVAL OF
DIRECTORS AND FILLING VACANCIES
Our Articles of Incorporation and By-Laws provide that our board of
directors consists of three classes as nearly equal in number as possible,
with directors serving three-year terms of office that expire at different
times in annual succession. The Articles of Incorporation provide that
directors may not be removed from office prior to the expiration of their
term without cause and the vote of 66 2/3% of the outstanding shares then
entitled to vote at an election of directors. A classified board makes it
more difficult for shareholders to change a majority of the directors.
The Articles of Incorporation and the By-Laws limit the total number
of directors to 14 plus any additional directors that the holders of
Preferred Shares may have the right to elect, and provide that a vote by a
majority of the directors then in office may fill any vacancy or any newly
created directorships resulting from any increase in the authorized number
of directors. Accordingly, the board of directors may prevent any
shareholder from obtaining majority representation on the board of
directors by increasing the size of the board and filling the newly created
directorships with its own nominees.
LIMITATIONS ON SHAREHOLDER ACTION BY WRITTEN CONSENT; ABILITY TO CALL
SPECIAL MEETINGS
Our Articles of Incorporation and By-Laws provide that an action by
written consent of shareholders instead of a meeting must be unanimous, as
the GBCL requires. Our By-Laws provide that only the chairman of our board
of directors, any president or a resolution of our board of directors can
call special shareholders' meetings, unless a statute or our Articles of
Incorporation provide otherwise. Furthermore, the By-Laws provide that
only business that is specified in the notice of any special meeting may
come before such meeting, as the GBCL requires.
These provisions may adversely affect the ability of shareholders to
influence our governance. These provisions also may adversely affect the
possibility of shareholders receiving a premium above market price for
their securities from a potential acquirer that is hostile to management.
ADVANCE NOTICE FOR RAISING BUSINESS OR MAKING NOMINATIONS AT MEETINGS
The By-Laws establish an advance notice procedure that shareholders
must follow in order to make shareholder proposals at an annual
shareholders' meeting. Shareholders must also follow this advance notice
procedure in order to make nominations of candidates for election as
directors at meetings at which directors are to be elected. The only
business that we will conduct at a shareholders' meeting is that business
that our board of directors has raised or directed, and business that a
shareholder has given to our secretary on time and in proper form. The
only candidates that will be eligible for election as directors will be
those candidates nominated by or at the direction of our board of directors
and those candidates nominated by any shareholder that has given notice of
such nomination on time and in proper form to our secretary.
BUSINESS COMBINATION AND CONTROL SHARE ACQUISITION STATUTES AND RELATED
PROVISIONS
We are subject to Missouri's Business Combination Statute and the
Control Share Acquisition Statute.
The Business Combination Statute restricts some "business
combinations" between a corporation and an "interested shareholder," or
affiliates of the interested shareholder, for a period of five years after
the date of the transaction in which the person became an interested
shareholder, unless such transaction is approved by the board of directors
on or before the date the interested shareholder obtains such status.
This statute also prohibits business combinations after the five-year
period following the transaction in which the person became an interested
shareholder unless:
o the transaction is approved by the board of directors prior
to the date the interested shareholder obtains such status;
o the business combination is approved by the board of
directors prior to the date the interested shareholder
obtains such status;
o the holders of a majority of the outstanding stock, other
than the stock owned by the interested shareholder, approve
the business combination; or
o the business combination satisfies detailed fairness and
procedural requirements.
A "business combination" includes a merger or consolidation, some
sales, leases, exchanges, pledges and similar dispositions of corporate
assets or stock and some reclassifications and recapitalizations. An
"interested shareholder" includes any person or entity which beneficially
owns or controls 20% or more of the outstanding voting shares of the
corporation.
Because there may be circumstances in which the Business Combination
Statute may not apply to us, our Articles of Incorporation contain a
similar provision restricting business combinations for a five-year period
after a person becomes an interested shareholder unless the business
combination or the transaction in which the person becomes an interested
shareholder was approved by our board of directors on or before the date of
the transaction by which the person became an interested shareholder, or if
such person was an interested shareholder on the date this provision was
adopted, by our shareholders. As with the Business Combination Statute,
our Articles of Incorporation prohibit business combinations after the
five-year period following the transaction in which the person became an
interested shareholder unless the same conditions set forth under the
Business Combination Statute are satisfied.
These provisions may make it more difficult for a 20% beneficial owner
to effect transactions with us and may encourage persons that seek to
acquire us to negotiate with our board of directors prior to acquiring a
20% interest. It is possible that such a provision could make it more
difficult to accomplish a transaction which shareholders may otherwise deem
to be in their best interest.
The GBCL also contains a Control Share Acquisition Statute which may
limit the rights of a shareholder to vote some or all of its shares. A
shareholder whose acquisition of shares results in its having the voting
power, when added to the shares previously held by it, to exercise or
direct the exercise of more than 20% of the outstanding stock of the
corporation, will lose the right to vote some or all of its shares unless
the shareholders approve the acquisition of such shares. In order for the
shareholders to grant approval, the acquiring shareholder must meet
disclosure requirements specified in the GBCL. In addition, a majority of
the outstanding voting shares, as determined before the acquisition, must
approve the acquisition. Furthermore, a majority of the outstanding voting
shares, as determined after the acquisition, but excluding shares held by
the acquiring shareholder, employee directors of the corporation and
officers of the corporation, must approve the acquisition.
Not all acquisitions of shares constitute control share acquisitions.
The following acquisitions do not constitute control share acquisitions:
o good faith gifts;
o transfers in accordance with wills;
o purchases made in connection with an issuance by us;
o mergers involving us which satisfy the other requirements of
the GBCL;
o transactions with a person who owned a majority of our
voting power within the prior year; or
o purchases from a person who previously satisfied the
requirements of the Control Share Acquisition Statute, so
long as the acquiring person does not have voting power
after the ownership in a different ownership range than the
selling shareholder (these ownership ranges are (1) 20% to
33 1/3%, (2) 33 1/3% to less than majority and (3) greater
than majority)
TERMINATION OF REIT STATUS
Our Articles of Incorporation permit our directors, with the approval
of both a majority of the holders of the Common Shares and a majority of
the holders of the Series A and Series B Preferred Shares (and the trustee
of the excess Common Shares and the excess Series A and Series B Preferred
Shares), to terminate our status as a REIT under the Internal Revenue Code
at any time.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Our Articles of Incorporation contain provisions indemnifying our
directors and officers to the maximum extent permitted by Missouri law.
PROVISIONS OF THE PARTNERSHIP
AGREEMENT FOR THE OPERATING PARTNERSHIP
Provisions in the First Amended and Restated Agreement of Limited
Partnership of Westfield America Limited Partnership, dated as of August 3,
1998, as amended, may also delay or make more difficult unsolicited
acquisitions of us or changes in our control. We serve as the general
partner of the operating partnership. We believe that such provisions will
enable us and the operating partnership to develop our businesses in a
manner that will foster long-term growth without disruption caused by the
threat of a takeover that our board of directors does not consider to be in
our best interests, our shareholders' best interests or in the best
interests of limited partners who hold partnership interests in the
operating partnership or other investors who hold OP Units. These
provisions could discourage third parties from making proposals involving
an unsolicited acquisition of us or change of our control, although some
shareholders might consider such proposals, if made, desirable. These
provisions could also discourage third parties from attempting to effect an
unsolicited acquisition of us or change of our control by attempting to
acquire control of the operating partnership, although shareholders might
consider such attempts, if made, desirable. Such provisions may also make
it more difficult for third parties to alter the management structure of
the operating partnership without the concurrence of our board of
directors. These provisions include, among others:
o management of the operating partnership by us;
o redemption rights of qualifying parties;
o transfer restrictions; and
o ability of the general partner to amend the partnership
agreement without the consent of the limited partners and
investors.
MANAGEMENT OF THE OPERATING PARTNERSHIP BY US
Except as otherwise expressly provided in the partnership agreement or
as delegated or provided to an additional partner by us or any successor
general partner pursuant to the partnership agreement, all management
powers over the business and affairs of the operating partnership are
exclusively vested in us. No limited partner or investor of the operating
partnership or any other person to whom one or more partnership interests
or OP Units have been transferred may, in its capacity as a limited partner
or investor, take part in the operations, management or control of the
operating partnership's business, transact any business in the operating
partnership's name or have the power to sign documents for or otherwise
bind the operating partnership. A general partner may not be removed by
the limited partners or investors with or without cause, except with our
consent. In addition to the powers granted a general partner of a limited
partnership under applicable law or that are granted to the general partner
under any other provision of the partnership agreement , we, subject to the
other provisions of the partnership agreement, have full power and
authority to do all things deemed necessary or desirable by us to conduct
the business of the operating partnership, to exercise all powers of the
operating partnership and to effectuate the purposes of the operating
partnership. The operating partnership may incur debt or enter into other
similar credit, guarantee, financing or refinancing arrangements for any
purpose, including, without limitation, in connection with any acquisition
of properties, upon such terms as we determine to be appropriate. We are
authorized to execute, deliver and perform some agreements and transactions
on behalf of the operating partnership without any further act, approval or
vote of the limited partners or the investors.
Restrictions on Our Authority
We may not take any action in contravention of the partnership
agreement. We may not, without the prior consent of the limited partners,
undertake, on behalf of the operating partnership, any of the following
actions or enter into any transaction that would have the effect of such
actions:
o amend, modify or terminate the partnership agreement, except
as provided in the partnership agreement; for a description
of the provisions of the partnership agreement permitting us
to amend the partnership agreement without the consent of
the limited partners see "-Amendment of the Partnership
Agreement;"
o make a general assignment for the benefit of creditors or
appoint or acquiesce in the appointment of a custodian,
receiver or trustee for all or any part of the assets of the
operating partnership;
o institute any proceeding for bankruptcy on behalf of the
operating partnership; or
o approve or acquiesce to the transfer of our partnership
interest or admit into the operating partnership any
additional or successor general partners, subject to the
exceptions discussed in "-Transfers and Withdrawals--
Restrictions on Us."
In addition, we may not amend the partnership agreement or take any
action on behalf of the operating partnership, without the prior consent of
each limited partner and investor adversely affected by such amendment or
action, if such amendment or action would:
o convert a limited partner into a general partner or convert
an investor into a partner for state law purposes;
o modify the limited liability of a limited partner or an
investor;
o alter the rights of any limited partner or investor to
receive the distributions to which such limited partner or
investor is entitled, or alter the allocations specified in
the partnership agreement; or
o alter or modify the redemption rights or related definitions
as provided in the partnership agreement.
However, we may make such an amendment or take such an action, if
approved by a majority in interest of the partners or investors holding the
affected class or series of partnership interests or OP Units.
Additional Limited Partners and Investors
We are authorized to admit additional limited partners and investors
to the operating partnership from time to time, on terms and conditions and
for such capital contributions as may be established by us in our sole and
absolute discretion. The net capital contribution need not be equal for
all partners or investors. No action or consent by the limited partners or
investors is required in connection with the admission of any additional
limited partner or investors. We are expressly authorized to cause the
operating partnership to issue additional partnership interests and rights:
o upon the conversion, redemption or exchange of any debt,
partnership interests, OP Units or other securities issued
by the operating partnership;
o for less than fair market value, so long as the we conclude
in good faith that such issuance is in the best interests of
us and the operating partnership; and
o in connection with any merger of any other entity into the
operating partnership if the applicable merger agreement
provides that persons are to receive partnership interests
or OP Units in exchange for their interests in the entity
merging into the operating partnership.
Subject to Delaware law, any additional partnership interests or OP Units
may be issued in one or more classes, or one or more series of any of such
classes, with such designations, preferences and relative, participating,
optional or other special rights, powers and duties as we shall determine,
in our sole and absolute discretion without the approval of any limited
partner, investor or any other person. Without limiting the generality of
the foregoing, we have authority to specify:
o the allocations of items of partnership income, gain, loss,
deduction and credit to each such class or series of
partnership interests and OP Units;
o the right of each such class or series of partnership
interests and OP Units to share in distributions;
o the rights of each such class or series of partnership
interests and OP Units upon dissolution and liquidation of
the operating partnership;
o the voting rights, if any, of each such class or series of
partnership interests and OP Units; and
o the conversion, redemption or exchange rights applicable to
each such class or series of partnership interests and OP
Units.
No person may be admitted as an additional limited partner or investor
without our consent which consent may be given or withheld in our sole and
absolute discretion.
REDEMPTION RIGHTS OF QUALIFYING PARTIES
After the first anniversary of becoming a holder of common partnership
interests or OP Units, each limited partner or investor, as applicable, and
some assignees have the right, subject to the terms and conditions set
forth in the partnership agreement, to require the operating partnership to
redeem all or a portion of the common partnership interests or OP Units
held by such party in exchange for a cash amount equal to the value of our
Common Shares, as the operating partnership may determine. The operating
partnership's obligation to effect a redemption, however, will not arise or
be binding against the operating partnership unless and until we decline or
fail to exercise our prior and independent right to purchase such common
partnership interests or OP Units for Common Shares pursuant to the
partnership agreement.
On or before the close of business on the fifth business day after a
partner or investor, as applicable gives us a notice of redemption, we may,
in our sole and absolute discretion but subject to the restrictions on the
ownership of our stock imposed under our Articles of Incorporation and the
transfer restrictions and other limitations set forth in our Articles of
Incorporation, acquire some or all of the tendered common partnership
interests or OP Units from the tendering party in exchange for Common
Shares, based on an exchange ratio of one Common Share for each common
partnership interest or OP Unit, subject to adjustment as provided in the
partnership agreement. The partnership agreement does not obligate us or
any general partner to register, qualify or list any Common Shares issued
in exchange for common partnership interests or OP Units with the SEC, with
any state securities commissioner, department or agency, or with any stock
exchange. Common Shares issued in exchange for common partnership
interests or OP Units pursuant to the partnership agreement may contain
legends regarding restrictions under the Securities Act and applicable
state securities laws as we in good faith determine to be necessary or
advisable in order to ensure compliance with securities laws.
TRANSFERS AND WITHDRAWALS
Restrictions on Transfer
The partnership agreement restricts the transferability of partnership
interests and OP Units. Any transfer or purported transfer of a
partnership interest or OP Unit not made in accordance with the partnership
agreement will not be valid. Until the expiration of one year from the
date on which a partner or investor acquired partnership interests or OP
Units, as applicable, such partner or investor generally may not transfer
all or any portion of its partnership interests or OP Units, as applicable,
to any transferee.
After the expiration of one year from the date on which a partner or
investor acquired partnership interests or OP Units, as applicable, such
partner or investor has the right to transfer all or any portion of its
partnership interests or OP Units, as applicable, to any person that is an
"accredited investor," subject to the satisfaction of conditions specified
in the partnership agreement, including our right of first refusal. For
purposes of this transfer restriction, "accredited investor" shall have the
meaning set forth in Rule 501 promulgated under the Securities Act. It is
a condition to any transfer that the transferee assumes by operation of law
or express agreement all of the obligations of the transferor limited
partner or investor under the partnership agreement with respect to such
partnership interests or OP Units, and no such transfer will relieve the
transferor partner or investor of its obligations under the partnership
agreement without our approval, in our sole and absolute discretion. This
transfer restriction does not apply to a statutory merger or consolidation
pursuant to which all obligations and liabilities of the transferor partner
or investor are assumed by a successor corporation by operation of law.
In connection with any transfer of partnership interests or OP Units,
we will have the right to receive an opinion of counsel reasonably
satisfactory to us to the effect that the proposed transfer may be effected
without registration under the Securities Act, and will not otherwise
violate any Federal or state securities laws or regulations applicable to
the operating partnership or the partnership interests or OP Units
transferred.
No transfer by a limited partner or investor of its partnership
interests or OP Units, including any redemption or any acquisition of
partnership interests or OP Units by us or by the operating partnership,
may be made to any person if:
o in the opinion of legal counsel , it would result in the
operating partnership being treated as an association
taxable as a corporation; or
o such transfer is effectuated through an "established
securities market" or a "secondary market (or the
substantial equivalent thereof)" within the meaning of
Internal Revenue Code Section 7704.
Substituted Limited Partners
No limited partner will have the right to substitute a transferee as a
limited partner in its place. A transferee of the interest of a limited
partner may be admitted as a substituted limited partner only with our
consent, which consent may be given or withheld in our sole and absolute
discretion. If we in our sole and absolute discretion, do not consent to
the admission of any permitted transferee as a substituted limited partner,
such transferee will be considered an assignee for purposes of the
partnership agreement. An assignee will be entitled to all the rights of
an assignee of a limited partnership interest under the Delaware Revised
Uniform Limited Partnership Act, including the right to receive
distributions from the operating partnership and the share of net income,
net losses and other items of income, gain, loss, deduction and credit of
the operating partnership attributable to the partnership interests
assigned to such transferee and the rights to transfer the partnership
interests provided in the partnership agreement, but will not be deemed to
be a holder of partnership interests for any other purpose under the
partnership agreement, and will not be entitled to effect a consent or vote
with respect to such partnership interests on any matter presented to the
limited partners for approval. The right to consent or vote, to the extent
provided in the partnership agreement or under the Delaware Limited
Partnership Act, will fully remain with the transferor limited partner.
Restrictions on Us
We may not transfer any of our general partner interest or withdraw
from managing the operating partnership unless:
o the limited partners and a majority in interest of the
investors consent; or
o immediately after a merger of us as general partner into
another entity, substantially all of the assets of the
surviving entity, other than the general partnership
interest in the operating partnership held by the general
partner, are contributed to the operating partnership as a
capital contribution in exchange for partnership interests
or OP Units.
AMENDMENT OF THE PARTNERSHIP AGREEMENT
By the General Partner Without the Consent of the Limited Partners or
the Investors
We have the power, without the consent of the limited partners or the
investors, to amend the partnership agreement as may be required to
facilitate or implement any of the following purposes:
o to add to our obligations as general partner or surrender
any right or power granted to us or any of our affiliates
for the benefit of the limited partners or the investors;
o to reflect the admission, substitution or withdrawal of
partners or the termination of the operating partnership in
accordance with the partnership agreement;
o to reflect a change that is of an inconsequential nature and
does not adversely affect the limited partners or the
investors in any material respect, or to cure any ambiguity,
correct or supplement any provision in the partnership
agreement not inconsistent with law or with other provisions
of the partnership agreement, or make other changes with
respect to matters arising under the partnership agreement
that will not be inconsistent with law or with the
provisions of the partnership agreement;
o to satisfy any requirements, conditions or guidelines
contained in any order, directive, opinion, ruling or
regulation of a Federal or state agency or contained in
Federal or state law;
o to reflect such changes as are reasonably necessary for us
to maintain our status as a REIT; and
o to modify the manner in which capital accounts are computed
to the extent set forth in the definition of "Capital
Account" in the partnership agreement or contemplated by the
Internal Revenue Code or the Treasury Regulations.
With the Consent of the Limited Partners and Investors
Amendments to the partnership agreement may be proposed only by us.
Following such proposal, we will submit to the partners and investors any
proposed amendment that, pursuant to the terms of the partnership
agreement, requires the consent of the partners holding partnership
interests and investors holding OP Units entitled to vote at the meeting.
We will seek the written consent of the partners and investors, if
applicable, on the proposed amendment or will call a meeting to vote on the
proposed amendment and to transact any other business that we may deem
appropriate.
PROCEDURES FOR ACTIONS AND CONSENTS OF PARTNERS
Meetings of the partners may be called only by us. Notice of any such
meeting will be given to all partners not less than seven days nor more
than thirty days prior to the date of such meeting. Partners may vote in
person or by proxy at such meeting. Each meeting of partners will be
conducted by us or such other person as we may appoint pursuant to such
rules for the conduct of the meeting as we or such other person deems
appropriate in its sole and absolute discretion. Whenever the vote or
consent of partners is permitted or required under the partnership
agreement, such vote or consent may be given at a meeting of partners or
may be given by written consent. Any action required or permitted to be
taken at a meeting of the partners may be taken without a meeting if a
written consent setting forth the action so taken is signed by partners
holding a majority of outstanding partnership interests (or such other
percentage as is expressly required by the partnership agreement for the
action in question).
DISSOLUTION
The operating partnership will dissolve, and its affairs will be wound
up, upon the first to occur of any of the following:
o December 31, 2097;
o an event of withdrawal, as defined in the Delaware Limited
Partnership Act, including, without limitation, bankruptcy,
of us unless, within ninety days after the withdrawal, a
majority in interest of the partners agree in writing, in
their sole and absolute discretion, to continue the business
of the operating partnership and to the appointment,
effective as of the date of withdrawal, of a successor
general partner;
o an election to dissolve the operating partnership made by
the general partner in its sole and absolute discretion,
with or without the consent of the partners;
o the entry of a decree of judicial dissolution of the
operating partnership pursuant to the provisions of the
Delaware Limited Partnership Act;
o the occurrence of a terminating capital transaction; or
o the redemption, or acquisition by us, of all partnership
interests other than partnership interests held by us and
all OP Units.
Upon dissolution, we, as general partner, or any liquidator will
proceed to liquidate the assets of the operating partnership and apply the
proceeds from such liquidation in the order of priority set forth in the
partnership agreement.
FEDERAL INCOME TAX CONSIDERATIONS
The following summary of certain Federal income tax considerations
regarding an investment in the Shares is based on current law, is for
general information only and is not tax advice. This discussion does not
purport to deal with all aspects of taxation that may be relevant to
particular investors in light of their personal investment or tax
circumstances, or, except to the limited extent discussed under ''--
Taxation of Tax-Exempt Holders '' and ''--Taxation of Foreign Holders,'' to
certain types of investors (including insurance companies, tax-exempt
organizations, financial institutions or broker-dealers, foreign
corporations and persons who are not citizens or residents of the United
States) that are subject to special treatment under the Federal income tax
laws, nor does it give a detailed discussion of any state, local or foreign
tax considerations. For purposes of this discussion, the term ''Holder''
means any person who purchases Shares, the term "Series C Shares" means the
Series C Preferred Shares, the Series C-1 Preferred Shares, and the Series
C-2 Preferred Shares, and the term "Shares" means the Series C Shares and
the Common Shares into which they convert.
EACH PROSPECTIVE PURCHASER SHOULD CONSULT WITH A TAX ADVISOR REGARDING
THE SPECIFIC TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND SALE OF THE
SHARES AND OF OUR ELECTION TO BE TAXED AS A REAL ESTATE INVESTMENT TRUST
INCLUDING THE FEDERAL, STATE, LOCAL, AND FOREIGN INCOME AND OTHER TAX
CONSEQUENCES OF SUCH PURCHASE, OWNERSHIP, SALE AND ELECTION, AND OF
POTENTIAL CHANGES IN APPLICABLE TAX LAWS.
TAXATION OF THE COMPANY
General
The REIT provisions of the Internal Revenue Code are highly technical
and complex. The following discussion sets forth the material aspects of
the provisions of the Code that govern the Federal income tax treatment of
a REIT and its shareholders. This summary is based on, and qualified in
its entirety by, current U.S. law, including the applicable Code
provisions, rules and regulations promulgated thereunder, and
administrative and judicial interpretations thereof, all of which are
subject to change which may apply retroactively.
Opinion of Counsel
We elected to be taxed as a REIT under the Code commencing with our
taxable year ending December 31, 1994, and we intend to continue to operate
in a manner consistent with our REIT election and all of the rules
applicable to a REIT. Skadden, Arps, Slate, Meagher & Flom LLP has issued
its opinion that, commencing with the taxable year ended December 31, 1994,
we were organized in conformity with the requirements for qualification as
a REIT and that our actual method of operation has enabled, and our
proposed method of operation will enable, us to meet the requirements for
qualification and taxation as a REIT.
The foregoing opinion is based and conditioned upon certain assumptions,
representations and covenants made by us as of the date thereof regarding
factual matters. The opinion is expressed as of August 23, 1999, and
Skadden, Arps, Slate, Meagher & Flom LLP has no obligation to advise
holders of the Shares of any subsequent change in the matters stated,
represented or assumed or any subsequent change in the applicable law. Our
qualification as a REIT depends on the qualification of Westland Properties
as a REIT during the period that Westland Properties was not wholly owned
by us, as well as the continuing qualification of subsidiary REITs in which
we own an interest. Moreover, such qualification and taxation as a REIT
depends upon our having met and continuing to meet through, among other
things, actual annual operating results, distribution levels and diversity
of stock ownership, the various qualification tests imposed under the Code
as discussed below, the results of which will not be reviewed by Skadden,
Arps, Slate, Meagher & Flom LLP. Accordingly, no assurance can be given
that the actual results of our operations for any particular taxable year
have satisfied or will satisfy such requirements. See ''--Failure to
Qualify.'' An opinion of counsel is not binding on the IRS, and no
assurance can be given that the IRS will not challenge our eligibility for
taxation as a REIT.
Taxation of the Company
If we continue to qualify for taxation as a REIT, we generally will not
be subject to Federal corporate income tax on our net income that is
currently distributed to Holders. This treatment substantially eliminates
the ''double taxation'' (at the corporate and shareholder levels) that
generally results from investment in a corporation. However, we will be
subject to Federal income tax as follows: First, we will be taxed at
regular corporate rates on any undistributed REIT taxable income, including
undistributed net capital gains. Second, under certain circumstances, we
may be subject to the ''alternative minimum tax'' on our items of tax
preference. Third, if we have net income from prohibited transactions
(which are, in general, certain sales or other dispositions of property,
other than certain foreclosure property, held primarily for sale to
customers in the ordinary course of business), such net income will be
subject to a 100% tax. Fourth, if we should fail to satisfy the 75% gross
income test or the 95% gross income test (as discussed below), but have
nonetheless maintained our qualification as a REIT because certain other
requirements have been met, we will be subject to a 100% tax on an amount
equal to (1) the gross income attributable to the greater of the amount by
which we fail the 75% or 95% test multiplied by (2) a fraction intended to
reflect our profitability. Fifth, if we should fail to distribute during
each calendar year at least the sum of (1) 85% of our REIT ordinary income
for such year, (2) 95% of our REIT capital gain net income for such year
(other than certain long-term capital gain net income which we elect to
retain and pay tax on), and (3) any undistributed taxable income from prior
periods, we would be subjected to a 4% excise tax on the excess of such
required distribution over the amounts actually distributed. Sixth, if,
during the ten-year period beginning on the first day of the first taxable
year for which we qualified as a REIT, we recognize gain on the disposition
of any property (including any partnership interest) held by us or any
partnership in which an interest was held as of the beginning of such ten-
year period, then, under IRS regulations that have not yet been
promulgated, we will be subject to tax imposed at the highest corporate
rate on the amount of gain equal to the excess of (1) the fair market value
of such property as of the beginning of such ten-year period over (2) our
or the partnership's adjusted tax basis in such property at the beginning
of such ten-year period. Seventh, if we acquire any asset from a C
corporation (i.e., generally a corporation subject to full corporate level
tax) in a transaction in which the adjusted tax basis of the asset in our
hands is determined by reference to the adjusted tax basis of the asset in
the hands of the C corporation, and we recognize gain on the disposition of
such asset during the ten-year period beginning on the date on which we
acquired such asset, then we will be subject to a tax imposed at the
highest corporate rate on the amount of gain equal to the excess of (1) the
fair market value of such property at the beginning of such ten-year period
over (2) our adjusted tax basis in such property at the beginning of such
ten-year period. The results described above with respect to the
recognition of gain on assets acquired from a C corporation assume that we
will make an election pursuant to IRS Notice 88-19 and that the
availability or nature of such election is not modified as proposed in
President Clinton's 1999 Federal Budget Proposal. In addition, we could
also be subject to tax in certain situations and on certain transactions
not presently contemplated.
Requirements for Qualification
The Code defines a REIT as a corporation, trust or association (1) that
is managed by one or more trustees or directors; (2) the beneficial
ownership of which is evidenced by transferable shares, or by transferable
certificates of beneficial interest; (3) which would be taxable as a
domestic corporation, but for the special Code provisions applicable to
REITs; (4) that is neither a financial institution nor an insurance company
subject to certain provisions of the Code; (5) the beneficial ownership of
which is held by 100 or more persons; (6) in which not more that 50% in
value of the outstanding stock is owned, directly or indirectly, by five or
fewer individuals (as defined in the Code to include certain entities); (7)
that makes an election to be a REIT (or has made such election for a
previous taxable year) and satisfies all relevant filing and other
administrative requirements established by the IRS that must be met in
order to elect and maintain REIT status; (8) that uses a calendar year for
Federal income tax purposes and complies with the record keeping
requirements of the Code and Treasury Regulations promulgated thereunder;
and (9) which meets certain other tests described below (including with
respect to the nature of its income and assets). The Code provides that
conditions (1) through (4) must be met during the entire taxable year, that
condition (5) must be met during at least 335 days of a taxable year of 12
months, or during a proportionate part of a taxable year of less than 12
months, and that condition (6) must be met during the last half of each
taxable year. We believe that we satisfy all of the conditions set forth
above. In order to comply with the share ownership tests described in
conditions (5) and (6) above, our Articles of Incorporation provide certain
restrictions on the transfer of our capital stock to prevent concentration
of stock ownership. These restrictions may not ensure that we will, in all
cases, be able to satisfy the share ownership tests set forth above. If a
REIT complies with all the requirements for ascertaining the ownership of
its outstanding stock in a taxable year and does not know or have reason to
know that it violated the share ownership tests set forth above, the REIT
will be deemed to have complied with such tests for such taxable year.
To monitor our compliance with the share ownership requirements imposed
on REITs, we are required to maintain records regarding the actual
ownership of our shares. To do so, we must demand written statements each
year from the record holders of certain percentages of our 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 distributions). A
list of those persons failing or refusing to comply with this demand must
be maintained as part of our records. A Holder who fails or refuses to
comply with the demand must submit a statement with its U.S. Federal
income tax return disclosing the actual ownership of the shares and certain
other information. We will not incur a penalty for failure to comply with
the foregoing requirements to the extent that such failure is due to
reasonable cause and not to willful neglect on our part.
Ownership of Partnership Interests
In the case of a REIT that is a partner in a partnership, regulations
provide that the REIT is deemed to own its proportionate share of the
partnership's assets and to earn its proportionate share of the
partnership's income. In addition, the assets and gross income of the
partnership retain the same character in the hands of the REIT for purposes
of the gross income and asset tests applicable to REITs as described below.
Thus, our proportionate share of the assets, liabilities and items of
income of the partnership will be treated as our assets, liabilities and
items of income for purposes of applying the REIT requirements described
herein. A summary of certain rules governing the Federal income taxation
of partnerships and their partners is provided below in ''--Tax Aspects of
Our Investments in Partnerships.''
Income Tests
In order to maintain qualification as a REIT, we annually must satisfy
two gross income requirements. First, at least 75% of our gross income
(excluding gross income from "prohibited transactions," i.e., certain sales
of property held primarily for sale to customers in the ordinary course of
business) for each taxable year must be derived directly or indirectly from
investments relating to real property or mortgages on real property
(including ''rents from real property'' and interest on obligations secured
by mortgages on real property or on interest in real property, and
distributions or other distributions on a gain from the sale of stock in
other REITs) or from certain types of temporary investments. Second, at
least 95% of our gross income (excluding gross income from prohibited
transactions) for each taxable year must be derived from such real property
investments, and from other distributions, interest and gain from the sale
or disposition of stock or securities (or from any combination of the
foregoing). Income earned on liability hedges against our indebtedness,
such as option, futures, and forward contracts will qualify for the 95%
test (but not the 75% test). In certain cases, Treasury Regulations treat
a variable rate and/or foreign currency debt instrument and a liability
and/or currency hedge as a synthetic debt instrument for all purposes of
the Code. If a hedge entered into by us is subject to these Treasury
Regulations, income earned on the hedge will operate to reduce our interest
expense, and, therefore such income will not affect our compliance with
either the 75% or 95% tests.
Rents we receive from the tenants of real property owned directly,
through partnerships (including limited liability companies treated as
partnerships for Federal income tax purposes) in which we have a direct or
indirect ownership interest (collectively, the ''Partnerships''), or
through its wholly-owned subsidiary corporations (''qualified REIT
subsidiaries,'' as described below) will qualify as ''rents from real
property'' in satisfying the gross income requirements described above only
if several conditions are met, including the following. If rent
attributable to personal property leased in connection with a lease of real
property is greater than 15% of the total rent received under the lease,
then the portion of rent attributable to such personal property will not
qualify as ''rents from real property.'' Moreover, for rents received to
qualify as ''rents from real property,'' the REIT generally must not
operate or manage the property or furnish or render services to the tenants
of such property, other than through an ''independent contractor'' from
which the REIT derives no revenue. However, we and our affiliates may, and
do, directly perform services that are ''usually or customarily rendered''
in connection with the rental of space for occupancy only and are not
otherwise considered rendered to the occupant of the property. In
addition, we and our affiliates may provide non-customary services to
tenants of its properties without disqualifying all of the rent from the
property if the payment for such services does not exceed 1% of the total
gross income from the property. For purposes of this test, the income
received from such non-customary services is deemed to be at least 150% of
the direct cost of providing the services. Because certain properties are
managed by third parties, the ability to treat amounts from such property
as ''rents from real property'' will be dependent on the actions of others
and will not be within our control. In addition, we generally may not, and
will not, charge rent that is based in whole or in part on the income or
profits of any person, except for rents that are based on a percentage of
the tenant's gross receipts or sales. Finally, rents derived from tenants
that are at least 10% owned, directly or constructively, by us does not
qualify as ''rents from real property'' for purposes of the gross income
requirements. While we regularly attempt to monitor such requirements and
diligently attempt to comply with them, no assurance can be given that we
will not realize income that does not qualify as ''rents from real
property,'' and that such amounts, when combined with other nonqualifying
income, may exceed 5% of our taxable income and thus disqualify us as a
REIT.
We have derived and continue to derive income from certain sources that
are not described above and that generally do not constitute qualifying
income for purposes of the gross income requirements. While no assurance
can be given that the IRS would not successfully assert otherwise, we
believe that the aggregate amount of such income in any taxable year will
not exceed the limits on nonqualifying income under the gross income tests.
If we fail to satisfy one or both of the 75% or 95% gross income tests
for any taxable year, we may nevertheless qualify as a REIT for such year
if we are entitled to relief under certain provisions of the Code. These
relief provisions generally will be available if our failure to meet such
tests was due to reasonable cause and not due to willful neglect, we attach
a schedule of the sources of our income to its return, and any incorrect
information on the schedule was not due to fraud with intent to evade tax.
It is not possible, however, to state whether in all circumstances we would
be entitled to the benefit of these relief provisions. If these relief
provisions are inapplicable to a particular set of circumstances involving
us, we will not qualify as a REIT. As discussed above, even where these
relief provisions apply, a tax is imposed with respect to the excess of the
actual amount of nonqualifying income over the amount permitted under the
gross income tests.
Asset Tests
At the close of each quarter of our taxable year, we must also satisfy
three tests relating to the nature of our assets. First, at least 75% of
the value of our total assets must be represented by real estate assets
(including our allocable share of real estate assets held by the
Partnerships), stock in other REITs, stock or debt instruments held for not
more than one year purchased with the proceeds of a stock offering or long-
term (at least five years) debt offering, cash, cash items and U.S.
government securities. Second, not more than 25% of our total assets may
be represented by securities other than those in the 75% asset class.
Third, of the investments not included in the 75% asset class, the value of
any one issuer's securities owned by us may not exceed 5% of the value of
our total assets, and we may not own more than 10% of any one issuer's
outstanding voting securities.
Our indirect interests in certain of the Partnerships and certain
properties are held through our wholly-owned corporate subsidiaries
organized and operated as ''qualified REIT subsidiaries'' within the
meaning of the Code. Qualified REIT subsidiaries are not treated as
separate entities from their parent REIT for Federal income tax purposes.
Instead, all assets, liabilities and items of income, deduction and credit
of each qualified REIT subsidiary are treated as our assets, liabilities
and items. Each qualified REIT subsidiary therefore will not be subject to
Federal corporate income taxation, although it may be subject to state or
local taxation.
In addition, our ownership of stock of each qualified REIT subsidiary
and our interest in the Partnerships do not violate either the 5% value
restriction or the restriction against ownership of more than 10% of the
voting securities of any issuer. Similarly, our ownership of any other
REIT, such as our interests in two subsidiary REITs, will not violate these
restrictions, so long as those REITs maintain their qualifications as
REITs.
If we should fail to satisfy the asset test at the end of a calendar
quarter, such a failure would not cause us to lose our REIT status if (1)
we satisfied the asset tests at the close of the preceding calendar quarter
and (2) the discrepancy between the value of our assets and the asset test
requirements arose from changes in the market value of its assets and was
not wholly or partly caused by the acquisition of one or more non-
qualifying assets. If the condition described in clause (2) of the
preceding sentence were not satisfied, we still could avoid
disqualification by eliminating, any discrepancy within 30 days after the
close of the calendar quarter in which it arose.
Annual Distribution Requirements
In order to qualify as a REIT, we are required to make distributions
(other than capital gain distributions) to our shareholders in an amount at
least equal to (1) the sum of (a) 95% of our "REIT taxable income''
(computed without regard to the dividends paid deduction and our net
capital gain to the extent designated as a capital gain distribution) and
(b) 95% of the net income (after tax), if any, from foreclosure property,
minus (2) the sum of certain items of noncash income. Such distributions
must be paid in the taxable year to which they relate, or in the following
taxable year if declared before we timely file our tax return for such year
and if paid with or before the first regular distribution payment after
such declaration. To the extent that we do not distribute all of our net
capital gain or distribute at least 95%, but less than 100%, of our ''REIT
taxable income,'' as adjusted, we will be subject to tax thereon at the
capital gains or ordinary corporate tax rates, as the case may be.
Furthermore, if we should fail to distribute during each calendar year at
least the sum of (1) 85% of our REIT ordinary income for such year, (2) 95%
of our REIT capital gain income for such year (other than certain long-term
capital gains income which we elect to retain and pay tax on), and (3) any
undistributed taxable income from prior periods, we would be subject to a
4% excise tax on the excess of such required distribution over the amounts
actually distributed. We believe that we have made, and we intend to
continue to make, timely distributions sufficient to satisfy this annual
distribution requirement.
It is possible that we, from time to time, may not have sufficient cash
or other liquid assets to meet the 95% distribution requirement due to
timing differences between (1) the actual receipt of income and actual
payment of deductible expenses and (2) the inclusion of such income and
deduction of such expenses in arriving at our REIT taxable income. In the
event that such timing differences occur, in order to meet the 95%
distribution requirement, we may find it necessary to arrange for short-
term, or possibly long-term, borrowings (on terms that may not be favorable
to us) or to pay distributions in the form of taxable distributions of
property.
Under certain circumstances, the Code permits us to rectify a failure to
meet the distribution requirement for a year by paying ''deficiency
dividends'' in a later year, which may be included in our deduction for
distributions paid for the earlier year. Thus, we may avoid being taxed on
amounts distributed as deficiency dividends. We would, however, be
required to pay interest based on the amount of any deduction taken for
deficiency dividends.
Tax legislation currently being considered by Congress would reduce the
foregoing distribution requirements so that we would be required to make
distributions (other than capital gain distributions) to our Shareholders
in an amount generally equal to 90% of our "REIT taxable income.''
Absence of Earnings and Profits
The Code provides that, in the case of a corporation like us that was
formerly a taxable C corporation, and in the case of a corporation that is
acquired by us, we may qualify as a REIT for a taxable year only if we
distribute, within the time required by the Code, all of its ''earnings and
profits," if any, accumulated in any non-REIT year. We and our former
owners retained independent certified public accountants to determine our
earnings and profits as of February 11, 1994 (and December 31, 1994) for
purposes of the distribution requirement. The determination by the
independent certified public accountants that we had no non-REIT earnings
and profits was based upon our tax returns as filed with the IRS and other
assumptions and qualifications set forth in the reports issued by such
accountants. We also believe we have satisfied this requirement with
respect to each corporation that we have acquired.
Any adjustments to our taxable income for taxable years ending on or
before the effective date of our REIT election, including as a result of an
examination of our returns by the IRS, could affect the calculation of our
earnings and profits as of the appropriate measurement date. Furthermore,
the determination of earnings and profits requires the resolution of
certain technical tax issues with respect to which there is no authority
directly on point and, consequently, the proper treatment of these issues
for earnings and profits purposes is not free from doubt. There can be no
assurance that the IRS will not examine our tax returns for prior years and
propose adjustments to increase our taxable income. In this regard, the
IRS can consider all taxable years of a corporation as open for review for
purposes of determining the amount of such earnings and profits.
Failure to Qualify
If we fail to qualify for taxation as a REIT in any taxable year, and
the relief provisions do not apply, we will be subject to tax (including
any applicable alternative minimum tax) on its taxable income at regular
corporate rates. Distributions to Holders in any year in which we fail to
qualify will not be deductible by us nor will they be required to be made.
In such event, to the extent of current and accumulated earnings and
profits, all distributions to Holders will be taxable as ordinary income,
and, subject to certain limitations of the Code, corporate distributees may
be eligible for the dividends received deduction. Unless entitled to
relief under specific statutory provisions, we will also be disqualified
from taxation as a REIT for the four taxable years following the year
during which qualification was lost. It is not possible to state whether
in all circumstances we would be entitled to such statutory relief. In
addition, tax legislation currently being considered by Congress contains
language which, due to the extent of Westfield America Trust's ownership
interest in us, may prevent us from re-electing REIT status in the event
that our REIT election is terminated. Moreover, a recent Federal budget
proposal contains language which, if enacted in its present form, would
result in the immediate taxation of all gain inherent in a C corporation's
assets upon an election by such corporation to become a REIT, and this
proposal, if enacted, could also effectively preclude us from re-electing
REIT status.
TAX ASPECTS OF OUR INVESTMENTS IN PARTNERSHIPS
General
Substantially all of our investments are held indirectly through the
Partnerships. In general, partnerships are ''pass-through'' entities that
are not subject to Federal income tax. Rather, partners are allocated
their proportionate shares of the items of income, gain, loss, deduction
and credit of the partnership, and are potentially subject to tax thereon,
without regard to whether the partners receive a distribution from the
partnership. We will include in our income our proportionate share of the
foregoing partnership items for purposes of the various REIT income tests
and in the computation of our REIT taxable income.
Moreover, for purposes of the REIT asset tests, we will include our
proportionate share of assets held by such partnerships. See ''--Taxation
of the Company--Ownership of Partnership Interests.''
Entity Classification
Our direct and indirect investment in the Partnerships involves special
tax considerations, including the possibility of a challenge by the IRS of
the status of any of the Partnerships as a partnership (as opposed to an
association taxable as a corporation) for Federal income tax purposes. If
one of the Partnerships were treated as an association for Federal income
tax purposes, it would be taxable as a corporation subject to an entity-
level tax on its income. In such a situation, the character of our assets
and items of gross income would change, which could preclude us from
satisfying the asset tests and/or the income tests (see ''--Taxation of the
Company-Asset Tests'' and ''--Taxation of the Company--Income Tests''), and
in turn could prevent us from qualifying as a REIT. See ''--Taxation of
the Company--Failure to Qualify'' above for a discussion of the effect of
our failure to meet such tests for a taxable year. In addition, any change
in the status of any of the Partnerships for tax purposes might be treated
as a taxable event, in which case we might incur a tax liability without
any related cash distributions.
Tax Allocations with Respect to the Properties
Pursuant to the Code and the regulations thereunder, income, gain, loss
and deduction attributable to appreciated or depreciated property that is
contributed to a partnership in exchange for an interest in the partnership
must be allocated in a manner such that the contributing partner is charged
with, or benefits from, respectively, the unrealized gain or unrealized
loss associated with the property at the time of the contribution. The
amount of such unrealized gain or unrealized loss is generally equal to the
difference between the fair market value of contributed property at the
time of contribution, and the adjusted tax basis of such property at the
time of contribution (a ''Book-Tax Difference''). Such allocations are
solely for Federal income tax purposes and do not affect the book capital
accounts or other economic or legal arrangements among the partners. Where
a partner contributes cash to a partnership that holds appreciated
property, the Treasury regulations provide for a similar allocation of such
items to the other partners. These rules would apply to the contribution
by us to an existing partnership of the cash proceeds received in any
offerings of its stock.
With respect to any property purchased or to be purchased by any of the
Partnerships (other than through the issuance of partnership units), such
property will initially have a tax basis equal to its fair market value and
the special allocation provisions described above will not apply.
Sale of the Properties
Our share of any gain realized by any of the Partnerships in which we
hold a direct or indirect interest on the sale of any property held as
inventory or primarily for sale to customers in the ordinary course of
business will be treated as income from a prohibited transaction that is
subject to a 100% penalty tax. See ''--Requirements for Qualification--
Income Tests.'' Such prohibited transaction income may also have an adverse
effect on our ability to satisfy the income tests for status as a REIT.
Under existing law, whether property is held as inventory or primarily for
sale to customers in the ordinary course of a partnership's trade or
business is a question of fact that depends on all the facts and
circumstances with respect to the particular transaction. We intend to
hold our interests in the Partnerships, and the Partnerships intend to hold
their properties for investment with a view to long-term appreciation, to
engage in the business of acquiring, developing, owning, and operating the
properties and to make such occasional sales of the properties, including
peripheral land, as are consistent with our investment objectives.
Accordingly, we believe that our interests in the Partnerships, and the
Partnerships' interests in the properties will not be treated as inventory
or as property held primarily for sale to customers in the ordinary course
of a trade or business.
TAXATION OF TAXABLE DOMESTIC HOLDERS
Distributions
As long as we qualify as a REIT, distributions made to our taxable
domestic Holders ("U.S. Holders") out of current or accumulated earnings
and profits (and not designated as capital gain distributions or retained
net long-term capital gains) will be taken into account by them as ordinary
income and will not be eligible for the dividends received deduction for
corporations. Distributions that are designated as capital gain
distributions will be taxed as long-term capital gain (to the extent that
they do not exceed our actual net capital gain for the taxable year)
without regard to the period for which the U.S. Holder has held its
Shares. If we elect to retain their share of capital gains rather than
distribute them, a U.S. Holder will be deemed to receive a capital gain
distribution equal to the amount of such retained net long-term capital
gains. In that case, a U.S. Holder: (1) will be allowed a credit against
its Federal income tax liability for its proportionate share of tax paid by
us on retained capital gains, and (2) will receive an increase in the basis
of its Shares equal to the excess of such deemed capital gain distribution
over the amount of such tax credit. Corporate U.S. Holders may be
required to treat up to 20% of certain capital gain distributions as
ordinary income.
Distributions in excess of current and accumulated earnings and profits
will not be taxable to a U.S. Holder to the extent that they do not exceed
the adjusted tax basis of the U.S. Holder's shares, but rather will reduce
the adjusted tax basis of such shares. To the extent that such
distributions exceed the adjusted tax basis of a U.S. Holder's shares,
they will be included in income as long-term capital gain (or short-term
capital gain if the shares have been held for one year or less) provided
that the shares are a capital asset in the hands of the U.S. Holder. In
addition, any distribution declared by us in October, November or December
of any year and payable to a U.S. Holder of record on a specified date in
any such month shall be treated as both paid by us and received by the U.S.
Holder on December 31 of such year, provided that the distribution is
actually paid by us during January of the following calendar year. Holders
may not include in their individual income tax returns any of our net
operating losses or capital losses.
Dispositions of Shares
In general, any loss upon a sale or exchange of Shares by a U.S. Holder
who has held such shares for six months or less (after applying certain
holding period rules) will be treated as a long-term capital loss to the
extent that distributions from us are required to be treated by such Holder
as long-term capital gain.
TAXATION OF NON-U.S. HOLDERS
The following is a discussion of certain anticipated U.S. Federal
income and estate tax consequences of the ownership and disposition of our
Shares applicable to Non-U.S. Holders of such Shares. A ''Non-U.S.
Holder'' is any Holder other than (1) a citizen or resident of the United
States, (2) a corporation or partnership created or organized in the United
States or under the laws of the United States or of any state thereof, (3)
an estate or trust whose income is includible in gross income for U.S.
Federal income tax purposes regardless of its source, or (4) a trust if a
United States court is able to exercise primary supervision over the
administration of such trust and one or more United States fiduciaries have
the authority to control all substantial decisions of such trust. The
discussion is based on current law and is for general information only.
The discussion addresses only certain and not all aspects of U.S. Federal
income and estate taxation.
Ordinary Distributions
The portion of distributions received by Non-U.S. Holders payable out
of our earnings and profits which are not attributable to our capital gains
and which are not effectively connected with a U.S. trade or business of
the Non-U.S. Holder will be subject to U.S. withholding tax at the rate
of 30% (or lower rate, if so provided by an applicable income tax treaty).
In general, Non-U.S. Holders will not be considered engaged in a U.S.
trade or business solely as a result of their ownership of Shares. In
cases where the distribution income from a Non-U.S. Holder's investment in
our stock is (or is treated as) effectively connected with the Non-U.S.
Holder's conduct of a U.S. trade or business, the Non-U.S. Holder
generally will be subject to U.S. tax at graduated rates, in the same
manner as U.S. Holders are taxed with respect to such distributions (and
may also be subject to the 30% branch profits tax in the case of a Non-U.S.
Holder that is a foreign corporation).
Return of Capital Distributions
Distributions in excess of our current and accumulated earnings and
profits to a Non-U.S. Holder will not be subject to income tax to the
extent that they do not exceed the Non-U.S. Holder's adjusted basis in the
Shares with respect to which such distribution occurs, but rather will
reduce the adjusted basis of such Shares. To the extent that such
distributions exceed the Non-U.S. Holder's adjusted basis in the Shares
with respect to which such distribution occurs, they will give rise to gain
from the sale or exchange of such Shares, the tax treatment of which is
described below. Because at the time of a distribution we generally will
not know whether such distribution is in excess of earnings and profits, we
generally will withhold at a rate of 30% (or a lower applicable treaty
rate) on the entire amount of any distribution that is not a capital gain
distribution, the tax treatment of which is described below. If we
determine that a distribution is in excess of our earnings and profits, we
will not withhold with respect to such excess provided that the Shares with
respect to which such distribution is made do not constitute a United
States Real Property Interest in the hands of the Non-U.S. Holder who
receives such distribution as provided below in "Disposition of Stock of
the Company". Any Non-U.S. Holder may seek a refund of withheld amounts
from the Internal Revenue Service if it is subsequently determined that
such distribution was, in fact, in excess of our current or accumulated
earnings and profits and the amount withheld exceeded such Non-U.S.
Holder's United States tax liability with respect to the distribution.
Capital Gain Distributions
Under the Foreign Investment in Real Property Tax Act of 1980
("FIRPTA"), a distribution made by us to a Non-U.S. Holder, to the
extent attributable to gains from dispositions of United States Real
Property Interests ("USRPIs") such as the properties beneficially owned
by us ("USRPI Capital Gains"), will be considered to be income
effectively connected with a U.S. trade or business of the Non-U.S. Holder
and subject to U.S. income tax at the rate applicable to U.S. individuals
or corporations, without regard to whether such distribution is designated
as a capital gain distribution. In addition, we will be required to
withhold tax equal to 35% of the amount of distributions to the extent such
distributions constitute USRPI Capital Gains. Distributions subject to
FIRPTA may also be subject to a 30% branch profits tax in the hands of a
corporate Non-U.S. Holder that is not entitled to treaty exemption. If we
elect to retain their share of capital gains rather than distribute them, a
Non-U.S. Holder will be deemed to receive a capital gain distribution equal
to the amount of such retained net long-term capital gains. In that case,
a Non-U.S. Holder: (1) will be allowed a credit against its Federal income
tax liability for its proportionate share of tax paid by us on retained
capital gains, and (2) will receive an increase in the basis of its Shares
equal to the excess of such deemed capital gain distribution over the
amount of such tax credit.
Disposition of Shares of the Company
Unless our Shares constitute a USRPI, a sale of such Shares by a Non-
U.S. Holder generally will not be subject to U.S. taxation under FIRPTA.
The Shares would not constitute a USRPI if we were a "domestically
controlled REIT." A domestically controlled REIT is a REIT in which, at
all times during a specified testing period, less than 50% in value of its
shares is held directly or indirectly by Non-U.S. Holders. We are not a
domestically controlled REIT. A Non-U.S. Holder's sale of Shares
generally nevertheless will not be subject to tax under FIRPTA as a sale of
a USRPI provided that (1) either the Series C Shares or the Common Shares
into which they convert are ''regularly traded'' (as defined by applicable
Treasury Regulations) on an established securities market (e.g., the NYSE,
on which the Common Shares will be listed) and (2) at all times during the
testing period specified in the Code, the selling Non-U.S. Holder (after
application of certain constructive ownership rules) held either (a) 5% or
less of our outstanding Series C Shares, in the event that such shares are
regularly traded on an established securities market, (b) an amount of
Series C Shares, the value of which is 5% or less than the value of our
outstanding Common Shares, in the event that the Series C Shares are not
regularly traded on an established securities market, or (c) 5% or less of
our outstanding Common Shares, if the Series C Shares owned by such Non-
U.S. Holder have been converted into Common Shares.
If gain on the sale of our stock were subject to taxation under FIRPTA,
the Non-U.S. Holder would be subject to the same treatment as a U.S.
Holder with respect to such gain (subject to applicable alternative minimum
tax and a special alternative minimum tax in the case of nonresident alien
individuals) and the purchaser of the stock could be required to withhold
10% of the purchase price and remit such amount to the IRS.
Capital gains not subject to FIRPTA will nonetheless be taxable in the
United States to a Non-U.S. Holder in two cases: (1) if the Non-U.S.
Holder's investment in our stock is effectively connected with a U.S.
trade or business conducted by such Non-U.S. Holder, and (2) the Non-U.S.
Holder 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.
Estate Tax
Stock of the Company owned or treated as owned by an individual who is
not a citizen or resident (as specially defined for U.S. Federal estate
tax purposes) of the United States at the time of death will be includible
in the individual's gross estate for U.S. Federal estate tax purposes,
unless an applicable estate tax treaty provides otherwise. Such
individual's estate may be subject to U.S. Federal estate tax on the
property includible in the estate for U.S. Federal estate tax purposes.
Information Reporting and Backup Withholding For Non-U.S. Holders
We must report annually to the IRS and to each Non-U.S. Holder the
amount of distributions (including any capital gain distributions) paid to,
and the tax withheld with respect to, such Non-U.S. Holder. These
reporting requirements apply regardless of whether withholding was reduced
or eliminated by an applicable tax treaty. Copies of these returns may
also be made available under the provisions of a specific treaty or
agreement with the tax authorities in the country in which the Non-U.S.
Holder resides.
U.S. backup withholding (which generally is imposed at the rate of 31%
on certain payments to persons that fail to furnish the information
required under the U.S. information reporting requirements) and
information reporting generally will not apply to distributions (including
any capital gain distributions) paid on our Shares to a Non-U.S. Holder at
an address outside the United States.
The payment of the proceeds from the disposition of Shares to or through
a U.S. office of a broker will be subject to information reporting and
backup withholding unless the owner, under penalties of perjury, certifies,
among other things, its status as a Non-U.S. Holder, or otherwise
establishes an exemption. The payment of the proceeds from the disposition
of Shares to or through a non-U.S. office of a non-U.S. broker generally
will not be subject to backup withholding and information reporting.
Backup withholding is not an additional tax. Any amounts withheld under
the backup withholding rules will be refunded or credited against the Non-
U.S. Holder's U.S. Federal income tax liability, provided that the
required information is furnished to the IRS.
The IRS has issued final Treasury Regulations regarding the backup
withholding rules as applied to Non-U.S. Holders. Those final Treasury
Regulations alter the current system of backup withholding compliance and
will be effective for payments made after December 31, 2000. Prospective
purchasers should consult their-tax advisors regarding the application of
the final Treasury Regulations and the potential effect on their ownership
of Shares.
SPECIAL TAX ISSUES RELATING TO THE SERIES C SHARES
Tax Consequences upon Conversion of Series C Shares into Common Shares
In general, unless a holder of Series C Shares (a "Series C Holder")
receives cash in lieu of fractional shares, such holder will not recognize
gain or loss upon the conversion of the Series C Shares into Common Shares.
Certain Non-U.S. Holders, however, may be required to comply with certain
filing requirements imposed under FIRPTA in order to convert their Series C
Shares into Common Shares on a tax free basis. The tax basis of a Series C
Holder in the Common Shares received upon such conversion will equal that
holders's tax basis in the Series C Shares surrendered in the conversion,
reduced by any basis attributable to fractional shares deemed received.
The holding period for the Common Shares will include the Series C Holder's
holding period for the Series C Shares. Based on the Internal Revenue
Service's present advance ruling policy, cash received in lieu of a
fractional Common Share upon conversion of Series C Shares should be
treated as a payment in redemption of the fractional share interest in that
Common Share. See "--Redemption of Series C Shares" below.
Deemed Dividends on Series C Shares
The conversion price of the Series C Shares may be adjusted if we make
certain distributions of stock, cash, or other property to our
shareholders. If we make such a distribution, and such distribution
results in an adjustment to the conversion price, a Series C Holder may be
viewed as receiving a "deemed distribution" which is taxable as a dividend
under Sections 301 and 305 of the Code.
Redemption of Series C Shares
The tax treatment of a Series C Holder upon our redemption of Series C
Shares can only be determined on the basis of particular facts as to each
Series C Holder at the time of such redemption. If a Series C Holder who
holds the Series C Shares as a capital asset satisfies one of the three
tests described below, then such holder will recognize capital gain or loss
from the sale of such Series C Shares measured by the difference between
the amount realized by the Series C Holder upon the redemption and that
holder's adjusted tax basis in the Series C Shares that are redeemed. Such
Series C Holder will be treated in that way only if the redemption: (1)
results in a "complete termination" of the Series C Holder's interest in
all classes of our shares, (2) is "substantially disproportionate" with
respect to the Series C Holder's interest in us or (3) is "not essentially
equivalent to a dividend" with respect to the Series C Holder. In
determining whether any of these tests have been met, shares considered to
be owned by the Series C Holder by reason of certain constructive ownership
rules set forth in the Code, as well as shares actually owned, must
generally be taken into account. To the extent a redemption does not
change the Series C Holder's net ownership in us, such a redemption will be
treated as a dividend to such redeeming Series C Holder. Because the
determination as to whether any of the alternative tests described above
will be satisfied with respect to any particular Series C Holder depends
upon the facts and circumstances at the time of the redemption, prospective
investors are advised to consult their own tax advisors to determine their
tax treatment upon a redemption. Non-U.S. Holders should note that a
redemption that is treated as a sale of the Series C Shares may be subject
to tax in the same manner as a sale of the Series C Shares. See "--
Taxation of Foreign Shareholders."
If the redemption does not meet any of the tests described above, then
the redemption proceeds received by the Series C Holder will be treated as
a distribution on the Series C Shares as described under "--Taxation of
Taxable Domestic Series C Holders" and "--Taxation of Non-U.S. Holders."
If the redemption is taxed as a dividend, the Series C Holder's adjusted
tax basis in the Series C Shares that are redeemed will be transferred to
any other shares of our stock held by such Series C Holder. If, however,
the Series C Holder has no remaining share holdings in us, that basis could
be transferred to a related person or it may be lost.
TAXATION OF TAX-EXEMPT HOLDERS
Based upon a published ruling by the IRS, distributions by us to a
Holder that is a tax-exempt entity will not constitute ''unrelated business
taxable income'' (''UBTI''), provided that the tax-exempt entity has not
financed the acquisition of its shares with ''acquisition indebtedness''
within the meaning of the Code and the shares are not otherwise used in an
unrelated trade or business of the tax-exempt entity.
Notwithstanding the preceding paragraph, however, a portion of the
distributions paid by us may be treated as UBTI to certain U.S. private
pension trusts if we are treated as a ''pension-held REIT.'' We are not,
and do not expect to become, a ''pension-held REIT.'' If we were to become
a pension-held REIT, these rules generally would only apply to certain U.S.
pension trusts that hold more than 10% of our stock.
OTHER TAX CONSEQUENCES
Possible Legislative or Other Actions Affecting Tax Consequences
The present Federal income tax treatment of an investment in us may be
modified by legislative, judicial or administrative action at any time, and
any such action may affect investments and commitments previously made. The
rules dealing with Federal income taxation are constantly under review by
persons involved in the legislative process and by the IRS and the U.S.
Treasury Department, resulting in revisions of regulations and revised
interpretations of established concepts as well as statutory changes.
Revisions in Federal tax laws and interpretations thereof could adversely
affect the tax consequences of an investment in us. For example, tax
legislation currently being considered by Congress contains language which,
due to the extent of Westfield America Trust's ownership interest in us,
may prevent us from re-electing REIT status in the event that our REIT
election is terminated. In addition, a recent Federal budget proposal
contains language which, if enacted in its present form, would result in
the immediate taxation of all gain inherent in a C corporation's assets
upon an election by the corporation to become a REIT, and this proposal, if
enacted, could also effectively preclude us from re-electing REIT status
following a termination.
State and Local Taxes
We may be subject to state or local income and other taxation in various
state or local jurisdictions. The state and local tax treatment of us may
not conform to the Federal income tax consequences discussed above.
Consequently, prospective Holders should consult their own tax advisors
regarding the effect of state and local tax laws on an investment in us.
PLAN OF DISTRIBUTION
The selling shareholder may offer the Series C Shares and the Common
Shares from time to time following the effectiveness of the registration
statement of which this prospectus constitutes a part. As used in this
section, "selling shareholder" includes Merrill Lynch International Private
Finance Limited, as a pledgee of the Series C Shares and any other donees
and pledgees selling Series C Shares or the Common Shares received from
Security Capital Preferred Growth after the date of this prospectus. The
methods by which the Series C Shares and the Common Shares may be sold
include:
o a block trade in which the broker-dealer so engaged will attempt to
sell the offered shares as agent but may position and resell a portion
of the block as principal to facilitate the transaction;
o purchases by a broker-dealer as principal and resale by such broker-
dealer for its account pursuant to this prospectus;
o ordinary brokerage transactions and transactions in which the broker
solicits purchasers;
o in the case of the offered Common Shares, an exchange distribution in
accordance with the rules of the New York Stock Exchange or other
exchange or trading system on which the Common Shares are admitted for
trading privileges;
o privately-negotiated transactions;
o through put or call transactions relating to the offered shares;
o through short-sales of the offered shares;
o pursuant to Rule 144 or otherwise; and
o underwritten transactions.
The Series C Shares or Common Shares may be sold from time to time in one
or more transactions at
o a fixed price or prices, which may be changed;
o market prices prevailing at the time of sale;
o prices related to such prevailing market prices; or
o negotiated prices.
The selling shareholder and any underwriters, broker-dealers or agents
that participate in the distribution of Series C Shares or Common Shares
may be deemed to be "underwriters" within the meaning of the Securities Act
and any profit on the sale of such securities and any discounts,
commissions, concessions or other compensation received by any such
underwriter, broker-dealer or agent may be deemed to be underwriting
discounts and commissions under the Securities Act. At the time a
particular offering of the Series C Shares or Common Shares is made, a
prospectus supplement, if required, will be distributed which will set
forth the aggregate amount and type of Series C Shares or Common Shares
being offered and the terms of the offering, including the name or names of
any underwriters, broker-dealers or agents, any discounts, commissions and
other terms constituting compensation from the selling shareholder and any
discounts, commissions or concessions allowed or reallowed or paid to
broker-dealers. In addition, upon our being notified by the selling
shareholder that a donee or pledgee intends to sell more than 500 shares, a
supplement to this prospectus will be filed.
To comply with the securities laws of some jurisdictions, if
applicable, the Series C Shares and Common Shares will be offered or sold
in such jurisdictions only through registered or licensed brokers or
dealers. In addition, in some jurisdictions the Series C Shares and Common
Shares may not be offered or sold unless they have been registered or
qualified for sale in such jurisdictions or any exemption from registration
or qualification is available and is complied with.
In addition, Security Capital Preferred Growth may from time to time
sell Series C Shares or Common Shares in transactions under Rule 144
promulgated under the Securities Act.
Pursuant to the Registration Rights Agreement, we will pay all
registration expenses in connection with the registration of the Series C
Shares and Common Shares. We and Security Capital Preferred Growth have
agreed to indemnify each other against some civil liabilities, including
some liabilities under the Securities Act.
LEGAL MATTERS
The validity under Missouri law of the Series C Shares and the Common
Shares offered hereby has been passed upon for us by Husch & Eppenberger,
LLC, St. Louis, Missouri, and some tax matters have been passed upon for us
by Skadden, Arps, Slate, Meagher & Flom LLP, Los Angeles, California.
EXPERTS
Ernst & Young LLP, independent auditors have audited our consolidated
financial statements included in our Annual Report on Form 10-K for the
year ended December 31, 1998, as set forth in their report, which is
incorporated by reference in this prospectus and elsewhere in the
registration statement. Our financial statements are incorporated by
reference in reliance on Ernst & Young LLP's report, given on their
authority as experts in accounting and auditing.
Ernst & Young LLP, independent auditors have audited the statement of
revenues and certain expenses of Topanga Plaza for the year ended December
31, 1997, included in our Form 8-K dated February 3, 1999, as set forth in
their report, which is incorporated by reference in this prospectus and
elsewhere in the registration statement. The statement of revenue and
certain expenses of Topanga Plaza is incorporated by reference in reliance
on Ernst & Young LLP's report, given on their authority as experts in
accounting and auditing.
The combined statement of revenues and certain expenses of selected
TrizecHahn Acquisition Properties to be acquired less than 100% by
Westfield America, Inc. for the year ended December 31, 1997 and the
statement of revenues and certain expenses of selected TrizecHahn
Acquisition Properties to be acquired by Westfield America, Inc. for the
year ended December 31, 1997 have been incorporated by reference in the
registration statement on Form S-3 of which this prospectus is a part in
reliance upon the reports of PricewaterhouseCoopers LLP, independent
accountants, included in our Form 8-K/A as filed on February 1, 1999, and
upon the authority of said firm as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any documents we
file at the SEC's public reference rooms in Washington, D.C., New York, New
York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference rooms. Our SEC filings are
also available to the public from the SEC's Website at
"http://www.sec.gov."
The SEC allows us to "incorporate by reference" the information we
file with them, which means that we can disclose important information to
you by referring you to those documents. The information incorporated by
reference is considered to be part of this prospectus, and information we
later file with the SEC will automatically update and supersede this
information. We incorporate by reference the documents listed below and
any future filings we will make with the SEC under Sections 13(a), 13(c),
14 and 15(d) of the Exchange Act:
o our Annual Report on Form 10-K for the year ended December 31, 1998;
o our Quarterly Reports on Form 10-Q for the quarterly periods ended
March 31, 1999 and June 30, 1999;
o our Current Reports on Form 8-K filed:
o o December 2, 1998 (as amended by Form 8-K/A filed on February 1,
1999);
o o February 3, 1999;
o o February 19, 1999; and
o o July 8, 1999 (as amended by Form 8-K/A filed on July 13, 1999);
o The description of our capital stock contained in our Registration
Statement on Form 8-A filed pursuant to the Exchange Act, including
any amendment or report filed to update the description.
You may request a copy of these filings, at no cost by writing or
telephoning us at the following address:
Westfield America
Secretary
11601 Wilshire Boulevard, 12th Floor
Los Angeles, CA 90025
(310) 478-4456
You should rely only on the information incorporated by reference or
provided in this prospectus or any prospectus supplement. We have not
authorized anyone else to provide you with different information. Security
Capital will not make an offer of the Series C Shares or Common Shares in
any state where the offer is not permitted. You should not assume that the
information in this prospectus or any prospectus supplement is accurate as
of any date other than the date on the front of those documents.
[GRAPHIC BOX DELETED] [WEA LOGO]
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses (other than
underwriting discounts, concessions and commissions) expected to be
incurred in connection with the issuance and distribution of securities
being registered. Except for the SEC filing fee, all amounts shown below
are estimates.
SEC registration fee . . . . . . . . . . . . . . . $ 34,751
Legal fees and expenses . . . . . . . . . . . . . . 100,000
Accounting fees and expenses . . . . . . . . . . . 20,000
Printing and engraving expenses . . . . . . . . . . 1,000
Miscellaneous . . . . . . . . . . . . . . . . . . . 4,249
Total . . . . . . . . . . . . . . . . . . . . . $160,000
The Company will bear all of the foregoing expenses.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company has obtained, and pays the cost of, directors' and
officers' liability insurance coverage in the amount of $25.0 million
(subject to a retention or a "deductible" of $250,000). Directors' and
officers' insurance insures (i) the directors and officers of the Company
from any claim arising out of an alleged wrongful act by the directors and
officers of the Company in their respective capacities as directors and
officers of the Company, and (ii) the Company to the extent that the
Company has indemnified the directors and officers for such loss. The
Articles of Incorporation provide for indemnification to the full extent
permitted by Missouri law.
Section 351.355(1) of the Revised Statutes of Missouri provides that a
corporation may indemnify a director, officer, employee or agent of the
corporation in any action, suit or proceeding other than an action by or in
the right of the corporation, against expenses (including attorney's fees),
judgments, fines and settlement amounts actually and reasonably incurred by
him in connection with such action, suit or proceeding if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation and, with respect to any criminal action,
had no reasonable cause to believe his conduct was unlawful.
Section 351.355(2) provides that the corporation may indemnify any
such person in any action or suit by or in the right of the corporation
against expenses (including attorney's fees) and settlement amounts
actually and reasonably incurred by him in connection with the defense or
settlement of the action or suit if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
corporation, except that he may not be indemnified in respect of any matter
in which he has been adjudged liable for negligence or misconduct in the
performance of his duty to the corporation, unless authorized by the court.
Section 351.355(3) provides that a corporation shall indemnify any
such person against expenses (including attorney's fees) actually and
reasonably incurred by him in connection with the action, suit or
proceeding if he has been successful in defense of such action, suit or
proceeding, and if such action, suit or proceeding is one for which the
corporation may indemnify him under Section 351.355(1) or (2). Section
351.355(7) provides that a corporation shall have the power to give any
further indemnity to any such person, in addition to the indemnity
otherwise authorized under Section 351.355, provided such further indemnity
is either (i) authorized, directed or provided for in the articles of
incorporation of the corporation or any duly adopted amendment thereof or
(ii) is authorized, directed or provided for in any by-law or agreement of
the corporation which has been adopted by a vote of the shareholders of the
corporation, provided that no such indemnity shall indemnify any person
from or on account of such person's conduct which was finally adjudged to
have been knowingly fraudulent, deliberately dishonest or willful
misconduct.
The Articles of Incorporation of the Company contain provisions
indemnifying its directors and officers to the extent authorized
specifically by Sections 351.355(1), (2), (3) and (7).
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or persons
controlling the registrant pursuant to the foregoing provisions, the
registrant has been informed that in the opinion of the SEC, such
indemnification is against public policy as expressed in the Securities Act
and is therefore unenforceable.
ITEM 16. LIST OF EXHIBITS.
EXHIBIT
NUMBER DESCRIPTION
4.1 Restated Articles of Incorporation of Westfield America, Inc.
(Exhibit 3.1(1)).
4.2 Second Amended and Restated By-Laws of Westfield America, Inc.
(Exhibit 3.2(2)).
4.3 Amendment No. 1 to the Second Amended and Restated By-Laws of
Westfield America, Inc. (Exhibit 3.3(2)).
4.4 Amendment No. 2 to the Second Amended and Restated By-Laws of
Westfield America, Inc. (Exhibit 3.4(2)).
4.5 Amendment No. 3 to the Second Amended and Restated By-Laws of
Westfield America, Inc. (Exhibit 3.5(2)).
4.6 Specimen certificate representing Series C Preferred Shares.*
4.7 Specimen certificate representing Series C-1 Preferred Shares.*
4.8 Specimen certificate representing Series C-2 Preferred Shares.*
4.9 Specimen certificate representing Common Shares.*
5.1 Opinion of Husch & Eppenberger, as to legality of the Series C
Shares and the Common Shares.
8.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP regarding tax
matters.
12.1 Statement re: Computation of Ratio of Earnings to Combined Fixed
Charges and Preferred Stock Dividends.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of PricewaterhouseCoopers LLP.
23.3 Consent of Husch & Eppenberger (included in Exhibit 5.1).
23.4 Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in
Exhibit 8.1).
24.1 Power of Attorney.*
____________________
* Previously filed.
(1) Incorporated by reference to designated exhibit to Westfield
America's quarterly report on Form 10-Q filed August 16, 1999, File
No. 333-22731.
(2) Incorporated by reference to designated exhibit to Westfield
America's quarterly report on Form 10-Q filed May 17, 1999, File
No. 333-22731.
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3)
of the Securities Act;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of this registration statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change
in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume
of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed
with the SEC pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent
change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective
registration statement; and
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the
registration statement or any material change to such information
in this registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(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 with or furnished
to the SEC by the registrant pursuant to Section 13 or Section 15(d) of the
Exchange Act 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.
(b) The undersigned registrant hereby undertakes that, for purposes
of determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of
the Exchange Act (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the registration statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act 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 SEC
such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
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 and will be governed by
the final adjudication of such issue.
(d) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the
Securities Act, the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon Rule
430A and contained in a form of prospectus filed by the registrant
pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act
shall be deemed to be part of this registration statement as of the
time it was declared effective.
(2) For the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, 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 registration statement on Form S-3 to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Los Angeles, State of California, on August 24, 1999.
WESTFIELD AMERICA, INC.
(Registrant)
By: /s/ Peter S. Lowy
Peter S. Lowy,
Director and Co-President
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Amendment No. 1 to registration statement has been signed by
the following persons in the capacities indicated on the 24th of August,
1999.
* Director and Chairman of the Board
_________________________
Frank P. Lowy
/s/ Peter S. Lowy Director and Co-President
_________________________ (Principal Executive Officer)
Peter S. Lowy
* Co-President
________________________ (Principal Executive Officer)
Richard E. Green
* Chief Financial Officer and Treasurer
________________________ (Principal Financial and Accounting
Mark A. Stefanek Officer)
* Director
________________________
Roy L. Furman
* Director
_________________________
Frederick G. Hilmer
* Director
_________________________
David H. Lowy
* Director
_________________________
Herman Huizinga
* Director
_________________________
Bernard Marcus
* Director
__________________________
Larry A. Silverstein
* Director
___________________________
Francis T. Vincent, Jr.
By: /s/ Irv Hepner
___________________________
Irv Hepner,
Attorney-in-fact
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION
5.1 Opinion of Husch & Eppenberger, as to legality of the Series C
Shares and the Common Shares.
8.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP regarding tax
matters.
12.1 Statement re Computation of Ratio of Earnings to Combined Fixed
Charges and Preferred Stock Dividends.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of PricewaterhouseCoopers LLP.
[LETTERHEAD OF HUSCH & EPPENBERGER, LLC]
EXHIBIT 5.1
August 23, 1999
Westfield America, Inc.
11601 Wilshire Boulevard, 12th Floor
Los Angeles, Ca 90025
Re: Registration of Series C Preferred Stock; Series C-1
Preferred Stock, Series C-2 Preferred Stock and Common Stock
on Form S-3
Dear Ladies and Gentlemen:
We have acted as special Missouri counsel to Westfield America, Inc.,
a Missouri corporation (the "Company"), in connection with the filing of
the Registration Statement (as hereinafter defined), registering (i) Four
Hundred Sixteen Thousand Six Hundred Sixty Seven (416,667) shares of the
Company's Series C Preferred Stock, par value $1.00 per share, (ii) One
Hundred Thirty Eight Thousand Eight Hundred Eighty Nine (138,889) shares
of the Company's Series C-1 Preferred Stock, par value $1.00 per share,
(iii) One Hundred Thirty Eight Thousand Eight Hundred Eighty Nine
(138,889) shares of the Company's Series C-2 Preferred Stock, par value
$1.00 per share, and (iv) Six Million Nine Hundred Forty Four Thousand
Four Hundred Fifty (6,944,450) shares of the Company's Common Stock, par
value $.01 per share (collectively, the "Shares") for offer by Security
Capital Preferred Growth Incorporated, a stockholder of the Company.
This opinion is being furnished in accordance with the requirements
of Item 601(b)(5) of Regulation S-K under the Securities Act of 1933, as
amended (the "Act").
In connection with this opinion, we have examined originals or
copies, certified or otherwise identified to our satisfaction, of (i) the
Registration Statement on Form S-3, as filed with the Securities and
Exchange Commission (the "Commission") on the date hereof under the Act
relating to the registration of the Shares under the Act (such
Registration Statement, referred to as the "Registration Statement"); (ii)
specimen certificates representing the Shares; (iii) the Articles of
Incorporation of the Company, as presently in effect; (iv) the By-Laws of
the Company, as presently in effect; and (v) certain resolutions of the
Board of Directors of the Company relating to the issuance and sale of the
Shares and related matters.
We have also examined originals or copies, certified or otherwise
identified to our satisfaction, of such records of the Company and such
agreements, certificates of public officials, certificates of officers or
other representatives of the Company and others, and such other documents,
certificates and records as we have deemed necessary or appropriate as a
basis for the opinions set forth herein. In our examination, we have
assumed the legal capacity of all natural persons, the genuineness of all
signatures, the authenticity of all documents submitted to us as originals,
the conformity to original documents of all documents submitted to us as
certified, conformed or photostatic copies and the authenticity of the
originals of such latter documents. In making our examination of documents
executed or to be executed by parties other than the Company, we have
assumed that such parties had or will have the power, corporate or other,
to enter into and perform all obligations thereunder and have also assumed
the due authorization by all requisite action, corporate or other, and
execution and delivery by such parties of such documents and the validity
and binding effect thereof. As to any facts material to the opinions
expressed herein which we have not independently established or verified,
we have relied upon statements and representations of officers and other
representatives of the Company and others.
Members of our firm are admitted to the bar in the State of Missouri,
and we do not express any opinion as to the laws of any other
jurisdiction.
Based upon and subject to the foregoing, we are of the opinion that
the Shares, when sold, will be validly issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion with the Commission
as an exhibit to the Registration Statement. We also consent to the
reference to our firm under the caption "Legal Matters" in the
Registration Statement.
This opinion is furnished by us, as your special counsel, in
connection with the filing of the Registration Statement and, except as
provided in the immediately preceding paragraph, is not to be used,
circulated, quoted or otherwise referred to for any other purpose or
relied upon by any other person without our prior written permission.
Very truly yours,
/s/ Husch & Eppenberger, LLC
HUSCH & EPPENBERGER, LLC
[LETTERHEAD OF SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP]
EXHIBIT 8.1
August 23, 1999
Westfield America, Inc.
11601 Wilshire Boulevard, 12th Floor
Los Angeles, California 90025-1748
Re: Federal Income Tax Matters
Dear Sirs:
You have requested our opinion concerning certain Federal income
tax considerations in connection with the Registration Statement on Form S-3
filed with the Securities and Exchange Commission on the date hereof
(the "Registration Statement") by Westfield America, Inc., a Missouri
corporation (1) ("WEA," and together with the subsidiary corporations, limited
liability companies and partnerships in which WEA owns a direct or indirect
interest, the "Company"). Capitalized terms used herein but not defined
shall have the meanings set forth in the Registration Statement.
----------------
(1) Westfield America, Inc. was formerly known as
CenterMark Properties, Inc.
We have acted as special tax counsel to the Company in connection
with, and have assisted in the preparation of, tax aspects of the
Registration Statement and certain other documents. You have provided to
us and we have reviewed certain documents (collectively, the "Documents")
that we have deemed necessary or appropriate as a basis for our opinion,
including, without limitation (i) organizational documents of the entities
comprising the Company, (ii) copies of certain leases, management contracts
and other agreements, (iii) responses to questionnaires describing the
Company's properties and their operation, (iv) a certificate executed by a
duly appointed officer of WEA (the "Officer's Certificate") setting forth
certain factual representations and covenants, and (v) certain schedules,
memoranda, financial information and other records. For purposes of our
opinion, we have not made an independent investigation of the facts set
forth in the Documents. We have, consequently, relied on your
representations that the information presented in the Documents or
otherwise furnished to us accurately and completely describes all material
facts relevant to our opinion.
In our examination, we have assumed the legal capacity of all
natural persons, the genuineness of all signatures, the authenticity of all
documents submitted to us as originals, the conformity to original
documents of all documents submitted to us as certified, conformed or
photostatic copies, and the authenticity of the originals of such copies.
Where documents have been provided to us in draft form, we have assumed
that the final executed versions of such documents will not differ
materially from such drafts.
Our opinion is based on the correctness of the following specific
assumptions: (i) WEA and each of the entities comprising the Company has
been and will continue to be operated in accordance with the laws of the
jurisdiction in which it was formed and in the manner described in the
relevant partnership agreement or other organizational documents; (ii)
there will be no changes in the applicable laws of the States of Missouri
or Delaware or any other state under the laws of which any of the entities
comprising the Company have been formed; (iii) each of the representations
contained in the Officer's Certificate are true, correct and complete; and
(iv) WEA, Westfield Subsidiary REIT 1, Inc. ("New REIT 1"), and Westfield
Subsidiary REIT 2, Inc. ("New REIT 2"), each will comply with the covenants
made by them in the Officer's Certificate, and WEA will take all steps
necessary to insure that New REIT 1 and New REIT 2 will qualify, at all
times after their respective dates of incorporation, as real estate
investment trusts for U.S. Federal income tax purposes.
In rendering our opinion, we have also considered and relied
upon the Internal Revenue Code of 1986, as amended (the "Code"), the
regulations promulgated thereunder by the Treasury Department (the
"Regulations"), administrative rulings, and the other interpretations of
the Code and the Regulations by the courts and the Internal Revenue
Service, all as they exist at the date of this letter. With respect to the
latter assumption, it should be noted that statutes, regulations, judicial
decisions, and administrative interpretations are subject to change at any
time and, in some circumstances, with retroactive effect. A material
change that is made after the date hereof in any of the foregoing bases for
our opinion could affect our conclusions.
We express no opinion as to the laws of any jurisdiction other
than the Federal laws of the United States of America to the extent
specifically referred to herein.
Based on the foregoing, we are of the opinion that:
1. Commencing with WEA's taxable year ended December 31, 1994,
WEA was organized in conformity with the requirements for qualification as
a real estate investment trust ("REIT") under the Code, and its actual
method of operation from February 12, 1994 through the date of this letter
has enabled, and its proposed method of operation will enable, it to meet
the requirements for qualification and taxation as a REIT under the Code.
The foregoing opinion takes into account WEA's interest in Westland
Properties, Inc. ("WPI") during the period that WPI was not a qualified
REIT subsidiary under section 856(i)(2) of the Code. Moreover, such
qualification and taxation as a REIT depends upon WEA's having met and
continuing to meet, through actual annual operating results, certain
requirements, including requirements relating to distribution levels,
diversity of stock ownership, and the various qualification tests imposed
under the Code, the results of which are not reviewed by us. Accordingly,
no assurance can be given that the actual results of WEA's operations for
any particular taxable year satisfy such requirements.
2. The discussion in the Registration Statement under the
heading "FEDERAL INCOME TAX CONSIDERATIONS" is a fair and accurate summary
of the material Federal income tax consequences of the purchase, ownership
and disposition of the shares of WEA stock being registered in such
Registration Statement, subject to the qualifications set forth therein.
Other than as expressly stated above, we express no opinion on
any issue relating to WEA, the Company or to any investment therein.
This opinion is intended for the exclusive use of the Company and
its shareholders and, except as set forth herein, it may not be used,
circulated, quoted or relied upon for any other purpose without our prior
written consent. We consent to the filing of this opinion as an exhibit to
the Registration Statement and to the references to Skadden, Arps, Slate,
Meagher & Flom LLP in the Registration Statement. In giving this consent,
we do not thereby admit that we are within the category of persons whose
consent is required under Section 7 of the Securities Act of 1933, as
amended, or the rules or regulations of the Securities and Exchange
Commission thereunder. This opinion is expressed as of the date hereof,
and we disclaim any undertaking to advise you of any subsequent changes in
the matters stated, represented, or assumed herein or any subsequent
changes in applicable law.
Very truly yours,
\s\Skadden, Arps, Slate, Meagher & Flom LLP
------------------------------------------
<TABLE>
<CAPTION>
EXHIBIT 12.1
WESTFIELD AMERICA, INC.
COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES
(AMOUNTS IN THOUSANDS, EXCEPT RATIOS)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
1999 1999
------------------ ----------------
<S> <C> <C>
Income before income taxes $12,091 $21,092
Add: Minority interest in consolidated real
estate partnership 752 1,336
Equity in (income) losses of
unconsolidated real estate partnerships (1,264) (2,320)
Distributions from unconsolidated
real estate partnerships 890 3,033
Interest expense 50,041 99,185
Less: Gains on sale of investments (1,971) (1,971)
------------------ ----------------
Total Earnings Available to Cover Fixed Charges $60,539 $120,355
Total Fixed Charges-Interest Expensed
and capitalized 50,642 100,029
Total Preferred Stock Dividends 8,625 17,250
------------------ ----------------
Total Combined Fixed Charges and Preferred Stock
Dividends 59,267 117,279
Ratio of Earnings to Fixed Charges 1.20x 1.20x
================== ================
Ratio of Earnings to Fixed Charges and Preferred
Stock Dividends 1.02x 1.03x
================== ================
Supplemental Disclosure of Ratio of Funds from
Operations (FFO) to Fixed Charges:
FFO $42,037 $83,207
Interest expense 50,041 99,185
------------------ ----------------
Adjusted FFO available to cover fixed charges 92,078 182,392
================== ================
Total Fixed Charges-interest expense 50,642 100,029
Total Preferred Stock Dividends 8,625 17,250
------------------ ----------------
Total Combined Fixed Charges and Preferred
Stock Dividends 59,267 117,279
================== ================
Ratio of FFO to Fixed Charges 1.82x 1.82x
================== ================
Ratio of FFO to Fixed Charges and Preferred Stock 1.55x 1.56x
Dividends
================== ================
</TABLE>
<TABLE>
<CAPTION>
EXHIBIT 12.1
WESTFIELD AMERICA, INC.
COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES
DECEMBER 31, 1998
(AMOUNTS IN THOUSANDS, EXCEPT RATIOS)
PERIOD FROM
FEBRUARY 12,
YEAR ENDED DECEMBER 31, 1994 THROUGH
------------------------------------ DECEMBER 31,
1998 1997 1996 1995 1994 (1)
--------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Income before income taxes $106,188 $46,865 $24,696 $21,846 $15,241
Add: Minority interest in consolidated real
estate partnership 4,257 2,478 1,063 - -
Equity in (income) losses of unconsolidated
real estate partnerships (5,949) (3,887) (3,707) (4,412) 386
Distributions from unconsolidated
real estate partnerships 9,812 10,013 11,430 17,611 29,961
Interest expense 106,852 57,472 40,233 27,916 24,156
Less:Gain on sale of properties and partnership
interest (53,895)
--------------------------------------------------------
Total Earnings Available to Cover Fixed Charges $167,265 $112,941 $73,715 $62,961 $69,744
========================================================
Total Fixed Charges-Interest Expensed and capitalized $108,410 $58,876 $41,736 $27,968 $24,156
Total Preferred Stock Dividends 17,619 11,428 4,264 3 -
--------------------------------------------------------
Total Combined Fixed Charges and Preferred
Stock Dividends 126,029 70,304 46,000 27,971 24,156
Ratio of Earnings to Fixed Charges 1.54x 1.92x 1.77x 2.25x 2.89x
========================================================
Ratio of Earnings to Fixed Charges and Preferred Stock
Dividends 1.33x 1.61x 1.60x 2.25x 2.89x
========================================================
Supplemental Disclosure of Ratio of Funds from Operations
(FFO) to Fixed Charges:
FFO $140,839 $111,271 $75,842 $65,792 $53,315
Interest expense 106,852 57,472 40,233 27,916 24,156
--------------------------------------------------------
Adjusted FFO available to cover fixed charges $247,691 $168,743 $116,075 $93,708 $77,471
========================================================
Total Fixed Charges-interest expense 108,410 58,876 41,736 27,968 24,156
Total Preferred Stock Dividends 17,619 11,428 4,264 3 -
--------------------------------------------------------
Total Combined Fixed Charges and Preferred Stock
Dividends $126,029 $70,304 $46,000 $27,971 $24,156
========================================================
Ratio of FFO to Fixed Charges 2.28x 2.87x 2.78x 3.35x 3.21x
========================================================
Ratio of FFO to Fixed Charges and Preferred Stock
Dividends 1.97x 2.40x 2.52x 3.35x 3.21x
========================================================
(1) The computation for the forty two days ended February 11, 1994 is not meaningful.
</TABLE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement on Form S-3 and the related Prospectus of Westfield
America, Inc., dated August 23, 1999, for the registration of common stock
and preferred stock and to the incorporation by reference therein of our
report dated January 25, 1999 with respect to the consolidated financial
statements of Westfield America, Inc. included in the Annual Report (Form
10-K) for the year ended December 31, 1998 filed with the Securities and
Exchange Commission.
We also consent to the incorporation by reference of our report dated
January 19, 1998, with respect to the statement of revenues and certain
expenses of Topanga Plaza for the year ended December 31, 1997, which is
included in the Current Report on Form 8-K dated February 3, 1999 and
incorporated by reference in the above mentioned Registration Statement on
Form S-3 and related Prospectus, dated August 23, 1999.
/s/ Ernst & Young LLP
August 23, 1999
Los Angeles, California
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration
statement on Form S-3 of our report dated April 27, 1998, on our audit of
the combined statement of revenues and certain expenses of selected
TrizecHahn Acquisition Properties to be acquired less than 100% by
Westfield America, Inc. for the year ended December 31, 1997 and of our
report dated May 29, 1998, on our audit of the statement of revenues and
certain expenses of selected TrizecHahn Acquisition Properties to be
acquired by Westfield America, Inc. for the year ended December 31, 1997
which reports are included in the Form 8-K/A of Westfield America, Inc.
filed February 1, 1999. We also consent to the reference to our Firm under
the caption "Experts".
/s/ PRICEWATERHOUSECOOPERS LLP
Newport Beach, California
August 24, 1999
