AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 20, 1999
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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WESTFIELD AMERICA, INC.
(Exact name of Registrant as specified in its charter)
MISSOURI 43-0758627
(State or other jurisdiction of (I.R.S. Employer
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
(Address, including zip code, and (310) 478-4456
telephone number, including area (Name, address, including zip code,
code, of registrant's principal and telephone number, including
executive offices) area code, of agent for service)
Copies to:
GREGG A. NOEL, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
300 SOUTH GRAND AVENUE
LOS ANGELES, CALIFORNIA 90071
(213) 687-5000
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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.
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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 Maximum Proposed Maximum Amount of
Title of Each Class of Amount to be Offering Price Aggregate Registration
Securities to be Registered Registered Per Share(1) Offering Price(1) Fee
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value
$0.01 per share ............. 978,378(2) $12.5625 $12,290,873.62 $3,417.00
- -----------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
in accordance with Rule 457(c) of the Securities Act.
(2) Represents the number of shares of Common Stock initially issuable
upon exchange of investor unit rights in Westfield America Limited
Partnership. 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 such investor unit rights as a
consequence of adjustments to the rate at which such investor unit
rights are exchanged into shares of Common Stock.
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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.
[FLAG]
The information in this prospectus is not complete and may be changed. We
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 we are not soliciting an offer to buy
these securities in any state where such offer of sale is not permitted.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED DECEMBER 20, 1999
PROSPECTUS
WESTFIELD AMERICA, INC.
11601 WILSHIRE BOULEVARD, 12TH FLOOR
LOS ANGELES, CALIFORNIA 90025
(310) 478-4456
978,378 COMMON SHARES
This prospectus relates to the possible issuance from time to time of
978,378 shares of our common stock, subject to adjustment, to the holders
of investor unit rights in Westfield America Limited Partnership. Holders
of investor unit rights in Westfield America Limited Partnership have the
right to receive cash in exchange for their investor unit rights, subject
to our prior and independent right to acquire some or all of such investor
unit rights for an equivalent number of shares of our common stock.
Westfield America Limited Partnership issued 978,378 investor unit rights
in connection with the acquisition of partnership interests in a
partnership known as Capital Mall Company that closed on December 9, 1998.
This prospectus also relates to the offer and sale from time to time
by shareholders of 978,378 shares of our common stock, subject to
adjustment, issued in exchange for investor unit rights in Westfield
America Limited Partnership. The registration of the shares does not
necessarily mean that any of the shares will be sold by the selling
shareholders.
We will not receive any cash proceeds from the issuance of the shares
or the sale of the shares.
Our common shares are listed on the New York Stock Exchange, Inc.
under the symbol "WEA." On December 17, 1999, the closing price of one common
share on the New York Stock Exchange was $12-5/8.
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.
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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.
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The date of this prospectus is , 1999.
TABLE OF CONTENTS
PAGE
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Risk Factors............................................................3
Special Note Regarding Forward-looking Statements......................18
The Company............................................................18
Use of Proceeds........................................................18
Description of Capital Stock...........................................19
Provisions of our Articles of Incorporation
and By-Laws and of Missouri Law........................................31
Description of OP Units and the Partnership
Agreement for the Operating Partnership ...............................35
Redemption of OP Units.................................................42
Comparison of Ownership of OP Units and
Common Shares..........................................................45
Comparison of Federal Income Tax Consequences
of Ownership of OP Units and Common Shares.............................50
Federal Income Tax Considerations......................................52
Selling Shareholders...................................................61
Plan of Distribution...................................................61
Legal Matters..........................................................63
Experts................................................................63
Where You Can Find More Information....................................63
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 September 30, 1999, some of our affiliates owned shares of our
common stock, par value $.01 per share, as follows:
o Westfield America Trust, an Australian public property trust,
owned 56.5% 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 21.9% of the common shares held by Westfield
America Trust, which is an additional 12.4% 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$303.2 million as of September 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 September 30, 1999, the Lowy family, or interests associated
with it, owned approximately 31.4% 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.
oo Independent directors are those members of our board of
directors who:
ooo are not, and have not for the last 12 months been,
directors, officers or employees of Westfield
Holdings or Westfield America Trust;
ooo are not affiliates of Westfield Holdings or
Westfield America Trust or officers or employees
of such affiliates;
ooo are not members of the immediate family of any
natural person described above; and
ooo 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 or holders of equity interests. 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, we will be entitled to payment of
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 $11.9
million in interest from the loan for the nine months ended September 30,
1999, which represents a return of approximately 11% 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.
OUR 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.
OUR INVESTMENTS IN REAL ESTATE INVOLVE RISKS
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 September 30, 1999, 20 of our 38 shopping center properties
were located in California (representing approximately 53% of our shopping
centers' total gross leasable area), 6 are located in Missouri
(representing approximately 16% of the total gross leasable area), 3 are
located in Maryland (representing approximately 11% 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 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 acquired 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 investor unit
rights 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 38 properties with total gross leasable area
of 35.3 million square feet as of September 30, 1999. Our 1998 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 September 30, 1999, anchors occupied 58.0% of the total gross
leasable area of our shopping centers. As of the same date, the May Company
leased 14.7%, J.C. Penney leased 10.8%, Sears leased 8.8% and Macy's leased
8.3% of our total gross leasable area. No other anchor leased more than
3.6% of our total gross leasable area.
As of September 30, 1999, tenants whose parent company is The Limited
Stores collectively occupied approximately 1,119,000 square feet, or 7.9%
of our gross leasable area for stores other than anchors. 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. See "There are risks
associated with being a REIT - We may liable for a corporate-level tax if we
sell property that we owned prior to our conversion to REIT status."
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.
OUR DEBT FINANCING INVOLVES RISKS
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 2000 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 September 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 $2,694 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.
At September 30, 1999, our consolidated indebtedness was $2,349
million, of which 98% is fixed rate debt after considering interest rate
protection agreements with notional amounts totaling approximately $1.7
billion. The interest rate on the fixed rate debt, including swap
contracts, ranges from 6.36% to 8.38%. The maturity dates of consolidated
indebtedness range from 2000 to 2018.
At September 30, 1999, the annual maturities of notes payable and
revolving credit facility were as follows:
1999 $ 3,634
2000 625,964
2001 958,404
2002 206,782
2003 109,513
Thereafter 444,987
----------
Total Debt $2,349,284
==========
As of September 30, 1999, our pro-rata share of debt-to-total market
capitalization based on the common share price on September 30, 1999, was
55.6%, excluding $301.1 million of notes issued to Australian investors
from the numerator, and our balance of cash and cash equivalents was $20.7
million, not including our proportionate share of cash held by
unconsolidated real estate affiliates. In addition, at September 30, 1999,
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
September 30, 1999, we had unused capacity under our unsecured revolving
credit facility totaling approximately $115.8 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.
As of September 30, 1999, one of our loans contained 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 the 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.
YOU MAY BE REQUIRED TO PAY FEDERAL INCOME TAX IF YOU EXCHANGE YOUR OP UNITS
FOR CASH OR COMMON SHARES
If we elect to acquire your OP Units in exchange for common shares,
the exchange of such OP Units will be treated for Federal income tax
purposes as a sale of your OP Units. Such a sale will be fully taxable to
you. In general, you will recognize gain equal to the excess of (1) the
value of the common shares you receive plus the amount of any liabilities
of the operating partnership allocable to the exchanged OP Units at the
time of the exchange, over (2) the adjusted basis of your OP Units. It is
possible that the amount of gain recognized, or even the tax liability
resulting from such gain, could exceed the value of the common shares you
would receive upon such disposition. In addition, your ability to sell a
substantial number of common shares in order to raise cash to pay your tax
liabilities associated with the redemption of OP Units may be limited by
the trading volume of our common shares and by fluctuations in the market
price of our common shares. As a result, the price you receive for such
shares may not equal the value of your OP Units at the time of the
redemption.
If we do not acquire the OP Units in exchange for common shares, and
the operating partnership redeems such OP Units for cash, the tax
consequences may differ depending on whether you tender all of your OP
Units and whether the operating partnership obtained from us the cash used
to effect such redemption. See "Redemption of OP Units --Federal Income Tax
Consequences of Redemption of OP Units."
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 (or
January 1, 1996, in the case of property held by our subsidiary, Westland
Properties).
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 September 30, 1999. Rather, we own a partial
interest in joint ventures with 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. There are, however, types of losses (such as from wars,
floods and earthquakes) that are generally not insured, not insured at full
replacement cost or insured subject to larger deductibles. 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 September 30, 1999, we had 73,346,541 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$303.2 million as of
September 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 5,555,560 common shares,
subject to anti-dilution adjustments, as well as additional shares of our
preferred stock, which are convertible into 4,777,780 of our common shares,
subject to anti-dilution adjustments. However, in order for such latter
shares to be convertible, 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. 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 OP Units for an
equivalent number of common shares, subject to adjustment as provided
in the partnership agreement for the operating partnership;
o 911,185 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 5,300,000 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 included
communications regarding the Year 2000 readiness 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 have upgraded any systems that were identified as not Year
2000 compliant.
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. 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 38 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
We will not receive any cash proceeds from the issuance of the common
shares, if any, that will be issued pursuant to this prospectus, nor will
we receive any cash proceeds from the offer and sale of the common shares,
if any, that will be made by the selling shareholders pursuant to this
prospectus.
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:
oo 940,000 shares of Series A cumulative redeemable
preferred stock (the "Series A Preferred Shares")
oo 400,000 shares of Series B cumulative redeemable
preferred stock (the "Series B Preferred Shares")
oo 416,667 shares of Series C cumulative convertible
redeemable preferred stock (the "Series C Preferred
Shares")
oo 138,889 shares of Series C-1 cumulative convertible
redeemable preferred stock (the "Series C-1 Preferred
Shares")
oo 138,889 Series C-2 cumulative convertible redeemable
preferred stock (the "Series C-2 Preferred Shares" and,
together with the Series C Preferred Shares and the
Series C-1 Preferred Shares, the "Series C Shares")
oo 694,445 shares of Series D cumulative convertible
redeemable preferred stock (the "Series D Preferred
Shares")
oo 138,889 shares of Series D-1 cumulative convertible
redeemable preferred stock (the "Series D-1 Preferred
Shares")
oo 477,778 shares of Series E cumulative convertible
redeemable preferred stock (the "Series E Preferred
Shares")
oo 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 September 30, 1999, our outstanding capital consisted of:
o 2,737,779 Preferred Shares, with the following amounts
outstanding:
oo 940,000 Series A Preferred Shares
oo 270,000 Series B Preferred Shares
oo 416,667 Series C Preferred Shares
oo 138,889 Series C-1 Preferred Shares
oo 138,889 Series C-2 Preferred Shares
oo 694,445 Series D Preferred Shares
oo 138,889 Series D-1 Preferred Shares
oo 477,778 Series E Preferred Shares
o 73,346,541 common shares
oo warrants to purchase up to 8,335,648 common shares
oo the right to sell A$465 million, which was approximately
US$303.2 million as of September 30, 1999, of common
shares
oo 2,164,235 OP Units that are exchangeable into 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
oo 911,185 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
oo 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 5,300,000 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 calendar quarter to
o $2.125 X 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 calendar quarter to
o $2.125 X the redemption 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;
oo 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.
oo 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;
oo 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:
oo decrease the rate or change the time of payment of any
dividend on the Series A Preferred Shares;
oo decrease the amount payable upon redemption of the
Series A Preferred Shares or upon our liquidation;
oo move forward the date on which we may redeem the
Series A Preferred Shares; or
oo 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 rank equal to 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" in this Section.
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 our option, 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;
oo 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;
oo 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.
oo 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.
oo 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. 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 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:
oo our cumulative undistributed funds from operations, as
determined by our board of directors, at December 31,
1997, plus
oo the cumulative amount of funds from operations, as
determined by our board of directors, after December 31,
1997, minus
oo 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
oo 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.
oo 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:
ooo are deemed to be transferred with such common
shares;
ooo are not exercisable; and
ooo 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.
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.
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 have filed a registration statement in response to a
request by the initial holder of the Series C Preferred Shares under such
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;
oo 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;
oo The holders of the Series C Preferred Shares would vote
on such matters with the holders of common shares,
together as a class.
oo 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;
oo 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;
oo 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 holder of 416,667 of the Series D Preferred Shares
does not have any registration rights, nor does it have the right to
participate in future offerings. The holder of 277,778 of the Series D
Preferred Shares has registration rights with respect to the common shares
it would receive upon conversion of its Series D Preferred Shares.
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;
oo 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;
oo 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 662/3% 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$303.2 million as of September 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 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 911,185 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 5,300,000 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 662/3% 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 resident domestic 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 business combination or the transaction
by which the person became an interested shareholder is approved by the
board of directors on or before the date the interested shareholder obtains
such status.
This statute also prohibits other business combinations between a
resident domestic corporation and an interested shareholder at any time
unless:
o the transaction by which the person became an interested
shareholder 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 beneficially owned by the interested shareholder,
approve the business combination not earlier than five years
after the transaction in which the person became an interested
shareholder; or
o the business combination satisfies detailed financial 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 at any time
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. Under
the GBCL, unless an issuing public corporation's articles of incorporation
or bylaws provide that the Control Share Acquisition Statute does not apply
to such corporation, "control shares" acquired in a "control share
acquisition" have the same voting rights that such shares had prior to the
control share acquisition only if voting rights for those shares are
granted by a resolution approved by the affirmative vote of a majority of
all outstanding shares entitled to vote on the matter, excluding all
interested shares.
"Control shares" are shares of an issuing public corporation that,
together with all other shares of the issuing public corporation owned by a
person or over which that person can exercise or direct the exercise of
voting power, would entitle that person, immediately after acquisition of
such shares, directly or indirectly, alone or as part of a group, to
exercise or direct the exercise of the voting power of those shares in the
election of directors within any of the following ranges of voting power:
1/5 or more but less than 1/3; 1/3 or more but less than a majority; or a
majority or more. However, shares that the person or group has owned or
over which the person or group could have exercised or directed voting
power for at least ten years are not considered to be "control shares" and
are not aggregated for determining inclusion within the above-stated
ranges.
A "control share acquisition" is an acquisition, directly or
indirectly, by any person of ownership of, or the power to direct the
exercise of voting power over, issued and outstanding control shares. Under
the GBCL, shares acquired within ninety days of any other acquisition of
shares, or the acquisition of shares under a plan to effect a control share
acquisition, are all considered to have been acquired in the same
acquisition. However, a person, who acquires shares in the ordinary course
of business for the benefit of others in good faith and not for the
purposes of circumventing the Control Share Acquisition Statute, will have
voting power over those shares that the person would be able to exercise or
direct the exercise of votes without further instructions from others.
Not all acquisitions of shares constitute control share acquisitions.
Acquisitions do not constitute control share acquisitions if effected:
o in accordance with a contract in existence prior to June 13,
1984;
o in accordance with a will or other testamentary disposition,
the laws of descent and distribution or by intervivios gift
where such gift is made in good faith and not for the purpose
of circumventing the Control Share Acquisition
Statute;
o in connection with a public offering, a private placement or
any other issuance of shares;
o in connection with a benefit or other compensation plan;
o in connection with the conversion of debt securities into
shares;
o under a binding contract other than in connection with a tender
offer, whereby the holders of shares representing at least
two-thirds of our voting power agree to sell such shares;
o in satisfaction of a pledge or other security interest created
in good faith and not to circumvent the Control Share
Acquisition Statute;
o in connection with a merger or consolidation effected in
compliance with the GBCL;
o under a binding contract with another entity which, at any time
within one-year prior to the acquisition in question, owned
more than fifty percent of our voting power;
o by or from any person whose shares have been previously granted
voting rights in accordance with the Control Share Acquisition
Statute, provided the acquisition entitles the person making
the acquisition, directly or indirectly, alone or as part of a
group, to exercise or direct the exercise of voting power of
the corporation in the election of directors within the range
of voting power not in excess of the range of voting power
associated with the shares to which voting rights have been
previously granted.
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.
DESCRIPTION OF OP UNITS AND THE PARTNERSHIP
AGREEMENT FOR THE OPERATING PARTNERSHIP
A summary of some provisions of the First Amended and Restated
Agreement of Limited Partnership of the Westfield America Limited
Partnership, dated as of August 3, 1998, as amended, and a description of
the material terms of the OP Units are set forth below. The following
description does not purport to be complete and is subject to and qualified
in its entirety by reference to applicable provisions of the Delaware
Revised Uniform Limited Partnership Act and the partnership agreement for
the operating partnership. We have filed a copy of the partnership
agreement for the operating partnership with the SEC.
GENERAL
Substantially all of our assets are held by, and substantially all of
our operations are conducted through, the operating partnership, either
directly or through subsidiaries. We are the sole general partner and also,
either directly or through subsidiaries, a limited partner of the operating
partnership and, we, either directly or through subsidiaries, own all of
the outstanding common partnership units and partnership preferred units in
the operating partnership. In addition, the operating partnership has
issued OP Units. As of September 30, 1999 the general partnership and
limited partnership interests represented approximately 97.7% of the
outstanding interests in the operating partnership and the OP Units
represented approximately 2.3% of the outstanding interests in the
operating partnership.
OP Units are held by persons who contributed interests in properties
and/or other assets to the operating partnership and may be held in the
future by persons who exchange their partnership interests in some of our
affiliated partnerships for OP Units. All holders of OP Units or other
interests in the operating partnership (including us in our capacity as
general partner) are entitled to share in cash distributions from, and in
the profits and losses of, the operating partnership in proportion to their
respective percentage interests in the operating partnership, as well as in
those properties that we own outside the operating partnership. The OP
Units and other interests in the operating partnership are not listed on
any exchange or quoted on any national market system. The partnership
agreement for the operating partnership imposes restrictions on the
transfer of OP Units and other partnership interests in the operating
partnership, as described below.
PURPOSES, BUSINESS AND MANAGEMENT
The purpose of the operating partnership includes the conduct of any
business that may be conducted lawfully by a limited partnership formed
under the Delaware Limited Partnership Act, except that the partnership
agreement for the operating partnership requires the business of the
operating partnership to be conducted in such a manner that will permit us
to be classified as a REIT under Sections 856 through 860 of the Internal
Revenue Code. Subject to the foregoing limitation, the operating
partnership may enter into partnerships, joint ventures or similar
arrangements and may own interests in any other entity. We may cause the
Operating Partnership not to take, or to refrain from taking, any action
that, in our judgment, in our sole and absolute discretion:
o could adversely affect our ability to continue to qualify as a
REIT;
o could subject us to any additional taxes under Internal Revenue
Code Section 857 or Internal Revenue Code Section 4981 or any
other related or successor provision under the Internal Revenue
Code;
o could violate any law or regulation of any governmental body or
agency having jurisdiction over us, our securities or the
operating partnership; or
o could violate in any material respects any of the covenants,
conditions or restrictions now or hereafter placed upon or
adopted by us pursuant to any of our agreements or applicable
laws and regulations,
unless, in any such case, such action described in the bullet points above
is specifically consented to by us in writing.
In general, our board of directors, in our capacity as sole general
partner of the operating partnership, will manage the affairs of the
operating partnership by directing our affairs.
Except as otherwise expressly provided in the partnership agreement
for the operating partnership or as delegated or provided to an additional
partner by us or any successor general partner pursuant to the partnership
agreement for the operating partnership, all management powers over the
business and affairs of the operating partnership are exclusively vested in
us. No limited partner or OP Unitholder 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 OP Unitholder, 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 OP
Unitholders 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 for the operating partnership, we,
subject to the other provisions of the partnership agreement for the
operating partnership, 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 OP Unitholders.
Restrictions on Our Authority
We may not take any action in contravention of the partnership
agreement for the operating partnership. 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 for the
operating partnership, except as provided in the partnership
agreement for the operating partnership; for a description of
the provisions of the partnership agreement for the operating
partnership permitting us to amend the partnership agreement
without the consent of the limited partners see "-Amendment of
the Partnership Agreement for the Operating Partnership;"
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 generally may not withdraw as general partner from
the operating partnership nor transfer all of our interest in the operating
partnership without the consent of a majority in interest of the OP
Unitholders, subject to the exceptions discussed in "--Transfers and
Withdrawals - Restrictions on Us." Furthermore, we may not amend, modify or
terminate the partnership agreement for the operating partnership without
the prior consent of a majority in interest of the OP Unitholders holding
each class or series of OP Units affected by such amendment.
In addition, we may not amend the partnership agreement for the
operating partnership or take any action on behalf of the operating
partnership, without the prior consent of each limited partner or OP
Unitholder 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
OP Unitholder into a partner for state law purposes;
o modify the limited liability of a limited partner or an OP
Unitholder;
o alter the rights of any limited partner or OP Unitholder to
receive the distributions to which such partner or OP
Unitholder is entitled, or alter the allocations specified in
the partnership agreement for the operating partnership; or
o alter or modify the redemption rights or related definitions as
provided in the partnership agreement for the operating
partnership.
However, we may make such an amendment or take such an action, if
approved by a majority in interest of the partners or OP Unitholders
holding the affected class or series of partnership interests or OP Units.
Additional Limited Partners and OP Unitholders
We are authorized to admit additional limited partners and OP
Unitholders 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 OP Unitholders. No action or consent by the
limited partners or OP Unitholders is required in connection with the
admission of any additional limited partner or OP Unitholder. We are
expressly authorized to cause the operating partnership to issue additional
partnership interests and OP Units:
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 the operating partnership 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, OP Unitholder 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 OP Unitholder
without our consent which consent may be given or withheld in our sole and
absolute discretion.
ABILITY TO ENGAGE IN OTHER BUSINESSES; CONFLICTS OF INTEREST
We may not conduct any business other than in connection with the
ownership, acquisition and disposition of partnership interests as general
partner, the management of the business of the operating partnership, our
operation as a reporting company with a class or classes of securities
registered under the Exchange Act, our operations as a REIT, the offering,
sale, syndication, private placement or public offering of stock, bonds,
securities or other interests, financing or refinancing of any type related
to the operating partnership or its assets or activities, and such
activities as are incidental to those activities discussed above. We may,
however, in our sole and absolute discretion, from time to time hold or
acquire assets in our own name or otherwise other than through the
operating partnership so long as we take commercially reasonable measures
to insure that the economic benefits and burdens of such property are
otherwise vested in the operating partnership. Other persons (including our
officers, directors, employees, agents and other affiliates) are not
prohibited under the partnership agreement for the operating partnership
from engaging in other business activities and are not required to present
any business opportunities to the operating partnership, however Messrs.
Frank Lowy, Peter Lowy, David Lowy and Steven Lowy have entered into
agreements with us, which include noncompetition provisions. In addition,
we, on behalf of the operating partnership, have adopted some procedures
regarding avoidance of specified conflicts of interest.
DISTRIBUTIONS
Subject to the terms of any partnership unit designation or OP Unit
designation, we shall cause the operating partnership to distribute
quarterly, or on a more or less frequent basis as we determine, all, or
such portion as we may in our sole and absolute discretion determine, of
Available Cash (as such term is defined in the partnership agreement for
the operating partnership) generated by the operating partnership during
such quarter to the partners and OP Unitholders:
o first, with respect to any partnership interests or OP Units
that are entitled to any preference in distribution, in
accordance with the rights of such class or classes of
partnership interests or OP Units, and, within such class or
classes, among the partners and OP Unitholders pro rata in
proportion to their respective percentage interests; and
o second, with respect to any partnership interests or OP units
that are not entitled to any preference in distribution, in
accordance with the rights of such class of partnership
interests, as applicable, and, within such class, among the
partners and OP Unitholders pro rata in proportion to their
respective percentage interests.
To the extent we own properties outside the operating partnership,
any income we receive in connection with the activities from those
properties will result in a recalculation of distributions from the
operating partnership such that we, the limited partners and OP
Unitholders, would each receive the same distributions that we and they
would have received had we contributed such properties to the operating
partnership.
BORROWING BY THE OPERATING PARTNERSHIP
We are authorized to cause the operating partnership to borrow money
and to issue and guarantee debt as we deem necessary for the conduct of the
activities of the operating partnership. Such debt may be secured, among
other things, by mortgages, deeds of trust, liens or encumbrances on
properties of the operating partnership.
REIMBURSEMENT OF US; TRANSACTIONS WITH OUR AFFILIATES AND US
We do not receive any compensation for our services as general
partner of the operating partnership. We, as a partner in the operating
partnership, have the same right to allocations and distributions as other
partners and OP Unitholders. In addition, the operating partnership will
reimburse us for all expenses incurred by us in connection with the
operating partnership's business, including expenses relating to the
ownership of interests in and management and operation of, or for the
benefit of, the operating partnership, compensation of officers and
employees, including, without limitation, payments under our future
compensation plans that may provide for stock units, or phantom stock,
pursuant to which our employees will receive payments based upon dividends
on or the value of our common shares, director fees and expenses and all
costs and expenses that we incur in connection with our being a public
company, including costs of filings with the SEC, reports and other
distributions to our shareholders. The operating partnership will reimburse
us for all expenses incurred by us relating to any other offering of
capital stock, including any underwriting discounts or commissions in such
case based on the percentage of the net proceeds from such issuance
contributed to or otherwise made available to the operating partnership.
Except as expressly permitted by the partnership agreement for the
operating partnership, we and our affiliates may not engage in any
transactions with the operating partnership except on terms that are fair
and reasonable and no less favorable to the operating partnership than
would be obtained from an unaffiliated third party.
OUR LIABILITY AND THAT OF THE LIMITED PARTNERS AND OP UNITHOLDERS
We, as the general partner of the operating partnership, are
ultimately liable for all general recourse obligations of the operating
partnership to the extent not paid by the operating partnership. We are not
liable for the nonrecourse obligations of the operating partnership.
The limited partners and OP Unitholders are not required to make
additional contributions to the operating partnership. Assuming that a
limited partner or OP Unitholder does not take part in the control of the
business of the operating partnership, the liability of the limited partner
for obligations of the operating partnership under the partnership
agreement for the operating partnership and the Delaware Limited
Partnership Act is limited, subject to limited exceptions, generally to the
loss of the limited partner's or OP Unitholder's investment in the
operating partnership represented by his or her limited partnership
interest or OP Units, as applicable. The operating partnership will operate
in a manner we deem reasonable, necessary and appropriate to preserve the
limited liability of the limited partners and OP Unitholders.
EXCULPATION AND INDEMNIFICATION OF US
The partnership agreement for the operating partnership generally
provides that we, as general partner, and any of our directors or officers
will incur no liability to the operating partnership, any limited partner,
OP Unitholder or assignee for losses sustained or liabilities incurred or
benefits not derived as a result of errors in judgment, mistakes of law or
of any act or omission if we or such officer or director acted in good
faith. In addition, we, as general partner, are not responsible for any
misconduct or negligence on the part of our agents, provided we appointed
such agents in good faith. We, as general partner, may consult with legal
counsel, accountants, appraisers, management consultants, investment
bankers and other consultants and advisors, and any action we take or omit
to take in reliance upon the opinion of such persons, as to matters which
we, as general partner, reasonably believe to be within their professional
or expert competence, shall be conclusively presumed to have been done or
omitted in good faith and in accordance with such opinion.
The partnership agreement for the operating partnership also provides
for the indemnification, to the fullest extent permitted by law, of us, as
general partner, of our directors and officers, and of such other persons
as we, as general partner, may from time to time designate against any and
all losses, claims, damages, liabilities, joint or several, expenses,
judgments, fines, settlements and other amounts arising from any and all
claims, demands, actions, suits or proceedings in which such person may be
involved that relate to the operations of the operating partnership,
provided that such person will not be indemnified for willful misconduct or
a knowing violation of the law or for any transaction in which such person
received an improper personal benefit in violation or breach of any
provision of the partnership agreement for the operating partnership.
SALES OF ASSETS
Under the partnership agreement for the operating partnership, we
generally have the exclusive authority to sell all or substantially all of
the assets of the operating partnership. However, in connection with the
acquisition of properties from persons to whom we issued OP Units as part
of the purchase price, 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.
REDEMPTION RIGHTS OF QUALIFYING PARTIES
For a description of the redemption rights of holders of common
partnership interests and OP Units, see "Redemption of OP Units."
TRANSFERS AND WITHDRAWALS
Restrictions on Transfer
The partnership agreement for the operating partnership 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 for the operating partnership
will not be valid. Until the expiration of one year from the date on which
a partner or OP Unitholder acquired partnership interests or OP Units, as
applicable, such partner or OP Unitholder 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
OP Unitholder acquired partnership interests or OP Units, as applicable,
such partner or OP Unitholder 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 for the operating partnership,
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 OP Unitholder under
the partnership agreement for the operating partnership with respect to
such partnership interests or OP Units, and no such transfer will relieve
the transferor partner or OP Unitholder of its obligations under the
partnership agreement for the operating partnership 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 OP Unitholder 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 OP Unitholder 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 for the operating partnership,
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 for the operating partnership. An assignee will be
entitled to all the rights of an assignee of a limited partnership interest
under the Delaware 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 for the operating
partnership, but will not be deemed to be a holder of partnership interests
for any other purpose under the partnership agreement for the operating
partnership, 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 for the operating partnership 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 OP
Unitholders 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 FOR THE OPERATING PARTNERSHIP
By the General Partner Without the Consent of the Limited Partners or the
OP Unitholders
We have the power, without the consent of the limited partners or the
OP Unitholders, to amend the partnership agreement for the operating
partnership 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 OP Unitholders;
o to reflect the admission, substitution or withdrawal of
partners or the termination of the operating partnership in
accordance with the partnership agreement for the operating
partnership;
o to reflect a change that is of an inconsequential nature and
does not adversely affect the limited partners or the OP
Unitholders in any material respect, or to cure any ambiguity,
correct or supplement any provision in the partnership
agreement for the operating partnership not inconsistent with
law or with other provisions of the partnership agreement for
the operating partnership, or make other changes with respect
to matters arising under the partnership agreement for the
operating partnership that will not be inconsistent with law or
with the provisions of the partnership agreement for the
operating partnership;
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 for the operating partnership or
contemplated by the Internal Revenue Code or the Treasury
Regulations.
With the Consent of the Limited Partners and OP Unitholders
Amendments to the partnership agreement for the operating partnership
may be proposed only by us. Following such proposal, we will submit to the
partners and OP Unitholders any proposed amendment that, pursuant to the
terms of the partnership agreement for the operating partnership, requires
the consent of the partners holding partnership interests and OP
Unitholders holding OP Units entitled to vote at the meeting. We will seek
the written consent of the partners and OP Unitholders, 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 for the operating partnership, 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 operating partnership 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, in the event that there
is no remaining general partner, a 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
for the operating partnership.
REDEMPTION OF OP UNITS
GENERAL
ICP Realty, Inc. and Cordano Associates acquired OP Units upon the
contribution to the operating partnership of their partnership interests in
a partnership known as Capital Mall Company. Under the partnership
agreement for the operating partnership, such OP Units can be redeemed for
cash, subject to our prior and independent right to acquire OP Units for an
equivalent number of our common shares.
Redemption of OP Units
After the first anniversary of becoming a holder of OP Units, each OP
Unitholder, and some assignees, may, subject to the terms and conditions
set forth in the partnership agreement for the operating partnership,
deliver a notice of redemption, in the form attached as an exhibit to the
partnership agreement for the operating partnership, a copy of which is
available from us, requesting the redemption of at least 2,000 OP Units, or
if the OP Unitholder holds fewer than 2,000 OP Units, all of the OP Units
that the OP Unitholder holds. On or before the close of business on the
fifth business day after delivery of this notice, the operating partnership
may acquire the tendered OP Units for a cash amount equal to the value of
our common shares, based on the ratio of one common share for each OP Unit,
subject to anti-dilution adjustments, and subject to our prior and
independent right to acquire some or all of the tendered OP Units for our
common shares, based on the ratio of one common share for each OP Unit,
subject to anti-dilution adjustments, and also subject to the restrictions
on ownership and the transfer restrictions and other limitations set forth
in our Articles of Incorporation. An OP Unitholder can effect a redemption
only once in each fiscal quarter of a twelve-month period and may not
effect a redemption after the operating partnership's record date with
respect to a distribution by the operating partnership and before the
record date we establish for our shareholders for some or all of our
portion of such distribution by the operating partnership.
If the OP Units are acquired for cash, then such OP Units will be
cancelled. If the OP Units are acquired for common shares, we will become
the owner of the OP Units. Such an acquisition of OP Units will be treated
as a sale of the OP Units by the OP Unitholder to us for Federal income tax
purposes. See "-- Federal Income Tax Consequences of Redemption of OP
Units" below. Upon redemption, the OP Unitholder's right to receive
distributions from the operating partnership with respect to its OP Units
will cease. If we elect to exercise our prior and independent right to
acquire OP Units in exchange for common shares, an OP Unitholder will have
the rights to distributions as a shareholder of us from the time of its
acquisition of common shares.
FEDERAL INCOME TAX CONSEQUENCES OF REDEMPTION OF OP UNITS
The following discussion summarizes certain Federal income tax
considerations that may be relevant to you if you tender your OP Units for
redemption. This summary 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 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.
YOU SHOULD CONSULT WITH A TAX ADVISOR REGARDING THE SPECIFIC TAX
CONSEQUENCES OF A REDEMPTION OF OP UNITS, INCLUDING THE FEDERAL, STATE,
LOCAL, AND FOREIGN INCOME AND OTHER TAX CONSEQUENCES OF SUCH REDEMPTION,
AND OF POTENTIAL CHANGES IN APPLICABLE TAX LAWS.
Tax Treatment of a Redemption of OP Units.
If we acquire your OP Units in exchange for our common shares, the
redemption will be treated as a sale of OP Units by you to us. The sale
will be fully taxable to you, and you generally will recognize for tax
purposes in an amount of gain equal to the excess of (1) the value of the
common shares received by you, plus the amount of any partnership
liabilities allocable to the redeemed OP Units at the time of the
redemption, over (2) the adjusted basis of your OP Units. The determination
of the adjusted basis of your OP Units is discussed more fully below. See
"-Basis of OP Units."
If we do not acquire your OP Units in exchange for our common shares,
then the operating partnership will redeem the OP Units for cash. If the
operating partnership redeems the OP Units for cash contributed by us, the
redemption likely would be treated for tax purposes as a sale of OP Units
by you to us in a fully taxable transaction as discussed above.
If the operating partnership redeems all of your OP Units using cash
that is not contributed by us, the tax consequences of such redemption
would be the same as described in the previous paragraph. If, however, such
partnership redeems less than all of the units owned by you: (1) you would
not be permitted to recognize any loss in connection with the redemption;
and (2) you would recognize taxable gain only to the extent that the sum of
the cash and the amount of any partnership liabilities allocable to the
redeemed OP Units exceeds your adjusted basis in all of your OP Units
immediately before the redemption. A recent Federal budget proposal,
however, contains language that, if enacted in its current form, would,
require you to: (1) allocate a portion of the total basis in your OP Units
to the units surrendered in the redemption; and (2) recognize taxable gain
equal to the excess (if any) of the sum of the cash and the amount of
partnership liabilities allocable to the redeemed units over the adjusted
basis allocated to such redeemed units.
Tax Treatment of Gain from Disposition of OP Units Generally.
Capital gains recognized by individuals and certain other
noncorporate taxpayers upon the sale or disposition of an OP Unit will
generally be subject to a maximum Federal income tax rate of 20% if such OP
Unit was held for more than one year and will be taxed at ordinary income
tax rates if such OP Unit was held for one year or less. Generally, gain or
loss recognized by a holder of OP Units on the sale or other taxable
disposition of an OP Unit will be taxable as capital gain or loss. However,
to the extent that the amount realized upon the sale or other taxable
disposition of an OP Unit attributable to such holder's share of
"unrealized receivables" of the operating partnership exceeds the basis
attributable to those assets, such excess will be treated as ordinary
income. Among other things, "unrealized receivables" include amounts
attributable to previously claimed depreciation deductions on certain types
of property. In addition, the portion of the gain recognized by you on the
sale of OP Units held for more than one year that is attributable to real
property depreciation deductions of the operating partnership that have not
been recaptured as ordinary income prior to, or in connection with, such
sale will be subject to a 25% (rather than a 20%) tax rate.
In general, if you acquired your OP Units by purchase or cash
contribution, your holding period in your OP Units begins at the time of
such acquisition. If you acquired your OP Units in exchange for property,
however, your holding period in your OP Units generally includes your
holding period in such property. If you acquired your OP Units at different
times or in exchange for multiple properties in which you had different
holding periods, each such unit may have a holding period that is divided
to reflect the different times of your purchases or the different holding
periods of the various properties that you exchanged. If you sell OP Units
having a divided holding period that is partially in excess of one year and
partially one year or less, any capital gain or loss that you recognize on
such sale would be partially long-term capital gain or loss and partially
short-term capital gain or loss.
Basis of OP Units. If you received your OP Units in connection with a
contribution of cash, a partnership interest, or other property to the
operating partnership, you generally will have an initial tax basis in your
OP Units ("Initial Basis") equal to the amount of cash, if any, that you
contributed, plus your basis in the contributed partnership interest or
other property. Similarly, if you are treated as having received OP Units
upon liquidation of a predecessor partnership, you generally will have an
Initial Basis in your OP Units equal to your basis in your interest in the
predecessor partnership.
Your Initial Basis generally is increased by (1) your share of the
operating partnership's income, (2) increases in your share of the
operating partnership's liabilities (including any increase in your share
of liabilities occurring in connection with the issuance of OP Units), and
(3) additional capital contributions made by you to the operating
partnership. Generally, your basis in your units is decreased (but not
below zero) by (1) distributions made to you by the operating partnership,
(2) decreases in your share of the operating partnership's liabilities
(including any decrease in your share of liabilities occurring in
connection with the issuance of OP Units), (3) your share of the operating
partnership's losses, and (4) your share of the operating partnership's
nondeductible expenditures that are not capitalized.
Potential Application of Disguised Sale Rules to a Redemption of OP
Units. If you received your OP Units in exchange for property, there is a
risk that a redemption of your OP Units may cause the original transfer of
property by you to the operating partnership to be treated as a "disguised"
sale of such property.
Under the Code, a transfer of property by a partner to a partnership
followed by a related transfer of money or property by the partnership to
the partner is treated as a "disguised" sale if: (1) the second transfer
would not have occurred but for the first transfer, and (2) the second
transfer "is not dependent on the entrepreneurial risks of the partnership
operations." In a disguised sale, the partner is treated as if such partner
sold the contributed property to the partnership as of the date the
property was contributed to the partnership. In addition, unless a few
technical exceptions apply, transfers of money or other property between a
partnership and a partner that are made within two years of each other,
such as a redemption of OP Units made within two years of a contribution by
you to the operating partnership, must be reported to the IRS and are
presumed to constitute a "disguised" sale unless the facts and
circumstances clearly establish that such transfers do not constitute a
sale. If two years have passed between the contribution of property and the
transfer of money or other consideration from the partnership to a partner,
the transactions will be presumed not to be a sale unless the facts and
circumstances clearly establish that the transfers constitute a sale.
While there is no authority applying the disguised sale rules to the
exercise of a redemption right by a partner with respect to a partnership
interest received in exchange for property, the exercise of a redemption
right with respect to OP Units within two years of the date of a
contribution of property by you may be treated as a disguised sale. If this
treatment were to apply, you would be treated for Federal income tax
purposes as if, on the date of the contribution of property by you, the
operating partnership transferred to you an obligation to give you the
proceeds received by you in the redemption. In that case, you would be
required to recognize gain on the disguised sale in the year in which you
contributed property to the operating partnership.
Withholding. If we purchase OP Units from you, or if the operating
partnership redeems your units with cash contributed by us, such sale will
be subject to a withholding tax equal to 10% of the amount realized by you
in connection with the redemption unless you (1) furnish us with an
affidavit stating, under penalty of perjury, your United States taxpayer
identification number and that you are not a foreign person, or (2)
otherwise establish an exemption from such withholding tax. For purposes of
the withholding tax, the "amount realized" is the sum of the cash and fair
market value of other property (e.g., our common shares) received by you,
plus the amount of any partnership liabilities allocable to the OP Unit
redeemed. Different withholding rules may apply to a partial redemption
that is not treated as a sale of your OP Units as described above. You may
seek a refund of amounts withheld from the Internal Revenue Service if it
is determined that the amount withheld exceeded your United States tax
liability. The Internal Revenue Service has issued final regulations
regarding the withholding tax rules that are effective for payments made
after December 31, 2000. You should consult your tax advisor regarding the
application of those final Treasury Regulations.
COMPARISON OF OWNERSHIP OF OP UNITS AND COMMON SHARES
The information below highlights a number of the significant
differences between the operating partnership and us relating to, among
other things, form of organization, permitted investments, policies and
restrictions, management structure, compensation and fees and investor
rights, and compares legal rights associated with the ownership of OP Units
and common shares. These comparisons are intended to assist you in
understanding how your investment will be changed if we exercise our prior
and independent right to acquire the OP Units for common shares. This
discussion is summary in nature and does not constitute a complete
discussion of these matters, and you should carefully review the balance of
this prospectus and the registration statement of which this prospectus is
a part for additional important information about us and the operating
partnership.
FORM OF ORGANIZATION AND ASSETS OWNED
Operating Partnership
The operating partnership is organized as a Delaware limited
partnership. Substantially all of our operations are conducted through the
operating partnership. The operating partnership has a stated termination
date of December 31, 2097, although it may be terminated earlier in some
circumstances.
Westfield America, Inc.
We are a Missouri corporation. We elected to be taxed as a REIT under
the Internal Revenue Code, commencing with our taxable year ended December
31, 1994, and intend to maintain our election as a REIT. We maintain both a
limited partner interest and a general partner interest in the operating
partnership, which give us an indirect investment in the properties and
other assets owned by the operating partnership. We and our wholly-owned
subsidiaries currently have a 97.7% economic interest in the operating
partnership. Our interest in the operating partnership will:
o increase as OP Units are redeemed for cash or acquired by us
and as we issue additional capital stock and contribute the net
proceeds from such issuance to the operating partnership in
exchange for additional interests in the operating partnership;
and
o decrease as we issue additional OP Units in exchange for
property contributed to the operating partnership.
There are no limits on our corporate existence in our Articles of
Incorporation.
PURPOSE AND PERMITTED INVESTMENTS
Operating Partnership
The operating partnership's purpose is to conduct any business that
may be lawfully conducted by a limited partnership organized pursuant to
the Delaware Limited Partnership Act, provided that such business is
conducted in a manner that permits us to qualify as a REIT. The operating
partnership may, subject to the foregoing limitation, invest in or enter
into partnerships, joint ventures, or similar arrangements and may own
interests in any other entity. We may cause the Operating Partnership not
to take, or to refrain from taking, any action that, in our judgment, in
our sole and absolute discretion:
o could adversely affect our ability to continue to qualify as a
REIT;
o could subject us to any additional taxes under Internal Revenue
Code Section 857 or Internal Revenue Code Section 4981 or any
other related or successor provision under the Internal Revenue
Code;
o could violate any law or regulation of any governmental body or
agency having jurisdiction over us, our securities or the
operating partnership; or
o could violate in any material respects any of the covenants,
conditions or restrictions now or hereafter placed upon or
adopted by us pursuant to any of our agreements or applicable
laws and regulations,
unless, in any such case, such action described in the bullet points above
is specifically consented to by us in writing.
Westfield America, Inc.
Our Articles of Incorporation permit us to engage in any lawful
activity permitted under Missouri law. However, under the partnership
agreement for the operating partnership, we, as general partner, generally
may not conduct any business other than in connection with the ownership,
acquisition and disposition of partnership interests as general partner,
the management of the business of the operating partnership, our operation
as a reporting company with a class or classes of securities registered
under the Exchange Act, our operations as a REIT, the offering, sale,
syndication, private placement or public offering of stock, bonds,
securities or other interests, financing or refinancing of any type related
to the operating partnership or its assets or activities, and such
activities as are incidental to those activities discussed above. We may,
however, in our sole and absolute discretion, from time to time hold or
acquire assets in our own name or otherwise other than through the
operating partnership so long as we take commercially reasonable measures
to insure that the economic benefits and burdens of such property are
otherwise vested in the operating partnership.
ADDITIONAL EQUITY
Operating Partnership
The operating partnership is authorized to issue OP Units,
partnership preferred units and other partnership interests to its
partners, investors or other persons for such consideration and on such
terms and conditions as we, as general partner, in our sole discretion may
deem appropriate. Additionally, we may cause the operating partnership to
issue to us additional common partnership interests, partnership preferred
units or other partnership interests in different series or classes that
may be senior to the OP Units, provided such issuance to us is in
conjunction with an issuance of our securities having substantially similar
rights and in which the proceeds raised in connection with such issuance
are contributed to the operating partnership. No limited partner or OP
Unitholder has any preemptive or similar rights with respect to additional
capital contributions to the operating partnership or the issuance or sale
of any interests in the operating partnership.
Westfield America, Inc.
Our board of directors, in its discretion, may cause us to issue
additional equity securities consisting of common shares, Senior Preferred
Shares or Preferred Shares; provided, however, that the total number of
equity securities outstanding may not exceed the total number of authorized
shares set forth in our Articles of Incorporation. As long as the operating
partnership is in existence, the net proceeds of all equity capital raised
by us will be contributed to the operating partnership in exchange for
common partnership interests, partnership preferred units or other
interests in the operating partnership.
BORROWING POLICIES
Operating Partnership
The operating partnership has no restrictions on borrowings, and we,
as general partner, have full power and authority to cause the operating
partnership to borrow money.
Westfield America, Inc.
We are not restricted under our Articles of Incorporation or By-Laws
from making borrowings. Accordingly, we could become more highly leveraged,
resulting in an increase in debt service that could adversely affect our
cash flow and, consequently, the amount available for distribution to our
shareholders.
OTHER INVESTMENT RESTRICTIONS
Operating Partnership
Other than restrictions precluding investments by the operating
partnership that would adversely affect our qualification as a REIT, there
are no restrictions upon the operating partnership's authority to enter
into specified transactions, including among others, making investments and
lending operating partnership funds.
Westfield America, Inc.
Neither our Articles of Incorporation nor our By-Laws impose any
restrictions upon the types of investments made by us, except that, under
our Articles of Incorporation, our board of directors is prohibited from
taking action that would terminate our REIT status, unless approved by a
majority in interest of the holders of common shares, Series A Preferred
Shares and Series B Preferred Shares, each voting separately as a class.
MANAGEMENT CONTROL
Operating Partnership
All management powers over the business and affairs of the operating
partnership are vested in us, as general partner. No limited partner or OP
Unitholder has any right to participate in or exercise control or
management power over the business and affairs of the operating
partnership. The limited partners have the right to vote on those matters
described under Voting Rights below. We as general partner may not be
removed by the limited partners, with or without cause.
Westfield America, Inc.
Our board of directors has exclusive control over our business and
affairs subject only to those restrictions set forth in our Articles of
Incorporation and By-Laws, the partnership agreement for the operating
partnership or Missouri law. Our board of directors is divided into three
classes. At each annual meeting of the shareholders, the successors of the
class of directors whose terms expire at that meeting will be elected. The
policies adopted by the board of directors may be altered or eliminated
without a vote of the shareholders. Accordingly, except for their vote in
the elections of directors, shareholders have no control over our ordinary
business policies.
FIDUCIARY DUTIES
Operating Partnership
Under Delaware law, we, as general partner, are accountable to the
operating partnership as a fiduciary and, consequently, are required to
exercise good faith and integrity in all of our dealings with respect to
partnership affairs. However, under the partnership agreement for the
operating partnership, we, as general partner, are under no obligation to
take into account the tax consequences to any partner or OP Unitholder of
any action taken by us, and we, as general partner, are not liable for
monetary damages for losses sustained or liabilities incurred by partners
or OP Unitholders as a result of errors of judgment or of any act or
omission, provided that we have acted in good faith. In connection with the
acquisition of properties where OP Units were issued as part of the
purchase price, we contractually agreed, in general, not to sell or
otherwise transfer those properties for a specified period of time in order
to preserve such persons' tax deferral, 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.
Westfield America, Inc.
Under Missouri law, our board of directors must perform their duties
in good faith, in a manner that they reasonably believe to be in our best
interests and with the care of an ordinarily prudent person in a like
position. Directors who act in such a manner generally will not be liable
to us for monetary damages arising from their activities.
MANAGEMENT LIABILITY AND INDEMNIFICATION
Operating Partnership
The partnership agreement for the operating partnership generally
provides that we, as general partner, and any of our directors and officers
will incur no liability to the operating partnership or any limited partner
for losses sustained or liabilities incurred or benefits not derived as a
result of errors in judgment, mistakes of law or of any act or omission if
we or such officer or director acted in good faith. In addition, we, as
general partner, are not responsible for any misconduct or negligence on
the part of our agents provided we appointed such agents in good faith. We,
as general partner, may consult with legal counsel, accountants,
appraisers, management consultants, investment bankers and other
consultants and advisors, and any action we take or omit to take in
reliance upon the opinion of such persons, as to matters which we, as
general partner, reasonably believe to be within their professional or
expert competence, shall be conclusively presumed to have been done or
omitted in good faith and in accordance with such opinion. The partnership
agreement for the operating partnership also provides for the
indemnification, to the fullest extent permitted by law, of us, as general
partner, of our directors and officers, and of such other persons as we, as
general partner, may from time to time designate, against any and all
losses, claims, damages, liabilities, expenses, judgments, fines,
settlements and other amounts arising from any and all claims, demands,
actions, suits or proceedings in which such person may be involved that
relate to the operations of the operating partnership, provided that no
such person will be indemnified: (1) for willful misconduct or a knowing
violation of the law or (2) for any transaction in which such person
received an improper personal benefit in violation or breach of any
provision of the partnership agreement for the operating partnership.
Westfield America, Inc.
Our Articles of Incorporation provide for the indemnification of our
directors and officers, and of other persons as we may from time to time
designate, against any and all expenses, including attorneys' fees,
judgments, fines and amounts paid in settlement actually and reasonably
incurred arising from any and all claims, demands, actions, suits or
proceedings in which these people may be involved that relate to our
operations, provided that these people will not be indemnified if they did
not act in good faith and in a manner reasonably believed to be in or not
opposed to our best interests, or, with respect to any criminal action or
proceeding, had reasonable cause to believe their conduct was unlawful.
VOTING RIGHTS
Operating Partnership
Under the partnership agreement for the operating partnership,
limited partners have voting rights only with respect to limited matters
such as some amendments and termination of the partnership agreement for
the operating partnership and some transactions such as the institution of
bankruptcy proceedings, an assignment for the benefit of creditors and some
transfers by the general partner of its interest in the operating
partnership or the admission of a successor general partner. OP Unitholders
generally have no voting rights.
Westfield America, Inc.
Each outstanding common share entitles the holder thereof to one vote
on all matters submitted to shareholders for vote, including the election
of directors. Our common shareholders have the right to vote on, among
other things, a merger of us, amendments to our Articles of Incorporation
and our dissolution. Some amendments to our Articles of Incorporation
require the affirmative vote of not less than three-fourths of votes
entitled to be cast on the matter. Our Articles of Incorporation permit our
board of directors to classify and issue Preferred Shares in one or more
series having voting power which may differ from that of our common shares.
AMENDMENT OF THE PARTNERSHIP AGREEMENTS OR OUR ARTICLES OF INCORPORATION
Operating Partnership
The partnership agreement for the operating partnership may be
amended through a proposal only by us, the general partner. Some proposals
require the consent of the limited partners and/or OP Unitholders. These
include proposals that would, among other things, convert a limited partner
into a general partner or an OP Unitholder into a partner, modify the
limited liability of a limited partner or an OP Unitholder, alter the
rights of any limited partner or OP Unitholder to receive the distributions
to which such partner or OP Unitholder is entitled, or alter the
allocations specified in the partnership agreement for the operating
partnership or alter the redemption rights described above. In addition,
we, as general partner, may, without the consent of the limited partners or
OP Unitholders, amend the partnership agreement for the operating
partnership as to limited matters enumerated in the partnership agreement
for the operating partnership.
Westfield America, Inc.
Except as described below, amendments to our Articles of
Incorporation must be approved by the board of directors and by the vote of
the holders of at least a majority of the shares entitled to vote on the
matter. Proposals that would cause us not to qualify as a REIT require the
affirmative vote of holders of at least a majority of the shares entitled
to vote on the matter, including the common shares, voting separately as a
class. Proposals that would alter Articles of Incorporation provisions
relating to the classification or removal of directors or that would repeal
provisions relating to business combinations require the affirmative vote
of holders of three-fourths of the shares entitled to vote on the matter.
Proposals that would alter Articles of Incorporation provisions relating to
control share acquisitions require the affirmative vote of holders of not
less than two-thirds of the shares entitled to vote on the matter.
Proposals that would alter Articles of Incorporation provisions relating to
preemptive rights, indemnification or amendments to the Articles of
Incorporation require the affirmative vote of holders at least a majority
of the shares entitled to vote on the matter.
COMPENSATION, FEES AND DISTRIBUTIONS
Operating Partnership
We, as general partner, do not receive any compensation for our
services as general partner of the operating partnership. As a partner in
the operating partnership, however, we have the same right to allocations
and distributions as other partners and investors of the operating
partnership. However, to the extent we own properties outside the operating
partnership, any income we receive in connection with the activities from
those properties will result in a recalculation of distributions from the
operating partnership such that we, the limited partners and the OP
Unitholders would each receive the same distribution that we and they would
have received had we contributed such properties to the operating
partnership. In addition, the operating partnership is responsible for all
expenses incurred by us in connection with the operating partnership's
business and reimburses us, as general partner, for such expenses paid by
us.
Westfield America, Inc.
Directors receive compensation for their services from us. Our
officers are compensated by Westfield Holdings or its subsidiaries.
LIABILITY OF INVESTORS
Operating Partnership
Under the partnership agreement for the operating partnership and
applicable Delaware law, the liability of the limited partners and OP
Unitholders for the operating partnership's debts and obligations is
generally limited to the amount of their investment in the operating
partnership.
Westfield America, Inc.
Under Missouri law, shareholders generally are not personally liable
for our debts and obligations.
NATURE OF INVESTMENT
Operating Partnership
The OP Units constitute equity interests entitling each OP Unitholder
to such OP Unitholder's proportionate share of cash distributions made to
the OP Unitholders and holders of common partnership interests. The
operating partnership may retain and reinvest proceeds of the sale of
property or excess refinancing proceeds in its business, subject to the
operating partnership's obligation to make any distributions required to be
made under the partnership agreement for the operating partnership.
Westfield America, Inc.
The common shares constitute equity interests in us. We are entitled
to receive our proportionate share of distributions made by the operating
partnership with respect to our interest in the operating partnership, and
each shareholder will be entitled to its proportionate share of any
dividends or distributions paid with respect to our common shares. The
dividends payable to our shareholders are not fixed in amount and are only
paid if, when and as declared by our board of directors. In order to
qualify as a REIT, we generally must distribute at least 95% of our "REIT"
taxable income, excluding capital gains, and any taxable income, including
capital gains, not distributed will be subjeTax 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."
POTENTIAL DILUTION OF RIGHTS
Operating Partnership
We, as general partner, are authorized, in our sole discretion and
without limited partner or OP Unitholder approval, to cause the operating
partnership to issue additional OP Units, partnership preferred units,
limited partnership interests and other equity securities for any
partnership purpose at any time to the limited partners, OP Unitholders or
to other persons on terms established by us as general partner.
Westfield America, Inc.
Our board of directors may in its discretion cause the issuance of
additional Senior Preferred Shares, Preferred Shares and common shares or
other equity securities with such powers, preferences and rights as the
board of directors may designate at the time.
The issuance of additional or other equity securities may result in the
dilution of interests of the shareholders.
LIQUIDITY
Operating Partnership
The partnership agreement for the operating partnership 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 for the operating partnership
will not be valid. Until the expiration of one year from the date on which
a partner or OP Unitholder acquired partnership interests or OP Units, as
applicable, such partner or OP Unitholder generally may not transfer all or
any portion of its partnership interests or OP Units, as applicable, to any
transferee without our consent, which consent may be withheld in our sole
and absolute discretion. After the expiration of one year from the date on
which a partner or OP Unitholder acquired partnership interests or OP
Units, as applicable, such person may transfer his or her partnership
interests or OP Units to an "accredited investor," subject to satisfaction
of conditions set forth in the partnership agreement for the operating
partnership, including our right of first refusal. Subject to some
limitations, a limited partner may assign its economic rights in its
partnership interests without our consent, but we may in our sole and
absolute discretion, refuse to admit the transferee as a substituted
limited partner. Beginning one year from the date of acquisition of the
partnership interests or OP Units, each partner or OP Unitholder has the
right to cause the operating partnership to redeem its partnership
interests or OP Units, as applicable, for cash, subject to our prior and
independent right to acquire such OP Units or partnership interests for
common shares. There is no market for partnership interests in the
operating partnership or OP Units, and the partnership interests in the
operating partnership and the OP Units are not registered under the
Exchange Act, nor are they listed for trading on any securities exchange.
Westfield America, Inc.
Subject to any restrictions under Rule 145 of the Securities Act, the
ownership limit provisions in our Articles of Incorporation and to
prospectus delivery and other requirements for registered securities, the
common shares will be freely transferable as registered securities under
the Securities Act. The common shares are listed on the New York Stock
Exchange. The breadth and strength of this market will depend, among other
things, upon the number of common shares outstanding, our financial results
and prospects, the general interest in our common shares and other real
estate investments and our dividend yield compared to that of other debt
and equity securities.
COMPARISON OF FEDERAL INCOME TAX CONSEQUENCES OF
OWNERSHIP OF OP UNITS AND COMMON SHARES
The information below highlights a number of the significant
differences between the operating partnership and us relating to Federal
income taxation, and compares the Federal income tax consequences
associated with the ownership of OP Units and common shares. This
discussion is summary in nature and does not constitute a complete
discussion of these matters, and you should carefully review the balance of
this prospectus and the registration statement of which this prospectus is
a part for additional important information about us and the operating
partnership.
ENTITY-LEVEL TAXATION
Operating Partnership
The operating partnership is not subject to Federal income tax.
Instead, each holder of OP Units includes such holder's allocable share of
such partnership's taxable income or loss in determining such holder's
Federal income tax liability. The maximum Federal income tax rate for
individuals under current law (without taking into account the phase out of
exemptions and other adjustments) is 39.6%.
Westfield America, Inc.
So long as we qualify as a REIT, we will be permitted to deduct
distributions paid to our shareholders, which will effectively reduce the
"double taxation" that typically results when a corporation earns income,
pays tax on that income and then distributes the remaining income to its
shareholders in the form of taxable dividends. A REIT is, however, subject
to Federal income tax on income that is not distributed and also may be
subject to Federal income and excise taxes in certain circumstances. The
maximum Federal income tax rate for corporations under current law is 35%,
but in certain circumstances a REIT is subject to a 100% tax on certain
kinds of income. In addition, 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 (or January 1, 1996, in the case of property held by
our subsidiary, Westland Properties).
APPLICABILITY OF THE "PASSIVE ACTIVITY" RULES
Operating Partnership
Income and loss from the operating partnership generally is subject
to the "passive activity" rules. Under these rules, any income and loss
from the operating partnership that constitutes "passive income" generally
can be offset by or against only income and loss from other investments
that constitute "passive activities."
Westfield America, Inc.
Dividends paid by us cannot be offset with losses from "passive
activities."
TAXATION OF DISTRIBUTIONS
Operating Partnership
Cash distributions from the operating partnership are not taxable to
a holder of OP Units except to the extent they exceed such holder's
adjusted basis in such holder's OP Units (which will include such holder's
allocable share of the liabilities of the operating partnership).
Westfield America, Inc.
Distributions that are made by us to our taxable shareholders out of
current or accumulated earnings and profits and not designated as capital
gain distributions will be taken into account by such shareholders as
ordinary income. Distributions that are designated as capital gain
dividends generally will be taxed as long-term capital gains, subject to
certain limitations. Distributions in excess of current or accumulated
earnings and profits will be treated as a nontaxable return of basis to the
extent of your adjusted basis in your common shares, and thereafter will be
taxed in the same manner as gain from a sale of such shares.
TAX INFORMATION PROVIDED TO INVESTORS
Operating Partnership
Each year, holders of OP Units receive a Schedule K-1 tax form
containing detailed tax information that such holders must use in preparing
their Federal income tax returns.
Westfield America, Inc.
Each year our shareholders receive a Form 1099 used by REITs to
report dividends paid to their stockholders.
STATE INCOME TAX
Operating Partnership
Holders of OP Units are required, in some cases, to file state income
tax returns and/or pay state income taxes in the states in which the
operating partnership owns property, even if such holders are not residents
of those states.
Westfield America, Inc.
Shareholders who are individuals generally will not be required to
file state income tax returns and/or pay state income taxes outside of
their states of residence solely as a result of the fact that we own
property or transact business in various states. We may be required to pay
state income taxes in certain states.
FEDERAL INCOME TAX CONSIDERATIONS
The following summary of certain Federal income tax considerations
regarding an investment in the common 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 common shares.
EACH PROSPECTIVE PURCHASER SHOULD CONSULT WITH A TAX ADVISOR
REGARDING THE SPECIFIC TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND SALE
OF THE COMMON 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 was expressed as of December
20, 1999, and Skadden, Arps, Slate, Meagher & Flom LLP has no obligation
to advise holders of common 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.
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 common
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 common 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 common shares, but
rather will reduce the adjusted tax basis of such common shares. To the
extent that such distributions exceed the adjusted tax basis of a U.S.
Holder's common shares, they will be included in income as long-term
capital gain (or short-term capital gain if the common shares have been
held for one year or less) provided that the common 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 Common Shares
In general, any loss upon a sale or exchange of common 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
common shares applicable to Non-U.S. Holders of such common 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 our common shares. In
cases where the distribution income from a Non-U.S. Holder's investment in
our common shares 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
common shares with respect to which such distribution occurs, but rather
will reduce the adjusted basis of such common shares. To the extent that
such distributions exceed the Non-U.S. Holder's adjusted basis in the
common shares with respect to which such distribution occurs, they will
give rise to gain from the sale or exchange of such common 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 common 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 common
shares equal to the excess of such deemed capital gain distribution over
the amount of such tax credit.
Disposition of Common Shares of the Company
Unless our common shares constitute a USRPI, a sale of such common
shares by a Non-U.S. Holder generally will not be subject to U.S. taxation
under FIRPTA. The common 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 common
shares generally nevertheless will not be subject to tax under FIRPTA as a
sale of a USRPI provided that (1) the common shares 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 5% or less of our outstanding common
shares.
If gain on the sale of our common shares 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 common shares 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 common shares 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
Common shares 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 common shares to a Non-U.S. Holder at an
address outside the United States.
The payment of the proceeds from the disposition of our common 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 common 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 common shares.
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 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. Changes to the Federal laws and
interpretations thereof could adversely affect an investment in us or in
the operating partnership. Recent legislative proposals contain provisions
that would, if enacted into law, significantly modify the Federal income
tax treatment of REITs and REIT stockholders. For example, Congress has
passed and the President has signed the Work Incentives Improvement Act of
1999 (the "Act"). The Act includes the following modifications, which are
generally effective in 2001:
- provisions that would modify the current ownership limitations
to permit a REIT to own up to 100% of the voting securities and
100% of the value of the other interests in a taxable REIT
subsidiary. In addition, the 5% REIT asset test would not apply
to taxable REIT subsidiaries, but securities of taxable REIT
subsidiaries could not exceed 20% of the total value of a
REIT's assets;
- provisions that would permit a taxable REIT subsidiary to
perform services to a REIT's tenants and impose a 100% excise
tax on certain non-arms length transactions between a taxable
REIT subsidiary and a REIT;
- provisions that would generally restrict a REIT from owning
more than 10% of the vote or value of the securities of a
non-REIT C corporation that is not a taxable REIT subsidiary;
- provisions that would also apply certain limitations to the
deductibility of interest paid by a taxable REIT subsidiary to
a related REIT;
- provisions that reduce the annual REIT distribution requirement
from a 95% to a 90% level; and
- provisions that change the measurement of rent attributable to
personal property leased in connection with a lease of real
property from a comparison based on adjusted tax bases of
properties to a comparison of fair market values.
Other legislation currently being considered by Congress contains
language that, 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 that, if enacted in its present form, would
result in the immediate taxation of gain inherent in a C corporation's
assets upon election by a corporation to become a REIT. This proposal, if
enacted, could effectively preclude us from re-electing REIT status
following a termination.
It cannot be predicted whether, when, in what form, or with what
effective dates, other legislative proposals applicable to us or our
stockholders will become law.
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.
SELLING SHAREHOLDERS
Those persons who may receive common shares upon exchange of OP Units
are referred to herein as "selling shareholders." Holders of OP Units have
the right to receive cash for their OP Units if presented for redemption,
subject to our prior and independent right to acquire some or all of such
OP Units for an equivalent number of common shares. There is no assurance
that the selling shareholders will sell any of their common shares. The
common shares that may be received upon exchange of OP Units represent
approximately 1.3% of the total common shares outstanding as of September
30, 1999.
The common shares offered by this prospectus may be offered from time
to time by the selling shareholders named below:
<TABLE>
<CAPTION>
Common shares issuable
Common shares owned in the exchange and Common shares owned
Selling shareholder prior to the exchange available for resale(1) after the offering(1)
- ------------------- --------------------- ----------------------- ---------------------
<S> <C> <C> <C>
JCP Realty, Inc. 0 489,189 0
Cordano Associates 0 489,189 0
</TABLE>
- --------------------
(1) Assumes all OP Units held by the selling shareholders are exchanged
for common shares and that all such common shares are resold pursuant
to this prospectus.
PLAN OF DISTRIBUTION
This prospectus relates to the possible issuance of common shares if,
and to the extent that, OP Units are presented for redemption for cash, and
we exercise our prior and independent right to acquire such OP Units for
common shares. This prospectus also relates to the possible offer and sale
by the selling shareholders of any common shares that they may receive if
we exercise our prior and independent right to acquire OP Units presented
for redemption in exchange for common shares. "Selling shareholders"
includes any donees and pledgees selling common shares received from a
named selling shareholder after the date of this prospectus.
We have registered the offer, issuance and sale of the common shares
pursuant to our obligations under the Registration Rights Agreement, dated
as of December 9, 1998, by and between us and JCP Realty, Inc. and the
Registration Rights Agreement, dated as of December 9, 1998, by and between
us and Cordano Associates, but registration of such shares does not
necessarily mean that all or any portion of the OP Units will be presented
for redemption, or that we will issue common shares. Registration of such
shares also does not necessarily mean that, even if we issue common shares,
such shares will be offered and sold by the selling shareholders. We will
not receive any cash proceeds from the issuance of the common shares to
holders of OP Units if we exercise our prior and independent right to
acquire OP Units for common shares, although we will receive OP Units.
Furthermore, if we exercise our prior and independent right to acquire OP
units for common shares, we will not receive any cash proceeds from the
offer and sale of common shares by the selling shareholders.
Common shares may be sold from time to time by the selling
shareholders. The methods by which the common shares may be sold include:
o a block trade in which the broker-dealer so engaged will
attempt to sell the common 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 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 sales "at the market" to or through a market maker or into an
existing trading market, on an exchange or otherwise, for the
common shares;
o sales in other ways not involving market makers or established
trading markets;
o through hedging transactions with broker-dealers or others;
o by selling the common shares short;
o by redelivering common shares to close out short positions
in the common shares;
o by pledging common shares to a broker or dealer or others;
o through put or call transactions relating to the common shares;
and
o pursuant to Rule 144 or otherwise.
The 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 shareholders and any broker-dealers or agents that
participate in the distribution of common shares may be deemed to be
"underwriters" within the meaning of the Securities Act and any profit on
the sale of such shares and any discounts, commissions, concessions or
other compensation received by any such 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 common shares is made, a
prospectus supplement, if required, will be distributed which will set
forth the aggregate amount of common shares being offered and the terms of
the offering, including the name or names of any broker-dealers or agents,
any discounts, commissions and other terms constituting compensation from
the selling shareholders and any discounts, commissions or concessions
allowed or reallowed or paid to broker-dealers. In addition, upon our being
notified by a named selling shareholder that a donee or a pledgee intends
to sell more than 500 shares, a supplement to this prospectus will be
filed.
Pursuant to the registration rights agreements, we have agreed to pay
all costs and expenses incurred in connection with the registration under
the Securities Act of the common shares, including, without limitation, all
registration and filing fees, printing expenses and fees and disbursements
of our counsel and accountants. We estimate that such costs and expenses
will equal $45,000. The selling shareholders will pay any brokerage fees
and commissions, fees and disbursements of legal counsel for the selling
shareholders and stock transfer and other taxes attributable to the sale of
the common shares. We and the selling shareholders 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 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, June 30, 1999 and September 30, 1999;
o our Current Reports on Form 8-K filed:
oo December 2, 1998 (as amended by Form 8-K/A filed on February 1,
1999);
oo February 3, 1999; o o February 19, 1999;
oo July 8, 1999 (as amended by Form 8-K/A filed on July 13, 1999);
and
oo August 26, 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. No one has been
authorized to provide you with different information. An offer of the
common shares will not be made in any state where such 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 OMITTED]
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...................................... $ 3,417
Legal fees and expenses................................... 27,000
Accounting fees and expenses.............................. 10,000
Printing and engraving expenses........................... 1,000
Miscellaneous............................................. 3,583
Total................................................. $ 45,000
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 common shares.
5.1 Opinion of Husch & Eppenberger, LLC, as to legality of the
common shares.
8.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP regarding
tax matters.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of PricewaterhouseCoopers LLP.
23.3 Consent of Husch & Eppenberger, LLC (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.
99.1 First Amended and Restated Agreement of Limited Partnership of
Westfield America Limited Partnership, dated as of August 3,
1998 (the "OP Agreement") (Exhibit 10.3(3))
99.2 First Amendment to the OP Agreement (Exhibit 10.4(3)).
99.3 Second Amendment to the OP Agreement (Exhibit 10.5(3)).
99.4 Third Amendment to the OP Agreement (Exhibit 10.6(3)).
99.5 Fourth Amendment to the OP Agreement (Exhibit 10.7(3)).
99.6 Fifth Amendment to the OP Agreement. (Exhibit 99.1(4)).
- --------------------
(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.
(3) Incorporated by reference to designated exhibit to Westfield America's
current report on Form 8-K filed February 19, 1999, File No.
333-22731.
(4) Incorporated by reference to designated exhibit to Westfield America's
registration statement on Form S-3 filed August 24, 1999,
(Registration No. 333-85805).
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 0of 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 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 December 20, 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 registration statement has been signed by the following
persons in the capacities indicated on the 20th of December, 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
Richard E. Green (Principal Executive Officer)
*
- ------------------------------ Chief Financial Officer and Treasurer
Mark A. Stefanek (Principal Financial and Accounting 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, LLC as to legality of the
common shares.
8.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP
regarding tax matters.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of PricewaterhouseCoopers LLP.
24.1 Power of Attorney
EXHIBIT 5.1
[Letterhead of Husch & Eppenberger, LLC]
December 20, 1999
Westfield America, Inc.
11601 Wilshire Boulevard, 12th Floor
Los Angeles, CA 90025
Re: Registration of 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 Nine
Hundred Seventy-Eight Thousand Three Hundred Seventy-Eight (978,378) shares
of the Company's Common Stock, par value $.01 per share (the "Shares") for
issuance to holders of investor unit rights (the "OP Units") in Westfield
America Limited Partnership, a partnership affiliated with the Company, in
exchange for such OP Units.
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 shares of the Company's common stock; (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 issued in exchange for the OP Units and subsequent to such
issuance, 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
EXHIBIT 8.1
[Letterhead of Skadden, Arps, Slate, Meagher & Flom LLP]
December 20, 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.
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 and have assumed that such representations are true
without regard to any qualification as to knowledge and belief. 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.
----------------
(1) Westfield America, Inc. was formerly known as CenterMark Properties,
Inc.
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"), and WEA will take all steps
necessary to ensure 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, and comply with the
covenants relating to each of them in the Officer's Certificate.
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:
i. 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.
ii. 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
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 Preliminary
Prospectus of Westfield America, Inc., dated December 20, 1999, for the
registration of 978,378 shares of common 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 Preliminary Prospectus dated December 20, 1999.
/s/ Ernst & Young LLP
December 20, 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
December 20, 1999
EXHIBIT 24.1
POWER OF ATTORNEY
Each of the undersigned directors and each of the undersigned
officers of Westfield America, Inc., a Missouri corporation (the
"Corporation"), does hereby constitute and appoint Peter S. Lowy, Mark A.
Stefanek and Irv Hepner and each of them, acting individually, as his or
her true and lawful attorney-in-fact and agents, with full power of
substitution and resubstitution, for him or her and in his or her name,
place and stead in any and all capacities, to execute and deliver in his or
her name and on his or her behalf:
(a) one or more Registration Statements (with all exhibits thereto)
of the Corporation on Form S-3 or any other appropriate form
proposed to be filed by the Corporation with the Securities and
Exchange Commission (the "SEC") (including, without limitation,
Registration Statements filed pursuant to Rule 462 under the
Securities Act of 1933, as amended, or any successor thereto
(the "Securities Act")) for the purpose of registering under
the Securities Act, pursuant to the Registration Rights
Agreement, dated as of December 9, 1998, by and between the
Corporation and JCP Realty, Inc. and the Registration Rights
Agreement, dated as of December 9, 1998, by and between the
Corporation and Cordano Associates, shares of the Corporation's
common stock, par value $0.01("Shares") issuable upon exchange
of investor unit rights in Westfield America Limited
Partnership;
(b) any and all supplements and amendments (including, without
limitation, post-effective amendments) to such Registration
Statements; and
(c) any and all other documents and instruments in connection with
the registration of the Shares which such attorney-in-fact and
agent deems necessary or advisable to enable the Corporation to
comply with (1) the Securities Act, the Securities Exchange Act
of 1934, as amended, and the other federal securities laws of
the United States of America and the rules, regulations and
requirements of the SEC in respect of any thereof; (2) the
securities or Blue Sky laws of any state or other governmental
subdivision of the United States of America; and (3) the
securities or similar applicable laws of any foreign
jurisdiction,
and each of the undersigned hereby grants unto such attorney-in-fact and
agents and each of them or their or his substitute or substitutes, each and
every act and thing requisite and necessary to be done in and about the
premises as fully as to all intents and purposes as he or she might or
could do in person, and does hereby ratify and confirm as his or her own
acts and deeds all that such attorney-in-fact and agents, or each of them
or their or his substitute or substitutes, shall lawfully do or cause to be
done by virtue hereof. Any such attorney-in-fact and agents and each of
them shall have, and may exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto subscribed this
power of attorney this 10th day of December, 1999.
/s/ Frank P. Lowy /s/ David H. Lowy
- --------------------------------- --------------------------------
Frank P. Lowy David H. Lowy
/s/ Mark A. Stefanek /s/ Richard E. Green
- --------------------------------- --------------------------------
Mark A. Stefanek Richard E. Green
/s/ Roy L. Furman /s/ Larry A. Silverstein
- --------------------------------- --------------------------------
Roy L. Furman Larry A. Silverstein
/s/ Frederick G. Hilmer /s/ Francis T. Vincent, Jr.
- --------------------------------- --------------------------------
Frederick G. Hilmer Francis T. Vincent, Jr.
/s/ Herman Huizinga /s/ Bernard Marcus
- --------------------------------- --------------------------------
Herman Huizinga Bernard Marcus
