AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 22, 2000
REGISTRATION NO. 333-85805
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 2 TO
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 (Name, address, including zip code,
area code, of registrant's and telephone number, including
principal 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
Title of Each Class of Amount to be Proposed Maximum Aggregate Offering Amount of
Securities to be Registered Registered Offering Price Per Share Price (2) Registration Fee(3)
<S> <C> <C> <C> <C>
Common Stock, par value
$0.01 per share ............. 788,328 (1) (2) $ 11,751,785.54 $3268
(1) Represents the number of shares of Common Stock issuable upon
exchange of partnership interests in affiliated partnerships. Also
being registered are: (a) such indeterminate number of additional
shares of Common Stock as may be issuable upon or in connection
with the exchange of such partnership interests as a consequence
of adjustments to the rate at which such partnership interests are
exchanged into shares of Common Stock and (b) such indeterminate
number of shares of Common Stock as may be issuable in connection
with payments of accrued and unpaid distributions required to be
made by an affiliated partnership, if the registrant exercises its
prior and independent right to pay such required distributions
with shares of Common Stock.
(2) Estimated solely for the purpose of calculating the registration
fee in accordance with Rule 457(c) of the Securities Act. For the
786,286 shares of common stock included in the Registration
Statement filed on August 24, 1999, the price of $14.91 was based
on the average of the high and low prices for the common stock on
August 17, 1999, as reported on the New York Stock Exchange. For
the additional 2,042 shares of common stock included in Amendment
No. 1 to the Registration Statement, the price of $13.84 was based
on the average of the high and low prices for the common stock on
November 19, 1999, as reported on the New York Stock Exchange.
(3) Of the total fee, $3,260 was paid in connection with the
Registration Statement filed on August 24, 1999 and $8.00 was paid
in connection with Amendment No. 1 to the Registration Statement.
</TABLE>
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 MAY 22, 2000
PROSPECTUS
WESTFIELD AMERICA, INC.
11601 WILSHIRE BOULEVARD, 12TH FLOOR
LOS ANGELES, CALIFORNIA 90025
(310) 478-4456
788,328 COMMON SHARES
This prospectus relates to the possible issuance from time to time
of 788,328 shares of our common stock, subject to adjustment, to the
holders of limited partnership interests in Westfield Independence Mall
Limited Partnership or investor unit rights in Westfield America Limited
Partnership. Holders of such interests in those partnerships have the right
to receive cash in exchange for their interests, subject to our prior and
independent right to acquire some or all of such interests for an
equivalent number of shares of our common stock.
This prospectus also relates to the offer and sale from time to
time by shareholders of 788,328 shares of our common stock, subject to
adjustment, issued in exchange for limited partnership interests in
Westfield Independence Mall Limited Partnership or investor unit rights in
Westfield America Limited Partnership. The registration of the shares does
not necessarily mean that any of the shares will be offered or sold by the
selling shareholders.
Westfield Independence Mall Limited Partnership issued 788,328
limited partnership interests in connection with the acquisition of real
estate properties that closed on August 11, 1998. Holders of limited
partnership interests in Westfield Independence Mall Limited Partnership
have the right to contribute all or a portion of their limited partnership
interests in Westfield Independence Mall Limited Partnership to Westfield
America Limited Partnership for an equivalent number of investor unit
rights in Westfield America Limited Partnership.
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 May 19, 2000, the closing price of one common
share on the New York Stock Exchange was $14.5625.
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 , 2000.
TABLE OF CONTENTS
PAGE
Risk Factors............................................................3
Special Note Regarding Forward-looking
Statements.............................................................17
The Company............................................................17
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
Description of Independence Mall Units and the Independence
Mall Partnership Agreement.............................................42
Redemption of OP Units and Independence Mall Units.....................49
Comparison of Ownership of OP Units, Independence Mall
Units and Common Shares................................................53
Comparison of Federal Income Tax Consequences of
Ownership of OP Units, Independence Mall Units and
Common Shares..........................................................62
Federal Income Tax Considerations......................................63
Selling Shareholders...................................................73
Plan of Distribution...................................................73
Legal Matters..........................................................74
Experts ..............................................................74
Where You Can Find More Information....................................74
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 March 31, 2000, 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 58.0% 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 32.1% of the common shares held by
Westfield America Trust, which is an additional 12.9% 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$282.3 million as of March 31,
2000, of common shares at a 5% discount to the then prevailing market price
of our common shares.
Westfield America Trust may also purchase, at its option, an
additional 8,335,648 common shares pursuant to warrants that it may
exercise in whole or in part at any time prior to May 21, 2017. See
"Possible future sales of shares by affiliates could adversely affect the
market price of our common shares."
To maintain our qualification as a real estate investment trust
("REIT"), generally no individual, other than Frank P. Lowy and the members
of his family, who are subject to a higher ownership threshold, may
directly or indirectly hold more than 5.5%, by value, of our capital stock.
As of December 31, 1999, the Lowy family, or interests associated
with it, owned approximately 32.16% 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 all
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 management control over 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 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 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 called Garden State Plaza. 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
$3.99 million in interest from the loan for the three months ended March
31, 2000, which represents a return of approximately 11.0% 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.
On June 1, 2000, we intend to acquire Westfield Holdings' 50%
partnership interest in the limited partnership that owns Garden State
Plaza, which partnership interest is the collateral for the $145.0 million
loan described above. In connection with our acquisition of this interest,
we intend to release the current borrowers from their debt obligations
under the loan. There can be no assurance that this transaction will occur
by June 1, 2000 or at all or that current borrowers will be release from
their debt obligations under 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 accounting principles generally accepted in the United
States, 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 March 31, 2000, 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) 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 35.6 million square feet as of March 31, 2000. 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
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 March 31, 2000, anchors occupied 57.5% of the total gross
leasable area of our shopping centers. As of the same date, the May Company
leased 14.9%, J.C. Penney leased 10.7%, Macy's leased 10.4% and Sears
leased 9.0% of our total gross leasable area. No other anchor leased more
than 3.6% of our total gross leasable area.
As of March 31, 2000, tenants whose parent company is The Limited
Stores collectively occupied approximately 1,094,000 square feet, or 7.6%
of our gross leasable area for stores other than anchors. These tenants
include 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 be 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 some
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 March 31, 2000, 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 $2,762.3 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 March 31, 2000, our consolidated indebtedness was $2,406.8
million, of which 94% is fixed rate debt after considering interest rate
protection agreements with notional amounts totaling approximately $1.3
billion. The interest rate on the fixed rate debt, including swap
contracts, ranges from 6.39% to 8.38%. The maturity dates of consolidated
indebtedness range from 2000 to 2022.
At March 31, 2000, the annual maturities of consolidated notes
payable and revolving credit facility were as follows:
2000 141,224
2001 967,009
2002 380,497
2003 114,625
2004 139,703
Thereafter 663,726
-----------
Total Debt $2,406,784
==========
As of March 31, 2000, our pro-rata share of debt-to-total market
capitalization based on the common share price on March 31, 2000, was
56.7%, excluding $301.1 million of notes issued to Australian investors
from the numerator, and our balance of cash and cash equivalents was $11.0
million, not including our proportionate share of cash held by
unconsolidated real estate affiliates. In addition, at March 31, 2000, we
had a $450 million secured line of credit with National Australia Bank
Limited, Australia and New Zealand Banking Group Limited, Commonwealth Bank
of Australia and Union Bank of Switzerland. As of March 31, 2000, we had
$281 million undrawn under our secured line of credit, 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.
Several of our loans contain cross-default and
cross-collateralization provisions with respect to some of our shopping
center properties that are collateral for such loans. A default with
respect to any mortgage included in any such loan constitutes a default
with respect to all 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 ay such 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
INDEPENDENCE MALL UNITS OR OP UNITS FOR CASH OR COMMON SHARES
If we elect to acquire your limited partnership interest
("Independence Mall Units") in the Westfield Independence Mall Limited
Partnership (the "Independence Mall Partnership") or OP Units in exchange
for common shares, the exchange of such Independence Mall Units or OP Units
will be treated for Federal income tax purposes as a sale of your
Independence Mall Units or 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 Independence Mall Partnership or the operating partnership allocable
to the exchanged Independence Mall Units or OP Units at the time of the
exchange, over (2) the adjusted basis of your Independence Mall Units or 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 Independence Mall
Units or 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
Independence Mall Units or OP Units at the time of the redemption.
If we do not acquire the Independence Mall Units or OP Units in
exchange for common shares, and the Independence Mall Partnership or the
operating partnership redeems such Independence Mall Units or OP Units for
cash, the tax consequences may differ depending on whether you tender all
of your OP Units or Independence Mall Units and whether the Independence
Mall Partnership or the operating partnership obtained from us the cash
used to effect such redemption. See "Redemption of OP Units and
Independence Mall Units -- Federal Income Tax Consequences of Redemption of
OP Units and Independence Mall 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, a recent Federal budget proposal contains
language which, if enacted in its present form, would, due to the extent of
Westfield America Trust's ownership interest in us, prevent 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 and a separate election that we
intend to make in accordance with recently issued Temporary Treasury
Regulations, 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% (or 90% after 2000) 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, a recent Federal budget proposal contains
language which, if enacted in its present form, would, due to the extent of
Westfield America Trust's ownership interest in us, prevent 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 eight of the properties owned as of March 31, 2000. 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 at full replacement cost or
that are 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. One of these
environmental reports was prepared in 1999 and the remainder 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 March 31, 2000, 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$282.3 million
as of March 31, 2000, 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.
In addition, we are contemplating issuing a warrant to Westfield
America Trust which would entitle Westfield America Trust to purchase up to
2,840,000 common shares from time to time prior to June 1, 2025 for $19.42
per share in cash, adjusted for stock splits, capital reconstructions or
similar matters.
Additionally, Westfield Holdings and its subsidiaries have demand
registration rights. They may require us to register the sale by Westfield
Holdings and its subsidiaries of up to 10,930,672 common shares. Westfield
Holdings and its subsidiaries also have currently exercisable demand
registration rights with respect to other common shares. Further, Westfield
Holdings, its subsidiaries, Westfield America Trust and other affiliated
shareholders may sell common shares in the open market subject to
compliance with Rule 144 promulgated under the Securities Act of 1933, as
amended.
In addition, Westfield America Trust owns shares of our preferred
stock, which are immediately convertible into 10,333,340 common shares,
subject to anti-dilution adjustments. Furthermore, a wholly-owned
subsidiary of Westfield Holdings owns shares of our preferred stock, which
are immediately convertible into 2,777,780 common shares, subject to
anti-dilution adjustments.
We have also issued to unaffiliated purchasers:
o 2,164,235 OP Units that are exchangeable into cash, subject to our
prior and independent right to acquire such 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,
including the Independence Mall Units, 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 actual numbers for the previous four calendar
quarters, would be equal to approximately 7,114,000 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."
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 are renewable
annually in May. 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% (or 90%
after 2000) 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 March 31, 2000, our outstanding capital consisted of:
o 3,215,557 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$282.3 million as of March 31, 2000, 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, including the Independence Mall Units
held by New Hanover Associates, 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 actual numbers for the
previous four calendar quarters, would be equal to
approximately 7,114,000 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"
In addition, we are contemplating the issuance of:
o up to 107,483 shares of Series F Cumulative Redeemable
Preferred Stock ("Series F Preferred Shares");
o up to 107,483 preferred partnership interests in the
operating partnership that will be exchangeable into cash,
subject to our prior and independent right to acquire such
partnership interests for an equivalent number of Series F
Preferred Shares; and
o a warrant to purchase up to 2,840,000 common shares.
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
o $2.125 X day of the most recently completed calendar quarter
to the liquidation date
---------------------------------------------------
90 days
Redemption. From July 1, 2003 on, we may, at the option of our
board of directors, with approval by a majority of independent directors,
redeem in whole, or in part, the outstanding Series A Preferred Shares at a
redemption price equal to the sum of the following:
o $100.00 per share
o all accrued and unpaid dividends through the last day of the
most recently completed calendar quarter prior to the
redemption date
the actual number of days elapsed from the last
o $2.125 X day of the most recently completed calendar quarter
to 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, which payment has a fair market value per common
share, 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, conversion and voting rights
as the holders of the Series D Preferred Shares. There are 477,778
outstanding Series E Preferred Shares and each Series 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. 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.
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% (or 90% after 2000) 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 2003, 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$282.3 million as of March 31, 2000, 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, including the Independence Mall Units held by New Hanover,
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 actual numbers for the previous four
calendar quarters, we could issue approximately 7,114,000 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 inter vivios 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 March 31, 2000, the general partner and limited
partner interests represented approximately 97.8% of the outstanding
interests in the operating partnership and the OP Units represented
approximately 2.2% 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, 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 some 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 and
Independence Mall 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 partner 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.
DESCRIPTION OF INDEPENDENCE MALL UNITS AND
THE INDEPENDENCE MALL PARTNERSHIP AGREEMENT
A summary of certain provisions of the Agreement of Limited
Partnership of Westfield Independence Mall Limited Partnership, dated as of
August 11, 1998, as amended (the "Independence Mall Partnership
Agreement"), and a description of the material terms of the Independence
Mall 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 Limited Partnership Act and the
Independence Mall Partnership Agreement. We have filed a copy of the
Independence Mall Partnership Agreement as an exhibit to the registration
statement of which this prospectus is a part.
GENERAL
Westfield Independence LLC, a Delaware limited liability company
and a subsidiary of the operating partnership, is the sole general partner
of the Independence Mall Partnership, and as of March 31, 2000, held a
20.0% capital interest in the Independence Mall Partnership. All remaining
partnership interests in the Independence Mall Partnership are Independence
Mall Units held by New Hanover, as a limited partner. New Hanover acquired
the Independence Mall Units upon the contribution of its interests in
Independence Mall Associates, a North Carolina limited partnership and
owner of Westfield Shoppingtown Independence Mall. All holders of
Independence Mall Units or other partnership interests in the Independence
Mall Partnership are entitled to share in cash distributions from, and in
the profits and losses of, the Independence Mall Partnership as described
below. The Independence Mall Units and other partnership interests in the
Independence Mall Partnership are not listed on any exchange or quoted on
any national market system. The Independence Mall Partnership Agreement
imposes restrictions on the transfer of Independence Mall Units and other
partnership interests in the Independence Mall Partnership, as described
below.
PURPOSES, BUSINESS AND MANAGEMENT
The purpose of the Independence Mall 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 Independence Mall Partnership Agreement requires the business of the
Independence Mall 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 unless we cease to qualify for reasons other than the
conduct of the business of the Independence Mall Partnership. Subject to
the foregoing limitation, the Independence Mall Partnership may enter into
partnerships, joint ventures or similar arrangements and may own interests
in any other entity. Notwithstanding the foregoing, until August 11, 2001,
the business of the Independence Mall Partnership is limited to the
ownership of partnership interests in Independence Mall Associates, acting
as general partner of Independence Mall Associates, and any related
activities. Westfield Independence may cause the Independence Mall
Partnership not to take, or refrain from taking, any action which, in its
judgment, and in its 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 Section 857
or Section 4981 of the Internal Revenue Code; or
o could violate any law or regulation of any governmental body
or agency having jurisdiction over Westfield Independence or
us, or our respective securities
unless such action is specifically consented to by Westfield Independence
in writing.
The affairs of the Independence Mall Partnership will be managed
by us, as directed by our board of directors, since Westfield Independence,
the sole general partner of Independence Mall Partnership, is a subsidiary
of the operating partnership and we are the sole general partner of the
operating partnership.
Except as otherwise expressly provided in the Independence Mall
Partnership Agreement, all management powers over the business and affairs
of the Independence Mall Partnership are exclusively vested in Westfield
Independence. No limited partner or any other person to whom a partnership
interest has been transferred may, in its capacity as a limited partner,
take part in the operation, management or control of the Independence Mall
Partnership's business, transact any business in the Independence Mall
Partnership's name or have the power to sign documents for or otherwise
bind the Independence Mall Partnership. The general partner may not be
removed by the limited partners with or without cause. In addition to the
powers granted to a general partner of a limited partnership under
applicable law or that are granted to the general partner under any other
provision of the Independence Mall Partnership Agreement, Westfield
Independence, subject to the other provisions of the Independence Mall
Partnership Agreement, has full power and authority to do all things deemed
necessary or desirable by it to conduct the business of the Independence
Mall Partnership, to exercise all powers of the Independence Mall
Partnership and to effectuate the purposes of the Independence Mall
Partnership. The Independence Mall Partnership may incur debt or enter into
other similar credit, guarantee, financing or refinancing arrangements that
Westfield Independence deems necessary for the conduct of the activities of
the Independence Mall Partnership, Independence Mall Associates or the
operating partnership, including, without limitation, in connection with
any acquisition of properties, upon such terms as we determine to be
appropriate; provided, that, until August 11, 2001 the Independence Mall
Partnership will not acquire properties or assets unrelated to Independence
Mall Associates, without the consent of a majority in interest of the
limited partners, excluding interests held by Westfield Independence or its
affiliates. Westfield Independence is authorized to execute, deliver and
perform some agreements and transactions on behalf of the Independence Mall
Partnership without any further act, approval or vote of the limited
partners.
Restrictions on Westfield Independence's Authority
Westfield Independence may not take any action in contravention of
the Independence Mall Partnership Agreement. Westfield Independence may
not, without the prior consent of a majority in interest of the limited
partners, excluding interests held by Westfield Independence or its
affiliates, undertake, on behalf of the Independence Mall 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 Independence Mall Partnership
Agreement, except as provided in the Independence Mall
Partnership Agreement; for a description of the provisions
of the Independence Mall Partnership Agreement permitting
Westfield Independence to amend the Independence Mall
Partnership Agreement without the consent of the limited
partners see "-Amendment of the Independence Mall
Partnership Agreement;" or
o approve or acquiesce to the transfer of its partnership
interest or admit into the Independence Mall Partnership any
additional or successor general partners, subject to the
exceptions discussed in "-Transfers and Withdrawals -
Restrictions on Westfield Independence."
In addition, Westfield Independence may not amend the Independence
Mall Partnership Agreement without the prior consent of each partner
adversely affected by such amendment, if such amendment would:
o convert a limited partner into a general partner;
o modify the limited liability of a limited partner;
o alter the rights of any partner to receive the distributions
to which such partner is entitled, or alter the allocations
specified in the Independence Mall Partnership Agreement;
o cause the termination of the Independence Mall Partnership
prior to the time set forth in the Independence Mall
Partnership Agreement; or
o amend the section of the Independence Mall Partnership
Agreement imposing limitations on Westfield Independence's
ability to amend the Independence Mall Partnership Agreement
mentioned in the bullet points above.
Additional Limited Partners
Westfield Independence is authorized to admit additional limited
partners to the Independence Mall Partnership from time to time, on terms
and conditions and for such capital contributions as may be established by
Westfield Independence in its sole and absolute discretion. The net capital
contribution need not be equal for all partners. No action or consent by
the limited partners is required in connection with the admission of any
additional limited partner, except that, prior to August 11, 2001, no
additional limited partner may be admitted to the Independence Mall
Partnership without the written consent of a majority in interest of the
limited partners excluding interests held by Westfield Independence or its
affiliates.
Subject to Delaware law, any additional partnership interests in
the Independence Mall Partnership 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 Westfield Independence shall determine, in its sole
and absolute discretion without the approval of any limited partner,
provided that, prior to August 11, 2001, no additional limited partner may
be admitted to the Independence Mall Partnership without the written
consent of a majority in interest of the limited partners excluding
interests held by Westfield Independence or its affiliates. Such rights,
powers and duties may be senior to the limited partners, but none of such
additional partnership interests in the Independence Mall Partnership shall
carry or give to their holders rights to receive distributions, as to
amount, timing and priority, senior to the rights of the limited partners
as set forth in the Independence Mall Partnership Agreement. Without
limiting the generality of the foregoing, Westfield Independence has
authority to specify:
o the allocations of items of Independence Mall Partnership
income, gain, loss, deduction and credit to each such class
or series of partnership interests in the Independence Mall
Partnership.
o the right of each such class or series of partnership
interests in the Independence Mall Partnerships to share in
distributions; and
o the rights of each such class or series of partnership
interests in the Independence Mall Partnership upon
dissolution and liquidation of the Independence Mall
Partnership.
No person may be admitted as an additional limited partner without
Westfield Independence's consent, which consent may be given or withheld in
Westfield Independence's sole and absolute discretion and, until August 11,
2001, the consent of a majority in interest of the limited partners,
excluding Westfield Independence and its affiliates.
ABILITY TO ENGAGE IN OTHER BUSINESSES; CONFLICTS OF INTEREST
Westfield Independence and its affiliates are permitted to
purchase, own, operate, manage and otherwise deal with and profit from any
property, real, personal or mixed, not owned by the Independence Mall
Partnership for their own account and benefit, whether or not competitive
with the business and affairs of the Independence Mall Partnership,
provided, however, that until August 11, 2001, Westfield Independence
cannot engage in any activities other than the ownership of its interest in
the Independence Mall Partnership and activities incidental to such
ownership interest. Westfield Independence may in the future acquire
additional real estate investments that may be competitive with the
business of the Independence Mall Partnership.
GUARANTEED PAYMENTS, DISTRIBUTIONS AND PROFITS AND LOSSES
The Independence Mall Partnership Agreement provides that the
limited partners are entitled to a quarterly guaranteed payment per
Independence Mall Unit in an amount equal to 87.5% of the dividends paid on
each of our common shares with respect to such quarter. In addition, the
Independence Mall Partnership Agreement provides for the quarterly
distribution of Available Cash, as such term is defined in the Independence
Mall Partnership Agreement, as follows:
o first, the limited partners receive 100% of the
distributions until they receive, with respect to each
Independence Mall Unit, an amount equal to a "priority
return," which is the distributions paid on each of our
common shares in that quarter, less their guaranteed
payment, plus any unpaid priority return and the interest
accrued on that priority return;
o second, the general partner receives 100% of the
distributions until it receives an amount equal to the
priority return and guaranteed payments paid to the limited
partners during that quarterly period; and
o third, any excess is distributed 99% to the general partner
and 1% to the limited partners.
The Independence Mall Partnership Agreement provides for the
allocation of Net Income, as such term is defined in the Independence Mall
Partnership Agreement to the limited partners and the general partner in
the same priority and amounts as the distributions described above on an
annual basis. The Independence Mall Partnership Agreement provides for the
allocation of Net Loss, as such term is defined in the Independence Mall
Partnership Agreement, in the amount of 99% to the general partner and 1%
to the limited partners, on an annual basis.
BORROWING BY THE INDEPENDENCE MALL PARTNERSHIP
Westfield Independence is authorized to cause the Independence
Mall Partnership to borrow money, to assume, guarantee or contract for
indebtedness and other liabilities, and to issue evidence of indebtedness
and incur any obligations it in good faith deems necessary for the conduct
of the activities of the Independence Mall Partnership, Independence Mall
Associates, the operating partnership or us. Such debt may be secured,
among other things, by deeds, mortgages, deeds of trust, negative pledges
or other liens or encumbrances on the Independence Mall Partnership's
assets.
REIMBURSEMENT OF WESTFIELD INDEPENDENCE; TRANSACTIONS WITH WESTFIELD
INDEPENDENCE AND ITS AFFILIATES
Westfield Independence and/or its affiliates have the right, but
not the obligation, in the sole discretion of Westfield Independence, to
perform all or any of the property management services on account of the
property owned or managed by the Independence Mall Partnership,
Independence Mall Associates or any affiliate, and may cause the
Independence Mall Partnership, Independence Mall Associates or any
affiliate to enter into a management agreement with Westfield Independence
or one or more of its affiliates, in form and substance acceptable to
Westfield Independence in its sole discretion. If Westfield Independence
elects to so perform, or to have an affiliate so perform, the property
management services, then Westfield Independence or its affiliate will be
reimbursed for its expenses and otherwise compensated by the Independence
Mall Partnership in amounts determined by Westfield Independence, in its
good faith discretion, to be comparable to amounts which would be charged
by reputable unrelated third party property management companies which have
substantial experience in performing property management services for
properties of the type owned or managed by the Independence Mall
Partnership for institutional owners with portfolios under management which
are substantially similar in size, nature, and condition of property owned
or managed by the Independence Mall Partnership. Westfield Independence
will not otherwise be compensated for its services as general partner of
the Independence Mall Partnership. Westfield Independence will be
reimbursed by the Independence Mall Partnership to the extent not paid by
Independence Mall Associates for all expenses that it incurs relating to
the ownership and operation of, or for the benefit of, the Independence
Mall Partnership or any of its assets.
Until August 11, 2001, with the consent of a majority in interest
of the limited partners, excluding interests held by Westfield Independence
or its affiliates, and provided that no consent is required in connection
with a permitted loan transaction under the Independence Mall Partnership
Agreement, and from and after August 11, 2001, without the consent of the
limited partners, the Independence Mall Partnership may lend or contribute
funds or other assets to its subsidiaries, Westfield Independence or its
affiliates or other persons in which it has an equity investment and such
persons may borrow funds from the Independence Mall Partnership, on terms
and conditions established in the sole and absolute discretion of Westfield
Independence.
From and after August 11, 2001, the Independence Mall Partnership
may transfer assets to joint ventures, other partnerships, corporations or
other business entities in which it is or thereby becomes a participant
upon such terms and subject to such conditions consistent with the
Independence Mall Partnership Agreement and applicable law as Westfield
Independence, in its sole and absolute discretion, believes are advisable.
Except as expressly permitted by the Independence Mall Partnership
Agreement, neither Westfield Independence nor any of its affiliates will
sell, transfer or convey any property to, or purchase or otherwise acquire
any property from, the Independence Mall Partnership, directly or
indirectly, except pursuant to transactions that are determined by
Westfield Independence in good faith to be fair and reasonable to the
Independence Mall Partnership.
LIABILITY OF WESTFIELD INDEPENDENCE AND LIMITED PARTNERS
Westfield Independence, as the general partner of the Independence
Mall Partnership, is ultimately liable for all general recourse obligations
of the Independence Mall Partnership to the extent not paid by the
Independence Mall Partnership. Westfield Independence is not liable for the
nonrecourse obligations of the Independence Mall Partnership.
The limited partners are not required to make additional
contributions to the Independence Mall Partnership. Assuming that a limited
partner does not take part in the control of the business of the
Independence Mall Partnership, the liability of the limited partner for
obligations of the Independence Mall Partnership under the Independence
Mall Partnership Agreement and the Delaware Limited Partnership Act is
limited, subject to limited exceptions, generally to the loss of the
limited partner's investment in the Independence Mall Partnership
represented by his or her limited partnership interest. The Independence
Mall Partnership will operate in a manner Westfield Independence deems
reasonable, necessary and appropriate to preserve the limited liability of
the limited partners.
EXCULPATION AND INDEMNIFICATION OF WESTFIELD INDEPENDENCE
The Independence Mall Partnership Agreement generally provides
that Westfield Independence, as general partner, and its members, officers,
and directors will not be liable for monetary damages to the Independence
Mall Partnership, any partners or any assignees for losses sustained or
liabilities incurred as a result of errors in judgment or of any act or
omission if Westfield Independence acted without bad faith, without a
knowing and willful breach of the Independence Mall Partnership Agreement
and without active and deliberate dishonesty. In addition, Westfield
Independence, as general partner, is not, subject to some limitations set
forth in the Independence Mall Partnership Agreement, responsible for any
misconduct or negligence on the part of its agents taken without bad faith,
without a knowing and willful breach of the Independence Mall Partnership
Agreement and without active and deliberate dishonesty. Westfield
Independence, as general partner, may consult with legal counsel,
accountants, appraisers, management consultants, investment bankers,
architects, engineers, environmental consultants and other consultants and
advisors, and any action Westfield Independence takes or omits to take in
reliance upon the opinion of such persons, as to matters which Westfield
Independence, as general partner, reasonably believes 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 Independence Mall Partnership Agreement also provides for the
indemnification, to the fullest extent permitted by law, of Westfield
Independence, as general partner, of its directors, officers, employees,
members, partners, agents, representatives and affiliates 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 Independence Mall Partnership
or Westfield Independence in its capacity as general partner, whether or
not suit or other legal proceedings are commenced, unless it is established
by a court of competent jurisdiction and all appeals relating to such
proceeding have been fully completed or the applicable appeal periods have
expired that: (1) the act or omission of the party to be indemnified was
material to the matter giving rise to the proceedings and either was
committed in bad faith or was the result of active and deliberate
dishonesty or a willful and knowing breach of the Independence Mall
Partnership Agreement; (2) the party to be indemnified actually received an
improper and unpermitted personal benefit in money, property or services;
or (3) in the case of any criminal proceeding, the party to be indemnified
knew, or was reckless in not knowing, that the act or omission was
unlawful.
REDEMPTION RIGHTS OF LIMITED PARTNERS
For a description of the redemption rights of limited partners of
the Westfield Independence Partnership, see "Redemption of OP Units and
Independence Mall Units."
SALES OF ASSETS
Until August 11, 2008, Westfield Independence does not, without
the prior approval of a majority of limited partner interests, excluding
those held by Westfield Independence and its affiliates, have the right to
consummate
o the sale or other taxable disposition of all or any material
portion, except for routine disposition of personal property
and fixtures in the ordinary course of business, of the
Independence Mall Partnership's assets and properties, or
the assets or properties of Independence Mall Associates,
whether in one or a series of transactions; or
o a merger, consolidation or dissolution of the Independence
Mall Partnership or Independence Mall Associates,
which in either case would result in the recognition of taxable gain by the
limited partner in such fiscal year. In addition, from and after August 11,
2008, Westfield Independence must use its good faith efforts, to the extent
not inconsistent with our business objectives or those of Westfield
Independence, the operating partnership or our or their respective
affiliates, to consummate any such sale or disposition in a manner that
would enable the limited partners to defer the recognition of taxable gain.
In addition, until August 11, 2005, Westfield Independence does not,
without the prior approval of a majority of limited partner interests,
excluding those held by Westfield Independence and its affiliates, have the
right to distribute any property contributed to the Independence Mall
Partnership by any partner to another partner if, as a result of such
distribution, any limited partner would recognize income pursuant to
Section 737 or Section 704(c)(1)(B) of the Internal Revenue Code.
TRANSFERS AND WITHDRAWALS
Restrictions on Transfer
The Independence Mall Partnership Agreement restricts the
transferability of interests in the Independence Mall Partnership. Any
transfer or purported transfer of a partnership interest in the
Independence Mall Partnership not made in accordance with the Independence
Mall Partnership Agreement will not be valid and the Independence Mall
Partnership shall have no duty or obligation to recognize the transferee as
a partner or holder of any interest whatsoever in the Independence Mall
Partnership and the transferee shall have no rights, interests or claims in
or against the Independence Mall Partnership or any partner of the
Independence Mall Partnership. Except for a transfer to Westfield
Independence, the operating partnership or any other affiliate of Westfield
Independence, a limited partner, other than Westfield Independence and its
affiliates, shall not transfer all or any portion of its interest in the
Independence Mall Partnership, or any of such limited partner's economic
rights as a limited partner, without Westfield Independence's prior written
consent, which consent may be withheld in its sole discretion, provided,
however, that a limited partner may, subject to the provisions of the
Independence Mall Partnership Agreement, but without the requirement of
first obtaining the consent of Westfield Independence, transfer all or any
portion of its interest in the Independence Mall Partnership, or any of
such limited partner's economic rights as a limited partner, to:
o the partners of New Hanover as of August 11, 1998 or the
constituent partners, members, beneficiaries or shareholders
as of August 11, 1998 of such partners;
o immediate family members of the limited partner or of any
party enumerated in the bullet point immediately above; and
o family planning trusts in which the limited partner or any
party enumerated in the first bullet point above, together
with their immediate family members, has a 50% or greater
economic interest.
Any such transferee must first execute and deliver a written
agreement, in form and substance reasonably satisfactory to Westfield
Independence, agreeing to be bound by the terms of the Independence Mall
Partnership Agreement.
Westfield Independence may prohibit any transfer by a limited
partner of its Independence Mall Units if, in the opinion of legal counsel
to the Independence Mall Partnership or Westfield Independence, such
transfer would require registration under the Securities Act , or would
otherwise violate any Federal or state securities laws or regulations
applicable to the Independence Mall Partnership or the Independence Mall
Units.
No transfer by a Limited Partner of its Independence Mall Units
may be made to any person if:
o in the opinion of legal counsel for the Independence Mall
Partnership or Westfield Independence, it would result in
the Independence Mall Partnership being treated as an
association taxable as a corporation;
o such transfer is effectuated through an "established
securities market" or a "secondary market (or the
substantial equivalent thereof)" within the meaning of
Section 7704 of the Internal Revenue Code;
o such transfer would cause the Independence Mall Partnership
to become, with respect to any employee benefit plan subject
to Title I of the Employment Retirement Income Security Act
of 1974, as amended, a "party-in-interest" as defined in
Section 3(14) of ERISA, or a "disqualified person," as
defined in Section 4975(c) of the Internal Revenue Code;
o such transfer would, in the opinion of legal counsel for the
Independence Mall Partnership or Westfield Independence,
cause any portion of the assets of the Independence Mall
Partnership to constitute assets of any employee benefit
plan pursuant to Department of Labor Regulations Section
2510.2-101;
o such transfer would subject the Independence Mall
Partnership to be regulated under the Investment Company Act
of 1940, the Investment Advisors Act of 1940 or ERISA, each
as amended; or
o in the opinion of legal counsel for the Independence Mall
Partnership or Westfield Independence, it would adversely
affect our ability to continue to qualify as a REIT or
subject Westfield Independence or us to any additional taxes
under Section 857 or Section 4981 of the Internal Revenue
Code.
Substituted Limited Partners
Except for a transferee permitted pursuant to the Independence
Mall Partnership Agreement, no limited partner has the right to substitute
a transferee as a limited partner in its place. Any transferee permitted
pursuant to the Independence Mall Partnership Agreement shall be admitted
to the Independence Mall Partnership as a substituted limited partner. In
addition, Westfield Independence shall have the right to consent to the
admission of any other transferee of the interest of a limited partner as a
substituted limited partner, which consent may be given or withheld in
Westfield Independence's sole and absolute discretion. If Westfield
Independence, in its sole and absolute discretion, does not consent to the
admission of any transferee as a substituted limited partner, such
transferee will be considered an assignee for purposes of the Independence
Mall Partnership Agreement. An assignee will be entitled to receive
distributions from the Independence Mall Partnership and the share of net
income, net losses, recapture income and any other items, gain, loss,
deduction and credit of the Independence Mall Partnership attributable to
the Independence Mall Units assigned to such transferee, but will not be
deemed to be a holder of Independence Mall Units for any other purpose
under the Independence Mall Partnership Agreement, and will not be entitled
to vote with respect to such Independence Mall Units on any matter
presented to the limited partners for approval. Such Independence Mall
Units will be deemed to have been voted on such matters in the same
proportion as all other Independence Mall Units held by limited partners
are voted.
Restrictions on Westfield Independence
Until August 11, 2001, Westfield Independence may transfer any of
its general partner interest or limited partner interests to any affiliate
of Westfield Independence or otherwise in connection with any merger
reorganization or restructuring of us or the operating partnership without
consent or approval of the limited partners. Until August 11, 2001, except
as permitted in the preceding sentence, Westfield Independence shall not
otherwise transfer all or any portion of its general partner interest or
withdraw as a general partner of the Independence Mall Partnership, without
the consent or approval of a majority in interest of the limited partners,
other than interests held by Westfield Independence or its affiliates. From
and after August 11, 2001, Westfield Independence may transfer any of its
general partner interest or withdraw as general partner, or transfer any of
its limited partner interest, without consent or approval from any limited
partners, and any affiliate of Westfield Independence may transfer any of
its general partner interest or limited partner interest without consent or
approval from any limited partners.
AMENDMENT OF THE INDEPENDENCE MALL PARTNERSHIP AGREEMENT
By the General Partner Without the Consent of the Limited Partners
Westfield Independence has the power, without the consent of the
limited partners, to amend the Independence Mall Partnership Agreement as
may be required to facilitate or implement any of the following purposes:
o to add to Westfield Independence's obligations as general
partner or surrender any right or power granted to Westfield
Independence or any of its affiliates for the benefit of the
limited partners;
o to reflect the admission, substitution or withdrawal of
partners in accordance with the Independence Mall
Partnership Agreement;
o to set forth the designations, rights, powers, duties and
preferences of other holders of any additional partnership
interests in the Independence Mall Partnership issued
pursuant to the Independence Mall Partnership Agreement;
o to reflect a change that is of an inconsequential nature and
does not adversely affect the limited partners in any
material respect, or to cure any ambiguity, correct or
supplement any provision in the Independence Mall
Partnership Agreement not inconsistent with law or with
other provisions of the Independence Mall Partnership
Agreement, or make other changes with respect to matters
arising under the Independence Mall Partnership Agreement
that will not be inconsistent with law or with the
provisions of the Independence Mall Partnership Agreement;
and
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;
With the Consent of the Limited Partners
Amendments to the Independence Mall Partnership Agreement may be
proposed by Westfield Independence or by any limited partners, other than
Westfield Independence, holding 25% or more of the partnership interests in
the Independence Mall Partnership. Following such proposal, Westfield
Independence will submit to the limited partners any proposed amendment
that, pursuant to the terms of the Independence Mall Partnership Agreement,
requires the consent of the limited partners. Westfield Independence will
seek the written consent of the partners on the proposed amendment or will
call a meeting to vote on the proposed amendment and to transact any other
business that it may deem appropriate.
MEETINGS
Meetings of the partners may be called by Westfield Independence.
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. Whenever the vote
or consent of partners is permitted or required under the Independence Mall
Partnership Agreement, such vote or consent may be given at a meeting of
partners or may be given by written consent. Any action required or
permitted to be taken at a meeting of the partners may be taken without a
meeting if a written consent setting forth the action so taken is signed by
partners holding a majority of outstanding partnership interests in the
Independence Mall Partnership, or such other percentage as is expressly
required by the Independence Mall Partnership Agreement for the action in
question.
DISSOLUTION
The Independence Mall Partnership will dissolve, and its affairs
will be wound up, upon the first to occur of any of the following:
o March 1, 2097;
o an event of withdrawal, as permitted by and defined in the
Delaware Limited Partnership Act, other than an event of
bankruptcy, of Westfield Independence, as general partner,
unless, within ninety days after the withdrawal, a majority
in interest in capital and profits of the remaining partners
agree in writing, to continue the business of the
Independence Mall Partnership and to the appointment,
effective as of the date of withdrawal, of a substitute
general partner;
o the entry of a decree of judicial dissolution of the
Independence Mall Partnership pursuant to the provisions of
the Delaware Limited Partnership Act;
o the sale of all or substantially all of the assets and
properties of the Independence Mall Partnership; or
o a final and non-appealable judgment is entered by a court of
competent jurisdiction ruling that Westfield Independence is
bankrupt or insolvent, or a final and non-appealable order
for relief is entered by a court with appropriate
jurisdiction against Westfield Independence, in each case
under any Federal or state bankruptcy or insolvency laws,
unless prior to the entry of such order or judgment a
majority in interest in capital and profits of the remaining
partners agree in writing to continue the business of the
Independence Mall Partnership and to the appointment,
effective as of a date prior to the date of such order or
judgment, of a substitute general partner.
Upon dissolution, Westfield Independence, as general partner, or,
in the event that there is no remaining general partner, a liquidator will
proceed to liquidate the assets of the Independence Mall Partnership and
apply the proceeds from such liquidation in the order of priority set forth
in the Independence Mall Partnership Agreement.
REDEMPTION OF OP UNITS AND INDEPENDENCE MALL UNITS
GENERAL
New Hanover acquired Independence Mall Units upon the contribution
to the Independence Mall Partnership of New Hanover's partnership interest
in a partnership known as Independence Mall Associates. Pursuant to the
Independence Mall Partnership Agreement, Independence Mall Unitholders have
the right to cause the Independence Mall Partnership to redeem their
Independence Mall Units for cash. The redemption price will be paid in
cash, subject to our prior and independent right to acquire Independence
Mall Units for an equivalent number of our common shares. Alternatively,
pursuant to an OP Contribution Agreement, dated as of August 11, 1998, by
and among the operating partnership and New Hanover, Independence Mall
Unitholders have the right to contribute all or a portion of their
Independence Mall Units to the operating partnership for an equivalent
number of OP Units. Pursuant to 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 Independence Mall Units
From and after August 11, 1999, you, as an Independence Mall
Unitholder, may, subject to the terms and conditions of the Independence
Mall Partnership Agreement, 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 all or a portion, but not less than 500, of your Independence
Mall Units. Within 10 business days following delivery of this notice,
Westfield Independence may acquire your tendered Independence Mall Units
for a cash amount equal to the value of our common shares, based on the
ratio of one common share for each Independence Mall Unit, subject to
anti-dilution adjustments, and subject to our prior and independent right
to acquire some or all of the tendered Independence Mall Units for our
common shares, based on the ratio of one common share for each Independence
Mall 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, as well as well as
the terms and conditions of the partnership agreement for the operating
partnership relating to redemption rights. In addition to this redemption
price, you will also be entitled to receive cash to compensate you for any
accrued but unpaid Priority Return, as defined in the Independence Mall
Partnership Agreement, related to the Independence Mall Units which you are
tendering, subject to our prior and independent right to use common shares
to compensate you for the Priority Return.
If your Independence Mall Units are acquired for cash, then
Westfield Independence will become the owner of the Independence Mall
Units. If the Independence Mall Units are acquired for common shares , we
will become the owner of the Independence Mall Units. Such an acquisition
of Independence Mall Units will be treated as a sale of the Independence
Mall Units by you to us for Federal income tax purposes. See "-- Federal
Income Tax Consequences of Redemption of OP Units and Independence Mall
Units" below. Upon redemption, your right to receive distributions from the
Independence Mall Partnership with respect to your Independence Mall Units
will cease. If we elect to exercise our prior and independent right to
acquire your Independence Mall Units in exchange for common shares, you
will have the right to distributions as a shareholder of us from the time
of your acquisition of common shares.
Redemption of OP Units
After the first anniversary of becoming a holder of OP Units, you,
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 of your OP Units, or if you
hold fewer than 2,000 OP Units, all of the OP Units that you hold. 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. You 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 your OP Units are acquired for cash, then such OP Units will be
cancelled. If your 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 you to us for Federal income tax purposes. See
"-- Federal Income Tax Consequences of Redemption of OP Units and
Independence Mall Units" below. Upon redemption, your right to receive
distributions from the operating partnership with respect to your OP Units
will cease. If we elect to exercise our prior and independent right to
acquire your OP Units in exchange for common shares, you will have the
rights to distributions as a shareholder of us from the time of your
acquisition of common shares.
FEDERAL INCOME TAX CONSEQUENCES OF REDEMPTION OF OP UNITS AND INDEPENDENCE
MALL UNITS
The following discussion summarizes certain Federal income tax
considerations that may be relevant to you if you tender your Independence
Mall Units or 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 INDEPENDENCE MALL UNITS OR 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 Independence Mall Units or OP Units
If we acquire your Independence Mall Units or OP Units in exchange
for our common shares, the redemption will be treated as a sale of
Independence Mall Units or 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 Independence Mall Units or OP Units at the time of the
redemption, over (2) the adjusted basis of your Independence Mall Units or
OP Units. The determination of the adjusted basis of your Independence Mall
Units or OP Units is discussed more fully below. See "-Basis of
Independence Mall Units or OP Units."
If we do not acquire your Independence Mall Units or OP Units in
exchange for our common shares, then the Independence Mall Partnership or
the operating partnership will redeem the Independence Mall Units or OP
Units, as the case may be, for cash. If the Independence Mall Partnership
or the operating partnership redeems the Independence Mall Units or OP
Units for cash contributed by us, the redemption likely would be treated
for tax purposes as a sale of such Independence Mall Units or OP Units by
you to us in a fully taxable transaction as discussed above.
If the Independence Mall Partnership or the operating partnership
redeems all of your Independence Mall Units or 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 Independence Mall Units or OP Units exceeds your adjusted basis in
all of your Independence Mall Units or OP Units immediately before the
redemption.
Tax Treatment of Gain from Disposition of Independence Mall Units or OP
Units Generally
Capital gains recognized by individuals and certain other
noncorporate taxpayers upon the sale or disposition of an Independence Mall
Unit or an OP Unit will generally be subject to a maximum Federal income
tax rate of 20% if such Independence Mall Unit or OP Unit was held for more
than one year and will be taxed at ordinary income tax rates if such
Independence Mall Unit or OP Unit was held for one year or less. Generally,
gain or loss recognized by a holder of Independence Mall Units or OP Units
on the sale or other taxable disposition of an Independence Mall Unit or 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
Independence Mall Unit or OP Unit attributable to such holder's share of
"unrealized receivables" of the Independence Mall Partnership or the
operating partnership, as the case may be, 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
Independence Mall Units or OP Units held for more than one year that is
attributable to real property depreciation deductions of the Independence
Mall Partnership or the operating partnership that have not been recaptured
as ordinary income prior to, or in connection with, such sale will be
subject to a maximum 25% (rather than a 20%) tax rate.
In general, if you acquired your Independence Mall Units or OP
Units by purchase or cash contribution, your holding period in your
Independence Mall Units or OP Units begins at the time of such acquisition.
If you acquired your Independence Mall Units or OP Units in exchange for
property, however, your holding period in your Independence Mall Units or
OP Units generally includes your holding period in such property. If you
acquired your Independence Mall Units or OP Units, as the case may be, 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
Independence Mall Units or 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 Independence Mall Units or OP Units. If you received your
Independence Mall Units or OP Units in connection with a contribution of
cash, a partnership interest, or other property to the Independence Mall
Partnership or the operating partnership, you generally will have an
initial tax basis in your Independence Mall Units or 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 Independence Mall Units or
OP Units upon liquidation of a predecessor partnership, you generally will
have an Initial Basis in your Independence Mall Units or 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
Independence Mall Partnership's or the operating partnership's income, (2)
increases in your share of the Independence Mall Partnership's or the
operating partnership's liabilities (including any increase in your share
of liabilities occurring in connection with the issuance of Independence
Mall Units or OP Units), and (3) additional capital contributions made by
you to the Independence Mall Partnership or operating partnership.
Generally, your basis in your units is decreased (but not below zero) by
(1) distributions made to you by the Independence Mall Partnership or the
operating partnership, (2) decreases in your share of the Independence Mall
Partnership's or the operating partnership's liabilities (including any
decrease in your share of liabilities occurring in connection with the
issuance of Independence Mall Units or OP Units), (3) your share of the
Independence Mall Partnership's or the operating partnership's losses, and
(4) your share of the Independence Mall Partnership's or the operating
partnership's nondeductible expenditures that are not capitalized.
Potential Application of Disguised Sale Rules to a Redemption of
Independence Mall Units or OP Units. If you received your Independence Mall
Units or OP Units in exchange for property, there is a risk that a
redemption of your Independence Mall Units or OP Units may cause the
original transfer of property by you to the Independence Mall Partnership
or 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 Independence Mall Units or OP Units made
within two years of a contribution by you to the Independence Mall
Partnership or 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 Independence Mall Units or 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 Independence Mall Partnership or the operating
partnership, as the case may be, 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 Independence Mall Partnership or the
operating partnership, as the case may be.
Withholding. If we purchase Independence Mall Units or OP Units
from you, or if the Independence Mall Partnership or 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
Independence Mall Unit or OP Unit redeemed. Different withholding rules may
apply to a partial redemption that is not treated as a sale of your
Independence Mall Units or 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, INDEPENDENCE MALL UNITS AND COMMON SHARES
The information below highlights a number of the significant
differences between the operating partnership, the Independence Mall
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, Independence Mall Units and
common shares, respectively. 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 and Independence Mall
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, the operating partnership and the Independence Mall 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.
Independence Mall Partnership
The Independence Mall Partnership is organized as a Delaware
limited partnership. The Independence Mall Partnership has a stated
termination date of March 1, 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 97.8% 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.
Independence Mall Partnership
The Independence Mall 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
Independence Mall 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. Notwithstanding the
foregoing, until August 11, 2001, the business of the Independence Mall
Partnership is limited to the ownership of interests in Independence Mall
Associates, acting as general partner of Independence Mall Associates and
any related activities. Westfield Independence may cause the Independence
Mall Partnership not to take, or to refrain from taking, any action that in
its judgment, in its sole and absolute discretion:
o could adversely affect our ability to continue to qualify as
a REIT;
o could subject Westfield Independence or us to any additional
taxes under Internal Revenue Code Section 857 or Internal
Revenue Code Section 4981; or
o could violate any law or regulation of any governmental body
or agency having jurisdiction over Westfield Independence,
us or our securities,
unless such action described in the bullet points above is specifically
consented to Westfield Independence 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.
Independence Mall Partnership
The Independence Mall Partnership is authorized to issue
Independence Mall Units and other partnership interests for such
consideration and on such terms and conditions as Westfield Independence,
as general partner, in its sole discretion may deem appropriate. Such
rights, powers and duties may be senior to the limited partners, but none
of such additional partnership interests in the Independence Mall
Partnership shall carry or give to their holders rights to receive
distributions, as to amount, timing and priority, senior to the rights of
the limited partners as set forth in the Independence Mall Partnership
Agreement. No action or consent by the limited partners is required in
connection with the admission of any additional limited partner, except
that, prior to August 11, 2001, no additional partner may be admitted to
the Independence Mall Partnership without the written consent of a majority
in interest of the limited partners, excluding interests held by Westfield
Independence or its affiliates.
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.
Independence Mall Partnership
The Independence Mall Partnership has no restrictions on
borrowings, and Westfield Independence, as general partner, has full power
and authority to cause the Independence Mall 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.
Independence Mall Partnership
Other than restrictions precluding investments by the Independence
Mall Partnership that would adversely affect our qualification as a REIT,
the Independence Mall Partnership generally has authority to enter into
specified transactions, including among others, making investments and
lending operating partnership funds. However, until August 11, 2001, some
transactions with affiliates of Westfield Independence require the consent
of a majority in interest of the limited partners, excluding interests held
by Westfield Independence or its affiliates.
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.
Independence Mall Partnership
All management powers over the business and affairs of the
Independence Mall Partnership are vested in Westfield Independence, as
general partner. No limited partner has any right to participate in or
exercise control or management power over the business and affairs of the
Independence Mall Partnership. The limited partners have the right to vote
on those matters described under "Voting Rights" below. Westfield
Independence 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.
Independence Mall Partnership
Under Delaware Law, Westfield Independence, as general partner, is
accountable to the Independence Mall Partnership, as a fiduciary and,
consequently, is required to exercise good faith and integrity in all of
its dealings with respect to partnership affairs. Until August 11, 2009,
Westfield Independence cannot, without the prior approval of a majority of
limited partner interests, excluding those held by Westfield Independence
and its affiliates, consummate: (1) the sale or other taxable disposition
of all or any material portion, except for routine disposition of personal
property and fixtures in the ordinary course of business, of the
Independence Mall Partnership's assets and properties, or the assets or
properties of Independence Mall Associates, or (2) a merger, consolidation
or dissolution of the Independence Mall Partnership or Independence Mall
Associates, which in either case would result in the recognition of taxable
gain by the limited partner in such fiscal year. In addition, from and
after August 11, 2009, Westfield Independence must use its good faith
efforts, to the extent not inconsistent with the business objectives of
Westfield Independence, the operating partnership or our or their
respective affiliates, to consummate any such sale or disposition in a
manner that would enable the limited partners to defer the recognition of
taxable gain. In addition, until August 11, 2005, Westfield Independence
does not, without the prior approval of a majority of limited partner
interests, excluding those held by Westfield Independence and its
affiliates, have the right to distribute any property contributed to the
Independence Mall Partnership by any partner to another partner if, as a
result of such distribution, any limited partner would recognize income
pursuant to Section 737 or Section 704(c)(1)(B) of the Internal Revenue
Code. However, under the Independence Mall Partnership Agreement, Westfield
Independence, as general partner, is not, subject to some limitations set
forth in the Independence Mall Partnership Agreement, liable for monetary
damages for losses sustained or liabilities incurred by limited partners as
a result of errors of judgment or of any act or omission, provided that
Westfield Independence has acted in good faith.
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 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.
Independence Mall Partnership
The Independence Mall Partnership Agreement generally provides
that Westfield Independence, as general partner, and its members, officers,
and directors will not, subject to some limitations set forth in the
Independence Mall Partnership Agreement, be liable for monetary damages to
the Independence Mall Partnership, any partners or any assignees for losses
sustained or liabilities incurred as a result of errors in judgment or of
any act or omission if Westfield Independence acted without bad faith,
without a knowing and willful breach of the Independence Mall Partnership
Agreement and without active and deliberate dishonesty. In addition,
Westfield Independence, as general partner, is not responsible for any
misconduct or negligence on the part of its agents taken without bad faith,
without a knowing and willful breach of the Independence Mall Partnership
Agreement and without active and deliberate dishonesty. Westfield
Independence, as general partner, may consult with legal counsel,
accountants, appraisers, management consultants, investment bankers,
architects, engineers, environmental consultants and other consultants and
advisors, and any action Westfield Independence takes or omits to take in
reliance upon the opinion of such persons, as to matters which Westfield
Independence, as general partner, reasonably believes 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
Independence Mall Partnership Agreement also provides for the
indemnification, to the fullest extent permitted by law, of Westfield
Independence, as general partner, of its directors, officers, employees,
members, partners, agents, representatives and affiliates 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 Independence Mall Partnership
or Westfield Independence in its capacity as general partner, whether or
not suit or other legal proceedings are commenced, unless it is established
by a court of competent jurisdiction and all appeals relating to such
proceeding have been fully completed or the applicable appeal periods have
expired that: (1) the act or omission of the party to be indemnified was
material to the matter giving rise to the proceedings and either was
committed in bad faith or was the result of active and deliberate
dishonesty or a willful and knowing breach of the Independence Mall
Partnership Agreement; (2) the party to be indemnified actually received an
improper and unpermitted personal benefit in money, property or services;
or (3) in the case of any criminal proceeding, the party to be indemnified
knew, or was reckless in not knowing, that the act or omission was
unlawful.
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.
Independence Mall Partnership
Under the Independence Mall Partnership Agreement, limited
partners have voting rights only with respect to limited matters such as
some amendments and termination of the Independence Mall Partnership
Agreement and some transactions such as the sale or other taxable
disposition of all or any material portion of Westfield Independence's
assets or properties or the assets or properties of Independence Mall
Associates, and the merger, consolidation or dissolution of the
Independence Mall Partnership or Independence Mall Associates. In addition,
until August 11, 2001, limited partners have voting rights with respect to
the admission of additional limited partners, some transactions between the
Independence Mall Partnership and its subsidiaries and affiliates,
including Westfield Independence, and some transfers by the general partner
of its interest in the Independence Mall Partnership or the admission of a
successor general partner.
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.
Independence Mall Partnership
Amendments to the Independence Mall Partnership Agreement may be
proposed by Westfield Independence or by any limited partners holding 25%
or more of the partnership interests in the Independence Mall Partnership.
Some proposals require the consent of the limited partners. These include
proposals that would, among other things, convert a limited partner into a
general partner, modify the limited liability of a limited partner, alter
the rights of any limited partner to receive the distributions to which
such partner is entitled or alter the allocation specified in the
Independence Mall Partnership Agreement or cause the termination of the
Independence Mall Partnership prior to the time set forth in the
Independence Mall Partnership Agreement. In addition, Westfield
Independence, as general partner, may, without the consent of the limited
partners, amend the Independence Mall Partnership Agreement as to limited
matters enumerated in the Independence Mall Partnership Agreement.
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.
Independence Mall Partnership
Westfield Independence, as general partner, does not receive any
compensation for its services as general partner of the Independence Mall
Partnership. As a partner in the Independence Mall Partnership, however,
Westfield Independence has the right to allocations and distributions of
the Independence Mall Partnership as set forth in the Independence Mall
Partnership Agreement. In addition, the Independence Mall Partnership is
responsible for all expenses incurred relating to the Independence Mall
Partnership's ownership of its assets and the operation of the Independence
Mall Partnership and reimburses Westfield Independence, as general partner,
for such expenses paid by Westfield Independence to the extent not paid by
Independence Mall Associates. In addition, Westfield Independence and/or
its affiliates have the right, but not the obligation, in the sole
discretion of Westfield Independence, to perform all or any of the property
management services on account of the property owned or managed by the
Independence Mall Partnership, Independence Mall Associates or any
affiliate, and may cause the Independence Mall Partnership, Independence
Mall Associates or any affiliate to enter into a management agreement with
Westfield Independence or one or more of its affiliates, in form and
substance acceptable to Westfield Independence in its sole discretion. If
Westfield Independence elects to so perform, or to have an affiliate so
perform, the property management services, then Westfield Independence or
its affiliate will be reimbursed for its expenses and otherwise compensated
by the Independence Mall Partnership in amounts determined by Westfield
Independence, in its good faith discretion, to be comparable to amounts
which would be charged by reputable unrelated third party property
management companies which have substantial experience in performing
property management services for properties of the type owned or managed by
the Independence Mall Partnership for institutional owners with portfolios
under management which are substantially similar in size, nature, and
condition of property owned or managed by the Independence Mall
Partnership.
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.
Independence Mall Partnership
Under the Independence Mall Partnership Agreement and applicable
Delaware law, the liability of the limited partners for the Independence
Mall Partnership's debts and obligations is generally limited to the amount
of their investment in the Independence Mall 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.
Independence Mall Partnership
The Independence Mall Units constitute equity interests entitling
each Independence Mall Unitholder to such Independence Mall Unitholder's
proportionate share of cash distributions made to the Independence Mall
Unitholders. The Independence Mall Partnership may retain and reinvest
proceeds of the sale of property or excess refinancing proceeds in its
business, subject to the Independence Mall Partnership's obligation to make
any distributions required to be made under the Independence Mall
Partnership Agreement.
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 subject to corporate
income taxRecently enacted legislation will reduce the foregoing
distribution requirements after 2000 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.
Independence Mall Partnership
Westfield Independence, as general partner, is authorized in its
discretion and, from and after August 11, 2001, without limited partner
approval, to cause the Independence Mall Partnership to issue additional
limited partnership interests and other equity securities for any
partnership purpose at any time to the limited partners, or to other
persons on terms established by Westfield Independence 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.
Independence Mall Partnership
The Independence Mall Partnership Agreement restricts the
transferability of interests in the Independence Mall Partnership. Any
transfer or purported transfer of a partnership interest in the
Independence Mall Partnership not made in accordance with the Independence
Mall Partnership Agreement will not be valid and the Independence Mall
Partnership shall have no duty or obligation to recognize the transferee as
a partner or holder of any interest whatsoever in the Independence Mall
Partnership and the transferee shall have no rights, interests or claims in
or against the Independence Mall Partnership or any partner of the
Independence Mall Partnership. Except for a transfer to Westfield
Independence, the operating partnership or any other affiliate of Westfield
Independence, a limited partner, other than Westfield Independence and its
affiliates, shall not transfer all or any portion of its interest in the
Independence Mall Partnership, or any of such limited partner's economic
rights as a limited partner, without Westfield Independence's consent,
which consent may be withheld in its sole discretion, provided, however,
that a limited partner may, subject to the provisions of the Independence
Mall Partnership Agreement, but without the requirement of first obtaining
the consent of Westfield Independence, transfer all or any portion of its
interest in the Independence Mall Partnership, or any of such limited
partner's economic rights as a limited partner, to
o the partners of New Hanover as of August 11, 1998 or the
constituent partners, members, beneficiaries or shareholders
as of August 11, 1998 of such partners;
o immediate family members of the limited partner or of any
party enumerated in the bullet point immediately above; and
o family planning trusts in which the limited partner or any
party enumerated in the first bullet point above (together
with their immediate family members) has a 50% or greater
economic interest.
There is no market for partnership interests in the Independence
Mall Partnership, and the partnership interests in the Independence Mall
Partnership 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,
INDEPENDENCE MALL UNITS AND COMMON SHARES
The information below highlights a number of the significant
differences between the operating partnership, the Independence Mall
Partnership and us relating to Federal income taxation, and compares the
Federal income tax consequences associated with the ownership of OP Units,
Independence Mall Units and common shares, respectively. 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, the operating partnership and
the Independence Mall Partnership.
ENTITY-LEVEL TAXATION
Operating Partnership or Independence Mall Partnership
The Independence Mall Partnership and the operating partnership
are not subject to Federal income tax. Instead, each holder of Independence
Mall Units or 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, 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 or Independence Mall Partnership
Income and loss from the Independence Mall Partnership or the
operating partnership generally is subject to the "passive activity" rules.
Under these rules, any income and loss from the Independence Mall
Partnership or 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 or Independence Mall Partnership
Cash distributions from the Independence Mall Partnership or the
operating partnership are not taxable to a holder of Independence Mall
Units or OP Units except to the extent they exceed such holder's adjusted
basis in such holder's Independence Mall Units or OP Units (which will
include such holder's allocable share of the liabilities of Independence
Mall Partnership or 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 or Independence Mall Partnership
Each year, holders of Independence Mall Units or 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 shareholders.
STATE INCOME TAX
Operating Partnership or Independence Mall Partnership
Holders of Independence Mall Units or 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 Independence Mall Partnership or 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 some 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 August
23, 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 recently issued Temporary Treasury
Regulations, 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. 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. Recent legislation adds, effective in 2001,
the requirement that we may not own more than 10% of the total value of the
outstanding securities of any one issuer. The 5% and 10% asset limitations
described above do not apply, effective 2001, to electing "taxable REIT
subsidiary" corporations. The value of the stock held by REIT in taxable
REIT subsidiary corporations, may not, however, exceed, in the aggregate,
20% of the value of a REIT's total assets.
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. Recently
enacted legislation has decreased the 95% distribution requirement to 90%,
effective in 2001. 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% (or 90% after 2000), 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.
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, a recent Federal budget proposal contains language which, if
enacted in its present form, would, due to the extent of Westfield America
Trust's ownership interest in us, prevent us from re-electing REIT status
in the event that our REIT election is terminated.
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 shareholders. 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:
o 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;
o 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;
o 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;
o provisions that would also apply certain limitations to the
deductibility of interest paid by a taxable REIT subsidiary
to a related REIT;
o provisions that reduce the annual REIT distribution
requirement from a 95% to a 90% level; and
o 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.
In February 2000, President Clinton released his proposed budget
for fiscal year 2001. Provisions contained in the proposal would, if
enacted into law:
o provide an additional requirement that entities will not
qualify as a REIT if one person, including an entity,
directly or constructively owns stock possessing 50% or more
of the voting power or value of its stocks. This provision,
while not retroactive, may prevent us from re-electing REIT
status in the event that our REIT election is terminated due
to the extent of Westfield America Trust's ownership in us.
o generally extend the 4% excise tax on delayed distributions
by REITs to cases where the REIT timely distributes less
than 98% of its ordinary income or capital gain net income
for a taxable year. As discussed above, the excise tax does
not currently apply if the REIT timely distributes at least
85% of its ordinary income and 95% of its capital gain net
income.
It cannot be predicted whether, when, in what form, or with what
effective dates, other legislative proposals applicable to us or our
shareholders 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
Independence Mall Units or OP Units, are referred to herein as "selling
shareholders." Holders of Independence Mall Units or OP Units have the
right to receive cash for their Independence Mall Units or OP Units if
presented for redemption, subject to our prior and independent right to
acquire some or all of such Independence Mall Units or 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 Independence Mall Units or OP Units
represent approximately 1.1% of the total common shares outstanding as of
March 31, 2000.
PLAN OF DISTRIBUTION
This prospectus relates to the possible issuance of common shares
if, and to the extent that, Independence Mall Units or OP Units are
presented for redemption for cash, and we exercise our prior and
independent right to acquire such Independence Mall Units or 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 Independence Mall
Units or OP Units presented for redemption in exchange for common shares.
We have registered the offer, issuance and sale of the common
shares pursuant to our obligations under the First Amended and Restated
Registration Rights Agreement, dated as of June 30, 1999, by and among us
and New Hanover, but registration of such shares does not necessarily mean
that all or any portion of the Independence Mall Units or 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 Independence Mall Units or OP Units if we exercise our
prior and independent right to acquire Independence Mall Units or OP Units
for common shares, although we will receive either Independence Mall Units
or OP Units. Furthermore, if we exercise our prior and independent right to
acquire Independence Mall Units or 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 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 named selling shareholder, 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.
Pursuant to the registration rights agreement, we will pay all
registration expenses in connection with the registration 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. In addition, upon our being notified by a named selling
shareholder that a donee or pledgee intends to sell more than 500 shares, a
supplement to this prospectus will be filed.
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, 1999, 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.
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,
1999;
o our Quarterly Report on Form 10-Q for the quarterly period ended
March 31, 2000;
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.
WESTFIELD LOGO
WESTFIELD AMERICA, INC.
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............................................. $ 3,260
Legal fees and expenses.......................................... 73,000
Accounting fees and expenses..................................... 20,000
Printing and engraving expenses.................................. 1,000
Miscellaneous.................................................... 2,740
Total........................................................ $ 100,000
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.*
4.7 Amendment No. 4 to the Second Amended and Restated By-Laws of
Westfield America, Inc. (Exhibit 3.6 (3)).
5.1 Opinion of Husch & Eppenberger, LLC, as to legality of the
common shares.*
5.2 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.
23.3 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).*
23.5 Consent of Husch & Eppenberger, LLC (included in Exhibit
5.2).*
24.1 Power of Attorney.*
99.1 Amendment No. 5, dated as of August 16, 1999, to First
Amended and Restated Agreement of Limited Partnership of
Westfield America Limited Partnership, dated as of August 3,
1998 (the "OP Agreement").*
99.2 Agreement of Limited Partnership of Westfield Independence
Mall Limited Partnership, dated as of August 11, 1998.*
99.3 OP Agreement (Exhibit 10.3(4)).
99.4 Amendment No. 1 to the OP Agreement (Exhibit 10.4(4)).
99.5 Amendment No. 2 to the OP Agreement (Exhibit 10.5(4)).
99.6 Amendment No. 3 to the OP Agreement (Exhibit 10.6(4)).
99.7 Amendment No. 4 to the OP Agreement (Exhibit 10.7(4)).
- --------------------
* Previously Filed
(1) Incorporated by reference to designated exhibit to Westfield America's
quarterly report on Form 10-Q filed August 16, 1999, File No.
333-22731.
(2) Incorporated by reference to designated exhibit to Westfield America's
quarterly report on Form 10-Q filed May 17, 1999, File No. 333-22731.
(3) Incorporated by reference to designated exhibit to Westfield America's
quarterly report on Form 10-Q filed May 15, 2000, File No. 333-22731.
(4) Incorporated by reference to designated exhibit to Westfield America's
current report on Form 8-K filed February 19, 1999, File No.
333-22731.
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales
are being made, a post-effective amendment to this registration
statement:
(i) To include any prospectus required by
section 10(a)(3) of the Securities Act;
(ii) To reflect in the prospectus any facts or
events arising after the effective date of this
registration statement (or the most recent post-effective
amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the
information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease
in volume of securities offered (if the total dollar
value of securities offered would not exceed that which
was registered) and any deviation from the low or high
end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the SEC
pursuant to Rule 424(b) if, in the aggregate, the changes
in volume and price represent no more than a 20 percent
change in the maximum aggregate offering price set forth
in the "Calculation of Registration Fee" table in the
effective registration statement; and
(iii) To include any material information with
respect to the plan of distribution not previously
disclosed in the registration statement or any material
change to such information in this registration
statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if
the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed with or furnished
to the SEC by the registrant pursuant to Section 13 or Section 15(d) of the
Exchange Act that are incorporated by reference in the registration
statement.
(2) That, for the purpose of determining any liability
under the Securities Act, each such post-effective amendment shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a
post-effective amendment any of the securities being registered
which remain unsold at the termination of the offering.
(b) The undersigned registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act, each filing
of the registrant's annual report pursuant to Section 13(a) or Section
15(d) of the Exchange Act (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Exchange Act) that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the SEC
such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
(d) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the
Securities Act, the information omitted from the form of
prospectus filed as part of this registration statement in
reliance upon Rule 430A and contained in a form of prospectus
filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under
the Securities Act, each post-effective amendment that contains a
form of prospectus shall be deemed to be a new registration
statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the registrant certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form S-3 and has duly
caused this Amendment No. 2 to the 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 May 22, 2000.
WESTFIELD AMERICA, INC.
(Registrant)
By: /s/ Irv Hepner
_________________________________
Irv Hepner,
Secretary
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Amendment No. 2 to the registration statement has been signed
by the following persons in the capacities indicated on the 22nd of May, 2000.
*
- ------------------------------------ Director and Chairman of the Board
Frank P. Lowy
*
- ------------------------------------ Director and Co-President
Peter S. Lowy (Principal Executive Officer)
*
- ------------------------------------ Co-President
Richard E. Green (Principal Executive Officer)
*
- ------------------------------------ Chief Financial Officer and
Mark A. Stefanek Treasurer (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 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption
"Experts" in the Amendment No. 2 to the Registration Statement on Form S-3
and the related Preliminary Prospectus of Westfield America, Inc., dated
May 22, 2000, for the registration of common stock and to the
incorporation by reference therein of our report dated January 26, 2000
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, 1999 filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
May 22, 2000
Los Angeles, California
