<PAGE>
Filed pursuant to Rule 424(b)(5). Prospectus relates
to Registration Statement No. 333-09775
PROSPECTUS SUPPLEMENT
- ---------------------
(To Prospectus dated August 8, 1996)
COLUMBUS REALTY TRUST
1,166,600 Common Shares
This Prospectus Supplement and the attached Prospectus relate to the
offering and sale of 1,166,600 common shares of beneficial interest, par value
$.01 per share (the "Common Shares"), of Columbus Realty Trust to one or more
institutional investors at a purchase price of $20.50 per share, or an aggregate
purchase price of approximately $23,915,300.
The Common Shares are listed on the New York Stock Exchange (the "NYSE")
under the symbol "CLB." On October 8, 1996, the last reported sale price of the
Common Shares on the NYSE was $21.50 per share.
SEE "RISK FACTORS" ON PAGE S-5 FOR CERTAIN FACTORS RELEVANT TO AN
INVESTMENT IN COMMON SHARES.
_______________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED THE
MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
_______________
THE DATE OF THIS PROSPECTUS SUPPLEMENT IS OCTOBER 9, 1996
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-3 under the Securities Act of
1933, as amended (the "Securities Act") with respect to the securities offered
hereby. As permitted by the rules and regulations of the Commission, this
Prospectus Supplement and the accompanying Prospectus omit certain information,
exhibits and undertakings contained in the Registration Statement. For further
information pertaining to the securities offered hereby, reference is made to
the Registration Statement, including the exhibits filed as part thereof.
The Company is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith, files reports, proxy and information statements and other information
with the Commission. The reports, proxy and information statements, the
Registration Statement and exhibits thereto, and other information filed by the
Company with the Commission can be inspected and copied at the Public Reference
Section of the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the regional offices of the Commission located at
13th Floor, 7 World Trade Center, New York, New York 10048, and at 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of the
material can be obtained from the Public Reference Section of the Commission at
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates. In addition, copies of the material can be obtained from the
Web site maintained by the Commission at http://www.sec.gov. The Company's
Common Stock is listed on the New York Stock Exchange (the "NYSE") under the
symbol "CLB." The reports, proxy and information statements and other
information also can be inspected at the offices of the NYSE, 20 Broad Street,
New York, New York 10005.
The Company furnishes its stockholders with annual reports containing
financial statements audited by its independent auditors and with quarterly
reports containing unaudited summary financial information for each of the first
three quarters of each fiscal year.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
There are incorporated herein by reference the following documents
heretofore filed by the Company with the Commission:
(a) The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995;
(b) The Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1996;
(c) The Company's Quarterly Report on Form 10-Q for the quarter ended June
30, 1996;
(d) The Company's Current Report on Form 8-K dated September 5, 1996;
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(e) The Company's Current Report on Form 8-K dated September 19, 1996; and
(f) The description of the Common Shares contained in the Company's
Registration Statement on Form 8-A filed December 16, 1993.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus Supplement
and prior to the termination of this offering shall be deemed to be incorporated
by reference into this Prospectus Supplement.
Any statement contained in a document all or a portion of which is
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of the Registration Statement, this
Prospectus Supplement and the accompanying Prospectus to the extent that a
statement contained in the Registration Statement, this Prospectus Supplement,
the accompanying Prospectus or any other subsequently filed document that is
also incorporated by reference herein or in an accompanying prospectus
supplement, if any, modifies or supersedes that statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus Supplement and the accompanying
Prospectus.
The Company hereby undertakes to provide without charge to each person,
including any beneficial owner, to whom this Prospectus Supplement and the
accompanying Prospectus is delivered, upon written or oral request of that
person, a copy of any document incorporated herein by reference (other than
exhibits to those documents unless the exhibits are specifically incorporated by
reference into the documents that this Prospectus Supplement or the accompanying
Prospectus incorporates by reference). Requests should be directed to Mr. J.
Michael Lewis, Senior Vice President and Treasurer, Columbus Realty Trust, 15851
Dallas Parkway, Suite 855, Dallas, Texas 75248-5421.
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PROSPECTUS SUPPLEMENT SUMMARY
The following summary is qualified in its entirety by the more detailed
information included elsewhere in this Prospectus Supplement or the accompanying
Prospectus or incorporated herein or therein by reference. Unless the context
otherwise requires, all references in this Prospectus Supplement to the
"Company" shall mean Columbus Realty Trust and its subsidiaries on a
consolidated basis and, as the context may require, its predecessors.
THE COMPANY
Columbus Realty Trust (the "Company") is a self-administered and self-
managed real estate investment trust ("REIT") formed pursuant to the Texas Real
Estate Investment Trust Act, as amended (the "Texas REIT Act"). The Company
presently owns and operates (i) 22 multifamily residential properties comprising
a total of 5,414 apartment units, (ii) two industrial properties, and (iii) one
retail property (collectively, the "Properties"), all but two of which are
located in the greater Dallas, Texas metropolitan area. The residential
Properties completed at June 30, 1996 had an occupancy rate of approximately 96%
as of such date. The Company also owns four parcels of land in the greater
Dallas, Texas and Jackson, Mississippi metropolitan areas which currently are
under construction (the "Development Properties") and two parcels of land for
future development (the "Development Land"). The Company anticipates that the
Development Properties currently under construction and the Development Land
proposed for development will add approximately 1,809 apartment units to the
Company's portfolio upon completion. The Company expects that approximately 502
of these additional apartment units will be completed in 1996 and the remaining
1,307 will be completed in 1997 and 1998. When the Development Properties and
the properties proposed for construction on the Development Land are completed,
the Company will own a total of approximately 7,223 units in 28 residential
properties.
The Company operates as a real estate investment trust ("REIT") under the
Internal Revenue Code of 1986, as amended.
The Company's executive offices are located at 15851 Dallas Parkway, Suite
855, Dallas, Texas 75248 and its telephone number is (972) 387-1492. The Common
Shares are listed on the New York Stock Exchange under the symbol "CLB".
RISK FACTORS
An investment in Common Shares involves various risks, and prospective
investors should carefully consider the matters discussed under "Risk Factors"
prior to any investment in the Company.
S-3
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THE OFFERING
<TABLE>
<S> <C>
Common Shares Offered by the Company.... 1,166,600 Common Shares
Common Shares Outstanding After the 12,900,171(A)
Offering..............................
Offering Price.......................... $20.50 per Common Share
Use of Proceeds......................... Repayment of floating rate debt
incurred in connection with the
development of certain Properties.
NYSE Symbol............................. "CLB"
</TABLE>
____________________
(A) Does not include 1,620,000 Common Shares reserved for issuance upon exercise
of outstanding options granted pursuant to the Company's Share Option Plan
and Long-Term Management Incentive Plan.
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<PAGE>
RISK FACTORS
An investment in Common Shares involves various risks. Prospective
investors should carefully consider the following information in conjunction
with the other information contained or incorporated by reference in this
Prospectus Supplement and the attached Prospectus before making a decision to
purchase Common Shares.
DEPENDENCE ON DALLAS MARKET/CONCENTRATIONS IN CERTAIN SUBMARKETS
The Company presently owns and operates (i) 22 multifamily residential
properties, (ii) two industrial properties and (iii) one retail property
(collectively, the "Properties"). All but two of the Properties are located in
Dallas and surrounding communities. The Company also owns four parcels of land
in the greater Dallas, Texas and Jackson, Mississippi metropolitan areas which
currently are under construction (the "Development Properties") and two parcels
of land for future development (the "Development Land"). The Company's
performance is therefore dependent upon economic conditions in Texas in general,
and Dallas in particular. A decline in the economy in these markets generally,
and the Dallas metropolitan area in particular, may adversely affect the ability
of the Company to make expected distributions to shareholders. Eight of the
Properties and one of the Development Properties are located within a one mile
radius in the Uptown District, a submarket of the Dallas metropolitan area. Two
of the Properties and one of the Development Properties are located within a
two-mile radius in the Las Colinas area of Irving, Texas, a suburb of Dallas.
The Company's performance also is dependent upon the attractiveness of these
submarkets, as well as its other submarkets, to potential residents.
PARTIAL OWNERSHIP OF CONDOMINIUM PROPERTIES
The Company holds a majority of units in each of two condominium
properties, and a minority of units in one condominium property. These units,
like many other condominium units in the Dallas area, are held for rental as
apartments. The Company intends to continue to rent the majority of its
condominium units, and to market selected units individually for sale as
condominiums. While renting condominium units is fairly common in the Dallas
market, the Company could experience difficulties and resistance in the
refinancing and/or bulk sale of units. Furthermore, the number and type of
buyers for such units may be more limited than buyers of traditional apartment
projects. In addition, although the Company, through its ownership of a
majority of the units in two of these condominium projects, controls the
homeowners association for each such property, certain actions may require a
super-majority (two-thirds or greater) or unanimous consent of all unit owners.
Actions requiring a super-majority or unanimous consent include changing the
percentage ownership of unit owners in the common elements, abandoning,
partitioning or subdividing the common elements, abandoning or terminating the
condominium regime, partitioning or subdividing condominium units, amending the
condominium declaration or bylaws, electing to rebuild the condominium project
after substantial casualty, and establishing self-management of the condominium
project.
S-5
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RISKS OF DEVELOPMENT, CONSTRUCTION AND ACQUISITION ACTIVITIES
The Company intends to actively continue development and construction of
multifamily communities. There can be no assurance that the Company will
undertake to develop any particular site or that it will be able to complete
such development if it is undertaken. Risks associated with the Company's
development and construction activities include: development opportunities may
be abandoned; construction costs of a community may exceed original estimates,
possibly making the community uneconomical; occupancy rates and rents at a newly
completed community may not be sufficient to make the community profitable;
financing may not be available on favorable terms for development of a
community; and construction and lease-up may not be completed on schedule,
resulting in increased debt service expense and construction costs. Development
activities also are subject to risks relating to the inability to obtain, or
delays in obtaining, all necessary zoning, land-use, building, occupancy, and
other required governmental permits and authorizations.
The Company intends to continue to acquire multifamily apartment
communities on a select basis. Acquisitions of multifamily communities entail
risks that investments will fail to perform in accordance with expectations. In
addition, estimates of the costs of improvements to bring an acquired property
up to established standards of the market position intended for that property
may prove inaccurate.
The Company anticipates that future developments and acquisitions will be
financed, in whole or in part, under existing credit facilities, loan
commitments, other lines of credit or other forms of secured or unsecured
financing or through the issuance of additional equity by the Company. The use
of equity financing, rather than debt, for future developments or acquisitions
could have a dilutive effect on the interest of existing shareholders of the
Company. If new developments are financed through construction loans, there is
a risk that, upon completion of construction, permanent financing for such newly
developed communities may not be available or may be available only on
disadvantageous terms.
REAL ESTATE FINANCING RISKS
No Limitation on Debt. The Company currently has a policy of incurring
debt only if upon such incurrence the ratio of debt to total market
capitalization (i.e., the total consolidated debt of the Company as a percentage
of the market value of issued and outstanding equity securities plus total
consolidated debt) would be 50% or less, but the organizational documents of the
Company do not contain any limitation on the amount of indebtedness the Company
may incur. Accordingly, the Company's Board of Trust Managers could alter or
eliminate this policy.
Existing Debt Maturities, Balloon Payments and Refinancing Risks. The
Company is subject to the risks normally associated with debt financing,
including the risk that the Company's cash flow will be insufficient to meet
required payments of principal and interest. Because the Company anticipates
that only a small portion of the principal of the Company's mortgage
indebtedness will be repaid prior to maturity, it will be necessary for the
Company to refinance this debt at or prior to maturity. Accordingly, there is a
risk that existing indebtedness on the
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Properties will not be able to be refinanced or that the terms of such
refinancing will not be as favorable as the terms of the existing indebtedness.
Risk of Rising Interest Rates. The Company has incurred and expects in the
future to incur floating rate indebtedness in connection with the construction
of multifamily apartment communities, as well as for other purposes. In
addition, additional indebtedness that the Company incurs under its credit
facility also bears interest at a floating rate. Accordingly, increases in
interest rates would increase the Company's interest costs (to the extent that
the related indebtedness was not protected by an interest rate protection
arrangement).
REAL ESTATE INVESTMENT RISKS
General Risks. Real property investments are subject to varying degrees of
risk. If the Company's properties do not generate revenues sufficient to meet
operating expenses, including debt service and capital expenditures, the
Company's cash flow and ability to make distributions to its shareholders will
be adversely affected. A multifamily community's revenues and value may be
adversely affected by the general economic climate; the local economic climate
(including the fiscal condition of the relevant governmental bodies); local real
estate conditions (such as oversupply of or reduced demand for apartment homes);
the perceptions by prospective residents of the safety, convenience and
attractiveness of the communities or neighborhoods in which they are located and
the quality of local schools and other amenities; the ability of the owner to
provide adequate management, maintenance and insurance; and increased operating
costs (including real estate taxes and utilities). Certain significant
expenditures associated with each equity investment (such as mortgage payments,
if any, real estate taxes, insurance and maintenance costs) are generally not
reduced when circumstances cause a reduction in income from the investment.
Market Illiquidity. Equity real estate investments are relatively
illiquid. Such illiquidity will tend to limit the ability of the Company to
vary its portfolio promptly in response to changes in economic or other
conditions. In addition, the Internal Revenue Code (the "Code") limits the
Company's ability to sell properties held for fewer than four years, which may
affect the Company's ability to sell properties without adversely affecting
returns to the holders of Common Shares.
Competition. There are numerous housing alternatives that compete with the
Properties in attracting residents. The Properties compete directly with other
multifamily rental apartments and single family homes that are available for
rent or purchase in the markets in which the Properties are located. In
addition, other competitors for development and acquisitions of properties,
including other REITs, may have greater resources than the Company. Increased
supply of apartment homes in the Company's principal markets over the past few
years and the next few years may adversely affect the current favorable demand
environment for apartment homes, including occupancy and rental rates.
S-7
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LIMITS ON CHANGES IN CONTROL
General. Certain provisions contained in the Company's Declaration of
Trust and Bylaws and in the Texas REIT Act may have the effect of discouraging a
third party from making an acquisition proposal for the Company and may thereby
inhibit a change in control of the Company. For example, such provisions may
(i) deter tender offers for the Common Shares, which offers may be attractive to
the shareholders, or (ii) deter purchases of large blocks of Common Shares,
thereby limiting the opportunity for shareholders to receive a premium for their
Common Shares over then-prevailing market prices.
Preferred Shares. The Declaration of Trust authorizes the Board of Trust
Managers to issue up to 10,000,000 preferred shares of beneficial interest, par
value $.01 (the "Preferred Shares" and, together with the Common Shares, the
"Shares") and to establish, without the approval of the holders of the Common
Shares, the preferences and rights (including the right to vote and the right to
convert into Common Shares) of any Preferred Shares issued. The issuance of
Preferred Shares could have the effect of delaying or preventing a change of
control of the Company even if a change of control were in the shareholders'
best interest. No Preferred Shares are presently issued or outstanding.
Ownership Limit. In order for the Company to maintain its qualification as
a REIT, not more than 50% in value of its outstanding Shares may be owned,
directly or indirectly, by five or fewer individuals (as defined in the Code).
For the purpose of preserving the Company's REIT qualification, the Declaration
of Trust provides that, with certain exceptions, no holder may own, directly or
indirectly, more than 9.8% of the outstanding Shares of the Company (the
"Ownership Limit").
Required Consent for Business Combinations. Unless otherwise approved by
the Trust Managers, the Company generally may not merge, consolidate or sell a
substantial portion of its assets to a shareholder holding more than 50% of the
Common Shares (or an affiliate of such a shareholder) unless such transaction is
approved by the affirmative vote of 80% of the shareholders. This voting
requirement might limit the possibility for merger or change in the control of
the Company.
Election of Trust Managers; Super-Majority Voting Requirements. The
Company's Bylaws provide that any vacancy among the Trust Managers may be filled
by a majority of the remaining Trust Managers, or by the affirmative vote of
holders of two-thirds of the Company's outstanding shares. The Bylaws require
the affirmative vote of holders of two-thirds of the outstanding shares to elect
new Trust Managers. If the requisite vote is not obtained with respect to an
election of Trust Managers, then the existing Trust Managers will continue in
their capacity as such. In addition, the Bylaws also require the affirmative
vote of holders of two-thirds of the outstanding shares to remove Trust
Managers. These requirements will make it more difficult for a third party to
effect a change of control of the Board of Trust Managers of the Company in an
election contest because the existing Trust Managers will continue to hold
office if the person seeking to elect new Trust Managers is unable to obtain the
required two-thirds vote. In addition, the Declaration of Trust requires the
affirmative vote of holders of two-thirds of the
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<PAGE>
outstanding shares to amend the Declaration of Trust and in certain
circumstances requires the affirmative vote of the holders of 80% of the
outstanding shares.
Classified Board. The classification of Trust Managers could have the
effect of making the removal of incumbent Trust Managers more time-consuming and
difficult, which could discourage a third party from making a tender offer or
otherwise attempting to obtain control of the Company, even though such an
attempt might be beneficial to the Company and its shareholders. At least two
annual meetings of shareholders, instead of one, generally will be required to
effect a change in a majority of the Board of Trust Managers. Thus, the
classified board provision could increase the likelihood that incumbent Trust
Managers will retain their positions. Further, holders of Common Shares will
have no right to cumulative voting for the election of Trust Managers.
Consequently, at each annual meeting of shareholders, the holders of two-thirds
of the outstanding shares will be able to elect all of the successors of the
class of Trust Managers then eligible for reelection.
Fair Price Provision. The Declaration of Trust contains a so-called "fair
price provision," which is generally designed to deter partial or "two-step"
tender offers. Although it may, under certain circumstances, have the effect of
discouraging unilateral tender offers or other takeover proposals, inclusion of
the fair price provision in the Declaration of Trust may help assure, to some
degree, that all shareholders of the Company will receive substantially the same
price for their Shares in transactions whereby the Company is acquired in two or
more steps. Because it contains a higher percentage requirement for shareholder
approval of certain two-step acquisitions, the fair price provision may
discourage or make more difficult offers for less than all of the outstanding
Common Shares of the Company.
ADVERSE CONSEQUENCES OF FAILURE TO QUALIFY AS A REIT; OTHER TAX LIABILITIES
The Company intends to continue to operate so as to qualify as a REIT under
the Code. Although management of the Company believes that the Company has been
and will continue to be organized and operated in such a manner, no assurance
can be given that the Company will qualify or remain qualified as a REIT.
Qualification as a REIT involves the application of highly technical and complex
Code provisions for which there are only limited judicial or administrative
interpretations. The determination of various factual matters and circumstances
not entirely within the Company's control may affect the Company's ability to
qualify as a REIT. For example, in order to qualify as a REIT, at least 95% of
the Company's gross income in any year must be derived from qualifying sources
and the Company must pay dividends to shareholders aggregating annually at least
95% of its REIT taxable income (excluding net capital gains). In addition, the
Company cannot have any earnings and profits which were accumulated during a
year when it did not qualify as a REIT. The Company would not satisfy this
requirement if any of the corporations which merged into the Company upon its
formation had earnings and profits which were not eliminated as of the close of
the Company's first taxable year as a REIT. The Company expects to satisfy this
earnings and profits requirement. If it is later determined that the Company
has earnings and profits from a non-REIT year which were not distributed as of
the close of the Company's first taxable year as a REIT, then the Company would
not qualify for taxation as a REIT for such taxable year. The Company could
qualify for taxation as a REIT
S-9
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thereafter, however, provided that the Company made a designated dividend
distribution of such earnings and profits within 90 days after such
determination was made. Further, no assurance can be given that new
legislation, regulations, administrative interpretations or court decisions will
not significantly change the tax laws with respect to qualification as a REIT or
the federal income tax consequences of such qualification. The Company,
however, is not aware of any pending tax legislation that would adversely affect
the Company's ability to operate as a REIT.
If in any taxable year the Company were to fail to qualify as a REIT, the
Company would not be allowed a deduction for dividends to shareholders in
computing its taxable income and would be subject to federal income tax
(including any applicable alternative minimum tax) on its taxable income at
corporate rates. Unless entitled to relief under certain statutory provisions,
the Company also would be disqualified from treatment as a REIT for the four
taxable years following the year during which qualification was lost. As a
result, the funds available for distribution to the Company's shareholders would
be reduced for each of the years involved. In addition, dividends would no
longer be required to be paid. To the extent that dividends to shareholders
would have been paid in anticipation of the Company's qualification as a REIT,
the Company might be required to borrow funds or to liquidate certain of its
investments to pay the applicable tax. Although the Company currently intends
to operate in a manner designed to qualify as a REIT, it is possible that future
economic, market, legal, tax or other considerations may cause the Company's
Board of Trust Managers, with the consent of two-thirds of the Company's
shareholders, to revoke the REIT election.
CARRYOVER BASIS AND POSSIBLE TAXATION OF BUILT-IN GAIN ON ASSETS
The Company's initial basis in those Properties acquired through tax-free
mergers with its predecessors is a carryover basis determined by reference to
the basis of such assets in the hands of such predecessors. The Company
believes that the carryover basis of such assets is approximately $34 million
less than the basis would have been if such acquisitions had not been tax-free
in any respect. This reduced the available depreciation deductions to the
Company and, if any such Properties are sold, may increase taxable gains or
reduce taxable losses to the Company. Consequently, this will result in greater
REIT taxable income and earnings and profits of the Company for tax purposes
than would be realized if the Company acquired such assets in taxable
transactions.
Under Treasury regulations that are to be promulgated, the Company may be
taxed at the highest corporate tax rate on any built-in gain (i.e., the excess
of value over adjusted tax basis) attributable to assets that the Company
acquires in certain tax-free corporate transactions, to the extent the gain is
recognized during the first ten years after the Company acquires such assets.
The Company acquired certain interests in certain of the Properties from its
predecessors in a "tax-free" corporate reorganization transaction and that
portion of each such Property attributable to such interests will be subject to
the potential tax on built-in gains. The fair market value of such assets
significantly exceeded their adjusted tax basis on the date of acquisition and,
therefore, the Company will be taxed at the highest corporate tax rate on such
built-in gain if and to the extent such assets are sold within ten years after
acquisition. The Company does not presently intend to sell any such assets
during the ten-year period, although no assurances can
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be made that any such assets will not be sold during such period. The Company
believes that the aggregate amount of built-in gain with respect to such assets
is approximately $7.8 million.
ORGANIZATION AS A TEXAS REIT
The Company was organized under the Texas REIT Act on October 12, 1993. As
a result of recent amendments to the Texas REIT Act, which became effective on
September 1, 1995, the Texas REIT Act is very similar to the Texas Business
Corporation Act. However, most provisions of the Texas REIT Act have not yet
been interpreted by the courts and a court may interpret the corporate
governance or other provisions in a manner unfavorable to the Company and its
shareholders.
POSSIBLE ADVERSE IMPACT OF MARKET CONDITIONS ON MARKET PRICE
The market value of the Common Shares could be substantially affected by
general market conditions, including changes in interest rates, government
regulatory action and changes in tax laws. An increase in market interest rates
may lead purchasers of the Common Shares to demand a higher annual yield on the
price paid for shares from distributions by the Company, which could adversely
affect the market price of the Common Shares.
POSSIBLE ENVIRONMENTAL LIABILITIES
Under various Federal, state and local environmental laws, a current or
previous owner or operator of real estate may be required (typically regardless
of knowledge or responsibility) to investigate and clean up hazardous or toxic
substances or petroleum product releases at such property and may be held liable
to a governmental entity or to third parties for property damage and for
investigation and clean-up costs incurred by such parties in connection with the
contamination, which may be substantial. The presence of such substances (or
the failure to properly remediate the contamination) may adversely affect the
owner's ability to borrow against, sell or rent such property.
USE OF PROCEEDS
The net proceeds to the Company from the offering of 1,166,600 Common
Shares at a price of $20.50 per Common Share are estimated to be approximately
$23,615,000 after deducting fees and expenses of the offering payable by the
Company, estimated at approximately $300,300. The Company intends to use such
net proceeds to repay outstanding floating rate indebtedness incurred to fund
the Company's development activities. Such indebtedness currently bears
interest at a weighted average annual interest rate of 7.12% and will mature on
December 31, 1997.
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THE COMPANY
"Safe Harbor" statement under the Private Securities Litigation Reform Act
of 1995: This prospectus, including the information incorporated by reference
herein, contains forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934. Actual results could differ materially from those projected in the
forward-looking statements as a result of the risk factors set forth under "Risk
Factors," and prospective purchasers of the Common Shares offered hereby should
carefully review such risk factors.
GENERAL
Columbus Realty Trust (the "Company") is a self-administered and self-
managed real estate investment trust ("REIT") formed pursuant to the Texas Real
Estate Investment Trust Act, as amended (the "Texas REIT Act"). The Company
presently owns and operates (i) 22 multifamily residential properties comprising
a total of 5,414 apartment units, (ii) two industrial properties, and (iii) one
retail property (collectively, the "Properties"), all but two of which are
located in the greater Dallas, Texas metropolitan area. The residential
Properties completed at June 30, 1996 had an occupancy rate of approximately 96%
as of such date. The Company also owns four parcels of land in the greater
Dallas, Texas and Jackson, Mississippi metropolitan areas which currently are
under development (the "Development Properties") and two parcels of land for
future development (the "Development Land"). The Company anticipates that the
Development Properties currently under construction and the Development Land
proposed for development will add approximately 1,809 apartment units to the
Company's portfolio upon completion. The Company expects that approximately 502
of these additional apartment units will be completed in 1996 and the remaining
1,307 will be completed in 1997 and 1998. When the Development Properties and
the properties proposed for construction on the Development Land are completed,
the Company will own a total of approximately 7,223 units in 28 residential
properties.
The Company intends to develop each of the Development Properties and
additional communities targeted for development with the same quality of
construction, innovation in design and uniqueness of setting that have
distinguished prior communities developed by the Company and its predecessors.
The Company also may from time to time make acquisitions of additional income-
producing properties which further its strategies, satisfy its standards for
quality and provide potential for attractive returns on investment.
The Company's core strategy is to acquire and develop dense concentrations
of units in close proximity in targeted areas which are near major employment
centers and which have long term growth potential. The Company believes this
strategy enables it to realize operating efficiencies, offer enhanced resident
amenities, and better serve its residents, thereby providing the Company with a
competitive advantage over others who do not have concentrated unit ownership.
The Company historically has focused its development activities on the greater
Dallas, Texas metropolitan area. The Company is exploring the feasibility of
developments in
S-12
<PAGE>
additional targeted metropolitan areas and anticipates expanding into new
markets in a manner consistent with its core strategy.
The Company generally targets residents who are "renters by choice," that
is, those who prefer the convenience and luxury afforded by the Company's
residential Properties to home ownership and who have income levels in excess of
that necessary to enable them to afford the Company's rental rates. The Company
intensively manages its communities and responds to the needs and lifestyles of
its residents. Management believes that these practices enable it to attract
and retain residents. The Company utilizes proprietary leasing software,
private telephone systems, private cable television systems, energy management
systems and other management and operating applications to generate additional
revenue and achieve operating efficiencies and cost savings.
The Common Shares are listed on the NYSE under the symbol "CLB." On July
15, 1996, the Company paid a dividend of $0.395 per Common Share for the second
quarter of 1996 to all shareholders of record on June 28, 1996. On September
19, 1996, the Company declared a dividend of $0.395 per Common Share for the
third quarter of 1996, payable on October 15, 1996 to all shareholders of record
on September 30, 1996. The Company intends to continue making regular quarterly
distributions to its shareholders. Distributions depend upon a variety of
factors, and there can be no assurance that future distributions will be made.
The Company operates as a real estate investment trust ("REIT") under the
Internal Revenue Code of 1986, as amended.
S-13
<PAGE>
THE PROPERTIES
The following table sets forth certain information relating to the
Company's completed residential Properties, and estimated information relating
to the Development Properties and the Development Land.
<TABLE>
<CAPTION>
Year
Completed Total
or to be Number
Completed Properties Location Completed of Units
-------------------- -------- --------- --------
<S> <C> <C> <C>
The Meridian........................ Dallas 1991 132
The Worthington..................... Dallas 1993 332
The Vintage......................... Dallas 1993 160
The Residences...................... Dallas 1987 196
Uptown Village...................... Dallas 1995 300
The Rock............................ Dallas 1988 208
Windhaven Village................... Dallas 1991 474
Parkway Village Villas.............. Dallas 1986 136
Springstead Condominiums............ Dallas 1983 67
Reflections on McCallum............. Dallas 1986 198
Town Lake/Parks..................... Dallas 1987/1986 238/160
Lakeside Village.................... Dallas 1986 327
Villas at Valley Ranch.............. Dallas 1985 61
Ascension Point/Ascension Point II.. Dallas 1985/1995 79/86
Lakeshore........................... Dallas 1988 404
The Trace/The Trace II.............. Jackson, MS 1989/1995 282/204
Hackberry Creek/Hackberry Creek II.. Dallas 1988/1996 240/192
Winsted Village..................... Dallas 1995 314
Columbus Square..................... Dallas 1995 218
The Vineyard........................ Dallas 1995 116
The Abbey........................... Dallas 1995 34
The Mark............................ Jackson, MS 256
-----
Sub Totals.......................... 5,414
</TABLE>
S-14
<PAGE>
<TABLE>
<CAPTION>
Year
Completed Total
or to be Number
Development Properties Location Completed of Units
---------------------- -------- --------- --------
<S> <C> <C> <C>
Addison Circle One.................. Dallas 1997 444
Columbus Shore...................... Dallas 1996 502
Columbus Pointe..................... Jackson, MS 1997 240
Hall Street (Cole's Corner)......... Dallas 1998 182
------
Sub Totals.......................... 1,368
</TABLE>
<TABLE>
<CAPTION>
Year Estimated
Completed Total
Land Owned and or to be Number
Proposed for Development Location Completed of Units
------------------------ ---------- --------- ---------
<S> <C> <C> <C>
Block 579........................... Dallas 1998 196
Block 580........................... Dallas 1998 245
-------
Sub Totals.......................... 441
TOTALS 7,223
</TABLE>
RECENT DEVELOPMENTS
Since the completion of the Company's initial public offering in December
1993, the Company has acquired six multifamily residential properties containing
an aggregate of 1,583 units, has completed the development of eight multifamily
residential properties and begun construction of four other properties. As a
result of these activities, the number of units owned or under construction has
increased by 188% since the Company's initial public offering.
On July 18, 1996, the Company acquired a parcel of land located on Hall
Street in the Uptown District of Dallas, Texas for a purchase price of
$1,290,000. In August 1996, the Company commenced construction on this parcel
of a 182-unit multifamily residential property to be known as Cole's Corner.
On July 19, 1996, the Company entered into a Development Agreement with
Gaylord Properties, Inc. ("Gaylord") relating to the development of
approximately 19 acres of land owned by Gaylord in Addison, Texas as office
space with complementary retail and commercial uses. Pursuant to the
Development Agreement, the Company will act as master developer and oversee the
development of this commercial subdistrict with a goal toward assuring that such
development is consistent with the master plan for Addison Circle and the
Company's development of the adjacent tracts of land zoned for multifamily
development on which the Company is currently constructing its multifamily
residential property known as Addison Circle One.
S-15
<PAGE>
Effective September 5, 1996, Jack F. Kemp resigned from the Company's Board
of Trust Managers due to his nomination as the Republican candidate for Vice
President of the United States. On September 19, 1996, the remaining members of
the Board of Trust Managers elected Ms. Amy DiGeso as a Class II Trust Manager
of the Company to fill the vacancy created by Mr. Kemp's resignation.
On September 19, 1996, the Company declared a dividend of $0.395 per Common
Share, payable on October 15, 1996, to shareholders of record on September 30,
1996.
PLAN OF DISTRIBUTION
The Company will sell the Common Shares offered hereby directly to
institutional investors. The Company may from time to time sell Common Shares
directly to other persons and may engage in other financing transactions,
including public offerings and private placements of equity securities.
LEGAL MATTERS
The validity of the Common Shares offered hereby will be passed upon for
the Company by Winstead Sechrest & Minick P.C., Dallas, Texas.
EXPERTS
The Company's consolidated financial statements and schedule as of December
31, 1995 and 1994, and for the years ended December 31, 1995 and 1994 and for
the period from October 12, 1993 (inception) through December 31, 1993,
appearing in the Company's Annual Report on Form 10-K for the year ended
December 31, 1995, have been audited by Ernst & Young LLP, independent auditors,
as set forth in their report thereon and have been included therein and
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
The combined financial statements and schedule of the Columbus Group at
December 28, 1993, and for the period from January 1, 1993 through December 28,
1993 and the year ended December 31, 1992, appearing in the Company's Annual
Report on Form 10-K for the year ended December 31, 1995, have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report thereon
and have been included therein and incorporated herein by reference in reliance
upon such report given upon the authority of such firm as experts in accounting
and auditing.
The combined financial statements and schedule of the Texana Group at
December 28, 1993, and for the period from January 1, 1993 through December 28,
1993 and the year ended December 31, 1992, appearing in the Company's Annual
Report on Form 10-K for the year ended
S-16
<PAGE>
December 31, 1995, have been audited by Coopers & Lybrand L.L.P., independent
auditors, as set forth in their reports thereon and have been included therein
and incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
Such consolidated and combined financial statements and schedules referred
to above are, and audited financial statements and schedules to be included in
subsequently filed documents will be, incorporated herein in reliance upon the
reports of Ernst & Young LLP and Coopers & Lybrand L.L.P. pertaining to such
financial statements and schedules (to the extent covered by consents filed with
the Securities and Exchange Commission) given upon the authority of such firms
as experts in accounting and auditing.
S-17
<PAGE>
PROSPECTUS
COLUMBUS REALTY TRUST
$200,000,000 DEBT SECURITIES, COMMON SHARES, PREFERRED SHARES
AND SECURITIES WARRANTS
_____________________
Columbus Realty Trust (the "Company") may from time to time offer and sell
in one or more series (i) its unsecured debt securities, which may be either
senior debt securities ("Senior Securities") or subordinated debt securities
("Subordinated Securities" and, together with Senior Securities, the "Debt
Securities"), (ii) common shares of beneficial interest, par value $.01 per
share (the "Common Shares"), (iii) preferred shares of beneficial interest, par
value $.01 per share (the "Preferred Shares"); and (iv) warrants to purchase
Common Shares (the "Common Shares Warrants"), warrants to purchase Preferred
Shares (the "Preferred Shares Warrants") and warrants to purchase Debt
Securities (the "Debt Securities Warrants" and, collectively with the Common
Shares Warrants and the Preferred Shares Warrants, the "Securities Warrants")
with an aggregate public offering price of up to $200,000,000, in amounts, at
prices and on terms to be determined by market conditions at the time of
offering. The Debt Securities, Common Shares, Preferred Shares and Securities
Warrants (collectively, the "Offered Securities") may be offered separately or
together, in separate series, in amounts and at prices and terms to be set forth
in one or more supplements to this Prospectus (each, a "Prospectus Supplement").
With respect to the Debt Securities, the specific title, aggregate
principal amount, ranking, currency, form (which may be registered or bearer, or
certified or global), authorized denominations, maturity, rate (or manner of
calculation thereof) and time of payment of interest, terms for redemption at
the option of the Company or repayment at the option of the holder, any sinking
fund provisions and any conversion provisions will be set forth in the
applicable Prospectus Supplement. In the case of the Common Shares, the specific
number of shares and issuance price per share will be set forth in the
applicable Prospectus Supplement. The terms of the Preferred Shares, including
the specific designation and stated value per share, any dividend, liquidation,
redemption, conversion, voting and other rights, the issuance price per share,
and all other specific terms of the Preferred Shares will be set forth in the
applicable Prospectus Supplement. In the case of the Securities Warrants, the
duration, offering price, exercise price and detachability, if applicable, will
be set forth in the applicable Prospectus Supplement. In addition, such
specific terms may include limitations on direct or beneficial ownership and
restrictions on transfer of the Offered Securities, in each case as may be
consistent with the Company's Declaration of Trust or otherwise appropriate to
preserve the status of the Company as a real estate investment trust ("REIT")
for Federal income tax purposes. The applicable Prospectus Supplement also will
contain information, where applicable, about certain Federal income tax
considerations relating to, and any listing on a securities exchange of, the
Offered Securities covered by such Prospectus Supplement.
The Offered Securities may be offered directly, through agents designated
from time to time by the Company, or to or through underwriters or dealers. If
any agents or underwriters are involved in the sale of any of the Offered
Securities, their names, and any applicable purchase price, fee, commission or
discount arrangement between or among them, will be set forth, or will be
calculable from the information set forth, in the applicable Prospectus
Supplement. See "Plan of Distribution." No Offered Securities may be sold
without delivery of the applicable Prospectus Supplement describing the method
and terms of the offering of such series of Offered Securities.
_____________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT
PASSED ON OR ENDORSED THE MERITS OF THIS OFFERING. ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
_____________________
THE DATE OF THIS PROSPECTUS IS AUGUST 8, 1996.
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement (of which this Prospectus is a part) on
Form S-3 under the Securities Act of 1933, as amended (the "Securities Act")
with respect to the securities offered hereby. This Prospectus does not contain
all of the information set forth in the Registration Statement, certain portions
of which have been omitted as permitted by the rules and regulations of the
Commission. Statements contained in this Prospectus as to the content of any
contract or other document are not necessarily complete, and in each instance
reference is made to the copy of the contract or other document filed as an
exhibit to the Registration Statement, each statement being qualified in all
respects by that reference and the exhibits to the Registration Statement. For
further information regarding the Company and the Shares offered hereby,
reference is hereby made to the Registration Statement and the exhibits to the
Registration Statement which may be obtained from the Commission at its
principal office in Washington, D.C., upon payment of fees prescribed by the
Commission.
The Company is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith, files reports, proxy and information statements and other information
with the Commission. The reports, proxy and information statements, the
Registration Statement and exhibits thereto, and other information filed by the
Company with the Commission can be inspected and copied at the Public Reference
Section of the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the regional offices of the Commission located at
13th Floor, 7 World Trade Center, New York, New York 10048, and at 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of the material
can be obtained from the Public Reference Section of the Commission at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates. The Company's Common Stock is listed on the New York Stock
Exchange (the "NYSE") under the symbol "CLB." The reports, proxy and
information statements and other information also can be inspected at the
offices of the NYSE, 20 Broad Street, New York, New York 10005.
The Company furnishes its stockholders with annual reports containing
financial statements audited by its independent auditors and with quarterly
reports containing unaudited summary financial information for each of the first
three quarters of each fiscal year.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
There are incorporated herein by reference the following documents
heretofore filed by the Company with the Commission:
(a) The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995;
(b) The Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1996;
-2-
<PAGE>
(c) The description of the Common Shares contained in the Company's
Registration Statement on Form 8-A filed December 16, 1993.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of this offering shall be deemed to be incorporated by reference
into this Prospectus.
Any statement contained in a document all or a portion of which is
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of the Registration Statement and this
Prospectus to the extent that a statement contained in the Registration
Statement, this Prospectus, or any other subsequently filed document that is
also incorporated by reference herein or in an accompanying prospectus
supplement, if any, modifies or supersedes that statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
The Company hereby undertakes to provide without charge to each person,
including any beneficial owner, to whom a Prospectus is delivered, upon written
or oral request of that person, a copy of any document incorporated herein by
reference (other than exhibits to those documents unless the exhibits are
specifically incorporated by reference into the documents that this Prospectus
incorporates by reference). Requests should be directed to Mr. J. Michael
Lewis, Senior Vice President and Treasurer, Columbus Realty Trust, 15851 Dallas
Parkway, Suite 855, Dallas, Texas 75248-5421.
-3-
<PAGE>
THE COMPANY
Columbus Realty Trust (the "Company") is a self-administered and self-
managed real estate investment trust ("REIT") formed pursuant to the Texas Real
Estate Investment Trust Act, as amended (the "Texas REIT Act"). The Company
presently owns and operates (i) 22 multifamily residential properties comprising
a total of 4,883 apartment units, (ii) two industrial properties, and (iii) one
retail property (collectively, the "Properties"), all but two of which are
located in the greater Dallas, Texas metropolitan area. The residential
Properties completed at June 30, 1996 had an occupancy rate of approximately 96%
as of such date. The Company also owns seven parcels of land in the greater
Dallas metropolitan area which currently are under development (the "Development
Properties"). Upscale multifamily residential communities are presently under
construction on five of the Development Properties. The Company anticipates
that the Development Properties currently under construction will add 1,720
apartment units to the Company's portfolio upon completion. The Company expects
that approximately 1,036 of these additional apartment units will be completed
in 1996 and the remaining 684 will be completed in 1997. When the Development
Properties currently under construction are complete, the Company will own a
total of 6,603 units in 27 residential properties.
The Company intends to develop each of the Development Properties and
additional communities targeted for development with the same quality of
construction, innovation in design and uniqueness of setting that have
distinguished prior communities developed by the Company and its predecessors.
The Company also may from time to time make acquisitions of additional income-
producing properties which further its strategies, satisfy its standards for
quality and provide potential for attractive returns on investment.
The Company's core strategy is to acquire and develop dense concentrations
of units in close proximity in targeted areas which are near major employment
centers and which have long term growth potential. The Company believes these
strategies enable it to realize operating efficiencies, offer enhanced resident
amenities, and better serve its residents, thereby providing the Company with a
competitive advantage over others who do not have concentrated unit ownership.
The Company generally targets residents who are "renters by choice," that
is, those who prefer the convenience and luxury afforded by the Company's
residential Properties to home ownership and who have income levels in excess of
that necessary to enable them to afford the Company's rental rates. The Company
intensively manages its communities and responds to the needs and lifestyles of
its residents. Management believes that these practices enable it to attract and
retain residents. The Company utilizes proprietary leasing software, private
telephone systems, private cable television systems, energy management systems
and other management and operating applications to generate additional revenue
and achieve operating efficiencies and cost savings.
The Common Shares of the Company are listed on the NYSE under the symbol
"CLB." On April 15, 1996, the Company paid a dividend of $0.375 per Common
Share for the first quarter of 1996 to all shareholders of record on March 25,
1996. On July 15, 1996, the
-4-
<PAGE>
Company paid a dividend of $0.395 per Common Share for the second quarter of
1996 to all shareholders of record on June 28, 1996. The Company intends to
continue making regular quarterly distributions to its shareholders.
Distributions depend upon a variety of factors, and there can be no assurance
that distributions will be made.
The Company's principal executive office is located at 15851 Dallas
Parkway, Suite 855, Dallas, Texas 75248 and its telephone number is (214) 387-
1492.
USE OF PROCEEDS
Unless otherwise described in the Prospectus Supplement which accompanies
this Prospectus, the Company intends to use the net proceeds from the sale of
the Offered Securities for general corporate purposes, which may include the
development and acquisition of multifamily residential properties as suitable
opportunities arise and the repayment of certain then-outstanding secured or
unsecured indebtedness.
DESCRIPTION OF COMMON SHARES OF BENEFICIAL INTEREST
The Declaration of Trust of the Company provides that the Company may issue
up to one hundred ten million (110,000,000) shares of beneficial interest of the
Company, par value $.01 per share, consisting of one hundred million
(100,000,000) Common Shares and ten million (10,000,000) Preferred Shares. As of
July 30, 1996, 11,717,049 Common Shares were issued and outstanding and no
Preferred Shares were issued or outstanding.
The following description of the Common Shares sets forth certain general
terms and provisions of the Common Shares to which any Prospectus Supplement may
relate, including a Prospectus Supplement providing that Common Shares will be
issuable upon conversion of Debt Securities or Preferred Shares of the Company
or upon the exercise of the Securities Warrants issued by the Company. The
statements below describing the Common Shares are in all respects subject to and
qualified in their entirety by reference to the applicable provisions of the
Company's Declaration of Trust and Bylaws.
VOTING RIGHTS
Subject to the provisions of the Declaration of Trust regarding Excess
Securities (as defined in the Declaration of Trust) and to such preferential
rights as may be granted by the Board of Trust Managers in connection with the
future issuance of Preferred Shares, each outstanding Common Share entitles the
holder to one vote on all matters submitted to a vote of shareholders, including
the election of Trust Managers. There is no cumulative voting in the election of
Trust Managers, which means that the holders of two-thirds of the outstanding
Common Shares can elect all of the Trust Managers then standing for election.
-5-
<PAGE>
DIVIDENDS
Subject to the provisions of the Declaration of Trust regarding Excess
Securities and to such preferential rights as may be granted by the Board of
Trust Managers in connection with the future issuance of Preferred Shares,
holders of Common Shares are entitled to receive ratably such dividends, in
cash, property or shares of beneficial interest, as may be declared from time to
time by the Board of Trust Managers. The Company is prohibited from declaring or
paying any dividend when the Company is unable to pay its debts as they become
due in the usual course or when the payment of such dividend would result in the
Company becoming unable to pay its debts as they become due.
LIQUIDATION RIGHTS
Subject to the provisions of the Declaration of Trust regarding Excess
Securities, in the event of any liquidation, dissolution or winding-up of the
affairs of the Company, holders of Common Shares will be entitled to share
ratably in the assets of the Company remaining after provision for liabilities
to creditors and payment of liquidation preferences to holders of Preferred
Shares or senior debt securities.
RESTRICTIONS ON TRANSFER
For the Company to qualify as a REIT under the Code, among other things,
not more than 50% in value of its outstanding Shares may be owned, directly or
indirectly, by five or fewer individuals (as defined in the Code to include
certain entities) during the last half of a taxable year, and such Shares must
be beneficially owned by 100 or more persons during at least 335 days of a
taxable year of 12 months, or during a proportionate part of a shorter taxable
year.
Because the Board of Trust Managers believes it is essential for the
Company to continue to qualify as a REIT, the Declaration of Trust provides,
subject to certain exceptions, that no holder of Shares may own, or be deemed to
own by virtue of the attribution provisions of the Code, more than 9.8% (the
"Ownership Limit") of the total outstanding Shares. The Trust Managers may not
waive the Ownership Limit except with respect to the initial acquisition by
certain entities of Common Shares in connection with the Company's initial
public offering of its Common Shares. Any transfer of Shares that would (i)
create a direct or indirect ownership of Shares in excess of the Ownership
Limit, (ii) result in the Shares being owned by fewer than 100 persons, (iii)
result in the Company being "closely held" within the meaning of Section 856(h)
of the Code, or (iv) result in the disqualification of the Company as a REIT,
shall be null and void, and the intended transferee will acquire no rights to
the Shares.
The Company's Declaration of Trust provides that Shares owned, or deemed to
be owned, or transferred to a shareholder in excess of the Ownership Limit will
automatically be deemed to be Excess Securities and as such will be transferred,
by operation of law, to the Company as trustee of a trust for the exclusive
benefit of the transferees to whom such Shares ultimately may be transferred
without violating the Ownership Limit. While the Excess Securities are held in
trust, they will not be entitled to vote, they will not be considered for
purposes of any
-6-
<PAGE>
shareholder vote or the determination of a quorum for such vote, and they will
not be entitled to participate in dividends or other distributions. Any dividend
or distribution paid to a proposed transferee of Excess Securities prior to the
discovery by the Company that Shares have been transferred in violation of the
provisions of the Company's Declaration of Trust shall be repaid to the Company
upon demand. The Excess Securities are not treasury stock, but rather constitute
a separate class of issued and outstanding Shares of the Company. The original
transferee-shareholder may, at any time the Excess Securities are held by the
Company in trust, transfer the interest in the trust representing the Excess
Securities to any individual whose ownership of the Shares that have been deemed
to be Excess Securities would be permitted under the Ownership Limit, at a price
not in excess of the price paid by the original transferee-shareholder for the
Shares that were exchanged into Excess Securities. Immediately upon the transfer
to the permitted transferee, the Excess Securities will be automatically deemed
to be Shares of the class from which they were converted. If the foregoing
transfer restrictions are determined to be void or invalid by virtue of any
legal decision, statute, rule or regulation, then the intended transferee-
shareholder of any Excess Securities may be deemed, at the option of the
Company, to have acted as an agent on behalf of the Company in acquiring the
Excess Securities and to hold the Excess Securities on behalf of the Company.
In addition to the foregoing transfer restrictions, the Company will have
the right, for a period of 90 days during the time any Excess Securities are
held by the Company in trust, to purchase all or any portion of the Excess
Securities from the original transferee-shareholder at the lesser of the price
paid for the Shares by the original transferee-shareholder and the market price
(as determined in the manner set forth in the Declaration of Trust) of the
Shares on the date the Company exercises its option to purchase. The 90-day
period begins on the later of the date of the violative transfer or date the
Board of Trust Managers determines that a violative transfer has been made.
All certificates representing Shares will bear a legend referring to the
restrictions described above.
Each shareholder shall be required upon request to disclose to the Company
in writing any information with respect to the direct, indirect, and
constructive ownership of beneficial interests as the Board of Trust Managers
deems necessary to comply with the provisions of the Code applicable to REITs,
to comply with the requirements of any taxing authority or governmental agency
or to determine any such compliance.
The Ownership Limit may have the effect of precluding acquisition of
control of the Company unless the Board of Trust Managers and the shareholders
determine that maintenance of REIT status is no longer in the best interests of
the Company.
-7-
<PAGE>
OTHER TERMS
Holders of Common Shares have no redemption, preference, conversion,
exchange or preemptive rights to subscribe to any securities of the Company. All
outstanding Common Shares will be fully paid and nonassessable.
Both the Texas REIT Act and the Declaration of Trust provide that no
shareholder of the Company will be personally liable for any debt, act, omission
or obligation incurred by the Company or its Trust Managers. However, certain
jurisdictions may not recognize the limited liability afforded shareholders
under the Texas REIT Act; therefore, a shareholder may be held personally liable
to the extent such claims are not satisfied by the Company. Due to this
uncertainty which may exist in the laws of certain states, the Company may hold
properties in states other than Texas in wholly owned subsidiaries, if it
determines that there would exist in that state a significant risk of
shareholder liability if the property were owned directly by the Company. The
Company will use such subsidiaries to the fullest extent it can in those states
where the law is unclear regarding limited shareholder liability in an effort to
minimize the possibility of shareholder liability.
In addition, the Company's Bylaws provide that the Company shall indemnify
each shareholder against any claim or liability to which the shareholder may
become subject by reason of being or having been a shareholder, and that the
Company shall reimburse each shareholder for all legal and other expenses
reasonably incurred by such shareholder in connection with any such claim or
liability. Further, it is the Company's policy to include a provision in its
contracts governed by laws other than those of the State of Texas which provides
that shareholders assume no personal liability for obligations entered into on
behalf of the Company. However, with respect to tort claims, contractual claims
where liability is not so negated, claims for taxes and certain statutory
liability, the shareholders may, in some jurisdictions, be personally liable to
the extent such claims are not paid by the Company. Because the Company will
carry public liability insurance which it believes is adequate, any risk of
personal liability to shareholders is limited to situations in which the
Company's assets plus its insurance coverage would be insufficient to satisfy
the claims against the Company and its shareholders.
MEETINGS OF SHAREHOLDERS
The Bylaws provide that annual meetings of shareholders will be held no
later than the last day of May of each year. Special meetings of the
shareholders may be called by the Trust Managers, any officer of the Company or
the holders of at least ten percent (10%) of all of the Shares entitled to vote
at the meetings.
TRANSFER AGENT AND REGISTRAR
The Company has appointed The First National Bank of Boston to act as
transfer agent and registrar for the Common Shares.
-8-
<PAGE>
DESCRIPTION OF PREFERRED SHARES
The following description of the terms of the Preferred Shares sets forth
certain general terms and provisions of the Preferred Shares to which any
Prospectus Supplement may relate. Certain other terms of any series of the
Preferred Shares offered by any Prospectus Supplement will be described in such
Prospectus Supplement. The description of certain provisions of the Preferred
Shares set forth below and in any Prospectus Supplement does not purport to be
complete and is subject to and qualified in its entirety by reference to the
Company's Declaration of Trust and the Board of Trust Managers' resolution or
resolutions relating to each series of the Preferred Shares which will be filed
with the Commission and incorporated by reference as an exhibit to the
Registration Statement of which this Prospectus is a part at or prior to the
time of the issuance of such series of Preferred Shares.
GENERAL
The Board of Trust Managers is empowered to issue Preferred Shares from
time to time in one or more series, without shareholder approval, and with
respect to each series to determine, subject to limitations prescribed by law,
(i) the number of shares constituting such series, (ii) the dividend rate on the
shares of each series, whether such dividends shall be cumulative and the
relation of such dividends to the dividends payable on any other class of stock,
(iii) whether the shares of each series shall be redeemable and the terms
thereof, (iv) whether the shares shall be convertible into Common Shares and the
terms thereof, (v) the amount per share payable on each series or other rights
of holders of such shares on liquidation or dissolution of the Company, (vi) the
voting rights, if any, of shares of each series, and (vii) generally any other
rights and privileges not in conflict with the Declaration of Trust or the Texas
REIT Act for each series and any qualifications, limitations or restrictions
thereof.
The Preferred Shares shall have the dividend, liquidation, redemption and
voting rights set forth below unless otherwise provided in a Prospectus
Supplement relating to a particular series of the Preferred Shares. Reference is
made to the Prospectus Supplement relating to the particular series of the
Preferred Shares offered thereby for specific terms, including:
A. the designation and stated value per share of such Preferred Shares
and the number of shares offered;
B. the amount of liquidation preference per share;
C. the initial public offering price at which such Preferred Shares will
be issued;
D. the dividend rate (or method of calculation), the dates on which
dividends shall be payable and the dates from which dividends shall
commence to cumulate, if any;
E. any redemption or sinking fund provisions;
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F. any conversion right and the terms and conditions thereof;
G. any listing of such Preferred Shares on any securities exchange;
H. a discussion of the federal income tax considerations applicable to
such Preferred Shares;
I. the relative ranking and preferences of such Preferred Shares as to
dividend rights and rights upon liquidation, dissolution or winding up
of the affairs of the Company;
J. any limitations on issuance of any series of Preferred Shares ranking
senior to or on a parity with such series of Preferred Shares as to
dividend rights and rights upon liquidation, dissolution or winding up
of the affairs of the Company;
K. any limitations on direct or beneficial ownership and restrictions on
transfer, in each case as may be appropriate to preserve the status of
the Company as a REIT; and
L. any additional voting, dividend, liquidation, redemption, sinking fund
and other rights, preferences, privileges, limitations and
restrictions not in conflict with the Declaration of Trust or the
Texas REIT Act.
The Preferred Shares will, when issued for lawful consideration therefor, be
fully paid and nonassessable and will have no preemptive rights.
RANK
Unless otherwise specified in the Prospectus Supplement, the Preferred
Shares will, with respect to dividend rights and rights upon liquidation,
dissolution or winding up of the Company, rank (i) senior to all classes or
series of Common Shares and to all equity securities ranking junior to such
Preferred Shares; (ii) on a parity with all equity securities issued by the
Company the terms of which specifically provide that such equity securities rank
on a parity with the Preferred Shares; and (iii) junior to all equity securities
issued by the Company the terms of which specifically provide that such equity
securities rank senior to the Preferred Shares. The rights of the holders of
each series of the Preferred Shares will be subordinate to those of the
Company's general creditors.
DIVIDENDS
Holders of each series of Preferred Shares shall be entitled to receive,
when, as and if declared by the Board of Trust Managers of the Company, out of
assets of the Company legally available therefor, cash dividends at such rates
and on such dates as will be set forth in the applicable Prospectus Supplement.
Such rate may be fixed or variable or both. Each such dividend shall be payable
to holders of record as they appear on the share transfer books of the
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Company on such record dates as shall be fixed by the Board of Trust Managers of
the Company, as specified in the Prospectus Supplement relating to such series
of Preferred Shares.
Dividends on any series of the Preferred Shares may be cumulative or non-
cumulative, as provided in the applicable Prospectus Supplement. Dividends, if
cumulative, will be cumulative from and after the date set forth in the
applicable Prospectus Supplement. If the Board of Trust Managers of the Company
fails to declare a dividend payable on a dividend payment date on any series of
the Preferred Shares for which dividends are non-cumulative, then the holders of
such series of the Preferred Shares will have no right to receive a dividend in
respect of the dividend period ending on such dividend payment date, and the
Company will have no obligation to pay the dividend accrued for such period,
whether or not dividends on such series are declared payable on any future
dividend payment date.
So long as any series of the Preferred Shares shall be outstanding, unless
(i) full dividends (including, if such dividends are cumulative, dividends for
prior dividend periods) shall have been paid or declared and set apart for
payment on all outstanding Preferred Shares of such series and all other classes
and series of Preferred Shares of the Company (other than Junior Shares, as
defined below); and (ii) the repurchase or other mandatory retirement of, or
with respect to any sinking or other analogous fund for, any Preferred Shares of
such series or any other Preferred Shares of the Company of any class or series
(other than Junior Shares), the Company may not declare any dividends on any
Common Shares of the Company or any other shares of the Company ranking as to
dividends or distributions of assets junior to such series of Preferred Shares
(the Common Shares and any such other shares being herein referred to as "Junior
Shares"), or make any payment on account of, or set apart money for, the
purchase, redemption or other retirement of, or for a sinking or other analogous
fund for, any Junior Shares or make any distribution in respect thereof, whether
in cash or property or in obligations or shares of the Company, other than
Junior Shares which are neither convertible into, nor exchangeable or
exercisable for, any securities of the Company other than Junior Shares.
Any dividend payment made on a series of Preferred Shares shall first be
credited against the earliest accrued but unpaid dividend due with respect to
shares of such series which remains payable. No interest, or sum of money in
lieu of interest, shall be payable in respect of any dividend payment or
payments on Preferred Shares of such series which may be in arrears.
REDEMPTION
A series of Preferred Shares may be redeemable, in whole or from time to
time in part, at the option of the Company, and may be subject to mandatory
redemption pursuant to a sinking fund or otherwise, in each case upon the terms,
at the times and at the redemption prices set forth in the Prospectus Supplement
relating to such series. Preferred Shares redeemed by the Company will be
restored to the status of authorized but unissued Preferred Shares of the
Company.
The Prospectus Supplement relating to a series of Preferred Shares that is
subject to mandatory redemption will specify the number of shares of such
Preferred Shares that shall be redeemed by the Company in each year commencing
after a date to be specified, at a redemption
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price per share to be specified, together with an amount equal to all accrued
and unpaid dividends thereon (which shall not, if such Preferred Shares do not
have a cumulative dividend, include any accumulation in respect of unpaid
dividends for prior dividend periods) to the date of redemption. The redemption
price may be payable in cash or other property, as specified in the applicable
Prospectus Supplement. If the redemption price for Preferred Shares of any
series is payable only from the net proceeds of the issuance of shares of
beneficial interest of the Company, the terms of such Preferred Shares may
provide that, if no such shares shall have been issued or to the extent the net
proceeds from any issuance are insufficient to pay in full the aggregate
redemption price then due, such Preferred Shares shall automatically and
mandatorily be converted into shares of the applicable shares of beneficial
interest of the Company pursuant to conversion provisions specified in the
applicable Prospectus Supplement.
So long as any dividends on shares of any series of the Preferred Shares or
any other series of Preferred Shares of the Company ranking on a parity as to
dividends and distribution of assets with such series of the Preferred Shares
are in arrears, no shares of any such series of the Preferred Shares or such
other series of Preferred Shares of the Company will be redeemed (whether by
mandatory or optional redemption) unless all such shares are simultaneously
redeemed, and the Company will not purchase or otherwise acquire any such
shares; provided, however, that the foregoing will not prevent the purchase or
acquisition of such shares pursuant to a purchase or exchange offer made on the
same terms to holders of all such shares outstanding.
In the event that fewer than all of the outstanding shares of a series of
the Preferred Shares are to be redeemed, whether by mandatory or optional
redemption, the number of shares to be redeemed will be determined by lot or pro
rata (subject to rounding to avoid fractional shares) as may be determined by
the Company or by any other method as may be determined by the Company in its
sole discretion to be equitable. From and after the redemption date (unless
default shall be made by the Company in providing for the payment of the
redemption price plus accumulated and unpaid dividends, if any), dividends shall
cease to accumulate on the Preferred Shares called for redemption and all rights
of the holders thereof (except the right to receive the redemption price plus
accumulated and unpaid dividends, if any) shall cease.
LIQUIDATION PREFERENCE
Upon any voluntary liquidation, dissolution or winding up of the affairs of
the Company, then, before any distribution or payment shall be made to the
holders of any Junior Shares, the holders of each series of Preferred Shares
shall be entitled to receive, out of assets of the Company legally available for
distribution to shareholders, liquidating distributions in the amount of the
liquidation preference per share (set forth in the applicable Prospectus
Supplement), plus an amount equal to all dividends accrued and unpaid thereon
(which shall not include any accumulation in respect of unpaid dividends for
prior dividend periods if such series of Preferred Shares does not have a
cumulative dividend). After payment of the full amount of the liquidating
distributions to which they are entitled, the holders of Preferred Shares will
have no right or claim to any of the remaining assets of the Company. In the
event that, upon any such voluntary or involuntary liquidation, dissolution or
winding up, the available assets of the Company are
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insufficient to pay the amount of the liquidating distributions on all
outstanding Preferred Shares and the corresponding amounts payable on all shares
of other classes or series of shares of beneficial interest of the Company
ranking on a parity with the Preferred Shares in the distribution of assets,
then the holders of the Preferred Shares and all other such classes or series
of shares of beneficial interest shall share ratably in any such distribution of
assets in proportion to the full liquidating distributions to which they would
otherwise respectively be entitled.
If liquidating distributions shall have been made in full to all holders of
Preferred Shares, the remaining assets of the Company shall be distributed among
the holders of Junior Shares, according to their respective rights and
preferences and in each case according to their respective number of shares.
For such purposes, the consolidation or merger of the Company with or into any
other corporation, or the sale, lease or conveyance of all or substantially all
of the property or business of the Company, shall not be deemed to constitute a
liquidation, dissolution or winding up of the Company.
VOTING RIGHTS
Except as indicated below or in a Prospectus Supplement relating to a
particular series of the Preferred Shares, or except as required by applicable
law, holders of the Preferred Shares will not be entitled to vote for any
purpose.
So long as any series of Preferred Shares remain outstanding, the consent
or the affirmative vote of the holders of at least 66-2/3% of the votes entitled
to be cast with respect to the then outstanding shares of such series of the
Preferred Shares together with any Other Preferred Shares (as defined below),
voting as one class, either expressed in writing or at a meeting called for that
purpose, will be necessary (i) to permit, effect or validate the authorization,
or any increase in the authorized amount, of any class or series of shares of
the Company ranking prior to the Preferred Shares of such series as to
dividends, voting or upon distribution of assets; and (ii) to repeal, amend or
otherwise change any of the provisions applicable to the Preferred Shares of
such series in any manner which adversely affects the powers, preferences,
voting power or other rights or privileges of such series of the Preferred
Shares. In case any series of the Preferred Shares would be so affected by any
such action referred to in clause (ii) above in a different manner than one or
more series of the Other Preferred Shares which will be similarly affected, the
holders of the Preferred Shares of such series, together with any series of the
Other Preferred Shares which will be similarly affected, will be entitled to
vote as a class, and the Company will not take such action without the consent
or affirmative vote, as above provided, of at least 66-2/3% of the total number
of votes entitled to be cast with respect to each such series of the Preferred
Shares and the Other Preferred Shares, then outstanding, in lieu of the consent
or affirmative vote hereinabove otherwise required.
With respect to any matter as to which the Preferred Shares of any series
are entitled to vote, holders of the Preferred Shares of such series and any
other series of Preferred Shares of the Company ranking on a parity with such
series of the Preferred Shares as to dividends and distributions of assets and
which by its terms provides for similar voting rights (the "Other Preferred
Shares") will be entitled to cast the number of votes set forth in the
Prospectus
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Supplement with respect to that series of Preferred Shares. As a result of the
provisions described in the preceding paragraph requiring the holders of shares
of a series of the Preferred Shares to vote together as a class with the holders
of shares of one or more series of Other Preferred Shares, it is possible that
the holders of such shares of Other Preferred Shares could approve action that
would adversely affect such series of Preferred Shares, including the creation
of a class of shares of beneficial interest ranking prior to such series of
Preferred Shares as to dividends, voting or distributions of assets.
CONVERSION RIGHTS
The terms and conditions, if any, upon which shares of any series of
Preferred Shares are convertible into Common Shares will be set forth in the
applicable Prospectus Supplement relating thereto. Such terms will include the
number of shares of Common Shares into which the Preferred Shares are
convertible, the conversion price (or manner of calculation thereof), the
conversion period, provisions as to whether conversion will be at the option of
the holders of the Preferred Shares or the Company, the events requiring an
adjustment of the conversion price and provisions affecting conversion.
RESTRICTIONS ON OWNERSHIP
See "Description of Common Shares--Restrictions on Transfer" for a
discussion of the restrictions on ownership of shares of beneficial interest
necessary for the Company to qualify as a REIT under the Code.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for shares of each series of the Preferred
Shares will be set forth in the applicable Prospectus Supplement.
DESCRIPTION OF DEBT SECURITIES
The Senior Securities are to be issued under an Indenture, as amended or
supplemented from time to time (the "Senior Securities Indenture"), between the
Company and a trustee to be selected by the Company (the "Senior Securities
Trustee") and the Subordinated Securities are to be issued under an Indenture,
as amended or supplemented from time to time (the "Subordinated Securities
Indenture"), between the Company and a trustee to be selected by the Company
(the "Subordinated Securities Trustee"). The Senior Securities Indenture and
the Subordinated Securities Indenture are referred to herein individually as the
"Indenture" and collectively as the "Indentures," and the Senior Securities
Trustee and the Subordinated Securities Trustee are referred to herein
individually as the "Trustee" and collectively as the "Trustees." A form of the
Senior Securities Indenture and of the Subordinated Securities Indenture will be
filed as an exhibit to an amendment to the Registration Statement of which this
Prospectus is a part and will be available for inspection at the corporate trust
office of the Senior Securities Trustee and of the Subordinated Securities
Trustee, respectively, or as described above under
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"Available Information." The Indentures will be subject to, and governed by, the
Trust Indenture Act of 1939, as amended (the "TIA"). The descriptions of the
Indentures set forth below assume that the Company has entered into the
Indentures. The Company will execute the applicable Indenture when and if the
Company issues Debt Securities. The statements made hereunder relating to the
Indentures and the Debt Securities to be issued thereunder are summaries of
certain anticipated provisions thereof and do not purport to be complete and are
subject to, and are qualified in their entirety by reference to, all provisions
of the Indentures and such Debt Securities. Unless otherwise specified, all
section references appearing herein are to sections of the Indentures, and
capitalized terms used but not defined herein shall have the meanings set forth
in the Indentures.
PROVISIONS APPLICABLE TO BOTH SENIOR SECURITIES AND SUBORDINATED SECURITIES
The Debt Securities will be direct, unsecured obligations of the Company.
Senior Securities will rank pari passu with certain other senior debt of the
Company that may be outstanding from time to time, and will rank senior to all
Subordinated Securities that may be outstanding from time to time. The
particular terms of the Debt Securities offered by a Prospectus Supplement will
be described in the applicable Prospectus Supplement, along with any applicable
modifications of or additions to the general terms of the Debt Securities as
described herein and in the applicable Indenture and any applicable federal
income tax considerations. Accordingly, for a description of the terms of any
series of Debt Securities, reference must be made to both the Prospectus
Supplement relating thereto and the description of the Debt Securities set forth
in this Prospectus.
Each Indenture provides that the Debt Securities may be issued without
limit as to aggregate principal amount (up to $200,000,000 in the aggregate), in
one or more series, in each case as established from time to time in, or
pursuant to authority granted by, a resolution of the Board of Trust Managers or
as established in one or more indentures supplemental to the Indenture. All
Debt Securities of one series need not be issued at the same time and, unless
otherwise provided, a series may be reopened, without the consent of the holders
of the Debt Securities of such series, for issuances of additional Debt
Securities of such series.
Each Indenture provides that there may be more than one Trustee thereunder,
each with respect to one or more series of Debt Securities. Any Trustee under
either Indenture may resign or be removed with respect to one or more series of
Debt Securities, and a successor Trustee may be appointed to act with respect to
such series. In the event that two or more persons are acting as Trustee with
respect to different series of Debt Securities, each such Trustee shall be a
Trustee of a trust under the applicable Indenture separate and apart from the
trust administered by any other Trustee, and, except as otherwise indicated
herein, any action described herein to be taken by the Trustee may be taken by
each such Trustee with respect to, and only with respect to, the one or more
series of Debt Securities for which it is Trustee under the applicable
Indenture.
The following summaries set forth certain general terms and provisions of
the Indentures and the Debt Securities. Reference is made to the Prospectus
Supplement relating to the series of Debt Securities being offered for the
specific terms thereof, including:
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(i) the title of such Debt Securities;
(ii) the classification of such Debt Securities as Senior Securities or
Subordinated Securities;
(iii) the aggregate principal amount of such Debt Securities and any
limit on such aggregate principal amount;
(iv) the price (expressed as a percentage of the principal amount thereof)
at which such Debt Securities will be issued and, if other than the
principal amount thereof, the portion of the principal amount thereof
payable upon declaration of acceleration of the maturity thereof, or
(if applicable) the portion of the principal amount of such Debt
Securities which is convertible into Common Shares or Preferred
Shares or Debt Securities of another series, or the method by which
any such portion shall be determined;
(v) the date or dates, or the method for determining such date or dates,
on which the principal of such Debt Securities will be payable;
(vi) the rate or rates (which may be fixed or variable), or the method by
which such rate or rates shall be determined, at which such Debt
Securities will bear interest, if any;
(vii) the date or dates, or the method for determining such date or dates,
from which any such interest will accrue, the Interest Payment Dates
on which any such interest will be payable, the Regular Record Dates
for such Interest Payment Dates, or the method by which such dates
shall be determined, the Persons to whom such interest shall be
payable, and the basis upon which interest shall be calculated if
other than that of a 360-day year of twelve 30-day months;
(viii)the place or places where the principal of (and premium, if any) and
interest, if any, on such Debt Securities will be payable, such Debt
Securities may be surrendered for conversion or registration of
transfer or exchange, and notices or demands to or upon the Company
in respect of such Debt Securities and the Indenture may be served;
(ix) the period or periods within which, the price or prices at which and
the other terms and conditions upon which such Debt Securities may be
redeemed, as a whole or in part, at the option of the Company, if the
Company is to have such an option;
(x) the obligation, if any, of the Company to redeem, repay or purchase
such Debt Securities pursuant to any sinking fund or analogous
provision or at the option of a Holder thereof, and the period or
periods within which, the price or prices at which and the other
terms and conditions upon which such Debt Securities will
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be redeemed, repaid or purchased, as a whole or in part, pursuant to
such obligation;
(xi) if other than United States dollars, the currency or currencies in
which such Debt Securities are denominated and payable, which may be
a foreign currency or units of two or more foreign currencies or a
composite currency or currencies, and the terms and conditions
relating thereto;
(xii) whether the amount of payments of principal of (and premium, if any)
or interest, if any, on such Debt Securities may be determined with
reference to an index, formula or other method (which index, formula
or method may, but need not, be based on a currency, currencies,
currency unit or units or composite currency or currencies) and the
manner in which such amounts shall be determined;
(xiii) whether such Debt Securities will be issued in the form of one or
more global securities and whether such global securities are to be
issuable in a temporary global form or a permanent global form and,
if in global form, the identity of the depositary for such Debt
Securities;
(xiv) any additions to, modifications of or deletions from the terms of
such Debt Securities with respect to the Events of Default or
covenants set forth in the Indenture and any change in the right of
any Trustee or any of the holders to declare the principal amount of
any of such Debt Securities due and payable;
(xv) whether such Debt Securities will be issued in certificated or book-
entry form and, if in the book-entry form, the identity of the
depositary for such Debt Securities;
(xvi) whether such Debt Securities will be in registered or bearer form
and, if in registered form, the denominations thereof if other than
$1,000 and any integral multiple thereof and, if in bearer form, the
denominations thereof and terms and conditions relating thereto;
(xvii) the applicability, if any, of the defeasance and covenant defeasance
provisions of the Indenture;
(xviii) if such Debt Securities are to be issued upon the exercise of Debt
Securities Warrants, the time, manner and place for such Debt
Securities to be authenticated and delivered;
(xix) the terms, if any, upon which Debt Securities may be convertible
into Common Shares, Preferred Shares or Debt Securities of another
series of the Company and the terms and conditions upon which such
conversion will be effected, including, without limitation, the
initial conversion price or rate and the conversion period;
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(xx) if convertible, in connection with the preservation of the Company's
status as a REIT, any applicable limitations on the ownership or
transferability of the Common Shares or Preferred Shares into which
such Debt Securities are convertible;
(xxi) whether and under what circumstances the Company will pay Additional
Amounts as contemplated in the Indenture on such Debt Securities in
respect of any tax, assessment or governmental charge and, if so,
whether the Company will have the option to redeem such Debt
Securities in lieu of making such payment; and
(xxii) any other terms of such Debt Securities not inconsistent with the
provisions of the Indenture.
If so provided in the applicable Prospectus Supplement, the Debt Securities
may be issued at a discount below their principal amount and provide for less
than the entire principal amount thereof to be payable upon declaration of
acceleration of the maturity thereof or bear no interest or bear interest at a
rate which at the time of issuance is below market rates ("Original Issue
Discount Securities"). Special Federal income tax, accounting and other
considerations applicable to Original Issue Discount Securities will be
described in the applicable Prospectus Supplement.
Except as set forth below under "Certain Covenants--Limitations on
Incurrence of Debt," the Indentures do not contain any other provisions that
would limit the ability of the Company to incur indebtedness or that would
afford holders of Debt Securities protection in the event of a highly leveraged
or similar transaction involving the Company or in the event of a change of
control. However, restrictions on ownership and transfers of the Common Shares
and Preferred Shares are designed to preserve its status as a REIT and,
therefore, may act to prevent or hinder a change of control. See "--
Restrictions on Transfer." Reference is made to the applicable Prospectus
Supplement for information with respect to any deletions from, modifications of
or additions to the Events of Default or covenants of the Company that are
described below, including any addition of a covenant or other provision
providing event risk or similar protection.
DENOMINATIONS, INTEREST, REGISTRATION AND TRANSFER
Unless otherwise described in the applicable Prospectus Supplement, the
Debt Securities of any series will be issuable in denominations of $1,000 and
integral multiples thereof.
Unless otherwise specified in the applicable Prospectus Supplement, the
principal of (and premium, if any) and interest on any series of Debt Securities
will be payable at the corporate trust office of the Trustee, provided that, at
the option of the Company, payment of interest may be made by check mailed to
the address of the Person entitled thereto as it appears in the Security
Register or by wire transfer of funds to such Person at an account maintained
within the United States.
Any interest not punctually paid or duly provided for on any Interest
Payment Date with respect to a Debt Security ("Defaulted Interest") will
forthwith cease to be payable to the holder
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on the applicable Regular Record Date and may either be paid to the person in
whose name such Debt Security is registered at the close of business on a
special record date (the "Special Record Date") for the payment of such
Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to
the holder of such Debt Security not less than 10 days prior to such Special
Record Date, or be paid at any time in any other lawful manner, all as more
completely described in the Indenture.
Subject to certain limitations imposed upon Debt Securities issued in book-
entry form, the Debt Securities of any series will be exchangeable for other
Debt Securities of the same series and of a like aggregate principal amount and
tenor of different authorized denominations upon surrender of such Debt
Securities at the corporate trust office of the Trustee. In addition, subject to
certain limitations imposed upon Debt Securities issued in book-entry form, the
Debt Securities of any series may be surrendered for conversion or registration
of transfer thereof at the corporate trust office of the Trustee. Every Debt
Security surrendered for conversion, registration of transfer or exchange shall
be duly endorsed or accompanied by a written instrument of transfer. No service
charge will be made for any registration of transfer or exchange of any Debt
Securities, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith. If the
applicable Prospectus Supplement refers to any transfer agent (in addition to
the Trustee) initially designated by the Company with respect to any series of
Debt Securities, the Company may at any time rescind the designation of any such
transfer agent or approve a change in the location through which any such
transfer agent acts, except that the Company will be required to maintain a
transfer agent in each Place of Payment for such series. The Company may at any
time designate additional transfer agents with respect to any series of Debt
Securities.
Neither the Company nor the Trustee shall be required to (i) issue,
register the transfer of or exchange Debt Securities of any series during a
period beginning at the opening of business 15 days before any selection of Debt
Securities of that series to be redeemed and ending at the close of business on
the day of mailing of the relevant notice of redemption; (ii) register the
transfer of or exchange any Debt Security, or portion thereof, called for
redemption, except the unredeemed portion of any Debt Security being redeemed in
part; or (iii) issue, register the transfer of or exchange any Debt Security
which has been surrendered for repayment at the option of the holder, except the
portion, if any, of such Debt Security not to be so repaid.
MERGER, CONSOLIDATION OR SALE OF ASSETS
The Indenture will provide that the Company, without the consent of the
Holders of any outstanding Debt Securities, may consolidate with, or sell, lease
or convey all or substantially all of its assets to, or merge with or into, any
other entity, provided that (i) either the Company shall be the continuing
entity, or the successor entity (if other than the Company) formed by or
resulting from any such consolidation or merger or which shall have received the
transfer of such assets shall expressly assume payment of the principal of (and
premium, if any) and interest on all of the Debt Securities and the due and
punctual performance and observance of all of the covenants and conditions
contained in the Indenture; (ii) immediately after giving effect to such
transaction and treating any indebtedness which becomes an obligation of the
Company or any
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Subsidiary as a result thereof as having been incurred by the Company or such
Subsidiary at the time of such transaction, no Event of Default under the
Indenture, and no event which, after notice or the lapse of time, or both, would
become such an Event of Default, shall have occurred and be continuing; and
(iii) an officer's certificate and legal opinion covering such conditions shall
be delivered to the Trustee.
CERTAIN COVENANTS
Restrictions on Dividends and Other Distributions. The Indentures provide
-------------------------------------------------
that the Company will not (i) declare or pay any dividend or make any
distribution on its shares of beneficial interest or to holders of its shares of
beneficial interest (other than dividends or distributions payable in its shares
of beneficial interest or other than as the Company determines is necessary to
maintain its status as a REIT); or (ii) purchase, redeem or otherwise acquire or
retire for value any of its shares of beneficial interest, or any warrants,
rights or options or other securities to purchase or acquire any of its shares
of beneficial interest (other than the Debt Securities) or permit any Subsidiary
to do so, if at the time of such action an Event of Default has occurred and is
continuing or would exist immediately after giving effect to such action.
Existence. Except as permitted under "--Merger, Consolidation or Sale of
---------
Assets," the Company will do or cause to be done all things necessary to
preserve and keep in full force and effect its corporate existence, rights
(charter and statutory) and franchises; provided, however, that the Company
shall not be required to preserve any right or franchise if it determines that
the preservation thereof is no longer desirable in the conduct of its business
and that the loss thereof is not disadvantageous in any material respect to the
holders of the Debt Securities.
Maintenance of Properties. The Indentures provide that the Company will
-------------------------
cause all of its material properties used or useful in the conduct of its
business or the business of any Subsidiary to be maintained and kept in good
condition, repair and working order and supplied with all necessary equipment
and will cause to be made all necessary repairs, renewals, replacements and
improvements thereof, all as in the judgment of the Company may be necessary so
that the business carried on in connection therewith may be properly and
advantageously conducted at all times; provided, however, that the Company and
its Subsidiaries shall not be prevented from selling or otherwise disposing of
for value its properties in the ordinary course of business.
Insurance. The Indentures provide that the Company will, and will cause
---------
each of its Subsidiaries to, keep all of its insurable properties insured
against loss or damage in accordance with industry practices and with insurers
of recognized responsibility and of suitable financial stability.
Payment of Taxes and Other Claims. The Indentures provide that the Company
---------------------------------
will pay or discharge or cause to be paid or discharged, before the same shall
become delinquent, (i) all taxes, assessments and governmental charges levied or
imposed upon it or any Subsidiary or upon the income, profits or property of the
Company or any Subsidiary; and (ii) all lawful claims for labor, materials and
supplies which, if unpaid, might by law become a lien upon the property of
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the Company or any Subsidiary; provided, however, that the Company shall not be
required to pay or discharge or cause to be paid or discharged any such tax,
assessment, charge or claim whose amount, applicability or validity is being
contested in good faith by appropriate proceedings.
Provision of Financial Information. The Indentures provide that, whether
----------------------------------
or not the Company is subject to Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act") the Company will, to the extent
permitted under the Exchange Act, file with the Securities and Exchange
Commission (the "Commission") the annual reports, quarterly reports and other
documents which the Company would have been required to file with the Commission
pursuant to such Section 13 or 15(d) (the "Financial Statements") if the Company
were so subject, such documents to be filed with the Commission on or prior to
the respective dates (the "Required Filing Dates") by which the Company would
have been required so to file such documents if the Company were so subject.
The Company also will in any event (i) within 15 days of each Required Filing
Date file with the Trustee copies of the annual reports, quarterly reports and
other documents which the Company would have been required to file with the
Commission pursuant to Section 13 or 15(d) of the Exchange Act if the Company
were subject to such Sections; and (ii) if filing such documents by the Company
with the Commission is not permitted under the Exchange Act, promptly upon
written request and payment of the reasonable cost of duplication and delivery,
supply copies of such documents to any prospective Holder.
Additional Covenants. Any additional covenants of the Company with respect
--------------------
to any series of Debt Securities will be set forth in the Prospectus Supplement
relating thereto.
EVENTS OF DEFAULT, NOTICE AND WAIVER
The Indentures provide that the following events are "Events of Default"
with respect to any series of Debt Securities issued thereunder: (i) default for
30 days in the payment of any installment of interest on any Debt Security of
such series; (ii) default in the payment of the principal of (or premium, if
any, on) any Debt Security of such series at its Maturity; (iii) default in
making any sinking fund payment as required for any Debt Security of such
series; (iv) default in the performance of any other covenant of the Company
contained in the Indenture (other than a covenant added to the Indenture solely
for the benefit of a series of Debt Securities issued thereunder other than such
series), continued for 60 days after written notice as provided in the
Indenture; (v) default in the payment of an aggregate principal amount exceeding
$5,000,000 of any evidence of indebtedness of the Company or any mortgage,
indenture or other instrument under which such indebtedness is issued or by
which such indebtedness is secured, such default having occurred after the
expiration of any applicable grace period and having resulted in the
acceleration of the maturity of such indebtedness, but only if such indebtedness
is not discharged or such acceleration is not rescinded or annulled; (vi)
certain events of bankruptcy, insolvency or reorganization, or court appointment
of a receiver, liquidator or trustee of the Company or for substantially all of
its properties; and (vii) any other Event of Default provided with respect to a
particular series of Debt Securities.
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If an Event of Default under the applicable Indenture with respect to Debt
Securities of any series at the time Outstanding occurs and is continuing, then
in every such case the Trustee or the Holders of not less than 25% in principal
amount of the Outstanding Debt Securities of that series may declare the
principal amount (or, if the Debt Securities of that series are Original Issue
Discount Securities or Indexed Securities, such portion of the principal amount
as may be specified in the terms thereof) of all of the Debt Securities of that
series to be due and payable immediately by written notice thereof to the
Company (and to the Trustee if given by the Holders). However, at any time
after such a declaration of acceleration with respect to Debt Securities of such
series (or of all Debt Securities then Outstanding under the applicable
Indenture, as the case may be) has been made, but before a judgment or decree
for payment of the money due has been obtained by the Trustee, the holders of
not less than a majority in principal amount of Outstanding Debt Securities of
such series (or of all Debt Securities then Outstanding under the applicable
Indenture, as the case may be) may rescind and annul such declaration and its
consequences if (i) the Company shall have deposited with the Trustee all
required payments of the principal of (and premium, if any) and interest on the
Debt Securities of such series (or of all Debt Securities then Outstanding under
the applicable Indenture, as the case may be), plus certain fees, expenses,
disbursements and advances of the Trustee and (ii) all Events of Default, other
than the non-payment of accelerated principal (or specified portion thereof),
with respect to Debt Securities of such series (or all Debt Securities then
Outstanding under the applicable Indenture, as the case may be) have been cured
or waived as provided in the applicable Indenture. The Indentures also provide
that the Holders of not less than a majority in principal amount of the
Outstanding Debt Securities of any series (or of all Debt Securities then
Outstanding under the applicable Indenture, as the case may be) may waive any
past default with respect to such series and its consequences, except a default
(a) in the payment of the principal of (or premium, if any) or interest on any
Debt Security of such series or (b) in respect of a covenant or provision
contained in the applicable Indenture that cannot be modified or amended without
the consent of the Holder of each outstanding Debt Security affected thereby.
The Trustee is required to give notice to the holders of Debt Securities
within 90 days of a default under the applicable Indenture; provided, however,
that the Trustee may withhold notice to the Holders of any series of Debt
Securities of any default with respect to such series (except a default in the
payment of the principal of (or premium, if any) or interest on any Debt
Security of such series or in the payment of any sinking fund installment in
respect of any Debt Security of such series) if the Responsible Officers of the
Trustee consider such withholding to be in the interest of such Holders.
The Indentures provide that no holders of Debt Securities of any series may
institute any proceedings, judicial or otherwise, with respect to the Indenture
or for any remedy thereunder, except in the case of failure of the Trustee, for
60 days, to act after it has received a written request to institute proceedings
in respect of an Event of Default from the holders of not less than 25% in
principal amount of the Outstanding Debt Securities of such series, as well as
an offer of reasonable indemnity. This provision will not prevent, however, any
Holder of Debt Securities from instituting suit for the enforcement of payment
of the principal of (and premium, if any) and interest on such Debt Securities
at the respective due dates thereof.
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Subject to provisions in the Indentures relating to its duties in case of
default, the Trustee is under no obligation to exercise any of its rights or
powers under the Indenture at the request or direction of any Holders of any
series of Debt Securities then outstanding under the Indenture, unless such
Holders shall have offered to the Trustee reasonable security or indemnity. The
Holders of not less than a majority in principal amount of the Outstanding Debt
Securities of any series (or of all Debt Securities then Outstanding under the
Indenture, as the case may be) shall have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee,
or of exercising any trust or power conferred upon the Trustee. However, the
Trustee may refuse to follow any direction which is in conflict with any law or
the Indenture, which may involve the Trustee in personal liability or which may
be unduly prejudicial to the holders of Debt Securities of such series not
joining therein.
Within 120 days after the close of each fiscal year, the Company must
deliver to the Trustee a certificate, signed by one of several specified
officers, stating whether or not such officer has knowledge of any default under
the Indenture and, if so, specifying each such default and the nature and status
thereof.
MODIFICATION OF THE INDENTURE
Modifications and amendments of the applicable Indenture may be made only
with the consent of the Holders of not less than a majority in principal amount
of all outstanding Debt Securities which are affected by such modification or
amendment; provided, however, that no such modification or amendment may,
without the consent of the Holder of each such Debt Security affected thereby,
(i) change the Stated Maturity of the principal of, or any installment of
interest (or premium, if any) on, any such Debt Security; (ii) reduce the
principal amount of, or the rate or amount of interest on, or any premium
payable on redemption of, any such Debt Security, or reduce the amount of
principal of an Original Issue Discount Security that would be due and payable
upon declaration of acceleration of the maturity thereof or would be provable in
bankruptcy, or adversely affect any right of repayment of the Holder of any such
Debt Security; (iii) change the Place of Payment, or the coin or currency, for
payment of principal of, premium, if any, or interest on any such Debt Security;
(iv) impair the right to institute suit for the enforcement of any payment on or
with respect to any such Debt Security; (v) reduce the above-stated percentage
of Outstanding Debt Securities of any series necessary to modify or amend the
Indenture, to waive compliance with certain provisions thereof or certain
defaults and consequences thereunder or to reduce the quorum or voting
requirements set forth in the Indenture; or (vi) modify any of the foregoing
provisions or any of the provisions relating to the waiver of certain past
defaults or certain covenants, except to increase the required percentage to
effect such action or to provide that certain other provisions may not be
modified or waived without the consent of the holder of such Debt Security.
The holders of not less than a majority in principal amount of each series
of Outstanding Debt Securities have the right, on behalf of all holders of Debt
Securities of that series, to waive compliance by the Company with certain
covenants in the Indenture with respect to such series.
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Modifications and amendments of the applicable Indenture may be made by the
Company and the Trustee without the consent of any holder of Debt Securities for
any of the following purposes: (i) to evidence the succession of another person
to the Company as obligor under the Indenture; (ii) to add to the covenants of
the Company for the benefit of the Holders of all or any series of Debt
Securities or to surrender any right or power conferred upon the Company in the
Indenture; (iii) to add Events of Default for the benefit of the Holders of all
or any series of Debt Securities; (iv) to add or change any provisions of the
applicable Indenture to facilitate the issuance of, or to liberalize certain
terms of, Debt Securities in bearer form, or to permit or facilitate the
issuance of Debt Securities in uncertificated form, provided that such action
shall not adversely affect the interest of the holders of the Debt Securities of
any series in any material respect; (v) to change or eliminate any provisions of
the applicable Indenture, provided that any such change or elimination shall
become effective only when there are no Debt Securities Outstanding of any
series created prior thereto which are entitled to the benefit of such
provision; (vi) to secure the Debt Securities; (vii) to establish the form or
terms of Debt Securities of any series, including the provisions and procedures,
if applicable, for the conversion of such Debt Securities into Common Shares or
Preferred Shares of the Company; (viii) to provide for the acceptance of
appointment by a successor Trustee or facilitate the administration of the
trusts under the Indenture by more than one Trustee; (ix) to cure any ambiguity,
correct or supplement any provision which may be defective or inconsistent or
make any other provisions with respect to matters or questions arising under the
applicable Indenture, provided that such action shall not adversely affect the
interests of Holders of Debt Securities of any series in any material respect;
(x) to supplement any of the provisions of the Indenture to the extent necessary
to permit or facilitate defeasance and discharge of any series of such Debt
Securities, provided that such action shall not adversely affect the interests
of the Holders of the Debt Securities of any series in any material respect or
(xi) to comply with the TIA.
The Indentures provide that in determining whether the holders of the
requisite principal amount of Outstanding Debt Securities of a series have given
any request, demand, authorization, direction, notice, consent or waiver
thereunder or whether a quorum is present at a meeting of holders of Debt
Securities, (i) the principal amount of an Original Issue Discount Security that
shall be deemed to be outstanding shall be the amount of the principal thereof
that would be due and payable as of the date of such determination upon
declaration of acceleration of the maturity thereof; (ii) the principal amount
of a Debt Security denominated in a Foreign Currency that shall be deemed
outstanding shall be the United States dollar equivalent, determined on the
issue date for such Debt Security, of the principal amount (or, in the case of
an Original Issue Discount Security, the United States dollar equivalent on the
issue date of such Debt Security of the amount determined as provided in (i)
above); (iii) the principal amount of an Indexed Security that shall be deemed
outstanding shall be the principal face amount of such Indexed Security at
original issuance, unless otherwise provided with respect to such Indexed
Security pursuant to the Indenture; and (iv) Debt Securities owned by the
Company or any other obligor upon the Debt Securities or any Affiliate of the
Company or of such other obligor shall be disregarded.
The Indentures contain provisions for convening meetings of the holders of
Debt Securities of a series. A meeting may be called at any time by the
Trustee, and also, upon request, by the Company or the holders of at least 10%
in principal amount of the Outstanding
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Debt Securities of such series, in any such case upon notice given as provided
in the applicable Indenture. Except for any consent that must be given by the
holder of each Debt Security affected by certain modifications and amendments of
the applicable Indenture, any resolution presented at a meeting or adjourned
meeting duly reconvened at which a quorum is present may be adopted by the
affirmative vote of the Holders of a majority in principal amount of the
Outstanding Debt Securities of that series; provided, however, that, except as
referred to above, any resolution with respect to any request, demand,
authorization, direction, notice, consent, waiver or other action that may be
made, given or taken by the holders of a specified percentage, which is less
than a majority, in principal amount of the Outstanding Debt Securities of a
series may be adopted at a meeting or adjourned meeting duly reconvened at which
a quorum is present by the affirmative vote of the holders of such specified
percentage in principal amount of the Outstanding Debt Securities of that
series. Any resolution passed or decision taken at any meeting of holders of
Debt Securities of any series duly held in accordance with the applicable
Indenture will be binding on all holders of Debt Securities of that series. The
quorum at any meeting called to adopt a resolution, and at any reconvened
meeting, will be Persons holding or representing a majority in principal amount
of the outstanding Debt Securities of a series; provided, however, that if any
action is to be taken at such meeting with respect to a consent or waiver which
may be given by the Holders of not less than a specified percentage in principal
amount of the Outstanding Debt Securities of a series, the Persons holding or
representing such specified percentage in principal amount of the Outstanding
Debt Securities of such series will constitute a quorum.
Notwithstanding the foregoing provisions, if any action is to be taken at a
meeting of holders of Debt Securities of any series with respect to any request,
demand, authorization, direction, notice, consent, waiver or other action that
the applicable Indenture expressly provides may be made, given or taken by the
holders of a specified percentage in principal amount of all Outstanding Debt
Securities affected thereby, or of the holders of such series and one or more
additional series: (i) there shall be no minimum quorum requirement for such
meeting; and (ii) the principal amount of the Outstanding Debt Securities of
such series that vote in favor of such request, demand, authorization,
direction, notice, consent, waiver or other action shall be taken into account
in determining whether such request, demand, authorization, direction, notice,
consent, waiver or other action has been made, given or taken under the
Indenture.
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
Unless otherwise indicated in the applicable Prospectus Supplement, the
Company may discharge certain obligations to holders of any series of Debt
Securities that have not already been delivered to the Trustee for cancellation
and that either have become due and payable or will become due and payable
within one year (or scheduled for redemption within one year) by irrevocably
depositing with the Trustee, in trust, funds in such currency or currencies,
currency unit or units or composite currency or currencies in which such Debt
Securities are payable in an amount sufficient to pay the entire indebtedness on
such Debt Securities in respect of principal (and premium, if any) and interest
to the date of such deposit (if such Debt Securities have become due and
payable) or to the Stated Maturity or Redemption Date, as the case may be.
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The Indentures provide that, if the provisions of the applicable Indenture
relating to defeasance are made applicable to the Debt Securities of or within
any series pursuant to the Indenture, the Company may elect either (i) to
defease and be discharged from any and all obligations with respect to such Debt
Securities (except for the obligation to pay Additional Amounts, if any, upon
the occurrence of certain events of tax, assessment or governmental charge with
respect to payments on such Debt Securities and the obligations to register the
transfer or exchange of such Debt Securities, to replace temporary or mutilated,
destroyed, lost or stolen Debt Securities, to maintain an office or agency in
respect of such Debt Securities and to hold moneys for payment in trust)
("defeasance") or (ii) to be released from its obligations with respect to such
Debt Securities under certain covenants of the applicable Indenture (being the
restrictions described under "-- Certain Covenants") or, if provided pursuant to
the applicable Indenture, its obligations with respect to any other covenant,
and any omission to comply with such obligations shall not constitute a default
or an Event of Default with respect to such Debt Securities ("covenant
defeasance"), in either case upon the irrevocable deposit by the Company with
the Trustee, in trust, of an amount, in such currency or currencies, currency
unit or units or composite currency or currencies in which such Debt Securities
are payable at Stated Maturity, or Government Obligations (as defined below), or
both, applicable to such Debt Securities which through the scheduled payment of
principal and interest in accordance with their terms will provide money in an
amount sufficient to pay the principal of (and premium, if any) and interest on
such Debt Securities, and any mandatory sinking fund or analogous payments
thereon, on the scheduled due dates therefor.
Such a trust may be established only if, among other things, the Company
has delivered to the Trustee an Opinion of Counsel (as specified in the
applicable Indenture) to the effect that the Holders of such Debt Securities
will not recognize income, gain or loss for Federal income tax purposes as a
result of such defeasance or covenant defeasance and will be subject to Federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such defeasance or covenant defeasance had not
occurred, and such Opinion of Counsel, in the case of defeasance, must refer to
and be based upon a ruling of the Internal Revenue Service or a change in
applicable Federal income tax law occurring after the date of the Indenture. In
the event of such defeasance, the holders of such Debt Securities would
thereafter be able to look only to such trust fund for payment of principal (and
premium, if any) and interest.
"Government Obligations" means securities which are (i) direct obligations
of the United States of America or the government which issued the Foreign
Currency in which the Debt Securities of a particular series are payable, for
the payment of which its full faith and credit is pledged or (ii) obligations of
a Person controlled or supervised by and acting as an agency or instrumentality
of the United States of America or such government which issued the Foreign
Currency in which the Debt Securities of such series are payable, the payment of
which is unconditionally guaranteed as a full faith and credit obligation by the
United States of America or such other government, which, in either case, are
not callable or redeemable at the option of the issuer thereof, and also shall
include a depository receipt issued by a bank or trust company as custodian with
respect to any such Government Obligation or a specific payment of interest on
or principal of any such Government Obligation held by such custodian for the
account of the
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holder of a depository receipt, provided that (except as required by law) such
custodian is not authorized to make any deduction from the amount payable to the
holder of such depository receipt from any amount received by the custodian in
respect of the Government Obligation or the specific payment of interest on or
principal of the Government Obligation evidenced by such depository receipt.
Unless otherwise provided in the applicable Prospectus Supplement, if after
the Company has deposited funds and/or Government Obligations to effect
defeasance or covenant defeasance with respect to Debt Securities of any series,
(i) the Holder of a Debt Security of such series is entitled to, and does, elect
pursuant to the Indenture or the terms of such Debt Security to receive payment
in a currency, currency unit or composite currency other than that in which such
deposit has been made in respect of such Debt Security, or (ii) a Conversion
Event (as defined below) occurs in respect of the currency, currency unit or
composite currency in which such deposit has been made, the indebtedness
represented by such Debt Security shall be deemed to have been, and will be,
fully discharged and satisfied through the payment of the principal of (and
premium, if any) and interest on such Debt Security as they become due out of
the proceeds yielded by converting the amount so deposited in respect of such
Debt Security into the currency, currency unit or composite currency in
which such Debt Security becomes payable as a result of such election or such
cessation of usage based on the applicable market exchange rate. "Conversion
Event" means the cessation of use of (a) a currency, currency unit or composite
currency both by the government of the country which issued such currency and
for the settlement of transactions by a central bank or other public
institutions of or within the international banking community, (b) the European
Currency Unit ("ECU") both within the European Monetary System and for the
settlement of transactions by public institutions of or within the European
Communities or (c) any currency unit or composite currency other than the ECU
for the purposes for which it was established. Unless otherwise provided in the
applicable Prospectus Supplement, all payments of principal of (and premium, if
any) and interest on any Debt Security that is payable in a Foreign Currency
that ceases to be used by its government of issuance shall be made in United
States dollars.
In the event the Company effects covenant defeasance with respect to any
Debt Securities and such Debt Securities are declared due and payable because of
the occurrence of any Event of Default other than the Event of Default described
in clause (iv) under "-- Events of Default, Notice and Waiver" (which would no
longer be applicable to such Debt Securities) or described in clause (vii) under
"-- Events of Default, Notice and Waiver" with respect to any other covenant as
to which there has been covenant defeasance, the amount in such currency,
currency unit or composite currency in which such Debt Securities are payable,
and Government Obligations on deposit with the Trustee, will be sufficient to
pay amounts due on such Debt Securities at the time of their Stated Maturity but
may not be sufficient to pay amounts due on such Debt Securities at the time of
the acceleration resulting from such Event of Default. However, the Company
would remain liable to make payment of such amounts due at the time of
acceleration.
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The applicable Prospectus Supplement may further describe the provisions,
if any, permitting such defeasance or covenant defeasance, including any
modifications to the provisions described above, with respect to the Debt
Securities of or within a particular series.
CONVERSION RIGHTS
The terms and conditions, if any, upon which the Debt Securities are
convertible into Common Shares, Preferred Shares or Debt Securities of another
series will be set forth in the applicable Prospectus Supplement relating
thereto. Such terms will include whether such Debt Securities are convertible
into Common Shares, Preferred Shares or Debt Securities of another series, the
conversion price (or manner of calculation thereof), the conversion period,
provisions as to whether conversion will be at the option of the Holders or the
Company, the events requiring an adjustment of the conversion price and
provisions affecting conversion in the event of the redemption of such Debt
Securities. To protect the Company's status as a REIT, a holder may not convert
any Debt Security, and such Debt Security shall not be convertible by any
holder, if as a result of such conversion any person would then be deemed to
own, directly or indirectly, more than 9.8% of the Company's shares of
beneficial interest.
GLOBAL SECURITIES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more fully registered global securities (the "Global Securities")
that will be deposited with, or on behalf of, a depositary (the "Depositary")
identified in the applicable Prospectus Supplement relating to such series.
Global Securities are expected to be deposited with The Depository Trust
Company, as Depositary. Global Securities may be issued in either registered or
bearer form and in either temporary or permanent form.
Unless and until it is exchanged in whole or in part for the individual
Debt Securities represented thereby, a Global Security may not be transferred
except as a whole by the Depositary for such Global Security to a nominee of
such Depositary or by a nominee of such Depositary to such Depositary or another
nominee of such Depositary or by the Depositary or any nominee of such
Depositary to a successor Depositary or any nominee of such successor.
The specific terms of the depositary arrangement with respect to a series
of Debt Securities will be described in the applicable Prospectus Supplement
relating to such series. Unless otherwise indicated in the applicable
Prospectus Supplement, the Company anticipates that the following provisions
will apply to depositary arrangements.
Upon the issuance of a Global Security, the Depositary for such Global
Security or its nominee will credit on its book-entry registration and transfer
system the respective principal amounts of the individual Debt Securities
represented by such Global Security to the accounts of persons that have
accounts with such Depositary ("Participants"). Such accounts shall be
designated by the underwriters, dealers or agents with respect to such Debt
Securities or by the Company if such Debt Securities are offered and sold
directly by the Company. Ownership of beneficial interests in a Global Security
will be limited to Participants or persons that may hold
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interests through Participants. Ownership of beneficial interests in such Global
Security will be shown on, and the transfer of that ownership will be effected
only through, records maintained by the applicable Depositary or its nominee
(with respect to beneficial interests of Participants) and records of
Participants (with respect to beneficial interests of persons who hold through
Participants). The laws of some states require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
limits and laws may impair the ability to own, pledge or transfer beneficial
interest in a Global Security.
So long as the Depositary for a Global Security or its nominee is the
registered owner of such Global Security, such Depositary or such nominee, as
the case may be, will be considered the sole owner or holder of the Debt
Securities represented by such Global Security for all purposes under the
applicable Indenture. Except as provided below or in the applicable Prospectus
Supplement, owners of a beneficial interest in a Global Security will not be
entitled to have any of the individual Debt Securities of the series represented
by such Global Security registered in their names, will not receive or be
entitled to receive physical delivery of any such Debt Securities of such series
in definitive form and will not be considered the owners or holders thereof
under the applicable Indenture.
Payments of principal of, premium, if any, and any interest on, or any
Additional Amounts payable with respect to, individual Debt Securities
represented by a Global Security registered in the name of a Depositary or its
nominee will be made to the Depositary or its nominee, as the case may be, as
the registered owner of the Global Security representing such Debt Securities.
None of the Company, the Trustees, any Paying Agent or the Security Registrar
for such Debt Securities will have any responsibility or liability for any
aspect of the records relating to or payments made on account of beneficial
ownership interests in the Global Security for such Debt Securities or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests.
The Company expects that the Depositary for a series of Debt Securities or
its nominee, upon receipt of any payment of principal, premium or interest in
respect of a permanent Global Security representing any of such Debt Securities,
will immediately credit Participants' accounts with payments in amounts
proportionate to their respective beneficial interests in the principal amount
of such Global Security for such Debt Securities as shown on the records of such
Depositary or its nominee. The Company also expects that payments by
Participants to owners of beneficial interests in such Global Security held
through such Participants will be governed by standing instructions and
customary practices, as is the case with securities held for the account of
customers in bearer form or registered in "street name." Such payments will be
the responsibility of such Participants.
If a Depositary for a series of Debt Securities is at any time unwilling,
unable or ineligible to continue as depositary and a successor depositary is not
appointed by the Company within 90 days, the Company will issue individual Debt
Securities of such series in exchange for the Global Security representing such
series of Debt Securities. In addition, the Company may, at any time and in its
sole discretion, subject to any limitations described in the applicable
Prospectus Supplement relating to such Debt Securities, determine not to have
any Debt Securities of such
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series represented by one or more Global Securities and, in such event, will
issue individual Debt Securities of such series in exchange for the Global
Security or Securities representing such series of Debt Securities. Individual
Debt Securities of such series so issued will be issued in denominations, unless
otherwise specified by the Company, of $1,000 and integral multiples thereof.
PAYMENT
Unless otherwise specified in the applicable Prospectus Supplement, the
principal of (and applicable premium, if any) and interest on any series of Debt
Securities will be payable at the corporate trust office of the Trustee, the
address of which will be stated in the applicable Prospectus Supplement;
provided that, at the option of the Company, payment of interest may be made by
check mailed to the address of the person entitled thereto as it appears in the
applicable register for such Debt Securities or by wire transfer of funds to
such person at an account maintained within the United States.
All moneys paid by the Company to a paying agent or the Trustee for the
payment of the principal of or any premium or interest on any Debt Security
which remain unclaimed at the end of two years after such principal, premium or
interest has become due and payable will be repaid to the Company, and the
holder of such Debt Security thereafter may look only to the Company for payment
thereof.
NO PERSONAL LIABILITY
No past, present or future trustee, officer, trust manager, employee or
shareholder, as such, of the Company or any successor thereof shall have any
liability for any obligations of the Company under the Debt Securities or the
applicable Indenture or for any claim based on, in respect of, or by reason of,
such obligations or their creation. Each Holder of Debt Securities by accepting
such Debt Securities waives and releases all such liability. The waiver and
release are part of the consideration for the issue of Debt Securities. Each
Holder of Debt Securities shall look solely to the assets of the Company for
satisfaction of any liability of the Company in respect of the applicable
Indenture or the Debt Securities and will not seek recourse or commence any
action against any of the trustees, officers, trust manager, employees or
shareholders of the Company or any of their personal assets for the performance
or payment of any obligation thereunder.
PROVISIONS APPLICABLE SOLELY TO SUBORDINATED SECURITIES
General. Subordinated Securities will be issued under the Subordinated
-------
Securities Indenture and will rank pari passu with certain other subordinated
debt of the Company that may be outstanding from time to time and will rank
junior to all Senior Indebtedness (as defined below) of the Company (including
any Senior Securities) that may be outstanding from time to time.
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The term "Senior Indebtedness" will be defined in the Subordinated
Securities Indenture as indebtedness incurred by the Company for money borrowed
whether outstanding on the effective date of the Subordinated Securities
Indenture or thereafter, all deferrals, renewals or extensions of any such
indebtedness and all evidences of indebtedness issued in exchange for any such
indebtedness and guarantees by the Company of the foregoing items of
indebtedness for money borrowed by persons other than the Company, unless, in
any such case, such indebtedness or guarantee provides by its terms that it
shall not constitute Senior Indebtedness.
If Subordinated Securities are issued under the Subordinated Securities
Indenture, the aggregate principal amount of Senior Indebtedness outstanding as
of a recent date will be set forth in the Prospectus Supplement relating to the
Subordinated Securities. The Subordinated Securities Indenture does not
restrict the amount of Senior Indebtedness that the Company may incur.
Subordination. The payment of the principal of (and premium, if any) and
-------------
interest on the Subordinated Securities is expressly subordinated, to the extent
and in the manner set forth in the Subordinated Securities Indenture, in right
of payment to the prior payment in full of all Senior Indebtedness of the
Company.
Upon (i) any acceleration of the principal amount due on the Subordinated
Securities or (ii) any payment or distribution of assets of the Company of any
kind or character, whether in cash, property or securities, to creditors upon
any dissolution or winding-up or total or partial liquidation or reorganization
of the Company, whether voluntary or involuntary, or in bankruptcy, insolvency,
receivership or other proceedings, all principal and premium, if any, and
interest due upon all Senior Indebtedness will first be paid in full, or payment
thereof provided for in money or money's worth in accordance with its terms,
before any payment is made on account of the principal of, premium, if any, or
interest on the indebtedness evidenced by the Subordinated Securities, and upon
any such acceleration, dissolution or winding-up or liquidation or
reorganization, any payment or distribution of assets of the Company of any kind
or character, whether in cash, property or securities, to which the holders of
the Subordinated Securities would be entitled, except for the provisions of the
Subordinated Indenture, will (subject to the power of a court of competent
jurisdiction to make other equitable provision reflecting the rights conferred
by the provisions of the Subordinated Securities upon the Senior Indebtedness
and the holders thereof with respect to the Subordinated Securities and the
holders thereof by a lawful plan of reorganization under applicable bankruptcy
law) be paid by the Company or any receiver, trustee in bankruptcy, liquidating
trustee, agent or other person making such payment or distribution, or by the
holders of the Subordinated Securities if received by them, directly to the
holders of Senior Indebtedness (pro rata to each such holder on the basis of the
respective amounts of Senior Indebtedness held by such holder) or their
representatives, to the extent necessary to pay all Senior Indebtedness
(including interest thereon) in full, in money or money's worth, after giving
effect to any concurrent payments or distribution to or for the holders of
Senior Indebtedness, before any payment or distribution is made to the holders
of the indebtedness evidenced by the Subordinated Securities. The consolidation
of the Company with or the merger of the Company into another Person or the
liquidation or dissolution of the Company following the conveyance or transfer
of its property as an entirety, or substantially as
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an entirety, to another Person upon the terms and conditions provided in the
Subordinated Securities Indenture will not be deemed a dissolution, winding-up,
liquidation or reorganization for these purposes.
In the event that any payment or distribution of assets of the Company of
any kind or character not permitted by the foregoing provisions, whether in
cash, property or securities, will be received by the holders of Subordinated
Securities before all Senior Indebtedness is paid in full, or provision made for
such payment, in accordance with its terms, such payment or distribution will be
held in trust for the benefit of, and shall be paid over or delivered to, the
holders of such Senior Indebtedness or their representative or representatives,
or to the trustee or trustees under any indenture pursuant to which any
instruments evidencing any of such Senior Indebtedness may have been issued, as
their respective interests may appear, for application to the payment of all
Senior Indebtedness remaining unpaid to the extent necessary to pay all such
Senior Indebtedness in full in accordance with its terms, after giving effect to
any concurrent payment or distribution to the holders of such Senior
Indebtedness.
No payment on account of principal of, premium, if any, sinking funds or
interest on the Subordinated Securities will be made unless full payment of
amounts then due for principal, premium, if any, sinking funds and interest on
any Senior Indebtedness has been made or duly provided for in money or money's
worth in accordance with the terms of such Senior Indebtedness. No payment on
account of principal, premium, if any, sinking funds or interest on the
Subordinated Securities will be made if, at the time of such payment or
immediately after giving effect thereto, (i) there shall exist a default in the
payment of principal, premium, if any, sinking fund or interest with respect to
any Senior Indebtedness or (ii) there shall have occurred an event of default
(other than a default in the payment of principal, premium, if any, sinking
funds or interest) with respect to any Senior Indebtedness, as defined therein
or in the instrument under which the same is outstanding, permitting the holders
thereof to accelerate the maturity thereof, and such event of default shall not
have been cured or waived or shall not have ceased to exist.
Subrogation. From and after the payment in full of all Senior
-----------
Indebtedness, the holders of the Subordinated Securities (together with the
holders of any other indebtedness of the Company which is subordinate in right
of payment to the payment in full of all Senior Indebtedness, which is not
subordinate in right of payment to the Subordinated Securities and which by its
terms grants such right of subrogation to the holder thereof) shall be
subrogated to the rights of the holders of Senior Indebtedness to receive
payments or distributions of assets or securities of the Company applicable to
the Senior Indebtedness until the Subordinated Securities shall be paid in full,
and, for the purposes of such subrogation, no such payments or distributions to
the holders of Senior Indebtedness of assets or securities, which otherwise
would have been payable or distributable to holders of the Subordinated
Securities, shall, as between the Company, its creditors other than the holders
of Senior Indebtedness, and the holders of the Subordinated Securities, be
deemed to be a payment by the Company to or on account of the Senior
Indebtedness, it being understood that these provisions of the Subordinated
Securities Indenture are and are intended solely for the purpose of defining the
relative rights of the holders of the Subordinated Securities, on the one hand,
and the holders of the Senior Indebtedness, on the other
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<PAGE>
hand, and nothing contained in the Subordinated Securities Indenture is intended
to or shall impair as between the Company, its creditors other than the holders
of Senior Indebtedness, and the holders of the Subordinated Securities, the
obligation of the Company, which is unconditional and absolute, to pay to the
holders of the Subordinated Securities the principal of, premium, if any, and
interest on the Subordinated Securities as and when the same shall become due
and payable in accordance with their terms, or to affect the relative rights of
the holders of the Subordinated Securities and creditors of the Company other
than the holders of the Senior Indebtedness, nor shall anything therein prevent
the Holder of any Subordinated Security from exercising all remedies otherwise
permitted by applicable law upon default under such Security subject to the
rights of the holders of Senior Indebtedness to receive cash, property or
securities of the Company otherwise payable or deliverable to the holders of the
Subordinated Securities or to a representative of such holders, on their behalf.
DESCRIPTION OF SECURITIES WARRANTS
GENERAL
The Company may issue Securities Warrants for the purchase of Debt
Securities, Preferred Shares or Common Shares. Securities Warrants may be
issued independently or together with any other Offered Securities offered by
any Prospectus Supplement or through a dividend or other distribution to the
Company's shareholders and may be attached to or separate from such Offered
Securities. Each series of Securities Warrants will be issued under a separate
warrant agreement (each, a "Warrant Agreement") to be entered into between the
Company and a warrant agent specified in the applicable Prospectus Supplement
(the "Warrant Agent"). The Warrant Agent will act solely as an agent of the
Company in connection with the Securities Warrants of such series and will not
assume any obligation or relationship of agency or trust for or with any holders
or beneficial owners of Securities Warrants. The following summaries of certain
provisions of the Securities Warrant Agreement and the Securities Warrants do
not purport to be complete and are subject to, and are qualified in their
entirety by reference to, all the provisions of the Securities Warrant Agreement
and the Securities Warrant certificates relating to each series of Securities
Warrants which will be filed with the Commission and incorporated by reference
as an exhibit to the Registration Statement of which this Prospectus is a part
at or prior to the time of the issuance of such series of Securities Warrants.
If Securities Warrants are offered, the applicable Prospectus Supplement
will describe the terms of such Securities Warrants, including, in the case of
Securities Warrants for the purchase of Debt Securities, the following where
applicable: (i) the title of such Securities Warrants; (ii) the aggregate number
of such Securities Warrants; (iii) the offering price; (iv) the denominations
and terms of the series of Debt Securities purchasable upon exercise of such
Securities Warrants; (v) the designation and terms of any series of Debt
Securities with which such Securities Warrants are being offered and the number
of such Securities Warrants being offered with such Debt Securities; (vi) the
date, if any, on and after which such Securities Warrants and the related series
of Debt Securities will be transferable separately; (vii) the principal amount
of the series of Debt Securities purchasable upon exercise of each such
Securities Warrant and the price at which such principal amount of Debt
Securities of such series
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<PAGE>
may be purchased upon such exercise; (viii) the date on which the right to
exercise such Securities Warrants shall commence and the date on which such
right shall expire (the "Expiration Date"); (ix) whether the Securities Warrants
will be issued in registered or bearer form; (x) any special Federal income tax
consequences; (xi) the terms, if any, on which the Company may accelerate the
date by which the Securities Warrants must be exercised; and (xii) any other
material terms of such Securities Warrants.
In the case of Securities Warrants for the purchase of Preferred Shares or
Common Shares, the applicable Prospectus Supplement will describe the terms of
such Securities Warrants, including the following where applicable: (i) the
title of such Securities Warrants; (ii) the aggregate number of such Securities
Warrants; (iii) the offering price; (iv) the aggregate number of shares
purchasable upon exercise of such Securities Warrants, the exercise price, and
in the case of Securities Warrants for Preferred Shares, the designation,
aggregate number and terms of the series of Preferred Shares purchasable upon
exercise of such Securities Warrants; (v) the designation and terms of any
series of Preferred Shares with which such Securities Warrants are being offered
and the number of such Securities Warrants being offered with such Preferred
Shares; (vi) the date, if any, on and after which such Securities Warrants and
the related series of Preferred Shares or Common Shares will be transferable
separately; (vii) the date on which the right to exercise such Securities
Warrants shall commence and the Expiration Date; (viii) any special Federal
income tax consequences; and (ix) any other material terms of such Securities
Warrants.
Securities Warrant certificates may be exchanged for new Securities Warrant
certificates of different denominations, may (if in registered form) be
presented for registration of transfer, and may be exercised at the corporate
trust office of the Securities Warrant Agent or any other office indicated in
the applicable Prospectus Supplement. Prior to the exercise of any Securities
Warrants to purchase Debt Securities, holders of such Securities Warrants will
not have any of the rights of holders of the Debt Securities purchasable upon
such exercise, including the right to receive payments of principal, premium, if
any, or interest, if any, on such Debt Securities or to enforce covenants in the
applicable indenture. Prior to the exercise of any Securities Warrants to
purchase Preferred Shares or Common Shares, holders of such Securities Warrants
will not have any rights of holders of such Preferred Shares or Common Shares,
including the right to receive payments of dividends, if any, on such Preferred
Shares or Common Shares, or to exercise any applicable right to vote.
EXERCISE OF SECURITIES WARRANTS
Each Securities Warrant will entitle the holder thereof to purchase such
principal amount of Debt Securities or number of shares of Preferred Shares or
Common Shares, as the case may be, at such exercise price as shall in each case
be set forth in, or calculable from, the Prospectus Supplement relating to the
offered Securities Warrants. After the close of business on the Expiration Date
(or such later date to which such Expiration Date may be extended by the
Company), unexercised Securities Warrants will become void.
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<PAGE>
Securities Warrants may be exercised by delivering to the Securities
Warrant Agent payment as provided in the applicable Prospectus Supplement of the
amount required to purchase the Debt Securities, Preferred Shares or Common
Shares, as the case may be, purchasable upon such exercise together with certain
information set forth on the reverse side of the Securities Warrant certificate.
Securities Warrants will be deemed to have been exercised upon receipt of
payment of the exercise price, subject to the receipt within five (5) business
days of the Securities Warrant certificate evidencing such Securities Warrants.
Upon receipt of such payment and the Securities Warrant certificate properly
completed and duly executed at the corporate trust office of the Securities
Warrant Agent or any other office indicated in the applicable Prospectus
Supplement, the Company will, as soon as practicable, issue and deliver the Debt
Securities, Preferred Shares or Common Shares, as the case may be, purchasable
upon such exercise. If fewer than all of the Securities Warrants represented by
such Securities Warrant certificate are exercised, a new Securities Warrant
certificate will be issued for the remaining amount of Securities Warrants.
AMENDMENTS AND SUPPLEMENTS TO WARRANT AGREEMENT
The Warrant Agreements may be amended or supplemented without the consent
of the holders of the Securities Warrants issued thereunder to effect changes
that are not inconsistent with the provisions of the Securities Warrants and
that do not adversely affect the interests of the holders of the Securities
Warrants.
ADJUSTMENTS
Unless otherwise indicated in the applicable Prospectus Supplement, the
exercise price of, and the number of shares of Common Shares covered by, a
Common Shares Warrant are subject to adjustment in certain events, including (i)
payment of a dividend on the Common Shares payable in shares of beneficial
interest and share splits, combinations or reclassification of the Common
Shares; (ii) issuance to all holders of Common Shares of rights or warrants to
subscribe for or purchase shares of Common Shares at less than their current
market price (as defined in the Warrant Agreement for such series of Common
Shares Warrants); and (iii) certain distributions of evidences of indebtedness
or assets (including securities but excluding cash dividends or distributions
paid out of consolidated earnings or retained earnings or dividends payable in
Common Shares) or of subscription rights and warrants (excluding those referred
to above).
No adjustment will be required unless such adjustment would require a
change of at least 1% in the exercise price then in effect. Except as stated
above, the exercise price of, and the number of Common Shares covered by, a
Common Shares Warrant will not be adjusted for the issuance of Common Shares or
any securities convertible into or exchangeable for Common Shares, or carrying
the right or option to purchase or otherwise acquire the foregoing, in exchange
for cash, other property or services. No adjustment in the exercise price of,
and the number of Common Shares covered by, a Common Shares Warrant will be made
for regular quarterly or other periodic or recurring cash dividends or
distributions or for cash dividends or distributions to the extent paid from
consolidated earnings or retained earnings.
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<PAGE>
In the event of any (i) consolidation or merger of the Company with or into
any entity (other than a consolidation or a merger that does not result in any
reclassification, conversion, exchange or cancellation of outstanding shares of
Common Shares); (ii) sale, transfer, lease or conveyance of all or substantially
all of the assets of the Company; or (iii) reclassification, capital
reorganization or change of the Common Shares (other than solely a change in par
value or from par value to no par value), then any holder of a Common Shares
Warrant will be entitled, on or after the occurrence of any such event, to
receive on exercise of such Common Shares Warrant the kind and amount of shares
of beneficial interest or other securities, cash or other property (or any
combination thereof) that the holder would have received had such holder
exercised such holder's Common Shares Warrant immediately prior to the
occurrence of such event. If the consideration to be received upon exercise of
the Common Shares Warrant following any such event consists of common shares of
the surviving entity, then from and after the occurrence of such event, the
exercise price of such Common Shares Warrant will be subject to the same anti-
dilution and other adjustments described in the second preceding paragraph,
applied as if such common shares were Common Shares.
RATIO OF EARNINGS TO FIXED CHARGES
The ratios of earnings to fixed charges for the six months ended June 30,
1996 and each of the last five fiscal years for the Company (including its
predecessors in interest) are presented below. The ratio of earnings to fixed
charges for the Company is computed by dividing earnings by fixed charges. To
date, the Company has not issued any Preferred Shares; therefore, the ratios of
earnings to combined fixed charges and preferred share dividends are the same as
the ratios of earnings to fixed charges presented below.
For purposes of computing this ratio, earnings have been calculated by
adding fixed charges to net income (loss). Fixed charges include interest on
indebtedness, capitalized interest and amortization of loan costs.
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<PAGE>
<TABLE>
<CAPTION>
Columbus Realty Trust Columbus Predecessors
----------------------------------------------------------------------------------------------------
Three Months Year Year December 29 January 1
Ended Ended Ended to to
March 31, December 31, December 31, December 31, December 28, Year Ended December 31,
1996 1995 1994 1993 1993 1992 1991
----------- ------------ ------------ ------------ ------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed
charges 1.38x 1.80x 2.83x 7.62x * .96x** *
Dollar amount of coverage $(973) $(278)** $(1,514)
deficiency (in thousands)
</TABLE>
* Prior to the completion of the Company's initial public offering in
December 1993 (the "IPO"), the Company's predecessors maintained different
capital structures from that which the Company maintains. Although the
Company's properties, while owned by the predecessors, historically
generated positive cash flow, the results of operations of the predecessors
indicate net losses for the period from January 1, 1993 through December
28, 1993, and for the fiscal year ended December 31, 1991. The computation
of the ratio of earnings to fixed charges reflects that earnings were
inadequate to cover fixed charges by approximately $973,000 and $1,514,000,
respectively, for such periods. The proceeds from completion of the
Company's IPO enabled the Company to significantly deleverage its
properties, resulting in improved ratios of earnings to fixed charges for
periods subsequent to the IPO.
** Although the Company's properties, while owned by the predecessors,
generated net income of $322,000 for the year ended December 31, 1992, the
computation of the ratio of earnings to fixed charges reflects interest
capitalized of $600,000, resulting in earnings that were inadequate to
cover fixed charges by approximately $278,000. The proceeds from completion
of the Company's IPO enabled the Company to significantly deleverage its
properties, resulting in improved ratios of earnings to fixed charges for
periods subsequent to the IPO.
FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is a general summary of the Code provisions
governing the United States federal income tax treatment of a REIT and is not
tax advice. The discussion is based upon the Code, Treasury regulations, and
Internal Revenue Service ("IRS") rulings and judicial decisions now in effect,
all of which are subject to change at any time, possibly with retroactive
effect, by legislative, judicial or administrative action. The tax treatment of
a holder of any of the Offered Securities will vary depending upon the terms of
the specific securities acquired by such holder, as well as his particular
situation, and this discussion does not attempt to address any aspects of
Federal income taxation relating to holders of Offered Securities. Certain
Federal income tax consideration relevant to holders of the Offered Securities
will be provided in the applicable Prospectus Supplement relating thereto.
EACH INVESTOR IS ADVISED TO CONSULT THE APPLICABLE PROSPECTUS SUPPLEMENT,
AS WELL AS HIS OR HER OWN TAX ADVISOR, REGARDING THE TAX CONSEQUENCES OF THE
ACQUISITION, OWNERSHIP AND SALE OF THE OFFERED SECURITIES, INCLUDING THE
FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES OF SUCH ACQUISITION,
OWNERSHIP, AND SALE AND OF POTENTIAL CHANGES IN APPLICABLE TAX LAWS.
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FEDERAL INCOME TAXATION OF THE COMPANY
GENERAL
The Company has elected to be taxed as a REIT under Sections 856 through
860 of the Code, commencing with its taxable year ended December 31, 1993. The
Company believes that, commencing with its taxable year ended December 31, 1993,
it was organized and operated in such a manner as to qualify for taxation as a
REIT under the Code, and the Company intends to continue to operate in such a
manner, but no assurance can be given that it will operate in a manner so as to
qualify or remain qualified.
Winstead Sechrest & Minick P.C. has opined that, commencing with the
Company's taxable year ended December 31, 1993, the Company was organized in
conformity with the requirements for qualification as a REIT, and its method of
operation enabled it to meet the requirements for qualification and taxation as
a REIT under the Code. It must be emphasized that this opinion was based on
various assumptions and was conditioned upon certain representations made by the
Company as to factual matters. Moreover, such qualification and taxation as a
REIT depends upon the Company's ability to meet, through actual annual operating
results, distribution levels, diversity of share ownership, and the various
other qualification tests imposed under the Code discussed below, the results of
which have not been and will not be reviewed by Winstead Sechrest & Minick P.C.
Accordingly, no assurance can be given that the actual results of the Company's
operation for any one taxable year will satisfy such requirements. See "--
Failure to Qualify as a Real Estate Investment Trust."
If the Company qualifies for tax treatment as a REIT, it will generally not
be subject to Federal corporate taxation on its net income to the extent
currently distributed to its shareholders. This substantially eliminates the
"double taxation" (at both the corporate and stockholder levels) that typically
results from the use of corporate investment vehicles.
The Company will be subject to Federal income tax, however, as follows:
First, the Company will be taxed at regular corporate rates on its undistributed
REIT taxable income, including undistributed net capital gains. Second, under
certain circumstances, the Company may be subject to the "alternative minimum
tax" to the extent that tax exceeds its regular tax. Third, if the Company has
net income from the sale or other disposition of "foreclosure property" that is
held primarily for sale to customers in the ordinary course of business or other
nonqualifying income from foreclosure property, it will be subject to tax at the
highest corporate rate on such income. Fourth, any net income that the Company
has from prohibited transactions (which are, in general, certain sales or other
dispositions of property other than foreclosure property held primarily for sale
to customers in the ordinary course of business) will be subject to a 100% tax.
Fifth, if the Company should fail to satisfy either the 75% or 95% gross income
tests (as discussed below), and has nonetheless maintained its qualification as
a REIT because certain other requirements have been met, it will be subject to a
100% tax on an amount equal to (a) the gross income attributable to the greater
of the amount by which the Company fails the 75% or 95% test, multiplied by (b)
a fraction intended to reflect the Company's profitability. Sixth, if the
Company fails to distribute during each year at least the sum of (i) 85% of its
REIT ordinary
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income for such year, (ii) 95% of its REIT capital gain net income for such
year, and (iii) any undistributed taxable income from preceding periods, the
Company will be subject to a 4% excise tax on the excess of such required
distribution over the amounts actually distributed. Seventh, if an election is
made pursuant to IRS Notice 88-19 and during the 10-year period commencing on
the first day of the first taxable year that the Company qualifies as a REIT,
the Company recognizes a gain from the disposition of an asset held by the
Company at the beginning of such period, or if during the 10-year period
commencing on the day on which an asset acquired by the Company from a C
corporation in a transaction in which the Company inherits the tax basis of the
asset from the C corporation, the Company recognizes a gain from the disposition
of such asset, then the Company will be subject to tax at the highest regular
corporate rate on the excess, if any, of the fair market value over the adjusted
basis of any such asset as of the beginning of the relevant period (the "Built-
In-Gain").
REQUIREMENTS FOR QUALIFICATION
A REIT is defined in the Code as a corporation, trust or association: (1)
which 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 Sections 856 through 860 of the Code; (4) which 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) not more than 50% in value of the outstanding stock of which is
owned during the last half of each taxable year, directly or indirectly, by or
for five or fewer individuals (as defined in the Code to include certain
entities) (the "Five or Fewer Requirement"); and (7) which meets certain income
and asset tests described below. Conditions (1) to (4), inclusive, must be met
during the entire taxable year and 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. However, conditions (5) and (6) will not apply
until after the first taxable year for which an election is made to be taxed as
REIT. For purposes of conditions (5) and (6), pension funds and certain other
tax-exempt entities are treated as individuals, subject to a "look-through"
exception in the case of condition (6).
The Company has satisfied the share ownership requirements set forth in (5)
and (6) above. In addition, the Company's Declaration of Trust provides
restrictions regarding the transfer of its Shares which are intended to assist
the Company in continuing to satisfy the shares ownership requirements described
in (5) and (6) above. Such transfer restrictions are described in "Description
of Common Shares of Beneficial Interest Restrictions on Transfer."
INCOME TESTS
There are three percentage tests relating to the sources of the Company's
gross income. First, at least 75% of the Company's gross income (excluding gross
income from certain sales of property held primarily for sale and from discharge
of indebtedness) must be directly or indirectly derived each taxable year from
investments relating to real property or mortgages on real property or certain
temporary investments. Second, at least 95% of the Company's gross income
(excluding gross income from certain sales of property held primarily for sale
and from
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discharge of indebtedness) must be directly or indirectly derived each taxable
year from any of the sources qualifying for the 75% test and from dividends,
interest, and gain from the sale or disposition of stock or securities. Third,
in each taxable year short-term gains from sales of stock or securities, gains
from sales of property (other than foreclosure property) held primarily for sale
and gains from the sale or other taxable disposition of real property held for
less than four years (other than from involuntary conversions and foreclosure
property) must represent less than 30% of the Company's gross income. In
applying these tests, if the Company invests in a partnership, the Company will
be treated as realizing its share of the income and bearing its share of the
loss of the partnership, and the character of such income or loss, as well as
other partnership items, will be determined at the partnership level.
Rents received by the Company will qualify as "rents from real property"
for purposes of satisfying the gross income tests for a REIT only if several
conditions are met. First, the amount of rent must not be based in whole or in
part on the income or profits of any person, although rents generally will not
be excluded merely because they are based on a fixed percentage of receipts or
sales. None of the rents under the Company's existing leases are based on income
or profits of a kind that would disqualify such rents from being treated as
rents from real property. Second, rents received from a tenant will not qualify
as "rents from real property" if the REIT, or an owner of 10% or more of the
REIT, also directly or constructively owns 10% or more of such tenant. Third, 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." Finally, for rents 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 whom the REIT derives no income; provided, however,
the Company may directly perform certain services other than services which are
considered rendered to the occupant of the property. The Company will, in a
timely manner, hire independent contractors from whom it derives no revenue to
perform such services, except that the Company may directly perform services
under certain of its leases in the event it receives an opinion of counsel that
its performance of such services will not cause the rents received with respect
to such leases to fail to qualify as "rents from real property."
The term "interest" generally does not include any amount if the
determination of such amount depends in whole or in part on the income or
profits of any person, although an amount generally will not be excluded from
the term "interest" solely by reason of being based on a fixed percentage of
receipts or sales.
If the Company fails to satisfy one or both of the 75% or 95% gross
income tests for any taxable year, it may be nevertheless qualify as a REIT for
such year if it is eligible for relief under certain provisions of the Code.
These relief provisions will be generally available if the Company's failure to
meet such tests was due to reasonable cause and not due to willful neglect, the
Company attaches a schedule of the sources of its income to its return, and any
incorrect information on the schedule was not due to fraud with intent to evade
tax. It is not now possible to determine the circumstances under which the
Company may be entitled to the benefit of these relief provisions. If these
relief provisions apply, a 100% tax is imposed on the net income
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attributable to the greater of the amount by which the Company failed the 75%
test or the 95% test.
ASSET TEST
At the close of each quarter of its taxable year, the Company must also
satisfy several tests relating to the nature and diversification of its assets.
First, at least 75% of the value of the Company's total assets must be
represented by real estate assets, cash, cash items (including receivables
arising in the ordinary course of the Company's operation) and government
securities. In addition, not more than 25% of the Company's total assets may be
represented by securities other than those includible in the 75% asset class.
Moreover, of the investments included in the 25% asset class, the value of any
one issuer's securities owned by the Company may not exceed 5% of the Company's
total assets. Finally, of the investments included in the 25% asset class, the
Company may not own more than 10% of any one issuer's outstanding voting
securities.
ANNUAL DISTRIBUTION REQUIREMENTS
The Company, in order to avoid being taxed as a regular corporation, is
required to make distributions (other than capital gain distributions) to its
shareholders which qualify for the dividends paid deduction in an amount at
least equal to (A) the sum of (i) 95% of the Company's "REIT taxable income"
(computed without regard to the dividends paid deduction and the Company's net
capital gain) and (ii) 95% of the after-tax net income, if any, from foreclosure
property, minus (B) the sum of certain items of non-cash income. Such
distributions must be paid in the taxable year to which they relate, or in the
following taxable year if declared before the Company timely files its tax
return for such year and if paid on or before the first regular distribution
payment after such declaration. To the extent that the Company does not
distribute all of its net capital gain or distributes at least 95%, but less
than 100%, of its "REIT taxable income," as adjusted, it will be subject to tax
thereon at regular corporate tax rates. Finally, as discussed above, the Company
may be subject to an excise tax if it fails to meet certain other distribution
requirements.
It is possible that the Company, from time to time, may not have sufficient
cash or other liquid assets to meet the 95% distribution requirement, or to
distribute such greater amount as may be necessary to avoid income and excise
taxation, due to timing differences between (i) the actual receipt of income and
actual payment of deductible expenses and (ii) the inclusion of such income and
deduction of such expenses in arriving at taxable income of the Company. In the
event that such timing differences occur, the Company may find it necessary to
arrange for borrowings or, if possible, pay taxable share distributions in order
to meet the distribution requirement.
Under certain circumstances, if as a result of a deficiency determined by
the IRS, the Company may be able to rectify a resulting failure to meet the
distribution requirement for a year by paying "deficiency dividends" to
shareholders in a later year, which may be included in the Company's deduction
for distributions paid for the earlier year. Thus, although the Company may be
able to avoid being taxed on amounts distributed as deficiency distributions, it
will be
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required to pay interest based upon the amount of any deduction taken for
deficiency distributions.
FAILURE TO QUALIFY AS A REAL ESTATE INVESTMENT TRUST
The Company's election to be treated as a REIT will be automatically
terminated if the Company fails to meet the requirements described above. In
that event, the Company will be subject to tax (including any applicable minimum
tax) on its taxable income at regular corporate rates, and distributions to
shareholders will not be deductible by the Company. All distributions to
shareholders will be taxable as ordinary income to the extent of current and
accumulated earnings and profits and will be eligible for the 70% dividends
received deduction for corporate shareholders (although special rules apply in
the case of any "extraordinary dividend" as defined in Code Section 1059). The
Company will not be eligible again to elect REIT status until the fifth taxable
year which begins after the year for which the Company's election was terminated
unless the Company did not willfully fail to file a timely return with respect
to the termination taxable year, inclusion of incorrect information in such
return was not due to fraud with intent to evade tax, and the Company
establishes that failure to meet the requirement was due to reasonable cause and
not willful neglect. Failure to qualify for even one year could result in the
Company incurring substantial indebtedness (to the extent borrowings are
feasible) or liquidating substantial investments in order to pay the resulting
taxes.
FEDERAL INCOME TAXATION OF SHAREHOLDERS
GENERAL
So long as the Company qualifies for taxation as a REIT, distributions with
respect to the Common Shares made out of current or accumulated earnings and
profits (and not designated as capital gain dividends) will be includible by the
shareholders as ordinary income for Federal income tax purposes. For this
purpose, the current and accumulated earnings and profits of the Company will be
allocated first to distributions with respect to Convertible Preferred Shares
and then to distributions with respect to Common Shares. None of these
distributions will be eligible for the dividends received deduction for
corporate shareholders. Distributions that are designated as capital gain
dividends will be taxed as long-term capital gains (to the extent they do not
exceed the Company's actual net capital gain for the taxable year) without
regard to the period for which the shareholder has held his share. Corporate
shareholders, however, may be required to treat up to 20% of certain capital
gain dividends as ordinary income.
Distributions in excess of current or accumulated earnings and profits will
not be taxable to a shareholder to the extent that they do not exceed the
adjusted basis of the shareholder's Shares. Shareholders will be required to
reduce the tax basis of their Shares by the amount of such distributions until
such basis has been reduced to zero, after which such distributions will be
taxable as capital gain (ordinary income in the case of a shareholder who holds
his Shares as a dealer). The tax basis as so reduced will be used in computing
the capital gain or loss, if any, realized upon sale of the Shares. Any loss
upon a sale or exchange of Shares by a shareholder who held such Shares for six
months or less (after applying certain holding period rules) will
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generally be treated as a long-term capital loss to the extent such shareholder
previously received capital gain distributions with respect to such Shares.
In general, net capital gains of noncorporate shareholders are taxed
at a maximum rate of 28%, while short-term capital gains and ordinary income are
taxable at a maximum rate of 39.6%. In general, net capital gains, short-term
capital gains and ordinary income of corporate shareholders are taxed at a
maximum rate of 34% (35% for taxable income in excess of $10 million).
Shareholders may not include in their individual Federal income tax
returns any net operating losses or capital loss of the Company. In addition,
any distribution declared by the Company in October, November or December of any
year payable to a shareholder of record on a specified date in any such month
shall be treated as both paid by the Company and received by the shareholder on
December 31 of such year, provided that the dividend is actually paid by the
Company no later than January 31 of the following year. The Company may be
required to withhold a portion of capital gain distributions to any shareholders
who fail to certify their non-foreign status to the Company.
Upon the sale or exchange of Common Shares to or with a person other than
the Company, a holder will recognize capital gain or loss equal to the
difference between the amount realized on such sale or exchange and the holder's
adjusted tax basis in such shares. Any capital gain or loss recognized will
generally be treated as long-term capital gain or loss if the holder held such
shares for more than one year.
BACKUP WITHHOLDING AND INFORMATION REPORTING
A noncorporate holder of the Common Shares who is not otherwise exempt from
backup withholding may be subject to backup withholding at the rate of 31% with
respect to dividends paid on, or the proceeds of a sale, exchange or redemption
of, the Common Shares. Generally, backup withholding applies only when the
taxpayer (i) fails to furnish or certify his correct taxpayer identification
number to the payor in the manner requested, (ii) is notified by the IRS that he
has failed to report payments of interest or dividends properly, or (iii) under
certain circumstances, fails to certify that he has not been notified by the IRS
that he is subject to backup withholding for failure to report interest or
dividend payments. Any amounts withheld under the backup withholding rules from
a payment to a holder will be allowed as a credit against the holder's federal
income tax liability or as a refund, provided that the required information is
furnished to the IRS. Holders should consult their own tax advisors regarding
their qualification for exemption from backup withholding and the procedure for
obtaining any applicable exemption.
FOREIGN SHAREHOLDERS
The rules governing United States Federal income taxation of nonresident
alien individuals, foreign corporations, foreign partnerships and other foreign
shareholders (collectively, "Non-U.S. Shareholders") are complex and no attempt
is made herein to provide more than a
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general summary of such rules. Prospective Non-U.S. Shareholders should consult
with their own tax advisors to determine the impact of Federal, state and local
income tax laws with regard to an investment in Shares, including any reporting
requirements, as well as the tax treatment of such an investment under their
home country laws.
Distributions that are not attributable to gain from sales or exchanges by
the Company of United States real property interests and not designated by the
Company as capital gain dividends will be treated as dividends of ordinary
income to the extent that they are made out of current or accumulated earnings
and profits of the Company. Such distributions ordinarily will be subject to a
withholding tax equal to 30% of the gross amount of the distribution unless an
applicable tax treaty reduces or eliminates that tax. However, if income from
the investment in the Shares is treated as effectively connected with the Non-
U.S. Shareholder's conduct of a United States trade or business, the Non-U.S.
Shareholder generally will be subject to a tax at graduated rates, in the same
manner as U.S. Shareholders are taxed with respect to such dividends (and may
also be subject to the 30% branch profits tax in the case of a shareholder that
is a foreign corporation). The Company expects to withhold United States income
tax at the rate of 30% on the gross amount of any such dividends paid to a Non-
U.S. Shareholder unless (i) a lower treaty rate applies and the Non-U.S.
Shareholder files an IRS Form 1001 with the Company claiming a lower treaty rate
or (ii) the Non-U.S. Shareholder files an IRS Form 4224 with the Company
claiming that the distribution is effectively connected income. Distributions in
excess of current and accumulated earnings and profits of the Company will not
be taxable to a shareholder to the extent that they do not exceed the adjusted
basis of the shareholder's Shares, but rather will reduce the adjusted basis of
such Shares. To the extent that such distributions exceed the adjusted basis of
a Non-U.S. Shareholder's Shares, they will give rise to tax liability if the
Non-U.S. Shareholder would otherwise be subject to tax on any gain from the sale
or disposition of his Shares in the Company, as described below. If it cannot be
determined at the time a distribution is made whether or not such distribution
will be in excess of current and accumulated earnings and profits, the
distributions will be subject to withholding at the same rate as dividends.
However, amounts thus withheld are refundable if it is subsequently determined
that such distribution, was, in fact, in excess of current and accumulated
earnings and profits of the Company.
For any year in which the Company qualifies as a REIT, distributions that
are attributable to gain from sales or exchanges by the Company of United States
real property interests will be taxed to a Non-U.S. Shareholder under the
provisions of the Foreign Investment in Real Property Tax Act of 1980
("FIRPTA"). Under FIRPTA, these distributions are taxed to a Non-U.S.
Shareholder as if such gain were effectively connected with a United States
business. Non-U.S. Shareholders would thus be taxed at the normal capital gains
rates applicable to U.S. shareholders (subject to applicable alternative minimum
tax and a special alternative minimum tax in the case of nonresident alien
individuals). Also, distributions subject to FIRPTA may be subject to a 30%
branch profits tax in the hands of a foreign corporate shareholder not entitled
to treaty exemption. The Company is required to withhold 35% of any distribution
that could be designated by the Company as a capital gain dividend. This amount
is creditable against the Non-U.S. Shareholder's FIRPTA tax liability.
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Gain recognized by a Non-U.S. Shareholder upon a sale of Shares generally
will not be taxed under FIRPTA if the Company is a "domestically controlled
REIT," defined generally as a REIT in which at all times during a specified
testing period less than 50% in value of the stock was held directly or
indirectly by foreign persons. It is currently anticipated that the Company will
be a "domestically controlled REIT," and that therefore the sale of Shares will
not be subject to taxation under FIRPTA. However, gain not subject to FIRPTA
will be taxable to a Non-U.S. Shareholder if (i) investment in the Shares is
effectively connected with the Non-U.S. Shareholder's United States trade or
business, in which case the Non-U.S. Shareholder will be subject to the same
treatment as U.S. shareholders with respect to such gain, or (ii) the Non-U.S.
Shareholder is a nonresident alien individual who was present in the United
States for 183 days or more during the taxable year and has a "tax home" in the
United States, in which case the nonresident alien individual will be subject to
a 30% tax on the individual's capital gains. If the gain on the sale of Shares
were to be subject to taxation under FIRPTA, the Non-U.S. Shareholder will be
subject to the same treatment as U.S. shareholders with respect to such gain
(subject to applicable alternative minimum tax and a special alternative minimum
tax in the case of nonresident alien individuals).
TAX-EXEMPT SHAREHOLDERS
Dividends from the Company to a tax-exempt employee pension trust or other
domestic tax-exempt shareholder generally will not constitute "unrelated
business taxable income" ("UBTI") unless the shareholder has borrowed to acquire
or carry its Shares. Qualified trusts that hold more than 10% (by value) of the
shares of certain REITs, however, may be required to treat a certain percentage
of such a REIT's distributions as UBTI. This requirement will apply only if (i)
the REIT would not qualify as such for Federal income tax purposes but for the
application of a "look-through" exception to the Five or Fewer Requirement
applicable to shares held by qualified trusts and (ii) the REIT is
"predominantly held" by qualified trusts. A REIT is predominantly held by
qualified trusts if either (i) a single qualified trust holds more than 25% by
value of the interests in the REIT or (ii) one or more qualified trusts, each
owning more than 10% by value of the interests in the REIT, hold in the
aggregate more than 50% of the interests in the REIT. The percentage of any REIT
dividend treated as UBTI is equal to the ratio of (a) the UBTI earned by the
REIT (treating the REIT as it were a qualified trust and therefore subject to
tax on UBTI) to (b) the total gross income of the REIT. A de minimis exception
applies where the percentage is less than 5% for any year. For these purposes, a
qualified trust is any trust described in section 401(a) of the Code and exempt
from tax under section 501(a) of the Code. The provisions requiring qualified
trusts to treat a portion of REIT distributions as UBTI will not apply if the
REIT is able to satisfy the Five or Fewer Requirement without relying upon the
"look-through" exception.
PROPOSED LEGISLATION
Various proposals are pending before the U.S. Congress to change the
federal income tax laws, including a proposal to lower the effective rate of tax
for individuals on capital gains. Prospective holders of Offered Securities
should consult their own tax advisors regarding any possible change in the tax
law.
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STATE, LOCAL AND FOREIGN TAXATION
The Company and its shareholders may be subject to state, local or foreign
taxation in various state, local or foreign jurisdictions, including those in
which it or they transact business or reside. Such state, local or foreign
taxation may differ from the Federal income tax treatment described above.
Consequently, prospective holders of Offered Securities should consult their own
tax advisors regarding the effect of state, local and foreign tax laws on an
investment in the Company.
PLAN OF DISTRIBUTION
The Company may sell the Offered Securities to one or more underwriters for
public offering and sale by them or may sell the Offered Securities to investors
directly or through agents in exchange for cash, real property or other
consideration as may be specified in the applicable Prospectus Supplement. Any
such underwriter or agent involved in the offer and sale of the Offered
Securities will be named in the applicable Prospectus Supplement. Direct sales
to investors also may be accomplished through subscription rights distributed on
a pro rata basis to the Company's shareholders, which may or may not be
transferable by such shareholders. In connection with any distribution of
subscription rights to shareholders, if all of the underlying Offered Securities
are not subscribed for, the Company may sell the unsubscribed Offered Securities
directly to third parties or may engage the services of one or more
underwriters, dealers or agents, including standby underwriters, to sell
unsubscribed Offered Securities to third parties.
Underwriters may offer and sell the Offered Securities at a fixed price or
prices, which may be changed, at prices related to the prevailing market prices
at the time of sale or at negotiated prices. The Company also may offer and sell
the Offered Securities in exchange for one or more of its then outstanding
issues of debt or convertible debt securities. The Company also may, from time
to time, authorize underwriters acting as the Company's agents to offer and sell
the Offered Securities upon such terms and conditions as are set forth in the
applicable Prospectus Supplement. In connection with the sale of Offered
Securities, underwriters may be deemed to have received compensation from the
Company in the form of underwriting discounts or commissions and also may
receive commissions from purchasers of Offered Securities for whom they may act
as agent. Underwriters may sell Offered Securities to or through dealers, and
such dealers may receive compensation in the form of discounts, concessions or
commissions from the underwriters and/or commissions from the purchasers for
whom they may act as agent.
Any underwriting compensation paid by the Company to underwriters or agents
in connection with the offering of Offered Securities, and any discounts,
concessions or commissions allowed by underwriters to participating dealers,
will be set forth in the applicable Prospectus Supplement. Underwriters, dealers
and agents participating in the distribution of the Offered Securities may be
deemed to be underwriters, and any discounts and commissions received by them
and any profit realized by them on resale of the Offered Securities may be
deemed to be underwriting discounts and commissions, under the Securities Act.
Underwriters,
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dealers and agents may be entitled, under agreements entered into with the
Company, to indemnification against and contribution toward certain civil
liabilities, including liabilities under the Securities Act.
If so indicated in the applicable Prospectus Supplement, the Company will
authorize dealers acting as the Company's agents to solicit offers by certain
institutions to purchase Offered Securities from the Company at the public
offering price set forth in such Prospectus Supplement pursuant to Delayed
Delivery Contracts ("Contracts") providing for payment and delivery on the date
or dates stated in such Prospectus Supplement. Each Contract will be for an
amount not less than, and the aggregate principal amount of Offered Securities
sold pursuant to Contracts shall be not less nor more than, the respective
amounts stated in the applicable Prospectus Supplement. Institutions with whom
Contracts, when authorized, may be made include commercial and savings banks,
insurance companies, pension funds, investment companies, educational and
charitable institutions, and other institutions but will in all cases be subject
to the approval of the Company. Contracts will not be subject to any conditions
except (i) the purchase by an institution of the Offered Securities covered by
its Contracts shall not at the time of delivery be prohibited under the laws of
any jurisdiction in the United States to which such institution is subject; and
(ii) if the Offered Securities are being sold to underwriters, the Company shall
have sold to such underwriters the total principal amount of the Offered
Securities less the principal amount thereof covered by the Contracts. If in
conjunction with the sale of Offered Securities to institutions under Contracts,
Offered Securities also are being sold to the public, the consummation of the
sale under the Contracts shall occur simultaneously with the consummation of the
sale to the public. The underwriters and such other agents will have no
responsibility in respect of the validity or performance of such Contracts.
Unless otherwise specified in the related Prospectus Supplement, each
series of Offered Securities will be a new issue with no established trading
market, other than the Common Shares, which are listed on the NYSE. Any Common
Shares sold pursuant to a Prospectus Supplement will be listed on the NYSE,
subject to official notice of issuance. The Company may elect to list any series
of Debt Securities or Preferred Shares on an exchange, but is not obligated to
do so. It is possible that one or more underwriters may make a market in a
series of Offered Securities, but will not be obligated to do so and may
discontinue any market making at any time without notice. Therefore, no
assurance can be given as to the liquidity of, or the trading market for, the
Offered Securities.
In order to comply with the securities laws of certain states, if
applicable, the Offered Securities will be sold in such jurisdictions only
through registered or licensed brokers or dealers. In addition, in certain
states Offered Securities may not be sold unless they have been registered or
qualified for sale in the applicable state or an exemption from the registration
or qualification requirement is available and is complied with.
Under applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the Offered Securities may not simultaneously
engage in market making activities with respect to the Offered Securities for a
period of two business days prior to the commencement of such distribution.
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Certain of the underwriters and their affiliates may be customers of,
engage in transactions with and perform services for the Company and its
subsidiaries in the ordinary course of business.
LEGAL MATTERS
The validity of the Offered Securities will be passed upon for the Company
by Winstead Sechrest & Minick P.C., Dallas, Texas.
EXPERTS
The Company's consolidated financial statements and schedule as of December
31, 1995 and 1994, and for the years ended December 31, 1995 and 1994 and for
the period from October 12, 1993 (inception) through December 31, 1993,
appearing in the Company's Annual Report on Form 10-K for the year ended
December 31, 1995, have been audited by Ernst & Young LLP, independent auditors,
as set forth in their report thereon and have been included therein and
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
The combined financial statements and schedule of the Columbus Group at
December 28, 1993, and for the period from January 1, 1993 through December 28,
1993 and the year ended December 31, 1992, appearing in the Company's Annual
Report on Form 10-K for the year ended December 31, 1995, have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report thereon
and have been included therein and incorporated herein by reference in reliance
upon such report given upon the authority of such firm as experts in accounting
and auditing.
The combined financial statements and schedule of the Texana Group at
December 28, 1993, and for the period from January 1, 1993 through December 28,
1993 and the year ended December 31, 1992, appearing in the Company's Annual
Report on Form 10-K for the year ended December 31, 1995, have been audited by
Coopers & Lybrand L.L.P., independent auditors, as set forth in their reports
thereon and have been included therein and incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
Such consolidated and combined financial statements and schedules referred
to above are, and audited financial statements and schedules to be included in
subsequently filed documents will be, incorporated herein in reliance upon the
reports of Ernst & Young LLP and Coopers & Lybrand L.L.P. pertaining to such
financial statements and schedules (to the extent covered by consents filed with
the Securities and Exchange Commission) given upon the authority of such firms
as experts in accounting and auditing.
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________________________________________________________________________________
No dealer, salesperson or any other person has 1,166,600 Common Shares
been authorized to give any information or to make
any representations other than those contained in
this Prospectus in connection with the offer made
by this Prospectus and, if given or made, such
information or representations must not be relied
upon as having been authorized by the Company. This
Prospectus does not constitute an offer to sell, or
a solicitation of an offer to buy, the securities
offered hereby in any jurisdiction in which such an COLUMBUS REALTY TRUST
offer or solicitation is not authorized, or to any
person to whom it is unlawful to make such an offer
or solicitation. Neither the delivery of this
Prospectus nor any sale made hereunder shall, under
any circumstances, create any implication that any
information contained herein is correct as of any
time subsequent to the date hereof.
_______________ COMMON SHARES OF
TABLE OF CONTENTS BENEFICIAL INTEREST
<TABLE>
<CAPTION>
<S> <C>
Page
Prospectus Supplement
---------------------
Available Information...........................S-1
Incorporation of Certain Documents by
Reference.....................................S-1
Prospectus Supplement Summary...................S-3
Risk Factors....................................S-5
Use of Proceeds................................S-11
The Company....................................S-12
Plan of Distribution...........................S-16
Legal Matters..................................S-16
Experts........................................S-16 ______________
PROSPECTUS
Prospectus SUPPLEMENT
---------- ______________
Available Information.............................2
Incorporation of Certain Documents by Reference...2
The Company.......................................4
Use of Proceeds...................................5
Description of Common Shares of
Beneficial Interest.............................5
Description of Preferred Shares...................9
Description of Debt Securities...................14 OCTOBER 9, 1996
Description of Securities Warrants...............33
Ratio of Earnings to Fixed Charges...............36
Federal Income Tax Considerations................37
Federal Income Taxation of the Company...........38
Federal Income Taxation of Shareholders..........42
Plan of Distribution.............................46
Legal Matters....................................48
Experts..........................................48
</TABLE>
________________________________________________________________________________
