<PAGE>
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED JULY 8, 1997)
FILED PURSUANT TO RULE 424B(3)
[LOGO]
1,500,000 SHARES
AMLI RESIDENTIAL PROPERTIES TRUST
COMMON SHARES
-----------------
AMLI RESIDENTIAL PROPERTIES TRUST (THE "COMPANY") IS A SELF-ADMINISTERED AND
SELF-MANAGED REAL ESTATE INVESTMENT TRUST (A "REIT") THAT WAS FORMED IN
FEBRUARY 1994 TO ENGAGE IN THE BUSINESS OF OWNING, MANAGING, LEASING,
ACQUIRING AND DEVELOPING INSTITUTIONAL QUALITY APARTMENT COMMUNITIES.
THE COMPANY WHOLLY-OWNS OR HAS A
CO-INVESTMENT INTEREST IN AND OPERATES A PORTFOLIO OF 49 MULTIFAMILY
RESIDENTIAL APARTMENT COMMUNITIES, COMPRISED OF 18,407 APARTMENT
HOMES, 37 OF WHICH, TOTALLING 14,639 APARTMENT HOMES, WERE
STABILIZED AS OF MARCH 31, 1997 AND 12 OF WHICH, TOTALLING
3,768 APARTMENT HOMES, WERE UNDER DEVELOPMENT OR IN
LEASE-UP AS OF SUCH DATE. THE COMPANY'S COMMUNITIES AND
THE COMMUNITIES OWNED THROUGH CO-INVESTMENT JOINT
VENTURES ARE LOCATED IN SEVEN MAJOR METROPOLITAN
MARKETS IN THE SOUTHWEST, SOUTHEAST AND MIDWEST
REGIONS OF THE UNITED STATES.
---------------------
ALL OF THE COMMON SHARES OF BENEFICIAL INTEREST OF THE COMPANY, $.01 PAR VALUE
PER SHARE (THE "COMMON SHARES"), OFFERED HEREBY (THE "OFFERING") ARE BEING
OFFERED BY THE COMPANY. THE COMMON SHARES ARE LISTED ON THE NEW
YORK STOCK EXCHANGE (THE "NYSE") UNDER THE SYMBOL "AML." THE
LAST REPORTED SALE PRICE OF THE COMMON SHARES ON THE
NYSE ON JULY 8, 1997 WAS $23 7/16.
---------------------
TO ENSURE THAT THE COMPANY MAINTAINS ITS QUALIFICATION AS A REIT FOR FEDERAL
INCOME TAX PURPOSES, IT EXPECTS TO CONTINUE TO PAY REGULAR QUARTERLY
DISTRIBUTIONS TO ITS SHAREHOLDERS. IN ADDITION, THE DECLARATION OF TRUST OF
THE COMPANY RESTRICTS THE OWNERSHIP OF MORE THAN 5% OF THE COMMON SHARES BY
ANY PERSON OR AFFILIATED GROUP, WITH CERTAIN EXCEPTIONS.
---------------------
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 SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-------------------
PRICE $23 7/16 A SHARE
-------------------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS (1) COMPANY (2)
-------------------- ----------------------------- --------------------
<S> <C> <C> <C>
PER SHARE................................... $23.4375 $1.2450 $22.1925
TOTAL (3)................................... $35,156,250 $1,867,500 $33,288,750
</TABLE>
- -------
(1) THE COMPANY HAS AGREED TO INDEMNIFY THE UNDERWRITER AGAINST CERTAIN
LIABILITIES, INCLUDING LIABILITIES UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. SEE "UNDERWRITER."
(2) BEFORE DEDUCTING EXPENSES ESTIMATED AT $105,000 PAYABLE BY THE COMPANY.
(3) THE COMPANY HAS GRANTED THE UNDERWRITER AN OPTION, EXERCISABLE WITHIN 30
DAYS FROM THE DATE HEREOF, TO PURCHASE UP TO 225,000 ADDITIONAL COMMON
SHARES AT THE PRICE TO PUBLIC, LESS THE UNDERWRITING DISCOUNTS AND
COMMISSIONS, FOR THE PURPOSE OF COVERING OVER-ALLOTMENTS, IF ANY. IF THE
UNDERWRITER EXERCISES SUCH OPTION IN FULL, THE TOTAL PRICE TO PUBLIC,
UNDERWRITING DISCOUNTS AND COMMISSIONS AND PROCEEDS TO COMPANY WILL BE
$40,429,687.50, $2,147,625.00 AND $38,282,062.50, RESPECTIVELY. SEE
"UNDERWRITER."
---------------------
THE COMMON SHARES ARE OFFERED, SUBJECT TO PRIOR SALE, WHEN, AS AND IF
ACCEPTED BY THE UNDERWRITER AND SUBJECT TO APPROVAL OF CERTAIN LEGAL MATTERS BY
SKADDEN, ARPS, SLATE, MEAGHER & FLOM (ILLINOIS), COUNSEL FOR THE UNDERWRITER. IT
IS EXPECTED THAT DELIVERY OF THE COMMON SHARES WILL BE MADE ON OR ABOUT JULY 14,
1997 AT THE OFFICES OF MORGAN STANLEY & CO. INCORPORATED, NEW YORK, NEW YORK
AGAINST PAYMENT THEREFOR IN IMMEDIATELY AVAILABLE FUNDS.
-------------------
MORGAN STANLEY DEAN WITTER
JULY 9, 1997
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON SHARES.
SPECIFICALLY, THE UNDERWRITER MAY OVERALLOT IN CONNECTION WITH THE OFFERING, AND
MAY BID FOR, AND PURCHASE, COMMON SHARES IN THE OPEN MARKET. FOR A DESCRIPTION
OF THESE ACTIVITIES, SEE "UNDERWRITER."
NO DEALER, SALESMAN OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IN
CONNECTION WITH THE OFFERING MADE BY THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITER.
NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS NOR ANY
SALE MADE HEREUNDER AND THEREUNDER SHALL, UNDER ANY CIRCUMSTANCE, CREATE AN
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE FACTS SET FORTH IN THIS
PROSPECTUS SUPPLEMENT OR IN THE PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT
CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY STATE IN WHICH SUCH OFFER
OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PROSPECTUS SUPPLEMENT Page
---------
<S> <C>
The Company........................................................................ S-3
Use of Proceeds.................................................................... S-3
Price Range of Common Shares and Distribution History.............................. S-4
Capitalization..................................................................... S-5
Underwriter........................................................................ S-6
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995... S-7
Experts............................................................................ S-7
Legal Matters...................................................................... S-7
PROSPECTUS
Available Information.............................................................. 2
Incorporation by Reference......................................................... 2
The Company........................................................................ 3
Use of Proceeds.................................................................... 3
Shares of Beneficial Interest and Shareholder Liability............................ 3
Description of Common Shares....................................................... 5
Description of Preferred Shares.................................................... 7
Description of Securities Warrants................................................. 12
Federal Income Tax Considerations.................................................. 14
Certain United States Tax Considerations for Non-U.S. Shareholders................. 24
Plan of Distribution............................................................... 27
Experts............................................................................ 28
Legal Matters...................................................................... 28
</TABLE>
S-2
<PAGE>
THE COMPANY
AMLI Residential Properties Trust ("AMLI" or the "Company") is a
self-administered and self-managed real estate investment trust (a "REIT")
engaged in the development, acquisition and management of upscale, institutional
quality multifamily apartment communities in seven major metropolitan markets in
the Southeast, Southwest and Midwest regions of the United States. Founded in
1980, AMLI became a publicly traded company through an initial public offering
in February, 1994 (the "Initial Offering").
As of March 31, 1997, AMLI owned or had co-investment interests in 49
multifamily apartment communities comprised of 18,407 apartment homes (the
"Communities"). Thirty-seven of these Communities, totalling 14,639 apartment
homes, were stabilized as of March 31, 1997. An additional 12 Communities were
under development or in lease-up as of such date. When completed, these
Communities under development will total 3,768 apartment homes.
AMLI is the sole general partner of, and controls a majority of the limited
partnership interests in, AMLI Residential Properties, L.P., a Delaware limited
partnership (the "Operating Partnership"), through which it owns its interests
in the Communities. As of March 31, 1997, the Company owned approximately 84% of
the outstanding partnership interests ("OP Units") in the Operating Partnership.
OP Units are convertible into Common Shares on a one-for-one basis. The Company
conducts all its business through the Operating Partnership and its subsidiaries
and affiliates.
The Company's headquarters offices are located at 125 S. Wacker Drive, Suite
3100, Chicago, Illinois 60606, and its telephone number is (312) 443-1477. In
addition, AMLI has regional offices in both Dallas and Atlanta.
USE OF PROCEEDS
The net proceeds to the Company from the sale of Common Shares in the
Offering, after paying underwriting discounts and transactional expenses, are
expected to be approximately $33.2 million (approximately, $38.2 million if the
Underwriters' over-allotment option is exercised in full). The Company expects
to use the net proceeds of the Offering to repay approximately $30.0 million
outstanding under its unsecured line of credit, which will provide the Company
additional capacity under the line to fund future acquisition and development
activities. As of July 8, 1997, the Company had outstanding borrowings under
this line of credit of $32.5 million bearing interest at LIBOR + 1.35%. The
balance of the net proceeds of approximately $3.2 million will be used to fund
the future acquisition and development activity of the Company.
Pending application of the net proceeds as set forth above, such net
proceeds will be invested in interest-bearing accounts and short-term,
interest-bearing securities, which are consistent with the Company's intention
to qualify for taxation as a REIT. Such investments may include, for example,
obligations of the Government National Mortgage Association, government and
government agency securities, certificates of deposit, commercial paper, money
market funds that invest in government securities and interest-bearing bank
deposits.
S-3
<PAGE>
PRICE RANGE OF COMMON SHARES AND DISTRIBUTION HISTORY
The Common Shares have been traded on the NYSE under the symbol "AML" since
the Initial Offering. The following table sets forth the quarterly high and low
sales prices per Common Share reported on the NYSE.
<TABLE>
<CAPTION>
DISTRIBUTIONS
HIGH LOW DECLARED(2)
--------- --------- ---------------
<S> <C> <C> <C>
1995
First Quarter.................................................................... $ 193/4 $ 17 $ .43
Second Quarter................................................................... $ 201/2 $ 175/8 $ .43
Third Quarter.................................................................... $ 201/8 $ 181/4 $ .43
Fourth Quarter................................................................... $ 203/8 $ 183/8 $ .43
1996
First Quarter.................................................................... $ 211/4 $ 195/8 $ .43
Second Quarter................................................................... $ 207/8 $ 187/8 $ .43
Third Quarter.................................................................... $ 207/8 $ 197/8 $ .43
Fourth Quarter................................................................... $ 231/2 $ 201/4 $ .43
1997
First Quarter.................................................................... $ 243/4 $ 223/8 $ .43
Second Quarter................................................................... $ 235/8 $ 211/2
Third Quarter (1)................................................................ $ 235/8 $ 231/4
</TABLE>
- ------------------------
(1) July 1, 1997 through July 8, 1997.
(2) Distributions are declared and paid in the quarter immediately following the
quarter for which they are paid.
On July 8, 1997, the last reported sale price of the Common Shares on the
NYSE was $23.4375 per share. On July 8, 1997, the Company had 229 shareholders
of record.
The Company intends to continue to pay regular quarterly distributions to
holders of Common Shares. The quarterly distribution rate of $.43, if
annualized, would equal an annual distribution rate of $1.72 per Common Share.
The distribution for the quarter ended March 31, 1997 represented approximately
84% of the Company's funds from operations for that quarter. On April 28, 1997,
the Board of Trustees declared its regular quarterly distribution of $.43 per
Common Share payable to shareholders of record as of May 7, 1997. Although the
Company intends to maintain this current distribution rate, future distributions
by the Company will be at the discretion of the Board of Trustees and will
depend on the actual Funds from Operations of the Company, its financial
condition, capital requirements, the annual distribution requirements under the
REIT provisions of the Code and such other factors as the Board of Trustees
deems relevant.
S-4
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of March
31, 1997, and of the Company on a pro forma basis assuming, as of such date, the
completion of the Offering and the application of the net proceeds as described
under the caption "Use of Proceeds." The information set forth in the following
table should be read in conjunction with the financial statements and notes
thereto incorporated herein and in the accompanying Prospectus by reference and
the discussion under "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources"
incorporated herein and in the accompanying Prospectus by reference.
<TABLE>
<CAPTION>
MARCH 31, 1997
-----------------------
HISTORICAL PRO FORMA
---------- -----------
(IN THOUSANDS)
<S> <C> <C>
Debt (1).................................................................................. $ 220,964 $ 211,676
Minority interest......................................................................... 45,605 50,943
Shareholders' Equity:
Common Shares of Beneficial Interest, $0.01 par value per share, 148,500,000 authorized,
14,828,703 Common Shares issued and outstanding (16,328,703 Common Shares pro forma)
(2)(3)................................................................................ 148 163
Series A Cumulative Convertible Preferred Shares of Beneficial Interest, $0.01 par value
per share, 1,500,000 authorized, 1,100,000 Preferred Shares issued and outstanding
(1,100,000 Preferred Shares pro forma) (2)............................................ 11 11
Additional paid-in capital.............................................................. 303,010 330,957
Employee and trustee notes.............................................................. (3,216) (3,216)
Distributions in excess of net income................................................... (60,954) (60,954)
---------- -----------
Total capitalization................................................................ $ 505,568 $ 529,580
---------- -----------
---------- -----------
</TABLE>
- ------------------------
(1) The Company Pro Forma debt includes additional debt incurred after March 31,
1997 to fund the Company's ongoing acquisition and development activities
through the anticipated date of the receipt of the net proceeds of the
Offering, less principal repayments made during this same period and less
the $30.0 million portion of the net proceeds which will be used to repay
debt.
(2) Does not include 3,039,465 Common Shares reserved for issuance upon exchange
of issued OP Units or 160,940 Common Shares reserved for issuance on the
exercise of options which have been granted by the Company, all of which are
currently exercisable. Any number of authorized and unissued Common Shares
may be classified by the Trustees as preferred shares with such preferences,
conversions or other rights as the Trustees may decide. Under the Company's
Declaration of Trust, 150,000,000 Common Shares are authorized, and pursuant
to Articles Supplementary filed January 30, 1996, 1,500,000 such Common
Shares were designated as Series A Cumulative Convertible Preferred Shares
of Beneficial Interest. In March 1996, 100,000 of the 1,200,000 Series A
Cumulative Convertible Preferred Shares of Beneficial Interest issued by the
Company were converted into Common Shares.
(3) Assumes the Underwriter's over-allotment option to purchase up to 225,000
additional Common Shares is not exercised. See "Underwriter."
S-5
<PAGE>
UNDERWRITER
Under the terms and subject to the conditions in the underwriting agreement,
dated the date hereof (the "Underwriting Agreement"), between Morgan Stanley &
Co. Incorporated (the "Underwriter") and the Company, the Underwriter has agreed
to purchase and the Company has agreed to sell to the Underwriter 1,500,000
Common Shares.
The Underwriting Agreement provides that the obligation of the Underwriter
to pay for and accept delivery of the Common Shares offered hereby is subject to
the approval of certain legal matters by counsel for the Underwriter and to
certain other conditions. The Underwriter is obligated to take and pay for all
of the Common Shares offered hereby (other than those covered by the
Underwriter's over-allotment option described below) if any such shares are
taken.
The Underwriter initially proposes to offer part of the Common Shares
directly to the public at the public offering price set forth on the cover page
hereof and part to certain dealers at a price that represents a concession not
in excess of $.62 a share under the public offering price. After the initial
offering of the Common Shares offered hereby, the offering price and other
selling terms may from time to time be varied by the Underwriter.
Pursuant to the Underwriting Agreement, the Company has granted to the
Underwriter an option, exercisable for 30 days from the date of this Prospectus,
to purchase up to 225,000 additional Common Shares at the public offering price
set forth on the cover page hereof, less underwriting discounts and commissions.
The Underwriter may exercise such option to purchase solely for the purpose of
covering over-allotments, if any, made in connection with the Offering.
The Common Shares are listed on the New York Stock Exchange under the symbol
"AML."
In order to facilitate the offering of the Common Shares, the Underwriter
may engage in transactions that stabilize, maintain or otherwise affect the
price of the Common Shares. Specifically, the Underwriter may over-allot in
connection with the offering, creating a short position in the Common Shares for
its own account. In addition, to cover over-allotments or to stabilize the price
of the Common Shares, the Underwriter may bid for, and purchase, Common Shares
in the open market. Finally, the Underwriter may reclaim selling concessions
allowed to a dealer for distributing the Common Shares in the offering, if the
Underwriter repurchases previously distributed Common Shares in transactions to
cover short positions, in stabilization transactions or otherwise. Any of these
activities may stabilize or maintain the market price of the Common Shares above
independent market levels. The Underwriter is not required to engage in these
activities and may end any of these activities at any time.
The Company has agreed that, until 90 days after the date of this Prospectus
Supplement, it will not (subject to certain exceptions), without the prior
written consent of the Underwriter, sell, offer to sell, issue, distribute or
otherwise dispose of any of its equity securities, sell or grant options, rights
or warrants with respect to any of its equity securities, or register for sale
under the Securities Act of 1933, as amended, any of its equity securities.
The Company has agreed to indemnify the Underwriter against certain
liabilities, including under the Securities Act of 1933.
S-6
<PAGE>
SAFE HARBOR STATEMENT UNDER THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Certain statements set forth herein or incorporated by reference herein from
the Company's filings under the Securities Exchange Act of 1934, as amended (see
"Incorporation by Reference" in the accompanying Prospectus), contain
forward-looking statements, including, without limitation, statements relating
to the timing and anticipated capital expenditures of the Company's development
programs. Although the Company believes that the expectations reflected in such
forward-looking statements are based on reasonable assumptions, the actual
results may differ materially from that set forth in the forward-looking
statements. Certain factors that might cause such difference include general
economic conditions, local real estate conditions, construction delays due to
the unavailability of construction materials, weather conditions or other delays
beyond the control of the Company. Consequently, such forward-looking statements
should be regarded solely as reflections of the Company's current operating and
development plans and estimates. These plans and estimates are subject to
revision from time to time as additional information becomes available, and
actual results may differ from those indicated in the referenced statements.
EXPERTS
The consolidated financial statements and schedule of AMLI Residential
Properties Trust as of December 31, 1996 and 1995 and for each of the years in
the three-year period ended December 31, 1996 have been incorporated by
reference in the accompanying Prospectus and in the Registration Statement, of
which the accompanying Prospectus is a part, in reliance upon the report of KPMG
Peat Marwick LLP, independent certified public accountants, which report is
incorporated by reference therein, and upon the authority of said firm as
experts in accounting and auditing.
LEGAL MATTERS
Mayer, Brown & Platt, Chicago, Illinois, has passed upon the validity of the
issuance of the Common Shares offered pursuant to this Prospectus Supplement and
the accompanying Prospectus and on certain tax matters as described under
"Federal Income Tax Considerations" in the accompanying Prospectus. Mayer, Brown
& Platt has in the past represented and is currently representing the Company
and certain of its affiliates. Mayer, Brown & Platt has in the past represented
and is presently representing Morgan Stanley & Co. Incorporated in certain other
matters. Certain legal matters relating to the Offering will be passed upon for
the Underwriter by Skadden, Arps, Slate, Meagher & Flom (Illinois).
S-7
<PAGE>
PROSPECTUS
AMLI RESIDENTIAL PROPERTIES TRUST
$200,000,000
PREFERRED SHARES, COMMON SHARES AND SECURITIES WARRANTS
-----------------
AMLI RESIDENTIAL PROPERTIES TRUST (THE "COMPANY") MAY FROM TIME TO TIME OFFER
AND SELL IN ONE OR MORE SERIES (I) PREFERRED SHARES OF BENEFICIAL INTEREST,
PAR VALUE $.01 PER SHARE (THE "PREFERRED SHARES"); (II) COMMON SHARES OF
BENEFICIAL INTEREST PAR VALUE $.01 PER SHARE (THE "COMMON SHARES"); OR
(III) WARRANTS TO PURCHASE PREFERRED SHARES (THE "PREFERRED SHARES
WARRANTS") AND WARRANTS TO PURCHASE COMMON SHARES (THE "COMMON
SHARES WARRANTS"), WITH AN AGGREGATE PUBLIC OFFERING PRICE OF
UP TO $200,000,000, ON TERMS TO BE DETERMINED BY MARKET
CONDITIONS AT THE TIME OF OFFERING. THE PREFERRED
SHARES WARRANTS AND THE COMMON SHARES WARRANTS SHALL
BE REFERRED TO HEREIN COLLECTIVELY AS THE
"SECURITIES WARRANTS." THE PREFERRED SHARES,
COMMON 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 AN ACCOMPANYING
SUPPLEMENT TO THIS
PROSPECTUS (EACH, A
"PROSPECTUS
SUPPLEMENT").
---------------------
THE SPECIFIC TERMS OF THE OFFERED SECURITIES IN RESPECT OF WHICH THIS PROSPECTUS
IS BEING DELIVERED WILL BE SET FORTH IN THE APPLICABLE PROSPECTUS SUPPLEMENT
AND WILL INCLUDE, WHERE APPLICABLE: (I) IN THE CASE OF PREFERRED SHARES, THE
SPECIFIC TITLE AND STATED VALUE, ANY DIVIDEND, LIQUIDATION, REDEMPTION,
CONVERSION, VOTING AND OTHER RIGHTS, AND ANY INITIAL PUBLIC OFFERING
PRICE, ALONG WITH ANY OTHER RELEVANT SPECIFIC TERMS; (II) IN THE CASE
OF COMMON SHARES, ANY INITIAL PUBLIC OFFERING PRICE; AND (III) IN THE
CASE OF SECURITIES WARRANTS, THE DURATION, OFFERING PRICE, EXERCISE
PRICE AND DETACHABILITY, IF APPLICABLE, ALONG WITH ANY OTHER
RELEVANT SPECIFIC TERMS. IN ADDITION, SUCH SPECIFIC TERMS MAY
INCLUDE LIMITATIONS ON DIRECT OR INDIRECT BENEFICIAL OWNERSHIP
AND RESTRICTIONS ON TRANSFER OF THE OFFERED SECURITIES, IN
EACH CASE AS MAY BE APPROPRIATE TO PRESERVE THE STATUS OF
THE COMPANY AS A REAL ESTATE INVESTMENT TRUST ("REIT")
FOR FEDERAL INCOME TAX PURPOSES.
---------------------
THE APPLICABLE PROSPECTUS SUPPLEMENT WILL ALSO CONTAIN INFORMATION, WHERE
APPLICABLE, ABOUT CERTAIN UNITED STATES FEDERAL INCOME TAX
CONSIDERATIONS RELATING TO, AND ANY LISTING ON A SECURITIES
EXCHANGE OF, THE OFFERED SECURITIES COVERED BY
SUCH PROSPECTUS SUPPLEMENT.
---------------------
THE OFFERED SECURITIES MAY BE OFFERED DIRECTLY BY THE COMPANY, OR 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 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 IS JULY 8, 1997
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission"). Reports, proxy material and other information
concerning the Company can be inspected and copied at the offices of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 or at its regional
offices, Citicorp Center, 500 West Madison Street, Chicago, Illinois 60661 and
Seven World Trade Center, New York, New York 10048. Copies of such material can
be obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates. In addition, such
material can also be obtained from the Commission's web site at
http://www.SEC.gov. The Company's outstanding Common Shares are listed on the
New York Stock Exchange (the "NYSE") under the symbol "AML", and all such
reports, proxy material and other information filed by the Company with the NYSE
may be inspected at the offices of the NYSE at 20 Broad Street, New York, New
York 10005.
The Company has filed with the Commission a registration statement on Form
S-3 (together with all amendments and exhibits, the "Registration Statement")
under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to the securities offered hereby. This prospectus ("Prospectus"), which
constitutes a part of the Registration Statement, does not contain all the
information set forth in the Registration Statement, certain items of which are
omitted in accordance with the rules and regulations of the Commission.
Statements made in this Prospectus as to the content of any contract, agreement
or other document referred to are not necessarily complete. With respect to each
such contract, agreement or other document filed or incorporated by reference as
an exhibit to the Registration Statement, reference is made to the exhibit for a
more complete description of the matter involved, and each such statement shall
be deemed qualified in its entirety by such reference. For further information,
reference is hereby made to the Registration Statement which may be inspected
and copied in the manner and at the sources described above.
INCORPORATION BY REFERENCE
The following documents filed by the Company with the Commission (File No.
1-12784) pursuant to the Exchange Act are incorporated by reference in this
Prospectus:
(1) The Company's Annual Report on Form 10-K (filed March 20, 1997) for the
fiscal year ended December 31, 1996;
(2) The Company's Quarterly Report on Form 10-Q (filed May 15, 1997) for the
fiscal quarter ended March 31, 1997;
(3) The Company's Current Report on Form 8-K (filed July 7, 1997) dated June
27, 1997;
(4) The Company's Proxy Statement for the annual meeting of shareholders
held on April 28, 1997; and
(5) Description of the Common Shares included in the Registration Statement
on Form 8-A dated February 1, 1994 (filed February 1, 1994).
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering made hereby shall be deemed to be incorporated
by reference in this Prospectus and to be a part hereof from the date of filing
of such documents. Any statement contained in a document incorporated or deemed
to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein, or in any other subsequently filed document which is or is
deemed to be incorporated by reference herein, modifies or supersedes any such
statement. Any such statement so modified or superseded will not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, on the request of such
person, a copy of any of the foregoing documents incorporated herein by
reference (other than the exhibits to such documents unless such exhibits are
specifically incorporated by reference into such documents). Requests should be
directed to AMLI Residential Properties Trust, 125 South Wacker Drive, Chicago,
Illinois 60606, Attention: Secretary, telephone (312) 443-1477.
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THE COMPANY
The Company and its affiliates constitute a self-administered and
self-managed real estate investment trust (a "REIT") which was organized in
February, 1994 to continue and expand the multifamily property business
conducted by AMLI Realty Co. and its affiliates since 1980. The Company and its
affiliates own, manage, lease, acquire and develop institutional quality
apartment communities. The Company's communities (the "Communities") are located
in specific markets in the Southwest, Southeast and Midwest areas of the United
States. The Company also holds interests in co-investment ventures involving
residential apartment communities (the "Co-investment Communities").
Additionally, the Company engages in development activities on its own and
through co-investment joint ventures.
The business of the Company is operated through the Operating Partnership,
AMLI Management Company (the "Management Company"), AMLI Institutional Advisors,
Inc. ("AIA") and AMLI Residential Construction, Inc. ("Amrescon" and together
with the Management Company and AIA, the "Service Companies"). The Company is
the sole general partner of the Operating Partnership, a Delaware limited
partnership, through which it owns the Communities and its interests in the
Co-Investment Communities. As of March 31, 1997, the Company owned 84% of the
partnership interests ("Units") in the Operating Partnership. The Management
Company provides management and leasing services to each of the Communities, the
Co-Investment Communities and several additional properties in which the Company
has no interest. AIA, a "QPAM" (qualified professional asset manager), renders
real estate investment advice to institutional capital sources, primarily
pension plans, endowments, foundations and insurance companies. The Company
actively pursues co-investments through relationships administered by AIA, in
this way seeking to diversify the sources of its equity capital for investment
in apartment communities. Amrescon provides general contracting, construction
management and landscaping services to the Company and its managed ventures.
The Company was formed as a Maryland real estate investment trust on
December 16, 1993. The Company's executive offices are located at 125 South
Wacker Drive, Suite 3100, Chicago, Illinois 60606 and its telephone number is
(312) 443-1477. The Company's principal office is in Chicago, Illinois with
regional offices in Dallas, Texas and Atlanta, Georgia.
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
acquisition and development of apartment communities, investment in further
co-investment ventures, improvement of the Communities and repayment of certain
then-outstanding secured or unsecured indebtedness.
SHARES OF BENEFICIAL INTEREST AND SHAREHOLDER LIABILITY
The Declaration of Trust of the Company provides that the Company may issue
up to 150,000,000 shares of beneficial interest, $.01 par value per share. No
holder of any class of shares of beneficial interest of the Company will have
any preemptive right to subscribe for any securities of the Company except as
may be granted by the Board of Trustees in authorizing the issuance of a class
of preferred shares of beneficial interest. The Company's Declaration of Trust
authorizes the Trustees to classify or reclassify any unissued Common Shares or
Preferred Shares by setting or changing the preferences, conversion or other
rights, voting powers, restrictions, limitations as to dividends, qualifications
or terms or conditions of redemption.
Both Maryland statutory law governing real estate investment trusts
organized under the laws of that state and the Company's Declaration of Trust
provide that no shareholder of the Company will be personally liable for any
obligations of the Company. The Company's Declaration of Trust further provides,
with certain limited exceptions, that the Company shall indemnify each
shareholder against
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claims or liabilities to which the shareholder may become subject by reason of
his being or having been a shareholder and that the Company shall reimburse each
shareholder for all legal and other expenses reasonably incurred by him in
connection with any such claim or liability. In addition, it is the Company's
policy to include a clause in its contracts, including the Partnership Agreement
of the Operating Partnership, 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 shareholder
liability is not so negated, claims for taxes and certain statutory liability, a
shareholder may, in some jurisdictions, be personally liable to the extent that
such claims are not satisfied by the Company. Inasmuch as the Company will carry
public liability insurance which it considers 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.
BUSINESS COMBINATIONS
Under the Maryland General Corporation Law, as amended from time to time
(the "MGCL"), as applicable to Maryland real estate investment trusts, certain
"business combinations" (including a merger, consolidation, share exchange, or,
in certain circumstances, an asset transfer or issuance or reclassification of
equity securities) between a Maryland real estate investment trust and any
person who beneficially owns 10% or more of the voting power of the shares of
the trust or an affiliate of the trust who, at any time within the two-year
period prior to the date in question, was the beneficial owner of 10% or more of
the voting power of the then-outstanding voting shares of beneficial interest of
the trust (an "Interested Shareholder") or an affiliate thereof are prohibited
for five years after the most recent date on which the Interested Shareholder
became an Interested Shareholder. Thereafter, any such business combination must
be (a) recommended by the Board of Trustees of such trust and (b) approved by
the affirmative vote of at least (i) 80% of the votes entitled to be cast by
holders of outstanding voting shares of the trust and (ii) two-thirds of the
votes entitled to be cast by holders of outstanding voting shares (other than
voting shares held by the Interested Shareholder with whom the business
combination is to be effected or by an affiliate or associate thereof), voting
together as a single group, unless, among other things, the company's common
shareholders receive a minimum price (as defined in the statute) for their
shares and the consideration is received in cash or in the same form as
previously paid by the Interested Shareholder for his shares. These provisions
of Maryland law do not apply, however, to business combinations with a
particular Interested Shareholder or its existing or future affiliates that are
approved or exempted by the board of trustees of the trust prior to the time
that the Interested Shareholder becomes an Interested Shareholder or if the
original declaration of trust includes a provision electing not to be governed,
in whole or in part, as to business combinations generally, specifically or
generally by types, as to identified or unidentified existing or future
Interested Shareholders or their affiliates. The Company's Declaration of Trust,
in accordance with Maryland law, exempts Mr. Mutz, Baldwin & Lyons, Inc., a
publicly traded casualty insurance company based in Indianapolis ("Baldwin &
Lyons") and AMLI Realty Co.and their respective affiliates and successors from
the foregoing restrictions. As a result, such persons and entities may be able
to enter into business combinations with the Company, which may not be in the
best interests of the shareholders, without compliance by the Company with the
super-majority voting requirements and the other provisions of the statute.
CONTROL SHARE ACQUISITIONS
The MGCL, as applicable to Maryland real estate investment trusts, imposes
limitations on the voting rights of shares acquired in a "control share
acquisition" relating to a Maryland real estate investment trust. The MGCL
defines a "control share acquisition" as the acquisition of "control shares,"
which is defined as voting shares that would entitle the acquiror to exercise
voting power in electing trustees in excess of the following levels of voting
power: 20%, 33 1/3%, and 50%. The MGCL requires a two-thirds shareholder vote
(excluding shares owned by the acquiring person and certain members of
management) to accord voting rights to shares acquired in a control share
acquisition. The MGCL also requires a
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Maryland real estate investment trust to hold a special meeting at the request
of an actual or proposed control share acquiror generally within 50 days after a
request is made with the submission of an "acquiring person statement," but only
if the acquiring person (a) delivers a written undertaking to pay the expenses
of such special meeting or, if required by the Board of Trustees, posts a bond
for the cost of the meeting and (b) submits a definitive financing agreement to
the extent that financing is not provided by the acquiring person. In addition,
unless the charter or bylaws provide otherwise, the MGCL gives a Maryland
real estate investment trust, within certain time limitations, various
redemption rights if there is a shareholder vote on the issue and the grant of
voting rights is not approved, or if an "acquiring person statement" is not
delivered to the target company within 10 days following a control share
acquisition. Moreover, unless the charter or bylaws provide otherwise, the MGCL
provides that if, before a control share acquisition occurs, voting rights are
accorded to the control shares which results in the acquiring person having a
majority of voting power, then minority shareholders are entitled to appraisal
rights. The fair value of the shares as determined for purposes of such
appraisal rights may not be less than the highest price per share paid by the
acquiror in the control share acquisition. The control share acquisition statute
does not apply (a) to shares acquired in a merger, consolidation or share
exchange if the trust is a party to the transaction or (b) to acquisitions
approved or exempted by the declaration of trust or bylaws of the trust. The
Company's Declaration of Trust, in accordance with Maryland law, contains a
provision exempting acquisitions of shares by Mr. Mutz, Baldwin & Lyons and AMLI
Realty Co. and their respective existing and future affiliates and successors
(which in the case of AMLI Realty Co. would include UICI, a NASDAQ National
Market traded holding company with interests in insurance, financial services
and technology which in November of 1996 acquired AMLI Realty Co.) from the
foregoing provisions.
DESCRIPTION OF COMMON SHARES
GENERAL
The following description sets forth certain general terms and provisions of
the Common Shares to which any Prospectus Supplement may relate, including a
Prospectus Supplement which provides for Common Shares issuable pursuant to
subscription offerings or rights offerings or upon conversion of Preferred
Shares. 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.
All Common Shares issued will be duly authorized, fully paid and, except as
described under "Shares of Beneficial Interest and Shareholder Liability,"
non-assessable. Subject to the provisions of the Company's Declaration of Trust
regarding Excess Shares (as defined therein), each outstanding Common Share
entitles the holder thereof to one vote on all matters voted on by shareholders,
including the election of Trustees. Holders of Common Shares do not have the
right to cumulate their votes in the election of Trustees, which means that the
holders of a majority of the outstanding Common Shares can elect all of the
Trustees then standing for election. Distributions may be paid to the holders of
Common Shares if and when declared by the Board of Trustees of the Company out
of funds legally available therefor, subject to the provisions of the Company's
Declaration of Trust regarding Excess Shares. The Company currently pays regular
quarterly dividends. Holders of Common Shares have no conversion, redemption,
preemptive or exchange rights to subscribe to any securities of the Company. If
the Company is liquidated, each outstanding Common Share will be entitled to
participate pro rata in the assets remaining after payment of, or adequate
provision for, all known debts and liabilities of the Company and the rights of
holders of any preferred shares of beneficial interest of the Company. The
rights of holders of Common Shares are subject to the rights and preferences
established by the Board of Trustees for any Preferred Shares which may
subsequently be issued by the Company. See "Description of Preferred Shares."
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RESTRICTIONS ON TRANSFER
The Company's Declaration of Trust contains certain restrictions on the
number of Common Shares and Preferred Shares that individual shareholders may
own. For the Company to qualify as a REIT under the Code, no more than 50% in
value of its shares of beneficial interest (after taking into account options to
acquire shares of beneficial interest) may be owned, directly or indirectly, by
five or fewer individuals (as defined in the Code to include certain entities
and constructive ownership among specified family members) during the last half
of a taxable year (other than the first taxable year) or during a proportionate
part of a shorter taxable year. The shares of beneficial interest must also be
beneficially owned (other than during the first taxable year) by 100 or more
persons during at least 335 days of a taxable year or during a proportionate
part of a shorter taxable year. Because the Company expects to qualify as a
REIT, the Declaration of Trust of the Company contains restrictions on the
acquisition of Common Shares and Preferred Shares intended to ensure compliance
with these requirements.
Subject to certain exceptions specified in the Company's Declaration of
Trust, no holder may own, or be deemed to own by virtue of the attribution
provisions of the Code, more than 5% (the "Ownership Limit") of the number or
value of the issued and outstanding shares of beneficial interest of the
Company. The Company's Board of Trustees, upon receipt of a ruling from the
Internal Revenue Service (the "Service"), an opinion of counsel or other
evidence satisfactory to the Board of Trustees, and upon such other conditions
as the Board of Trustees may direct, may also exempt a proposed transferee from
the Ownership Limit. As a condition of such exemption, the intended transferee
must give written notice to the Company of the proposed transfer no later than
the fifteenth day prior to any transfer which, if consummated, would result in
the intended transferee owning shares in excess of the Ownership Limit. The
Board of Trustees of the Company may require such opinions of counsel,
affidavits, undertakings or agreements as it may deem necessary or advisable in
order to determine or ensure the Company's status as a REIT. Any transfer of
Common Shares or Preferred Shares that would (i) create a direct or indirect
ownership of shares in excess of the Ownership Limit, (ii) result in the shares
being beneficially owned by fewer than 100 persons as provided in Section 856(a)
of the Code, or (iii) result in the Company being "closely held" within the
meaning of Section 856(h) of the Code, shall be null and void, and the intended
transferee will acquire no rights to the shares. The foregoing restrictions on
transferability and ownership will not apply if the Board of Trustees
determines, which determination must be approved by the shareholders, that it is
no longer in the best interests of the Company to attempt to qualify, or to
continue to qualify, as a REIT.
The Company's Board of Trustees by resolution has excluded from the
foregoing ownership restriction UICI and Gregory T. Mutz, who collectively may
own up to 34.9% of the outstanding shares of beneficial interest of the Company
as a group, or, subject to certain limitations, individually (subject to the
group restrictions) up to 29.9% of the outstanding shares of beneficial interest
of the Company in the case of UICI and up to 24.9% in the case of Gregory T.
Mutz. The Company's Declaration of Trust excludes certain investors (and their
transferees) from whom apartment communities were obtained in exchange for Units
or Common Shares in connection with the formation of the Company and who would
exceed the Ownership Limit as a result of the ownership of such Common Shares or
the exchange of such Units for Common Shares. In no event will such persons be
entitled to acquire additional shares of beneficial interest of the Company such
that the five largest beneficial owners of shares of beneficial interest of the
Company hold more than 50% of the total outstanding shares.
Any purported transfer of shares that would result in a person owning shares
in excess of the Ownership Limit or cause the Company to become "closely held"
under Section 856(h) of the Code that is not otherwise permitted as provided
above will constitute excess shares ("Excess Shares"), which will be transferred
pursuant to the Declaration of Trust to the Company as trustee for the exclusive
benefit of the person or persons to whom the Excess Shares are ultimately
transferred, until such time as the purported transferee retransfers the Excess
Shares. While these Excess Shares are held in trust, they will not be entitled
to vote or to share in any dividends or other distributions. Subject to the
Ownership Limit, the
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Excess Shares may be transferred by the purported transferee to any person (if
the Excess Shares would not be Excess Shares in the hands of such person) at a
price not to exceed the price paid by the purported transferee (or, if no
consideration was paid, fair market value), at which point the Excess Shares
will automatically be exchanged for the shares to which the Excess Shares are
attributable. In addition, such Excess Shares held in trust are subject to
purchase by the Company at a purchase price equal to the lesser of the price
paid for the shares by the purported transferee (or, if no consideration was
paid, fair market value) and the fair market value of the shares of beneficial
interest (as reflected in the last reported sales price reported on the NYSE on
the trading day immediately preceding the relevant date, or if not then traded
on the NYSE, the last reported sales price of such shares on the trading day
immediately preceding the relevant date as reported on any exchange or quotation
system over which such shares may be traded, or if not then traded over any
exchange or quotation system, then the market price of such shares on the
relevant date as determined in good faith by the Board of Trustees of the
Company) on the date the Company elects to purchase.
All certificates representing shares of beneficial interest will bear a
legend referring to the restrictions described above.
TRANSFER AGENT AND REGISTRAR
Harris Trust and Savings Bank has been appointed as transfer agent and
registrar for the Common Shares.
DESCRIPTION OF PREFERRED SHARES
GENERAL
Subject to limitations prescribed by Maryland law and the Company's
Declaration of Trust, the Board of Trustees is authorized to issue, without the
approval of the shareholders, Preferred Shares, from the authorized but unissued
shares of beneficial interest of the Company, in series and to establish from
time to time the number of Preferred Shares to be included in such series and to
fix the designation and any preferences, conversion and other rights, voting
powers, restrictions, limitations as to dividends, qualifications and terms and
conditions of redemption of the shares of each series. All Preferred Shares
issued will be duly authorized, fully paid and, except as described under
"Shares of Beneficial Interest and Shareholder Liability," non-assessable.
Reference is made to the Prospectus Supplement relating to the Preferred
Shares offered thereby for the specific terms of such Preferred Shares,
including:
(1) The title and stated value of such Preferred Shares;
(2) The number of shares of such Preferred Shares offered, the
liquidation preference per share and the offering price of such Preferred
Shares;
(3) The dividend rate(s), period(s) and/or payment date(s) or method(s)
of calculation thereof applicable to such Preferred Shares;
(4) The date from which dividends on such Preferred Shares shall
cumulate, if applicable;
(5) The procedures for any auction and remarketing, if any, for such
Preferred Shares;
(6) The provision for a sinking fund, if any, for such Preferred Shares;
(7) The provision for redemption, if applicable, of such Preferred
Shares;
(8) Any listing of such Preferred Shares on any securities exchange;
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(9) The terms and conditions, if applicable, upon which such Preferred
Shares will be convertible into Common Shares of the Company, including the
conversion price (or manner of calculation thereof);
(10) Whether interests in such Preferred Shares will be represented by
Global Securities;
(11) Any other specific terms, preferences, rights, limitations or
restrictions of such Preferred Shares;
(12) A discussion of federal income tax considerations applicable to such
Preferred Shares;
(13) 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;
(14) 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; and
(15) Any limitations on direct or beneficial ownership and restrictions
on transfer of Preferred Shares, in each case as may be appropriate to
preserve the status of the Company as a REIT.
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 Trustees of the Company, out of assets
of the Company legally available for payment, cash dividends at such rates and
on such dates as will be set forth in the applicable Prospectus Supplement. Such
rate may be fixed or variable or both. Each such dividend shall be payable to
holders of record as they appear on the share transfer books of the Company on
such record dates as shall be fixed by the Board of Trustees of the Company.
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 Trustees 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 noncumulative, 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.
If Preferred Shares of any series are outstanding, no full dividends shall
be declared or paid or set apart for payment on the Preferred Shares of the
Company of any other series ranking, as to dividends, on a parity with or junior
to the Preferred Shares of such series for any period unless (i) if such series
of Preferred Shares has a cumulative dividend, full cumulative dividends have
been or contemporaneously are declared and paid or declared and a sum sufficient
for the payment thereof set apart for such payment on the Preferred Shares of
such series for all past dividend periods and the then current dividend period
or
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(ii) if such series of Preferred Shares does not have a cumulative dividend,
full dividends for the then current dividend period have been or
contemporaneously are declared and paid or declared and a sum sufficient for the
payment thereof set apart for such payment on the Preferred Shares of such
series. When dividends are not paid in full (or a sum sufficient for such full
payment is not so set apart) upon the Preferred Shares of any series and the
shares of any other series of Preferred Shares ranking on a parity as to
dividends with the Preferred Shares of such series, all dividends declared upon
Preferred Shares of such series and any other series of Preferred Shares ranking
on a parity as to dividends with such Preferred Shares shall be declared pro
rata so that the amount of dividends declared per share on the Preferred Shares
of such series and such other series of Preferred Shares shall in all cases bear
to each other the same ratio that accrued dividends per share on the Preferred
Shares of such series (which shall not include any cumulation in respect of
unpaid dividends for prior dividend periods if such series of Preferred Shares
does not have a cumulative dividend) and such other series of Preferred Shares
bear to each other. 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.
Except as provided in the immediately preceding paragraph, unless (i) if
such series of Preferred Shares has a cumulative dividend, full cumulative
dividends on the Preferred Shares of such series have been or contemporaneously
are declared and paid or declared and a sum sufficient for the payment thereof
set apart for payment for all past dividend periods and the then current
dividend period and (ii) if such series of Preferred Shares does not have a
cumulative dividend, full dividends on the Preferred Shares of such series have
been or contemporaneously are declared and paid or declared and a sum sufficient
for the payment thereof set apart for payment for the then current dividend
period, no dividends (other than in Common Shares or other shares of beneficial
interest ranking junior to the Preferred Shares of such series as to dividends
and upon liquidation) shall be declared or paid or set aside for payment or
other distribution shall be declared or made upon the Common Shares or any other
shares of beneficial interest of the Company ranking junior to or on a parity
with the Preferred Shares of such series as to dividends or upon liquidation,
nor shall any Common Shares or any other shares of beneficial interest of the
Company ranking junior to or on a parity with the Preferred Shares of such
series as to dividends or upon liquidation be redeemed, purchased or otherwise
acquired for any consideration (or any moneys be paid to or made available for a
sinking fund for the redemption of any such shares) by the Company (except by
conversion into or exchange for other shares of beneficial interest of the
Company ranking junior to the Preferred Shares of such series as to dividends
and upon liquidation).
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.
REDEMPTION
If so provided in the applicable Prospectus Supplement, the Preferred Shares
will be subject to mandatory redemption or redemption at the option of the
Company, as a whole or in part, in each case upon the terms, at the times and at
the redemption prices set forth in such Prospectus Supplement.
The Prospectus Supplement relating to a series of Preferred Shares that is
subject to mandatory redemption will specify the number of such Preferred Shares
that shall be redeemed by the Company in each year commencing after a date to be
specified, at a redemption price per share to be specified, together with an
amount equal to all accrued and unpaid dividends thereon (which shall not, if
such Preferred Shares do not have a cumulative dividend, include any cumulation
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 of beneficial interest
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
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converted into shares of the applicable shares of beneficial interest of the
Company pursuant to conversion provisions specified in the applicable Prospectus
Supplement.
Notwithstanding the foregoing, unless (i) if such series of Preferred Shares
has a cumulative dividend, full cumulative dividends on all Preferred Shares of
any series have been or contemporaneously are declared and paid or declared and
a sum sufficient for the payment thereof set apart for payment for all past
dividend periods and the then current dividend period and (ii) if such series of
Preferred Shares does not have a cumulative dividend, full dividends on all
Preferred Shares of any series have been or contemporaneously are declared and
paid or declared and a sum sufficient for the payment thereof set apart for
payment for the then current dividend period, no Preferred Shares of any series
shall be redeemed unless all outstanding Preferred Shares of such series are
simultaneously redeemed; PROVIDED, HOWEVER, that the foregoing shall not prevent
the purchase or acquisition of Preferred Shares of such series pursuant to a
purchase or exchange offer made on the same terms to holders of all outstanding
Preferred Shares of such series, and, unless (i) if such series of Preferred
Shares has a cumulative dividend, full cumulative dividends on all Preferred
Shares of any series have been or contemporaneously are declared and paid or
declared and a sum sufficient for the payment thereof set apart for payment for
all past dividend periods and the then current dividend period and (ii) if such
series of Preferred Shares does not have a cumulative dividend, full dividends
on all Preferred Shares of any series have been or contemporaneously are
declared and paid or declared and a sum sufficient for the payment thereof set
apart for payment for the then current dividend period, the Company shall not
purchase or otherwise acquire directly or indirectly any shares of Preferred
Shares of such series (except by conversion into or exchange for shares of
beneficial interest of the Company ranking junior to the Preferred Shares of
such series as to dividends and upon liquidation).
If fewer than all of the outstanding Preferred Shares of any series are to
be redeemed, the number of shares to be redeemed will be determined by the
Company and such shares may be redeemed pro rata from the holders of record of
Preferred Shares of such series in proportion to the number of Preferred Shares
of such series held by such holders (with adjustments to avoid redemption of
fractional shares), by lot in a manner determined by the Company or by any other
method as may be determined by the Company in its sole discretion to be
equitable.
Notice of redemption will be mailed at least 30 days but not more than 60
days before the redemption date to each holder of record of Preferred Shares of
any series to be redeemed at the address shown on the share transfer books of
the Company. Each notice shall state: (i) the redemption date; (ii) the number
of shares and series of the Preferred Shares to be redeemed; (iii) the
redemption price; (iv) the place or places where certificates for such Preferred
Shares are to be surrendered for payment of the redemption price; (v) that
dividends on the Preferred Shares to be redeemed will cease to accrue on such
redemption date; and (vi) the date upon which the holder's conversion rights, if
any, as to such Preferred Shares shall terminate. If fewer than all the
Preferred Shares of any series are to be redeemed, the notice mailed to each
such holder thereof shall also specify the number of Preferred Shares to be
redeemed from each such holder. If notice of redemption of any Preferred Shares
has been given and if the funds necessary for such redemption have been set
aside by the Company in trust for the benefit of the holders of any Preferred
Shares so called for redemption, then from and after the redemption date
dividends will cease to accrue on such Preferred Shares, and all rights of the
holders of such shares will terminate, except the right to receive the
redemption price.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding up of
the affairs of the Company, then, before any distribution or payment shall be
made to the holders of any Common Shares or any other class or series of shares
of beneficial interest of the Company ranking junior to the Preferred Shares in
the distribution of assets upon any liquidation, dissolution or winding up of
the Company, the holders of each series of Preferred Shares shall be entitled to
receive out of assets of the Company legally
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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 cumulation in respect of unpaid dividends
for prior dividend periods if such Preferred Shares do 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 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 be respectively
entitled.
If liquidating distributions shall have been made in full to all holders of
the Preferred Shares, the remaining assets of the Company shall be distributed
among the holders of any other classes or series of shares of beneficial
interest ranking junior to the Preferred Shares upon liquidation, dissolution or
winding up of the Company, 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
entity, 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
Holders of the Preferred Shares of a particular series will not have any
voting rights, except as set forth below or in the applicable Prospectus
Supplement or as otherwise required by applicable law. The following is a
summary of the voting rights that, unless provided otherwise in the applicable
Prospectus Supplement, will apply to each series of Preferred Shares.
If six quarterly dividends (whether or not consecutive) payable on the
Preferred Shares of such series, or any other series of Preferred Shares ranking
on a parity with such series of Preferred Shares with respect in each case to
the payment of dividends, amounts upon liquidation, dissolution and winding up
("Parity Shares"), are in arrears, whether or not earned or declared, the number
of Trustees then constituting the Board of Trustees will be increased by two,
and the holders of Preferred Shares of such series, voting together as a class
with the holders of Parity Shares of any other series (any such other series,
the "Voting Preferred Shares"), will have the right to elect two additional
Trustees to serve on the Board of Trustees at any annual meeting of shareholders
or a properly called special meeting of the holders of Preferred Shares of such
series and such Voting Preferred Shares and at each subsequent annual meeting of
shareholders until all such dividends and dividends for the current quarterly
period on the Preferred Shares of such series and such other Voting Preferred
Shares have been paid or declared and set aside for payment. Such voting rights
will terminate when all such accrued and unpaid dividends have been declared and
paid or set aside for payment. The term of office of all Trustees so elected
will terminate with the termination of such voting rights.
The approval of two-thirds of the outstanding Preferred Shares of such
series and all other series of Voting Preferred Shares similarly affected,
voting as a single class, is required in order to (i) amend the Company's
Declaration of Trust to affect materially and adversely the rights, preferences
or voting power of the holders of the Preferred Shares of such series or the
Voting Preferred Shares, (ii) enter into a share exchange that affects the
Preferred Shares of such series, consolidate with or merge into another entity,
or permit another entity to consolidate with or merge into the Company, unless
in each such case each Preferred Share of such series remains outstanding
without a material and adverse change to its terms and rights or is converted
into or exchanged for convertible preferred shares of the surviving entity
having preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends,
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qualifications and terms or conditions of redemption thereof identical to that
of a Preferred Share of such series (except for changes that do not materially
and adversely affect the holders of the Preferred Shares of such series) or
(iii) authorize, reclassify, create, or increase the authorized amount of any
class of shares having rights senior to the Preferred Shares of such series with
respect to the payment of dividends or amounts upon liquidation, dissolution or
winding up. However, the Company may create additional classes of Parity Shares
and Preferred Shares of any other series ranking junior to such series of
Preferred Shares with respect in each case to the payment of dividends, amounts
upon liquidation, dissolution and winding up ("Junior Shares"), increase the
authorized number of Parity Shares and Junior Shares and issue additional series
of Parity Shares and Junior Shares without the consent of any holder of
Preferred Shares of such series.
Except as provided above and as required by law, the holders of Preferred
Shares of each series will not be entitled to vote on any merger or
consolidation involving the Company or a sale of all or substantially all of the
assets of the Company.
With respect to any matter as to which the Preferred Shares of any series is
entitled to vote, holders of the Preferred Shares of such series and any Voting
Preferred Shares will be entitled to cast the number of votes set forth in the
respective Prospectus Supplement with respect to that series of Preferred Shares
and Voting Preferred Shares. As a result of the provisions 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 Parity Shares, it is possible
that the holders of such Parity 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 Preferred Shares of any series
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 in the event of the
redemption of such Preferred Shares.
RESTRICTIONS ON TRANSFER
See "Description of Common Shares--Restrictions on Transfer" for a
discussion of the restrictions on the transfer of shares of beneficial interest.
TRANSFER AGENT AND REGISTRAR
The name and address of the transfer agent and registrar for any series of
Preferred Shares will be set forth in the applicable Prospectus Supplement.
DESCRIPTION OF SECURITIES WARRANTS
The Company may issue Securities Warrants for the purchase of Preferred
Shares or Common Shares. Securities Warrants may be issued independently or
together with any other Offered Securities offered by any Prospectus Supplement
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
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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 the following
where applicable: (i) the offering price; (ii) 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; (iii) 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; (iv) 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; (v) 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"); (vi) any special United States federal income tax consequences; and
(vii) 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 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.
To protect the Company's status as a REIT, restrictions on ownership of
Securities Warrants similar to the restrictions on ownership of Common Shares
and Preferred Shares will be imposed and enforced. See "Description of Common
Shares--Restrictions on Transfer" and "Description of Preferred Shares--
Restrictions on Transfer."
EXERCISE OF SECURITIES WARRANTS
Each Securities Warrant will entitle the holder thereof to purchase such
number 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.
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 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 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.
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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 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. 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.
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.
FEDERAL INCOME TAX CONSIDERATIONS
The following is a description of the material Federal income tax
consequences to the Company and its shareholders of the treatment of the Company
as a REIT. The discussion is general in nature and not exhaustive of all
possible tax considerations, nor does the discussion give a detailed description
of any state, local, or foreign tax considerations. The discussion does not
discuss all aspects of Federal income tax law that may be relevant to a
prospective shareholder in light of his particular circumstances or to certain
types of shareholders (including insurance companies, financial institutions or
broker-dealers, tax exempt organizations, foreign corporations and persons who
are not citizens or residents of the United States)
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subject to special treatment under the federal income tax laws nor does the
discussion address special considerations, if any, which may relate to the
purchase of Preferred Shares or Securities Warrants.
THIS DISCUSSION IS NOT INTENDED AS A SUBSTITUTE FOR CAREFUL TAX PLANNING,
AND EACH PROSPECTIVE INVESTOR IS ADVISED TO CONSULT WITH ITS TAX ADVISOR
REGARDING THE SPECIFIC TAX CONSEQUENCES TO IT OF THE PURCHASE, OWNERSHIP AND
SALE OF THE OFFERED SECURITIES, INCLUDING THE FEDERAL, STATE, LOCAL, FOREIGN AND
OTHER TAX CONSEQUENCES OF SUCH PURCHASE, OWNERSHIP AND SALE, AND OF POTENTIAL
CHANGES IN APPLICABLE TAX LAWS.
If certain detailed conditions imposed by the REIT provisions of the Code
are met, entities, such as the Company, that invest primarily in real estate and
that otherwise would be treated for Federal income tax purposes as corporations,
are generally not taxed at the corporate level on their "REIT taxable income"
that is currently distributed to shareholders. This treatment substantially
eliminates the "double taxation" (I.E., at both the corporate and shareholder
levels) that generally results from the use of corporations.
If the Company fails to qualify as a REIT in any year, however, it will be
subject to Federal income taxation as if it were a domestic corporation, and its
shareholders will be taxed in the same manner as shareholders of ordinary
corporations. In this event, the Company could be subject to potentially
significant tax liabilities, and therefore the amount of cash available for
distribution to its shareholders would be reduced or eliminated.
The Company has elected REIT status effective for the taxable year ended
December 31, 1994, and the Board of Trustees of the Company believes that the
Company has operated and expects that the Company will continue to operate in a
manner that will permit the Company to elect REIT status in each taxable year
thereafter. There can be no assurance, however, that this belief or expectation
will be fulfilled, since qualification as a REIT depends on the Company
continuing to satisfy numerous asset, income and distribution tests described
below, which in turn will be dependent in part on the Company's operating
results.
TAXATION OF THE COMPANY
GENERAL. In any year in which the Company qualifies as a REIT it will not,
in general, be subject to Federal income tax on that portion of its REIT taxable
income or capital gain which is distributed to shareholders. The Company may,
however, be subject to tax at normal corporate rates upon any taxable income or
capital gain not distributed.
Notwithstanding its qualification as a REIT, the Company may also be subject
to taxation in certain other circumstances. If the Company should fail to
satisfy either the 75% or the 95% gross income test (as discussed below), and
nonetheless maintains its qualification as a REIT because certain other
requirements are met, it will be subject to a 100% tax on the greater of the
amount by which the Company fails either the 75% or the 95% test, multiplied by
a fraction intended to reflect the Company's profitability. The Company will
also be subject to a tax of 100% on net income from any "prohibited transaction"
as described below, and if the Company has (i) net income from the sale or other
disposition of "foreclosure property" which is held primarily for sale to
customers in the ordinary course of business or (ii) other non-qualifying income
from foreclosure property, it will be subject to tax on such income from
foreclosure property at the highest corporate rate. In addition, if the Company
should fail to distribute during each calendar year at least the sum of (i) 85%
of its REIT ordinary income for such year, (ii) 95% of its REIT capital gain net
income for such year, and (iii) any undistributed taxable income from prior
years, the Company would be subject to a 4% excise tax on the excess of such
required distribution over the amounts actually distributed. The Company may
also be subject to the corporate alternative minimum tax, as well as tax in
certain situations not presently contemplated. Each of the Management Company,
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Amrescon and AIA will be taxed on its income at regular corporate rates. The
Company will use the calendar year both for Federal income tax purposes and for
financial reporting purposes.
In order to qualify as a REIT, the Company must meet, among others, the
following requirements:
SHARE OWNERSHIP TESTS. The Company's shares of beneficial interest must be
held by a minimum of 100 persons for at least 335 days in each taxable year (or
a proportional number of days in any short taxable year). In addition, at all
times during the second half of each taxable year, no more than 50% in value of
the outstanding shares of beneficial interest of the Company may be owned,
directly or indirectly and by applying certain constructive ownership rules, by
five or fewer individuals, which for this purpose includes certain tax-exempt
entities. However, for purposes of this test, any shares of beneficial interest
held by a qualified domestic pension or other retirement trust will be treated
as held directly by its beneficiaries in proportion to their actuarial interest
in such trust rather than by such trust.
In order to attempt to ensure compliance with the foregoing share ownership
tests, the Company has placed certain restrictions on the transfer of its shares
of beneficial interest to prevent additional concentration of share ownership.
Moreover, to evidence compliance with these requirements, under Treasury
regulations the Company must maintain records which disclose the actual
ownership of its outstanding shares of beneficial interest. In fulfilling its
obligations to maintain records, the Company must and will demand written
statements each year from the record holders of designated percentages of its
shares of beneficial interest disclosing the actual owners of such shares of
beneficial interest (as prescribed by Treasury regulations). A list of those
persons failing or refusing to comply with such demand must be maintained as a
part of the Company's records. A shareholder failing or refusing to comply with
the Company's written demand must submit with his tax return a similar statement
disclosing the actual ownership of Company shares of beneficial interest and
certain other information. In addition, the Company's Declaration of Trust
provides restrictions regarding the transfer of its shares of beneficial
interest that are intended to assist the Company in continuing to satisfy the
share ownership requirements. See "Description of Common Shares--Restrictions on
Transfer" and "Description of Preferred Shares-- Restrictions on Transfer."
ASSET TESTS. At the close of each quarter of the Company's taxable year,
the Company must satisfy two tests relating to the nature of its assets (with
"assets" being determined in accordance with generally accepted accounting
principles). First, at least 75% of the value of the Company's total assets must
be represented by interests in real property, interests in mortgages on real
property, shares in other REITs, cash, cash items, government securities and
qualified temporary investments. Second, although the remaining 25% of the
Company's assets generally may be invested without restriction, securities in
this class may not exceed (i) in the case of securities of any one
non-government issuer, 5% of the value of the Company's total assets or (ii) 10%
of the outstanding voting securities of any one such issuer. Where the Company
invests in a partnership (such as the Operating Partnership), it will be deemed
to own a proportionate share of the partnership's assets. See "--Tax Aspects of
the Company's Investments in Partnerships--General." Accordingly, the Company's
investment in the Communities and the Co-Investment Communities through its
interest in the Operating Partnership is intended to constitute an investment in
qualified assets for purposes of the 75% asset test.
The Operating Partnership owns 100% of the non-voting preferred stock of
each of the Management Company, Amrescon and AIA and 5% of the voting common
stock of each of the Management Company, Amrescon and AIA. See "The Company." By
virtue of its partnership interest in the Operating Partnership, the Company is
deemed to own its pro rata share of the assets of the Operating Partnership,
including the securities of the Management Company, Amrescon and AIA, as
described above. Because the Operating Partnership owns only 5% of the voting
securities of each of the Management Company, Amrescon and AIA and the preferred
stock's approval right in the case of each of the Management Company, Amrescon
and AIA is limited to certain fundamental corporate actions that could adversely
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affect the preferred stock as a class, the 10% limitation on holdings of voting
securities of any one issuer should not be exceeded.
Based upon its analysis of the total estimated value of the Management
Company stock, Amrescon stock and AIA stock and the Subordinated Notes,
respectively, owned by the Operating Partnership relative to the estimated value
of the total assets owned by the Operating Partnership and the other assets of
the Company, the Company believes that the Company's pro rata share of the
non-voting preferred stock, voting common stock and Subordinated Note of the
Management Company owned by the Operating Partnership does not exceed, on the
date of this Prospectus, 5% of the value of the Company's total assets, that the
Company's pro rata share of the non-voting preferred stock and voting common
stock of Amrescon owned by the Operating Partnership does not exceed, on the
date of this Prospectus, 5% of the value of the Company's total assets, and that
the Company's pro rata share of the non-voting preferred stock, voting common
stock and Subordinated Note of AIA owned by the Operating Partnership does not
exceed, on the date of this Prospectus, 5% of the value of the Company's total
assets. As to the securities of any Services Company, this 5% limitation must be
satisfied not only as of the date that the Company (directly or through the
Operating Partnership) acquired securities of the Management Company, Amrescon
or AIA, but also at the end of any quarter in which the Company increases its
interest in the Management Company, Amrescon or AIA or so acquires other
property. In this respect, if the holder of a right to exchange Units for Common
Shares exercises such rights, the Company will thereby increase its
proportionate (indirect) ownership interest in the Management Company, Amrescon
and AIA, thus requiring the Company to meet the 5% test in any quarter in which
such conversion option is exercised. Although the Company plans to take steps to
ensure that it satisfies the 5% value test for any quarter with respect to which
retesting is to occur, there can be no assurance that such steps will always be
successful or will not require a reduction in the Operating Partnership's
overall interest in the Management Company, Amrescon or AIA.
GROSS INCOME TESTS. There are three separate percentage tests relating to
the sources of the Company's gross income which must be satisfied for each
taxable year. For purposes of these tests, where the Company invests in a
partnership, the Company will be treated as receiving its share of the income
and loss of the partnership, and the gross income of the partnership will retain
the same character in the hands of the Company as it has in the hands of the
partnership. See "--Tax Aspects of the Company's Investments in
Partnerships--General" below. The three tests are as follows:
THE 75% TEST. At least 75% of the Company's gross income for the taxable
year must be "qualifying income." Qualifying income generally includes (i) rents
from real property (except as modified below); (ii) interest on obligations
secured by mortgages on, or interests in, real property; (iii) gains from the
sale or other disposition of interests in real property and real estate
mortgages, other than gain from property held primarily for sale to customers in
the ordinary course of the Company's trade or business ("dealer property"); (iv)
dividends or other distributions on shares in other REITs, as well as gain from
the sale of such shares; (v) abatements and refunds of real property taxes; (vi)
income from the operation, and gain from the sale, of property acquired at or in
lieu of a foreclosure of the mortgage secured by such property ("foreclosure
property"); (vii) commitment fees received for agreeing to make loans secured by
mortgages on real property or to purchase or lease real property; and (viii)
certain qualified temporary investment income attributable to the investment of
new capital received by the Company in exchange for its shares during the
one-year period following the receipt of such capital.
Rents received from a tenant will not, however, qualify as rents from real
property in satisfying the 75% test (or the 95% gross income test described
below) if the Company, or an owner of 10% or more of the Company, directly or
constructively owns 10% or more of such tenant. In addition, if rent
attributable to personal property leased in connection with a lease of real
property is greater than 15% of the total rent received under the lease, then
the portion of rent attributable to such personal property will not qualify as
rents from real property. Moreover, an amount received or accrued will not
qualify as rents from real property (or as interest income) for purposes of the
75% and 95% gross income tests if it is based in whole
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or in part on the income or profits of any person, although an amount received
or accrued generally will not be excluded from "rents from real property" solely
by reason of being based on a fixed percentage or percentages of receipts or
sales. Finally, for rents received to qualify as rents from real property for
purposes of the 75% and 95% gross income tests, the Company generally must not
operate or manage the property or furnish or render services to tenants, other
than through an "independent contractor" from whom the Company derives no
income, except that the "independent contractor" requirement does not apply to
the extent that the services provided by the Company are "usually or customarily
rendered" in connection with the rental of space for occupancy only, or are not
otherwise considered "rendered to the occupant for his convenience."
The Management Company (which does not satisfy the independent contractor
standard) provides management and leasing services to each of the Communities
and each of the Co-Investment Communities and may provide certain services on
any newly acquired properties of the Operating Partnership. The Company believes
for purposes of the 75% and 95% gross income tests, that the services provided
by the Management Company on the Operating Partnership's properties and any
other services and amenities provided by the Operating Partnership or its agents
with respect to such properties are and will continue to be of the type usually
or customarily rendered in connection with the rental of space for occupancy
only. The Company intends to monitor the services and amenities provided by the
Management Company as management agent as well as by others, if any, on the
properties of the Operating Partnership. The Company intends that services that
cannot be provided directly by the Operating Partnership, the Management Company
or other agents will be performed by independent contractors.
THE 95% TEST. In addition to deriving 75% of its gross income from the
sources listed above, at least 95% of the Company's gross income for the taxable
year must be derived from the above-described qualifying income, or from
dividends, interest, or gains from the sale or other disposition of stock or
other securities that are not dealer property. Dividends and interest on any
obligations not collateralized by an interest in real property are included for
purposes of the 95% test, but not for purposes of the 75% test.
For purposes of determining whether the Company complies with the 75% and
the 95% gross income tests, gross income does not include income from prohibited
transactions. A "prohibited transaction" is a sale of dealer property (excluding
foreclosure property); however, it does not include a sale of property if such
property is held by the Company for at least four years and certain other
requirements (relating to the number of properties sold in a year, their tax
bases, and the cost of improvements made thereto) are satisfied. See "--Taxation
of the Company--General" and "--Tax Aspects of the Company's Investments in
Partnerships--Sale of the Communities and Co-Investment Communities."
The Company believes that, for purposes of both the 75% and the 95% gross
income tests, its investment in the Communities and the Co-Investment
Communities through the Operating Partnership will in major part give rise to
qualifying income in the form of rents, and that gains on sales of the
Communities and the Co-Investment Communities, or of the Company's interest in
the Operating Partnership, generally will also constitute qualifying income.
The Management Company receives and anticipates continuing to receive fee
income in consideration of the performance of property management and other
services with respect to properties not owned by the Company or the Operating
Partnership, Amrescon receives and anticipates continuing to receive fee income
in consideration of the performance of general contracting and construction
management services, and AIA receives and anticipates continuing to receive fee
income for providing investment advisory services; however, substantially all
income derived by the Company from the Management Company, Amrescon and AIA will
be in the form of dividends on the preferred stock and common stock of each of
the Service Companies owned by the Operating Partnership and interest on the
Subordinated Notes. Such dividends and interest income will satisfy the 95%, but
not the 75%, gross income test (as discussed above). In addition, the Company's
share of any income realized on interest rate swap or cap agreements, including
income received at the time of entering into such agreements, will satisfy the
95%, but not the
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75%, gross income test. The Company intends to closely monitor its
non-qualifying income and anticipates that non-qualifying income on its other
investments and activities, including such dividend income, interest income and
interest rate swap or cap income (if any), will not result in the Company
failing either the 75% or 95% gross income test.
Even if the Company fails to satisfy one or both of the 75% or 95% gross
income tests for any taxable year, it may still qualify as a REIT for such year
if it is entitled to relief under certain provisions of the Code. These relief
provisions will generally be available if: (i) the Company's failure to comply
was due to reasonable cause and not to willful neglect; (ii) the Company reports
the nature and amount of each item of its income included in the tests on a
schedule attached to its tax return; and (iii) any incorrect information on this
schedule is not due to fraud with intent to evade tax. If these relief
provisions apply, however, the Company will nonetheless be subject to a 100% tax
on the greater of the amount by which it fails either the 75% or 95% gross
income test, multiplied by a fraction intended to reflect the Company's
profitability.
THE 30% TEST. The Company must derive less than 30% of its gross income for
each taxable year from the sale or other disposition of (i) real property held
for less than four years (other than foreclosure property and involuntary
conversions); (ii) stock or securities (including an interest rate swap or cap
agreement) held for less than one year; and (iii) property in a prohibited
transaction. The Company does not anticipate that it will have difficulty in
complying with this test. However, if extraordinary circumstances were to occur
that give rise to dispositions of Communities or Co-Investment Communities held
for less than four years (for example, on account of the inability to obtain
refinancing), the 30% test could become an issue.
ANNUAL DISTRIBUTION REQUIREMENTS. In order to qualify as a REIT, the
Company is required to distribute dividends (other than capital gain dividends)
to its shareholders each year 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
net income (after tax), 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 dividend 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 on the undistributed amount at regular capital gains or
ordinary corporate tax rates, as the case may be.
The Company intends to make timely distributions sufficient to satisfy the
annual distribution requirements described in the first sentence of the
preceding paragraph. In this regard, the Partnership Agreement authorizes the
Company, as general partner, to take such steps as may be necessary to cause the
Operating Partnership to distribute to its partners an amount sufficient to
permit the Company to meet these distribution requirements. It is possible that
the Company may not have sufficient cash or other liquid assets to meet the 95%
distribution requirement, due to timing differences between the actual receipt
of income and actual payment of expenses on the one hand, and the inclusion of
such income and deduction of such expenses in computing the Company's REIT
taxable income on the other hand; due to the Operating Partnership's inability
to control cash distributions with respect to any properties as to which it does
not have decision making control; or for other reasons. To avoid a problem with
the 95% distribution requirement, the Company will closely monitor the
relationship between its REIT taxable income and cash flow and, if necessary,
intends to borrow funds (or cause the Operating Partnership or other affiliates
to borrow funds) in order to satisfy the distribution requirement. However,
there can be no assurance that such borrowing would be available at such time.
If the Company fails to meet the 95% distribution requirement as a result of
an adjustment to the Company's tax return by the Service, the Company may
retroactively cure the failure by paying a "deficiency dividend" (plus
applicable penalties and interest) within a specified period.
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FAILURE TO QUALIFY. If the Company fails to qualify for taxation as a REIT
in any taxable year and the relief provisions do not apply, the Company will be
subject to tax (including any applicable alternative minimum tax) on its taxable
income at regular corporate rates. Distributions to shareholders in any year in
which the Company fails to qualify as a REIT will not be deductible by the
Company, nor generally will they be required to be made under the Code. In such
event, to the extent of current and accumulated earnings and profits, all
distributions to shareholders will be taxable as ordinary income, and, subject
to certain limitations in the Code, corporate distributees may be eligible for
the dividends received deduction. Unless entitled to relief under specific
statutory provisions, the Company also will be disqualified from re-electing
taxation as a REIT for the four taxable years following the year during which
qualification was lost.
TAX ASPECTS OF THE COMPANY'S INVESTMENTS IN PARTNERSHIPS
GENERAL. The Company holds a partnership interest in the Operating
Partnership. See "The Company." In general, a partnership is a "pass-through"
entity which is not subject to Federal income tax. Rather, partners are
allocated their proportionate shares of the items of income, gain, loss,
deduction and credit of a partnership, and are potentially subject to tax
thereon, without regard to whether the partners receive a distribution from the
partnership. The Company will include its proportionate share of the foregoing
partnership items for purposes of the various REIT gross income tests and in the
computation of its REIT taxable income. See "--Taxation of the Company--General"
and "--Gross Income Tests."
Accordingly, any resultant increase in the Company's REIT taxable income
from its interest in the Operating Partnership (whether or not a corresponding
cash distribution is also received from the Operating Partnership) will increase
its distribution requirements (see "--Taxation of the Company-- Annual
Distribution Requirements"), but will not be subject to Federal income tax in
the hands of the Company provided that an amount equal to such income is
distributed by the Company to its shareholders. Moreover, for purposes of the
REIT asset tests (see "--Taxation of the Company--Asset Tests"), the Company
will include its proportionate share of assets held by the Operating
Partnership.
ENTITY CLASSIFICATION. The Company's interest in the Operating Partnership
involves special tax considerations, including the possibility of a challenge by
the Service of the status of the Operating Partnership as a partnership (as
opposed to an association taxable as a corporation for Federal income tax
purposes). If the Operating Partnership were to be treated as an association, it
would be taxable as a corporation and therefore subject to an entity-level tax
on its income. In such a situation, the character of the Company's assets and
items of gross income would change, which would preclude the Company from
satisfying the REIT asset tests and the REIT gross income tests (see "--Taxation
of the Company--Asset Tests" and "--Gross Income Tests"), which in turn would
prevent the Company from qualifying as a REIT. (See "--Taxation of the
Company--Failure to Qualify" above, for a discussion of the effect of the
Company's failure to meet such tests.)
TAX ALLOCATIONS WITH RESPECT TO THE COMMUNITIES. Pursuant to Section 704(c)
of the Code, income, gain, loss and deduction attributable to appreciated or
depreciated property that is contributed to a partnership in exchange for an
interest in the partnership (such as certain of the Communities), must be
allocated in a manner such that the contributing partner is charged with, or
benefits from, respectively, the unrealized gain or unrealized loss associated
with the property at the time of the contribution. The amount of such unrealized
gain or unrealized loss is generally equal to the difference between the fair
market value of the contributed property at the time of contribution, and the
adjusted tax basis of such property at the time of contribution (a "Book-Tax
Difference"). Such allocations are solely for Federal income tax purposes and do
not affect the book capital accounts or other economic arrangements among the
partners. The formation of the Operating Partnership included contributions of
appreciated property (including certain Communities or interests therein).
Consequently, the Partnership Agreement requires certain allocations to be made
in a manner consistent with Section 704(c) of the Code.
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In general, certain contributors of certain of the Communities or interests
therein will be allocated lower amounts of depreciation deductions for tax
purposes and increased taxable income and gain on sale by the Operating
Partnership on the contributed assets (including certain of the Communities).
This will tend to eliminate the Book-Tax Difference over the life of the
Operating Partnership. However, the special allocation rules of Section 704(c)
do not always entirely rectify the Book-Tax Difference on an annual basis or
with respect to a specific taxable transaction such as a sale or a deemed sale,
and accordingly variations from normal Section 704(c) principles may arise,
which could result in the allocation of additional taxable income to the Company
in excess of corresponding cash proceeds in certain circumstances.
Treasury regulations issued under Section 704(c) of the Code provide
partnerships with a choice of several methods of accounting for Book-Tax
Differences, including retention of the method under current law. The Operating
Partnership and the Company will use the remedial method for making allocations
under Section 704(c) with respect to the existing Communities.
With respect to any property purchased by the Operating Partnership
subsequent to the admission of the Company to the Operating Partnership, in
general, such property will initially have a tax basis equal to its fair market
value and Section 704(c) of the Code will not apply.
SALE OF THE COMMUNITIES AND CO-INVESTMENT COMMUNITIES. The Company's share
of any gain realized by the Operating Partnership on the sale of any dealer
property generally will be treated as income from a prohibited transaction that
is subject to a 100% penalty tax. See "Taxation of the Company--General" and
"Gross Income Tests--The 95% Test." Under existing law, whether property is
dealer property is a question of fact that depends on all the facts and
circumstances with respect to the particular transaction. The Operating
Partnership intends to hold the Communities and Co-Investment Communities for
investment with a view to long-term appreciation, to engage in the business of
acquiring, owning, operating and developing the Communities, Co-Investment
Communities and other multifamily residential properties, and to make such
occasional sales of the Communities, Co-Investment Communities and other
properties acquired subsequent to the date hereof as are consistent with the
Company's investment objectives. Based upon the Company's investment objectives,
the Company believes that overall the Communities and Co-Investment Communities
should not be considered dealer property and that the amount of income from
prohibited transactions, if any, will not be material.
TAXATION OF SHAREHOLDERS
TAXATION OF TAXABLE DOMESTIC SHAREHOLDERS. As long as the Company qualifies
as a REIT, distributions made to the Company's taxable domestic shareholders out
of current or accumulated earnings and profits (and not designated as capital
gain dividends) will be taken into account by them as ordinary income and will
not be eligible for the dividends received deduction for corporations.
Distributions that are designated as capital gain 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 its shares of beneficial interest of the Company.
However, corporate shareholders may be required to treat up to 20% of certain
capital gain dividends as ordinary income. To the extent that the Company makes
distributions in excess of current and accumulated earnings and profits, these
distributions are treated first as a tax-free return of capital to the
shareholder, reducing the tax basis of a shareholder's shares of beneficial
interest by the amount of such excess distribution (but not below zero), with
distributions in excess of the shareholder's tax basis being taxed as capital
gains (if the shares of beneficial interest are held as a capital asset). In
addition, any dividend declared by the Company in October, November or December
of any year and payable to a shareholder of record on a specific 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 during January of the following calendar year. Shareholders
may not include in their individual income tax returns any net
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operating losses or capital losses of the Company. Federal income tax rules may
also require that certain minimum tax adjustments and preferences be apportioned
to Company shareholders.
In general, any loss upon a sale or exchange of shares of beneficial
interest by a shareholder who has held such shares of beneficial interest for
six months or less (after applying certain holding period rules) will be treated
as a long-term capital loss, to the extent of distributions from the Company
required to be treated by such shareholder as long-term capital gains.
BACKUP WITHHOLDING. The Company will report to its domestic shareholders
and to the Service the amount of dividends paid for each calendar year, and the
amount of tax withheld, if any, with respect thereto. Under the backup
withholding rules, a shareholder may be subject to backup withholding at the
rate of 31% with respect to dividends paid unless such shareholder (i) is a
corporation or comes within certain other exempt categories and, when required,
demonstrates this fact or (ii) provides a taxpayer identification number,
certifies as to no loss of exemption from backup withholding, and otherwise
complies with applicable requirements of the backup withholding rules. A
shareholder that does not provide the Company with its correct taxpayer
identification number may also be subject to penalties imposed by the Service.
Any amount paid as backup withholding is available as a credit against the
shareholder's income tax liability. In addition, the Company may be required to
withhold a portion of capital gain distributions made to any shareholders who
fail to certify their non-foreign status to the Company. See "Certain United
States Tax Considerations for Non-U.S. Shareholders--Distributions from the
Company--Capital Gain Dividends" below.
TAXATION OF TAX-EXEMPT SHAREHOLDERS. The Service has issued a revenue
ruling in which it held that amounts distributed by a REIT to a tax-exempt
employees' pension trust do not constitute unrelated business taxable income
("UBTI"). Subject to the discussion below regarding a "pension-held REIT," based
upon such ruling and the statutory framework of the Code, distributions by the
Company to a shareholder that is a tax-exempt entity should not constitute UBTI,
provided that the tax-exempt entity has not financed the acquisition of its
shares with "acquisition indebtedness" within the meaning of the Code, that the
shares are not otherwise used in an unrelated trade or business of the
tax-exempt entity, and that the Company, consistent with its present intent,
does not hold a residual interest in a real estate mortgage investment conduit.
However, if any pension or other retirement trust that qualifies under
Section 401(a) of the Code ("qualified pension trust") holds more than 10% by
value of the interests in a "pension-held REIT" at any time during a taxable
year, a portion of the dividends paid to the qualified pension trust by such
REIT may constitute UBTI. For these purposes, a "pension-held REIT" is defined
as a REIT if (i) such REIT would not have qualified as a REIT but for the
provisions of the Code which look through such a qualified pension trust in
determining ownership of shares of the REIT and (ii) at least one qualified
pension trust holds more than 25% by value of the interests of such REIT or one
or more qualified pension trusts (each owning more than a 10% interest by value
in the REIT) hold in the aggregate more than 50% by value of the interests in
such REIT.
DIVIDEND REINVESTMENT PLAN. Shareholders participating in the dividend
reinvestment and share purchase plan adopted by the Company will be deemed to
have received the gross amount of any cash distributions which would have been
paid by the Company to such shareholders had they not elected to participate.
These deemed distributions will be treated as actual distributions from the
Company to the participating shareholders and will retain the character and tax
effects applicable to distributions from the Company generally. See "--Taxation
of Shareholders--Taxation of Taxable Domestic Shareholders." Participants in the
dividend reinvestment and share purchase plan are subject to Federal income tax
on the amount of the deemed distributions to the extent that such distributions
represent dividends or gains, even though they receive no cash. In addition,
participants in the dividend reinvestment and share purchase plan are subject to
Federal income tax on payment by the Company of brokerage commissions and bank
fees on their behalf. Common Shares received under the plan will have a holding
period beginning with the day
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after purchase, and a tax basis equal to their cost (which is the gross amount
of the deemed distribution plus the amount of any brokerage commissions and bank
fees paid on the holder's behalf).
OTHER TAX CONSIDERATIONS
THE MANAGEMENT COMPANY, AMRESCON AND AIA; OTHER CONSIDERATIONS. A portion
of the cash to be used by the Operating Partnership to fund distributions to
partners, including the Company, is expected to come from the Management
Company, Amrescon and AIA through dividends on the common and preferred stock of
the Management Company, Amrescon and AIA held by the Operating Partnership and
from interest on the Subordinated Notes. In addition, the Management Company,
Amrescon and AIA will each receive income from the Company, the Operating
Partnership and unrelated third parties. Because the Company, the Operating
Partnership, the Management Company, Amrescon and AIA are related through stock
or partnership ownership, income of the Management Company, Amrescon or AIA from
services performed for the Company and the Operating Partnership may be subject
to certain rules under which additional income may be allocated to the
Management Company, Amrescon or AIA. On account of such ownership relationships,
the allocation of certain expenses and reimbursements thereof among the Company,
the Management Company, the Operating Partnership, Amrescon and AIA could be
subject to additional scrutiny by the Service.
Each of the Management Company, Amrescon and AIA will pay Federal and state
income taxes at the full applicable corporate rates on its income prior to
payment of any dividends. Each of the Management Company, Amrescon and AIA will
attempt to minimize the amount of such taxes, but there can be no assurance
whether or the extent to which measures taken to minimize taxes will be
successful. To the extent that the Management Company, Amrescon and AIA are
required to pay Federal, state, or local taxes, the cash available for
distribution by the Company to shareholders will be reduced accordingly.
In addition, to the extent that tax exempt entities and foreign persons hold
shares of beneficial interest of the Company, the interest expense deductions of
the Management Company and AIA on the Subordinated Notes could be reduced.
POSSIBLE LEGISLATIVE OR OTHER ACTIONS AFFECTING TAX
CONSEQUENCES. Prospective shareholders should recognize that the present
Federal income tax treatment of investment in the Company may be modified by
legislative, judicial or administrative action at any time and that any such
action may affect investments and commitments previously made. The rules dealing
with Federal income taxation are constantly under review by persons involved in
the legislative process and by the Service and the Treasury Department,
resulting in revisions of regulations and revised interpretations of established
concepts as well as statutory changes. No assurance can be given as to the form
or content (including with respect to effective dates) of any tax legislation
which may be enacted. Revisions in Federal tax laws and interpretations thereof
could adversely affect the tax consequences of investment in the Company.
In particular, two separate versions of a tax bill, cited as the Revenue
Reconciliation Bill of 1997 (H.R. 2014) (the "Bill") have been approved by the
United States House of Representatives on June 26, 1997 and by the United States
Senate on June 27, 1997. It is expected that the differences between such
versions of the Bill will be reconciled by a committee made up of members from
the House and Senate. Among other things, the Bill would modify many of the
provisions relating to the requirements for qualification as, and the taxation
of, a REIT. In particular, the Bill would (i) replace the rule that disqualifies
a REIT for any year in which the REIT failed to comply with Treasury regulations
to ascertain its ownership with an intermediate penalty for failing to do so;
(ii) permit a REIT to render a de minimis amount of impermissible services to
tenants, or in connection with the management of property, and still treat
amounts received with respect to that property as rents from real property;
(iii) permit a REIT to elect to retain and pay income tax on net long-term
capital gains; (iv) repeal the rule that requires that less than 30% of a REIT's
gross income be derived from gain from the sale or other disposition of stock or
securities held for less than one year, certain real property held less than
four years, and property that is sold or
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disposed of in a prohibited transaction; (v) lengthen the original grace period
for foreclosure property from two years after the REIT acquired the property to
a period ending on the last day of the third full taxable year following the
election; (vi) treat income from all hedges that reduce the interest rate risk
of REIT liabilities, not just interest rate swaps and caps, as qualifying income
under the 95% gross income test; (vii) permit any corporation wholly-owned by a
REIT to be treated as a qualified subsidiary, regardless of whether the
corporation has always been owned by the REIT; and (viii) modify various other
REIT limitations and restrictions. It is impossible at this time to predict the
form or content of any tax legislation, whether any such tax legislation will be
enacted, and the effective date of any such tax legislation.
STATE AND LOCAL TAXES. The Company and its shareholders may be subject to
state or local taxation, and the Company and the Operating Partnership may be
subject to state or local tax withholding requirements, in various
jurisdictions, including those in which it or they transact business or reside.
The state and local tax treatment of the Company and its shareholders may not
conform to the Federal income tax consequences discussed above. Consequently,
prospective shareholders should consult their own tax advisors regarding the
effect of state and local tax laws on an investment in shares of beneficial
interest of the Company.
CERTAIN UNITED STATES TAX CONSIDERATIONS
FOR NON-U.S. SHAREHOLDERS
The following is a discussion of certain anticipated U.S. Federal income and
U.S. Federal estate tax consequences of the ownership and disposition of shares
of beneficial interest applicable to Non-U.S. Shareholders of such shares. A
"Non-U.S. Shareholder" is (i) any individual who is neither a citizen nor
resident of the United States, (ii) any corporation or partnership other than a
corporation or partnership created or organized in the United States or under
the laws of the United States or any state thereof or under the laws of the
District of Columbia or (iii) any estate or trust that is not "resident" in the
United States. The discussion is based on current law and is for general
information only. The discussion does not address other aspects of U.S. Federal
taxation other than income and estate taxation or all aspects of U.S. Federal
income and estate taxation. The discussion does not consider any specific facts
or circumstances that may apply to a particular Non-U.S. Shareholder.
PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR TAX ADVISORS REGARDING THE
U.S. FEDERAL, STATE, LOCAL AND NON-U.S. INCOME, ESTATE AND OTHER TAX
CONSEQUENCES OF HOLDING AND DISPOSING OF SHARES OF BENEFICIAL INTEREST.
DISTRIBUTIONS FROM THE COMPANY
ORDINARY DIVIDENDS. The portion of dividends received by Non-U.S.
Shareholders payable out of the Company's earnings and profits that are not
attributable to capital gains of the Company and that are not effectively
connected with a U.S. trade or business of the Non-U.S. Shareholder will be
subject to U.S. withholding tax at the rate of 30% (unless reduced by treaty or
the Non-U.S. Shareholder files an Internal Revenue Service Form 4224 with the
Company certifying that the investment to which the distribution relates is
effectively connected to a United States trade or business of such Non-U.S.
Shareholder). Under certain limited circumstances, the amount of tax withheld
may be refundable, in whole or in part, because of the tax status of certain
partners or beneficiaries of Non-U.S. Shareholders that are either foreign
partnerships or foreign estates or trusts. In general, Non-U.S. Shareholders
will not be considered engaged in a U.S. trade or business solely as a result of
their ownership of shares of beneficial interest. In cases where the dividend
income from a Non-U.S. Shareholder's investment in shares of beneficial interest
is (or is treated as) effectively connected with the Non-U.S. Shareholder's
conduct of a U.S. trade or business, the Non-U.S. Shareholder generally will be
subject to U.S. 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 (unless reduced by treaty) in the case of a Non-U.S.
Shareholder that is a foreign corporation).
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Under currently applicable Treasury regulations, withholding agents are
required to determine the applicable withholding rate pursuant to the
appropriate tax treaty, and withhold the appropriate amount. Under the current
regulations, dividends paid to an address in a foreign country are presumed to
be paid to a resident of that country (unless the payer has knowledge to the
contrary) for purposes of the withholding discussed above and, under the current
interpretation of the Treasury regulations, for purposes of determining the
applicability of a tax treaty rate. Treasury regulations proposed in 1996, which
have not been adopted, and are, therefore, not currently effective, would, if
and when they become effective, require Non-U.S. Shareholders to file a form W-8
to obtain the benefit of any applicable tax treaty providing for a lower rate of
withholding tax on dividends paid after December 31, 1997. Such form would
require a representation by the holder as to foreign status, the holder's name
and permanent residence address, the basis for a reduced withholding rate (e.g.,
the relevant tax treaty) and other pertinent information, to be certified by
such holder under penalties of perjury. Such information is subject to being
reported to the Internal Revenue Service. A permanent residence address for this
purpose generally is the address in the country where the person claims to be a
resident for the purpose of the country's income tax. If the beneficial holder
is a corporation, then the address is where the corporation maintains its
principal office in its country of incorporation.
CAPITAL GAIN DIVIDENDS. Under the Foreign Investment in Real Property Tax
Act of 1980 ("FIRPTA"), any distribution made by the Company to a Non-U.S.
Shareholder, to the extent attributable to gains from dispositions of United
States Real Property Interests ("USRPIs") by the Company ("USRPI Capital
Gains"), will be considered effectively connected with a U.S. trade or business
of the Non-U.S. Shareholder and subject to U.S. income tax at the rates
applicable to U.S. individuals or corporations, without regard to whether such
distribution is designated as a capital gain dividend. In addition, the Company
will be required to withhold tax equal to 35% of the amount of such distribution
to the extent it constitutes USRPI Capital Gains. Such distribution may also be
subject to the 30% branch profits tax (unless reduced by treaty) in the case of
a Non-U.S. Shareholder that is a foreign corporation.
NON-DIVIDEND DISTRIBUTIONS. Any distributions by the Company that exceed
both current and accumulated earnings and profits of the Company will not be
taxed as either ordinary dividends or capital gain dividends. See "Federal
Income Tax Considerations--Taxation of Shareholders--Taxation of Taxable
Domestic Shareholders." However, 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 distribution will be subject
to withholding. Should this occur, the Non-U.S. Shareholder may seek a refund of
over withholding from the Service once it is subsequently determined that such
distribution was, in fact, in excess of current and accumulated earnings and
profits of the Company.
DISPOSITIONS OF SHARES OF BENEFICIAL INTEREST
Unless the shares of beneficial interest constitute USRPIs, a sale or
exchange of shares of beneficial interest by a Non-U.S. Shareholder generally
will not be subject to U.S. taxation under FIRPTA. The shares of beneficial
interest will not constitute USRPIs if the Company is a "domestically controlled
REIT." A domestically controlled REIT is a REIT in which, at all times during a
specified testing period, less than 50% in value of its shares is held directly
or indirectly by Non-U.S. Shareholders. It is currently anticipated that the
Company will be a domestically controlled REIT and, therefore, that the sale of
shares of beneficial interest will not be subject to taxation under FIRPTA. No
assurance can be given that the Company will continue to be a domestically
controlled REIT.
If the Company does not constitute a domestically controlled REIT, a
Non-U.S. Shareholder's sale or exchange of shares of beneficial interest
generally will still not be subject to tax under FIRPTA as a sale of USRPIs
provided that (i) the Company's shares of beneficial interest are "regularly
traded" (as defined by applicable Treasury regulations) on an established
securities market (e.g., the NYSE, on which the Common Shares are listed) and
(ii) the selling Non-U.S. Shareholder held 5% or less of the Company's
outstanding shares of beneficial interest at all times during a specified
testing period.
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If gain on the sale or exchange of shares of beneficial interest were
subject to taxation under FIRPTA, the Non-U.S. Shareholder would be subject to
U.S. income tax at the rates applicable to U.S. individuals or corporations, and
the purchaser of shares of beneficial interest could be required to withhold 10%
of the purchase price and remit such amount to the Service. The branch profits
tax would not apply to such sales or exchanges.
Capital gains not subject to FIRPTA will nonetheless be taxable in the
United States to a Non-U.S. Shareholder in three cases: (i) if the Non-U.S.
Shareholder's investment in shares of beneficial interest is effectively
connected with a U.S. trade or business conducted by such Non-U.S. Shareholder,
the Non-U.S. Shareholder will be subject to the same treatment as U.S.
shareholders with respect to such gain, (ii) if 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, the
nonresident alien individual will be subject to 30% tax on the individual's
capital gain (unless reduced or eliminated by treaty), or (iii) if the Non-U.S.
Shareholder is subject to tax pursuant to the Code provisions applicable to
certain U.S. expatriates.
FEDERAL ESTATE TAX
Shares of beneficial interest owned or treated as owned by an individual who
is not a citizen or "resident" (as specifically defined for U.S. Federal estate
tax purposes) of the United States at the time of death will be includable in
the individual's gross estate for U.S. Federal estate tax purposes, unless an
applicable estate tax treaty provides otherwise. Such individual's estate may be
subject to U.S. Federal estate tax on the property includable in the estate for
U.S. Federal estate tax purposes.
INFORMATION REPORTING AND BACKUP WITHHOLDING
The Company must report annually to the Service and to each Non-U.S.
Shareholder the amount of dividends (including any capital gain dividends) paid
to, and the tax withheld with respect to, each Non-U.S. Shareholder. These
reporting requirements apply regardless of whether withholding was reduced or
eliminated by an applicable tax treaty. Copies of these returns may also be made
available under the provisions of a specific treaty or agreement with the tax
authorities in the country in which the Non-U.S. Shareholder resides.
U.S. backup withholding (which generally is imposed at the rate of 31% on
certain payments to persons that fail to furnish the information required under
the U.S. information reporting requirements) and information reporting will
generally not apply to dividends (including any capital gain dividends) paid on
shares of beneficial interest to a Non-U.S. Shareholder at an address outside
the United States. The proposed Treasury regulations referred to under
"Distributions from the Company--Ordinary Dividends," in general, would
similarly require a Non-U.S. Shareholder to provide the form W-8 for dividends
paid after December 31, 1997 to be exempt from backup withholding and
information reporting.
The payment of the proceeds from the disposition of shares of beneficial
interest to or through a U.S. office of a broker will be subject to information
reporting and backup withholding unless the owner, under penalties of perjury,
certifies, among other things, its status as a Non-U.S. Shareholder, or
otherwise establishes an exemption. The payment of the proceeds from the
disposition of shares of beneficial interest to or through a non-U.S. office of
a non-U.S. broker generally will not be subject to backup withholding and
information reporting, except as noted below. In the case of a payment of
proceeds from the disposition of shares of beneficial interest to or through a
non-U.S. office of a broker which is (i) a U.S. person, (ii) a "controlled
foreign corporation" for U.S. Federal income tax purposes or (iii) a foreign
person 50% or more of whose gross income for certain periods is derived from a
U.S. trade or business (a "Foreign U.S. Connected Broker"), information
reporting (but not backup withholding) will apply unless the broker has
documentary evidence in its files that the holder is a Non-U.S. Shareholder (and
the broker has no actual knowledge to the contrary) and certain other conditions
are met, or the holder otherwise
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establishes an exemption. In addition, the Treasury Department has indicated
that it is studying the possible application of backup withholding in the case
of such foreign offices of U.S. and Foreign U.S. Connected Brokers. Under
proposed Treasury regulations, a payment of the proceeds from the disposition of
shares of beneficial interest to or through such broker will be subject to
backup withholding if such broker has actual knowledge that the holder is a U.S.
person.
Backup withholding is not an additional tax. Any amounts withheld under the
backup withholding rules will be refunded or credited against the Non-U.S.
Shareholder's U.S. Federal income tax liability, provided that required
information is furnished to the Service.
These backup withholding and information reporting rules are currently under
review by the Treasury Department, and their application to shares of beneficial
interest is subject to change.
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. Direct sales to investors may be accomplished
through subscription offerings or through subscription rights distributed to the
Company's shareholders. In connection with subscription offerings or the
distribution of subscription rights to shareholders, if all of the underlying
Offered Securities are not subscribed for, the Company may sell such
unsubscribed Offered Securities to third parties directly or through
underwriters or agents and, in addition, whether or not all of the underlying
Offered Securities are subscribed for, the Company may concurrently offer
additional Offered Securities to third parties directly or through underwriters
or agents. Any such underwriter or agent involved in the offer and sale of the
Offered Securities will be named in the applicable Prospectus Supplement.
The distribution of the Offered Securities may be effected from time to time
in one or more transactions at a fixed price or prices, which may be changed, or
at prices related to the prevailing market prices at the time of sale or at
negotiated prices (any of which may represent a discount from the prevailing
market prices). The Company also may, from time to time, authorize underwriters
acting as the Company's agents to offer and sell the Offered Securities upon the
terms and conditions as are set forth in the applicable Prospectus Supplement.
In connection with the sale of Offered Securities, underwriters may be deemed to
have received compensation from the Company in the form of underwriting
discounts or commissions and may also receive commissions from purchasers of
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, 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
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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.
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.
EXPERTS
The consolidated financial statements and schedule of AMLI Residential
Properties Trust as of December 31, 1996 and 1995, and for each of the years in
the three-year period ended December 31, 1996, have been incorporated by
reference herein and in the Registration Statement in reliance upon the report
of KPMG Peat Marwick LLP, independent certified public accountants, which report
is incorporated by reference herein, and upon the authority of said firm as
experts in accounting and auditing. To the extent that KPMG Peat Marwick LLP
audits and reports on financial statements of AMLI Residential Properties Trust
issued at future dates, and consents to the use of their report thereon, such
financial statements also will be incorporated by reference in the Registration
Statement in reliance upon their report and said authority.
LEGAL MATTERS
Certain legal matters relating to the validity of the Offered Securities
offered pursuant to this Prospectus will be passed upon for the Company by
Mayer, Brown & Platt. Mayer, Brown & Platt has in the past represented and is
currently representing the Company and certain of its affiliates.
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