Filed Pursuant to Rule 424(b)(2)
Under Registration Statement
Number 33-93120
Prospectus Supplement To Prospectus Dated January 27, 1998
130,950 Shares
Amli Residential Properties Trust
Common Shares of Beneficial Interest
($.01 par value per share)
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This Prospectus Supplement relates to the offer and sale by AMLI
Residential Properties Trust (the "Company") of up to 130,950 Common Shares
of Beneficial Interest, $.01 par value per share (the "Common Shares"), of
the Company to an investor (the "Purchaser") in accordance with the plan of
distribution described herein. See "Plan of Distribution".
All of the Common Shares offered hereby (the "Offering") are being
offered by the Company to the Purchaser. The Company intends to file an
application to list the Common Shares on the New York Stock Exchange (the
"NYSE"). The last reported sale price of the Common Shares on the NYSE on
January 27, 1998 was $22 11/16.
The Common Shares offered by this Prospectus are being offered for
cash to the parties identified herein.
The per share price for the securities offered hereby will be
determined based on the average of the high and low trading prices (the
"Average Trading Price") of the Common Shares on the NYSE during each of
the fifteen trading days during the period from February 2, 1998 through
February 20, 1998 (the "Investment Period"). On each day during the
Investment Period that the Average Trading Price exceeds $23.50, the
Purchaser will acquire that number of Common Shares which is obtained by
dividing $200,000 by the Average Trading Price for that day less two and
one half percent (2-1/2%), such amount being the per share purchase price
with respect to the Common Shares acquired with respect to each such day.
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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 PROSPECTUS
TO WHICH IT RELATES. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
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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.
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The date of this Prospectus Supplement is January 28, 1998.
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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 September 30, 1997, AMLI owned or had co-investment interests
in 49 multifamily apartment communities comprised of 19,605 apartment homes
(the "Communities"). Thirty-nine of these Communities, totalling 15,819
apartment homes, were stabilized as of September 30, 1997. An additional
10 Communities were under development or in lease-up as of such date. When
completed, these Communities under development will total 3,786 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 September 30, 1997, the
Company owned approximately 85.5% 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 of 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 the Common Shares
offered hereby are estimated to be approximately $3,000,000. The net
proceeds will be used for the development and acquisition of multifamily
properties, as suitable opportunities arise, for the repayment of
indebtedness under the Company's principal revolving line of credit and for
general corporate purposes. As of September 30, 1997, the Company had
outstanding borrowings under this line of credit of $38 million bearing
interest at LIBOR + 1.35%.
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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.
Distributions
High Low Declared (2)
---- --- -------------
1995
First Quarter. . . . $19-3/4 $17 $.43
Second Quarter . . . $20-1/2 $17-5/8 $.43
Third Quarter. . . . $20-1/8 $18-1/4 $.43
Fourth Quarter . . . $20-3/8 $18-3/8 $.43
1996
First Quarter. . . . $21-1/4 $19-5/8 $.43
Second Quarter . . . $20-7/8 $18-7/8 $.43
Third Quarter. . . . $20-7/8 $19-7/8 $.43
Fourth Quarter . . . $23-1/2 $20-1/4 $.43
1997
First Quarter. . . . $24-3/4 $22-3/8 $.43
Second Quarter . . . $23-5/8 $21-1/2 $.43
Third Quarter. . . . $23-11/16 $21-3/4 $.43
Fourth Quarter . . . $24-3/16 $21-3/4 $.44
1998
First Quarter(1) . . $24-3/8 $22-3/8
____________________
(1) For the period January 1, 1998 through January 27, 1998.
(2) Distributions are declared and paid in the quarter immediately
following the quarter for which they are paid.
On January 27, 1998, the last reported sale price of the Common
Shares on the NYSE was $22-1/16 per share.
The Company intends to continue to pay regular quarterly
distributions to holders of Common Shares. The quarterly distribution rate
of $.44, if annualized, would equal an annual distribution rate of $1.76
per Common Share. The distribution for the quarter ended September 30,
1997 represented approximately 78.6% of the Company's funds from operations
for that quarter. On November 13, 1997, the Board of Trustees declared its
regular quarterly distribution of $.44 per Common Share payable to
shareholders of record as of November 14, 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
Trustee deems relevant.
S-3
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PLAN OF DISTRIBUTION
The Company expects to sell the securities offered hereby to the
Purchaser at a price per share of not less than $22.91. The offer and sale
effected hereby are being made in accordance with the Purchaser's Offer to
Purchase Common Shares, dated January 21, 1998 (the "Offer to Purchase")
which was accepted by the Company on January 28, 1998. The Offer to
Purchase provides that on each trading day during the period beginning on
February 2, 1998 and ending on February 20, 1998 (the "Investment Period")
that the average of the high and low trading prices (the "Average Trading
Price") of the Company's Common Shares on the NYSE exceeds $23.50, the
Purchaser will acquire that number of Common Shares which is obtained by
dividing $200,000 by the Average Trading Price for that day less two and
one half percent (2-1/2%), such amount being the per share purchase price
with respect to the Common Shares acquired with respect to each such day.
Payment for the Common Shares issued pursuant to this Prospectus will be
made on the last day of the Investment Period and Common Shares will be
issued and delivered to the Purchaser within three business days thereof.
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.
VALIDITY OF SHARES
The validity of the issuance of the Common Shares offered pursuant to
this Prospectus Supplement will be passed upon for the Company by Mayer,
Brown & Platt, Chicago, Illinois. Mayer, Brown & Platt has in the past
represented and is currently representing the Company and certain of its
affiliates.
S-4
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PROSPECTUS
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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.
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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.
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The date of this Prospectus is January 27, 1998
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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. The Commission maintains a
Web site (http://www.sec.gov) that contains reports, proxy information
statements and other information regarding companies which file
electronically with the Commission. 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 contained in exhibits to the
Registration Statement as permitted by 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
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 for the fiscal year
ended December 31, 1996;
(2) The Company's Quarterly Reports on Form 10-Q for the fiscal
quarters ended March 31, 1997, June 30, 1997 and September 30, 1997;
(3) The Company's Proxy Statement for the annual meeting of
shareholders held on April 28, 1997;
(4) Description of the Common Shares included in the Registration
Statement on Form 8-A dated 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.
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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
THE COMPANY
The Company and its affiliates constitute a self-administered and
self-managed real estate investment trust (a "REIT") which was formed 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 September 30, 1998, the Company owned approximately 85.5% 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.
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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 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
case 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,
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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. Gregory T. Mutz, the
Company's Chairman, Baldwin & Lyons, Inc., a publicly traded casualty
insurance company based in Indianapolis ("Baldwin & Lyons") and AMLI Realty
Co. and their respective affiliates and successors (which in the case of
AMLI Realty Co. would include UICI, a NASDAQ National Market traded holding
company with interest in insurance, financial services and technology which
in November 1996 acquired AMLI Realty Co.) 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 MCGA 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 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 he foregoing provisions.
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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."
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
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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 distribution. Subject to the Ownership Limit, the
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, 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.
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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;
(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.
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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 (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.
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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 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
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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 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
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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
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other rights, voting powers, restrictions, limitations as to dividends,
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.
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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 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."
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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.
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.
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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) 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.
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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.
Under recently enacted legislation, shareholders are required to include
their proportionate share of the REIT's undistributed long-term capital
gain in income but receive a credit for their share of any taxes paid on
such gain by the REIT.
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, 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.
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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 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 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
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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. For each of its taxable years up to and
including 1997, the Company had to meet three separate percentage tests
relating to the source of the Company's gross income. Under the Taxpayer
Relief Act of 1997 (the "1997 Act"), however, the "30% test" (described
below) has been repealed and the Company will not be required to comply
with this test beginning January 1, 1998. For purposes of all three 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 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
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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
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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 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. For its taxable years prior to 1998, 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. Under the 1997 Act, the 30% test has been repealed and the
Company will not be required to comply with this test beginning January 1,
1998.
ANNUAL DISTRIBUTION REQUIREMENTS. In order to qualify as a REIT, the
Company is required to distribute 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
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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.
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.)
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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.
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.
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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 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.
Beginning with its taxable year January 1, 1998, the Company is
permitted under the Code to elect to retain and pay income tax on its net
capital gain for any taxable year. Under the 1997 Act, however, if the
Company so elects, a shareholder must include in income such shareholder's
proportionate share of the Company's undistributed capital gain for the
taxable year, and will be deemed to have paid such shareholder's
proportionate share of the income tax paid by the Company with respect to
such undistributed capital gain. Such tax would be credited against the
shareholder's tax liability and subject to normal refund procedures. In
addition, each shareholder's basis in such shareholder's Common Shares
would be increased by the amount of undistributed capital gain (less the
tax paid by the Company) included in the shareholder's income.
The 1997 Act also alters the taxation of capital gain income for
individuals (and for certain trusts and estates). Gain from the sale or
exchange of certain investments held for more than 18 months will be taxed
at a maximum capital gain rate of 20%. Gain from the sale or exchange of
such investments held for 18 months or less, but for more than one-year,
will be taxed at a maximum capital gain rate of 28%. The 1997 Act also
provides a maximum rate of 25% for "unrecaptured section 1250 gain"
recognized on the sale or exchange of certain real estate assets,
introduces special rules of "qualified 5-year gain," and makes certain
other changes to prior law. On November 10, 1997, the Service issued
Notice 97-64 which provides generally that the Company may classify
portions of its designated capital gain as (i) a 20% rate gain distribution
(which would be taxed as capital gain in the 20% group); (ii) an
unrecaptured Section 1250 gain distribution (which would be taxed as
capital gain in the 25% group), or (iii) a 28% rate gain distribution
(which would be taxed as capital gain in the 28% group). If no designation
is made, the entire designated capital gain dividend will be treated as a
28% rate capital gain distribution. Notice 97-64 provides that a REIT must
determine the maximum amounts that it may designate as 20% and 25% rate
capital gain dividends by performing the computation required by the Code
as if the REIT were an individual whose ordinary income was subject to a
marginal tax rate of at least 28%.
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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 after purchase,
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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.
THE 1997 ACT. The 1997 Act modifies many of the provisions relating
to the requirements for qualification as, and the taxation of, a REIT.
Among other things, the 1997 Act (i) replaces the rule that disqualifies a
REIT for any year in which the REIT fails to comply with United States
Treasury regulations that are intended to enable a REIT to ascertain its
ownership, with an intermediate penalty for failing to do so; (ii) permits
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)
permits a REIT to elect to retain and pay income tax on net long-term
capital gains; (iv) repeals a rule that required that less than 30% of a
REIT's gross income be derived from gain from the sale or other disposition
of stock of securities held for less than one year, certain real property
held for less than four years, and property that is sold or disposed of in
a prohibited transaction; (v) lengthens 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 taxable year in which the property was acquired; (vi) treats 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; and (vii) permits any corporation wholly-owned by a REIT to be
treated as a qualified subsidiary, regardless of whether the corporation
has always been owned by a REIT. The changes are effective for taxable
years beginning after the date of enactment. Thus, these changes will
apply to the Company beginning January 1, 1998.
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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.
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 by a beneficial owner of shares of beneficial
interest who is not a U.S. person (a "Non-U.S. Shareholder"). For purposes
of this discussion, a "U.S. person" means a citizen or resident of the
United States, a corporation or partnership created or organized in the
United States or under the law of the United States or of any State or
political subdivision of the foregoing, any estate whose income is
includible in gross income for U.S. federal income tax purposes regardless
if its source, or a "United States Trust." A United States Trust is (a)
for taxable years beginning after December 31, 1996, or if the trustee of a
trust elects to apply the definition to an earlier taxable year, any trust
if (i) a court within the United States is able to exercise primary
supervision over the administration of the trust and (ii) one or more U.S.
persons have the authority to control all substantial decisions of the
trust, and (b) for all other taxable years, any trust whose income is
includible in gross income for U.S. federal income tax purposes regardless
of its source. 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 (and, if certain tax treaties apply, is
attributable to a United State permanent establishment maintained by such
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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 (and, if certain tax treaties apply, is attributable to a
United States permanent establishment maintained by such Non-U.S.
Shareholder), 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).
Under Treasury Regulations currently in effect, dividends paid to an
address in a foreign country are presumed to be paid to a resident of that
country (unless the payor has knowledge to the contrary) for purposes of
the withholding tax described above and for purposes of determining the
applicability of a tax treaty rate. Under recently enacted withholding tax
regulations (the "Final Regulations") which will be effective for payments
made after 1998, however, a Non-U.S. Shareholder who wishes to claim the
benefit of an applicable treaty rate would be required to satisfy
applicable certification and other requirements. Such certification
generally will be made on Form W-8, although a Non-U.S. Shareholder who
owns Common Shares through an offshore account may provide alternative
forms of certification. In the case of a foreign partnership, the
certification requirement would generally be applied to the partners of the
partnership unless the foreign partnership is a qualified intermediary.
Under the Final Regulations, Non-U.S. Shareholders who claim that the
dividends are effectively connected with the conduct of a U.S. trade or
business will have to supply Form W-8 in lieu of Form 4224.
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. Under the Final
Regulations, the Company will be entitled to make a reasonable estimate of
the portion of the distribution that is not a dividend.
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.
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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.
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 two 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 or (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 or an office or other fixed place of
business in the United States to which such gain is attributable, the
nonresident alien individual will be subject to 30% tax on the individual's
capital gain (unless reduced or eliminated by treaty).
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.
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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. However, under the Final
Regulations, a Non-U.S. Shareholder may be required to provide a
certification on Form W-8 to be exempt from backup withholding.
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,
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 establishes an
exemption. 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
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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 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.
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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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No person 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, and, if given or made, such
information or representations must not be relied upon as having been
authorized. This Prospectus Supplement and the Prospectus do not constitute
an offer to sell or the solicitation of an offer to buy any securities
other than the securities to which they relate or any offer to sell or the
solicitation of any offer to buy such securities in any circumstances in
which such offer or solicitation is unlawful. Neither the delivery of the
Prospectus Supplement or the Prospectus nor any sale made hereunder or
thereunder shall, under any circumstances, create any implication that
there has been no change in the affairs of the Company since the date
hereof or thereof or that the information contained or incorporated by
reference herein or therein is correct as of any time subsequent to the
date of such information.
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TABLE OF CONTENTS
Page
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PROSPECTUS SUPPLEMENT
The Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-2
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . S-2
Price Range of Common Shares and Distribution History . . . . . . . S-3
Plan of Distribution. . . . . . . . . . . . . . . . . . . . . . . . S-4
Safe Harbor Statement under the Private Securities Litigation
Reform Act of 1995 . . . . . . . . . . . . . . . . . . . . . . . . S-4
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-4
Validity of Shares. . . . . . . . . . . . . . . . . . . . . . . . . S-4
PROSPECTUS
Available Information . . . . . . . . . . . . . . . . . . . . . . . . 2
Incorporation by Reference. . . . . . . . . . . . . . . . . . . . . . 2
The Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Shares of Beneficial Interest and Shareholder Liability . . . . . . . 4
Description of Common Shares. . . . . . . . . . . . . . . . . . . . . 6
Description of Preferred Shares . . . . . . . . . . . . . . . . . . . 8
Description of Securities Warrants. . . . . . . . . . . . . . . . . .14
Federal Income Tax Considerations . . . . . . . . . . . . . . . . . .16
Certain United States Tax Considerations for
Non-U.S. Shareholders . . . . . . . . . . . . . . . . . . . . . . .27
Plan of Distribution. . . . . . . . . . . . . . . . . . . . . . . . .30
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . .32
<PAGE>
130,950 Shares
AMLI RESIDENTIAL
PROPERTIES TRUST
a Real Estate Investment Trust
COMMON SHARES OF
BENEFICIAL INTEREST
(PAR VALUE, $.01 PER SHARE)
------------------------------
PROSPECTUS SUPPLEMENT
