<PAGE> 1
Filed Pursuant to Rule 424(b)(5)
Registration No. 33-91222
PROSPECTUS SUPPLEMENT
- ----------------------------------
(TO PROSPECTUS DATED MAY 11, 1995)
2,400,000 SHARES
(LOGO) JDN JDN REALTY CORPORATION
COMMON STOCK
---------------------
JDN Realty Corporation (the "Company" or "JDN") is a real estate
development company specializing in the development and asset management of
retail shopping centers anchored by value-oriented retailers. As of February 28,
1997, the Company owned and operated, either directly or through affiliated
entities or joint ventures, 49 properties containing approximately 6.3 million
square feet of gross leasable area located in ten states, primarily in the
Southeast.
All of the shares of common stock of the Company (the "Common Stock")
offered hereby are being sold by the Company (the "Offering"). To assist the
Company in maintaining its qualification as a REIT, ownership by any person is
limited to 8% of the Common Stock, with certain exceptions.
The Common Stock is listed on the New York Stock Exchange (the "NYSE")
under the symbol "JDN." On March 5, 1997, the last reported sale price of the
Common Stock on the NYSE was $29 1/8. The Company pays regular quarterly
distributions. See "Price Range of Common Stock and Distributions."
SEE "RISK FACTORS" BEGINNING ON PAGE 5 OF THE ACCOMPANYING PROSPECTUS FOR
CERTAIN FACTORS RELEVANT TO AN INVESTMENT IN THE COMMON STOCK.
---------------------
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. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
=============================================================================================================
PRICE TO UNDERWRITING DISCOUNTS PROCEEDS TO
PUBLIC AND COMMISSIONS(1) COMPANY(2)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share $29.00 $1.52 $27.48
- -------------------------------------------------------------------------------------------------------------
Total(3) $69,600,000 $3,648,000 $65,952,000
=============================================================================================================
</TABLE>
(1) The Company has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(2) Before deducting expenses of the Offering payable by the Company estimated
at $100,000.
(3) The Company has granted the Underwriters a 30-day option to purchase up to
360,000 additional shares of Common Stock solely to cover over-allotments,
if any. To the extent that the option is exercised, the Underwriters will
offer the additional shares at the Price to Public shown above. If the
option is exercised in full, the total Price to Public, Underwriting
Discounts and Commissions and Proceeds to Company will be $80,040,000,
$4,195,200 and $75,844,800, respectively. See "Underwriting."
---------------------
The shares of Common Stock are being offered by the several Underwriters,
subject to prior sale, when, as and if delivered to and accepted by the
Underwriters, subject to approval of certain legal matters by counsel for the
Underwriters and to certain further conditions. It is expected that delivery of
the Common Stock will be made on or about March 11, 1997 in New York, New York.
---------------------
MERRILL LYNCH & CO. A.G. EDWARDS & SONS, INC.
---------------------
The date of this Prospectus Supplement is March 5, 1997.
<PAGE> 2
Certain persons participating in this Offering may engage in transactions
that stabilize, maintain, or otherwise affect the price of the Common Stock.
Such transactions may include stabilizing, the purchase of Common Stock to cover
syndicate short positions and the imposition of penalty bids. For a description
of these activities, see "Underwriting."
S-2
<PAGE> 3
The following summary is qualified in its entirety by the more detailed
information and financial statements and notes thereto appearing elsewhere in,
or incorporated by reference into, the accompanying Prospectus. Unless indicated
otherwise, the information contained in this Prospectus Supplement assumes no
exercise of the Underwriters' over-allotment option. Unless the context
otherwise requires, as used herein the terms "Company" or "JDN" include JDN
Realty Corporation, its predecessor, JDN Development Company, Inc., subsidiaries
of JDN Realty Corporation and JDN Development Company, Inc., and joint ventures
(including limited liability companies) in which JDN Realty Corporation, JDN
Development Company, Inc. or their subsidiaries own an interest.
THE COMPANY
The Company, which began operations in 1978, is a real estate development
company specializing in the development and asset management of retail shopping
centers anchored by value-oriented retailers. As of February 28, 1997, the
Company owned and operated, either directly or through affiliated entities or
joint ventures, 49 properties containing approximately 6.3 million square feet
of gross leasable area ("Company GLA") located in ten states, primarily in the
Southeast. The principal tenants of the Company's properties include Wal-Mart,
Lowe's, Kroger and Bruno's. The Company also owns 35 undeveloped parcels of land
containing a total of 123 acres which are available for ground leasing, tenant
expansion or future retail development.
The Company is one of the largest developers of Wal-Mart anchored shopping
centers in the United States. The Company and its founders have developed or
jointly developed 125 shopping center projects, 91 of which were built on
assignment from Wal-Mart, and have developed, sold or leased more than 140
outparcels.
The Company's business objective is to increase its funds from operations
by (i) development of new shopping centers anchored by strong retail tenants,
(ii) redevelopment and expansion of its existing properties, (iii) effective
leasing and management of its properties and ground leasing of adjacent
outparcels, and (iv) acquisition of existing shopping centers. The Company is a
fully integrated real estate firm with in-house development, redevelopment,
expansion, leasing, property management and acquisition expertise.
The seven members of the Company's senior management team have an average
of 11 years with the Company and each has significant experience in the real
estate industry. As of December 31, 1996, the executive officers and directors
of the Company beneficially owned approximately 10.1% of the Common Stock of the
Company.
RECENT DEVELOPMENTS
Development. During the quarter ended December 31, 1996, the Company's
development activities resulted in the following:
- In Canton, Georgia, the completion of a 238,000 square foot shopping
center anchored by a Wal-Mart Supercenter. As of December 31, 1996, the
project was 94.1% leased.
- In Greenville, North Carolina, the completion of a 324,000 square foot
power center anchored by Target (owned by Target), Kroger, T.J. Maxx,
Circuit City, Barnes & Noble, Reading China, Shoe Carnival, Dress Barn and
Chili's. As of December 31, 1996, the project was 94.8% leased.
- In Conyers, Georgia, the opening of Rhodes and Sport Shoe Expo. These
tenants represent 58,000 square feet of this 424,000 square foot power
center, which is anchored by a Wal-Mart Supercenter (owned by Wal-Mart)
and Home Depot (owned by Home Depot). As of December 31, 1996, the project
was 100.0% leased or committed.
- In Asheville, North Carolina, the opening of Food Lion, Carmike Cinemas,
Office Max and Michaels. These tenants represent 116,000 square feet of
this 188,000 square foot power center. As of December 31, 1996, the
project was 96.0% leased.
S-3
<PAGE> 4
The following is a summary of the Company's development projects which, as
of February 28, 1997, were under construction:
<TABLE>
<CAPTION>
TOTAL GLA COMPANY PERCENTAGE OF
(SQUARE GLA ESTIMATED TOTAL TOTAL GLA LEASED
LOCATION ANCHOR TENANTS FEET)(1) (SQUARE FEET) PROJECT COST OR COMMITTED(2)
-------- -------------- --------- ------------- --------------- ----------------
<S> <C> <C> <C> <C> <C>
Conyers, GA(3)........ Wal-Mart(4), Home Depot(4), 424,000 120,000 $ 7,310,000 100.0%
Rhodes, Petsmart, Goody's,
Sport Shoe Expo, Party
City(5)
Asheville, NC(6)...... Food Lion, Circuit City, 188,000 188,000 15,747,000 99.1
Carmike Cinemas, Goody's,
Office Max, Michaels
Warner Robins, GA..... Lowe's 156,000 156,000 10,688,000 89.7
Monaca, PA............ Lowe's 154,000 154,000 10,961,000 81.6
Cumming, GA........... Wal-Mart(5), Home Depot(4) 455,000 353,000 21,895,000 67.3
Winston-Salem, NC..... Wal-Mart 205,000 205,000 14,316,000 100.0
Greensboro, NC........ Target(4), Kohl's, 469,000 347,000 27,834,000 83.3
Kroger(5)(7), Home Place,
Baby Superstore, Petsmart,
Shoe Carnival(5)
Marietta, GA.......... Lowe's 151,000 151,000 12,435,000 88.0
Cordele, GA........... Wal-Mart(5) 176,000 176,000 9,464,000 85.2
Woodstock, GA......... Pike's Nurseries 12,000 12,000 2,400,000 100.0
Peachtree City, GA.... Pike's Nurseries 12,000 12,000 1,630,000 100.0
--------- --------- ------------ -----
Total or Average..... 2,402,000 1,874,000 $134,680,000 86.8%
========= ========= ============
<CAPTION>
PROJECTED OR ACTUAL
LOCATION TENANT OPENINGS
-------- ----------------------
<S> <C>
Conyers, GA(3)........ 3rd Qtr 96/3rd Qtr 97
Asheville, NC(6)...... 3rd Qtr 96/3rd Qtr 97
Warner Robins, GA..... 2nd Qtr 97
Monaca, PA............ 3rd Qtr 97/1st Qtr 98
Cumming, GA........... 3rd Qtr 97/1st Qtr 98
Winston-Salem, NC..... 2nd Qtr 97
Greensboro, NC........ 4th Qtr 97/1st Qtr 98
Marietta, GA.......... 4th Qtr 97/1st Qtr 98
Cordele, GA........... 4th Qtr 97/1st Qtr 98
Woodstock, GA......... 2nd Qtr 97
Peachtree City, GA.... 2nd Qtr 97
Total or Average.....
</TABLE>
- ---------------
(1) Represents Company GLA plus square footage of the project not owned by the
Company.
(2) Calculated by adding the square footage of executed leases with the Company,
square footage of leases that the Company expects to be leased by anchor
tenants, and the square footage of anchor tenants who will own their
portion of the project, and dividing this total by Total GLA.
(3) Project is owned by a joint venture that is 60% owned by the Company and 40%
owned by two unaffiliated third parties.
(4) Tenant will build and own its portion of the shopping center project.
(5) Anchor tenant has committed to lease but has not yet delivered a signed
lease agreement to the Company and, therefore, there can be no assurance
that a lease agreement with this tenant will be executed.
(6) Project is owned by a joint venture that is 50% owned by the Company and 50%
owned by an unaffiliated third party.
(7) The tenant has committed to lease the property pursuant to a ground lease.
S-4
<PAGE> 5
Leasing and Management. The following information represents results of
the Company's leasing and management activities:
- On a same property basis, annualized base rent per square foot increased
to $6.50 as of December 31, 1996 from $6.42 as of December 31, 1995.
- During the quarter ended December 31, 1996, the Company executed new
leases for 7,202 square feet at an average rental rate of $8.44 per square
foot.
- During the quarter ended December 31, 1996, contractual rental increases
averaging 5.2% went into effect under 56 tenant leases.
- The occupancy rate for the Company's operating portfolio of shopping
center projects was 98.2% as of December 31, 1996.
Tenant Information. The following table sets forth, as of December 31,
1996, certain information with respect to tenants which individually account for
more than 2% of annualized base rent:
<TABLE>
<CAPTION>
NUMBER COMPANY PERCENTAGE OF PERCENTAGE OF
OF STORES ADDITIONAL GLA ANNUALIZED COMPANY
TENANT LEASED STORES(1) (SQUARE FEET) BASE RENT GLA
------ --------- ---------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Wal-Mart........................ 17 10 1,776,775 21.2% 29.0%
Lowe's.......................... 7 1 714,007 10.7 11.6
Kroger.......................... 6 2 367,062 7.0 6.0
Bruno's......................... 7 0 365,613 5.1 6.0
Kmart........................... 4 0 389,564 4.1 6.4
Food Lion....................... 7 0 204,798 3.5 3.3
Winn-Dixie...................... 4 0 160,328 2.4 2.6
-- -- --------- ---- ----
Total................. 52 13 3,978,147 54.0% 64.9%
== == ========= ==== ====
</TABLE>
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(1) Represents additional tenant stores that are not owned by the Company but
are part of or adjacent to the Company's shopping center projects.
The following tables set forth, as of December 31, 1996, certain
information with respect to the type of tenant space leased by the Company:
<TABLE>
<CAPTION>
ANNUALIZED
COMPANY PERCENTAGE OF PERCENTAGE OF BASE RENT
GLA COMPANY ANNUALIZED ANNUALIZED PER LEASED
TYPE OF TENANT SPACE (SQUARE FEET) GLA BASE RENT BASE RENT SQUARE FOOT
-------------------- ------------- ------------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Anchor..................... 4,751,807 77.5% $28,183,910 68.1% $ 5.93
Non-Anchor Retail.......... 1,271,071 20.7 13,204,981 31.9 10.39
Unleased................... 111,752 1.8 0 0.0 0.00
--------- ----- ----------- ----- ------
Total or
Average........ 6,134,630 100.0% $41,388,891 100.0% $ 6.87
========= ===== =========== =====
</TABLE>
<TABLE>
<CAPTION>
ANNUALIZED
COMPANY PERCENTAGE OF PERCENTAGE OF BASE RENT
GLA COMPANY ANNUALIZED ANNUALIZED PER LEASED
TYPE OF TENANT SPACE (SQUARE FEET) GLA BASE RENT BASE RENT SQUARE FOOT
-------------------- ------------- ------------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C>
National................... 4,171,256 68.0% $26,543,218 64.1% $ 6.36
Regional................... 1,340,887 21.9 9,566,583 23.1 7.13
Local...................... 510,735 8.3 5,279,090 12.8 10.34
Unleased................... 111,752 1.8 0 0.0 0.00
--------- ----- ----------- ----- ------
Total or
Average........ 6,134,630 100.0% $41,388,891 100.0% $ 6.87
========= ===== =========== =====
</TABLE>
S-5
<PAGE> 6
Operating Results and Distributions. Funds from operations ("FFO")
increased 13.9% on a per share basis between the years ended December 31, 1996
and 1995 and 11.8% on a per share basis between the three months ended December
31, 1996 and 1995. The Company generally considers FFO a widely used and
appropriate measure of performance for an equity REIT which provides a relevant
basis for comparison among REITs. FFO is defined by the National Association of
Real Estate Investment Trusts, Inc. ("NAREIT") to mean net income computed in
accordance with generally accepted accounting principles excluding gains or
losses from debt restructuring and sales of property, plus depreciation and
amortization of real estate assets, and after adjustments for unconsolidated
partnerships and joint ventures. The Company's method of calculating FFO may be
different from methods used by other REITs and, accordingly, may not be
comparable to such other REITs. FFO does not represent cash flows from
operations as defined by generally accepted accounting principles, should not be
considered as an alternative to net income as an indicator of operating
performance and is not indicative of cash available to fund all cash flow needs.
The Company's payout ratio, based on funds available for distribution, has
decreased from 86.1% for the three months ended December 31, 1995 to 80.3% for
the three months ended December 31, 1996. The Company's payout ratio, based on
FFO, has decreased from 87.8% for the three months ended December 31, 1995 to
82.0% for the three months ended December 31, 1996.
On February 27, 1997, the Company's Board of Directors declared a quarterly
distribution of $0.475 per share, payable on March 31, 1997 to shareholders of
record on March 21, 1997. This distribution equals $1.90 per share on an
annualized basis.
Common Stock Offering. In November and December 1996, the Company issued
and sold 2,044,000 shares of Common Stock at a price to the public of $25.75 per
share. The Company used the net proceeds of approximately $49.9 million to repay
indebtedness under its $40.0 million revolving line of credit with Bankers Trust
Company (the "Bank Credit Facility") and to retire interim financing incurred to
fund the Company's development, redevelopment and acquisition activities. This
Common Stock offering positioned the Company to continue to pursue development,
redevelopment and acquisition opportunities.
As of December 31, 1996, the Company's ratio of total indebtedness to total
market capitalization was 28.2%. On a pro forma basis, giving effect to the
Offering and the application of the net proceeds therefrom as described in "Use
of Proceeds," the ratio of total indebtedness to total market capitalization
would be 15.1%. Management of the Company believes that this reduction in its
leverage level will provide additional capacity to use debt financing to fund
future development, redevelopment and acquisition opportunities.
Acquisitions. In December 1996, the Company acquired the Southland Plaza
Shopping Center in Decatur, Alabama for a purchase price of approximately $6.8
million. In February 1997, the Company acquired The Junction Shopping Center in
Jackson, Mississippi for a purchase price of approximately $9.1 million, $7.3
million of which represents the assumption of indebtedness.
Other Developments. The Company has agreed to purchase the interest of its
joint venture partner in the limited liability company that owns the Asheville,
North Carolina property upon completion of development. The Company is obligated
to purchase the interest of its joint venture partner in the limited liability
company that owns the Loganville, Georgia property under certain circumstances.
In December 1996, the Company entered into new employment agreements with
J. Donald Nichols, Elizabeth L. Nichols, William J. Kerley and David L. Henzlik.
In December 1996, the Company entered into a contract to purchase a
shopping center in Fayetteville, North Carolina, for $12.9 million which is to
close no sooner than January 29, 1998, and no later than February 28, 1998. In
connection with this acquisition agreement, the Company purchased a $10.5
million mortgage loan which bears interest at 11.0%, matures in January 1998,
and is secured by the Fayetteville shopping center. If the Company elects not to
purchase this property, then the borrower has certain rights to extend the term
of this loan for up to an additional year.
S-6
<PAGE> 7
THE OFFERING
<TABLE>
<S> <C>
Common Stock Offered hereby........................ 2,400,000 shares
Common Stock to be Outstanding after the
Offering......................................... 15,457,054 shares (1)
Use of Proceeds.................................... Primarily to repay indebtedness under the Bank
Credit Facility and to retire interim financing
incurred to fund the Company's development,
redevelopment and acquisition activities
NYSE Symbol........................................ JDN
</TABLE>
- ---------------
(1) Excludes 1,619,813 shares of Common Stock reserved for issuance under the
Company's 1993 Incentive Stock Plan and 1993 Non-Employee Director Stock
Option Plan, 498,390 shares of Common Stock reserved for issuance under the
Company's Dividend Reinvestment and Stock Purchase Plan, and 100,000 shares
of Common Stock reserved for issuance under the Company's 1995 Employee
Stock Purchase Plan.
USE OF PROCEEDS
The net proceeds from the sale of the shares of the Common Stock offered
hereby, after deducting underwriting discounts and commissions and estimated
expenses of this Offering, are approximately $65.9 million ($75.7 million if the
Underwriters' over-allotment option is exercised in full).
The Company intends to use the net proceeds primarily to repay amounts
outstanding under the Bank Credit Facility and to retire interim financing
incurred to fund the Company's development, expansion and acquisition
activities. The Company intends to use approximately $28.8 million of the net
proceeds to repay amounts outstanding under the Bank Credit Facility,
approximately $19.6 million of the net proceeds to repay an outstanding
construction loan related to its development project in Newnan, Georgia,
approximately $15.1 million of the net proceeds to repay an outstanding
construction loan related to its development project in Greenville, North
Carolina, approximately $1.5 million to repay an outstanding construction loan
related to the expansion of its Opelika, Alabama shopping center and the
remainder to fund its ongoing development, redevelopment and acquisition
activities.
The Bank Credit Facility had an outstanding principal balance of $28.8
million at February 28, 1997, bears interest at the 30-day Eurodollar plus 1.50%
(6.9375% at February 28, 1997) and matures in June 1998. The Newnan, Georgia
construction loan had an outstanding principal balance of $19.6 million at
February 28, 1997, bears interest at LIBOR plus 1.50% (6.9600% at February 28,
1997) and matures in August 1998. The Greenville, North Carolina construction
loan had an outstanding principal balance of $15.1 million at February 28, 1997,
bears interest at LIBOR plus 1.50% (6.9685% at February 28, 1997) and matures in
January 1999. The Opelika, Alabama construction loan had an outstanding
principal balance of $1.5 million at February 28, 1997, bears interest at LIBOR
plus 1.75% (6.9910% at February 28, 1997) and matures in December 1997.
If the Underwriters' over-allotment option is exercised in whole or in
part, any balance of the net proceeds will be used for one or more of the
following: (i) to repay amounts outstanding under the Bank Credit Facility, (ii)
to fund current development or acquisition projects, (iii) to develop and
acquire new properties or (iv) for working capital purposes.
S-7
<PAGE> 8
PRICE RANGE OF COMMON STOCK AND DISTRIBUTIONS
The Common Stock is listed on the NYSE under the symbol "JDN." The
following table sets forth the range of high and low sale prices on the NYSE for
the period from January 1, 1995 through March 5, 1997, and the distributions per
share declared by the Company for the periods indicated:
<TABLE>
<CAPTION>
DISTRIBUTIONS
HIGH LOW PER SHARE
------- ------- -------------
<S> <C> <C> <C>
1995
First Quarter....................................... $20.625 $18.375 $.4375
Second Quarter...................................... 21.125 18.000 .4550(1)
Third Quarter....................................... 22.375 19.625 .4550
Fourth Quarter...................................... 22.500 20.000 .4550
1996
First Quarter....................................... 24.250 20.625 .4550
Second Quarter...................................... 22.875 20.375 .4750(2)
Third Quarter....................................... 24.500 20.875 .4750
Fourth Quarter...................................... 27.625 23.750 .4750
1997
First Quarter (through March 5, 1997)............... 29.125 25.250 .4750
</TABLE>
- ---------------
(1) On May 24, 1995, the Company increased its quarterly distribution from
$.4375 to $.4550 per share.
(2) On June 11, 1996, the Company increased its quarterly distribution from
$.4550 to $.4750 per share.
On February 27, 1997, the Company's Board of Directors declared a quarterly
distribution of $.4750 per share, payable on March 31, 1997 to shareholders of
record on March 21, 1997. Purchasers of the Common Stock offered hereby who are
holders of record on March 21, 1997 will receive this distribution.
On March 5, 1997, the last reported sale price of the Common Stock on the
NYSE was $29 1/8 per share. As of February 28, 1997, there were approximately
347 holders of record of the Company's Common Stock. The Company's current
indicated annualized distribution is $1.90 per share. For the year ended
December 31, 1996, 16% of the Company's declared distributions were a return of
capital for federal income tax purposes and management believes that a portion
of the Company's distributions declared in 1997 to shareholders will be a return
of capital for federal income tax purposes.
The Company currently has a Dividend Reinvestment and Stock Purchase Plan
(the "Plan"), which permits shareholders to acquire additional shares of Common
Stock by automatically reinvesting cash distributions and making optional cash
purchases without payment of any broker commissions or service charges.
Shareholders who do not participate in the Plan continue to receive cash
distributions, as paid.
The Company intends to continue to pay regular quarterly distributions to
shareholders. Future distributions will be declared and paid at the discretion
of the Board of Directors and will depend upon cash generated by operating
activities, the Company's financial condition, capital requirements, annual
distribution requirements under the REIT provisions of the Internal Revenue Code
of 1986, as amended, and such other factors as the board of directors deems
relevant.
The Company anticipates that cash available for distribution will be
greater than earnings and profits, as a result of non-cash expenses, comprised
primarily of depreciation and amortization, to be incurred by the Company.
Distributions by the Company to the extent of its current accumulated earnings
and profits for federal income tax purposes will be taxable to shareholders as
ordinary dividend income. Distributions in excess of earnings and profits
generally will be treated as non-taxable return of capital. Such distributions
have the effect of deferring taxation until the sale of a shareholder's Common
Stock. In order to maintain its qualification as a REIT, the Company must make
annual distributions to shareholders of at least 95% of its taxable income.
Under certain circumstances, which management of the Company does not expect to
occur, the Company could be required to make distributions in excess of cash
available for distribution in order to meet such requirements.
S-8
<PAGE> 9
UNDERWRITING
Subject to the terms and conditions set forth in the underwriting agreement
(the "Underwriting Agreement"), the Company has agreed to sell to each of the
Underwriters named below and each of the Underwriters has severally agreed to
purchase from the Company, the number of shares of Common Stock set forth
opposite the name of such Underwriter.
<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES
----------- ----------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated................................... 1,200,000
A.G. Edwards & Sons, Inc. .................................. 1,200,000
---------
Total.......................................... 2,400,000
=========
</TABLE>
The Underwriting Agreement provides that the obligation of the Underwriters
to pay for and accept delivery of the Common Stock is subject to approval of
certain legal matters by counsel and to certain other conditions. The
Underwriters are obligated to take and pay for all shares of Common Stock
offered hereby (other than those covered by the over-allotment option described
below) if any such shares are taken.
The Underwriters propose to offer the Common Stock directly to the public
at the public offering price set forth on the cover page of this Prospectus
Supplement and to certain dealers at such price less a concession not in excess
of $.90 per share. The Underwriters may allow, and such dealers may reallow, a
concession not in excess of $.10 per share to certain dealers.
The Company has granted to the Underwriters an option exercisable for 30
days after the date of this Prospectus Supplement to purchase up to 360,000
additional shares of Common Stock to cover over-allotments, if any, at the
public offering price less the underwriting discount set forth on the cover page
of this Prospectus Supplement. If the Underwriters exercise this option, each
Underwriter will have a firm commitment, subject to certain conditions, to
purchase approximately the same percentage thereof which the number of shares of
Common Stock to be purchased by it shown in the foregoing table bears to the
total number of shares of Common Stock initially offered hereby.
Subject to certain exceptions, the Company, certain of its executive
officers and directors have agreed that, for a period of 30 days from the date
of this Prospectus Supplement, they will not, without the prior written consent
of Merrill Lynch, Pierce, Fenner & Smith Incorporated, offer, sell, contract to
sell or otherwise dispose of any Common Stock or any security convertible into
or exercisable or exchangeable for Common Stock.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as amended,
or to contribute to payments the Underwriters may be required to make in respect
thereof.
In connection with the Offering the Underwriters are permitted to engage in
certain transactions that stabilize the price of the Common Stock. Such
transactions consist of bids or purchases for the purpose of pegging, fixing or
maintaining the price of the Common Stock.
If the Underwriters create a short position in the Common Stock in
connection with the Offering, i.e., if they sell more shares of Common Stock
than are set forth on the cover page of this Prospectus Supplement, the
Underwriters may reduce that short position by purchasing Common Stock in the
open market. The Underwriters may also select to reduce any short position by
exercising all or part of the over-allotment option described above.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases.
Neither the Company nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Common Stock. In addition, neither
the Company nor any of the Underwriters makes any representation that the
Underwriters will engage in such transactions or that such transactions, once
commenced, will not be discontinued without notice.
S-9
<PAGE> 10
LEGAL MATTERS
The validity of the shares of Common Stock offered by this Prospectus
Supplement will be passed upon for the Company by Waller Lansden Dortch & Davis,
A Professional Limited Liability Company, Nashville, Tennessee. In addition, the
description of federal income tax consequences contained in the section of the
accompanying Prospectus entitled "Federal Income Tax Considerations" is based
upon the opinion of Waller Lansden Dortch & Davis, A Professional Limited
Liability Company. Certain matters of Maryland law will be passed upon for the
Company by Brown & Wood, LLP, Washington, D.C.
Certain legal matters relating to the Offering will be passed upon for the
Underwriters by Hogan & Hartson L.L.P., Washington, D.C.
ADDITIONAL AVAILABLE INFORMATION
The Securities and Exchange Commission (the "SEC") maintains a web site
(http://www.sec.gov) that contains reports, proxy and information statements and
other information regarding registrants such as the Company which file
electronically with the SEC.
S-10
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PROSPECTUS
JDN REALTY CORPORATION
$200,000,000
COMMON STOCK, COMMON STOCK WARRANTS, PREFERRED STOCK AND DEBT SECURITIES
JDN Realty Corporation (the "Company") operates as a real estate
investment trust ("REIT") under the Internal Revenue Code of 1986, as amended,
and may from time to time offer in one or more series (i) shares of common
stock, par value $.01 per share (the "Common Stock"), (ii) warrants to purchase
Common Stock (the "Common Stock Warrants"), (iii) shares of preferred stock, par
value $.01 per share (the "Preferred Stock"), or (iv) debt securities (the "Debt
Securities"), with an aggregate public offering price of up to $200,000,000 (or
the equivalent thereof in foreign currencies or currency units) in amounts, at
prices and on terms to be determined at the time of any such offering. The
Company may offer the Common Stock, Common Stock Warrants, Preferred Stock, and
Debt Securities (collectively, the "Securities") from time to time, separately
or together, in separate series, in amounts, at prices and on terms to be set
forth in supplements to this Prospectus (each a "Prospectus Supplement").
The specific terms of the 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 Common Stock, the specific
number of shares and issuance price per share; (ii) in the case of Common Stock
Warrants, the duration, offering price, exercise price and detachability; (iii)
in the case of Preferred Stock, the specific number of shares, designation, any
dividend, liquidation, redemption, conversion, voting and other rights, and any
initial public offering price; and (iv) in the case of Debt Securities, the
specific title, aggregate principal amount, currency, form (which may be
registered or bearer, or certificated or global), authorized denominations,
maturity, rate (or manner of calculation thereof) and time of payment of
interest, terms for redemption at the option of the Company or repayment at the
option of the holder, terms for any sinking fund payments, terms for conversion
into Common Stock, Preferred Stock or Debt Securities of another series, and any
initial public offering price. In addition, such specific terms may include
limitations on direct or beneficial ownership and restrictions on transfer of
the Securities, in each case as may be appropriate to preserve the status of the
Company as a REIT for federal income tax purposes.
The applicable Prospectus Supplement will also contain information, where
applicable, about certain federal income tax considerations relating to, and any
listing on a securities exchange of, the Securities covered by such Prospectus
Supplement.
The Securities may be offered directly, through agents designated from time
to time by the Company, or to or through underwriters or dealers. If any agents
or underwriters are involved in the sale of any of the 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 Securities may be sold without delivery of the applicable
Prospectus Supplement describing the method and terms of the offering of such
series of Securities.
------------------------
SEE "RISK FACTORS" FOR CERTAIN INFORMATION THAT SHOULD BE CONSIDERED BY
PROSPECTIVE INVESTORS.
------------------------
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.
------------------------
THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF SECURITIES UNLESS
ACCOMPANIED BY A PROSPECTUS SUPPLEMENT.
------------------------
THE DATE OF THIS PROSPECTUS IS MAY 11, 1995
<PAGE> 12
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, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company can be inspected and
copied at the public reference facilities of the Commission at Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the following Regional
Offices of the Commission: Midwest Regional Office, Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511; Northeast Regional
Office, 7 World Trade Center, Suite 1300, New York, New York 10048. Copies of
such material may be obtained from the Public Reference Section of the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549 at prescribed rates. Copies of such materials and other information
concerning the Company also will be available for inspection at The New York
Stock Exchange, Inc., 20 Broad Street, New York, New York 10005.
The Company has filed with the Commission a Registration Statement on Form
S-3 (the "Registration Statement") under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to the Securities. The Prospectus and any
accompanying Prospectus Supplement do not contain all of the information
included in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. For further
information with respect to the Company and the Securities, reference is hereby
made to the Registration Statement, including the exhibits and schedules
thereto. Statements contained in this Prospectus and any accompanying Prospectus
Supplement concerning the provisions or contents of any contract, agreement or
any other document referred to herein are not necessarily complete. With respect
to each such contract, agreement or document filed as an exhibit to the
Registration Statement, reference is made to such exhibit for a more complete
description of the matters involved, and each such statement shall be deemed
qualified in its entirety by such reference to the copy of the applicable
document filed with the Commission. The Registration Statement, including the
exhibits and schedules thereto, may be inspected without charge at the
Commission's principal office at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and copies of it or any part thereof may be obtained from
such office, upon payment of the fees prescribed by the Commission.
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<PAGE> 13
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following document which has previously been filed by the Company with
the Commission under the Exchange Act (File No. 1-12844) is incorporated herein
by reference: the Annual Report on Form 10-K for the year ended December 31,
1994.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering of the Securities made hereby shall be deemed to be
incorporated in this Prospectus by reference and to be a part hereof from the
date of filing of such documents. Any statement contained herein, or 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 subsequently filed document
which also is or is deemed to be incorporated by reference herein, modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus is delivered, on the written
request of any such person, a copy of any or all of the documents incorporated
herein by reference, except the exhibits to such documents (unless such exhibits
are specifically incorporated by reference in such documents). Requests for such
copies should be directed to the Company, at 3340 Peachtree Road, Suite 1530,
Atlanta, Georgia 30326, Attention: Investor Relations, (404) 262-3252.
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THE COMPANY
JDN Realty Corporation (the "Company") is a fully integrated,
self-administered and self-managed real estate company that operates as a REIT.
The Company develops, redevelops, acquires, leases and manages power and
community shopping centers located primarily in the southeastern United States.
As of March 31, 1995, the Company owned and operated 39 shopping center
properties containing approximately 4.2 million square feet of gross leasable
area.
The Company is one of the largest developers of Wal-Mart anchored shopping
centers in the United States. The Company expects to continue to develop power
and community shopping centers in close cooperation with Wal-Mart, Lowe's Home
Centers and other major anchor tenants. The Company credits much of its success
to its strong relationships with national, regional and local tenants, financing
sources and other real estate companies, which it has developed during its years
of operations. The Company continuously works to improve existing tenant
relationships and to develop new tenant relationships.
USE OF PROCEEDS
Unless otherwise specified in the Prospectus Supplement accompanying this
Prospectus, the Company intends to use the net proceeds from the sale of the
Securities for general corporate purposes, which may include the development,
redevelopment and acquisition of shopping center properties as suitable
opportunities arise, the expansion and improvement of certain properties in the
Company's portfolio and the repayment of outstanding indebtedness.
Pending such uses, net proceeds of any offering of Securities will be
invested in short-term, investment grade instruments, interest-bearing bank
accounts or certificates of deposit, consistent with the Company's qualification
as a REIT, the Company's Articles of Incorporation, as amended (the "Articles of
Incorporation") and the Company's agreements with its lenders.
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<PAGE> 15
RISK FACTORS
In addition to the other information in this Prospectus, the following
factors should be considered carefully in evaluating an investment in the
Securities offered by this Prospectus.
SIGNIFICANT RELIANCE ON MAJOR TENANTS
As of December 31, 1994, approximately 49% of the gross leasable area owned
and leasable by the Company ("Company GLA") was leased to Wal-Mart, Kmart,
Lowe's Home Centers and Winn-Dixie, and approximately 39% of total base rents
was attributable to these tenants. At December 31, 1994, Wal-Mart occupied
approximately 26% of the Company GLA, and for the year ended December 31, 1994,
Wal-Mart accounted for 20% of the Company's total minimum rent. No other single
tenant accounts for more than 10% of Company GLA or more than 10% of base rents.
The Company could be adversely affected and distributions could be reduced in
the event of the bankruptcy or insolvency of, or a downturn in the business of,
any of such tenants, or if any of such tenants is unable to pay its rent as it
becomes due or does not renew its leases as they expire.
DEPENDENCE ON AND INFLUENCE OF PRINCIPALS, DIRECTORS AND EXECUTIVE OFFICERS
The Company is dependent on the efforts of its principals, J. Donald
Nichols and Elizabeth L. Nichols (collectively, the "Principals"), and its other
executive officers. The loss of their services could have an adverse effect on
the operations of the Company. The Principals and William J. Kerley are the only
executive officers of the Company who have entered into employment agreements
with the Company.
The Principals, each of whom is a director and an executive officer, and
the other directors and executive officers of the Company have substantial
influence on the affairs of the Company, including the ability of the directors
to amend the investment and financing policies of the Company without a vote of
the holders of the Common Stock. Any such amendments could result in decisions
that are detrimental to the value of the Company.
RISK OF LEVERAGE AND DEFAULT; RISK OF BALLOON PAYMENTS OF DEBT
The Company is subject to the risks normally associated with debt
financing, including the risk that the Company's cash provided by operating
activities will be insufficient to meet required payments of principal and
interest, the risk that the Company will not be able to pay or refinance
indebtedness on its properties or that the terms of a refinancing will not be as
favorable as the terms of existing indebtedness.
If prevailing interest rates or other factors at the time of refinancing
result in higher interest rates on refinancing, the Company's interest expense
would increase, which would adversely affect the Company's cash provided by
operating activities and its ability to make distributions or payments to
holders of the Securities. In addition, in the event the Company were unable to
secure refinancing of such indebtedness on acceptable terms, the Company might
be forced to dispose of properties upon disadvantageous terms, which might
result in losses to the Company and might adversely affect the Company's funds
from operations. In addition, if a property or properties are mortgaged to
secure payment of indebtedness and the Company is unable to meet mortgage
payments, the property could be foreclosed upon by or otherwise transferred to
the mortgagee with a consequent loss of income and asset value to the Company.
The Company's present policy prohibits incurring debt (secured or
unsecured) in excess of 60% of total market capitalization. This limitation can
be changed by the Board of Directors without approval of the holders of the
Common Stock. The Articles of Incorporation and Bylaws of the Company do not
limit the amount of borrowings the Company can incur.
GENERAL REAL ESTATE INVESTMENT RISKS
General. Real property investments are subject to varying degrees of risk.
Real estate values and the income generated from real estate investments may be
affected by a number of factors, including changes in the general economic
climate, local conditions (such as an oversupply of or a reduction in demand for
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<PAGE> 16
shopping center space in an area), the quality and philosophy of management,
competition from other available space, the ability of the owner to provide
adequate maintenance and insurance and variable operating costs (including real
estate taxes). Real estate values and the income from real properties are also
affected by such factors as the costs associated with government regulations,
interest rate levels, the availability of financing and potential liability
under and changes in environmental and other laws. Since substantially all of
the Company's income is derived from rental income from real property, the
Company's income would be adversely affected if a significant number of the
Company's tenants were unable to meet their obligations to the Company, or if
the Company were unable to lease on economically favorable terms a significant
amount of space in its properties. In the event of default by a tenant, the
Company may experience delays in enforcing, and incur substantial costs to
enforce, its rights as landlord. In addition, certain significant expenditures
associated with ownership of real estate (such as mortgage payments, real estate
taxes and maintenance costs) are generally not reduced when circumstances cause
a reduction in income from the investment.
Operating Risks. The Properties are subject to all operating risks common
to shopping center developments. Such risks include: competition from other
shopping center developments; excessive building of comparable properties or
increases in unemployment in the areas in which the Company's properties are
located, either of which might adversely affect occupancy or rental rates;
increases in operating costs due to inflation and other factors, which increases
may not necessarily be offset by increased rents; inability or unwillingness of
lessees to pay rent increases; and future enactment of laws regulating public
places, including present and possible future laws relating to access by
disabled persons. If operating expenses increase, the local rental market may
limit the extent to which rents may be increased to meet increased expenses
without decreasing occupancy rates. If any of the above occurred, the Company's
ability to make distributions or payments to holders of the Securities could be
adversely affected. The operations of each shopping center in the Company's
portfolio are subject to competition from similar shopping centers in their
respective locations.
Illiquidity of Real Estate. Equity real estate investments are relatively
illiquid and therefore may tend to limit the ability of the Company to react
promptly in response to changes in economic or other conditions. Further, the
Internal Revenue Code of 1986, as amended (the "Code"), places limits on a
REIT's ability to sell properties held for fewer than four years, which may
affect the Company's ability to sell properties without adversely affecting
returns to holders of the Securities. The Company intends to hold its properties
as long-term investments and does not have any present intent to sell any of its
properties.
Ability to Rent Unleased Space. The ability of the Company to rent
unleased space is affected by many factors, including certain covenants
restricting the use of other space at a property found in certain leases with
tenants in shopping centers. In addition, the Company may incur costs in making
improvements or repairs to a property required by a new tenant.
Effect of Uninsured Loss on Performance. The Company carries comprehensive
liability, fire, flood, extended coverage and rental loss insurance with respect
to its properties with policy specifications and insured limits customarily
carried for similar properties. There are, however, certain types of losses
(such as from wars or earthquakes) are either uninsurable or insurable only at
costs which are not economically justifiable. Should an uninsured loss occur,
the Company could lose both its invested capital in, and anticipated profits
from, the property and would continue to be obligated to repay any recourse
mortgage indebtedness on the property.
Competition. There are numerous commercial developers, real estate
companies and other owners of real estate, including those that operate in the
region in which the Company's properties are located, that compete with the
Company in seeking land for development, properties for acquisition and tenants
for properties. Certain of these competitors may have greater capital and other
resources than the Company.
Potential Environmental Liability and Cost of Remediation. Under various
federal, state and local environmental laws, ordinances and regulations, an
owner of real property may be liable for the costs of removal or remediation of
certain hazardous or toxic substances at, under or disposed of in connection
with such property, as well as certain other potential costs relating to
hazardous or toxic substances (including government fines and injuries to
persons and adjacent property). These laws often impose such liability without
regard to whether the owner knew of, or was responsible for, the presence or
disposal of such substances and may be imposed on the owner in connection with
the activities of an operator of the property.
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The cost of any required remediation, removal, fines or personal or property
damages and the owner's liability therefor could exceed the value of the
property. In addition, the presence of such substances, or the failure to
properly dispose of or remediate such substances, may adversely affect the
owner's ability to sell or rent such property or to borrow using such property
as collateral which, in turn, would reduce the owner's revenues.
Americans with Disabilities Act. The Company's properties and any
additional developments or acquisitions must comply with Title III of the
Americans with Disabilities Act (the "ADA"). Compliance with ADA requirements
could require removal of structural, architectural or communication barriers to
handicapped access and utilization in certain public areas of the Company's
properties. Noncompliance could result in injunctive relief, imposition of fines
or an award of damages to private litigants. If changes are required to bring
any of the properties into compliance with the ADA, the Company's ability to
make expected distributions could be adversely affected. The Company believes
that its competitors face similar costs to comply with the requirements of the
ADA.
RISKS INHERENT IN DEVELOPMENT AND ACQUISITION ACTIVITIES
Developing or expanding existing shopping centers is an integral part of
the Company's strategy for maintaining and enhancing the value of its shopping
center portfolio. While the Company's policies with respect to its activities
are intended to limit some of the risks otherwise associated with those
activities (including not commencing construction on a project prior to signing
a lease with an anchor tenant), the Company nevertheless will incur certain
risks, including risks related to delays in construction and lease-up, costs of
materials, financing availability, volatility in interest rates, labor
availability, and the failure of properties to perform as expected.
LIMITATIONS ON POTENTIAL CHANGES IN CONTROL
Certain provisions of the Company's Articles of Incorporation and Bylaws
and Maryland law may make a change in the control of the Company more difficult,
even if a change of control were in the shareholders' interest. These provisions
include the limitation on ownership of the Company's capital stock by any single
holder (other than the Principals, their immediate family and certain
affiliates) to (a) 8% of either the number or the value of the outstanding
shares of Common Stock and (b) 8% of either the number or the value of the
outstanding shares of Preferred Stock, the staggered terms of the Company's
Board of Directors, super-majority voting and business combination provisions
and the ability of the Board of Directors to issue Preferred Stock without
shareholder approval.
ADVERSE CONSEQUENCES OF FAILURE TO QUALIFY AS A REIT
Tax Liabilities of Failure to Qualify as a REIT. The Company is treated
for federal income tax purposes as a REIT under the Code. No assurance can be
given that the Company will continue to operate in a manner enabling it to
remain so qualified. Qualification as a REIT involves the application of highly
technical and complex Code provisions which have only a limited number of
judicial or administrative interpretations, and the determination of various
factual matters and circumstances not entirely within the Company's control may
impact its ability to qualify as a REIT. In addition, no assurance can be given
that new legislation, regulations, administrative interpretations or court
decisions will not significantly change the tax laws with respect to the
qualification as a REIT or the federal income tax consequences of such
qualification.
If in any taxable year the Company does not qualify as a REIT, it would be
taxed as a corporation and distributions to the holders of the Capital Stock
would not be deductible by the Company in computing its taxable income. In
addition, unless entitled to relief under certain statutory provisions, the
Company will also be disqualified from treatment as a REIT for the four taxable
years following the year during which qualification was lost. This treatment
would reduce the net earnings of the Company available for investment or
distribution or payment to holders of the Securities because of the additional
tax liability to the Company for the year or years involved. In addition, the
Company would no longer be required by the Code to make any distributions.
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To qualify as a REIT, the Company will be required to distribute at least
95% of its taxable income to its shareholders each year. Possible timing
differences between receipt of income and payment of expenses, and the inclusion
and deduction of such amounts in determining taxable income, could require the
Company to reduce its dividends below the level necessary to maintain its
qualification as a REIT, which would have material adverse tax consequences. See
"Federal Income Tax Considerations."
Other REIT Taxes. Although qualified to be taxed as a REIT, certain
transactions or other events could lead to the Company being taxed at rates
ranging from 4% to 100% on certain income or gains.
RATIO OF EARNINGS TO FIXED CHARGES
The Company's ratio of earnings to fixed charges for the year ended
December 31, 1994 was 1.64.
For purposes of computing this ratio, earnings have been calculated by
adding fixed charges (excluding capitalized interest) to income (loss) before
income tax benefit, net gain (loss) on real estate sales, extraordinary items
and cumulative effect of change in accounting principle. Fixed charges consist
of interest costs, whether expensed or capitalized, and amortization of deferred
debt costs.
Prior to completion of the Company's initial public offering of its common
stock on March 29, 1994, the Company and its predecessor businesses were
privately held and operated in a manner to minimize net taxable income and to
fund any operating cash flow deficits through the sale of shopping center
properties. As a result, although the Company historically generated positive
cash flow, it had net losses for the years ended December 31, 1993, 1992, 1991,
and 1990. Consequently, the computation of the ratio of earnings to fixed
charges for such years indicates that earnings were inadequate to cover fixed
charges by approximately $1.2 million, $1.8 million, $6.4 million, and $9.9
million for the years ended December 31, 1993, 1992, 1991, and 1990,
respectively.
The proceeds from the initial public offering and related transactions
permitted the Company to significantly deleverage many shopping center
properties, resulting in a significantly higher ratio of earnings to fixed
charges for periods subsequent to March 1994.
DESCRIPTION OF CAPITAL STOCK
The Company is authorized to issue an aggregate of 170,000,000 shares of
capital stock, which includes 150,000,000 shares of Common Stock and 20,000,000
shares of Preferred Stock. As of March 15, 1995, 7,530,844 shares of Common
Stock were outstanding and no shares of Preferred Stock were outstanding.
RESTRICTIONS ON OWNERSHIP
For the Company to qualify as a REIT under the Code in any taxable year,
(i) not more than 50% in value of its outstanding capital stock may be owned,
directly or indirectly (after application of certain complex attribution rules),
by five or fewer individuals (as defined in the Code) at any time during the
last half of its taxable year, and (ii) its stock must be beneficially owned by
100 or more persons during at least 335 days of a taxable year of 12 months or
during a proportionate part of a shorter taxable year. In order to ensure that
requirement (i) above is satisfied, the Board of Directors shall refuse to
transfer shares of the Common Stock to any person whose acquisition of such
shares would result in the direct or indirect ownership of more than 8% either
in number or value of the outstanding Common Stock and to transfer shares of
Preferred Stock to any person whose acquisition of such shares would result in
the direct or indirect ownership of more than 8% either in number or value.
In connection with the foregoing, if the Board of Directors shall, at any
time and in good faith, believe that direct or indirect ownership (as determined
under applicable federal tax attribution rules) of at least 8% or more either in
number or value of the outstanding capital stock has or may become concentrated
in the hands of one beneficial owner (other than the Principals), their family
and certain affiliates), the Board of Directors shall refuse to transfer or
issue capital stock, to a person whose acquisition of such capital stock would
cause a beneficial holder to hold in excess of 8% in value of the outstanding
capital stock, subject to
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certain exceptions specified in the Articles of Incorporation. Further, any
transfer of capital stock that would create a beneficial owner of more than 8%
of the outstanding capital stock (other than to the Principals, their family and
certain affiliates, and certain exceptions specified in the Articles of
Incorporation) shall be deemed void and the intended transferee shall be deemed
never to have had an interest therein. As of March 15, 1995, the Principals,
members of their family and certain affiliates beneficially owned in excess of
8% in value of the outstanding Common Stock of the Company and may continue to
do so. The Principals, members of their family and certain affiliates may
acquire additional shares of Common Stock but not such that any five individuals
(as defined in the Code), taking into account the 8% limit, would beneficially
own more than 49.9% of the Company's outstanding Common Stock.
The Board of Directors is entitled to waive the ownership limit with
respect to a particular stockholder if evidence satisfactory to the Board of
Directors and the Company's tax counsel is presented that such ownership will
not then or in the future jeopardize the Company's status as a REIT. As a
condition of such waiver, the Board of Directors may require opinions of counsel
satisfactory to it and/or an undertaking from the stockholder with respect to
preserving the REIT status of the Company.
If at any time there is a transfer in violation of such restrictions, those
shares of outstanding capital stock in excess of 8% either in number or value of
the Company's outstanding Common Stock, and those shares of outstanding
Preferred Stock in excess of 8% either in number or value of the Company's
outstanding Preferred Stock, subject to the foregoing exceptions ("Excess
Shares"), shall be deemed to have been transferred to the Company, as trustee
for the benefit of such persons to whom the Excess Shares are later transferred.
Subject to the Company's right to purchase the Excess Shares, the interest in
the trust representing the Excess Shares shall be freely transferable by the
intended transferee at a price that does not exceed the price paid by the
intended transferee for the Excess Shares. Excess Shares shall have no voting
rights, and shall not be considered for the purpose of any shareholder vote or
determining a quorum, but shall continue to be reflected as issued and
outstanding stock. No dividends shall be paid with respect to Excess Shares. The
Company shall have the right to purchase Excess Shares for the lesser of the
amount paid by the intended transferee for the Excess Shares or the market
price. The market price for any capital stock so purchased, shall be equal to
the fair market value of such Excess Shares reflected in (i) the closing sales
price for the capital stock, if then listed on only one national securities
exchange, or (ii) the average closing sales price of such capital stock if then
listed on more than one national securities exchange, or (iii) if the capital
stock is not then listed on a national securities exchange, the latest bid
quotation for the capital stock if then traded over-the-counter, as of the day
immediately preceding the date on which notices of such purchase are sent by the
Company. If no such closing sales prices or quotations are available, the
purchase price shall equal the net asset value of such capital stock as
determined by the Board of Directors in good faith.
All persons who own a specified percentage (or more) of the outstanding
capital stock of the Company must file a certificate with the Company containing
information regarding their ownership of stock as set forth in the Treasury
Regulations. Under current Treasury Regulations, the percentage is set between
one-half of one percent and five percent, depending on the number of record
holders of stock. In addition, each stockholder shall upon demand be required to
disclose to the Company in writing such information with respect to the direct,
indirect, and constructive ownership of shares of stock of the Company as the
Board of Directors deems necessary to comply with the provisions of the Code
applicable to a REIT or to comply with the requirements of any taxing authority
or governmental agency.
All certificates representing shares of capital stock bear a legend
referring to the restrictions described above.
DESCRIPTION OF COMMON STOCK
The Company is authorized to issue 150,000,000 shares of Common Stock. As
of March 15, 1995, 7,530,844 shares of Common Stock were outstanding, held by
192 record holders.
The following description of the Common Stock sets forth certain general
terms and provisions of the Common Stock to which any Prospectus Supplement may
relate, including a Prospectus Supplement
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providing that Common Stock will be issuable upon conversion of Debt Securities
or Preferred Stock of the Company or upon the exercise of Common Stock Warrants
issued by the Company. The statements below describing the Common Stock are in
all respects subject to and qualified in their entirety by reference to the
applicable provisions of the Articles of Incorporation.
Holders of shares of Common Stock are entitled to receive such dividends as
the Board of Directors may declare out of funds legally available for the
payment of dividends. Upon issuance, the shares of Common Stock will be fully
paid and nonassessable and have no preferences or conversion, exchange or
preemptive rights. In the event of any liquidation, dissolution or winding-up of
the Company, the holders of shares of Common Stock are entitled to share ratably
in any of the Company's assets remaining after the satisfaction of all
obligations and liabilities of the Company and after required distributions to
holders of Preferred Stock, if any. Each share is entitled to one vote on all
matters voted upon by the holders of Common Stock. Holders of shares of Common
Stock have no cumulative voting rights.
EXCHANGE LISTING
The Company's Common Stock is listed on the New York Stock Exchange under
the symbol JDN.
BUSINESS COMBINATIONS
Under the Maryland General Corporation Law, certain "business combinations"
(including a merger, consolidation, share exchange, or, in certain
circumstances, an asset transfer or issuance of equity securities) between a
Maryland corporation and any person who beneficially owns 10% or more of the
corporation's stock (an "Interested Shareholder") must be: (a) recommended by
the corporation's board of directors; and (b) approved by the affirmative vote
of at least (i) 80% of the corporation's outstanding shares entitled to vote and
(ii) two-thirds of the outstanding shares entitled to vote which are not held by
the Interested Shareholder with whom the business combination is to be effected,
unless, among other things, the corporation's holders of capital stock 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. In addition, an Interested Shareholder or affiliate
thereof may not engage in a business combination with the corporation for a
period of five years following the most recent date the person became an
Interested Shareholder. These provisions of Maryland law do not apply, however,
to business combinations that are approved by the board of directors of a
Maryland corporation prior to a person's becoming an Interested Shareholder.
CONTROL SHARE ACQUISITIONS
The Maryland General Corporation Law provides that "control shares" of a
Maryland corporation acquired in a "control share acquisition" may not be voted
except to the extent approved by a vote of two-thirds of all the corporation's
shares entitled to vote on the matter, excluding shares owned by the acquirer,
officers and directors who are also employees of the corporation. "Control
shares" are shares which, if aggregated with all other shares owned by the
person or in respect of which that person is entitled to exercise or direct the
exercise of voting power, except solely by virtue of a revocable proxy, would
entitle the acquirer to vote (i) 20% or more but less than one-third, (ii)
one-third or more but less than a majority, or (iii) a majority or more of the
outstanding shares entitled to vote. Control shares do not include shares which
the acquiring person is entitled to vote because the required shareholder
approval has previously been obtained. A "control share acquisition" means the
acquisition of control shares, subject to certain exceptions.
A person who has made or proposes to make a control share acquisition and
who has undertaken to reimburse certain expenses of the corporation and has
obtained a definitive financing agreement with a responsible financial
institution providing for any amount of financing not to be provided by the
acquiring person may compel the corporation's board of directors to call a
special meeting of shareholders to be held within 50 days of demand to consider
the voting rights of the shares. If no request for a meeting is made, the
corporation may itself present the question at any shareholders meeting.
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Subject to certain conditions and limitations, if the voting rights of the
control shares were considered and not approved, the corporation may redeem any
or all of the control shares, except those for which voting rights have
previously been approved, for fair value determined, without regard to absence
of voting rights, as of the date of the last control share acquisition by the
acquirer or as of the date of any meeting of shareholders at which the voting
rights of such shares are considered and not approved. If voting rights for
control shares are approved at a shareholders meeting and the acquirer is
entitled to vote a majority of the shares entitled to vote, all other
shareholders may exercise appraisal rights, unless the articles of incorporation
or bylaws of the corporation provide otherwise prior to the control share
acquisition. 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
acquiring person in the control share acquisition. Certain limitations and
restrictions otherwise applicable to the exercise of dissenter's rights do not
apply in the context of a control share acquisition.
The control share acquisition statute does not apply to shares acquired in
a merger, consolidation or share exchange if the corporation is a party to the
transaction, or to the acquisitions approved or exempted by the Articles of
Incorporation or bylaws of the Corporation prior to a control share acquisition.
The limitation on ownership of the Company's Stock set forth in the
Articles of Incorporation, as well as the provisions of Maryland law described
above, could have the effect of discouraging offers to acquire the Company and
of increasing the difficulty of consummating any such offer.
DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
The Company has reserved 500,000 shares of Common Stock for issuance under
its Dividend Reinvestment and Stock Purchase Plan (the "Plan") to provide record
owners of the Company's Common Stock with a method of investing dividends and
other distributions paid in cash in additional shares of the Company's Common
Stock. The Company may issue original issue shares under the Plan or, from time
to time, direct First Union National Bank of North Carolina, as the Company's
agent under the Plan, to repurchase shares of the Company's Common Stock in the
open market for sale under the Plan. To the extent shares of Common Stock
purchased under the Plan are purchased from the Company, the Company will
receive additional funds to be used for its general corporate purposes.
RESTRICTIONS ON OWNERSHIP
The Common Stock is subject to certain restrictions on ownership described
above under "Description of Capital Stock -- Restrictions on Ownership".
TRANSFER AGENT
The transfer agent and registrar for the Company's Common Stock is First
Union National Bank of North Carolina ("First Union").
DESCRIPTION OF COMMON STOCK WARRANTS
The Company may issue Common Stock Warrants for the purchase of Common
Stock. Common Stock Warrants may be issued independently or together with any
other Securities offered pursuant to any Prospectus Supplement and may be
attached to or separate from such Securities. Each series of Common Stock
Warrants will be issued under a separate warrant agreement (each, a "Warrant
Agreement") to be entered into between the Company and the warrant recipient or,
if the recipients are numerous, a warrant agent identified in the applicable
Prospectus Supplement (the "Warrant Agent"). The Warrant Agent, if engaged, will
act solely as an agent of the Company in connection with the Common Stock
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 Common Stock
Warrants. Further terms of the Common Stock Warrants and the applicable Warrant
Agreements will be set forth in the Prospectus Supplement.
The applicable Prospectus Supplement will describe the terms of any Common
Stock Warrants in respect of which this Prospectus is being delivered,
including, where applicable, the following: (1) the title of such
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Common Stock Warrants; (2) the aggregate number of such Common Stock Warrants;
(3) the price or prices at which such Common Stock Warrants will be issued; (4)
the designation, number and terms of the shares of Common Stock purchasable upon
exercise of such Common Stock Warrants; (5) the designation and terms of the
other Securities with which such Common Stock Warrants are issued and the number
of such Common Stock Warrants issued with such offered Securities; (6) the date,
if any, on and after which such Common Stock Warrants and the related Common
Stock will be separately transferable; (7) the price at which each share of
Common Stock purchasable upon exercise of such Common Stock Warrants may be
purchased; (8) the date on which the right to exercise such Common Stock
Warrants shall commence and the date on which such right shall expire; (9) the
minimum or maximum amount of such Common Stock Warrants which may be exercised
at any one time; (10) information with respect to book-entry procedures, if any;
(11) a discussion of certain federal income tax considerations relevant to a
holder of such Common Stock Warrants; and (12) any other terms of such Common
Stock Warrants, including terms, procedures and limitations relating to the
exchange and exercise of such Common Stock Warrants.
Reference is made to the section captioned "Description of Common Stock"
for a general description of the Common Stock to be acquired upon the exercise
of the Common Stock Warrants. Additionally, the section captioned "Description
of Capital Stock" includes a description of certain restrictions on transfer of
the Common Stock.
DESCRIPTION OF PREFERRED STOCK
GENERAL
The Company is authorized to issue 20,000,000 shares of Preferred Stock,
par value $.01 per share, none of which were outstanding as of March 15, 1995.
The following description of the Preferred Stock sets forth anticipated
certain general terms and provisions of the Preferred Stock to which any
Prospectus Supplement may relate. Certain other terms of any series of Preferred
Stock (which terms may be different than those stated below) will be described
in the Prospectus Supplement to which such series relates. The statements below
describing the Preferred Stock are in all respects subject to and qualified in
their entirety by reference to the applicable provisions of the Prospectus
Supplement and Articles of Incorporation (including the amendment describing the
designations, rights, and preferences of each series of Preferred Stock) and
Bylaws.
Subject to limitations prescribed by Maryland law and the Articles of
Incorporation, the Company's Board of Directors is authorized to fix the number
of shares constituting each series of Preferred Stock and the designations and
powers, preferences and relative, participating, optional or other special
rights and qualifications, limitations or restrictions thereof, including such
provisions as may be desired concerning voting, redemption, dividends,
dissolution or the distribution of assets, conversion or exchange, and such
other subjects or matters as may be fixed by resolution of the Board of
Directors or the duly authorized committee thereof. The Preferred Stock will,
when issued, be fully paid and nonassessable and will have no preemptive rights.
Reference is made to the Prospectus Supplement relating to the Preferred
Stock offered thereby for specific terms, including: (1) the title and stated
value of such Preferred Stock; (2) the number of shares of such Preferred Stock
offered, the liquidation preference per share and the offering price of such
Preferred Stock; (3) the dividend rate(s), period(s) and or payment date(s) or
method(s) of calculation thereof applicable to such Preferred Stock; (4) the
date from which dividends on such Preferred Stock shall accumulate, if
applicable; (5) the procedures for any auction and remarketing, if any, for such
Preferred Stock; (6) the provision for a sinking fund, if any, for such
Preferred Stock; (7) the provisions for redemption, if applicable, of such
Preferred Stock; (8) any listing of such Preferred Stock on any securities
exchange; (9) the terms and conditions, if applicable, upon which such Preferred
Stock will be convertible into Common Stock, including the conversion price (or
manner of calculation thereof); (10) a discussion of certain federal income tax
considerations relevant to a holder of such Preferred Stock; (11) the relative
ranking and preferences of such Preferred Stock as to dividend rights and rights
upon liquidation, dissolution or winding up
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of the affairs of the Company; (12) any limitations on issuance of any series of
Preferred Stock ranking senior to or on a parity with such series of Preferred
Stock as to dividend rights and rights upon liquidation, dissolution or winding
up of the affairs of the Company; (13) any limitations on direct or beneficial
ownership and restrictions on transfer, in each case as may be appropriate to
preserve the status of the Company as a REIT and (14) any other specific terms,
preferences, rights, limitations or restrictions of such Preferred Stock.
RANK
Unless otherwise specified in the Prospectus Supplement, the Preferred
Stock 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 Stock of the Company, and to all equity and debt securities
which are specifically designated as ranking junior to such Preferred Stock with
respect to dividend rights or rights upon liquidation, dissolution or winding up
of the Company; (ii) on a parity with all equity and debt securities issued by
the Company the terms of which specifically provide that such equity and debt
securities rank on a parity with the Preferred Stock with respect to dividend
rights or rights upon liquidation, dissolution or winding up of the Company; and
(iii) junior to all equity and debt securities issued by the Company the terms
of which specifically provide that such equity and debt securities rank senior
to the Preferred Stock with respect to dividend rights or rights upon
liquidation, dissolution or winding up of the Company.
DIVIDENDS
Holders of shares of the Preferred Stock of each series shall be entitled
to receive, when, as and if declared by the Board of Directors of the Company,
out of assets of the Company legally available for payment, cash dividends (or
dividends in kind or in other property if expressly permitted and described in
the applicable Prospectus Supplement) at such rates and on such dates as will be
set forth in the applicable Prospectus Supplement. Each such dividend shall be
payable to holders of record as they appear on the stock transfer books of the
Company on such record dates as shall be fixed by the Board of Directors of the
Company.
Dividends on any series of the Preferred Stock 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
Prospectus Supplement. If the Board of Directors of the Company fails to declare
a dividend payable on a dividend payment date on any series of the Preferred
Stock for which dividends are noncumulative, then the holders of such series of
the Preferred Stock 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.
Unless otherwise specified in the applicable Prospectus Supplement, if any
shares of the Preferred Stock of any series are outstanding, no full dividends
shall be declared or paid or set apart for payment on the Preferred Stock of the
Company of any other series ranking, as to dividends, on a parity with or junior
to the Preferred Stock of such series for any period unless full dividends
(which include all unpaid dividends in the case of cumulative dividend Preferred
Stock) 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 Stock 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 shares of Preferred Stock of any series
and the shares of any other series of Preferred Stock ranking on a parity as to
dividends with the Preferred Stock of such series, all dividends declared upon
shares of Preferred Stock of such series and any other series of Preferred Stock
ranking on a parity as to dividends with such Preferred Stock shall be declared
pro rata among the holders of such series. No interest, or sum of money in lieu
of interest, shall be payable in respect of any dividend payment or payments on
Preferred Stock of such series which may be in arrears.
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Until required dividends are paid, no dividends (other than in Common Stock
or other capital stock ranking junior to the Preferred Stock 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 Stock or
any other capital stock of the Company ranking junior to or on a parity with the
Preferred Stock of such series as to dividends or upon liquidation, nor shall
any Common Stock or any other capital stock of the Company ranking junior to or
on a parity with the Preferred Stock 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 shares of any such stock) by the Company (except by conversion
into or exchange for other capital stock of the Company ranking junior to the
Preferred Stock of such series as to dividends and upon liquidation).
Any dividend payment made on shares of a series of Preferred Stock shall
first be credited against the earliest accrued but unpaid dividend due with
respect to shares of Preferred Stock of such series which remains payable.
REDEMPTION
If so provided in the applicable Prospectus Supplement, the shares of
Preferred Stock 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 Stock that is
subject to mandatory redemption will specify the number of shares of such
Preferred Stock 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 Stock does not have a cumulative dividend, include
any accumulation in respect of unpaid dividends for prior dividend periods) to
the date of redemption. The redemption price may be payable in cash or other
property, as specified in the Prospectus Supplement. If the redemption price for
Preferred Stock of any series is payable only from the net proceeds of the
issuance of capital stock of the Company, the terms of such Preferred Stock may
provide that, if no such capital stock 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 Stock shall automatically and
mandatorily be converted into shares of the applicable capital stock of the
Company pursuant to conversion provisions specified in the applicable Prospectus
Supplement.
So long as any dividends on shares of any series of the Preferred Stock of
the Company ranking on a parity as to dividends and distributions of assets with
such series of the Preferred Stock are in arrears, no shares of any such series
of the Preferred Stock of the Company will be redeemed (whether by mandatory or
optional redemption) unless all such shares are simultaneously redeemed, and the
Company will not purchase or otherwise acquire any such shares; provided,
however, that the foregoing will not prevent the purchase or acquisition of such
shares of Preferred Stock to preserve the REIT status of the Company or pursuant
to a purchase or exchange offer made on the same terms to holders of all
outstanding shares of Preferred Stock of such series and, unless the full
cumulative dividends on all outstanding shares of any cumulative Preferred Stock
of such series and any other stock of the Company ranking on a parity with such
series as to dividends and upon liquidation shall have been paid or
contemporaneously are declared and paid for all past dividend periods, the
Company shall not purchase or otherwise acquire directly or indirectly any
shares of Preferred Stock of such series (except by conversion into or exchange
for stock of the Company ranking junior to the Preferred Stock of such series as
to dividends and upon liquidation); provided, however, that the foregoing will
not prevent the purchase or acquisition of such shares of Preferred Stock to
preserve the REIT status of the Company or pursuant to a purchase or exchange
offer made on the same terms to holders of all outstanding shares of Preferred
Stock of such series.
If fewer than all of the outstanding shares of Preferred Stock 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 such shares in proportion to the number of such shares held
by such holders
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(with adjustments to avoid redemption of fractional shares) or any other
equitable method determined by the Company that will not result in the issuance
of any Excess Shares.
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 a share of Preferred
Stock of any series to be redeemed at the address shown on the stock transfer
books of the Company. If notice of redemption of any shares of Preferred Stock
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 shares of
Preferred Stock so called for redemption, then from and after the redemption
date dividends will cease to accrue on such shares of Preferred Stock, such
shares of Preferred Stock shall no longer be deemed outstanding 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 Common Stock, or any other class or series of capital
stock of the Company ranking junior to the Preferred Stock in the distribution
of assets upon any liquidation, dissolution or winding up of the Company, the
holders of each series of Preferred Stock shall be entitled to receive out of
assets of the Company legally available for distribution to shareholders
liquidating distributions in the amount of the liquidation preference per share
(set forth in the applicable Prospectus Supplement), plus an amount equal to all
dividends accrued and unpaid thereon (which shall not include any accumulation
in respect of unpaid dividends for prior dividend periods if such Preferred
Stock does not have a cumulative dividend). After payment of the full amount of
the liquidating distributions to which they are entitled, the holders of shares
of Preferred Stock 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 legally available assets of the
Company are insufficient to pay the amount of the liquidating distributions on
all outstanding shares of Preferred Stock and the corresponding amounts payable
on all shares of other classes or series of capital stock of the Company ranking
on a parity with the Preferred Stock in the distribution of assets upon
liquidation, dissolution or winding up, then the holders of the Preferred Stock
and all other such classes or series of capital stock 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
shares of Preferred Stock, the remaining assets of the Company shall be
distributed among the holders of any other classes or series of capital stock
ranking junior to the Preferred Stock upon liquidation, dissolution or winding
up, according to their respective rights and preferences and in each case
according to their respective number of shares.
VOTING RIGHTS
Holders of the Preferred Stock will not have any voting rights, except as
set forth below or as otherwise from time to time required by law or as
indicated in the applicable Prospectus Supplement.
Any series of Preferred Stock may provide that, so long as any shares of
such series of Preferred Stock remain outstanding, the holders of such series
may vote as a separate class on certain specified matters, which may include
changes in the Company's capitalization, amendments to the Articles of
Incorporation, and mergers and dispositions.
The foregoing voting provisions will not apply if, at or prior to the time
when the act with respect to which such vote would otherwise be required shall
be effected, all outstanding shares of such series of Preferred Stock shall have
been redeemed or called for redemption upon proper notice and sufficient funds
shall have been irrevocably deposited in trust to effect such redemption.
The provisions of a series of Preferred Stock may provide for additional
rights, remedies, and privileges if dividends on such series are in arrears for
specified periods, which rights and privileges will be described in the
applicable Prospectus Supplement.
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Under Maryland law, notwithstanding anything to the contrary set forth
above, holders of each series of Preferred Stock will be entitled to vote upon a
proposed amendment to the Articles of Incorporation, whether or not entitled to
vote thereon by the Articles of Incorporation, if the amendment would alter the
contract rights, as set forth in the Articles of Incorporation, of their shares
of stock.
CONVERSION RIGHTS
The terms and conditions, if any, upon which shares of any series of
Preferred Stock are convertible into Common Stock will be set forth in the
applicable Prospectus Supplement relating thereto. Such terms will include the
number of shares of Common Stock into which the Preferred Stock is 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 Stock 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 Stock.
RESTRICTIONS ON OWNERSHIP
The Preferred Stock is subject to certain restrictions on ownership
described above under "Description of Capital Stock -- Restrictions on
Ownership".
DESCRIPTION OF DEBT SECURITIES
The Company may issue Debt Securities under one or more trust indentures
(each an "Indenture") to be executed by the Company and one or more trustees
(each a "Trustee") meeting the requirements of a trustee under the Trust
Indenture Act of 1939, as amended (the "TIA"). The Indentures will be qualified
under the TIA.
The following description sets forth certain anticipated general terms and
provisions of the Debt Securities to which any Prospectus Supplement may relate.
The particular terms of the Debt Securities offered by any Prospectus Supplement
(which terms may be different than those stated below) and the extent, if any,
to which such general provisions may apply to the Debt Securities so offered
will be described in the Prospectus Supplement relating to such Debt Securities.
Accordingly, for a description of the terms of a particular issue of Debt
Securities, reference must be made to both the Prospectus Supplement relating
thereto and the following description. Forms of the Senior Indenture (as defined
herein) and the Subordinated Indenture (as defined herein) have been filed as
exhibits to the Registration Statement of which this Prospectus is a part.
GENERAL
The Debt Securities will be direct obligations of the Company and may be
either senior Debt Securities ("Senior Securities") or subordinated Debt
Securities ("Subordinated Securities"). The indebtedness represented by
Subordinated Securities will be subordinated in right of payment to the prior
payment in full of the Senior Debt (as defined in the applicable Indenture) of
the Company. Senior Securities and Subordinated Securities will be issued
pursuant to separate indentures (respectively, a "Senior Indenture" and a
"Subordinated Indenture"), in each case between the Company and a Trustee.
Except as set forth in the applicable Indenture and described in a
Prospectus Supplement relating thereto, the Debt Securities may be issued
without limit as to aggregate principal amount, in one or more series, secured
or unsecured, in each case as established from time to time in or pursuant to
authority granted by a resolution of the Board of Directors of the Company or as
established in the applicable Indenture. All Debt Securities of one series need
not be issued at the same time and, unless otherwise provided, a series may be
reopened, without the consent of the holders of the Debt Securities of such
series, for issuances of additional Debt Securities of such series.
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The Prospectus Supplement relating to any series of Debt Securities being
offered will contain the specific terms thereof, including, without limitation:
(1) the title of such Debt Securities and whether such Debt Securities
are Senior Securities or Subordinated Securities;
(2) the aggregate principal amount of such Debt Securities and any
limit on such aggregate principal amount;
(3) the percentage of the principal amount at which such Debt
Securities will be issued and, if other than the principal amount thereof,
the portion of the principal amount thereof payable upon declaration of
acceleration of the maturity thereof, or (if applicable) the portion of the
principal amount of such Debt Securities which is convertible into Common
Stock or Preferred Stock, or the method by which any such portion shall be
determined;
(4) if convertible, any applicable limitations on the ownership or
transferability of the Common Stock or Preferred Stock into which such Debt
Securities are convertible;
(5) the date or dates, or the method for determining such date or
dates, on which the principal of such Debt Securities will be payable;
(6) the rate or rates (which may be fixed or variable), or the method
by which such rate or rates shall be determined, at which such Debt
Securities will bear interest, if any;
(7) the date or dates, or the method for determining such date or
dates, from which any interest will accrue, the interest payment dates on
which any such interest will be payable, the regular record dates for such
interest payment dates, or the method by which any such date shall be
determined, the person to whom such interest shall be payable, and the
basis upon which interest shall be calculated if other than that of a
360-day year of twelve 30-day months;
(8) the place or places where the principal of (and premium, if any)
and interest, if any, on such Debt Securities will be payable, such Debt
Securities may be surrendered for conversion or registration of transfer or
exchange and notices or demands to or upon the Company in respect of such
Debt Securities and the applicable Indenture may be served;
(9) the period or periods within which, the price or prices at which
and the terms and conditions upon which such Debt Securities may be
redeemed, as a whole or in part, at the option of the Company, if the
Company is to have such an option;
(10) the obligation, if any, of the Company to redeem, repay or
purchase such Debt Securities pursuant to any sinking fund or analogous
provision or at the option of a holder thereof, and the period or periods
within which, the price or prices at which and the terms and conditions
upon which such Debt Securities will be redeemed, repaid or purchased, as a
whole or in part, pursuant to such obligation;
(11) if other than U.S. dollars, the currency or currencies in which
such Debt Securities are denominated and payable, which may be a foreign
currency or units of two or more foreign currencies or a composite currency
or currencies, and the terms and conditions relating thereto;
(12) whether the amount of payments of principal of (and premium, if
any) or interest, if any, on such Debt Securities may be determined with
reference to an index, formula or other method (which index, formula or
method may, but need not be, based on a currency, currencies, currency unit
or units or composite currency or currencies) and the manner in which such
amounts shall be determined;
(13) any additions to, modifications of or deletions from the terms of
such Debt Securities with respect to the Events of Default or covenants set
forth in the Indenture;
(14) any provisions for collateral security for repayment of such Debt
Securities;
(15) whether such Debt Securities will be issued in certificated
and/or book-entry form;
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(16) whether such Debt Securities will be in registered or bearer form
and, if in registered form, the denominations thereof if other than $1,000
and any integral multiple thereof and, if in bearer form, the denominations
thereof and terms and conditions relating thereto;
(17) the applicability, if any, of defeasance and covenant defeasance
provisions of the applicable Indenture;
(18) the terms, if any, upon which such Debt Securities may be
convertible into Common Stock or Preferred Stock of the Company and the
terms and conditions upon which such conversion will be effected,
including, without limitation, the initial conversion price or rate and the
conversion period;
(19) whether and under what circumstances the Company will pay
additional amounts as contemplated in the Indenture on such Debt Securities
in respect of any tax, assessment or governmental charge and, if so,
whether the Company will have the option to redeem such Debt Securities in
lieu of making such payment; and
(20) any other terms of such Debt Securities not inconsistent with the
provisions of the applicable Indenture.
The Debt Securities may provide for less than the entire principal amount
thereof to be payable upon declaration of acceleration of the maturity thereof
("Original Issue Discount Securities"). Special federal income tax, accounting
and other considerations applicable to Original Issue Discount Securities will
be described in the applicable Prospectus Supplement.
Except as set forth in the applicable Indenture, the applicable Indenture
will not contain any provisions that would limit the ability of the Company to
incur indebtedness or that would afford Holders of Debt Securities protection in
the event of a highly leveraged or similar transaction involving the Company or
in the event of a change of control. Restrictions on ownership and transfers of
the Company's Common Stock and Preferred Stock are designed to preserve its
status as a REIT and, therefore, may act to prevent or hinder a change of
control. See "Description of Capital Stock -- Restrictions on Ownership."
Reference is made to the applicable Prospectus Supplement for information with
respect to any deletions from, modifications of or additions to the Events of
Default or covenants of the Company that are described below, including any
addition of a covenant or other provision providing event risk or similar
protection.
MERGER, CONSOLIDATION OR SALE
It is expected that the Indenture will provide that the Company may
consolidate with, or sell, lease or convey all or substantially all of its
assets to, or merge with or into, any other corporation, provided that (a)
either the Company shall be the continuing corporation, or the successor
corporation (if other than the Company) formed by or resulting from any such
consolidation or merger or which shall have received the transfer of such assets
shall expressly assume payment of the principal of (and premium, if any), and
interest on, all of the applicable Debt Securities and the due and punctual
performance and observance of all of the covenants and conditions contained in
the applicable Indenture; (b) immediately after giving effect to such
transaction and treating any indebtedness which becomes an obligation of the
Company or any subsidiary as a result thereof as having been incurred by the
Company or such subsidiary at the time of such transaction, no Event of Default
under the applicable Indenture, and no event which, after notice or the lapse of
time, or both, would become such an Event of Default, shall have occurred and be
continuing; and (c) an officer's certificate and legal opinion covering such
conditions shall be delivered to the Trustee.
COVENANTS
The Indenture will contain covenants requiring the Company to take certain
actions and prohibiting the Company from taking certain actions. The covenants
with respect to any series of Debt Securities will be described in the
Prospectus Supplement relating thereto.
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EVENTS OF DEFAULT, NOTICE AND WAIVER
Each Indenture will described specific "Events of Defaults" with respect to
any series of Debt Securities issued thereunder. Such "Events of Defaults" are
likely to include (with grace and cure periods): (i) default in the payment of
any installment of interest on any Debt Security of such series; (ii) default in
the payment of principal of (or premium, if any, on) any Debt Security of such
series at its maturity; (iii) default in making any required sinking fund
payment for any Debt Security of such series; (iv) default in the performance or
breach of any other covenant or warranty of the Company contained in the
applicable Indenture (other than a covenant added to the Indenture solely for
the benefit of a series of Debt Securities issued thereunder other than such
series), continued for a specified period of days after written notice as
provided in the applicable Indenture; (v) default in the payment of specified
amounts of indebtedness of the Company or any mortgage, indenture or other
instrument under which such indebtedness is issued or by which such indebtedness
is secured, such default having occurred after the expiration of any applicable
grace period and having resulted in the acceleration of the maturity of such
indebtedness, but only if such indebtedness is not discharged or such
acceleration is not rescinded or annulled and (vi) certain events of bankruptcy,
insolvency or reorganization, or court appointment of a receiver, liquidator or
trustee of the Company or any Significant Subsidiary or either of its property.
If an Event of Default under any Indenture with respect to Debt Securities
of any series at the time outstanding occurs and is continuing, then in every
such case the applicable Trustee or the holders of not less than 25% of the
principal amount of the outstanding Debt Securities of that series will have the
right to declare the principal amount (or, if the Debt Securities of that series
are Original Issue Discount Securities or indexed securities, such portion of
the principal amounts may be specified in the terms thereof) of all the Debt
Securities of that series to be due and payable immediately by written notice
thereof to the Company (and to the applicable Trustee if given by the holders).
However, at any time after such a declaration of acceleration with respect to
Debt Securities of such series (or of all Debt Securities then outstanding under
any Indenture, as the case may be) has been made, but before a judgment or
decree for payment of the money due has been obtained by the applicable Trustee,
the holders of not less than a majority in principal amount of outstanding Debt
Securities of such series (or of all Debt Securities then outstanding under the
applicable Indenture, as the case may be) may rescind and annul such declaration
and its consequences if (a) the Company shall have deposited with the applicable
Trustee all required payments of the principal of (and premium, if any) and
interest on the Debt Securities of such series (or of all Debt Securities then
outstanding under the applicable Indenture, as the case may be), plus certain
fees, expenses, disbursements and advances of the applicable Trustee and (b) all
events of default, other than the non-payment of accelerated principal (or
specified portion thereof), with respect to Debt Securities of such series (or
of all Debt Securities then outstanding under the applicable Indenture, as the
case may be) have been cured or waived as provided in such Indenture. Each
Indenture also will provide that the holders of not less than a majority in
principal amount of the outstanding Debt Securities of any series (or of all
Debt Securities then outstanding under the applicable Indenture, as the case may
be) may waive any past default with respect to such series and its consequences,
except a default (x) in the payment of the principal of (or premium, if any) or
interest on any Debt Security of such series or (y) in respect of a covenant or
provision contained in the applicable Indenture that cannot be modified or
amended without the consent of the holder of each outstanding Debt Security
affected thereby.
Each Trustee will be required to give notice to the holders of Debt
Securities within 90 days of a default under the applicable Indenture unless
such default shall have been cured or waived; provided, however, that such
Trustee may withhold notice to the holders of any series of Debt Securities of
any default with respect to such series (except a default in the payment of the
principal of (or premium, if any) or interest on any Debt Security of such
series or in the payment of any sinking fund installment in respect of any Debt
Security of such series) if specified responsible officers of such Trustee
consider such withholding to be in the interest of such holders.
Each Indenture will provide that no holders of Debt Securities of any
series may institute any proceedings, judicial or otherwise, with respect to
such Indenture or for any remedy thereunder, except in the cases of failure of
the applicable Trustee, for 60 days, to act after it has received a written
request to institute proceedings in respect of a Event of Default from the
holders of not less than 25% in principal amount of the
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outstanding Debt Securities of such series, as well as an offer of indemnity
reasonably satisfactory to it. This provision will not prevent, however, any
holder of Debt Securities from instituting suit for the enforcement of payment
of the principal of (and premium, if any) and interest on such Debt Securities
at the respective due dates thereof.
Subject to provisions in each Indenture relating to its duties in case of
default, no Trustee will be under any obligation to exercise any of its rights
or powers under an Indenture at the request or direction of any holders of any
series of Debt Securities then outstanding under such Indenture, unless such
holders shall have offered to the Trustee thereunder reasonable security or
indemnity. The holders of not less than a majority in principal amount of the
outstanding Debt Securities of any series (or of all Debt Securities then
outstanding under an Indenture, as the case may be) shall have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the applicable Trustee, or of exercising any trust or power
conferred upon such Trustee. However, a Trustee may refuse to follow any
direction which is in conflict with any law or the applicable Indenture, which
may involve such Trustee in personal liability or which may be unduly
prejudicial to the holders of Debt Securities of such series not joining
therein.
Within 120 days after the close of each fiscal year, the Company will be
required to deliver to each Trustee a certificate, signed by one of several
specified officers, stating whether or not such officer has knowledge of any
default under the applicable Indenture and, if so, specifying each such default
and the nature and status thereof.
MODIFICATION OF THE INDENTURES
It is anticipated that modifications and amendments of an Indenture may be
made by the Company and the Trustee, with the consent of the holders of not less
than a majority in aggregate principal amount of each series of the outstanding
Debt Securities issued under the Indenture which are affected by the
modification or amendment, provided that no such modification or amendment may,
without a consent of each holder of such Debt Securities affected thereby: (1)
change the stated maturity date of the principal of (or premium, if any) or any
installment of interest, if any, on anysuch Debt Security; (2) reduce the
principal amount of (or premium, if any) or the interest, if any, on any such
Debt Security or the principal amount due upon acceleration of an Original Issue
Discount Security; (3) change the place or currency of payment of principal of
(or premium, if any) or interest, if any, on any such Debt Security; (4) impair
the right to institute suit for the enforcement of any such payment on or with
respect to any such Debt Security; (5) reduce the above-stated percentage of
holders of Debt Securities necessary to modify or amend the Indenture; or (6)
modify the foregoing requirements or reduce the percentage of outstanding Debt
Securities necessary to waive compliance with certain provisions of the
Indenture or for waiver of certain defaults. A record date may be set for any
act of the holders with respect to consenting to any amendment.
The holders of not less than a majority in principal amount of outstanding
Debt Securities of each series affected thereby will have the right to waive
compliance by the Company with certain covenants in such Indenture.
Each Indenture will contain provisions for convening meetings of the
holders of Debt Securities of a series to take permitted action.
REDEMPTION OF SECURITIES
The Indenture will provide that the Debt Securities may be redeemed at any
time at the option of the Company, in whole or in part, for certain reasons
intended to protect the Company's status as a REIT. Debt Securities may also be
subject to optional or mandatory redemption on terms and conditions described in
the applicable Prospectus Supplement.
From and after notice has been given as provided in the Indenture, if funds
for the redemption of any Debt Securities called for redemption shall have been
made available on such redemption date, such Debt Securities will cease to bear
interest on the date fixed for such redemption specified in such notice, and the
only right of the holders of the Debt Securities will be to receive payment of
the Redemption Price.
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CONVERSION OF SECURITIES
The terms and conditions, if any, upon which the Debt Securities are
convertible into Common Stock or Preferred Stock will be set forth in the
applicable Prospectus Supplement relating thereto. Such terms will include
whether such Debt Securities are convertible into Common Stock or Preferred
Stock, the conversion price (or manner of calculation thereof), the conversion
period, provisions as to whether conversion will be at the option of the holders
or the Company, the events requiring an adjustment of the conversion price and
provisions affecting conversion in the event of the redemption of such Debt
Securities and any restrictions on conversion, including restrictions directed
at maintaining the Company's REIT status.
SUBORDINATION
Upon any distribution to creditors of the Company in a liquidation,
dissolution or reorganization, the payment of the principal of and interest on
any Subordinated Securities will be subordinated to the extent provided in the
applicable Indenture in right of payment to the prior payment in full of all
Senior Securities. No payment of principal or interest will be permitted to be
made on Subordinated Securities at any time if a default in Senior Securities
exists that permits the Holders of such Senior Securities to accelerate their
maturity and the default is the subject of judicial proceedings or the Company
receives notice of the default. After all Senior Securities are paid in full and
until the Subordinated Securities are paid in full, Holders of Subordinated
Securities will be subrogated to the right of Holders of Senior Securities to
the extent that distributions otherwise payable to Holders of Subordinated
Securities have been applied to the payment of Senior Securities. By reason of
such subordination, in the event of a distribution of assets upon insolvency,
certain general creditors of the Company may recover more, ratably, than Holders
of Subordinated Securities. If this Prospectus is being delivered in connection
with a series of Subordinated Securities, the accompanying Prospectus Supplement
or the information incorporated herein by reference will contain the approximate
amount of Senior Securities outstanding as of the end of the Company's most
recent fiscal quarter.
FEDERAL INCOME TAX CONSIDERATIONS
INTRODUCTION
The Company believes that it has qualified and intends to remain qualified
to be taxed as a REIT for federal income tax purposes under Sections 856 through
860 of the Code, commencing with the taxable period beginning March 26, 1994 and
ending December 31, 1994. The following discussion addresses the material tax
considerations relevant to the taxation of the Company and summarizes certain
federal income tax consequences that may be relevant to certain shareholders.
However, the actual tax consequences of holding particular Securities being
issued by the Company may vary in light of a prospective Securities holder's
particular facts and circumstances. Certain holders, such as tax-exempt
entities, insurance companies and financial institutions, are generally subject
to special rules. In addition, the following discussion does not discuss issues
under any foreign, state or local tax laws. The tax treatment of a holder of any
of the Securities offered by Prospectus Supplements will vary depending upon the
terms of the specific Securities acquired by such holder, as well as his
particular situation, and this discussion does not attempt to address aspects of
federal income taxation relating to holders of particular Securities. Certain
federal income tax considerations relevant to holders of the particular
Securities will be provided in the applicable Prospectus Supplement relating
thereto. Waller Lansden Dortch & Davis has acted as tax counsel to the Company
in connection with the filing of this Prospectus. This summary is qualified in
its entirety by the applicable Code provisions, rules and regulations
promulgated thereunder, and administrative and judicial interpretations thereof.
No rulings have been obtained or are expected to be obtained from the IRS
concerning any of the matters discussed herein. It should be noted that the
Code, rules, regulations, and administrative and judicial interpretations are
all subject to change (possibly on a retroactive basis).
EACH INVESTOR IS ADVISED TO CONSULT THE APPLICABLE PROSPECTUS SUPPLEMENT,
AS WELL AS WITH HIS OWN TAX ADVISOR, REGARDING THE TAX CONSEQUENCES TO HIM OF
THE ACQUISITION, OWNERSHIP AND SALE OF THE OFFERED SECURITIES,
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INCLUDING THE FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES OF SUCH
ACQUISITION, OWNERSHIP AND SALE AND OF POTENTIAL CHANGES IN APPLICABLE TAX LAWS.
It is the opinion of Waller Lansden Dortch & Davis that the Company is
organized and is operating in conformity with the requirements for qualification
and taxation as a REIT commencing with the Company's taxable year ending
December 31, 1994, and its method of operation will enable it to continue to
meet the requirements for qualification and taxation as a REIT under the Code.
It must be emphasized that this opinion is based on various assumptions and is
conditioned upon certain representations made by the Company as to factual
matters including, but not limited to, those set forth below in this discussion
of "Federal Income Tax Considerations" and those concerning its business and
properties as set forth in this Prospectus. Moreover, such qualification and
taxation as a REIT depends upon the Company's ability to meet, through actual
annual operating results, the various income, asset, distribution, stock
ownership and other tests discussed below, the results of which will not be
reviewed by Waller Lansden Dortch & Davis. Accordingly, no assurance can be
given that the actual results of the Company's operations for any one taxable
year will satisfy such requirements.
If the Company initially failed to elect or qualify for taxation as a REIT
or ceases to qualify as a REIT, and the relief provisions do not apply, the
Company's income that is distributed to shareholders would be subject to the
"double taxation" on earnings (once at the corporate level and again at the
shareholder level) that generally results from investment in a corporation.
Failure to qualify and to maintain qualification as a REIT would force the
Company to reduce significantly its distributions and possibly incur substantial
indebtedness or liquidate substantial investments in order to pay the resulting
corporate taxes. In addition, the Company, once having obtained REIT status and
having lost such status, would not be eligible to elect REIT status for the four
subsequent taxable years, unless its failure to maintain its qualification was
due to reasonable cause and not willful neglect, and certain other requirements
were satisfied. In order to elect to again be taxed as a REIT, just as with the
original election, the Company would be required to distribute all of its
earnings and profits accumulated in any non-REIT taxable year.
TAXATION OF THE COMPANY
If the Company qualifies for taxation as a REIT, it generally will not be
subject to federal income taxes on that portion of its ordinary income or
capital gain that is currently distributed to shareholders.
However, the Company will be subject to federal income tax as follows:
First, the Company will be taxed at regular corporate rates on any undistributed
"real estate investment trust taxable income," including undistributed net
capital gains. Second, under certain circumstances, the Company may be subject
to the "alternative minimum tax" on its items of tax preference, if any. Third,
if the Company has (i) net income from the sale or other disposition of
"foreclosure property" that is held primarily for sale to customers in the
ordinary course of business, or (ii) other nonqualifying income from foreclosure
property, it will be subject to tax on such income at the highest corporate
rate. Fourth, any net income that the Company has from prohibited transactions
(which are, in general, certain sales or other dispositions of property other
than foreclosure property held primarily for sale to customers in the ordinary
course of business) will be subject to a 100% tax. Fifth, if the Company should
fail to satisfy either the 75% or 95% gross income tests (as discussed below),
and has nonetheless maintained its qualification as a REIT because certain other
requirements have been met, it will be subject to a 100% tax on the net income
attributable to the greater of the amount by which the Company fails the 75% or
95% gross income tests. Sixth, if the Company fails to distribute during each
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 preceding periods, then the Company will be
subject to a four percent excise tax on the excess of such required distribution
over the amounts actually distributed. Seventh, to the extent that the Company
recognizes gain from the disposition of an asset with respect to which there
existed "built-in gain" as of January 1, 1994 and such disposition occurs within
a 10-year recognition period beginning January 1, 1994, the Company will be
subject to federal income tax at the highest regular corporate rate on the
amount of its "net recognized built-in gain." Because the Company was a C
corporation owning real property through 1993, prior to its S election effective
January 1,
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1994 and its subsequent election to be a REIT, it is anticipated that this
election will be made. It is estimated that on January 1, 1994, the aggregate
"built-in gain" was approximately $14.2 million. The Company may offset any net
recognized built-in gain by available net operating loss carryforwards. On
January 1, 1994, the Company had approximately $2.7 million in net operating
loss carryforwards which expire at various dates through 2007. These properties,
however, have not been independently appraised and the IRS may challenge the
estimated built in gain with respect to any or all of such properties at a
future time when, and if, such property is sold within the ten-year period. The
Company will consider this tax effect when determining if it is in the best
interest of the Company to sell a specific piece of real property.
REQUIREMENTS FOR QUALIFICATION AS A REIT
To qualify as a REIT for a taxable year under the Code, the Company must
have no earnings and profits accumulated in any non-REIT year. The Company also
must elect or have in effect an election to be taxed as a REIT and must meet
other requirements, some of which are summarized below, including percentage
tests relating to the sources of its gross income, the nature of the Company's
assets and the distribution of its income to shareholders. Such election, if
properly made and assuming continuing compliance with the qualification tests
described herein, will continue in effect for subsequent years. The Company
intends to make such election for its taxable year ending December 31, 1994.
ORGANIZATIONAL REQUIREMENTS AND SHARE OWNERSHIP TESTS
Section 856(a) of the Code defines a REIT as a corporation, trust or
association; (1) which is managed by one or more trustees or directors; (2) the
beneficial ownership of which is evidenced by transferable shares or by
transferable certificates of beneficial interest; (3) which would be taxable,
but for Sections 856 through 860 of the Code, as an association taxable as a
domestic corporation; (4) which is neither a financial institution nor an
insurance company subject to certain provisions of the Code; (5) the beneficial
ownership of which is held by 100 or more persons, determined without reference
to any rules of attribution (the "share ownership test"); (6) that during the
last half of each taxable year not more than 50% in value of the outstanding
stock of which is owned, directly or indirectly, by five or fewer individuals
(as defined in the Code to include certain entities) (the "five or fewer test");
and (7) which meets certain other tests, described below, regarding the nature
of its income and assets.
Section 856(b) of the Code provides that conditions (1) through (4),
inclusive, must be met during the entire taxable year and that condition (5)
must be met during at least 335 days of a taxable year of 12 months, or during a
proportionate part of a taxable year of fewer than 12 months. The "five or fewer
test" and the share ownership test do not apply to the first taxable year for
which an election is made to be treated as a REIT.
The Company has issued sufficient shares to a sufficient number of people
pursuant to its initial public offering to allow it to satisfy the share
ownership test and the five or fewer test. In addition, to assist in complying
with the five or fewer test, the Company's Articles of Incorporation contain
certain provisions restricting share transfers where the transferee (other than
the Principals, members of their families and certain affiliates, and certain
exceptions specified in the Articles of Incorporation) would, after such
transfer, own (a) more than 8% either in number or value of the outstanding
Common Stock of the Company or (b) more than 8% either in number or value of the
outstanding Preferred Stock of the Company. Pension plans and certain other tax
exempt entities will have different restrictions on ownership. If, despite this
prohibition, stock is acquired increasing a transferee's ownership to over 8% in
value of either the outstanding Common Stock of the Company or Preferred Stock
of the Company, the stock in excess of the 8% is deemed to be held in trust for
transfer at a price which does not exceed what the purported transferee paid for
the stock and, while held in trust, the stock is not entitled to receive
dividends or to vote. In addition, under these circumstances, the Company also
has the right to redeem such stock.
Under the Revenue Reconciliation Act of 1993, for purposes of determining
whether the "five or fewer test" (but not the share ownership test) is met, any
stock held by a qualified trust (generally pension plans, profit-sharing plans
and other employee retirement trusts) generally is treated as held directly by
the trust's beneficiaries in proportion to their actuarial interests in the
trust, and not held by the trust.
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INCOME TESTS
In order to maintain qualification as a REIT, three gross income
requirements must be satisfied annually. First, at least 75% of the Company's
gross income (excluding gross income from certain sales of property held
primarily for sale) must be derived directly or indirectly from investments
relating to real property (including "rents from real property") or mortgages on
real property. When the Company receives new capital in exchange for its shares
(other than dividend reinvestment amounts) or in a public offering of debt
instruments with maturities of five years or longer, income attributable to the
temporary investment of such new capital, if received or accrued within one year
of the Company's receipt of the new capital, is qualifying income under the 75%
test. Second, at least 95% of the Company's gross income (excluding gross income
from certain sales of property held primarily for sale) must be derived from
such real property investments, dividends, interest, certain payments under
interest rate swap or cap agreements, and gain from the sale or other
disposition of stock, securities not held for sale in the ordinary course of
business or from any combination of the foregoing. Third, short-term gain from
the sale or other disposition of stock or securities, including, without
limitation, dispositions of interest rate swap or cap agreements, and gain from
certain prohibited transactions or from other dispositions of real property and
mortgages on real property held for less than four years (apart from involuntary
conversions and sales of foreclosure property) must represent less than 30% of
the Company's gross income. (This rule does not apply for a year in which the
REIT is completely liquidated, as to dispositions occurring after the adoption
of a plan of complete liquidation.) For purposes of these rules, income derived
from a "shared appreciation provision" in a real estate backed mortgage is
treated as gain recognized on the sale of the property to which it relates.
The Company may temporarily invest its working capital in short-term
investments, including shares in other REITs or interests in REMICs. Although
the Company will use its best efforts to ensure that its income generated by
these investments will be of a type which satisfies the 75% and 95% gross income
tests, there can be no assurance in this regard (see the discussion above of the
"new capital" rule under the 75% gross income test). Moreover, the Company may
realize short-term capital gain upon sale or exchange of such investments, and
such short-term capital gain would be subject to the limitations imposed by the
30% gross income test. The Company has analyzed its gross income through
December 31, 1994 and has determined that it has met and generally expects to
meet in the future the 75% and 95% gross income tests through the rental of the
property it has and acquires, and by monitoring the sale of assets has not and
does not expect to violate the 30% gross income test.
In order to qualify as "rents from real property," the amount of rent
received generally must not be based on the income or profits of any person, but
may be based on a fixed percentage or percentages of receipts or sales. The Code
also provides that rents will not qualify as "rents from real property," in
satisfying the gross income tests, if the REIT owns ten percent or more of the
tenant, whether directly or under certain attribution rules. The Company leases
and intends to lease property only under circumstances such that substantially
all, if not all, rents from such property qualify as "rents from real property."
Although it is possible that a tenant could sublease space to a sublessee in
which the Company is deemed to own directly or indirectly ten percent or more of
the tenant, the Company believes that as a result of the provisions in the
Articles of Incorporation limiting ownership to eight percent such occurrence
would be unlikely. Application of the ten percent ownership rule is, however,
dependent upon complex attribution rules provided in the Code and circumstances
beyond the control of the Company. Ownership, directly or by attribution, by an
unaffiliated third party of more than ten percent of the Company's stock and
more than ten percent of the stock of any lessee or sublessee would result in a
violation of the rule.
In order to qualify as "interest on obligations secured by mortgages on
real property," the amount of interest received generally must not be based on
the income or profits of any person, but may be based on a fixed percentage or
percentages of receipts or sales.
In addition, the Company must not manage its properties or furnish or
render services to the tenants of its properties, except through an independent
contractor from whom the Company derives no income. There is an exception to
this rule permitting a REIT to perform directly certain "usually or customarily
rendered "tenant services of the sort which a tax-exempt organization could
perform without being considered in receipt of
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"unrelated business taxable income." The Company self-manages the properties,
but does not provide services to tenants which it believes are outside the
exception.
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." Generally, this 15% test is applied separately to
each lease. The portion of rental income treated as attributable to personal
property is determined according to the ratio of the tax basis of the personal
property to the total tax basis of the property which is rented. The
determination of what fixtures and other property constitute personal property
for federal tax purposes is difficult and imprecise. Based upon allocations of
value as found in the purchase agreements and/or upon review by employees of the
Company, the Company currently does not have and does not believe that is likely
in the future to have 15% in value of any of its real properties classified as
personalty. Waller Lansden Dortch & Davis, in rendering its opinion as to the
qualification of the Company as a REIT, is relying on the allocations found in
the purchase agreements and/or the conclusions of the Company and its senior
management as to the proportionate value of the personalty. If, however, rent
payments do not qualify, for reasons discussed above, as rents from real
property for purposes of Section 856 of the Code, it will be more difficult for
the Company to meet the 95% or 75% gross income tests and continue to qualify as
a REIT.
The Company is and expects to continue performing third-party management
services. If the gross income to the Company from this or any other activity
producing disqualified income for purposes of the 95% or 75% gross income test
exceeds three percent, the Company intends to provide such services through an
affiliated entity to avoid failing to satisfy either the 95% or 75% gross income
test. The Company presently has an affiliated entity which is engaged in
development activities.
If the Company fails to satisfy one or both of the 75% or 95% gross income
tests for any taxable year, it may nevertheless qualify as a REIT for such year
if it is entitled to relief under certain provisions of the Code. These relief
provisions will be generally available if the Company's failure to meet such
tests was due to reasonable cause and not to willful neglect, the Company
attaches a schedule of the sources of its income to its return, and any
incorrect information on the schedule was not due to fraud with intent to evade
tax. It is not possible, however, to know whether the Company would be entitled
to the benefit of these relief provisions as the application of the relief
provisions is dependent on future facts and circumstances. If these relief
provisions apply, a special tax generally equal to 100% is imposed upon the net
income attributable to the greater of the amount by which the Company failed the
75% or 95% gross income tests.
ASSET TESTS
At the close of each quarter of the Company's taxable year, it must also
satisfy three tests relating to the nature of its assets. First, at least 75% of
the value of the Company's total assets must consist of real estate assets
(including interests in real property and interests in mortgages on real
property as well as its allocable share of real estate assets held by joint
ventures or partnerships in which the Company participates), cash, cash items
and government securities. Second, not more than 25% of the Company's total
assets may be represented by securities other than those includable in the 75%
asset class. Finally, of the investments included in the 25% asset class, the
value of any one issuer's securities owned by the Company may not exceed five
percent of the value of the Company's total assets, and the Company may not own
more than ten percent of any one issuer's outstanding voting securities. The
Company, however, may own 100% of the stock of a corporation if such stock is
held by the Company at all times during such subsidiary's existence. Such a
subsidiary is called a "qualified REIT subsidiary". Under that circumstance, the
qualified REIT subsidiary is ignored and the assets, income, gain, loss and
other attributes are treated as being owned or generated directly by the Company
for federal tax purposes. The Company currently has two wholly owned qualified
REIT subsidiaries.
If the Company meets the 25% requirement at the close of any quarter, it
will not lose its status as a REIT because of the change in value of its assets
unless the discrepancy exists immediately after the acquisition of any security
or other property which is wholly or partly the result of an acquisition during
such quarter. Where a failure to satisfy the 25% asset test results from an
acquisition of securities or other property
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during a quarter, the failure can be cured by disposition of sufficient
nonqualifying assets within 30 days after the close of such quarter. The Company
maintains and intends to continue to maintain adequate records of the value of
its assets to maintain compliance with the 25% asset test, and to take such
action as may be required to cure any failure to satisfy the test within 30 days
after the close of any quarter.
In order to qualify as a REIT, the Company is required to distribute
dividends (other than capital gain dividends) to its shareholders in an amount
equal to or greater than the excess of (A) the sum of (i) 95% of the Company's
"real estate investment trust taxable income" (computed without regard to the
dividends paid deduction and the Company's net capital gain) and (ii) 95% of the
net income, if any, (after tax) from foreclosure property, over (B) the sum of
certain non-cash income (from certain imputed rental income and income from
transactions inadvertently failing to qualify as like-kind exchanges). These
requirements may be waived by the IRS if the REIT establishes that it failed to
meet them by reason of distributions previously made to meet the requirements of
the four percent excise tax described below. To the extent that the Company does
not distribute all of its net long-term capital gain and all of its "real estate
investment trust taxable income," it will be subject to tax thereon. In
addition, the Company will be subject to a four percent excise tax to the extent
it fails within a calendar year to make "required distributions" to its
shareholders of 85% of its ordinary income and 95% of its capital gain net
income plus the excess, if any, of the "grossed up required distribution" for
the preceding calendar year over the amount treated as distributed for such
preceding calendar year. For this purpose, the term "grossed up required
distribution" for any calendar year is the sum of the taxable income of the
Company for the taxable year (without regard to the deduction for dividends
paid) and all amounts from earlier years that are not treated as having been
distributed under the provision. Dividends declared in the last quarter of the
year and paid during the following January will be treated as having been paid
and received on December 31. The Company has analyzed its income and
distributions for its short taxable year ended December 31, 1994 and has
satisfied the distribution test for such year.
It is possible that the Company, from time to time, may not have sufficient
cash or other liquid assets to meet the 95% distribution requirements due to
timing differences between actual receipt of income and actual payment of
deductible expenses or dividends on the one hand and the inclusion of such
income and deduction of such expenses or dividends in arriving at "real estate
investment trust taxable income" of the Company on the other hand. The problem
of inadequate cash to make required distributions could also occur as a result
of the repayment in cash of principal amounts due on the Company's outstanding
debt, particularly in the case of "balloon" repayments or as a result of capital
losses on short-term investments of working capital. Therefore, the Company
might find it necessary to arrange for short-term, or possibly long-term
borrowing, or new equity financing. If the Company were unable to arrange such
borrowing or financing as might be necessary to provide funds for required
distributions, its REIT status could be jeopardized.
Under certain circumstances, the Company may be able to rectify a failure
to meet the distribution requirement for a year by paying "deficiency dividends"
to shareholders in a later year, which may be included in the Company's
deduction for dividends paid for the earlier year. The Company may be able to
avoid being taxed on amounts distributed as deficiency dividends; however, the
Company may in certain circumstances remain liable for the four percent excise
tax described above.
The Company is also required to request annually (within 30 days after the
close of the REIT's taxable year) from record holders of certain significant
percentages of its shares certain written information regarding the ownership of
such shares. A list of shareholders failing to fully comply with the demand for
the written statements shall be maintained as part of the Company's records
required under the Code. Rather than responding to the Company, the Code allows
the shareholder to submit such statement to the IRS with the shareholder's tax
return. The Company's Bylaws require such record holders to respond to such
requests for information.
FEDERAL INCOME TAX TREATMENT OF LEASES
The availability to the Company of, among other things, depreciation
deductions with respect to the facilities owned and leased by the Company
depends upon the treatment of the Company as the owner of the
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<PAGE> 37
facilities and the classification of the leases of the facilities as true
leases, rather than as sales or financing arrangements, for federal income tax
purposes. The Company has not requested nor received an opinion that it will be
treated as the owner of the portion of the facilities constituting real property
and the leases will be treated as true leases of such real property for federal
income tax purposes. Based on the conclusions of the Company and its senior
management as to the values of personalty, the Company has met and plans to meet
in the future its compliance with the 95% distribution requirement (and the
required distribution requirement) by making distributions on the assumption
that it is not entitled to depreciation deductions for that portion of the
leased facilities which it believes constitutes personal property, but to report
the amount of income taxable to its shareholders by taking into account such
depreciation. The value of real and personal property and whether certain
fixtures are real or personal property are factual evaluations that cannot be
determined with absolute certainty under current IRS regulations and therefore
are somewhat uncertain.
OTHER ISSUES
With respect to property acquired from and leased back to the same or an
affiliated party, the IRS could assert that the Company realized prepaid rental
income in the year of purchase to the extent that the value of the leased
property exceeds the purchase price paid by the Company for that property. In
litigated cases involving sale-leasebacks which have considered this issue,
courts have concluded that buyers have realized prepaid rent where both parties
acknowledged that the purported purchase price for the property was
substantially less than fair market value and the purported rents were
substantially less than the fair market rentals. Because of the lack of clear
precedent and the inherently factual nature of the inquiry, complete assurance
cannot be given that the IRS could not successfully assert the existence of
prepaid rental income in such circumstances. The value of property and the fair
market rent for properties involved in sale-leasebacks are inherently factual
matters and always subject to challenge.
Additionally, it should be noted that Section 467 of the Code (concerning
leases with increasing rents) may apply to those leases of the Company which
provide for rents that increase from one period to the next. Section 467
provides that in the case of a so-called "disqualified leaseback agreement,"
rental income must be accrued at a constant rate. If such constant rent accrual
is required, the Company would recognize rental income in excess of cash rents
and as a result, may fail to meet the 95% dividend distribution requirement.
"Disqualified leaseback agreements" include leaseback transactions where a
principal purpose of providing increasing rent under the agreement is the
avoidance of federal income tax. Because Section 467 directs the Treasury to
issue regulations providing that rents will not be treated as increasing for tax
avoidance purposes where the increases are based upon a fixed percentage of
lessee receipts additional rent provisions of leases containing such clauses
should not be "disqualified leaseback agreements." In addition the legislative
history of Section 467 indicates that the Treasury should issue regulations
under which leases providing for fluctuations in rents by no more than a
reasonable percentage from the average rent payable over the term of the lease
will be deemed not motivated by tax avoidance; this legislative history
indicates that a standard allowing a ten percent fluctuation in rents may be too
restrictive for real estate leases. It should be noted, however, that leases
involved in sale-leaseback transactions are subject to special scrutiny under
this Section. The Company, based on its evaluation of the value of the property
and the terms of the leases, does not believe it has or will have in the future
rent subject to the provisions of Section 467.
Subject to a safe harbor exception for annual sales of up to seven
properties (or properties with a basis of up to 10% of the REIT's assets) that
have been held for at least four years, gain from sales of property held for
sale to customers in the ordinary course of business is subject to a 100% tax.
The simultaneous exercise of options to acquire leased property that may be
granted to certain lessees or other events could result in sales of properties
by the Company that exceed this safe harbor. However, the Company believes that
in such event, it will not have held such properties for sale to customers in
the ordinary course of business.
As a part of the formation transactions effected in connection with its
initial public offering, the Company exchanged with J. Donald Nichols 15 parcels
of land subject to approximately $3.0 million of debt for a shopping center in
Georgia that was encumbered with approximately $3.2 million of debt. No
appraisals were obtained with respect to any of these properties. If the IRS
determines that the value of one or more of these properties differs from the
value utilized by the Company, the Company may recognize a taxable gain.
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DEPRECIATION OF PROPERTIES
For tax purposes, the Company's real property acquired subsequent to its
initial public offering will be depreciated over 40 years and personal property
over seven years utilizing the straight-line method of depreciation. The
Company's existing real property will be depreciated over the remaining lives
and in accordance with the method being used by the Company prior to the initial
public offering.
FAILURE TO QUALIFY AS A REIT
If the Company fails to qualify for federal taxation purposes as a REIT in
any taxable year, and the relief provisions do not apply, the Company will be
subject to tax on its taxable income at regular corporate rates (plus any
applicable alternative minimum tax). Distributions to shareholders in any year
in which the Company fails to qualify will not be deductible by the Company nor
will they be required to be made. In such event, to the extent of current or
accumulated earnings and profits, all distributions to shareholders will be
taxable as ordinary income and, subject to certain limitations in the Code,
eligible for the 70% dividends received deductions for corporate shareholders.
Unless entitled to relief under specific statutory provisions, the Company will
also be disqualified from taxation as a REIT for the following four taxable
years. It is not possible to state whether in all circumstances the Company
would be entitled to statutory relief from such disqualification. Failure to
qualify for even one year could result in the Company's incurring substantial
indebtedness (to the extent borrowings are feasible) or liquidating substantial
investments in order to pay the resulting taxes.
PLAN OF DISTRIBUTION
The Company may sell Securities through underwriters for public offer and
sale by them, and also may sell Securities offered hereby to investors directly
or through agents. Any such underwriter or agent involved in the offer and sale
of the Securities will be named in the applicable Prospectus Supplement.
Underwriters may offer and sell the Securities at a fixed price or prices,
which may be changed, at prices related to the prevailing market prices at the
time of sale or at negotiated prices. The Company also may, from time to time,
authorize underwriters acting as the Company's agents to offer and sell
Securities upon terms and conditions set forth in the applicable Prospectus
Supplement. In connection with the sale of the 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 the Securities for whom they may act as agent. Underwriters may
sell 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 underwriters or agents in connection with an offering of the
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 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 Securities may be deemed to be underwriting discounts and
commissions, under the Securities Act. Underwriters, dealers and agents may be
entitled, under agreements to be 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 underwriters or other persons acting as the Company's agents to
solicit offers by certain institutions to purchase Securities from the Company
at the public offering price set forth in such Prospectus Supplement pursuant to
delayed delivery contracts providing for payment and delivery on the date or
dates stated in such Prospectus Supplement. Each delayed delivery contract will
be for an amount not less than, and the aggregate principal amount of Securities
sold pursuant to delayed delivery contracts shall be not less nor more than, the
respective amounts stated in the applicable Prospectus Supplement. Institutions
with whom delayed delivery contracts, when authorized, may be made include
commercial and savings banks, insurance companies, pension funds,
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investment companies, educational and charitable institutions, and other
institutions but will in all cases be subject to the approval of the Company.
Delayed delivery contracts will not be subject to any conditions except (i) the
purchase by an institution of the Securities covered by its delayed delivery
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 Securities are being sold to underwriters, the Company shall have sold to
such underwriters the total principal amount of the Securities less the
principal amount thereof covered by delayed delivery contracts.
EXPERTS
The consolidated financial statements of JDN Realty Corporation
incorporated by reference in JDN Realty Corporation's Annual Report (Form 10-K)
for the year ended December 31, 1994 have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon included therein and
incorporated herein by reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
LEGAL MATTERS
The legality of the Securities and the description of federal income tax
considerations will be passed upon for the Company by Waller Lansden Dortch &
Davis, Nashville, Tennessee. Certain matters of Maryland law will be passed upon
for the Company by Morgan, Lewis & Bockius, Washington, D.C.
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NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS IN
CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE
UNDERWRITERS. THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS DO NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE SHARES
OFFERED HEREBY IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS
NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
The Company........................... S-3
Recent Developments................... S-3
The Offering.......................... S-7
Use of Proceeds....................... S-7
Price Range of Common Stock and
Distributions....................... S-8
Underwriting.......................... S-9
Legal Matters......................... S-10
Additional Available Information...... S-10
PROSPECTUS
Available Information................. 2
Incorporation of Certain Documents by
Reference........................... 3
The Company........................... 4
Use of Proceeds....................... 4
Risk Factors.......................... 5
Ratio of Earnings to Fixed Charges.... 8
Description of Capital Stock.......... 8
Description of Common Stock........... 9
Description of Common Stock
Warrants............................ 11
Description of Preferred Stock........ 12
Description of Debt Securities........ 16
Federal Income Tax Considerations..... 21
Plan of Distribution.................. 28
Experts............................... 29
Legal Matters......................... 29
</TABLE>
======================================================
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2,400,000 SHARES
(LOGO) JDN
JDN REALTY CORPORATION
COMMON STOCK
---------------------------
PROSPECTUS SUPPLEMENT
---------------------------
MERRILL LYNCH & CO.
A.G. EDWARDS & SONS, INC.
MARCH 5, 1997
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