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FILED PURSUANT TO
RULE 424(b)(3) UNDER
THE SECURITIES ACT OF
1933, AS AMENDED
COMMISSION FILE NO. 333-22211
PROSPECTUS
[LOGO OF LIBERTY PROPERTY TRUST APPEARS HERE]
$479,395,000
LIBERTY PROPERTY TRUST
COMMON SHARES OF BENEFICIAL INTEREST
PREFERRED SHARES OF BENEFICIAL INTEREST
DEPOSITARY SHARES
WARRANTS
GUARANTIES
$400,000,000
LIBERTY PROPERTY LIMITED PARTNERSHIP
DEBT SECURITIES
Liberty Property Trust, a Maryland real estate investment trust (the "Trust"),
may offer from time to time in one or more series hereunder, together or
separately, at prices and on terms to be determined at the time of offering:
(a) its Preferred Shares of Beneficial Interest, $0.001 par value ("Preferred
Shares"), which may be issued in the form of depositary shares evidenced by
depositary receipts ("Depositary Shares") and which may be convertible into or
exchangeable for Common Shares (as defined below) or other Securities (as
defined below); (b) its Common Shares of Beneficial Interest, $0.001 par value
("Common Shares"); and (c) warrants to purchase Preferred Shares ("Preferred
Shares Warrants") or Common Shares ("Common Shares Warrants"). The Preferred
Shares Warrants and Common Shares Warrants are herein referred to collectively
as "Warrants" and, together with Trust Guaranties (as defined below), Preferred
Shares, Depositary Shares and Common Shares, as "Trust Securities." No Debt
Securities (as defined below) will be offered hereby by the Trust.
Liberty Property Limited Partnership, a Pennsylvania limited partnership (the
"Operating Partnership" and, together with the Trust, the "Company"), may offer
from time to time in one or more series hereunder, together or separately, at
prices and on terms to be determined at the time of offering, its debt
securities ("Debt Securities"), consisting of debentures, notes and/or other
evidences of indebtedness, representing secured or unsecured obligations of the
Operating Partnership, which may be either senior or subordinated, which may
have the benefit of conditional or unconditional guaranties of the Trust
("Guaranties") and which may be convertible into or exchangeable for Common
Shares, Preferred Shares, units of limited partnership interest of the Operating
Partnership ("Units") and other Securities. The Debt Securities and Units are
herein referred to as "Partnership Securities" and, together with Trust
Securities, as "Securities."
The specific terms of the Securities in respect of which this Prospectus is
being delivered will be set forth in an accompanying Prospectus Supplement (the
"Prospectus Supplement") which will describe, without limitation and to the
extent applicable, terms for such Securities, including: (a) in the case of Debt
Securities, the specific title, aggregate principal amount, currency,
denomination, maturity, priority, rate of interest (which may be fixed or
variable), time and place of payment of interest, terms for optional redemption
or repayment by the issuer thereof or any holder thereof or for sinking fund
payments,
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terms for conversion into or exchange for other Securities, if any, including
terms of any Securities into or for which they are convertible or exchangeable,
the initial public offering price, any securities exchange listings, any special
provisions related to denomination in a foreign currency or issuance as medium
term notes, original issue discount or other special terms, the designation of
the Trustee (as defined below), Security Registrar (as defined below) and
Paying Agent (as defined below), and the terms of any applicable Guaranty; (b)
in the case of Preferred Shares, the specific designation and stated value,
number of shares or fractional interests therein, any dividend, liquidation
preference, redemption, sinking fund, voting or other rights, the terms for
conversion into or exchange for other Securities, if any, including terms of any
Securities into or for which they are convertible or exchangeable, the initial
public offering price and any securities exchange listings; (c) in the case of
Depositary Shares, the fraction of a Preferred Share represented by one
Depositary Share and terms of the Preferred Shares; (d) in the case of Common
Shares, the aggregate number of shares offered, public offering price and other
terms thereof; and (e) in the case of Warrants, to the extent applicable, the
duration, offering price, exercise price, terms of the Securities for which they
are exercisable, any securities exchange listings and detachability and other
terms thereof. The Prospectus Supplement will also contain information, where
applicable, with regard to certain U.S. federal income tax, accounting or other
considerations relating to the Securities offered thereby.
The offering price to the public of the Securities to be issued by the Trust
and the Operating Partnership will be limited to US $479,395,000 and US
$400,000,000, respectively (or the equivalent based on the applicable exchange
rate at the time of issue, if Securities offered are denominated in one or more
foreign currencies or currency units). The Debt Securities may be denominated in
United States dollars or, at the option of the Operting Partnership, if so
specified in the applicable Prospectus Supplement, in one or more foreign
currencies or currency units. Such Debt Securities may be issued in registered
form or bearer form, or both. If so specified in the applicable Prospectus
Supplement, Debt Securities of a series may be issued in whole or in part in the
form of one or more temporary or permanent global securities.
The Securities may be sold to or through dealers or underwriters, directly
to other purchasers or through agents. If an agent of the Trust or the
Operating Partnership or a dealer or an underwriter is involved in the sale of
the Securities with respect to which this Prospectus is being delivered, such
agent's commission or dealer's purchase price or underwriter's discount will
be set forth in, or may be calculated from, the Prospectus Supplement. Any
underwriters, dealers or agents participating in the offering of Securities
may be deemed "underwriters" within the meaning of the Securities Act of 1933,
as amended (the "Securities Act"). See "Plan of Distribution" for possible
indemnification arrangements for any agents, dealers or underwriters.
The Securities may be used as all or part of the consideration to be paid by
the Trust or the Operating Partnership for the acquisition of non-operating
assets, for which financial statements would not be required to be filed with
the Securities and Exchange Commission (the "Commission"), or in exchange for
units of limited partnership interest of the Operating Partnership. In
addition, Common Shares may be offered hereby in exchange for certain debt
securities of the Operating Partnership that are exchangeable for such Common
Shares. This Prospectus may not be used to consummate sales of Securities
unless accompanied by a Prospectus Supplement.
The Common Shares are traded on the New York Stock Exchange (the "NYSE")
under the symbol "LRY." On June 11, 1997, the last reported sale price, as
reported on the NYSE Composite Tape, was $25 per Common Share.
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 OR ANY SUPPLEMENT HERETO. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS JUNE 12, 1997.
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AVAILABLE INFORMATION
The Trust and the Operating Partnership are subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and, in accordance therewith, file reports and other information with
the Commission, including proxy statements in the case of the Trust. Such
reports and other information can be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549, and at the Commission's regional offices at
Seven World Trade Center, Suite 1300, New York, New York 10048 and 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material
also may be obtained from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, at prescribed
rates. Electronic filings made through the Electronic Data Gathering, Analysis
and Retrieval System ("EDGAR") are publicly available through the Commission's
Web site (http://www.sec.gov). Reports, proxy statements and other information
regarding the Trust and the Operating Partnership may also be inspected at the
offices of the NYSE at 20 Broad Street, New York, New York 10005.
The Trust and the Operating Partnership have filed with the Commission a
registration statement on Form S-3 (together with any amendments thereto, the
"Registration Statement") under the Securities Act with respect to the
Securities offered hereby. This Prospectus constitutes a part of such
Registration Statement. As permitted by the rules and regulations of the
Commission, this Prospectus and the Prospectus Supplement do not contain all
of the information set forth in the Registration Statement and the exhibits
thereto. Statements contained in this Prospectus, the Prospectus Supplement or
in any document incorporated by reference in this Prospectus or the Prospectus
Supplement as to the contents of any contract or other document referred to
herein or therein are not necessarily complete, and in each instance where
such contract or document has been filed as an exhibit to the Registration
Statement or other document incorporated by reference, reference is made to
the copy of such contract or other document, each such statement being
qualified in all respects by such reference. The Registration Statement,
together with exhibits thereto, may be inspected at the Commission's public
reference facilities in Washington, D.C., and copies of all or any part
thereof may be obtained from the Commission upon the payment of prescribed
fees.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission under the Exchange Act,
are hereby incorporated herein by reference as of their respective dates:
(a) The Annual Report on Form 10-K of the Trust and the Operating
Partnership for the fiscal year ended December 31, 1996;
(b) The Quarterly Report on Form 10-Q of the Trust and the Operating
Partnership for the fiscal quarter ended March 31, 1996;
(c) The Current Reports on Form 8-K of the Trust and the Operating Partnership
filed February 13, 1997, March 5, 1997 and March 21, 1997; and
(d) The description of the Common Shares contained in the Registration
Statement on Form 8-A filed by the Trust to register such securities
under Section 12 of the Exchange Act.
All documents and reports filed by the Trust or the Operating Partnership
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the
date of this Prospectus and prior to termination of the offering described
herein shall be deemed to be incorporated by reference in this Prospectus and
to be a part hereof from the respective dates of filing of such documents or
reports, except as to any portion of any future annual or quarterly report to
the holders of securities of the Trust or the Operating Partnership or any
proxy or information statement which is not deemed to be filed under such
provisions.
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 the Registration Statement, this Prospectus
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and the Prospectus Supplement to the extent that a statement contained herein,
in the Prospectus Supplement or in any other subsequently filed document which
also is or is deemed to be incorporated by reference in the Registration
Statement or this Prospectus modifies or supersedes such statement. Any such
statement so modified or superseded, except as so modified or superseded,
shall not be deemed to constitute a part of this Prospectus or the Prospectus
Supplement.
The Company will provide without charge to each person to whom a copy of
this Prospectus or the Prospectus Supplement has been delivered, upon written
or oral request of such person, a copy of any or all of the documents
incorporated herein by reference, other than exhibits to such documents unless
such exhibits are specifically incorporated by reference into such documents.
Requests for such copies should be directed to: Investor Relations, Liberty
Property Trust, 65 Valley Stream Parkway, Malvern, Pennsylvania 19355;
telephone (610) 648-1700.
THE COMPANY
Liberty Property Trust is one of the largest owners and operators of
suburban industrial and office real estate in the United States. The Trust is
a self-administered and self-managed Maryland real estate investment trust
("REIT") that was formed to continue and expand the commercial real estate
business of Rouse & Associates, a developer and manager of commercial real
estate in the Mid-Atlantic and Southeastern states, founded in 1972. The Trust
provides leasing, property management, acquisition, development, construction
and design management and other related services to a portfolio which, as of
March 31, 1997, consisted of 285 industrial and office properties.
On a consolidated basis, substantially all of the Trust's assets are owned
directly or indirectly by, and all of the Trust's operations are conducted
directly or indirectly by, Liberty Property Limited Partnership, a
Pennsylvania limited partnership. As used herein, unless the context otherwise
requires, such partnership, together with its direct and indirect
subsidiaries, is referred to as the "Operating Partnership" and the Operating
Partnership, together with the Trust (and, where the context requires, the
predecessor entity), is referred to as the "Company." The Trust is the sole
general partner and also is a limited partner of the Operating Partnership,
with a combined equity interest in the Operating Partnership of 91.54% at
March 31, 1997.
The Company's primary objective is to increase funds from operations per
share. See "Selected Financial Data" in the Prospectus Supplement for the
definition of this term. The strategies for achieving this goal are to deliver
outstanding tenant service, emphasize marketing to attract new tenants and
enhance the Company's portfolio through the acquisition and development of
high quality projects in markets affording opportunities for attractive
yields. In pursuing these strategies, the Company seeks to manage its capital
structure to fund growth while maintaining the strength of its balance sheet.
The Company owned 285 properties as of March 31, 1997, including 190
industrial and 95 office properties, which at that date were approximately
92.9% leased to over 1,000 tenants. As of March 31, 1997, the Company also
had 24 properties under development and held 999 acres of land for future
development.
The Company's executive offices are located at 65 Valley Stream Parkway,
Malvern, Pennsylvania 19355. The telephone number is (610) 648-1700. The
Company maintains offices in each of its primary markets.
USE OF PROCEEDS
Unless otherwise provided in the Prospectus Supplement, the net proceeds, if
any, from the sale of the Securities offered hereby will be used for general
business purposes, including the acquisition of properties or
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other assets. At the date hereof, no specific material proposed purchases have
been identified as probable. The amount of Securities offered from time to
time pursuant to this Prospectus and any Prospectus Supplement, and the
precise amounts and timing of the application of net proceeds from the sale of
such Securities, will depend upon funding requirements of the Company. If the
Company elects at the time of an issuance of Securities to make different or
more specific use of proceeds than set forth herein, such use will be
described in the Prospectus Supplement.
RATIOS OF EARNINGS TO FIXED CHARGES
The ratios of earnings to fixed charges of the Company for the quarter ended
March 31, 1997, for the years ended December 31, 1996 and 1995 and for the
period from June 23, 1994 to December 31, 1994 were 1.81, 1.83, 1.65 and 2.04,
respectively. The ratios of earnings to fixed charges were computed by dividing
earnings by fixed charges. For this purpose, earnings have been calculated by
adding fixed charges (excluding capitalized interest) to income (loss) before
minority interest and extraordinary items. Fixed charges consist of interest
costs, whether expensed or capitalized, and amortization of deferred financing
costs.
Prior to the completion of the initial public offering of its Common Shares
on June 23, 1994, the operations of the Company were conducted through its
predecessor, Rouse & Associates and certain of its affiliates (collectively,
the "Rouse Group"). In connection with completion of the initial public
offering, the Company reorganized the Rouse Group and substantially
deleveraged such predecessor's asset base. As a result of these factors, the
Company does not consider information relating to the ratio of earnings to
fixed charges for the periods prior to the completion of the public offering
to be meaningful.
DESCRIPTION OF DEBT SECURITIES
The Debt Securities may be issued in one or more series under a senior
indenture (the "Senior Indenture") or a subordinated indenture (the
"Subordinated Indenture" and, together with the Senior Indenture, the
"Indenture"), between the Operating Partnership and a Trustee (a "Trustee"), and
in the forms that have been filed as exhibits to the Registration Statement,
subject to the terms of such amendments or supplements thereto as may be entered
into from time to time and filed with the Commission as exhibits to or
incorporated by reference in the Registration Statement. The following summaries
of certain provisions of the Indentures do not purport to be complete and are
subject to, and qualified in their entirety by reference to, all provisions of
the Indentures, including the definitions therein of certain terms. Wherever
particular sections or defined terms of the Indentures are summarized herein or
in a Prospectus Supplement, it is intended that such sections or defined terms
(including, unless otherwise indicated herein, definitions of terms capitalized
in such summaries) shall be incorporated herein or therein by reference. The
following sets forth certain 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 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. The
Operating Partnership is referred to as the "Issuer" for purposes of the
following summary.
The Issuer's rights and the rights of its creditors, including the holders
of the Debt Securities offered hereby, to participate in the assets of any
subsidiary upon the latter's liquidation or recapitalization will be subject
to the prior claims of the subsidiary's creditors except, subject to certain
limitations, to the extent that the Issuer may itself be a creditor with
recognized claims against the subsidiary.
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GENERAL
The Indentures do not limit the aggregate principal amount of Debt Securities
that may be issued thereunder and provide that Debt Securities may be issued
from time to time in one or more series. The Debt Securities will be direct
obligations, secured or unsecured, of the Issuer. The Debt Securities issued
under the Senior Indenture ("Senior Debt Securities") will rank on a parity with
all other unsubordinated indebtedness of the Issuer. The Debt Securities issued
under the Subordinated Indenture ("Subordinated Debt Securities") will be
subordinate and junior in right of payment to all Senior Indebtedness of the
Issuer, to the extent and in the manner set forth in the Subordinated Indenture.
To the extent applicable to any particular series of Debt Securities, the terms
that are capitalized herein, but are not defined herein, shall have the
respective meanings ascribed to them in the Indenture applicable to such Debt
Securities. Whenever defined terms of the Indenture are summarized herein or in
a Prospectus Supplement, it is intended that such defined terms shall be
incorporated herein or therein by reference. See "Special Terms Relating to
Subordinated Debt Securities."
Reference is made to the Prospectus Supplement relating to the particular
series of Debt Securities offered thereby for the following terms, to the extent
applicable: (a) the title and series of such Debt Securities; (b) any limit on
the aggregate principal amount of such Debt Securities; (c) the price or prices
(expressed as a percentage of the aggregate principal amount thereof) at which
such Debt Securities will be issued; (d) the date or dates on which such Debt
Securities will mature, or the method or methods, if any, by which such date or
dates shall be determined; (e) the rate or rates (which may be fixed or
variable) per annum at which such Debt Securities will bear interest, if any, or
the method or methods, if any, by which such rate or rates are to be determined;
(f) the date or dates from which such interest, if any, on such Debt Securities
will accrue or the method or methods, if any, by which such date or dates are to
be determined, the dates on which such interest, if any, will be payable, the
date on which payment of such interest, if any, will commence and the Regular
Record Dates for such Interest Payment Dates, if any; (g) the dates, if any, on
which, and the price or prices at which the Debt Securities will, pursuant to
any mandatory sinking fund provisions, or may, pursuant to any optional sinking
fund or purchase fund provisions, be redeemed by the Issuer or otherwise, and
the other detailed terms and provisions of any such sinking fund or purchase
fund; (h) the date, if any, after which, and the price or prices at which the
Debt Securities may, pursuant to any optional redemption provisions, be redeemed
at the option of the Issuer, the holder thereof or otherwise and the other
detailed terms and provisions of such optional redemption; (i) the extent to
which any of the Debt Securities will be issuable in temporary or permanent
global form and, if so, the identity of the depositary for such global Debt
Security, and the manner in which any interest payable on a temporary or
permanent global Debt Security will be paid; (j) the denomination or
denominations in which such Debt Securities are authorized to be issued; (k)
whether any of the Debt Securities will be issued in bearer form and, if so, any
limitations on the issuance or conversion of such bearer Debt Securities
(including exchange for registered Debt Securities of the same series); (l)
information with respect to book-entry procedures; (m) whether any of the Debt
Securities will be issued as Original Issue Discount Securities (as defined
below); (n) each office or agency where, subject to the terms of the related
Indenture, such Debt Securities may be presented for registration of transfer or
exchange; (o) the currencies or currency units in which such Debt Securities are
issued and in which the principal of, interest on and additional amounts, if
any, in respect of such Debt Securities will be payable; (p) whether the amount
of payments of principal of, and interest and additional amounts, 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 one
or more currencies, currency units or composite currencies, commodities, equity
indices or other indices) and the manner in which such amounts shall be
determined; (q) whether the Issuer or a holder may elect payment of the
principal of or interest on such Debt Securities in a currency, currencies,
currency unit or units or composite currency or currencies other than that in
which such Debt Securities are denominated or stated to be payable, the period
or periods within which, and the terms and conditions upon which, such election
may be made, and the time and manner of determining the exchange rate between
the currency, currencies, currency unit or units or composite currency or
currencies in which such Debt Securities are denominated or stated to be payable
and the currency, currencies, currency unit or units or composite currency or
currencies in which such Debt Securities are to be so payable; (r) the identity
of the Trustee, and if other than the applicable Trustee, the identity of each
Security Registrar, Paying Agent and Authenticating Agent and the designation of
the initial Exchange Rate Agent, if any; (s) if applicable, the defeasance of
certain obligations by the Issuer pertaining to Debt Securities of the series;
(t) the person to whom any interest on any registered Debt Security of the
series shall be payable, if other than the person in whose name that Debt
Security (or one or more predecessor Debt Securities) is registered at the close
of business on the Regular Record Date for such interest, the manner
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in which, or the person to whom, any interest on any bearer Debt Security of
the series shall be payable, if otherwise than upon presentation and surrender
of the coupons appertaining thereto as they severally mature, and the extent
to which, or the manner in which, any interest payable on a temporary global
Debt Security on an Interest Payment Date will be paid if other than in the
manner provided in the related Indenture; (u) whether and under what
circumstances the Issuer will pay additional amounts (the term "interest," as
used in this Prospectus, shall include such additional amounts) on such Debt
Securities to any holder who is not a United States person (including any
modification to the definition of such term as contained in the related
Indenture as originally executed) in respect of any tax, assessment or
governmental charge and, if so, whether the Issuer will have the option to
redeem such Debt Securities rather than pay such additional amounts (and the
terms of any such option); (v) any deletions from, modifications of or
additions to the Events of Default or covenants of the Issuer with respect to
any of such Debt Securities; (w) whether such Debt Securities shall be
convertible into or exchangeable for other Securities and, if so, the terms of
any such conversion or exchange and the terms of such other Securities; (x)
any other terms of the series (which will not be inconsistent with the
provisions of the applicable Indenture); and (y) the terms of any guaranties,
which may be conditional. The Prospectus Supplement relating to any particular
guaranty offered thereby will include any additional terms of such guaranty,
including the rank in priority and any covenants applicable to such guaranty.
Debt Securities may be issued as "Original Issue Discount Securities" to be
sold at a discount below their principal amount, which discount may be
substantial. In the event of an acceleration of the maturity of any Original
Issue Discount Security, the amount payable to the holder of such Original
Issue Discount Security upon such acceleration will be determined in
accordance with the applicable Prospectus Supplement, the terms of such Debt
Security and the applicable Indenture, but will be an amount less than the
amount payable at the maturity of such Original Issue Discount Security. All
material federal income tax, accounting and other considerations applicable
thereto will be described in the Prospectus Supplement relating thereto.
REGISTRATION, TRANSFER, PAYMENT AND PAYING AGENT
Unless otherwise indicated in the applicable Prospectus Supplement, each
series of Debt Securities will be issued in registered form only, without
coupons. The Indentures, however, provide that the Issuer may also issue Debt
Securities in bearer form only, or in both registered and bearer form. Debt
Securities issued in bearer form shall have interest coupons attached, unless
issued as Original Issue Discount Securities. Debt Securities in bearer form
shall not be offered, sold, resold or delivered in connection with their
original issuance in the United States or to any United States person (as
defined below) other than through offices located outside the United States of
certain United States financial institutions. As used herein, "United States
person" means any citizen or resident of the United States, any corporation,
partnership or other entity created or organized in or under the laws of the
United States, or any estate or trust, the income of which is subject to
United States federal income taxation regardless of its source, and "United
States" means the United States of America (including the States and the
District of Columbia), its territories, its possessions and other areas
subject to its jurisdiction. Purchasers of Debt Securities in bearer form will
be subject to certification procedures and may be affected by certain
limitations under United States tax laws. Such procedures and limitations will
be described in the Prospectus Supplement relating to the offering of the Debt
Securities in bearer form.
Unless otherwise indicated in the applicable Prospectus Supplement, Debt
Securities will be issued in denominations of $1,000 or any integral multiple
thereof. No service charge will be made for any transfer, exchange or
conversion of the Debt Securities but the Issuer may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith.
Unless otherwise described in the Prospectus Supplement relating thereto,
the principal, premium, if any, and interest, if any, of or on the Debt
Securities will be payable, transfer of the Debt Securities will be
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registerable, and, if applicable, any Convertible Debt Securities (as defined
below) will be convertible, at the office or agency of the Issuer maintained for
that purpose, as the Issuer may designate from time to time, provided that
payments of interest may be made at the option of the Issuer by check mailed to
the address appearing in the Security Register of the person in whose name such
registered Debt Security is registered at the close of business on the
applicable Regular Record Date(s).
Unless otherwise indicated in the applicable Prospectus Supplement, payment
of principal of, premium, if any, and interest, if any, on, Debt Securities in
bearer form will be made payable, subject to any applicable laws and
regulations, at such office outside the United States as specified in the
Prospectus Supplement and as the Issuer may designate from time to time, at
the option of the holder, by check or by transfer to an account maintained by
the payee with a bank located outside the United States. Unless otherwise
indicated in the applicable Prospectus Supplement, payment of interest and
certain additional amounts on Debt Securities in bearer form will be made only
against surrender of the coupon relating to the applicable Interest Payment
Date. No payment with respect to any Debt Security in bearer form will be made
at any office or agency of the Issuer in the United States or by check mailed
to any address in the United States or by transfer to an account maintained
with a bank located in the United States.
GLOBAL DEBT SECURITIES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more global securities ("Global Debt Securities") that will be
deposited with, or on behalf of, a depositary (the "Depositary") identified in
the Prospectus Supplement relating to such series. Global Debt Securities may
be issued in either registered or bearer form and in either temporary or
permanent form. Unless and until it is exchanged in whole or in part for
individual certificates evidencing Debt Securities in definitive form
represented thereby, a Global Debt Security may not be transferred except as a
whole by the Depositary for such Global Debt Security to a nominee of such
Depositary or by a nominee of such Depositary to such Depositary or another
nominee of such Depositary or by such Depositary or any such nominee to a
successor of such Depositary or a nominee of such successor.
The specific terms of the depositary arrangement with respect to a series of
Global Debt Securities, and certain limitations and restrictions relating to a
series of bearer Global Debt Securities, will be described in the Prospectus
Supplement relating to such series.
RESTRICTIVE COVENANTS
The Indentures do not contain restrictive covenants, but the indenture
supplement or amendment entered into at the time of the issuance of any Debt
Securities may contain such restrictions on the Issuer and its operations. The
applicable Prospectus Supplement will describe any restrictive covenants
applicable to the Debt Securities that are issued thereunder.
OUTSTANDING DEBT SECURITIES
Unless otherwise indicated in the applicable Prospectus Supplement, in
determining whether the holders of the requisite principal amount of
Outstanding Debt Securities have given any request, demand, authorization,
direction, notice, consent or waiver under the Indentures: (a) the portion of
the principal amount of an Original Issue Discount Security that shall be
deemed to be Outstanding for such purposes shall be that portion of the
principal amount thereof that could be declared to be due and payable pursuant
to the terms of such Original Issue Discount Security as of the date of such
determination; (b) the principal amount of any Indexed Security shall be the
principal face amount of such Indexed Security determined on the date of its
original issuance; and (c) any Debt Security owned by the Issuer or any
obligor on such Debt Security, or any Affiliate of the Issuer or such other
obligor, shall be deemed not to be outstanding.
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MODIFICATION AND WAIVER
The Issuer may amend the Indentures with the written consent of the holders
of a majority in principal amount of the respective Debt Securities
outstanding thereunder. However, without the consent of each Holder affected,
an amendment may not: (a) reduce the amount of Debt Securities whose holders
must consent to an amendment; (b) reduce the rate or change the time of
payment of interest on any Debt Securities; (c) reduce the principal of or
change the fixed maturity of Debt Securities; (d) make any Debt Securities
payable in money other than that stated in the definitive notes representing
such Debt Securities; (e) change the provisions of the respective Indenture
regarding the right of a majority of the Holders to waive defaults under such
Indenture or impair the right of any Holder to institute suit for the
enforcement of any payment of principal and interest on the Debt Securities on
and after their respective due dates; (f) make any change that adversely
affects the right to convert or exchange any Convertible Debt Securities; or
(g) make any change to the provisions of the respective Indenture regarding
subordination and seniority of the Debt Securities that adversely affects the
rights of any Holders.
SPECIAL TERMS RELATING TO SUBORDINATED DEBT SECURITIES
Upon any distribution of assets of the Issuer resulting from any
dissolution, winding up, liquidation or reorganization, payments on
Subordinated Debt Securities are to be subordinated, to the extent provided in
the Subordinated Indenture, in right of payment to the prior payment in full
of all Senior Indebtedness, but the obligation of the Issuer to make payments
on the Subordinated Debt Securities will not otherwise be affected. No payment
on Subordinated Debt Securities may be made at any time when there is a
default in the payment of any principal, premium, interest, Additional Amounts
or sinking fund of or on any Senior Indebtedness. Holders of Subordinated Debt
Securities will be subrogated to the rights of holders of Senior Indebtedness
to the extent of payments made on Senior Indebtedness upon any distribution of
assets in any such proceedings out of the distributive shares of Subordinated
Debt Securities. By reason of such subordination, in the event of a
distribution of assets upon insolvency, certain creditors of the Issuer may
recover more, ratably, than holders of Subordinated Debt Securities.
The Prospectus Supplement relating to any Subordinated Debt Securities will
set forth the aggregate amount of Senior Indebtedness outstanding as of the
most recent date practicable and any limitations on the issuance of additional
Senior Indebtedness. As of the date of this Prospectus, there is no limitation
on the amount of Senior Indebtedness that may be issued by the Trust or the
Operating Partnership.
CONVERSION OR EXCHANGE
The holders of Debt Securities of a specified series that are convertible
into or exchangeable for other Securities ("Convertible Debt Securities") will
be entitled at certain times specified in the Prospectus Supplement relating
to such Convertible Debt Securities, subject to prior redemption, exchange,
repayment or repurchase, to convert or exchange any Convertible Debt
Securities of such series into such other Securities, at the conversion price
set forth in such Prospectus Supplement, subject to adjustment and to such
other terms as are set forth in such Prospectus Supplement. Any such
conversion or exchange of Convertible Debt Securities will be further subject
to the applicable terms and conditions set forth in the Indentures, as
supplemented or amended from time to time.
DESCRIPTION OF PREFERRED SHARES
GENERAL
The rights, preferences, privileges and restrictions of the Preferred Shares
in respect of which this Prospectus is delivered shall be described in the
Prospectus Supplement relating to such Preferred Shares. Among the terms of
the Preferred Shares which may be specified in the related Prospectus
Supplement are the following: (a) the annual dividend rate, if any, or the
means by which such dividend rate may be calculated (including
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without limitation the possibility that the rate of such dividends may bear an
inverse relationship to some index or standard) and the date or dates from
which such dividends shall accrue and the date or dates on which such
dividends shall be paid and whether such dividends shall be cumulative; (b)
the price at which and the terms and conditions on which the shares of such
series of Preferred Shares may be redeemed, including the period of time
during which such shares may be redeemed, any premium to be paid over and
above the par value of such Preferred Shares, whether and to what extent
accumulated dividends on such Preferred Shares will be paid upon the
redemption of such shares; (c) the liquidation preference, if any, over and
above the par value of such Preferred Shares and whether and to what extent
the holders of such shares shall be entitled to accumulated dividends in the
event of the voluntary or involuntary liquidation, dissolution or winding-up
of the affairs of the Company; (d) whether the Preferred Shares shall be
subject to the operation of a retirement or sinking fund and, if so, a
description of the operation of such retirement or sinking fund; (e) the terms
and conditions, if any, on which the Preferred Shares may be convertible into,
or exchangeable for, shares of any other class or classes of equity interests
in the Trust, including the price or rate of conversion or exchange and the
method for effecting such conversion or exchange, provided that no Preferred
Shares will be convertible into shares of a class that has superior rights or
preferences as to dividends or distribution of assets of the Company upon the
voluntary or involuntary dissolution or liquidation of the Company; (f) a
description of the voting rights, if any, of the Preferred Shares; and (g)
other preferences, rights, qualifications or restrictions or material terms of
such Preferred Shares.
The description of the foregoing provisions of the Preferred Shares as set
forth in the related Prospectus Supplement is only a summary, does not purport
to be complete and is subject to, and is qualified in its entirety by,
reference to the definitive Certificate of Amendment to the Trust's
Declaration of Trust relating to such series of Preferred Shares. In
connection with any offering of Preferred Shares, such Certificate of
Amendment will be filed with the Commission as an exhibit to or incorporated
by reference in the Registration Statement.
DEPOSITARY SHARES
The Trust may, at its option, elect to offer fractional Preferred Shares,
rather than full Preferred Shares. In the event such option is exercised, the
Trust will issue receipts for Depositary Shares, each of which will represent
a fraction (to be set forth in the Prospectus Supplement relating to the
Preferred Shares) of a share of such Preferred Shares.
The Preferred Shares represented by Depositary Shares will be deposited
under a Deposit Agreement (the "Deposit Agreement") between the Trust and a
bank or trust company selected by the Trust having its principal office in the
United States and having a combined capital and surplus of at least
$50,000,000 (the "Depositary Shares Depositary"). Subject to the terms of the
Deposit Agreement, each owner of a Depositary Share will be entitled, in
proportion to the applicable fraction of a Preferred Share represented by such
Depositary Share, to all the rights and preferences of the Preferred Share,
represented thereby (including dividend, voting, redemption, conversion and
liquidation rights).
The above description of the Depositary Shares is only a summary, is not
complete and is subject to, and is qualified in its entirety by, the
description in the related Prospectus Supplement and the provisions of the
Deposit Agreement (which will contain the form of Depositary Receipt), a copy
of which will be filed with the Commission as an exhibit to or incorporated by
reference in the Registration Statement.
DESCRIPTION OF WARRANTS
The Trust may issue separately, or together with any Preferred Shares or
Common Shares offered by any Prospectus Supplement, Warrants for the purchase of
other Preferred Shares or Common Shares (collectively, "Warrants"). The Warrants
may be issued under warrant agreements (each, a "Warrant Agreement") to be
entered into between the Trust and a bank or trust company, as warrant agent
(the "Warrant Agent"), or may be represented by certificates evidencing the
Warrants (the "Warrant Certificates"), all as set
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forth in the Prospectus Supplement relating to the particular series of
Warrants. The following summaries of certain provisions of the Warrants do not
purport to be complete and are subject to, and are qualified in their entirety
by reference to, all the provisions of any related Warrant Agreement and
Warrant Certificate, respectively, including the definitions therein of
certain terms. Wherever defined terms of the Warrant Agreement are summarized
herein or in a Prospectus Supplement, it is intended that such defined terms
shall be incorporated herein or therein by reference. In connection with any
offering of Warrants, any such Warrant Agreement or a form of any such Warrant
Certificate will be filed with the Commission as an exhibit to or incorporated
by reference in the Registration Statement.
GENERAL
The Prospectus Supplement relating to the particular series of Warrants
offered thereby will describe the terms of the offered Warrants, any related
Warrant Agreement and Warrant Certificate, including the following, to the
extent applicable: (a) if the Warrants are offered for separate consideration,
the offering price and the currency for which Warrants may be purchased; (b) if
applicable, the designation, number, stated value and terms (including, without
limitation, liquidation, dividend, conversion and voting rights) of the
Preferred Shares purchasable upon exercise of Preferred Shares Warrants and the
price at which such number of Preferred Shares may be purchased upon such
exercise; (c) if applicable, the number of shares of Common Shares purchasable
upon exercise of Common Shares Warrants and the price at which such number of
Common Shares may be purchased upon such exercise; (d) the date, if any, on and
after which the offered Warrants and the related Preferred Shares and/or Common
Shares will be separately transferable; (e) the date on which the right to
exercise the offered Warrants shall commence and the date on which such right
shall expire ("Expiration Date"); (f) a discussion of the specific U.S. federal
income tax, accounting and other considerations applicable to the Warrants or to
any Securities purchasable upon the exercise of such Warrants; (g) whether the
offered Warrants represented by Warrant Certificates will be issued in
registered or bearer form, and if registered, where they may be transferred and
registered; (h) any applicable anti-dilution provisions; (i) any applicable
redemption or call provisions; (j) any applicable book-entry provisions; and (k)
any other terms of the offered Warrants.
Warrant Certificates will be exchangeable on the terms specified in the
related Prospectus Supplement for new Warrant Certificates of different
denominations and Warrants may be exercised at the corporate trust office of the
Warrant Agent or any other office indicated in the Prospectus Supplement
relating thereto. Prior to the exercise of their Warrants, holders of Warrants
will not have any of the rights of holders of the Preferred Shares or Common
Shares purchasable upon such exercise, including the right to receive payments
of dividends or distributions of any kind, if any, on the Preferred Shares or
Common Shares, respectively, purchasable upon exercise or to exercise any
applicable right to vote.
EXERCISE OF WARRANTS
Each Warrant will entitle the holder thereof to purchase such number of
Preferred Shares or Common Shares, as the case may be, at such exercise price as
shall in each case be set forth in, or be determinable from, the Prospectus
Supplement relating to such Warrant, by payment of such exercise price in full
in the currency and in the manner specified in such Prospectus Supplement.
Warrants may be exercised at any time up to the close of business on the
Expiration Date (or such later date to which such Expiration Date may be
extended by the Trust); unexercised Warrants will become null and void.
Upon receipt at the corporate trust office of the Warrant Agent or any other
office indicated in the related Prospectus Supplement of (a) payment of the
exercise price and (b) the Warrant Certificate properly completed
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and duly executed, the Trust will, as soon as practicable, forward the Preferred
Shares or Common Shares purchasable upon such exercise to the holder of such
Warrant. If less than all of the Warrants represented by such Warrant
Certificate are exercised, a new Warrant Certificate will be issued for the
remaining number of Warrants.
FEDERAL INCOME TAX CONSIDERATIONS
WITH RESPECT TO THE TRUST AND THE OPERATING PARTNERSHIP
The following summary of the material federal income tax considerations with
respect to the Trust and the Operating Partnership regarding the offering of
Securities is based on current law, is for general information only and is not
tax advice. The tax treatment of a holder of any of the Securities will vary
depending on the terms of the specific Securities acquired or held by such
holder as well as such holder's particular situation, and this summary does
not attempt to address any aspects of federal income taxation relating to
holders of the Securities. Certain federal income tax consideration relevant
to holders of Securities will be provided on the applicable Prospectus
Supplement relating thereto.
EACH PROSPECTIVE PURCHASER OF SECURITIES IS ADVISED TO CONSULT HIS OR HER
OWN TAX ADVISOR REGARDING THE SPECIFIC TAX CONSEQUENCES TO HIM OR HER OF THE
PURCHASE, OWNERSHIP AND SALE OF THE SECURITIES AND OF THE TRUST'S ELECTION TO
BE TAXED AS A REAL ESTATE INVESTMENT TRUST, INCLUDING THE FEDERAL, STATE,
LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES OF SUCH PURCHASE, OWNERSHIP, SALE
AND ELECTION AND OF POTENTIAL CHANGES IN APPLICABLE TAX LAWS.
TAXATION OF THE TRUST
The Trust believes that, commencing with the Trust's taxable year ended
December 31, 1994, the Trust has been organized and operated in such a manner
as to qualify as a REIT under Sections 856 through 860 of the Code. The Trust
intends to continue to operate in such a manner as to qualify for taxation as
a REIT in the future, but no assurance can be given that is has or will remain
qualified.
The sections of the Code relating to qualification and operation as a REIT
are highly technical and complex. The following sets forth the material
aspects of the Code sections that govern the federal income taxation of a
REIT. This summary is qualified in its entirety by the applicable Code
provisions, rules and regulations promulgated thereunder, and administrative
and judicial interpretations thereof.
Wolf, Block, Schorr and Solis-Cohen has opined that, commencing with the
Trust's taxable year ended December 31, 1994, the Trust has been organized and
operated in conformity with the requirements for qualification and taxation as
a REIT under the Code, and its proposed method of operation will enable it to
continue to meet the requirements for qualification and taxation as a REIT
under the Code for future taxable periods. It must be emphasized that the
opinion of Wolf, Block, Schorr and Solis-Cohen is based on certain assumptions
and representations made by the Trust and the Operating Partnership as to
factual matters. Moreover, such qualification and taxation as a REIT depend
upon the Trust's future ability to meet, through actual annual operating
results, certain distribution levels, the diversity of stock ownership
requirements and the various other qualification tests imposed under the Code
discussed below, the results of which may not be reviewed by Wolf, Block,
Schorr and Solis-Cohen. Accordingly, no assurance can be given that the actual
results of the Trust's operation for any particular taxable year will satisfy
such requirements. For a discussion of the tax consequences of failure to
qualify as a REIT, see "--Failure to Qualify."
As a REIT, the Trust generally is not subject to federal corporate income
taxes on its net income that it currently distributes to shareholders. This
treatment substantially eliminates the "double taxation" (at the corporate and
shareholder levels) that generally results from investment in a corporation.
However, the Trust will be subject to federal income tax as follows. First,
the Trust will be taxed at regular corporate rates on any
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undistributed real estate investment trust taxable income, including
undistributed net capital gains. Second, under certain circumstances, the
Trust may be subject to the "alternative minimum tax" on its items of tax
preference. Third, if the Trust has (i) net income from the sale or other
disposition of "foreclosure property" (generally property acquired by a REIT
upon the default by a debtor with respect to indebtedness secured by the
property or upon the default by a lessee where the REIT was the lessor) which
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 at the highest corporate tax rate on such income. Fourth, if the Trust
has net income from "prohibited transactions" (which are, in general, certain
sales or other dispositions of property held primarily for sale to customers
in the ordinary course of business other than foreclosure property), such
income will be subject to a 100% tax. Fifth, if the Trust should fail to
satisfy the 75% gross income test or the 95% gross income test (discussed
below), but 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 Trust
fails the 75% test or the 95% test in the taxable year, multiplied by a
fraction generally intended to reflect the Trust's profitability. Sixth, if
the Trust should fail to distribute during each calendar year at least the sum
of (i) 85% of its REIT ordinary income for such year, (ii) 95% of its REIT
capital gain net income for such year, and (iii) any undistributed taxable
income from prior periods, the Trust would be subject to a 4% excise tax on
the excess of such required distribution over the amounts actually
distributed. Seventh, if the Trust acquires any asset from a C corporation
(i.e., generally a corporation subject to full corporate-level tax) in a
transaction in which the basis of the asset in the Trust's hands is determined
by reference to the basis of the asset (or any other property) in the hands of
the C corporation, and the Trust recognizes gain on the disposition of such
asset during the 10-year period following acquisition of the asset, then,
pursuant to guidelines issued by the Internal Revenue Service (the "IRS"), to
the extent of the "built-in gain," the excess of the fair market value of the
asset on the date acquired over its adjusted tax basis at that date, such gain
will be subject to tax at the highest regular corporate rate. The result
described above with respect to the recognition of built-in gain assumes the
Trust is eligible to make, and makes, an election pursuant to IRS Notice 88-
19.
REQUIREMENTS FOR QUALIFICATION
The Code defines a REIT as a corporation, trust or association (1) that is
managed by one or more trustees or directors; (2) the beneficial ownership of
which is evidenced by transferable shares, or by transferable certificates of
beneficial interest; (3) that would be taxable as a domestic corporation, but
for Sections 856 through 860 of the Code; (4) that is neither a financial
institution nor an insurance company subject to certain provisions of the
Code; (5) the beneficial ownership of which is held by 100 or more persons;
(6) 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 as
"individuals" for these purposes); and (7) which meets certain other tests,
described below, regarding the nature of its income and assets. The Code
provides that conditions (1) to (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
less than 12 months. Conditions (5) and (6) do not apply until after the first
taxable year for which an election is made by the Trust to be taxed as a REIT.
For purposes of determining stock ownership under the rule limiting ownership
by five or fewer individuals, REIT shares held by a pension fund generally are
treated as held proportionately by its beneficiaries.
The Trust has satisfied conditions (5) and (6) above. In making the "five or
fewer individual" determination, if treating interests in the Operating
Partnership that can be converted into shares of the Trust as converted into
outstanding shares would cause the Trust to fail that test, the interests are
deemed to have been converted. In addition, the Trust's Declaration of Trust
provides for restrictions regarding transfer of its shares, in order to assist
the Trust in continuing to satisfy the share ownership requirements described
in (5) and (6) above. Such transfer restrictions are included in the Trust's
Registration Statement on Form 8-A, which is incorporated by reference herein.
See "Incorporation of Certain Documents by Reference."
Code Section 856(i) provides that a corporation which is a "qualified REIT
subsidiary" is not to be treated as a separate corporation, and all assets,
liabilities, and items of income, deduction, and credit of a "qualified
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REIT subsidiary" are treated as assets, liabilities, and such items (as the
case may be) of the REIT. A qualified REIT subsidiary is a corporation 100% of
the stock of which is held by the REIT at all times during the existence of
the corporation. Thus, in applying the requirements described herein, the
Trust's "qualified REIT subsidiaries" are ignored, and all assets,
liabilities, and items of income, deduction, and credit of such subsidiaries
will be treated as assets, liabilities and items of the Trust.
In the case of a REIT which is a partner in a partnership, Treasury
Regulations provide that the REIT will be deemed to own its proportionate
share of the assets of the partnership and will be deemed to be entitled to
the income of the partnership attributable to such share. In addition, the
character of the assets and gross income of the partnership retain the same
character in the hands of the REIT for purposes of Section 856 of the Code,
including satisfying the gross income tests and the asset tests described
below. The Trust's proportionate share of the assets, liabilities and items of
income of the Operating Partnership and the other partnerships through which
the Trust's properties are owned (the "Property Partnerships") will be treated
as assets, liabilities and items of income of the Trust for purposes of
applying the requirements described herein. The references to the gross income
or assets of the Trust, as discussed immediately below in "Income Tests" and
"Assets Tests," include the Trust's proportionate share of the gross income or
assets, as the case may be, of the Operating Partnership and the Property
Partnerships.
INCOME TESTS
For the Trust to maintain its qualification as a REIT, the Trust must
satisfy three separate tests based on the nature of the underlying gross
income. These requirements must be satisfied annually. First, at least 75% of
the Trust's gross income (excluding gross income from prohibited transactions)
for each taxable year must consist of income derived directly or indirectly
from investments relating to real property or mortgages on real property
(including "rents from real property" and, in certain circumstances, interest)
or certain types of "qualified temporary investment income." Second, at least
95% of the Trust's gross income (excluding gross income from prohibited
transactions) for each taxable year must be derived from such real property
investments, and from dividends, other types of interest, and gain from the
sale or disposition of stock or securities or from any combination of the
foregoing. Third, short-term gain from the sale or other disposition of stock
or securities, gain from prohibited transactions and gain on the sale or other
disposition of real property held for less than four years (apart from
involuntary conversions and sales of foreclosure property) must represent less
than 30% of the Trust's gross income (including gross income from prohibited
transactions) for each taxable year.
Rents received by the Trust will qualify as "rents from real property" in
satisfying the gross income requirements for a REIT described above provided
that several conditions are met. First, the amount of rent must not be based
in whole or in part on the income or profits of any person. An amount received
or accrued generally is not excluded from the term "rents from real property"
solely by reason of being based on a fixed percentage or percentages of
receipts or sales. Special rules apply where the tenant is a sublessor with
respect to property which permits a REIT to receive rent determined by
reference to the income or profits of the tenant in some cases. Second, the
Code provides that rents received from a tenant do not qualify as "rents from
real property" in satisfying the gross income tests if the REIT, or a direct
or indirect owner of 10% or more of the REIT, directly or constructively, owns
10% or more of such tenant (a "Related Party Tenant"). Although the Trust may
lease portions of its properties to tenants that may constitute Related Party
Tenants, the Trust does not believe that the rents attributable to such leases
would cause the Trust to fail to satisfy the 75% or 95% gross income tests.
Third, if rent attributable to personal property leased in connection with a
lease of real property is greater than 15% of the total rent received under
the lease, the portion of rent attributable to such personal property will not
qualify as "rents from real property." The Trust does not anticipate that the
rent attributable to the personal property leased in connection with the real
property will be greater than 15% of the total rent received under the lease
or, if it was as to any particular lease or group of leases, that the rent
attributable to the personal property would cause the Trust to fail to satisfy
the 75% or 95% gross income tests. Finally, in order for rents received to
qualify as "rents from real property," the REIT generally must not operate or
manage the property or furnish or render services to the tenants of such
property, other than through an independent contractor that is adequately
compensated and from whom the REIT derives no revenue; provided, however, that
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the Trust may directly perform services "usually and customarily" rendered in
connection with the rental of space for occupancy only and that are not
otherwise considered "rendered to the occupant" of the property. The Trust has
represented that it does not and will not knowingly (i) charge rent for any
property that is based in whole or in part on the income or profits of any
person or (ii) directly perform services considered to be rendered to the
occupant of property.
The Trust is a self-managed REIT; i.e., the Operating Partnership performs
all of the management and leasing functions with respect to the properties it
owns; provided that the services called for do not cause the rents received
with respect to those leases to fail to qualify as "rents from real property."
To the extent that the services provided are not "usual and customary" under
the foregoing rules, the Trust will employ a qualifying independent contractor
to render the services. The Trust may provide property management and leasing
services to third parties and will provide services to an affiliated entity
for a fee. Although such income will not be qualifying income under the 75%
and 95% gross income tests, the Trust does not expect that the revenue derived
from such services would cause it to fail to qualify as a REIT.
For purposes of the gross income test, the term "interest" generally does
not include any amount received or accrued (directly or indirectly) if the
determination of such amount depends in whole or in part on the income or
profits of any person. However, an amount received or accrued generally will
not be excluded from the term "interest" solely by reason of being based on a
fixed percentage or percentages of receipts or sales.
Any gross income derived from a prohibited transaction is taken into account
in applying the 30% income test necessary to maintain the Trust's
qualification as a REIT (and the net income from that transaction is subject
to a 100% tax). The Operating Partnership and the Trust believe that no asset
owned by the Operating Partnership, the Property Partnerships or the Trust is
inventory property or property held for sale to customers or in the ordinary
course of business of the Operating Partnership, the relevant Property
Partnership or the Trust. Whether property is held "primarily for sale to
customers in the ordinary course of a trade or business" depends, however, on
the facts and circumstances in effect from time to time, including those
related to a particular property. The Trust, Operating Partnership and the
Property Partnerships will attempt to comply with the terms of safe-harbor
provisions in the Code prescribing when asset sales will not be characterized
as prohibited transactions. Complete assurance cannot be given, however, that
the Trust can comply with the safe-harbor provisions of the Code or avoid
owning property that may be characterized as property held "primarily for sale
to customers in the ordinary course of business." Assets owned by Liberty
Development may constitute property held for sale, although the Trust owns an
interest solely as a shareholder in such entity.
Generally, the failure to satisfy either or both of the 75% and 95% gross
income tests will cause the REIT status of the Trust to terminate with the
taxable year in which the failure occurs. Relief from the adverse consequences
of such failure is available if the Trust's failure to meet such tests was due
to reasonable cause and not willful neglect, the Trust attaches a schedule of
the nature and the sources of its gross income to its income tax return, and
any incorrect information set forth on the schedule is not due to fraud with
intent to evade tax. It is not possible to state whether, in all
circumstances, the Trust would be entitled to the benefit of these relief
provisions. As discussed above in "Taxation of the Trust," even if these
relief provisions apply, a tax would be imposed with respect to the excess of
75% or 95% of the Trust's gross income over the Trust's qualifying income in
the relevant category, whichever is greater. This statutory relief is
available only for failures to satisfy the 75% and 95% gross income tests and
no such relief is available for a failure to satisfy the 30% gross income
test. In such case, the Trust would cease to qualify as a REIT.
ASSET TESTS
The Trust, at the close of each quarter of its taxable year, must also
satisfy three tests relating to the nature of its assets. First, at least 75%
of the value of the Trust's total assets must be represented by real estate
assets (including (i) its allocable share of real estate assets held by
partnerships in which the Trust owns an interest or held by "qualified REIT
subsidiaries" of the Trust and (ii) stock or debt instruments held for not
more than one year purchased with the proceeds of a stock offering or long-
term (at least five years) debt offering of the Trust),
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cash, cash items and governmental securities. Second, not more than 25% of the
Trust's total assets may be represented by securities other than those in the
75% asset class. Third, of the investments included in the 25% asset class,
the value of any one issuer's securities owned by the Trust may not exceed 5%
of the value of the Trust's total assets and the Trust may not own more than
10% of any one issuer's outstanding voting securities (excluding the stock of
a qualified REIT subsidiary, of which the REIT is required to own all of the
stock, or of another real estate investment trust).
The Operating Partnership owns 8.0% of the voting common stock and 100% of
the non-voting common stock of Liberty Development. By virtue of its ownership
of partnership interests in the Operating Partnership, the Trust owns its pro
rata share of the common stock of Liberty Development. The Operating
Partnership does not own more than 10% of the voting securities of Liberty
Development and, therefore, the Trust will not own more than 10% of the voting
securities of Liberty Development. The IRS could contend that the Trust,
through its interest in the Operating Partnership, should be viewed as owning
more than 10% of the voting securities of Liberty Development because of its
substantial economic position in Liberty Development and the close business
relationship between the two entities. If such contention were sustained, the
Trust would not qualify as a REIT. The Operating Partnership does not posses
the requisite power to elect or designate a member of the Board of Directors
of Liberty Development, and there is no understanding or arrangement
permitting the Trust to exercise voting power or control over the voting
common stock of Liberty Development not owned by it. Accordingly, Wolf, Block,
Schorr and Solis-Cohen and the Trust do not believe that the Trust will be
viewed as owning in excess of 10% of the voting securities of Liberty
Development. Based on its analysis of the estimated value of the securities of
the subsidiaries to be owned by the Operating Partnership relative to the
estimated value of the other assets to be owned by the Operating Partnership,
the Trust has determined that its pro rata share of the securities of Liberty
Development held by the Operating Partnership does not exceed 5% of the total
value of the Trust's assets. No independent appraisals will be obtained to
support this conclusion and Wolf, Block, Schorr and Solis-Cohen, in rendering
its opinion as to the qualification of the Trust as a REIT, is relying solely
on the representations of the Trust regarding the value of Liberty
Development. The 5%-of-value requirement must be satisfied each time the Trust
increases its ownership of securities of Liberty Development (including as a
result of increasing its interest in the Operating Partnership as its limited
partners exercise their conversion rights). Although the Trust plans to take
steps to insure that it satisfies the 5% value test for any quarter with
respect to which retesting is to occur, there can be no assurance that such
steps will always be successful or will not require a reduction in the
Operating Partnership's overall interest in Liberty Development.
After initially meeting the asset tests at the close of any quarter, the
Trust will not lose its status as a REIT for failure to satisfy the asset
tests at the end of a later quarter solely by reason of changes in asset
values. If the failure to satisfy the asset tests results from an acquisition
of securities or other property during a quarter, the failure can be cured by
disposition of sufficient non-qualifying assets within 30 days after the close
of any quarter as may be required to cure any non-compliance.
ANNUAL DISTRIBUTION REQUIREMENTS
The Trust, to qualify as a REIT is required to distribute dividends (other
than capital gain dividends) to its stockholders in an amount at least equal
to (A) the sum of (i) 95% of the "REIT taxable income" of the Trust (computed
without regard to the dividends paid deduction and the Trust's net capital
gain) and (ii) 95% of the net taxable income (after tax), if any, from
foreclosure property, minus (B) the sum of certain items of noncash income.
Such distributions must be paid in the taxable year to which they relate, or
in the following taxable year if declared before the Trust timely files its
tax return for such year and if paid on or before the first regular dividend
payment after such declaration. To the extent the Trust does not distribute
all of the net capital gain or distributes at least 95%, but less than 100%,
of its "REIT taxable income," as adjusted, it will be subject to tax on the
undistributed amount at the regular corporate tax rates applicable to such
income. Furthermore, if the Trust should fail to distribute during each
calendar year at least the sum of (i) 85% of its REIT ordinary income for such
year, (ii) 95% of its REIT capital gain income for such year, and (iii) any
undistributed taxable income from prior periods, the Trust would be subject to
a 4% excise tax on the excess of such required distribution over the amounts
actually distributed.
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The Trust has made, and intends to make, timely distributions to its
shareholders in amounts sufficient to satisfy the annual distribution
requirements. The Operating Partnership, as the general partner of each
Property Partnership, is authorized under the various partnership agreements
to cause distributions to be made to their respective partners of all
available cash to permit the Trust to meet the annual distribution
requirement. It is possible that, from time to time, the Trust may experience
timing differences between (i) the actual receipt of income and actual payment
of deductible expenses and (ii) the inclusion of such income and deduction of
such expenses in arriving at REIT taxable income. Further, it is possible
that, from time to time, the Trust may be allocated a share of net capital
gain attributable to the sale of depreciable property which exceeds its
allocable share of cash attributable to that sale. In such cases, the Trust
may have less cash available for distribution than is necessary to meet the
annual 95% distribution requirement or to avoid tax with respect to the
capital gain or the excise tax imposed on certain undistributed income. To
meet the 95% distribution requirement necessary to qualify as a real estate
investment trust or to avoid tax with respect to capital gain or the excise
tax imposed on certain undistributed income, the Trust may find it appropriate
to arrange for short-term (or possibly long-term) borrowings or to pay
distributions in the form of taxable stock dividends. Any such borrowings for
the purpose of making distributions to shareholders of the Trust are required
to be arranged through the Operating Partnership.
Under certain circumstances, the Trust 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 Trust's
deduction for dividends paid for the earlier year. Thus, the Trust may be able
to avoid being taxed on amounts distributed as deficiency dividends; however,
the Trust will be required to pay interest based upon the amount of any
deduction taken for deficiency dividends.
Pursuant to applicable Treasury Regulations, in order to qualify as a REIT,
the Trust must maintain certain records and timely request certain information
from its shareholders designed to disclose the actual ownership of its stock.
The Trust believes it has complied, and intends to continue to comply, with
such requirements.
FAILURE TO QUALIFY
If the Trust fails to qualify for taxation as a REIT in any taxable year and
the relief provisions do not apply, the Trust would be subject to tax
(including any applicable alternative minimum tax) on its taxable income at
regular corporate rates. Distributions to shareholders of the Trust in any
year in which the Trust failed to qualify would not be deductible by the Trust
nor would there be a requirement to make distributions. In such event, to the
extent of current and accumulated earnings and profits, all distributions to
shareholders of the Trust would be taxable as ordinary income, and, subject to
certain limitations of the Code, corporate distributees may be eligible for
the dividends received deduction. Unless entitled to relief under specific
statutory provisions, the Trust would also be disqualified from taxation as a
REIT for the four taxable years following the year in which qualification was
lost. It is not possible to state whether in all circumstances the Trust would
be entitled to such statutory relief.
OTHER TAX CONSIDERATIONS
The Trust may be subject to state or local taxation in various state or
local jurisdictions, including those in which it transacts business. The state
and local tax treatment of the Trust may not conform to the federal income tax
consequences discussed above. Consequently, prospective investors should
consult their own tax advisors regarding the effect of state and local tax
laws on an investment in the Trust.
To the extent that the Trust engages in real estate development activities
in foreign countries or invests in real estate located in foreign countries,
the Trust's profits from such activities or investments will generally be
subject to tax in the countries where such activities are conducted or such
properties are located. The precise nature and amount of such taxation will
depend on the laws of the countries where the activities are conducted or the
properties are located. Although the Trust will attempt to minimize the amount
of such foreign taxation, there can be no assurance as to whether or the
extent to which measures taken to minimize such taxes will be
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successful. If the Trust satisfies the annual distribution requirements for
qualification as a REIT and is, therefore, not subject to federal corporate
income tax on that portion of its ordinary income and capital gain that is
currently distributed to its shareholders, the Trust will generally not be
able to recover the cost of any foreign tax imposed on such profits from its
foreign activities or investments by claiming foreign tax credits against its
federal income tax liability on such profits. Moreover, the Trust will not be
able to pass foreign tax credits through to its shareholders. As a result, to
the extent that the Trust is required to pay taxes in foreign countries, the
cash available for distribution to its shareholders will be reduced
accordingly.
The Operating Partnership will receive fees from an affiliated entity as
consideration for services that the Operating Partnership will provide to such
entity in connection with the development and management of the Kings Hill
project in the United Kingdom ("U.K."). The amount of this fee income will not
be qualifying income for purposes of the 75% or 95% gross income tests,
although the Trust does not expect that the revenue derived from such services
would cause it to fail the 75% or 95% gross income tests. The Trust may be
subject to Corporation Tax in the U.K. at the rate of 33% on its share of such
fee income if the Trust is deemed to have a branch or agency in the U.K. as a
result of services that may be performed for such entity in the U.K. In
addition, rental income received by the Trust with respect to leases of real
property in the U.K. would be subject to U.K. withholding tax at the rate of
25%. It is possible that such rental income (together with any gain arising
from the sale or other disposition of such properties) could instead be
subject to Corporation Tax in the U.K. at the rate of 33% if the U.K. Inland
Revenue did not regard the Trust as holding the properties for purposes of
long term investment or if such income or gain were deemed attributable to a
branch or agency of the Trust in the U.K. Such U.K. taxes will reduce the
amount of cash available for distribution by the Trust to its shareholders out
of such income.
TAX ASPECTS OF THE TRUST'S INVESTMENTS IN PARTNERSHIPS
The following discussion summarizes certain federal income tax
considerations applicable solely to the Trust's investment in the Operating
Partnership and the Property Partnerships (collectively, the "Partnerships").
CLASSIFICATION AS A PARTNERSHIP
The Trust will be required to include in its income its distributive share
of the Operating Partnership's income and to deduct its distributive share of
the Operating Partnership's losses, and the Trust and the Operating
Partnership will be required to include in computing their income their
respective distributive shares of the income and losses of the Property
Partnerships only if the Operating Partnership and each of the Property
Partnerships is classified, for federal income tax purposes, as a partnership
rather than as an association taxable as a corporation.
For taxable periods prior to January 1, 1997, an organization formed as a
partnership was treated as a partnership rather than as a corporation for
federal income tax purposes only if it possessed no more than two of the four
corporate characteristics that the Treasury Regulations used to distinguish a
partnership from a corporation. These four characteristics were continuity of
life, centralization of management, limited liability, and free
transferability of interests. Although neither the Operating Partnership nor
the Property Partnerships requested a ruling from the IRS that they would be
classified as partnerships for Federal income tax purposes, rather than as
associations taxable as corporations, Wolf, Block, Schorr and Solis-Cohen had
opined that, based on the provisions of the respective Partnership Agreements
of the Operating Partnership and each Property Partnership, and certain
factual assumptions and representations as to each of them, the Operating
Partnership and each Property Partnership will be treated as partnerships for
federal income tax purposes and not as associations taxable as corporations.
Effective January 1, 1997, newly promulgated Treasury Regulations eliminated
the four-factor test described above and, instead, permit partnerships and
other non-corporate entities to be taxed as partnerships for federal income
tax purposes without regard to the number of corporate characteristics
possessed by such entity. Under those Regulations, both the Operating
Partnership and each of the Property Partnerships will be classified as
partnerships for federal income tax purposes unless an affirmative election is
made by the entity to be taxed as a corporation. The Trust has represented
that no such election has
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been made, or is anticipated to be made, on behalf of the Operating
Partnership or any of the Property Partnerships. Under a special transitional
rule in the Regulations, the IRS will not challenge the classification of an
existing entity such as the Operating Partnership or a Property Partnership
for periods prior to January 1, 1997 if: (i) the entity has a "reasonable
basis" for its classification; (ii) the entity and each of its members
recognized the federal income tax consequences of any change in classification
of the entity made within the 60 months prior to January 1, 1997; and (iii)
neither the entity nor any of its members had been notified in writing on or
before May 8, 1996 that its classification was under examination by the IRS.
Neither the Partnership nor any of the Property Partnerships changed their
classification within the 60 month period preceding May 8, 1996, nor was any
one of them notified that their classification as a partnership for federal
income tax purposes was under examination by the IRS. Therefore, in reliance
on the opinion previously rendered by Wolf, Block, Schorr and Solis-Cohen, the
Operating Partnership and each of the Property Partnerships should continue to
be taxed as partnerships for federal tax purposes.
If for any reason the Operating Partnership or a Property Partnership were
taxable as a corporation rather than as a partnership for federal income tax
purposes, the Trust would not be able to satisfy the income and asset
requirements for status as a REIT. In addition, any change in the Operating
Partnership's status or that of a Property Partnership for tax purposes might
be treated as a taxable event, in which case the Trust might incur a tax
liability without any related cash distribution. See "--Taxation of the
Trust," above. Further, items of income and deduction for the Operating
Partnership or a Property Partnership would not pass through to the respective
partners, and the partners would be treated as stockholders for tax purposes.
Each Partnership would be required to pay income tax at regular corporate tax
rates on its net income and distributions to partners would constitute
dividends that would not be deductible in computing the Partnership's taxable
income.
INCOME TAXATION OF THE PARTNERSHIPS
Partners, Not the Operating Partnership or Property Partnerships, Subject to
Tax
A partnership is not a taxable entity for federal income tax purposes.
Rather, the Trust will be required to take into account its allocable share of
the income, gains, losses, deductions and credits of each of the Operating
Partnership and the Property Partnerships for any taxable year of such
Partnerships ending within or with the taxable year of the Trust, without
regard to whether the Trust has received or will receive any cash
distributions. The same will be true for the Operating Partnership with
respect to its allocable share of the income, gains, losses, deductions and
credits of each of the Property Partnerships.
Partnership Allocations
Although a partnership agreement generally will determine the allocation of
income and losses among partners, the allocations provided in the partnership
agreement will be disregarded for tax purposes if they do not comply with the
provisions of Section 704(b) of the Code and the Treasury Regulations
promulgated thereunder.
If an allocation is not recognized for federal income tax purposes, the item
subject to the allocation will be reallocated in accordance with the partners'
interests in the partnership, which will be determined by taking into account
all of the facts and circumstances relating to the economic arrangement of the
partners with respect to such item. The allocations of taxable income and loss
of each of the Operating Partnership and the Property Partnerships are
intended to comply with the requirements of Section 704(b) of the Code and the
Treasury Regulations promulgated thereunder.
Tax Allocations With Respect to Pre-Contribution Gain
Pursuant to Section 704(c) of the Code, income, gain, loss, and deduction
attributable to appreciated property that is contributed to a partnership in
exchange for an interest in the partnership must be allocated for federal
income tax purposes in a manner such that the contributor is charged with the
unrealized gain associated
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with the property at the time of the contribution. The amount of such
unrealized gain is generally equal to the difference between the fair market
value of the contributed property at the time of contribution and the adjusted
tax basis of such property at the time of contribution (the "Book-Tax
Difference"). In general, the fair market value of the properties owned
(directly or indirectly) by the Trust and interests in Property Partnerships
contributed to the Operating Partnership has been substantially in excess of
their respective adjusted tax bases. The Partnership Agreements of each of the
Operating Partnership and the Property Partnerships require that allocations
attributable to each item of contributed property be made so as to allocate
the tax depreciation available with respect to such property first to the
partners other than the partner that contributed the property, to the extent
of, and in proportion to, their book depreciation, and then, if any tax
depreciation remains, to the partner that contributed the property. Upon the
disposition of any item of contributed property, any gain attributable to the
"built-in" gain of the property at the time of contribution would be allocated
for tax purposes to the contributing partner. These allocations are intended
to be consistent with the Treasury Regulations under Section 704(c) of the
Code.
In general, participants in the formation of the Trust (and the
Partnerships) have been allocated disproportionately lower amounts of
depreciation deductions for tax purposes relative to their percentage
interests in the Operating Partnership, and disproportionately greater shares
relative to their percentage interests in the Operating Partnership of the
gain on the sale by the Partnerships of one or more of the contributed
properties. These tax allocations will tend to reduce or eliminate the Book-
Tax Difference over the life of the Partnerships. Because the Partnership
Agreements of the Partnerships adopt the "traditional method" in obtaining
items allocable under Section 704(c) of the Code, the amounts of the special
allocations of depreciation and gain under the special allocation rules of
Section 704(c) of the Code may be limited by the so-called "ceiling rule" and
may not always eliminate the Book-Tax Difference on an annual basis or with
respect to a specific transaction such as a sale. Thus, the carryover basis of
the contributed assets in the hands of the Partnerships may cause the Trust to
be allocated less depreciation than would be available for newly purchased
properties.
The foregoing principles also apply in determining the earnings and profits
of the Trust. The application of these rules may result in a larger share of
the distributions from the Trust being taxable to shareholders as dividends.
Basis in Operating Partnership Interest
The Trust's adjusted tax basis in its partnership interest in the Operating
Partnership generally (i) will be equal to the amount of cash and the basis of
any other property contributed to the Operating Partnership by the Trust plus
the fair market value of the Shares it issues or cash it pays upon conversion
of interests in the Operating Partnership, (ii) has been, and will be,
increased by (a) its allocable share of the Operating Partnership's income and
(b) its allocable share of indebtedness of the Operating Partnership and of
the Property Partnerships and (iii) has been, and will be, reduced (but not
below zero) by the Trust's allocable share of (a) the Operating Partnership's
loss and (b) the amount of cash distributed to the Trust, and by constructive
distributions resulting from a reduction in the Trust's share of indebtedness
of the Operating Partnership and the Property Partnerships.
If the allocation of the Trust's distributive share of the Operating
Partnership's loss would reduce the adjusted tax basis of the Trust's
partnership interest in the Operating Partnership below zero, the loss is
deferred until such time as the recognition of such loss would not reduce the
Trust's adjusted tax basis below zero. To the extent that the Operating
Partnership's distributions, or any decrease in the Trust's share of the
indebtedness of the Operating Partnership or a Property Partnership (each such
decrease being considered a constructive cash distribution to the partners),
would reduce the Trust's adjusted tax basis below zero, such distributions
(including such constructive distributions) would be includible as taxable
income to the Trust in the amount of such excess. Such distributions and
constructive distributions would normally be characterized as capital gain,
and if the Trust's partnership interest in the Operating Partnership has been
held for longer than the long-term capital gain holding period (currently, one
year), the distributions and constructive distributions would constitute long-
term capital gain. Based on certain undertakings by limited partners of the
Operating Partnership, the Subordinated
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Debentures issued by the Operating Partnership are allocated for purposes of
Section 752 of the Code disproportionately in favor of certain limited
partners.
SALE OF THE PARTNERSHIPS' PROPERTY
Generally, any gain realized by the Operating Partnership or a Property
Partnership on the sale of property held by the Operating Partnership or a
Property Partnership, or on the sale of partnership interests in the Property
Partnerships, if the property or partnership interests are held for more than
one year, will be long-term capital gain, except for any portion of such gain
that is treated as depreciation or cost recovery recapture.
The Trust's share of any gain realized on the sale of any property held by
the Operating Partnership or a Property Partnership as inventory or other
property held primarily for sale to customers in the ordinary course of the
trade or business of any of the Operating Partnership or the Property
Partnerships will, however, be treated as income from a prohibited transaction
that is subject to a 100% penalty tax. See "--Requirements for Qualification"
and "--Income Tests." Such prohibited transaction income may also have an
adverse effect upon the Trust's ability to satisfy the income tests for REIT
status. See "--Requirements For Qualification" and "--Income Tests," above.
Under existing law, whether property is held as inventory or primarily for
sale to customers in the ordinary course of a trade or business is a question
of fact that depends on all the facts and circumstances with respect to the
particular transaction. The Operating Partnership and the Property
Partnerships intend to hold their properties for investment with a view to
long-term appreciation, to engage in the business of acquiring, developing,
owning and operating their properties and to make such occasional sales of
such properties, including peripheral land, as are consistent with the
investment objectives of the Trust and the Operating Partnership.
PLAN OF DISTRIBUTION
The Trust and/or the Operating Partnership, as the case may be, may sell the
Securities being offered hereby: (a) directly to purchasers; (b) through
agents; (c) through underwriters; (d) through dealers; or (e) through a
combination of any such methods of sale. The Securities may also be used as
all or part of the consideration to be paid by the Trust or the Operating
Partnership for the acquisition of non-operating assets for which financial
statements would not be required to be filed with the Commission, or in
exchange for units of limited partnership interest of the Operating
Partnership. In addition, Common Shares may be offered hereby in exchange for
certain debt securities of the Operating Partnership that are exchangeable for
such Common Shares.
The distribution of the Securities may be effected from time to time in one
or more transactions: (a) at a fixed price or at final prices, which may be
changed; (b) at market prices prevailing at the time of sale; (c) at prices
related to such prevailing market prices; or (d) at negotiated prices. Offers
to purchase Securities may be solicited directly by the Trust or the Operating
Partnership, as the case may be, or by agents designated by the Trust or the
Operating Partnership, as the case may be, from time to time. Any such agent,
which may be deemed to be an underwriter as that term is defined in the
Securities Act, involved in the offer or sale of the Securities in respect of
which this Prospectus is delivered will be named, and any commissions payable
by the Trust or the Operating Partnership, as the case may be, to such agent
will be set forth, in the applicable Prospectus Supplement.
If an underwriter is, or underwriters are, utilized in the offer and sale of
Securities in respect of which this Prospectus and the accompanying Prospectus
Supplement are delivered, the Trust and/or the Operating Partnership will
execute an underwriting agreement with such underwriter(s) for the sale to it
or them and the name(s) of the underwriter(s) and the terms of the transaction
will be set forth in such Prospectus Supplement, which will be used by the
underwriter(s) to make resales of the Securities in respect of which this
Prospectus and such Prospectus Supplement are delivered to the public.
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If a dealer is utilized in the sale of the Securities in respect of which
this Prospectus is delivered, the Trust and/or the Operating Partnership will
sell such Securities to the dealer, as principal. The dealer may then resell
such Securities to the public at varying prices to be determined by such
dealer at the time of resale.
Certain of the underwriters, dealers or agents utilized by the Trust and/or
the Operating Partnership in any offering hereby may be customers of,
including borrowers from, engage in transactions with, and perform services
for, the Trust and/or the Operating Partnership or one or more of their
respective affiliates in the ordinary course of business. Underwriters,
dealers, agents and other persons may be entitled, under agreements which may
be entered into with the Trust or the Operating Partnership, as the case may
be, to indemnification against certain civil liabilities, including
liabilities under the Securities Act.
Until the distribution of the Securities is completed, rules of the
Commission may limit the ability of the underwriters and certain selling group
members, if any, to bid for and purchase the Securities. As an exception to
these rules, the representatives of the underwriters, if any, are permitted to
engage in certain transactions that stabilize the price of the Securities.
Such transactions may consist of bids or purchases for the purpose of pegging,
fixing or maintaining the price of the Securities.
If underwriters create a short position in the Securities in connection with
the offering thereof, (i.e., if they sell more Securities than are set forth
on the cover page of the applicable Prospectus Supplement), the
representatives of such underwriters may reduce that short position by
purchasing Securities in the open market. Any such representatives also may
elect to reduce any short position by exercising all or part of the over-
allotment option described in the applicable Prospectus Supplement.
Any such representatives also may impose a penalty bid on certain
underwriters and selling group members. This means that if the representatives
purchase Securities in the open market to reduce the underwriters' short
position or to stabilize the price of the Securities, they may reclaim the
amount of the selling concession from the underwriters and selling group
members who sold those shares as part of the offering thereof.
In general, purchases of a security for the purpose of stabilization or to
reduce a syndicate short position could cause the price of the security to be
higher than it might otherwise be in the absence of such purchases. The
imposition of a penalty bid might have an effect on the price of a security to
the extent that it were to discourage resales of the security by purchasers in
the offering.
Neither the Company nor any of the underwriters, if any, 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 Securities.
In addition, neither the Company nor any of the underwriters, if any, makes
any representation that the representatives of the underwriters, if any, will
engage in such transactions or that such transactions, once commenced, will
not be discontinued without notice.
LEGAL OPINIONS
Wolf, Block, Schorr and Solis-Cohen, Philadelphia, Pennsylvania, has
rendered an opinion with respect to the legality of the Securities to be
issued by the Operating Partnership. Weinberg & Green LLC, Baltimore,
Maryland, has rendered an opinion with respect to the legality of the
Securities to be issued by the Trust. The statements in this Prospectus under
the caption "Federal Income Tax Considerations with Respect to the Trust and
the Operating Partnership" and the other statements herein relating to the
Trust's qualification as a real estate investment trust will be passed upon
for the Trust by Wolf, Block, Schorr and Solis-Cohen, although such firm has
rendered no opinion as to matters involving the imposition of non-U.S. taxes
on the operations of, and distributions of payments from, its United Kingdom
affiliate. Michael M. Dean, a partner of Wolf, Block, Schorr and Solis-Cohen,
is the sole trustee of irrevocable trusts established by three of the Trust's
senior executives for the benefit of their respective children. Each of such
trusts received limited partnership interests in the Operating Partnership in
connection with the Company's formation in exchange for interests in the Rouse
Group owned by such trusts.
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EXPERTS
The consolidated financial statements of the Trust and the Operating
Partnership for the years ended December 31, 1996 and 1995 and the period from
June 23, 1994 through December 31, 1994 and the combined financial statements
of the Rouse Group for the period January 1, 1994 through June 22, 1994,
appearing in the Annual Reports (Form 10-K) of the Trust and the Operating
Partnership for the year ended December 31, 1996, have been audited by Ernst &
Young LLP, independent auditors, as set forth in their reports thereon
included therein and incorporated herein by reference. Such consolidated
financial statements are incorporated herein by reference in reliance upon
such reports given upon the authority of such firm as experts in accounting
and auditing.
The statement of operating revenues and certain operating expenses of 650-
660 E. Swedesford Road for the years ended December 31, 1996 and 1995
appearing in the Current Reports (Form 8-K) of the Trust and the Operating
Partnership, filed February 13, 1997, have been audited by Fegley &
Associates, independent auditors, as set forth in their report thereon
included therein and incorporated herein by reference. Such statement of
operating revenues and certain operating expenses is incorporated herein by
reference in reliance upon such report given upon the authority of such firm
as experts in accounting and auditing.
The statement of operating revenues and certain operating expenses of the
Minnesota Properties for the year ended December 31, 1996 appearing in the
Current Reports (Form 8-K) of the Trust and the Operating Partnership, filed
March 5, 1997, have been audited by Fegley & Associates, independent auditors,
as set forth in their report thereon included therein and incorporated herein
by reference. Such statement of operating revenues and certain operating
expenses is incorporated herein by reference in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
The statement of operating revenues and certain operating expenses of the
South Carolina Properties for the year ended December 31, 1996 appearing in
the Current Reports (Form 8-K) of the Trust and the Operating Partnership
filed March 5, 1997 have been audited by Fegley & Associates, independent
auditors, as set forth in their report thereon included therein and
incorporated herein by reference. Such statement of operating revenues and
certain operating expenses is incorporated herein by reference in reliance
upon such report given upon the authority of such firm as experts in
accounting and auditing.
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