As filed with the Securities and Exchange Commission, via EDGAR, on
June 13, 2000
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------------
LIBERTY PROPERTY TRUST
LIBERTY PROPERTY LIMITED PARTNERSHIP
(Exact name of each Registrant as specified in its governing documents)
----------------------
MARYLAND 23-7768996
PENNSYLVANIA 23-2766549
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization of Number of respective Registrant)
respective Registrant)
----------------------
65 VALLEY STREAM PARKWAY, MALVERN, PENNSYLVANIA 19355
(610) 648-1700
(Address, including zip code, and telephone number, including
area code, of Registrants' principal executive offices)
----------------------
JAMES J. BOWES, ESQUIRE
65 VALLEY STREAM PARKWAY
MALVERN, PENNSYLVANIA 19355
(610) 648-1700
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
-----------------------
APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE TO THE PUBLIC:
From time to time after this Registration Statement becomes effective.
-----------------------
If the only securities being registered on this Form are being
offered pursuant to dividend or interest reinvestment plans, please
check the following box: / /
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in
connection with dividend or interest reinvestment plans, check the
following box: /x/
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check
the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same
offering: / / __________
If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier
effective registration statement for the same offering: / / ________
If delivery of the prospectus is expected to be made pursuant to
Rule 434 under the Securities Act, please check the following box: /x/
-----------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
=========================================================================================
PROPOSED
PROPOSED MAXIMUM
AMOUNT MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED (1) PER UNIT (2) PRICE (2) FEE
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Shares of Beneficial
Interest, $0.001 par
value (3)(4)(5)
Preferred Shares of
Beneficial Interest,
$0.001 par value (4)(5) $600,001,000 100% $600,001,000 $158,401
Depository Shares (4)(5)(6)
Warrants (4)(7)
Guaranties (4)(8)
Debt Securities (9)(10)
=========================================================================================
</TABLE>
(1) Not specified as to each class of the above-referenced securities
being registered hereby, pursuant to General Instruction II. D of Form
S-3. In no event will the aggregate initial offering price of the
securities registered hereby exceed $1,000 in the case of Liberty
Property Trust or $600,000,000 in the case of Liberty Property Limited
Partnership, or the respective equivalents thereof in one or more
foreign currencies or composite currencies, including currency units.
The securities registered hereby may be sold separately, together or in
units with other securities registered hereby. This registration
statement also includes any securities issuable upon stock splits or
similar transactions pursuant to Rule 416 under the Securities Act.
(2) Estimated solely for the purpose of computing the registration
fee, pursuant to Rule 457(o) under the Securities Act. The proposed
maximum offering price per unit will be determined from time to time by
the respective registrant in connection with the issuance by such
registrant of the securities registered hereby.
(3) Includes rights to purchase Series A Junior Participating
Preferred Shares of the Trust. No separate consideration is paid for
these rights and, as a result, the registration fee for these rights is
included in the fee for the common shares of beneficial interest of the
Trust.
(4) Issuable by the Trust.
(5) In addition to any common shares of beneficial interest of the
Trust, preferred shares of beneficial interest of the Trust or
depositary shares of the Trust that may be issued directly under this
registration statement, there are being registered hereby an
indeterminate number of common shares, preferred shares and depositary
shares that may be issued, either at the option of the holder thereof
or the applicable registrant, upon conversion of or in exchange for
debt securities of the Operating Partnership, preferred shares,
depositary shares or other securities issued by the Trust, the
Operating Partnership or their affiliates, as the case may be, for
which no separate consideration will be received.
(6) There are being registered hereby an indeterminate number of
depositary shares to be evidenced by depositary receipts issued
pursuant to a deposit agreement to be entered into between the Trust
and a depositary. In the event the Trust elects to offer to the public
fractional interests in the preferred shares registered hereby,
depositary receipts will be distributed to those persons purchasing
such fractional interests and the preferred shares will be issued to
the depositary under a deposit agreement.
(7) There are being registered hereby an indeterminate number of
warrants entitling the holders thereof to purchase preferred shares
and/or common shares, which may be sold separately, together or in
units with other securities registered hereby.
(8) Guaranties by the Trust of debt securities of the Operating
Partnership.
(9) Issuable by the Operating Partnership.
(10) In addition to any debt securities of the Operating Partnership
that may be issued directly under this registration statement, there is
being registered hereby an indeterminate amount of debt securities of
the Operating Partnership that may be issued upon conversion of or in
exchange for other debt securities of the Operating Partnership or
preferred shares.
-----------------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE
REGISTRANTS SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES
THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN
ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL
THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE
SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(A), MAY DETERMINE.
To appear vertically in left margin of prospectus:
=====================================================================
The information in this prospectus is not complete and may be changed
or supplemented. We cannot sell any of the securities described in
this prospectus until the registration statement that we have filed to
cover the securities has become effective under the rules of the
Securities and Exchange Commission. This prospectus is not an offer to
sell the securities, nor is it a solicitation of an offer to buy the
securities, in any state where an offer or sale of the securities is
not permitted.
=====================================================================
SUBJECT TO COMPLETION, DATED JUNE 13, 2000
PROSPECTUS
[LIBERTY PROPERTY TRUST LOGO]
$1,000
LIBERTY PROPERTY TRUST
COMMON SHARES OF BENEFICIAL INTEREST,
PREFERRED SHARES OF BENEFICIAL INTEREST, DEPOSITARY SHARES,
WARRANTS AND GUARANTIES
$ 600,000,000
LIBERTY PROPERTY LIMITED PARTNERSHIP
DEBT SECURITIES
Liberty Property Trust may offer up to $1,000 of its common shares
of beneficial interest, preferred shares of beneficial interest,
depositary shares representing interests in its preferred shares,
warrants to purchase common shares and/or preferred shares, and
guaranties of the debt securities of Liberty Property Limited
Partnership. The Trust's common shares are listed on the New York
Stock Exchange under the symbol "LRY."
Liberty Property Limited Partnership may offer up to $600,000,000
of its debt securities in one or more series.
We may offer the securities at prices and on terms to be set forth
in one or more supplements to this prospectus. The securities may be
offered directly, through agents on our behalf or through underwriters
or dealers.
The terms of the securities may include limitations on ownership
and restrictions on transfer thereof as may be appropriate to preserve
the status of the Trust as a real estate investment trust for United
States federal income tax purposes.
SEE "RISK FACTORS" BEGINNING ON PAGE 4 OF THIS PROSPECTUS FOR A
DESCRIPTION OF RISKS THAT SHOULD BE CONSIDERED BY PURCHASERS OF THE
SECURITIES.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THE SECURITIES
DESCRIBED IN THIS PROSPECTUS OR PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
THE DATE OF THIS PROSPECTUS IS , 2000.
<PAGE>
ABOUT THIS PROSPECTUS
This prospectus describes certain securities of Liberty Property
Trust, which is a real estate investment trust, and Liberty Property
Limited Partnership, which is a limited partnership. We sometimes
refer to the Trust and the Operating Partnership together, along with
their subsidiaries and affiliates, using the words "we," "our" or "us,"
or as the "Company." This prospectus is part of a registration
statement that we filed with the SEC utilizing a "shelf" registration
process, which allows us to offer and sell any combination of the
securities described in this prospectus in one or more offerings.
Using this Prospectus, the Trust may offer up to $1,000 worth of
securities, and the Operating Partnership may offer up to $600,000,000
worth of securities.
This prospectus contains a general description of the securities
we may offer. We will describe the specific terms of these securities,
as necessary, in supplements that we attach to this prospectus for each
offering. Each supplement will also contain specific information about
the terms of the offering it describes. The supplements may also add,
update or change information contained in this prospectus. In
addition, as we describe below in the section entitled "Where to Find
Additional Information," we have filed and plan to continue to file
other documents with the SEC that contain information about us. Before
you decide whether to invest in our securities, you should read this
prospectus, the supplement that further describes the offering of those
securities and the information we otherwise file with the SEC.
WHERE TO FIND ADDITIONAL INFORMATION
We are required by federal securities laws to file certain
information with the SEC. You can access this material on the SEC's
Internet website, at http://www.sec.gov. You can also read and copy
this material at the SEC's public reference room, located at 450 Fifth
Street, N.W., Washington, DC 20549. Please call the SEC at (800) 732-
0330 for information on how the public reference room operates. In
addition, the common shares are listed on the NYSE, and you can obtain
our reports, proxy statements and other information about us at the
offices of the NYSE, located at 20 Broad Street, New York, New York
10005.
We will also send you copies of the material we file with the SEC,
free of charge, upon your request. Please call or write our Investor
Relations department at:
65 Valley Stream Parkway
Malvern, Pennsylvania 19355
Telephone No.: (610) 648-1700
The SEC allows us to "incorporate by reference" into this
prospectus certain important information about us. This means that the
information in this prospectus and any later supplement may not be
complete, and you should read the information incorporated by reference
for more detail. We incorporate by reference in two ways. First, we
list certain documents that we have already filed with the SEC. The
information in these documents is considered part of this prospectus.
Second, we may in the future file additional documents with the SEC.
-2-
<PAGE>
When filed, the information in these documents will update and
supersede the current information in, and incorporated by
reference in, this prospectus and any supplement.
We incorporate by reference the documents listed below, and any
other documents we file with the SEC under Section 13(a), 13(c), 14 or
15 of the Securities Exchange Act of 1934 until the offer of the
securities described in this prospectus is completed:
(a) Our Annual Reports on Form 10-K for the fiscal year
ended December 31, 1999;
(b) Our Quarterly Reports on Form 10-Q for the fiscal
quarter ended March 31, 2000;
(c) The description of the Trust's common shares contained
in the Registration Statement on Form 8-A of the Trust registering such
securities under Section 12 of the Securities Exchange Act of 1934; and
(d) The description of the Trust's preferred share purchase
rights contained in the Registration Statement on Form 8-A of the Trust
registering such securities under Section 12 of the Securities Exchange
Act of 1934.
This prospectus is part of our "shelf" registration statement. We
have filed the registration statement with the SEC under the Securities
Act of 1933 to register the securities that we may offer by this
prospectus and any supplements. Not all of the information in the
registration statement appears in this prospectus, or will appear in
any supplement. For more detail, you can read the entire registration
statement, and all of the exhibits filed with it, at the SEC's offices
as described above.
You should rely on the information that is in this prospectus and
its supplements, or incorporated by reference. You should not,
however, assume that the information that appears directly in this
prospectus, or any supplement, is accurate or complete as of any date
other than the date on the front cover of the document.
-3-
<PAGE>
RISK FACTORS
Investing in our securities can involve various risks. We have
described below all of the risks that we believe are material to your
investment decision.
RISKS THAT ARE GENERALLY APPLICABLE TO INVESTMENTS IN COMPANIES THAT
OWN, OPERATE AND DEVELOP REAL ESTATE
We Depend on Our Tenants and Our Ability to Renew Leases and Relet
Space. Our cash flow from operations depends on our ability to lease
space to tenants, on economically favorable terms, in our properties
currently in operation and those under development. If our tenants do
not renew their leases as they expire, we may not be able to relet the
space. Some leases that are renewed, and some new leases for space
that we relet, may have terms that are less economically favorable to
us than current lease terms, or may require us to incur significant
costs, such as for renovations. These events could adversely affect
our cash flow from operations and our ability to make expected
distributions to shareholders.
Our cash flow from operations also could be adversely affected if
one or more significant tenants fail to pay rent or become bankrupt.
Also, if a tenant defaults on a lease, we may experience delays and
costs in enforcing our rights as landlord.
We could also be adversely affected by various facts and events
over which we have no control, such as:
- a lack of demand for space in the areas where our properties are
located
- inability to attract tenants
- economic or physical decline of the areas where our properties
are located
- physical damage to our properties
- the national, state and local economic climate and real
estate conditions, such as oversupply of or reduced demand
for space and changes in market rental rates
- the need to periodically renovate, repair and relet our space
- increasing operating costs, including real estate taxes and
utilities, which may not be passed through to tenants
- defaults by our tenants or their failure to pay rent on a timely
basis
- uninsured losses
A significant portion of our expenses of real estate investments,
such as mortgage and debt service payments, real estate taxes,
insurance and maintenance costs, are generally not reduced when
circumstances cause a decrease in income from our properties.
-4-
<PAGE>
There are Risks Associated with Developing and Acquiring
Properties. We intend to continue to develop and acquire properties.
Our acquisition and development activities include the risks that:
- our construction and leasing up of a property may not be
completed on schedule, which could result in increased debt
service expenses and construction costs
- we may exceed our original or budgeted estimates, possibly
making the property uneconomical
- some acquisitions and developments may fail to perform in
accordance with our expectations
- we may have to abandon some development projects
Our development activities are also subject to risks relating to
our inability to obtain, or delays in obtaining, all necessary zoning,
land-use, building, occupancy and other required governmental permits
and authorizations.
We anticipate that future acquisitions and development will be
financed through secured or unsecured financing, including our $450
million credit facility. Also, we intend to sell securities in capital
markets. It is possible that financing on desirable terms may become
unavailable, and that we would not be able to continue our acquisitions
and development. If this occurs, our ability to distribute cash to our
shareholders might be adversely affected. Also, our newly developed or
acquired properties could be foreclosed on.
If any particular property that we develop is not successful, we
could lose more than we invested in that property.
Real Estate Investments Are Illiquid, and We May Not Be Able to
Sell Properties When Appropriate. Real estate generally cannot be sold
quickly. We may not be able to alter our portfolio or properties
promptly in response to economic or other conditions. In addition,
provisions of the Internal Revenue Code limit a REIT's ability to sell
properties in some situations when it may be economically advantageous
to do so, thereby adversely affecting returns to our shareholders and
adversely impacting our ability to meet our obligations to the holders
of our other securities.
We Experience Competition in Our Industry. We experience a great
deal of competition in locating land to develop, properties to acquire
and tenants for properties. If the availability of land for
development or high quality properties to acquire in our markets
diminishes, our operating results could be adversely affected.
Increasing Operating Costs Could Adversely Affect Cash Flow. Our
properties are subject to operating risks common to commercial real
estate, any and all of which could adversely affect occupancy or rental
rates. Our properties are subject to increases in our operating
expenses such as cleaning, electricity, heating, ventilation and air
conditioning; elevator repair and maintenance; insurance and
administrative costs; and other costs associated with security,
-5-
<PAGE>
landscaping, repairs and maintenance of our properties. While our
tenants generally are currently obligated to pay a portion of these
costs, there is no assurance that tenants will agree to pay these
costs upon renewal or that new tenants will agree to pay these costs
initially. If operating expenses increase in some or all of our
markets, we may not be able to increase rents in all of these markets
so as to meet increased expenses without at the same time decreasing
occupancy rates. If this occurs, our ability to pay distributions to
our shareholders and service our indebtedness could be adversely
affected.
Some Potential Losses Are Not Covered by Insurance. We carry
comprehensive liability, fire, extended coverage and rental loss
insurance on all of our properties. However, losses arising from acts
of war or relating to pollution are not generally insured because they
are either uninsurable or not economically insurable. If an
uninsured loss or a loss in excess of insured limits should occur, we
could lose our capital invested in a property, as well as any future
revenue from the property. We would nevertheless remain obligated on
any mortgage indebtedness or other obligations related to the property.
There are Possible Environmental Liabilities in our Operations.
Various federal, state and local laws, ordinances and regulations
designed to protect the environment may require us to investigate and
clean up damage to our properties from hazardous materials. These
environmental laws often impose liability regardless of whether we knew
of, or were responsible for, the damage. Also, the presence of
hazardous materials on a property, or the damage caused by those
materials, may make it impossible to sell or rent the property or use
it as collateral. Our liability for the costs of cleaning up
environmental damage is generally not limited under environmental laws
and could exceed the value of the property and/or our aggregate assets.
Also, private plaintiffs can sue us for personal injury or initiate
other causes of action if hazardous materials are found on our
properties.
We may incur environmental liability on some of our properties,
and may have to comply with rules and regulations regarding
business-related activities on our properties as they affect the
environment. Our failure to comply with those requirements could
result in difficulty in leasing or selling any affected property or in
our incurrence of monetary penalties and fines in addition to the costs
necessary to attain compliance.
DEBT SERVICING AND REFINANCING, INCREASES IN INTEREST RATES AND
FINANCIAL COVENANTS COULD ADVERSELY AFFECT OUR ECONOMIC PERFORMANCE
We May Not be Able to Access Financial Markets to Obtain Capital.
In order to qualify as a REIT for federal income tax purposes, we are
required to distribute 95% of our taxable income (90% of our taxable
income for taxable years beginning after December 31, 2000) to our
shareholders each year. As a result, we rely on third party capital
sources for many of our capital needs, including capital for
acquisitions and development. The public debt and equity markets are
among the sources we rely on. There is no guarantee that we will be
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<PAGE>
able to access these markets, or any other source of capital. Our
ability to access the public debt and equity markets depends on a
variety of factors, including:
- general economic conditions affecting these markets
- our own financial structure and performance
- the market's opinion of REITs in general
- the market's opinion of REITs that own properties like ours
We Are Indebted to Various Lenders and May Suffer Adverse Effects
as a Result of the Terms of this Debt. Our required payments on the
mortgages and other indebtedness on some of our properties generally
are not reduced if the economic performance of the property declines.
If the economic performance of a property declines, our income, cash
from operations and cash available for distribution to our shareholders
will be reduced. If we cannot make payments on our debt, we could
sustain a loss, suffer foreclosures by mortgagees or suffer judgments
against us.
Further, some of our obligations, including our exchangeable
subordinated debentures due in 2001 and our credit facility, contain
cross-default and/or cross-acceleration provisions, which means that a
default on one obligation may constitute a default on other
obligations. Our exchangeable subordinated debentures are exchangeable
for our common shares, and, depending on how many debentures are
exchanged prior to the time they mature, we may not have sufficient
cash to repay the principal due on the debentures upon their maturity.
If this happens, we would be forced to meet our obligations through
refinancings, which may not be available on attractive terms.
Also, some of our indebtedness, including that incurred under our
credit facility, bears interest at variable rates and we therefore are
at risk of increasing interest rates. If interest rates increase, we
may not be able to refinance the credit facility, or any other
indebtedness, on attractive terms. We also may not be able to
refinance any indebtedness we incur in the future.
Finally, we may not be able to obtain funds by selling assets or
raising equity to make required payments on maturing indebtedness.
Rising Market Interest Rates Could Adversely Affect Cash
Flow. Increases in interest rates could increase our operating
partnership's interest expense, which could adversely affect the
ability to service our indebtedness or our ability to pay
distributions to our shareholders. Outstanding advances under our
credit facility bear interest at variable rates. In addition, we
may incur indebtedness in the future that also bears interest at a
variable rate.
THERE ARE RISKS IN ENTERING NEW MARKETS
At times we may attempt to expand our operations into markets
where we don't currently operate. When we determine whether to enter a
new market, we consider the market's demographics, job growth,
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<PAGE>
employment, real estate fundamentals and competition. We may not be
able to find attractive new markets, and we may not achieve our
anticipated results in the new markets we do enter. If this occurs,
our cash from operations may be adversely affected.
WE DEPEND ON CONDITIONS IN OUR PRIMARY MARKETS
Our properties are located principally in specific geographic
areas in the Southeastern, Mid-Atlantic and Midwestern United States,
and our performance is therefore dependent on economic conditions in
these areas. Like much of the country, these areas have experienced
periods of economic decline.
WE ARE REQUIRED TO COMPLY WITH VARIOUS TAX LAWS
We Could Suffer Adverse Consequences if We Fail to Qualify as a
REIT. Although we believe that we qualify as a REIT under federal tax
laws, we cannot be certain that we in fact qualify, or that we will
remain qualified. Qualification as a REIT involves the application of
highly technical and complex provisions of the Internal Revenue Code,
as to which there are only limited judicial or administrative
interpretations. The complexity of these provisions and of the related
income tax regulations is greater in the case of a REIT that holds its
assets in partnership form, as we do. Moreover, no assurance can be
given that new tax laws will not significantly affect our qualification
as a REIT or the federal income tax consequences of such qualification.
New laws could be applied retroactively, which means that our past
operations could be found to be in violation, which would have a
negative effect on our business. Presently, we have no reason to
expect a change in the tax laws that would significantly and adversely
affect our qualification and operation as a REIT.
If we fail to qualify as a REIT in any taxable year, we would not
be able to deduct our distributions to shareholders when computing our
taxable income. If this happened, we would be subject to federal
income tax on our taxable income at regular corporate rates. Also, we
could be prevented from qualifying as a REIT for the four years
following the year in which we were disqualified. Further, if we
requalified as a REIT after failing to qualify, we might have to pay
the full corporate-level tax on any unrealized gain in our assets
during the period we were not qualified as a REIT. We would then have
to distribute to our shareholders the earnings we accumulated while we
were not qualified as a REIT. These additional taxes would reduce our
funds available for distribution to our shareholders for each of the
years involved. In addition, while we were disqualified as a REIT, we
would not be required by the Internal Revenue Code to make
distributions to our shareholders.
Although we intend to continue to operate and qualify as a REIT,
future economic, market, legal, tax or other considerations may cause
our Board of Trustees to revoke our election to qualify as a REIT.
This decision requires the consent of the holders of a majority of the
voting interests of all of our outstanding common shares.
For more information about federal income tax law as it affects
us, including a discussion of the qualification of the Operating
Partnership as a partnership for federal income tax purposes, see
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<PAGE>
"Federal Income Tax Considerations with Respect to the Trust and the
Operating Partnership-Classification as a Partnership" in the
Registration Statement we incorporate by reference in this Prospectus.
Certain Officers and Trustees of the Trust May Not Have the Same
Interests as Our Shareholders as to Certain Tax Laws. Certain officers
and trustees of the Trust own units of limited partnership interest in
the Operating Partnership. These units may be exchanged for our common
shares. The officers and trustees who own those units and have not yet
exchanged them for our common shares may suffer different and more
adverse tax consequences than holders of our common shares suffer in
certain situations:
- when certain of our properties are sold
- when debt on those properties is refinanced
- if we are involved in a tender offer or merger
The Trust also owns units in the Operating Partnership. Because the
Trust, as well as the trustees and officers who own units, face
different consequences than our shareholders do, the Trust and those
trustees and officers may have different objectives as to these
transactions than our shareholders do.
THERE ARE LIMITATIONS ON THE CHANGE OF CONTROL OF THE COMPANY
There is an Ownership Limit on Our Shares. To qualify as a REIT,
five or fewer individuals cannot own, directly or indirectly, more than
50% in value of our outstanding shares of beneficial interest. To this
end, our Declaration of Trust, among other things, generally prohibits
any holder of the Trust's shares from owning more than 5.0% of the
Trust's outstanding shares of beneficial interest, unless that holder
gets the consent of our Board of Trustees. This limitation could
prevent the acquisition of control of the Company by a third party
without the consent of our Board of Trustees.
We Have a Staggered Board and Certain Restrictive Nominating
Procedures. Our Board of Trustees has three classes of trustees. The
term of office of one class expires each year. Trustees for each class
are elected for three-year terms as that class' term expires. The
terms of the Class I, Class II and Class III trustees expire in 2001,
2002 and 2003, respectively. Any nominee for trustee must be selected
under the nominating provisions contained in our Declaration of Trust
and By-Laws. The staggered terms for trustees and the nominating
procedures may affect our shareholders' ability to take control of the
Company, even if a change in control was in the shareholders' interest.
Our Board Can Issue Preferred Shares. Our Declaration of Trust
authorizes our Board of Trustees to issue preferred shares of
beneficial interest and to establish the preferences and rights of any
shares issued. The issuance of preferred shares could have the effect
of delaying, making or preventing a change of control of the Company,
even if a change in control was in the shareholders' interest.
We Have a Poison Pill. Under our shareholder rights plan, rights
are issued along with each of the Trust's common shares. Holders of
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these rights can purchase from us, under certain conditions, a portion
of a preferred share of beneficial interest, or receive common shares
of the Trust, or common shares of an entity acquiring us, or other
consideration, having a value equal to twice the exercise price of the
right. The exercise price of the right is $200. This arrangement is
often called a "poison pill." Our poison pill could have the effect of
delaying or preventing a change of control of the Company, even if a
change in control was in the shareholders' interest.
Limitations on Acquisition of And Changes in Control Pursuant to
Maryland Law. The Maryland General Corporation Law contains provisions
which are applicable to the Trust as if the Trust were a corporation.
Among these provisions is a section, referred to as the "control share
acquisition statute," which eliminates the voting rights of shares
acquired in quantities so as to constitute "control shares," as defined
under the MGCL. The MGCL also contains provisions applicable to us
that are referred to as the "business combination statute," which
would generally limit business combinations between the Company and
any 10% owners of the Trust's shares or any affiliate thereof. These
provisions may have the effect of inhibiting a third party from making
an acquisition proposal for our company or of delaying, deferring or
preventing a change in control of our company under circumstances that
otherwise could provide the holders of our common shares with the
opportunity to realize a premium over the then current market price.
VARIOUS FACTORS COULD HURT THE MARKET VALUE OF OUR PUBLICLY TRADED
SECURITIES
Market Conditions Could Change for the Worse. As with other
publicly traded securities, the value of our publicly traded securities
depends on various market conditions, which may change from time to
time. In addition to general economic and market conditions and our
particular financial condition and performance, the value of our
publicly traded securities could be affected by, among other things,
the extent of institutional investor interest in us and the market's
opinion of REITs in general and, in particular, REITs that own and
operate properties similar to ours.
The market value of the equity securities of a REIT may be based
primarily upon the market's perception of the REIT's growth potential
and its current and future cash distributions, and may be secondarily
based upon the real estate market value of the underlying assets. Our
failure to meet the market's expectations with regard to future
earnings and cash distributions likely would adversely affect the
market price of our common shares.
Rising Market Interest Rates Could Harm the Market Prices of Our
Securities. If market interest rates increase, purchasers of the
Trust's common shares may demand a higher annual yield on the price
they pay for their shares. This could adversely affect the market
price of the Trust's common shares.
TRANSACTIONS BY THE TRUST OR THE OPERATING PARTNERSHIP COULD ADVERSELY
AFFECT DEBT HOLDERS
Except with respect to several covenants limiting the incurrence
of indebtedness and a covenant requiring the Operating Partnership to
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maintain a certain unencumbered total asset value, our indentures do
not contain any provisions that would protect holders of the Operating
Partnership's debt securities in the event of (i) a highly leveraged or
similar transaction involving the Operating Partnership, the management
of the Operating Partnership or the Trust, or any affiliate of any
these parties, (ii) a change of control, or (iii) certain
reorganizations, restructuring, mergers or similar transactions
involving the Operating Partnership or the Trust.
WE MAKE FORWARD-LOOKING STATEMENTS WHICH MAY NOT COME TRUE
The Private Securities Litigation Reform Act of 1995 provides us
with a "safe harbor" for forward-looking statements we make. This
means that we may not be liable to our shareholders if the projections
we make about our future operations or performance do not come true.
Certain materials that we have filed or will file with the SEC, and
that we incorporate by reference in this Prospectus, contain
forward-looking statements. These may include projections about the
performance of properties we acquire (including pro forma financial
information that we file about those properties) and other business
development activities. We may also make forward-looking statements
about future capital expenditures, access to financing sources, the
effects of regulations (including environmental regulations) and
competition in our operations. These forward-looking statements
involve important risks and uncertainties that could significantly
affect our future results, which may not meet our expectations. Among
other things, these risks and uncertainties could include the types of
risks discussed in this "Risk Factors" section.
THE COMPANY
Liberty Property Trust (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 Southeastern, Mid-Atlantic and West Coast markets, founded in
1972. The Trust provides leasing, property management, acquisition,
development, construction and design management and other related
services to its portfolio of 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 (the "Operating Partnership"). The Trust is the sole
general partner and also is a limited partner of the Operating
Partnership. Unless the context otherwise requires, as used in this
Prospectus, (i) the term "Operating Partnership" includes Liberty
Property Limited Partnership and its subsidiaries (and, where the
context indicates, its predecessor entities, Rouse & Associates, a
Pennsylvania general partnership, and certain affiliated entities) and
(ii) the term "Company" includes the Trust and the Operating
Partnership.
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.
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SECURITIES OFFERED BY THIS PROSPECTUS
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 Common Shares of
Beneficial Interest, $0.001 par value ("Common Shares"); (b) 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 or other Securities
(as defined below); 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
Common Shares, Preferred Shares, Depositary Shares and Guaranties (as
defined below), as "Trust Securities."
The Operating Partnership 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,
together with Trust Securities, as "Securities."
USE OF PROCEEDS
Unless otherwise provided in the applicable supplement
accompanying this Prospectus (the "Prospectus Supplement"), the net
proceeds, if any, from the sale of the Securities offered hereby will
be used for general corporate purposes, including the acquisition or
development of properties or other assets and the repayment of
indebtedness. At the date hereof, we have not identified as probable
any specific material proposed purchases. If, as of the date of any
Prospectus Supplement, we have identified any such purchases, we will
describe all such purchases in such Prospectus Supplement. 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.
CERTAIN RATIOS
The ratios of earnings to fixed charges of the Company for the
three months ended March 31, 2000 and for the years ended December 31,
1999, 1998, 1997, 1996 and 1995 were 2.34, 2.24, 2.07, 1.92, 1.66 and
1.47, respectively. The ratios of earnings to combined fixed charges
and preferred share dividends of the Company for the three months ended
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March 31, 2000 and for the years ended December 31, 1999, 1998, 1997,
1996 and 1995 were 2.01, 1.98, 1.85, 1.80, 1.66 and 1.47, respectively.
The ratios of earnings to fixed charges and the ratios of earnings
to combined fixed charges and preferred share dividends were computed
by dividing earnings by fixed charges and by combined fixed charges and
preferred share dividends, respectively. For the purpose of such
computations, earnings have been calculated by adding fixed charges
(excluding capitalized interest) to income before minority interest and
extraordinary items. Fixed charges consist of interest costs, whether
expensed or capitalized, and amortization of deferred financing costs.
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 "Indentures"), by and 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.
Except as otherwise indicated, each reference to a section contained
herein is to that section of each of the Indentures. 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 its 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.
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
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under the Subordinated Indenture ("Subordinated Debt Securities") will
be subordinated 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 Indentures applicable to such Debt Securities.
Whenever defined terms of the Indentures 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:
- the title and series of such Debt Securities;
- any limit on the aggregate principal amount of such Debt
Securities;
- the price or prices (expressed as a percentage of the aggregate
principal amount thereof) at which such Debt Securities will be
issued;
- 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;
- 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;
- 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;
- 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;
- the period or periods within which, the price or prices at which,
the currency or currencies, currency unit or units or composite
currency or currencies in which, and other terms and conditions
upon 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;
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- the extent to which any of the Debt Securities will be issuable in
temporary or permanent global form with or without coupons 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;
- the denomination or denominations in which such Debt Securities
are authorized to be issued;
- 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);
- information with respect to book-entry procedures;
- whether any of the Debt Securities will be issued as Original
Issue Discount Securities (as defined below);
- the place or places where, subject to the terms of the related
Indenture, the principal of and interest on, and any other
applicable amounts payable in respect of, such Debt Securities
shall be payable, and where such Debt Securities may be presented
for registration of transfer, exchange or conversion and where
notices or demands to or upon the Issuer in respect of such Debt
Securities may be served;
- 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;
- 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;
- whether the Issuer or a holder may elect payment of the principal
of or interest on such Debt Securities in a currency or
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 or 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;
- 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;
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- if applicable, the defeasance of certain obligations by the Issuer
pertaining to Debt Securities of the series;
- 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 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;
- 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);
- 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, whether or not such Events of Default or
Covenants are consistent with Events of Default or Covenants set
forth in the Indenture;
- 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;
- any other terms of the series (which will not be inconsistent with
the provisions of the applicable Indenture); and
- 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
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material federal income tax, accounting and other considerations
applicable thereto will be described in the Prospectus Supplement
relating thereto.
Except as described below under "Merger, Consolidation or Sale" or
as indicated in the applicable Prospectus Supplement, the Indentures do
not contain any provisions that would limit the ability of the Issuer
to incur indebtedness or that would afford holders of Debt Securities
protection in the event of:
- a highly leveraged or similar transaction involving the Issuer,
the Trust as the sole general partner of the Issuer or any
affiliate of either such party;
- a change of control; or
- a reorganization, restructuring, merger or similar transaction
involving the Company that may adversely affect the holders of
Debt Securities.
However, certain restrictions on the ownership and transfer of the
Common Shares and the Preferred Shares designed to preserve the Trust's
status as a REIT may act to prevent or hinder a change of control. The
Issuer and its management have no present intention of engaging in a
transaction which would result in the Issuer being highly leveraged or
that would result in a change of control.
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
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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 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 (as defined below) 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.
MERGER, CONSOLIDATION OR SALE
The Issuer may consolidate with, or sell, lease or convey all or
substantially all of its assets to, or merge with or into any other
entity, provided that in any such case: (i) either the Issuer shall be
the continuing entity, or the successor entity shall be an entity
organized and existing under the laws of the United States or a State
thereof and such successor entity shall expressly assume the due and
punctual payment of the principal of (and premium or Make-Whole Amount,
if any) and any interest on all of any series of Debt Securities,
according to their tenor, and the due and punctual performance and
observance of all of the covenants and conditions of the Indentures to
be performed by the Issuer by supplemental indenture, complying with
the provisions of the Indentures relating to supplemental indentures,
satisfactory to the Trustee, executed and delivered to the Trustee by
such entity; (ii) immediately after giving effect to such transaction
and treating any indebtedness which becomes an obligation of the Issuer
or any Subsidiary as a result thereof as having been incurred by the
Issuer or such Subsidiary at the time of such transaction, no Event of
Default, and no event which, after notice or the lapse of time, or
both, would become an Event of Default, shall have occurred and be
continuing; and (iii) an officer's certificate and legal opinion
covering such conditions shall be delivered to the Trustee (Sections
801 and 803).
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CERTAIN COVENANTS
The Indentures contain various covenants including the following:
Existence. Except as described under "Merger, Consolidation or
Sale," above, the Issuer will do or cause to be done all things
necessary to preserve and keep in full force and effect its existence,
rights (by partnership agreement and statute) and franchises; provided,
however, that the Issuer shall not be required to preserve any right or
franchise if it determines that the preservation thereof is no longer
desirable in the conduct of its business and that the loss thereof is
not disadvantageous in any material respect to the Holders of Debt
Securities (Section 1005).
Maintenance of Properties. The Issuer will cause all of its
material properties used or useful in the conduct of its business or
the business of any Subsidiary (as defined below) to be maintained and
kept in good condition, repair and working order and supplied with all
necessary equipment and will cause to be made all necessary repairs,
renewals, replacements, betterments and improvements thereof, all as in
the judgment of the Issuer may be necessary so that the business
carried on in connection therewith may be properly and advantageously
conducted at all times; provided, however, that the Issuer and its
Subsidiaries shall not be prevented from selling or otherwise disposing
of for value their respective properties in the ordinary course of
business (Section 1006).
Insurance. The Issuer will, and will cause each of its
Subsidiaries to, keep all of its insurable properties insured against
loss or damage at least equal to their then full insurable value with
insurers of recognized responsibility and having an A.M. Best policy
holder's rating of not less than A-V (Section 1007).
Payment of Taxes and Other Claims. The Issuer will pay or
discharge or cause to be paid or discharged, before the same shall
become delinquent: (i) all taxes, assessments and governmental charges
levied or imposed upon it or any Subsidiary or upon the income, profits
or property of the Issuer or any Subsidiary; and (ii) all lawful claims
for labor, materials and supplies which, if unpaid, might by law become
a lien upon the property of the Issuer or any Subsidiary; provided,
however, that the Issuer shall not be required to pay or discharge or
cause to be paid or discharged any such tax, assessment, charge or
claim whose amount, applicability or validity is being contested in
good faith by appropriate proceedings or for which the Issuer has set
apart and maintains an adequate reserve (Section 1008).
Provision of Financial Information. Whether or not the Issuer is
subject to Section 13 or 15(d) of the Exchange Act, the Issuer will, to
the extent permitted under the Exchange Act, file with the Commission
the annual reports, quarterly reports and other documents which the
Issuer would have been required to file with the Commission pursuant to
such Sections 13 or 15(d) if the Issuer were so subject (the "Financial
Information"), such documents to be filed with the Commission on or
prior to the respective dates (the "Required Filing Dates") by which
the Issuer would have been required so to file such documents if the
Issuer were so subject. The Issuer also will in any event (x) within
15 days of each Required Filing Date: (i) transmit by mail to all
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Holders of Debt Securities, as their names and addresses appear in the
Security Register, without cost to such Holders, copies of the
Financial Information; and (ii) file with the Trustee copies of the
Financial Information, and (y) if filing such documents by the Issuer
with the Commission is not permitted under the Exchange Act, promptly
upon written request and payment of the reasonable cost of duplication
and delivery, supply copies of such documents to any prospective Holder
(Section 1009).
As used in the Indentures and the description thereof herein:
"Security Register" means a register maintained at a place of
payment for the registration and transfer of the Debt Securities.
"Subsidiary" means a corporation, partnership or limited liability
company, a majority of the outstanding voting stock, partnership
interests or membership interests, as the case may be, of which is
owned or controlled, directly or indirectly, by the Company or by one
or more Subsidiaries of the Company. Liberty Property Development
Corp. and Liberty Property Development Corp.-II are Subsidiaries for
purposes of this definition. For the purposes of this definition,
"voting stock" means stock having the voting power for the election of
directors, general partners, managers or trustees, as the case may be,
whether at all times or only so long as no senior class of stock has
such voting power by reason of any contingency.
ADDITIONAL COVENANTS AND/OR MODIFICATION TO THE COVENANTS DESCRIBED
ABOVE
Any additional covenants of the Issuer and/or modifications to the
covenants described above with respect to any Debt Securities or series
thereof, including any covenants relating to limitations on incurrence
of indebtedness or other financial covenants, will be set forth in the
applicable Indenture or an indenture supplemental thereto and described
in the Prospectus Supplement relating thereto.
EVENTS OF DEFAULT, NOTICE AND WAIVER
The term "Event of Default," when used in the Indenture, means any
one of the following events (whatever the reason for such Event of
Default and whether or not it shall be voluntary or involuntary or be
effected by operation of law or pursuant to any judgment, decree or
order of any court or any order, rule or regulation of any
administrative or governmental body): (i) default in the payment of any
interest upon any series of Debt Securities issued thereunder when such
interest becomes due and payable, and continuance of such default for a
period of 30 days; (ii) default in the payment of the principal of (or
premium or Make-Whole Amount, if any, on) any Debt Security issued
thereunder when it becomes due and payable at its Maturity Date or by
declaration of acceleration, notice of redemption or otherwise; (iii)
default in the performance, or breach, of any covenant or warranty of
the Issuer in the Indentures with respect to any Debt Security issued
thereunder (other than a covenant or warranty a default in whose
performance or whose breach is elsewhere in the relevant section of the
Indentures specifically dealt with), and continuance of such default or
breach for a period of 60 days after there has been given, by
registered or certified mail, to the Issuer by the Trustee, or to the
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Issuer and the Trustee by the Holders of at least 25% in principal
amount of the Debt Securities of such series, a written notice
specifying such default or breach and requiring it to be remedied and
stating that such notice is a "Notice of Default" under the Indenture;
(iv) a default under any bond, debenture, note or other evidence of
indebtedness of the Issuer, or under any mortgage, indenture or other
instrument of the Issuer under which there may be issued or by which
there may be secured any indebtedness of the Issuer (or by any
Subsidiary of the Issuer, the repayment of which the Issuer has
guaranteed or for which the Issuer is directly responsible or liable as
obligor or guarantor on a full recourse basis), whether such
indebtedness now exists or shall hereafter be created, which default
shall constitute a failure to pay an aggregate principal amount
exceeding $10,000,000 of such indebtedness when due and payable after
the expiration of any applicable grace period with respect thereto and
shall have resulted in such indebtedness in an aggregate principal
amount exceeding $10,000,000 becoming or being declared due and payable
prior to the date on which it would otherwise have become due and
payable, without such indebtedness having been discharged, or such
acceleration having been rescinded or annulled, within a period of 10
days after there shall have been given, by registered or certified
mail, to the Issuer by the Trustee, or to the Issuer and the Trustee by
the Holders of at least 10% in principal amount of the outstanding Debt
Securities, a written notice specifying such default and requiring the
Issuer to cause such indebtedness to be discharged or cause such
acceleration to be rescinded or annulled and stating that such notice
is a "Notice of Default" under the Indenture; or (v) certain events of
bankruptcy, insolvency or reorganization (Section 501).
If an Event of Default under the Indentures with respect to any
series of Debt Securities at the time outstanding occurs and is
continuing (other than Events of Default arising in connection with
certain events of bankruptcy, insolvency or reorganization), then in
every such case the Trustee or the Holders of not less than 25% of the
principal amount of the outstanding Debt Securities of such series may
declare the principal amount and premium (if any) and accrued interest
on all the Debt Securities of such series to be due and payable
immediately by written notice thereof to the Issuer (and to the Trustee
if given by the Holders). However, at any time after such a
declaration of acceleration with respect to the Debt Securities has
been made, but before a judgment or decree for payment of the money due
has been obtained by the Trustee, the Holders of not less than a
majority in principal amount of the outstanding Debt Securities of such
series may rescind and annul such declaration and its consequences if
(a) the Issuer shall have deposited with the Trustee all required
payments of the principal of (and premium or Make-Whole Amount, if any)
and interest on the Debt Securities of such series, plus certain fees,
expenses, disbursements and advances of the Trustee and (b) all Events
of Default with respect to the Debt Securities of such series, other
than the non-payment of principal of (or premium or Make-Whole Amount,
if any) or interest on the Debt Securities of such series which has
become due solely by such declaration of acceleration, have been cured
or waived as provided in the Indenture. In the event of a declaration
of acceleration because an Event of Default as described in clause (iv)
of the preceding paragraph has occurred and is continuing, such
declaration shall be automatically rescinded and annulled if the
default triggering such Event of Default (along with any other defaults
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caused thereby) shall be remedied or cured by the Issuer or its
relevant Subsidiary or waived by the holders of such indebtedness
within 60 days after such declaration of acceleration. Upon the
occurrence of an Event of Default arising in connection with certain
events of bankruptcy, insolvency or reorganization, the principal of,
premium, if any, and accrued interest on all Debt Securities of such
series then outstanding shall immediately become due and payable
without any declaration or other act on the part of the Trustee or any
Holder (Section 502).
The Trustee will be required to give notice to the Holders of the
Debt Securities of such series within 90 days of the occurrence of a
default under the Indentures unless such default shall have been cured
or waived; provided, however, that the Trustee may withhold notice to
the Holders of the Debt Securities of such series of any default
(except a default in the payment of the principal of (or premium or
Make-Whole Amount, if any) or interest on the Debt Securities of such
series) if and so long as specified responsible officers of the Trustee
determine in good faith that the withholding of such notice is in the
interest of such Holders; provided, that in the case of any default or
breach of a covenant or warranty under the Indentures as described in
clause (iii) of the first paragraph of this section "Events of Default,
Notice and Waiver," no such notice to Holders shall be given until at
least 60 days after the occurrence thereof. For purposes of this
paragraph, the term "default" means any event which is, or after notice
or lapse of time or both would become, an Event of Default under the
Indentures with respect to the Debt Securities of such series (Section
601).
The Indentures provide that no Holder of Debt Securities may
institute any proceedings, judicial or otherwise, with respect to the
Indentures or for any remedy thereunder, except in the case of failure
of the Trustee, for 60 days, to act after it has received a written
request to institute proceedings in respect of an Event of Default from
the Holders of not less than 25% in principal amount of the outstanding
Debt Securities of any series, as well as an offer of indemnity
reasonably satisfactory to it (Section 507). Such provision will not
prevent, however, any Holder of Debt Securities from instituting suit
for the payment of the principal of (and premium or Make-Whole Amount,
if any) and interest on the Debt Securities of such series on the
respective due dates thereof (Section 508).
Defaults (except a default in the payment of principal of (or
premium or Make-Whole Amount, if any) or interest on the Debt
Securities of any series or default with respect to a covenant or
provision which cannot be modified under the terms of the Indentures
without the consent of each Holder affected) may be waived by the
Holders of not less than a majority of principal amount of the then
outstanding Debt Securities of such series, upon the conditions
provided in the Indentures (Section 513).
Subject to provisions in the Indentures relating to its duties in
case of default, the Trustee is under no obligation to exercise any of
its rights or powers under the Indentures at the request or direction
of any Holders of any series of Debt Securities then outstanding under
the Indenture, unless such Holders shall have offered to the Trustee
reasonable security or indemnity (Section 602). The Holders of not
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less than a majority in principal amount of the outstanding Debt
Securities of any series shall have the right to direct the time,
method and place of conducting any proceeding for any remedy available
to the Trustee or exercising any trust or power conferred upon such
Trustee. However, the Trustee may refuse to follow any direction which
is in conflict with any law or the Indenture, which may involve the
Trustee in personal liability or which may be unduly prejudicial to the
Holders of the Debt Securities of such series not joining therein and
the Trustee may take any other action it deems proper not inconsistent
with such direction (Section 512).
Within 120 days after the close of each fiscal year, the Issuer
will be required to deliver to the Trustee a certificate, signed by one
of several specified officers of the Issuer, stating whether or not
such officer has knowledge of any default under the Indentures and, if
so, specifying each such default and the nature and status thereof
(Section 1010).
MODIFICATION OF THE INDENTURE
Modifications and amendments of each Indenture may be made only
with the consent of the Holders of not less than a majority in
principal amount of all of the Debt Securities issued under that
Indenture; provided, however, that no such modification or amendment
may, without the consent of the Holder of each Debt Security affected
thereby:
- change the stated maturity of the principal of (or premium or
Make-Whole Amount, if any, on), or any installment of interest on,
any such Debt Security;
- reduce the principal amount of, or the rate or amount of interest
on, or any premium payable on redemption of Debt Securities, or
adversely affect any right of repayment of the Holder of any Debt
Securities;
- change the place of payment, or the coin or currency, for payment
of principal or premium, if any, or interest on the Debt
securities;
- impair the right to institute suit for the enforcement of any
payment on or with respect to the Debt Securities on or after the
stated maturity of any such Debt Security;
- reduce the above-stated percentage in principal amount of
outstanding Debt Securities the consent of whose Holders is
necessary to modify or amend the Indenture, for any waiver with
respect to the Debt Securities, or to waive compliance with
certain provisions of the Indentures or certain defaults and
consequences thereunder or to reduce the quorum or voting
requirements set forth in the Indenture; or
- modify any of the foregoing provisions or any of the provisions
relating to the waiver of certain past defaults or certain
covenants, except to increase the required percentage to effect
such action or to provide that certain other provisions of the
Indentures may not be modified or waived without the consent of
the Holder of each Debt Security of all series under both
Indentures (Section 902).
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The Holders of not less than a majority in principal amount of the
Debt Securities have the right to waive compliance by the Issuer with
certain covenants in the Indentures (Section 1012).
Modifications and amendments of each Indentures are permitted to
be made by the Issuer and the Trustee without the consent of any Holder
for any of the following purposes:
- to evidence the succession of another person to the Issuer as
obligor under the Indenture;
- to add to the covenants of the Issuer for the benefit of the
Holders of Debt Securities or to surrender any right or power
conferred upon the Issuer in the Indenture;
- to add Events of Default for the benefit of the Holders of Debt
Securities;
- to add or change any provisions of the Indentures to facilitate
the issuance of, or to liberalize certain terms of, Debt
Securities in bearer form, or to permit or facilitate the issuance
of Debt Securities in uncertificated form, provided that such
action shall not adversely affect the interests of the Holders of
Debt Securities in any material respect;
- to change or eliminate any provisions of the Indenture, provided
that any such change or elimination shall become effective only
when the outstanding Debt Securities are not entitled to the
benefit of such provision;
- to secure the Debt Securities;
- to establish the form or terms of the Debt Securities and any
related coupons as permitted by the Indenture;
- to evidence and provide for the acceptance of appointment under
the Indentures by a successor Trustee with respect to the Debt
Securities or facilitate the administration of the trust under the
Indentures by more than one Trustee;
- to cure any ambiguity, defect or inconsistency in the Indenture,
provided that such action is not inconsistent with the provisions
of the Indenture and shall not adversely affect the interests of
Holders of Debt Securities in any material respect; or
- to supplement any of the provisions of the Indenture to the extent
necessary to permit or facilitate defeasance and discharge of Debt
Securities, provided that such action shall not adversely affect
the interests of the Holders of Debt Securities in any material
respect (Section 901).
Each of the Indentures contain provisions for convening meetings
of the Holders of the Debt Securities of any series (Section 1501). A
meeting will be permitted to be called at any time by the Trustee, and
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also, upon request, by the Issuer or the Holders of at least 10% in
principal amount of the outstanding Debt Securities of such series, in
any such case upon notice given as provided in the Indenture. Except
for any consent that must be given by the Holder of each Debt Security
of such series affected by certain modifications and amendments of the
Indenture, any resolution presented at a meeting or adjourned meeting
duly reconvened at which a quorum is present may be adopted by the
affirmative vote of the Holders of a majority in principal amount of
the outstanding Debt Securities of such series; provided, however,
that, except as referred to above, any resolution with respect to any
request, demand, authorization, direction, notice, consent, waiver or
other action that may be made, given or taken by the Holders of a
specific percentage, which is less than a majority, in principal amount
of the outstanding Debt Securities of a series, may be adopted at a
meeting or adjourned meeting duly reconvened and at which a quorum is
present by the affirmative vote of the Holders of such specified
percentage in principal amount of the outstanding Debt Securities of
that series. Any resolution passed or decision taken at any meeting of
Holders of the Debt Securities of any series duly held in accordance
with the Indenture will be binding on all Holders of Debt Securities of
that series. The quorum at any meeting called to adopt a resolution,
and at any reconvened meeting, will be persons entitled to vote a
majority in principal amount of the outstanding Debt Securities of a
series; provided, however, that if any action is to be taken at such
meeting with respect to a consent or waiver which may be given by the
Holders of not less than a specified percentage in principal amount of
the outstanding Debt Securities of a series, the persons entitled to
vote such specified percentage in principal amount of the outstanding
Debt Securities of such series will constitute a quorum (Section 1504).
Notwithstanding the foregoing provisions, each of the Indentures
provides that if any action is to be taken at a meeting of Holders of
Debt Securities of any series with respect to any request, demand,
authorization, direction, notice, consent, waiver and other action that
the Indenture expressly provides may be made, given or taken by the
Holders of a specified percentage in principal amount of all
outstanding Debt Securities affected thereby, or the Holders of such
series and the other series: (i) there shall be no minimum quorum
requirement for such meeting; and (ii) the principal amount of the
outstanding Debt Securities of such series that vote in favor of such
request, demand, authorization, direction, notice, consent, waiver or
other action shall be taken into account in determining whether such
request, demand, authorization, direction, notice, consent, waiver or
other action has been made, given or taken under the Indenture.
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
The Issuer will be permitted under each of the Indentures to
discharge certain obligations to the Holders of any series of Debt
Securities that have not already been delivered to the Trustee for
cancellation by irrevocably depositing with the Trustee, in trust,
funds in the currency in which the Debt Securities of such series are
payable in an amount sufficient to pay the entire indebtedness on such
Debt Securities in respect of principal (and premium or Make-Whole
Amount, if any) and interest to the date of such deposit (if such Debt
Securities have become due and payable) or to the stated Maturity Date
or redemption date, as the case may be.
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Each of the Indentures will also provide that the Issuer may elect
either (a) to defease and be discharged from any and all obligations
with respect to any series of Debt Securities other than the
obligations to register the transfer or exchange of such Debt
Securities, to replace temporary or mutilated, destroyed, lost or
stolen Debt Securities, to maintain an office or agency in respect of
such Debt Securities and to hold moneys for payment in trust
("defeasance") (Section 1402) or (b) to be released from its
obligations with respect to such Debt Securities under certain sections
of Article Ten of the Indenture relating to limitations on the
incurrence of Debt, maintenance of Unencumbered Total Asset Value,
existence of the Issuer, maintenance of the Issuer's properties,
insurance, payment of taxes and other claims and provision of financial
information and any omission to comply with such obligations shall not
constitute an Event of Default with respect to such Debt Securities
("covenant defeasance") (Section 1403), in either case upon the
irrevocable deposit by the Issuer with the Trustee, in trust, of an
amount, in the currency in which such Debt Securities are payable at
stated maturity, or Government Obligations (as defined below), or both,
applicable to such Debt Securities which through the scheduled payment
of principal and interest in accordance with their terms will provide
money in an amount sufficient without reinvestment to pay the principal
of (and premium or Make-Whole Amount, if any) and interest on such Debt
Securities or analogous payments thereon, on the scheduled due dates
therefor.
Such a trust may only be established if, among other things, the
Issuer has delivered to the Trustee an opinion of counsel (as specified
in the Indenture) to the effect that the Holders of such Debt
Securities will not recognize income, gain or loss for federal income
tax purposes as a result of such defeasance or covenant defeasance and
will be subject to federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such
defeasance or covenant defeasance had not occurred, and such opinion of
counsel, in the case of defeasance, will be required to refer to and be
based upon a ruling of the Internal Revenue Service or a change in
applicable federal income tax law occurring after the date of the
Indenture (Section 1404).
"Government Obligations" means securities which are: (i) direct
obligations of the United States of America for the payment of which
its full faith and credit is pledged; or (ii) obligations of a Person
controlled or supervised by and acting as an agency or instrumentality
of the United States of America, the payment of which is
unconditionally guaranteed as a full faith and credit obligation by the
United States of America, which, in either case, are not callable or
redeemable at the option of the issuer thereof, and shall also include
a depository receipt issued by a bank or trust company as custodian
with respect to any such Government Obligation or a specific payment of
interest on or principal of any such Government Obligation held by such
custodian for the account of the holder of a depositary receipt,
provided that (except as required by law) such custodian is not
authorized to make any deduction from the amount payable to the holder
of such depositary receipt from any amount received by the custodian in
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respect of the Government Obligation or the specific payment of
interest on or principal of the Government Obligation evidenced by such
depositary receipt.
In the event the Issuer effects covenant defeasance with respect
to any Debt Securities and such Debt Securities are declared due and
payable because of the occurrence of any Event of Default other than
the Event of Default described in clause (iii) under "Events of
Default, Notice and Waiver" with respect to certain specified sections
of Article Ten of the Indentures (which sections would no longer be
applicable to such Debt Securities as a result of such covenant
defeasance) the amount in such currency in which such Debt Securities
are payable, and Government Obligations on deposit with the Trustee,
will be sufficient to pay amounts due on such Debt Securities at the
time of their stated maturity but may not be sufficient to pay amounts
due on such Debt Securities at the time of the acceleration resulting
from such Default. However, the Issuer would remain liable to make
payment of such amounts due at the time of acceleration.
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 an
Indenture: (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.
MODIFICATION AND WAIVER
The Issuer may amend either of 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
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 Indenture regarding subordination and seniority
of the Debt Securities that adversely affects the rights of any Holders
of Debt Securities outstanding thereunder.
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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 applicable Indenture,
as supplemented or amended from time to time.
OPTIONAL REDEMPTION
Except as otherwise provided in the applicable Prospectus
Supplement, the Debt Securities of any series may be redeemed at any
time at the option of the Issuer, in whole or from time to time in
part, at a redemption price equal to the sum of: (i) the principal
amount of the Debt Securities being redeemed plus accrued interest
thereon to the redemption date; and (ii) the Make-Whole Amount (as
defined below), if any, with respect to such Debt Securities (the
"Redemption Price").
If notice of redemption has been given as provided in the
applicable Indenture and funds for the redemption of any Debt
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Securities called for redemption shall have been made available on the
redemption date referred to in such notice, such Debt Securities will
cease to bear interest on the date fixed for such redemption specified
in such notice and the only right of the Holders of the Debt Securities
from and after the redemption date will be to receive payment of the
Redemption Price upon surrender of such Debt Securities in accordance
with such notice.
Notice of any optional redemption of any Debt Securities will be
given to Holders at their addresses, as shown in the security register
for the Debt Securities, not more than 60 nor less than 30 days prior
to the date fixed for redemption. The notice of redemption will
specify, among other items, the Redemption Price and principal amount
of the Debt Securities held by such Holder to be redeemed.
If all or less than all of the Debt Securities of any series are
to be redeemed at the option of the Issuer, the Issuer will notify the
Trustee at least 45 days prior to giving notice of redemption (or such
shorter period as may be satisfactory to the Trustee) of the aggregate
principal amount of Debt Securities to be redeemed, if less than all of
the Debt Securities of any series are to be redeemed, and their
redemption date. If less than all of the Debt Securities of any series
are to be redeemed, the Trustee shall select, in such manner as it
shall deem fair and appropriate, no less than 60 days prior to the date
of redemption, the Debt Securities of such series to be redeemed.
Neither the Issuer nor the Trustee shall be required to: (i)
issue, register the transfer of or exchange Debt Securities during a
period beginning at the opening of business 15 days before any
selection of Debt Securities to be redeemed and ending at the close of
business on the day of mailing of the relevant notice of redemption;
(ii) register the transfer of or exchange any Debt Securities, or
portion thereof, called for redemption, except the unredeemed portion
of any Debt Securities being redeemed in part; or (iii) issue, register
the transfer of or exchange any Debt Securities that have been
surrendered for repayment at the option of the Holder, except the
portion, if any, of such Debt Securities not to be so repaid (Section
305).
As used herein:
"Make-Whole Amount" means, in connection with any optional
redemption of any Debt Securities, the excess, if any, of: (i) the
aggregate present value as of the date of such redemption of each
dollar of principal being redeemed and the amount of interest
(exclusive of interest accrued to the date of redemption) that would
have been payable in respect of each such dollar if such redemption had
not been made, determined by discounting, on a semi-annual basis, such
principal and interest at the Reinvestment Rate (as defined below)
(determined on the third Business Day preceding the date notice of such
redemption is given) from the respective dates on which such principal
and interest would have been payable if such redemption had not been
made, to the date of redemption, over (ii) the aggregate principal
amount of the Debt Securities being redeemed.
"Reinvestment Rate" means the yield on Treasury securities at a
constant maturity corresponding to the remaining life (as of the date
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of redemption, and rounded to the nearest month) to stated maturity of
the principal being redeemed (the "Treasury Yield"), plus 0.25%, unless
such percentage is otherwise provided in the applicable Pricing
Supplement. For purposes hereof, the Treasury Yield shall be equal to
the arithmetic mean of the yields published in the Statistical Release
(as defined below) under the heading "Week Ending" for "U.S.
Government Securities -- Treasury Constant Maturities" with a maturity
equal to such remaining life; provided, that if no published maturity
exactly corresponds to such remaining life, then the Treasury Yield
shall be interpolated or extrapolated on a straight-line basis from the
arithmetic means of the yields for the next shortest and next longest
published maturities. For purposes of calculating the Reinvestment
Rate, the most recent Statistical Release published prior to the date
of determination of the Make-Whole Amount shall be used. If the format
or content of the Statistical Release changes in a manner that
precludes determination of the Treasury Yield in the above manner, then
the Treasury Yield shall be determined in the manner that most closely
approximates the above manner, as reasonably determined by the Issuer.
"Statistical Release" means the statistical release designated
"H.15(519)" or any successor publication which is published weekly by
the Federal Reserve System and which reports yields on actively traded
United States government securities adjusted to constant maturities,
or, if such statistical release is not published at the time of any
determination under the Indenture, then such other reasonably
comparable index which shall be designated by the Issuer.
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.
BOOK-ENTRY SYSTEM
Certain series of Debt Securities may be represented by a single
fully registered note in book-entry form (each, a "Global Note")
registered in the name of a nominee of The Depository Trust Company
("DTC"). The following are summaries of certain rules and operating
procedures of DTC that affect the payment of principal and interest and
transfers in the Global Notes. Upon issuance, each series of Debt
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Securities that is represented by a Global Note will be issued only in
the form of a Global Note which will be deposited with, or on behalf
of, DTC and registered in the name of Cede & Co., as nominee of DTC.
Unless and until it is exchanged in whole or in part for Debt
Securities of such series in definitive form under the limited
circumstances described below, a Global Note may not be transferred
except as a whole: (i) by DTC to a nominee of DTC; (ii) by a nominee of
DTC to DTC or another nominee of DTC; or (iii) by DTC or any such
nominee to a successor or a nominee of such successor.
Ownership of beneficial interests in a Global Note will be limited
to persons that have accounts with DTC for such Global Note
("participants") or persons that may hold interests through
participants. Upon the issuance of a Global Note, DTC will credit, on
its book-entry registration and transfer system, the participants'
accounts with the respective principal amounts of the Debt Securities
represented by such Global Note beneficially owned by such
participants. Ownership of beneficial interests in such Global Notes
will be shown on, and the transfer of such ownership interests will be
effected only through, records maintained by DTC (with respect to
interests of participants) and on the records of participants (with
respect to interests of persons holding through participants). The
laws of some states may require that certain purchasers of securities
take physical delivery of such securities in definitive form. Such
laws may limit or impair the ability to own, transfer or pledge
beneficial interests in the Global Notes.
So long as DTC or its nominee is the registered owner of a Global
Note, DTC or its nominee, as the case may be, will be considered the
sole owner or Holder of the Debt Securities represented by such Global
Note for all purposes under the Indenture. Except as set forth below,
owners of beneficial interests in a Global Note will not be entitled to
have Debt Securities represented by such Global Note registered in
their names, will not receive or be entitled to receive physical
delivery of such Debt Securities in certified form and will not be
considered the registered owners or Holders thereof under the
Indenture. Accordingly, each person owning a beneficial interest in a
Global Note must rely on the procedures of DTC and, if such person is
not a participant, on the procedures of the participant through which
such person owns its interest, to exercise any rights of a Holder under
the Indenture. The Issuer understands that under existing industry
practices, if the Issuer requests any action of Holders or if an owner
of a beneficial interest in a Global Note desires to give or take any
action that a Holder is entitled to give or take under the Indenture,
DTC would authorize the participants holding the relevant beneficial
interests to give or take such action, and such participants would
authorize beneficial owners owning through such participants to give or
take such action or would otherwise act upon the instructions of
beneficial owners holding through them.
Principal and interest payments on interests represented by a
Global Note will be made to DTC or its nominee, as the case may be, as
the registered owner of such Global Note. None of the Issuer, the
Trustee or any agent of the Trustee will have any responsibility or
liability for any aspect of the records relating to or payment made on
account of beneficial ownership interests in the Global Notes or for
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maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
The Issuer expects that DTC, upon receipt of any payment of
principal or interest in respect of a Global Note, will immediately
credit participants' accounts with payments in amounts proportionate to
their respective beneficial interests in such Global Note as shown on
the records of DTC. The Issuer also expects that payments by
participants to owners of beneficial interests in the Global Notes held
through such participants will be governed by standing customer
instructions and customary practice, as is now the case with securities
held for the accounts of customers in bearer form or registered in
"street name," and will be the responsibility of such participants.
If DTC is at any time unwilling or unable to continue as
depository for Debt Securities represented by a Global Note and the
Issuer fails to appoint a successor depository registered as a clearing
agency under the Exchange Act within 90 days, the Issuer will issue
such Debt Securities in definitive from in exchange for the Global
Notes. Any Debt Securities issued in definitive form in exchange for
the Global Notes will be registered in such name or names, and will be
issued in denominations of $1,000 and such integral multiples thereof,
as DTC shall instruct the Trustee. It is expected that such
instructions will be based upon directions received by DTC from
participants with respect to ownership of beneficial interests in the
Global Notes.
DTC has advised the Issuer of the following information regarding
DTC. DTC is a limited-purpose trust company organized under the
Banking Law of the State of New York, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the New York
Uniform Commercial Code, and a "clearing agency" registered pursuant to
the provisions of Section 17A of the Exchange Act. DTC was created to
hold securities of its participants and to facilitate the clearance and
settlement of transactions among its participants in such securities
through electronic book-entry changes in accounts of the participants,
thereby eliminating the need for physical movement of securities
certificates. DTC's participants include securities brokers and
dealers, banks, trust companies, clearing corporations and certain
other organizations, some of which (and/or their representatives) own
DTC. Access to the DTC book-entry system is also available to others,
such as banks, brokers and dealers and trust companies that clear
through or maintain a custodial relationship with a participant, either
directly or indirectly.
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:
- the annual dividend rate, if any, or the means by which such
dividend rate may be calculated (including without limitation the
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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;
- 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;
- 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 Trust;
- 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;
- 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 Trust upon the voluntary or involuntary dissolution
or liquidation of the Trust;
- a description of the voting rights, if any, of the Preferred
Shares; and
- other preferences, rights, qualifications or restrictions or
material terms of such Preferred Shares.
The Maryland Real Estate Investment Trust Law and the Trust's
Declaration of Trust provide that no shareholder shall be personally
liable for any obligation of the Trust. The Trust's Declaration of
Trust and By-laws further provide that the Trust shall indemnify each
shareholder against any claim or liability to which such holder may
become subject by reason of such person being or having been a
shareholder, and that the Company shall reimburse each shareholder for
all legal or other expenses reasonably incurred by such person in
connection with any such claim or liability. It should be noted,
however, that with respect to tort claims, claims for taxes and certain
statutory liabilities, shareholders may, in some jurisdictions, be
personally liable to the extent that such claims are not satisfied by
the Company. Because the Company will carry public liability insurance
in amounts that it considers adequate, any risk of personal liability
to shareholders will be limited to situations in which the Company's
assets, together with its insurance coverage, would be insufficient to
satisfy the claims against the Company and the shareholders, or in
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which the claim is not covered by the Company's liability insurance
policies.
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.
RANK
Unless otherwise specified in the Prospectus Supplement, the
Preferred Shares will, with respect to dividend rights and rights upon
liquidation, dissolution or winding up of the Trust, rank (i) senior to
all classes or series of Common Shares of the Trust, and to all equity
securities ranking junior to such Preferred Shares; (ii) on a parity
with all equity securities issued by the Trust the terms of which
specifically provide that such equity securities rank on a parity with
the Preferred Shares; and (iii) junior to all equity securities issued
by the Trust the terms of which specifically provide that such equity
securities rank senior to the Preferred Shares. The term "equity
securities" does not include convertible debt securities for this
purpose.
DIVIDENDS
Holders of the Preferred Shares of each series will be entitled to
receive, when, as and if declared by the Board of Trustees of the Trust
(the "Board of Trustees"), out of assets of the Trust legally available
for payment, cash dividends (or dividends in kind or in other property
if expressly permitted and described in the applicable Prospectus
Supplement) at such rates and on such dates as will be set forth in the
applicable Prospectus Supplement. Each such dividend shall be payable
to holders of record as they appear in the shareholder records of the
Trust at the close of business on such record dates as shall be fixed
by the Board of Trustees.
Dividends on any series of Preferred Shares may be cumulative or
non-cumulative, as provided in the applicable Prospectus Supplement.
Dividends, if cumulative, will be cumulative from and after the date
set forth in the applicable Prospectus Supplement. If the Board of
Trustees fails to declare a dividend payable on a dividend payment date
on any series of the Preferred Shares for which dividends are
non-cumulative, then the holders of such series of the Preferred Shares
will have no right to receive a dividend in respect of the dividend
period ending on such dividend payment date, and the Trust will have no
obligation to pay the dividend accrued for such period, whether or not
dividends on such series are declared payable on any future dividend
payment date.
Unless otherwise specified in the Prospectus Supplement, if any
Preferred Shares of any series are outstanding, no full dividends shall
be declared or paid or set apart for payment on any capital shares of
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the Trust of any other series ranking, as to dividends, on a parity
with or junior to the Preferred Shares of such series for any period
unless (i) if such series of Preferred Shares has a cumulative
dividend, full cumulative dividends have been or contemporaneously are
declared and paid or declared and a sum sufficient for the payment
thereof set apart for such payment on the Preferred Shares of such
series for all past dividend periods and the then current dividend
period or (ii) if such series of Preferred Shares does not have a
cumulative dividend, full dividends for the then current dividend
period have been or contemporaneously are declared and paid or declared
and a sum sufficient for the payment thereof set apart for such payment
on the Preferred Shares of such series. When dividends are not paid in
full (or a sum sufficient for such full payment is not so set apart)
upon Preferred Shares of any series and the shares of any other series
of Preferred Shares ranking on a parity as to dividends with the
Preferred Shares of such series, all dividends declared upon Preferred
Shares of such series and any other series of Preferred Shares ranking
on a parity as to dividends with such Preferred Shares shall be
declared pro rata so that the amount of dividends declared per share of
Preferred Shares of such series and such other series of Preferred
Shares shall in all cases bear to each other the same ratio that
accrued dividends per share on the Preferred Shares of such series
(which shall not include any accumulation in respect of unpaid
dividends for prior dividend periods if such Preferred Shares do not
have a cumulative dividend) and such other series of Preferred Shares
bear to each other. No interest, or sum of money in lieu of interest,
shall be payable in respect of any dividend payment or payments on
Preferred Shares of such series which may be in arrears.
Except as provided in the immediately preceding paragraph, unless
(i) if such series of Preferred Shares has a cumulative dividend, full
cumulative dividends on the Preferred Shares of such series have been
or contemporaneously are declared and paid or declared and a sum
sufficient for the payment thereof set apart for payment for all past
dividend periods and the then current dividend period, and (ii) if such
series of Preferred Shares does not have a cumulative dividend, full
dividends on the Preferred Shares of such series have been or
contemporaneously are declared and paid or declared and a sum
sufficient for the payment thereof set apart for payment for the then
current dividend period, no dividends (other than in Common Shares or
other capital shares ranking junior to the Preferred Shares of such
series as to dividends and upon liquidation) shall be declared or paid
or set aside for payment or other distribution upon the Common Shares,
or any other capital shares of the Trust ranking junior to or on a
parity with the Preferred Shares of such series as to dividends or upon
liquidation, nor shall any Common Shares, or any other capital shares
of the Trust ranking junior to or on a parity with the Preferred Shares
of such series as to dividends or upon liquidation be redeemed,
purchased or otherwise acquired for any consideration (or any moneys be
paid to or made available for a sinking fund for the redemption of any
such shares) by the Trust (except by conversion into or exchange for
other capital shares of the Trust ranking junior to the Preferred
Shares of such series as to dividends and upon liquidation).
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REDEMPTION
If so provided in the applicable Prospectus Supplement, the
Preferred Shares will be subject to mandatory redemption or redemption
at the option of the Trust, in whole or in part, in each case upon the
terms, at the times and at the redemption prices set forth in such
Prospectus Supplement.
The Prospectus Supplement relating to a series of Preferred Shares
that is subject to mandatory redemption will specify the number of such
Preferred Shares that shall be redeemed by the Trust in each year
commencing after a date to be specified, at a redemption price per
share to be specified, together with an amount equal to all accrued and
unpaid dividends thereon (which shall not, if such Preferred Shares do
not have a cumulative dividend, include any accumulation in respect of
unpaid dividends for prior dividend periods) to the date of redemption.
The redemption price may be payable in cash or other property, as
specified in the applicable Prospectus Supplement. If the redemption
price for Preferred Shares of any series is payable only from the net
proceeds of the issuance of capital shares of the Trust, the terms of
such Preferred Shares may provide that, if no such capital shares shall
have been issued or to the extent the net proceeds from any issuance
are insufficient to pay in full the aggregate redemption price then
due, such Preferred Shares shall automatically and mandatorily be
converted into the applicable capital shares of the Trust pursuant to
conversion provisions specified in the applicable Prospectus
Supplement.
Notwithstanding the foregoing, unless (i) if such series of
Preferred Shares has a cumulative dividend, full cumulative dividends
on all Preferred Shares of any series shall have been or
contemporaneously are declared and paid or declared and a sum
sufficient for the payment thereof set apart for payment for all past
dividend periods and the current dividend period and (ii) if such
series of Preferred Shares does not have a cumulative dividend, full
dividends of the Preferred Shares of any series have been or
contemporaneously are declared and paid or declared and a sum
sufficient for the payment thereof set apart for payment for the then
current dividend period, no Preferred Shares of any series shall be
redeemed unless all outstanding Preferred Shares of such series are
simultaneously redeemed; provided, however, that the foregoing shall
not prevent the purchase or acquisition of Preferred Shares of such
series to preserve the REIT status of the Trust or pursuant to a
purchase or exchange offer made on the same terms to holders of all
outstanding Preferred Shares of such series. In addition, unless (i)
if such series of Preferred Shares has a cumulative dividend, full
cumulative dividends on all outstanding shares of any series of
Preferred Shares have been or contemporaneously are declared and paid
or declared and a sum sufficient for the payment thereof set apart for
payment for all past dividends periods and the then current dividend
period, and (ii) if such series of Preferred Shares does not have a
cumulative dividend, full dividends on the Preferred Shares of any
series have been or contemporaneously are declared and paid or declared
and a sum sufficient for the payment thereof set apart for payment for
the then current dividend period, the Trust shall not purchase or
otherwise acquire directly or indirectly any Preferred Shares of such
series (except by conversion into or exchange for capital shares of the
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Trust ranking junior to the Preferred Shares of such series as to
dividends and upon liquidation); provided, however, that the foregoing
shall not prevent the purchase or acquisition of Preferred Shares of
such series to preserve the REIT status of the Trust or pursuant to a
purchase or exchange offer made on the same terms to holders of all
outstanding Preferred Shares of such series.
If fewer than all of the outstanding Preferred Shares of any
series are to be redeemed, the number of shares to be redeemed will be
determined by the Trust and such shares may be redeemed pro rata from
the holders of record of such shares in proportion to the number of
such shares held or for which redemption is requested by such holder
(with adjustments to avoid redemption of fractional shares) or by lot
in a manner determined by the Trust.
Notice of redemption will be mailed at least 30 days but not more
than 60 days before the redemption date to each holder of record of
Preferred Shares of any series to be redeemed at the address shown on
the share transfer books of the Trust. Each notice shall state: (i)
the redemption date; (ii) the number and series of Preferred Shares to
be redeemed; (iii) the place or places where the Preferred Shares are
to be surrendered for payment of the redemption price; (iv) that
dividends on the shares to be redeemed will cease to accrue on the
redemption date; and (v) the date upon which the holder's conversion
rights, if any, as to such shares shall terminate. If fewer than all
of the Preferred Shares of any series are to be redeemed, the notice
mailed to each such holder thereof shall also specify the number of
Preferred Shares to be redeemed from such holder. If notice of
redemption of any Preferred Shares has been given and if the funds
necessary for such redemption have been set aside by the Trust from and
after the redemption date dividends will cease to accrue on such
Preferred Shares, and all rights of the holders of such shares will
terminate, except the right to receive the redemption price.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or
winding up of the affairs of the Trust, then, before any distribution
or payment shall be made to the holders of any Common Shares or any
other class or series of capital shares of the Trust ranking junior to
the Preferred Shares in the distribution of assets upon any
liquidation, dissolution or winding up of the Trust, the holders of
each series of Preferred Shares shall be entitled to receive out of the
assets of the Trust legally available for distribution to shareholders
liquidating distributions in the amount of the liquidation preference
per share (set forth in the applicable Prospectus Supplement), plus an
amount equal to all dividends accrued and unpaid thereon (which shall
not include any accumulation in respect of unpaid dividends for prior
dividend periods if such Preferred Shares do not have a cumulative
dividend). After payment of the full amount of the liquidating
distributions to which they are entitled, the holders of Preferred
Shares will have no right or claim to any of the remaining assets of
the Trust. In the event that, upon any such voluntary or involuntary
liquidation, dissolution or winding up, the available assets of the
Trust are insufficient to pay the amount of the liquidating
distributions on all outstanding Preferred Shares and the corresponding
amounts payable on all shares of other classes or series of capital
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shares of the Trust ranking on a parity with the Preferred Shares in
the distribution of assets, then the holders of the Preferred Shares
and all other such classes or series of capital shares shall share
ratably in any such distribution of assets in proportion to the full
liquidating distributions to which they would otherwise be respectively
entitled.
If liquidating distributions shall have been made in full to all
holders of Preferred Shares, the remaining assets of the Trust shall be
distributed among the holders of any other classes or series of capital
shares ranking junior to the Preferred Shares upon liquidation,
dissolution or winding up, according to their respective rights and
preferences and in each case according to their respective number of
shares. For such purposes, the consolidation or merger of the Trust
with or into any other corporation, trust or entity, or the sale, lease
or conveyance of all or substantially all of the property or business
of the Trust, shall not be deemed to constitute a liquidation,
dissolution or winding up of the Trust.
VOTING RIGHTS
Holders of Preferred Shares will not have any voting rights except
as indicated in the applicable Prospectus Supplement.
CONVERSION RIGHTS
The terms and conditions, if any, upon which any series of
Preferred Shares is convertible into Common Shares will be set forth in
the applicable Prospectus Supplement relating thereto. Such terms will
include the number of Common Shares into which the Preferred Shares are
convertible, the conversion price (or manner of calculation thereof),
the conversion period, provisions as to whether conversion will be at
the option of the holders of the Preferred Shares or the Trust, the
events requiring an adjustment of the conversion price and provisions
affecting conversion in the event of the redemption of such series of
Preferred Shares.
SHAREHOLDER LIABILITY
As discussed above under "Description of Preferred Shares-
General," applicable Maryland law provides that no shareholder,
including holders of Preferred Shares, shall be personally liable for
the acts and obligations of the Trust and that the funds and property
of the Trust shall be the only recourse for such acts or obligations.
RESTRICTIONS ON OWNERSHIP
For the Trust to qualify as a REIT under the Internal Revenue Code
of 1986, as amended (the "Code"), the issued and outstanding Common
Shares and Preferred Shares (together, the "Shares"), taken as a whole,
must be beneficially owned by 100 or more persons during at least 335
days of a taxable year of 12 months (other than the first year) or
during a proportionate part of a shorter taxable year. In addition,
not more than 50% of the value of the issued and outstanding Shares may
be owned, directly or indirectly, by five or fewer individuals (defined
in the Code to include as one individual certain entities) during the
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last half of a taxable year (other than the first year) or during a
proportionate part of a shorter taxable year.
Because the Board of Trustees believes it is essential for the
Trust to continue to qualify as a REIT, the Trust's Declaration of
Trust, subject to certain exceptions, provides that no holder may own,
or be deemed to own by virtue of the attribution provisions of the
Code, more than 5.0% (the "Ownership Limit") of the number or value of
the issued and outstanding Shares. The Board of Trustees, upon receipt
of a ruling from the Internal Revenue Service (the "IRS"), an opinion
of counsel, or other evidence satisfactory to the Board of Trustees,
and upon such other conditions as the Board of Trustees may direct, may
also exempt a proposed transferee from the Ownership Limit. As a
condition of such exemption, the intended transferee must give written
notice to the Trust of the proposed transfer no later than the
fifteenth day prior to any transfer which, if consummated, would result
in the intended transferee owning Shares in excess of the Ownership
Limit. The Board of Trustees may require such opinions of counsel,
affidavits, undertakings or agreements as it may deem necessary or
advisable in order to determine or ensure the Trust's status as a REIT.
Any transfer of Shares that would (i) create a direct or indirect
ownership of Shares in excess of the Ownership Limit, (ii) result in
the Shares being owned by fewer than 100 persons or (iii) result in the
Trust being "closely held" within the meaning of Section 856(h) of the
Code, shall be null and void, and the intended transferee will acquire
no rights to the Shares. The foregoing restrictions on transferability
and ownership will not apply if the Board of Trustees determines that
it is no longer in the best interests of the Trust to attempt to
qualify, or to continue to qualify, as a REIT.
Any purported transfer of Shares that would (i) result in a person
owning Shares in excess of the Ownership Limit, (ii) cause the Trust to
become "closely held" under Section 856(h) of the Code or (iii) cause
the Shares to be owned by fewer than 100 persons and is not otherwise
permitted as provided above will result in those of the transferred
Shares which cause any of the events in clauses (i) through (iii) above
to occur to become excess shares ("Excess Shares"), which will be
transferred by operation of law to the Trust as trustee for the
exclusive benefit of one or more organizations described in Sections
170(b)(1)(A) and 170(c) of the Code ("Charitable Beneficiary"). While
these Excess Shares are held in trust, the Trust, in its capacity as
trustee, will be deemed to have an irrevocable proxy to vote the Excess
Shares for the benefit of the Charitable Beneficiary and will hold any
dividends payable with respect to the Excess Shares in trust for the
Charitable Beneficiary. Subject to the Ownership Limit, the Excess
Shares may be retransferred by the Trust, in its capacity as trustee,
to any person (if the Excess Shares would not be Excess Shares in the
hands of such person). If such a transfer is made, the interest of the
Charitable Beneficiary would terminate and proceeds of the sale would
be payable to the intended transferee and to the Charitable
Beneficiary. The intended transferee would receive the lesser of (1)
the price paid by the intended transferee or, if the intended
transferee did not give value for such Excess Shares (e.g., a transfer
by gift or devise), the fair market value (as described below) at the
time of the purported transfer that resulted in the Excess Shares and
(2) the price per share received by the trustee from the sale or other
disposition of the Excess Shares held in trust. Any proceeds in excess
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of the amount payable to the intended transferee will be payable to the
Charitable Beneficiary. In addition, such Excess Shares held in trust
are subject to purchase by the Trust at a purchase price equal to the
lesser of the price paid for the Shares by the intended transferee (or,
in the case of a devise or gift, the fair market value at the time of
such devise or gift) and the fair market value of the Shares on the
date the Trust exercises its right to purchase. Fair market value
shall be the last reported sales price reported on the New York Stock
Exchange ("NYSE") on the trading day immediately preceding the relevant
date, or if not then traded on the NYSE, the last reported sales price
of such Shares on the trading day immediately preceding the relevant
date as reported on any exchange or quotation system over which such
Shares may be traded, or if not then traded over any exchange or
quotation system, then the fair market value of such Shares on the
relevant date as determined in good faith by the Board of Trustees.
The Trust's right to purchase may be exercised during the 90 day period
beginning immediately after the later of the date of the purported
transfer which resulted in the Excess Shares and the date the Board of
Trustees determines in good faith that such a transfer has occurred.
From and after the intended transfer to the intended transferee of the
Excess Shares, the intended transferee shall cease to be entitled to
distributions, voting rights and other benefits with respect to such
Shares except the right to payment of the purchase price for the Shares
on the retransfer of Shares as provided above and except for certain
distributions upon liquidation. Any dividends or distribution paid to
a proposed transferee on Excess Shares prior to the discovery by the
Trust that such Shares have been transferred in violation of the
provisions of the Trust's Declaration of Trust shall be repaid to the
Trust upon demand. Any dividends so disgorged will then be paid over
to the trustee and held in trust for the Charitable Beneficiary. If
the foregoing transfer restrictions are determined to be void or
invalid by virtue of any legal decision, statute, rule or regulation,
then the intended transferee of any Excess Shares may be deemed, at the
option of the Trust, to have acted as an agent on behalf of the Trust
in acquiring such Excess Shares and to hold such Excess Shares on
behalf of the Trust.
All certificates representing Shares will bear a legend referring
to the restrictions described above.
All persons who own, directly or by virtue of the attribution
provisions of the Code, more than 5.0% (or such other percentage
between 0.5% and 5.0%, as provided in the rules and regulations
promulgated under the Code) of the number or value of the outstanding
Shares must give a written notice to the Trust by January 31 of each
year. In addition, each shareholder shall be required upon demand to
disclose to the Trust in writing such information with respect to the
direct, indirect and constructive ownership of Shares as the Board of
Trustees deems reasonably necessary to comply with the provisions of
the Code applicable to a REIT, to comply with the requirements of any
taxing authority or governmental agency or to determine any such
compliance.
REGISTRAR AND TRANSFER AGENT
The Registrar and Transfer Agent for the Preferred Shares will be
set forth in the applicable Prospectus Supplement.
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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 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
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Warrants, any related Warrant Agreement and Warrant Certificate,
including the following, to the extent applicable:
- if the Warrants are offered for separate consideration, the
offering price and the currency for which Warrants may be
purchased;
- 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;
- if applicable, the number 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;
- the date, if any, on and after which the offered Warrants and the
related Preferred Shares and/or Common Shares will be separately
transferable;
- the date on which the right to exercise the offered Warrants shall
commence and the date on which such right shall expire
("Expiration Date");
- 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;
- 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;
- any applicable anti-dilution provisions;
- any applicable redemption or call provisions;
- any applicable book-entry provisions; and
- 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
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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 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 intended as 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 is
addressed only to holders that hold Securities as capital assets and
does not attempt to address all aspects of federal income taxation
relating to holders of the Securities. Nor does it discuss all of the
aspects of federal income taxation that may be relevant to certain
types of holders (including insurance companies, tax-exempt entities,
financial institutions or broker-dealers, foreign corporations and
persons who are not citizens or residents of the United States) who are
subject to special treatment under the federal income tax laws.
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
Management of 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 it 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
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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 LLP 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 LLP 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
LLP. 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 or excise tax as follows. First, the Trust
will be taxed at regular corporate rates on any undistributed real
estate investment trust taxable income, including undistributed net
capital gains. Second, under certain circumstances, the 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 and, effective for the Trust's taxable year ending
December 31, 1998 and thereafter, dispositions of property that occur
due to involuntary conversion), 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
an amount equal to (i) the gross 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 (ii) 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
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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
corporation, where some or all of the gain from the taxable disposition
of the asset would have been taxable to the corporation 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 such 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 in the case
of assets acquired from a C corporation), such gain will be subject to
tax at the Trust level 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 or the temporary or final regulations issued under
Section 337(d) of the Code.
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. 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
and certain other attribution rules will apply.
The Trust has satisfied and will continue to satisfy conditions
(1) through (6) above. In making the "five or fewer individuals"
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 Declaration of Trust, filed as
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an exhibit to a report 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 REIT subsidiary" are treated as
assets, liabilities, and such items (as the case may be) of the REIT.
Effective for the Trust's taxable year ending December 31, 1998, a
qualified REIT subsidiary is any corporation 100% of the stock of which
is held by the REIT, regardless of whether the REIT has held such
corporation's stock at all times during its existence. 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 (as defined below) 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.
Thus, 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 two 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. For taxable years ending on or before
December 31, 1997, 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
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(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, although a payment of rent 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 to permit 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,
directly or through the applicable ownership attribution rules, owns
10% or more, by voting power or value, 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 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, other than services usually and
customarily rendered in connection with the rental of space for
occupancy only.
For taxable years beginning after December 31, 2000, rent received
from a taxable REIT subsidiary will, under certain circumstances,
qualify as rents from real property even if the Trust owns more than
10% of the voting power or value of such subsidiary.
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
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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.
Effective for the Trust's taxable years beginning on or after
January 1, 1998, the Trust is permitted to render a de minimis amount
of impermissible services to tenants, or in connection with the
management of a property (together, "Impermissible Services"), without
otherwise qualifying rents from the property being classified as not
"rents from real property." In order to qualify for this de minimis
exception, the amount received by the Trust for Impermissible Services
with respect to any property for any taxable year may not exceed 1% of
all amounts received or accrued by the Trust during such taxable year
with respect to such property. For purposes of the foregoing, the
amount treated as "received" by the Trust for Impermissible Services
will not be less than 150% of the Trust's direct cost in rendering such
service. However, the amount of any income that the Trust receives for
Impermissible Services will not be treated as "rents from real
property" for purposes of the gross income tests. The Trust does not
believe that the level of its gross income from Impermissible Services,
if any, would cause the Trust to violate the 1% safe harbor as to any
property.
The Operating Partnership may receive fees in consideration of the
performance of management and administrative services with respect to
any properties that are not owned entirely by the Operating
Partnership. Although a portion of such management and administrative
fees generally will not constitute "qualifying income" for purposes of
the 75% and 95% gross income tests, the Trust Management believes that
the aggregate amount of such fees, if any (plus any income from
Impermissible Services and other nonqualifying income), in any taxable
year will not cause the Trust to fail the 75% and 95% gross income
tests.
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 net 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.
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
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Trust's qualifying income in the relevant category, whichever is
greater.
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), cash, cash items and government
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 (other than 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).
This rule was amended recently to allow REITs to have a greater
percentage ownership of the stock of "taxable REIT subsidiaries."
For taxable years beginning after December 31, 2000, not more than
20% of the Trust's total assets may constitute securities issued by
taxable REIT subsidiaries, and of the investments included in the 25%
asset class, the value of any one issuer's securities, other than
securities issued by another REIT or by a taxable REIT subsidiary,
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 the vote or value of
the outstanding securities of any one issuer, except for issuers that
are taxable REIT subsidiaries. For these purposes, a taxable REIT
subsidiary is any corporation in which the Trust owns an interest, that
joins with the Trust in making an election to be treated as a taxable
REIT subsidiary, and that does not engage in certain activities.
The Operating Partnership owns 8.0% of the voting common stock and
100% of the non-voting common stock of Liberty Property Development
Corp. ("Liberty Development") and none of the voting common stock and
100% of the non-voting common stock of Liberty Property Development
Corp.-II ("Development-II" and, together with Liberty Development, the
"Development Companies"). By virtue of its ownership of partnership
interests in the Operating Partnership, the Trust owns its pro rata
shares of the common stock of the Development Companies. The Operating
Partnership does not own more than 10% of the voting securities of
either of the Development Companies and, therefore, the Trust will not
own more than 10% of the voting securities of either of the Development
Companies. 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 either of the Development Companies because
of its substantial economic positions in the Development Companies and
because of the close business relationships between it and each of the
two Development Companies. If such contention were sustained, the
Trust would not qualify as a REIT. The Operating Partnership does not
possess the requisite power to elect or designate a member of the
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respective Boards of Directors of the Development Companies, and there
is no understanding or arrangement permitting the Trust to exercise
voting power or control over the voting common stock of either of the
Development Companies not owned by it. Accordingly, Wolf, Block,
Schorr and Solis-Cohen LLP and the Trust do not believe that the Trust
will be viewed as owning in excess of 10% of the voting securities of
either of the Development Companies. 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 respective pro rata shares of the securities of the
Development Companies held by the Operating Partnership do 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 LLP, 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 values of the Development Companies. The
5%-of-value requirement must be satisfied each time the Trust increases
its ownership of securities of either of the Development Companies
(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 either of the Development Companies.
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
To qualify as a REIT, the Trust 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% (90% for taxable years
beginning after December 31, 2000) 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% (90% for taxable years beginning
after December 31, 2000) 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% (90% for taxable years beginning after
December 31, 2000), 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
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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.
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.
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
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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
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
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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.
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 LLP 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 permitted
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 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
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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 LLP, 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
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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 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.
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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 Treasury Regulations to be issued, the tax rates applicable to
such capital gain will likely vary depending on the precise amount of
time such interest has been held by the Trust and the nature of the
Operating Partnership's property.
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), and may result in capital
gain distributions to the shareholders. See "-- Taxation of Taxable
Domestic Shareholders," below.
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
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tax. 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.
Complete assurance cannot be given, however, that the Trust will be
able to avoid owning property that may be characterized as property
held "primarily for sale to customers in the ordinary course of
business."
TAXATION OF TAXABLE DOMESTIC SHAREHOLDERS
As long as the Trust qualifies as a REIT, distributions made to
the Trust's taxable U.S. shareholders out of current or accumulated
earnings and profits (and not designated as capital gain dividends)
will be taken into account by such U.S. shareholders as ordinary
income and will not be eligible for the dividends received deduction
for corporations. Distributions that are designated as capital gain
dividends will be taxed as gain from the sale or exchange of a capital
asset held for more than one year (to the extent they do not exceed the
Trust's actual net capital gain for the taxable year) without regard to
the period for which the shareholder has held its stock. Subject to
certain limitations, the Trust may further designate capital gain
dividends as a "20% rate gain distribution" or an "unrecaptured section
1250 gain distribution," in which case such dividends will be taxable
to recipient individual shareholders when received at tax rates of 20%
and 25%, respectively. Corporate shareholders may be required to treat
up to 20% of certain capital gain dividends as ordinary income.
Distributions in excess of current and accumulated earnings and
profits will not be taxable to a shareholder to the extent that they do
not exceed the adjusted basis of the shareholder's shares, but rather
will reduce the adjusted basis of such shares. To the extent that such
distributions exceed the adjusted basis of a shareholder's shares, they
will be included in income as short-term, mid-term or long-term capital
gain (depending on the length of time the shares have been held)
assuming the shares are a capital asset in the hands of the
shareholder. In addition, any dividend declared by the Trust in
October, November or December of any year payable to a shareholder of
record on a specified date in any such month shall be treated as both
paid by the Trust and received by the shareholder on December 31 of
such year, provided that the dividend is actually paid by the Trust
during January of the following calendar year. Shareholders may not
include in their individual income tax returns any net operating losses
or capital losses of the Trust.
In general, a domestic shareholder will realize capital gain or
loss on the disposition of common shares equal to the difference
between (i) the amount of cash and the fair market value of any
property received on such disposition, and (ii) the shareholder's
adjusted basis of such common shares. Subject to certain exceptions,
the maximum rate of tax on net capital gains of individuals, trusts and
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estates from the sale or exchange of capital assets held for more than
one year is 20%. Any loss upon a sale or exchange of shares by a
shareholder who has held such shares for six months or less (after
applying certain holding-period rules) will be treated as a long-term
capital loss to the extent of distributions from the Trust required to
be treated by such shareholder as long-term capital gain.
Effective for its taxable years beginning on or after January 1,
1998, the Trust may elect to retain its net long-term capital gains
recognized during a taxable year ("Retained Gains") and pay a
corporate-level tax on such Retained Gains. Corporations are currently
subject to a maximum 35 percent tax on recognized capital gains. A
shareholder owning the Trust's shares of beneficial interest on
December 31 of any taxable year in which the Trust has Retained Gains
would be required to include in gross income such shareholder's
proportionate share of the Retained Gains (as designated by the Trust
in a notice mailed to shareholders within 60 days following the end of
the taxable year). The amount of any corporate-level tax paid by the
Trust in respect of the Retained Gains (the "Trust Tax") would be
treated as having been paid by the shareholders of the Trust and each
shareholder would receive a credit for such shareholder's share of the
Trust Tax. A shareholder's basis in his shares of beneficial interest
would increase by the excess of such shareholder's proportionate share
of the Retained Gains over the shareholder's share of the Trust Tax.
Unless the Retained Gains were treated as actually distributed, it is
possible that the Retained Gains might be subject to the Excise Tax.
BACKUP WITHHOLDING
The Trust will report to its U.S. shareholders and the IRS the
amount of distributions paid during each calendar year, and the amount
of tax withheld, if any. Under the backup withholding rules, a
shareholder may be subject to backup withholding at the rate of 31%
with respect to distributions paid unless such shareholder (a) is a
corporation or comes within certain other exempt categories and, when
required, demonstrates this fact or (b) provides a taxpayer
identification number, certifies as to no loss of exemption from backup
withholding, and otherwise complies with applicable requirements of the
backup withholding rules. A shareholder that does not provide the
Trust with his correct taxpayer identification number may also be
subject to penalties imposed by the IRS. Any amount paid as backup
withholding will be creditable against the shareholder's income tax
liability. In addition, the Trust may be required to withhold a
portion of capital gain distributions to shareholders who fail to
certify their non-foreign status to the Trust. The United States
Treasury has recently issued final regulations (the "Final
Regulations") which affect the procedures regarding the withholding and
information reporting rules discussed above. In general, the Final
Regulations do not alter the substantive withholding and information
reporting requirements but unify current certification procedures and
forms and clarify and modify reliance standards. The Final Regulations
are generally effective for payments made on or after January 1, 1999,
subject to certain transition rules. Prospective investors should
consult their own tax advisors concerning the adoption of the Final
Regulations and the potential effect on their ownership of common
shares. See "-- Taxation of Foreign Shareholders."
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TAXATION OF TAX-EXEMPT SHAREHOLDERS
Generally, distributions to a tax-exempt entity from a real estate
investment trust do not constitute unrelated business taxable income,
as defined in Section 512(a) of the Code ("UBTI"), provided that the
tax-exempt entity has not financed its acquisition of its shares with
"acquisition indebtedness" within the meaning of the Code and the
shares are not otherwise used in an unrelated trade or business of the
tax-exempt entity. Thus, distributions by the Trust to shareholders
that are tax-exempt should not be taxable as UBTI, provided that no
acquisition indebtedness was incurred with respect to such shares.
Some or all of the distributions by a real estate investment trust
to a tax-exempt employee's pension fund that owns more than 10% in
value of the real estate investment trust would be treated as UBTI if
the real estate investment trust constitutes a "pension-held REIT" and
if other conditions are met. In order to constitute a "pension-held
REIT" the real estate investment trust must meet the test for
classification as a real estate investment trust only because
tax-exempt pension funds are not treated as a single individual for
purposes of the "five-or-fewer" rule (see "Risk Factors -- Limitations
on Changes in Control -- Ownership Limit") and either (A) one pension
fund owns more than 25% in value of the real estate investment trust or
(B) one or more pension funds (holding at least 10% in value of the
real estate investment trust each) own, in the aggregate, more than 50%
of the value of the real estate investment trust. In addition, the
gross income of the real estate investment trust derived from
activities that would constitute unrelated trades or businesses,
computed as if the REIT was a "qualified trust," must be at least five
percent of the gross income of the real estate investment trust in the
taxable year in which the distributions are made. The ownership
limitations in the Trust's Declaration of Trust (assuming no waiver by
the Board of Trustees) would prevent the Trust from being classified as
a "pension-held REIT."
TAXATION OF FOREIGN SHAREHOLDERS
The rules governing United States federal income taxation of
nonresident alien individuals, foreign corporations, foreign
partnerships and other foreign shareholders (collectively, "Non-U.S.
Shareholders") are complex, and no attempt will be made herein to
provide more than a summary of the rules. Prospective Non-U.S.
Shareholders should consult with their own tax advisors to determine
the impact of federal, state and local income tax laws with regard to
an investment in the Common Shares offered hereby, including any
reporting requirements, as well as the tax treatment of such an
investment under their home country laws. If income from the
investment in the Common Shares offered hereby is treated as
"effectively connected" with the Non-U.S. Shareholder's conduct of a
United States trade or business or attributable to a permanent
establishment that the Non-U.S. Shareholder maintains in the United
States that is required by an applicable income tax treaty as a
condition for subjecting the Non-U.S. Shareholder to tax on a "net
income basis," the Non-U.S. Shareholder generally will be subject to a
tax at graduated rates, in the same manner as U.S. shareholders are
taxed with respect to the dividends (and may also be subject to the 30%
"branch profits" tax in the case of a shareholder that is a foreign
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corporation). The remainder of this discussion assumes that the
distributions do not constitute "effectively connected" income.
Prospective investors whose investment in common shares may be
"effectively connected" with the conduct of a United States trade or
business should consult their own tax advisors as to the tax
consequences thereof.
Distributions by the Trust that are not attributable to gain from
sales or exchanges by the Trust of United States real property
interests and not designated by the Trust as capital gains dividends
will be treated as dividends of ordinary income to the extent that they
are made out of current or accumulated earnings and profits of the
Trust. Such distributions, ordinarily, will be subject to a
withholding tax equal to 30% of the gross amount of the distribution
unless an applicable tax treaty reduces or eliminates that tax.
Distributions in excess of current and accumulated earnings and profits
of the Trust will not be taxable to a shareholder to the extent that
such distributions do not exceed the adjusted basis of the
shareholder's shares, but rather will reduce the adjusted basis of such
shares. To the extent that distributions in excess of current
accumulated earnings and profits exceed the adjusted basis of a
Non-U.S. Shareholder's shares, such distributions will give rise to
tax liability if the Non-U.S. Shareholder would otherwise be subject
to tax on any gain from the sale or disposition of his shares in the
Trust, as described below. The Trust expects to withhold United States
income tax at the rate of 30% on the gross amount of any distributions
made to a Non-U.S. Shareholder unless (i) a lower treaty rate applies
and the Non-U.S. Shareholder files all necessary forms required to
establish eligibility for the lower rate and provides certification as
to such eligibility, if necessary, or (ii) the Non-U.S. Shareholder
files an IRS Form W 8-ECI with the Trust certifying that the investment
to which the distribution relates is "effectively connected" to a
United States trade or business of such Non-U.S. Shareholder. Lower
treaty rates generally applicable to dividend income may not
necessarily apply to distributions from a REIT, such as the Trust. If
it cannot be determined at the time a distribution is made whether or
not such distribution will be in excess of current and accumulated
earnings and profits, the distributions will be subject to withholding
at the same rate as dividends. Effective for distributions made after
August 20, 1996, the Trust is obligated to withhold 10% of the amount
of any distribution in excess of the Trust's current and accumulated
earnings and profits. However, amounts withheld are refundable if it
is subsequently determined that the distribution was in excess of
current and accumulated earnings and profits of the Trust and the
amount withheld exceeded the Non-U.S. Shareholders' United States tax
liability, if any.
For any year in which the Trust qualifies as a REIT, distributions
that are attributable to gain from sales or exchanges by the Trust of
United States real property interests will be taxed to a Non-U.S.
Shareholder under the provisions of the Foreign Investment in Real
Property Tax Act of 1980 ("FIRPTA"). Under FIRPTA, these distributions
are taxed to a Non-U.S. Shareholder as if the gain were "effectively
connected" with a United States business. Non-U.S. Shareholders would
be taxed at the normal capital gain rates applicable to domestic
shareholders (subject to applicable alternative minimum tax and a
special alternative minimum tax in the case of nonresident alien
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individuals), without regard to whether such distributions are
designated by the Trust as capital gain dividends. Also, distributions
subject to FIRPTA may be subject to a 30% "branch profits" tax in the
hands of a foreign corporate shareholder not entitled to treaty
exemption. The Trust is required by applicable income tax regulations
that have been promulgated under the Code (the "Treasury Regulations")
to withhold 35% of any distribution that could be designated by the
Trust as a capital gains dividend. This amount is creditable against
the Non-U.S. Shareholder's FIRPTA tax liability.
Gain recognized by a Non-U.S. Shareholder upon a sale of shares
generally will not be taxed under FIRPTA if the Trust is a
"domestically controlled REIT," defined generally as a REIT in which at
all times during a specified testing period less than 50% in value of
the stock was held directly or indirectly by foreign persons. The
Trust currently is a "domestically controlled REIT," and anticipates
continuing to be so classified, and therefore the sale of the common
shares offered hereby should not be subject to taxation under FIRPTA.
However, because the common shares will be publicly traded, no
assurance can be given that the Trust will continue to so qualify.
Notwithstanding the foregoing, any gain not otherwise subject to FIRPTA
will be taxable to a Non-U.S. Shareholder if (i) investment in the
shares is effectively connected with the Non-U.S. Shareholder's United
States trade or business, in which case the Non-U.S. Shareholder will
be subject to the same treatment as U.S. shareholders with respect to
the gain (a shareholder that is a foreign corporation may also be
subject to the 30% "branch profits" tax), or (ii) the Non-U.S.
Shareholder is a nonresident alien individual who was present in the
United States for 183 days or more during the taxable year and has a
"tax home" in the United States or maintains an office or a fixed place
of business in the United States to which the gain is attributable, in
which case the nonresident alien individual will be subject to a 30%
tax on the individual's capital gains. If the gain on the sale of
shares were to be subject to taxation under FIRPTA, the Non-U.S.
Shareholder will be subject to the same treatment as U.S. shareholders
with respect to the gain (subject to applicable alternative minimum tax
and a special alternative minimum tax in the case of nonresident alien
individuals and, in the case of foreign corporations, subject to the
possible application of the 30% "branch profits" tax).
If the proceeds of a disposition of common shares are paid by or
through a United States office of a broker, the payment is subject to
information reporting requirements and to backup withholding unless the
disposing Non-U.S. Shareholder certifies as to his name, address, and
non-United States status or otherwise establishes an exemption.
Generally, United States information reporting and backup withholding
will not apply to the payment of disposition proceeds if the payment is
made outside the United States through a non-United States broker.
United States information reporting (but not backup withholding) will
apply, however, to a payment of disposition proceeds outside the United
States if (i) the payment is made through an office outside the United
States that is either (a) a United States person, (b) a foreign person
that derives 50% or more of its gross income for certain periods from
the conduct of a trade or business in the United States, (c) a foreign
partnership which is owned 50% or more by United States persons or is
engaged in United States trade or business, (d) a United States branch
of a foreign bank or foreign insurance company, or (e) a "controlled
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foreign corporation" for United States federal income tax purposes, and
(ii) the broker fails to obtain documentary evidence that the
Shareholder is a Non-U.S. Shareholder and that certain conditions are
met or that the Non-U.S. Shareholder is otherwise entitled to an
exemption. The Final Regulations, issued by the United States Treasury
on October 6, 1997, affect the rules applicable to payments to foreign
persons. In general, the Final Regulations do not alter the substantive
withholding and information reporting requirements but unify current
certification procedures and forms and clarify and modify reliance
standards. The Final Regulations also address certain issues relating
to intermediary certification procedures designed to simplify
compliance by withholding agents. The Final Regulations are generally
effective for payments made on or after January 1, 2001, subject to
certain transition rules. Prospective investors should consult their
own tax advisors concerning the adoption of the Final Regulations and
the potential effect on their ownership of the common shares.
TAXATION OF HOLDERS OF DEBT SECURITIES
As used herein, the term "U.S. Holder" means a holder of a Debt
Security who (for United States Federal income tax purposes) is (i) a
citizen or resident of the United States, (ii) a domestic corporation,
(iii) an estate, the income of which is subject to United States
federal income tax without regard to its source, (iv) a Trust if a
court within the United States is able to exercise primary supervision
over the administration of the Trust and one or more United States
persons have the authority to control all substantial decisions of the
Trust, or (v) any other person who is subject to United States Federal
income taxation on a net income basis with respect to a Debt Security
and "U.S. Alien Holder" means a holder of a Debt Security who is not a
U.S. Holder. In the case of a holder of a Debt Security that is a
partnership for United States tax purposes, and each partner will take
into account its allocable share of income or loss from the Debt
Security, and will take such income or loss into account under the
rules of taxation applicable to such partner, taking into account the
partnership and the partner.
U.S. HOLDERS
Payments of Interest
Interest on a Debt Security will be taxable to a U.S. Holder as
ordinary income at the time it is received or accrued, depending on the
U.S. Holder's method of accounting for tax purposes.
Purchase, Sale and Retirement of the Debt Securities
A U.S. Holder's tax basis in a Debt Security will generally be its
U.S. dollar cost.
A U.S. Holder will generally recognize gain or loss on the sale or
retirement of a Debt Security equal to the difference between the
amount realized on the sale or retirement and the U.S. Holder's tax
basis in the Debt Security. Except to the extent attributable to
accrued but unpaid interest, gain or loss recognized on the sale or
retirement of a Debt Security will be capital gain or loss, will be a
long-term capital gain or loss if the Debt Security was held for more
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than one year and may be eligible for a reduced rate of tax if the Debt
Security was held for more than 18 months and in certain other
circumstances.
U.S. ALIEN HOLDERS
This discussion assumes that the Debt Security is not subject to
the rules of Section 871(h)(4)(A) of the Code (relating to interest
payments that are determined by reference to the income, profits,
changes in the value of property or other attributes of the debtor or a
related party).
Under present United States Federal income and estate tax law, and
subject to the discussion of backup withholding above:
(i) payments of principal, premium (if any) and interest by
the Operating Partnership or any of its paying agents to any
holder of a Debt Security that is a U.S. Alien Holder will not be
subject to United States Federal withholding tax if, in the case
of interest (a) the beneficial owner of the Debt Security does not
actually or constructively own 10% or more of the capital or
profits interest in the Operating Partnership, (b) the beneficial
owner of the Debt Security is not a controlled foreign corporation
that is related to the Operating Partnership through stock
ownership, and (c) either (A) the beneficial owner of the Debt
Security certifies to the Operating Partnership or its agent,
under penalties of perjury, that it is not a U.S. person and
provides its name and address or (B) a securities clearing
organization, bank or other financial institution that holds
customers' securities in the ordinary course of its trade or
business (a "financial institution") and holds the Debt Security
certifies to the Operating Partnership or its agent under
penalties of perjury that such statement has been received from
the beneficial owner by it or by a financial institution between
it and the beneficial owner and furnishes the payor with a copy
thereof;
(ii) a U.S. Alien Holder of a Debt Security will not be
subject to United States Federal withholding tax on any gain
realized on the sale or exchange of a Debt Security; and
(iii) a Debt Security held by an individual who at death is
not a citizen or resident of the United States will not be
includible in the individual's gross estate for purposes of the
United States Federal estate tax as a result of the individual's
death if (a) the individual did not actually or constructively own
10% or more of the capital or profits interest in the Operating
Partnership, and (b) the income on the Debt Security would not
have been effectively connected with a United States trade or
business of the individual at the time of the individual's death.
Special rules may apply in the case of U.S. Alien Holders (i) that
are engaged in a United States trade or business, (ii) that are former
citizens or long term residents of the United States, "controlled
foreign corporations," "foreign personal holding companies,"
corporations which accumulate earnings to avoid United States Federal
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income tax, and certain foreign charitable organizations, each within
the meaning of the Code, or (iii) certain non-resident alien
individuals who are present in the United States for 183 days of more
during a taxable year. Such persons are urged to consult their own tax
advisors before purchasing a Debt Security.
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 of 1933, as amended (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, including any
underwriting discounts and other items constituting compensation of the
underwriters and dealers, if any, 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. The securities will be
acquired by the underwriters for their own accounts and may be resold
from time to time in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying prices
determined at the time of sale. Any initial public offering price and
any discounts or concessions allowed or reallowed or paid to dealers
may be changed from time to time.
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
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dealer may then resell such Securities to the public at varying prices
to be determined by such dealer at the time of resale. The name of the
dealer and the terms of the transaction will be identified in the
applicable Prospectus Supplement.
If an agent is used in an offering of securities being offered by
this Prospectus, the agent will be named, and the terms of the agency
will be described, in the applicable Prospectus Supplement relating to
the offering. Unless otherwise indicated in the Prospectus Supplement,
an agent will act on a best efforts basis for the period of its
appointment.
If indicated in the applicable Prospectus Supplement, the
issuer(s) of the Securities to which the Prospectus Supplement relates
will authorize underwriters or their other agents to solicit offers by
certain institutional investors to purchase Securities from the
issuer(s) pursuant to contracts providing for payment and delivery at a
future date. Institutional investors with which these contracts may be
made include commercial and savings banks, insurance companies, pension
funds, investment companies, educational and charitable institutions
and others. In all cases, these purchasers must be approved by the
issuer(s) of the Securities. The obligations of any purchaser under any
of these contracts will not be subject to any conditions except that
(a) the purchase of the securities must not at the time of delivery be
prohibited under the laws of any jurisdiction to which that purchaser
is subject and (b) if the securities are also being sold to
underwriters, the issuer(s) must have sold to these underwriters the
securities not subject to delayed delivery. Underwriters and other
agents will not have any responsibility in respect of the validity or
performance of these contracts.
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
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exercising all or part of any 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.
The anticipated date of delivery of the Securities offered by this
Prospectus will be described in the applicable Prospectus Supplement
relating to the offering. The Securities offered by this Prospectus
may or may not be listed on a national securities exchange or a foreign
securities exchange. We cannot give any assurances that there will be a
market for any of the Securities offered by this Prospectus and any
Prospectus Supplement.
We estimate that the total expenses we will incur in offering the
Securities to which this Prospectus relates, excluding underwriting
discounts and commissions, if any, will be approximately $1,060,000.
LEGAL OPINIONS
Wolf, Block, Schorr and Solis-Cohen LLP, Philadelphia,
Pennsylvania, has rendered an opinion with respect to the legality of
the Securities to be issued by the Operating Partnership. Saul, Ewing,
Remick & Saul LLP, 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 LLP, 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, the
Trust's United Kingdom affiliate.
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EXPERTS
The consolidated financial statements and schedule of Liberty
Property Trust and Liberty Property Limited Partnership appearing in
Liberty Property Trust's and Liberty Property Limited Partnership's
Annual Reports (Form 10-K) for the year ended December 31, 1999, have
been audited by Ernst & Young LLP, independent auditors, as set forth
in their reports thereon included therein and incorporated herein by
reference. Such financial statements and schedule are incorporated
herein by reference in reliance upon such reports given upon the
authority of such firm as experts in accounting and auditing.
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PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the costs and expenses of the sale
and distribution of the Securities being registered, all of which are
being borne by the Company. Such costs and expenses do not include
amounts that may be incurred upon the issuance of certain types of
securities represented hereunder.
Securities and Exchange Commission registration fee..........$ 158,401
NASD Filing Fee.............................................. 30,500
Printing and engraving....................................... 100,000
Blue Sky fees and expenses................................... 10,000
Trustees' fees and expenses.................................. 10,000
Rating Agency fees and expenses.............................. 495,000
Legal and accounting fees and expenses....................... 250,000
Miscellaneous................................................ 6,099
---------
Total........................................................$1,060,000
==========
All expenses except the Securities and Exchange Commission
registration fee and the NASD filing fee are estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Trust
Under Section 8-301(15) and 2-418 of the Maryland General
Corporation Law, as amended, the Trust has the power to indemnify
trustees and officers under certain prescribed circumstances (including
when authorized by a majority vote of a quorum of disinterested
trustees, by a majority vote of a committee of two or more
disinterested trustees, by independent legal counsel, or by
shareholders) and, subject to certain limitations (including, unless
otherwise determined by the proper court, when such trustee or officer
is adjudged liable to the Trust), against certain costs and expenses,
including attorneys' fees actually and reasonably incurred in
connection with any action, suit or proceeding, whether civil,
criminal, administrative or investigative, to which any of them is a
party by reason of his or her being a trustee or officer of the Trust
if it is determined that he or she acted in accordance with the
applicable standard of conduct set forth in such statutory provisions
including when such trustee or officer acted in good faith and in a
manner he or she reasonably believed to be in or not opposed to the
Trust's best interests, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her conduct was
unlawful.
Article XII of the Trust's By-laws provides that the Trust has the
power to indemnify trustees, officers and shareholders of the Trust
against expenses (including legal fees) reasonably incurred by any of
them in connection with the successful defense of a proceeding to which
such person was made a party by reason of such status, whether the
success of such defense was on the merits or otherwise, to the maximum
extent permitted by law. The trustees, officers and shareholders of the
Trust also have the right, in certain circumstances, to be paid in
advance for expenses incurred in connection with any such proceedings.
The Operating Partnership
Section 8570 of the Pennsylvania Revised Uniform Limited
Partnership Act authorizes the Operating Partnership to indemnify any
partner or other person from and against any and all claims and demands
whatsoever, unless it is determined by a court that the act or omission
giving rise to the claim of indemnification constituted willful
misconduct or recklessness.
Reference is made to Section 7.8 of the Operating Partnership's
Second Restated and Amended Limited Partnership Agreement, as amended
to the date hereof (the "Partnership Agreement"), a copy of which is
filed as Exhibit 3.1.2 to the Registration Statement, which provides
for indemnification of the general partners and others. Section 7.8(d)
of the Partnership Agreement authorizes the Operating Partnership to
purchase and maintain insurance on behalf of the general partner and
others against any liability that may be asserted against or expenses
that may be incurred by such person regardless of whether the Operating
Partnership would have the power to indemnify such person against
liability under the Partnership Agreement.
Reference is made to Section 7.9 of the Partnership Agreement
which limits the general partner's liability for monetary or other
damages.
ITEM 16. EXHIBITS.
Item Description
---- -----------
1 Form of Underwriting Agreement. (Incorporated by
reference to Exhibit 1 filed with the Registrants'
Registration Statement on Form S-3 (Commission File No.
333-43267)).
4.1 Form of Senior Indenture by and between the Operating
Partnership and the First National Bank of Chicago.
(Incorporated by reference to Exhibit 4.1 filed with the
Registrants' Quarterly Report on Form 10-Q for the
fiscal quarter ended June 30, 1997).
4.2 Form of Subordinated Indenture by and between the
Operating Partnership and the First National Bank of
Chicago. (Incorporated by reference to Exhibit 10.6
filed with the Registrants' Quarterly Report on Form
10-Q for the fiscal quarter ended September 30, 1997.
4.3 Form of Supplemental Indenture. (Incorporated by
reference to Exhibit 4.3 filed with the Registrants'
Registration Statement on Form S-3 (Commission File No.
333-43267)).
4.4 Rights Agreement, dated as of December 17, 1997, by and
between the Trust and the Rights Agent (including as
Exhibit A thereto the Form of Articles Supplementary
Relating to Designation, Preferences, and Rights of
Series A Junior Participating Preferred Shares of
Liberty Property Trust, as Exhibit B thereto the Form of
Rights Certificate and as Exhibit C thereto the Summary
of Rights to Purchase Series A Junior Participating
Preferred Shares). (Incorporated by reference to Exhibit
1 filed with the Trust's Registration Statement on Form
8-A filed with Commission on December 23, 1997).
5.1 Opinion and Consent of Wolf, Block, Schorr and Solis-
Cohen LLP.
5.2 Opinion and Consent of Saul, Ewing, Remick & Saul, LLP.
12.1 Statements regarding computation of certain ratios.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Wolf, Block, Schorr and Solis-Cohen LLP
(included in Exhibit 5.1).
23.3 Consent of Saul, Ewing, Remick & Saul, LLP (included in
Exhibit 5.2).
24.1 Powers of Attorney (included on signature pages included
in this Registration Statement).
Additional exhibits to the Registration Statement will be filed
with or incorporated by reference in the Registration Statement in
connection with the future amendments or supplements to the prospectus
forming a part of the Registration Statement.
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrants hereby undertake:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration
Statement:
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act;
(ii) To reflect in the Prospectus any facts or events arising
after the effective date of the Registration Statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the Registration
Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form
of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price
represent no more than a 20 percent change in the maximum
aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective Registration
Statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
Registration Statement or any material change to such
information in the Registration Statement;
provided, however, that paragraphs (i) and (ii) of this paragraph
do not apply if the information required to be included in a post-
effective amendment by those paragraphs is contained in periodic
reports filed with or furnished to the Commission by the
Registrants pursuant to Section 13 or Section 15(d) of the
Exchange Act that are incorporated by reference in the
Registration Statement.
(2) That, for the purpose of determining any liability under
the Securities Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(b) The undersigned Registrants hereby undertake that, for
purposes of determining any liability under the Securities Act, each
filing of the Registrants' annual report pursuant to Section 13(a) or
Section 15(d) of the Exchange Act that is incorporated by reference in
the Registration Statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering
of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to trustees, officers or controlling
persons of the Registrants pursuant to the foregoing provisions, or
otherwise, the Registrants have been advised that in the opinion of the
Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than
the payment by the Registrants of expenses incurred or paid by a
trustee, officer or controlling person of either Registrant in the
successful defense of any action, suit or proceeding) is asserted by
such trustee, officer or controlling person in connection with the
securities being registered, the Registrants will, unless in the
opinion of their counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by either of them is against public policy
as expressed in the Act and will be governed by the final adjudication
of such issue.
(d) The undersigned Registrants hereby undertake that:
(1) For purposes of determining any liability under the
Securities Act, the information omitted from the form of
prospectus filed as part of this Registration Statement in
reliance upon Rule 430A under the Securities Act and contained in
a form of prospectus filed by the Registrants pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be
deemed to be part of this Registration Statement as of the time it
was declared effective.
(2) For the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(e) The undersigned Registrants hereby undertake to file an
application for the purpose of determining the eligibility of the
trustee to act under subsection (a) of Section 310 of the Trust
Indenture Act of 1939 as amended (the "TIA") in accordance with the
rules and regulations prescribed by the Commission under Section
305(b)(2) of the TIA.
SIGNATURES AND POWERS OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, as
amended, the undersigned Registrant certifies that it has reasonable
grounds to believe that it meets all of the requirements for filing on
Form S-3 and has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the
City of Malvern, Commonwealth of Pennsylvania, on the 14th day of
June, 2000.
LIBERTY PROPERTY TRUST
By: /s/ Willard G. Rouse III
-------------------------------------
Willard G. Rouse III
President and Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints Willard G. Rouse III and
George J. Alburger, Jr., his or her true and lawful attorneys-in-fact
and agents, with full power of substitution and resubstitution, for him
or her and in his or her name, place and stead, in any and all
capacities, to sign any and all amendments to this Registration
Statement, and any additional related registration statement filed
pursuant to Rule 462(b) under the Securities Act of 1933, as amended
(including post-effective amendments to the Registration Statement and
any such related registration statements), and to file the same, with
all exhibits thereto, and any other documents in connection therewith,
granting unto said attorneys-in-fact and agents full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents
and purposes as he or she might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents, or their
substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed below by the
following persons in the capacities with the above Registrant and on
the dates indicated.
Chairman of the Board
of Trustees and Chief
Executive Officer
(Principal Executive
/s/ Willard G. Rouse III Officer) June 14, 2000
---------------------------
Willard G. Rouse III
Chief Financial Officer
and Treasurer (Principal
Financial and Accounting
/s/ George J. Alburger, Jr. Officer) June 14, 2000
---------------------------
George J. Alburger, Jr.
/s/ Joseph P. Denny Trustee June 14, 2000
---------------------------
Joseph P. Denny
/s/ M. Leanne Lachman Trustee June 14, 2000
---------------------------
M. Leanne Lachman
/s/ Frederick F. Buchholz Trustee June 14, 2000
---------------------------
Frederick F. Buchholz
/s/ J. Anthony Hayden Trustee June 14, 2000
---------------------------
J. Anthony Hayden
/s/ David L. Lingerfelt Trustee June 14, 2000
---------------------------
David L. Lingerfelt
/s/ John A. Miller Trustee June 14, 2000
---------------------------
John A. Miller, CLU
/s/ Stephen B. Siegel Trustee June 14, 2000
---------------------------
Stephen B. Siegel
/s/ Thomas C. DeLoach, Jr. Trustee June 14, 2000
---------------------------
Thomas C. DeLoach, Jr.
SIGNATURES AND POWERS OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, as amended,
the undersigned Registrant certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form S-3
and has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Malvern, Commonwealth of Pennsylvania, on the 14th day of June, 2000.
LIBERTY PROPERTY LIMITED PARTNERSHIP
By: Liberty Property Trust,
as its sole general partner
By:/s/ Willard G. Rouse III
--------------------------------------
Willard G. Rouse III
President and Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints Willard G. Rouse III and
George J. Alburger, Jr., his or her true and lawful attorneys-in-fact
and agents, with full power of substitution and resubstitution, for him
or her and in his or her name, place and stead, in any and all
capacities, to sign any and all amendments to this Registration
Statement, and any additional related registration statement filed
pursuant to Rule 462(b) under the Securities Act of 1933, as amended
(including post-effective amendments to the Registration Statement and
any such related registration statements), and to file the same, with
all exhibits thereto, and any other documents in connection therewith,
granting unto said attorneys-in-fact and agents full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents
and purposes as he or she might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents, or their
substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following
persons in the capacities indicated with the sole general partner of
the above Registrant and on the dates indicated.
Chairman of the Board
of Trustees and Chief
Executive Officer
(Principal Executive
/s/ Willard G. Rouse III Officer) June 14, 2000
---------------------------
Willard G. Rouse III
Chief Financial Officer
and Treasurer (Principal
Financial and Accounting
/s/ George J. Alburger, Jr. Officer) June 14, 2000
---------------------------
George J. Alburger, Jr.
Trustee of the
/s/ Joseph P. Denny General Partner June 14, 2000
---------------------------
Joseph P. Denny
Trustee of the
/s/ M. Leanne Lachman General Partner June 14, 2000
---------------------------
M. Leanne Lachman
Trustee of the
/s/ Frederick F. Buchholz General Partner June 14, 2000
---------------------------
Frederick F. Buchholz
Trustee of the
/s/ J. Anthony Hayden General Partner June 14, 2000
---------------------------
J. Anthony Hayden
Trustee of the
/s/ David L. Lingerfelt General Partner June 14, 2000
---------------------------
David L. Lingerfelt
Trustee of the
/s/ John A. Miller General Partner June 14, 2000
---------------------------
John A. Miller, CLU
Trustee of the
/s/ Stephen B. Siegel General Partner June 14, 2000
---------------------------
Stephen B. Siegel
Trustee of the
/s/ Thomas C. DeLoach, Jr. General Partner June 14, 2000
---------------------------
Thomas C. DeLoach, Jr.
