AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 13, 1998
REGISTRATION NO. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
HOME PROPERTIES OF NEW YORK, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
MARYLAND 16-1455126
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
850 CLINTON SQUARE
ROCHESTER, NEW YORK 14604
(716) 546-4900
(ADDRESS, INCLUDING ZIP CODE, AND
TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
ANN M. MCCORMICK, ESQ.
VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL
HOME PROPERTIES OF NEW YORK, INC.
850 CLINTON SQUARE
ROCHESTER, NEW YORK 14604
(716) 246-4105
FACSIMILE: (716) 546-5433
(NAME, ADDRESS, INCLUDING ZIP CODE,
AND TELEPHONE NUMBER, INCLUDING AREA
CODE, OF AGENT FOR SERVICE)
COPIES TO:
Deborah McLean Quinn, Esq.
Nixon, Hargrave, Devans & Doyle LLP
900 Clinton Square
Rochester, New York 14604
(716) 263-1307
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If 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
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 registration statement for the same
offering. [ ] _______________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
Title of Amount to be Proposed Maximum Proposed Maximum Amount of
Each Class Registered Offering Price Aggregate Registration
of Securities Per Unit (2) Offering Fee (5)
to be Registered Price (3)
- ---------------- ------------ ---------------- ---------------- ------------
<S> <C> <C> <C> <C>
Common Stock,
par value $.01 (1)(4) (6) (6)
Preferred Stock,
par value $.01 (1)(7) (6) (6)
Common Stock Rights
or Warrants (1)(8) (6) (6)
Debt Securities (1)(10) (6) (6)
Total $400,000,000 $400,000,000 $118,000.00
- --------------------------------------------------------------------------------
</TABLE>
(1) The Common Stock, the Preferred Stock, Common Stock Rights or Warrants, and
Debt Securities (collectively the "Offered Securities") registered hereunder may
be sold separately, together or as units with other Offered Securities
registered hereunder.
(2) The proposed maximum offering price per unit will be determined from time to
time by Registrant in connection with the issuance of such securities.
(3) The proposed maximum aggregate offering price has been estimated solely for
purposes of calculating the registration fee as provided in General Instruction
II.D to Form S-3.
(4) Subject to the limitations set forth in Note 10, an indeterminate amount of
Common Stock is registered to be sold from time to time by Registrant. In
addition, an intermediate number of shares of Common Stock as may be issuable
upon the exercise of any rights to purchase Common Stock or on the conversion of
any Preferred Stock registered hereunder.
(5) The prospectus forming part of this Registration Statement, as such
prospectus may be amended and supplemented from time to time (the "Prospectus"),
shall be deemed to relate to the $400,000,000 of Offered Securities being
offered pursuant to this registration statement and, pursuant to Rule 429 under
the Securities Act, to $13,650,000 of Common Stock, the Preferred Stock,
Common Stock Rights or Warrants, and Debt Securities registered and issuable by
the Company pursuant to the Registration Statement on Form S-3, Registration No.
333-02674 (the "Prior Shelf Registration Statement"). The amount of filing fees
associated with such securities registered pursuant to the Prior Shelf
Registration Statement (calculated at the fee in effect at the time of filing
of the Prior Shelf Registration Statement is approximately $47,069.
(6) Omitted pursuant to General Instruction II.D. of Form S-3.
(7) Subject to the limitations set forth in Note 10, an indeterminate number of
shares of Preferred Stock is registered to be sold by the registrant
(8) Subject to the limitations set forth in Note 10, an indeterminate number of
shares of Common Stock Purchase Rights or Warrants is registered to be sold by
the registrant.
(9) Subject to the limitations set forth in Note 10, an indeterminate principal
amount of Debt Securities is registered to be sold by the registrant.
(10) The aggregate initial offering price of all securities issued from time to
time pursuant to this registration statement, calculated in accordance with Rule
457, will not exceed $400,000,000.00. The securities registered hereunder may be
sold separately or in units with other securities registered hereunder.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT 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 COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED MAY 13, 1998
PROSPECTUS
$400,000,000
HOME PROPERTIES OF NEW YORK, INC.
COMMON STOCK
PREFERRED STOCK
COMMON STOCK PURCHASE
RIGHTS OR WARRANTS AND
DEBT SECURITIES
Home Properties of New York, Inc., a Maryland corporation (the "Company"),
may from time to time offer in one or more series (i) shares of its common
stock, par value $.01 per share (the "Common Stock"); (ii) shares of its
preferred stock, par value $.01 per share (the "Preferred Stock); (iii) rights
or warrants to purchase shares of its Common Stock (the "Common Stock Purchase
Rights") and (iv) one or more series of debt securities ("Debt Securities"),
which may be either senior debt securities or subordinated debt securities, with
an aggregate public offering price of up to $400,000,000. The Common Stock,
Preferred Stock, Common Stock Purchase Rights or Warrants and Debt Securities
(collectively, the "Offered Securities") may be offered, separately or together,
in separate classes or series, in amounts, at prices and on terms to be
determined at the time of offering and set forth in a supplement to this
Prospectus (each, a "Prospectus Supplement").
The specific terms of the Offered Securities in respect of which this
Prospectus is being delivered will be set forth in the applicable Prospectus
Supplement and will include, where applicable, (i) in the case of Common Stock,
any public offering price; (ii) in the case of Preferred Stock, the specific
title and stated value, any distribution, any return of capital, liquidation,
redemption, conversion, voting and other rights, and any initial public offering
price; (iii) in the case of Common Stock Purchase Rights, the duration, offering
price, exercise price and any reallocation of Purchase Rights not initially
subscribed, and (iv) in the case of Debt Securities, the title, aggregate
principal amount, denominations, maturity, rate (which may be fixed or variable)
or method of calculation thereof, time of payment of any interest, any terms for
redemption at the option of the holder or the Company, any terms for sinking
fund payments, rank, any conversion or exchange rights, any listing on a
securities exchange, and the initial public offering price and any other terms
in connection with the offering and sale of any Debt Securities. In addition,
such specific terms may include limitations on direct or beneficial ownership
and restrictions on transfer of the Offered Securities, in each case as may be
appropriate to preserve the status of the Company as a real estate investment
trust ("REIT") for federal income tax purposes.
The applicable Prospectus Supplement will also contain information, where
applicable, about all material United States federal income tax considerations
relating to, and any listing on a securities exchange of, the Offered Securities
covered by such Prospectus Supplement. The Common Stock is listed on the New
York Stock Exchange under the symbol "HME." Any Common Stock offered pursuant to
a Prospectus Supplement will be listed on such exchange, subject to official
notice of issuance.
The Offered Securities may be offered directly, through agents designated
from time to time by the Company, or to or through underwriters or dealers. If
any agents or underwriters are involved in the sale of any of the Offered
Securities, their names, and any applicable purchase price, fee, commission or
discount arrangement between or among them will be set forth, or will be
calculable from the information set forth, in the applicable Prospectus
Supplement. See "Plan of Distribution." No Offered Securities may be sold
without delivery of the applicable Prospectus Supplement describing the method
and terms of the offering of such class or series of the Offered Securities.
SEE "RISK FACTORS" (beginning on page 4) FOR INFORMATION THAT SHOULD BE
CONSIDERED BY PROSPECTIVE INVESTORS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED
ON OR ENDORSED THE MERITS OF THIS OFFERING. ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
The date of this Prospectus is May , 1998
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED OR INCORPORATED
BY REFERENCE IN THIS PROSPECTUS, AND ANY INFORMATION OR REPRESENTATION NOT
CONTAINED OR INCORPORATED HEREIN MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, BY ANY PERSON
IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR SUCH PERSON TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS AT ANY TIME NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, IMPLY THAT THE INFORMATION
HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
--------------------------
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These Securities may not be sold nor may
offers to by be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy not shall there by any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission"), a Registration Statement on Form S-3 under the Securities Act of
1933, as amended (the "Securities Act"), and the rules and regulations
promulgated thereunder, with respect to the Offered Securities. This Prospectus,
which is part of such Registration Statement, does not contain all of the
information set forth in the Registration Statement and the exhibits thereto.
For further information with respect to the Company and the Offered Securities,
reference is hereby made to the Registration Statement and such exhibits, copies
of which may be examined without charge at, or obtained upon payment of
prescribed fees from, the Public Reference Section of the Commission at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and will
also be available for inspection and copying at the regional offices of the
Commission located at Seven World Trade Center, 13th Floor, New York, New York
10048 and at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Commission. Such reports, proxy statements and other information can be
inspected and copied at the locations described above. Copies of such materials
can be obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. The Commission
maintains a Web site that contains reports, proxy and information statements and
other information regarding Company at http://www.sec.gov. In addition, the
Common Stock is listed on the New York Stock Exchange and similar information
concerning the Company can be inspected at the New York Stock Exchange, 20 Broad
Street, New York, New York 10005.
The Company furnishes its stockholders with annual reports containing
audited financial statements with a report thereon by its independent public
accountants.
FORWARD LOOKING STATEMENTS
Certain information contained herein or incorporated by reference may
contain forward-looking statements. Although the Company believes
expectations reflected in such forward-looking statements are based on
reasonable assumptions, it can give no assurance that its expectations will be
achieved. Factors that may cause actual results to differ include the
general economic and local real estate conditions, the weather and other
conditions that might affect operating expenses, the timely completion
of repositioning activities, the actual pace of acquisitions, and the
continued access to capital to fund growth.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents, which have been filed by the Company (Commission
File No. 1-13136) under the Exchange Act are incorporated into this Prospectus
by reference: the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997, filed on March 24, 1998; the Company's Current
Reports on Form 8-K filed on February 20, 1998, as amended by Form 8-K/A filed
on March 24, 1998, on March 24, 1998, on March 26, 1998 and on April 15, 1998,
the Company's Current Report on Form 8-K/A filed January 12, 1998 amending its
Current Report on Form 8-K filed on October 7, 1997 and the Company's
registration statement with respect to its Common Stock on Form 8-A
effective July 27, 1994.
Documents incorporated herein by reference are available to any
stockholder of the Company, on written or oral request, without charge, from
the Company. Requests should be directed to David P. Gardner, Chief Financial
Officer, Home Properties of New York, Inc., 850 Clinton Square, Rochester, New
York 14604, telephone (716) 546-4900. Copies of documents so requested will be
sent by first class mail, postage paid.
All reports and other documents subsequently filed by the Company pursuant
to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to the filing
of a post-effective amendment which indicates that all securities offered hereby
have been sold or which deregisters all securities then remaining unsold, shall
be deemed to be incorporated by reference in, and to be a part of, this
Prospectus from the date of filing of such reports and documents (provided,
however, that the information referred to in Instruction 8 to Item 402(a)(3) of
Regulation S-K promulgated by the Securities and Exchange Commission is not
incorporated herein by reference).
Any statement or information contained in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein, in the Registration Statement containing this Prospectus or in
any subsequently filed documents which also is or is deemed to be incorporated
by reference herein, modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
THE COMPANY
AS USED IN THIS SECTION, THE TERMS "HOME PROPERTIES" AND "COMPANY",
INCLUDE HOME PROPERTIES OF NEW YORK, INC., A MARYLAND CORPORATION, HOME
PROPERTIES OF NEW YORK, L.P. (THE "OPERATING PARTNERSHIP") A NEW YORK LIMITED
PARTNERSHIP, HOME PROPERTIES TRUST (THE "TRUST"), A MARYLAND REAL ESTATE
INVESTMENT TRUST, AND THE TWO MANAGEMENT COMPANIES (THE "MANAGEMENT COMPANIES")
- - HOME PROPERTIES MANAGEMENT, INC. ("HP MANAGEMENT") AND CONIFER REALTY
CORPORATION ("CONIFER REALTY"), BOTH OF WHICH ARE MARYLAND CORPORATIONS.
The Company is a self-administered, self-managed and fully integrated real
estate investment trust ("REIT")formed in November, 1993 to continue and expand
the multifamily residential real estate business of Home Leasing Corporation,
which was organized in 1967. The Company is one of the largest owners and
operators of multifamily residential properties in upstate New York (based on
the number of apartment units owned and managed).
The Company, as of May 11, 1998, operates 231 communities (the
"Properties") containing 26,090 apartment units. Of these, 17,103 units in 71
communities are owned outright by the Company, 6,139 units are managed by the
Company as general partner of a limited partnership, and 2,848 units are managed
for third-party owners. The Properties are located throughout the Northeast,
Mid-Atlantic and Midwest. In addition, the Company manages 1.7 million square
feet of commercial space.
The Company conducts substantially all of its business and owns all of its
properties through the Operating Partnership and the Management Companies. To
comply with certain technical requirements of the Internal Revenue Code of 1986,
as amended (the "Code"), applicable to REITs, the Operating Partnership carries
out portions of its property management and development activities through the
Management Companies, which are beneficially owned by the Operating Partnership
but controlled by one or more officers of the Company. The Company owns a 1%
general partnership interest in the Operating Partnership and, through its
wholly owned subsidiary the Trust, a 55.9% limited partnership interest in the
Operating Partnership as of March 31, 1998.
The Company's executive offices are located at 850 Clinton Square,
Rochester, New York 14604. Its telephone number is (716) 546-4900.
RISK FACTORS
An investment in the Offered Securities involves various risks. In
addition to general investment risks and those factors set forth elsewhere in
this Prospectus, prospective investors should consider, among other things, the
following factors:
ASSIMILATION OF A SUBSTANTIAL NUMBER OF NEW ACQUISITIONS.
The Company has undertaken a strategy of aggressive growth through
acquisitions. From January 1, 1997 through April 30, 1998, the Company has
acquired 44 new communities with 10,551 apartment units, more than doubling
the number of its owned multifamily units. The Company's ability to manage
its growth effectively will require the Company, among other things, to
successfully apply its experience in managing its existing portfolio to an
increased number of properties. In addition, the Company will be required to
successfully manage the integration of a substantial number of new
personnel. There can be no assurances that the Company will
be able to integrate and manage these operations effectively or maintain or
improve on their historical financial performance.
REAL ESTATE FINANCING RISKS
GENERAL. The Company is subject to the customary risks associated
with debt financing including the potential inability to refinance existing
mortgage indebtedness upon maturity on favorable terms. If a property is
mortgaged to secure payment of indebtedness and the Company is unable to
meet its debt service obligations, the property could be foreclosed upon.
This could adversely affect the Company's cash flow and, consequently, the
amount available for distributions to stockholders.
NO LIMITATION ON DEBT. The Board of Directors has adopted a policy
of limiting the Company's indebtedness to approximately 50% of its total
market capitalization (i.e., the market value of issued and outstanding
shares of Common Stock and limited partnership interest in the Operating
Partnership ("Units") plus total debt), but the organizational documents
of the Company do not contain any limitation on the amount or percentage of
indebtedness, funded or otherwise, the Company may incur. Accordingly,
the Board of Directors could alter or eliminate its current policy on
borrowing. If this policy were changed, the Company could become more
highly leveraged, resulting in an increase in debt service that could
adversely affect the Company's ability to make expected distributions
to its stockholders and an increased risk of default on the
Company's indebtedness.
The Company's debt to total market capitalization ratio fluctuates based
on the timing of acquisitions and financings. At December 31, 1997, the
ratio of the Company's indebtedness to its total capitalization ws 33%, based
on a year-end closing price of the Company's Stock of $27.1875, and at
March 31, 1998 was 32%, based on the closing price of the Company's Common
Stock on that date of $27.75.
EXISTING DEBT MATURITIES. The Company is subject to the risks
normally associated with debt financing, including the risk that the Company's
cash flow will be insufficient to meet the required payments of principal
and interest. Because much of the financing is not fully self-amortizing,
the Company anticipates that only a portion of the principal of the
Company's indebtedness will be repaid prior to maturity. So, it will be
necessary for the Company to refinance debt. Accordingly, there is a risk
that existing indebtedness will not be able to be refinanced or that the
terms of such refinancing will not be as favorable as the terms of the
existing indebtedness. The Company aims to stagger its debt maturities
with the goal of minimizing the amount of debt which must be refinanced
in any year.
ADVERSE CONSEQUENCES OF FAILURE TO QUALIFY AS A REIT
Although the Company believes that it was organized and has operated to
qualify as a REIT under the Code, no assurance can be given that the Company
will remain so qualified. Qualification as a REIT involves the application of
highly technical and complex Code provisions and REIT qualification rules,
which include (i) maintaining ownership of specified minimum levels of real
estate related assets; (ii) generating specified minimum levels of real estate
related income; (iii) maintaining diversity of ownership of Common Stock; and
(iv) distributing at least 95% of all real estate investment taxable income on
an annual basis.
If in any taxable year the Company fails to qualify as a REIT, the Company
would not be allowed a deduction in computing its taxable income for
distributions to stockholders and would be subject to federal income tax
(including any applicable alternative minimum tax) on its taxable income at
regular corporate rates. As a result, the amount available for distribution
to the Company's stockholders would be reduced for the year or years involved.
In addition, unless entitled to relief under certain statutory provisions,
the Company would also be disqualified from treatment as a REIT for the
four taxable years following the year during which qualification was lost.
REAL ESTATE INVESTMENT RISKS
GENERAL RISKS. Real property investments are subject to varying degrees
of risk. If the Company's communities do not generate revenues sufficient to
meet operating expenses, including debt service and capital expenditures, the
Company's cash flow and ability to make distributions to its stockholders will
be adversely affected. A multifamily apartment community's revenues and value
may be adversely affected by the general economic climates; the local economic
climate; local real estate considerations (such as over supply of or reduced
demand for apartments); the perception by prospective residents of the safety,
convenience and attractiveness of the communities or neighborhoods in which
they are located and the quality of local schools and other amenities; and
increased operating costs (including real estate taxes and utilities).
Certain significant fixed expenses are generally not reduced when
circumstances cause a reduction in income from the investment.
OPERATING RISKS. The Company is dependent
on rental income to pay operating expenses and to generate cash to enable the
Company to make distributions to its stockholders. If the Company is unable to
attract and retain residents or if its residents are unable, due to an adverse
change in the economic condition of the region or otherwise, to pay their rental
obligations, the Company's ability to make expected distributions will be
adversely affected.
DEPENDENCE ON PRIMARY MARKETS. The Properties are located in the
Northeast, Midwest and Mid-Atlantic regions of the United States. At
April 30, 1998, 6,550 of the Company's owned multifamily units were located
in the upstate New York region and 3,482 units were located in markets
surrounding Detroit, Michigan (representing approximately 38.3% and
approximately 20.4% of the units respectively of the Company's portfolio).
Accordingly, the Company's performance is partially linked to economic
conditions and the demand for apartments in upstate New York and the
Detroit, Michigan area. A decline in the economy in these regions
particularly, or in any other areas where the Company has a concentration
of apartment units, may result in a decline in the demand for apartments
which may adversely affect the ability of the Company to make distributions
to stockholders.
ILLIQUIDITY OF REAL ESTATE. Real estate investments are relatively
illiquid and, therefore, the Company has limited ability to vary its portfolio
quickly in response to changes in economic or other conditions. In addition, the
prohibition in the Code on REITs holding property for sale and related
regulations may affect the Company's ability to sell properties without
adversely affecting distributions to stockholders. A significant number of the
Company's properties acquired using Units restrict the Company's ability to sell
such properties in transactions which would create currrent taxable income to
the former owners.
COMPLIANCE WITH LAWS AND REGULATIONS. Many laws and governmental
regulations are applicable to the Properties and changes in these laws and
regulations, or their interpretation by agencies and the courts, occur
frequently. Under the Americans with Disabilities Act of 1990 (the "ADA"), all
places of public accommodation are required to meet certain federal requirements
related to access and use by disabled persons. These requirements became
effective in 1992. Compliance with the ADA requires removal of structural
barriers to handicapped access in certain public areas of the Properties, where
such removal is "readily achievable." The ADA does not, however, consider
residential properties, such as apartment communities, to be public
accommodations or commercial facilities, except to the extent portions of such
facilities, such as a leasing office, are open to the public. A number of
additional federal, state and local laws exist which also may require
modifications to the Properties, or restrict certain further renovations
thereof, with respect to access thereto by disabled persons. For example, the
Fair Housing Amendments Act of 1988 (the "FHAA") requires apartment communities
first occupied after March 13, 1990 to be accessible to the handicapped.
Noncompliance with the ADA or the FHAA could result in the imposition of fines
or an award of damages to private litigants. Although management believes that
the Properties are substantially in compliance with present requirements, the
Company may incur additional costs in complying with the ADA for both existing
properties and properties acquired in the future. The Company believes that the
Properties that are subject to the FHAA are in compliance with such laws.
Under the federal Fair Housing Act and state fair housing laws,
discrimination on the basis of certain protected classes is prohibited. The
Company has a policy against any kind of discriminatory behavior and trains its
employees to avoid discrimination or the appearance of discrimination. There is
no assurance, however, that an employee will not violate the Company's policy
against discrimination and violate the fair housing laws. Such a violation could
subject the Company to legal action and the possible awards of damages.
Under various laws, ordinances and regulations relating to the protection
of the environment, a current or previous owner or operator of real estate may
be held liable for the costs of removal or remediation of certain hazardous or
toxic substances located on, under or in the property. These laws often impose
liability without regard to whether the owner or operator was responsible for,
or even knew of, the presence of such substances. The presence of contamination
from hazardous or toxic substances, or the failure to remediate such
contaminated property properly, may adversely affect the owner's ability to rent
or sell the property or use the property as collateral. Independent
environmental consultants conducted "Phase I" environmental audits (which
involve visual inspection but not soil or groundwater analysis) of substantially
all of the Properties owned by the Company prior to their acquisition by the
Company. The Phase I audit reports did not reveal any significant issues of
environmental concern, nor is the Company aware of any environmental liability
that management believes would have a material adverse effect on the Company.
There is no assurance that Phase I reports would reveal all
environmental liabilities or that environmental conditions not known to the
Company may exist now or in the future on existing properties or those
subsequently acquired which would result in liability to the Company for
remediation or fines, either under existing laws and regulations or future
changes to such requirements.
If compliance with the various laws and regulations, now existing or
hereafter adopted, exceeds the Company's budgets for such items, the Company's
ability to make expected distributions could be adversely affected.
COMPETITION. The Company plans to continue to
acquire additional multifamily residential properties in the Northeast,
Mid-Atlantic and Midwest regions of the United States. There are a number of
multifamily developers and other real estate companies that compete with the
Company in seeking properties for acquisition, prospective residents and land
for development. Most of the Company's Properties are in developed areas where
there are other properties of the same type. Competition from other properties
may affect the Company's ability to attract and retain residents, to increase
rental rates and to minimize expenses of operation. Virtually all of the leases
for the Properties are short-term leases (i.e., one year or less).
UNINSURED LOSSES. Certain extraordinary losses may not be covered by the
Company's comprehensive liability, fire, extended and rental loss insurance. If
an uninsured loss occurred, the Company could lose its investment in and cash
flow from the affected Property (but would be required to repay any indebtedness
secured by that Property and related taxes and other charges).
LIMITS ON OWNERSHIP
OWNERSHIP LIMIT. In order for the Company to maintain its qualification
as a REIT, not more than 50% in value of the outstanding stock of the
Company may be owned, directly or indirectly, by five or fewer individuals
(as defined in the Code to include certain entities) at any time during the
last half of its taxable year. The Company has limited ownership of the
issued and outstanding shares of Common
Stock by any single stockholder to 8.0% of the outstanding shares. Shares of
Common Stock held by certain entities, such as qualified pension plans, are
treated as if the beneficial owners of such entities were the holders of the
Common Stock. Norman and Nelson Leenhouts will be permitted to acquire
additional shares, except to the extent that such acquisition results in 50%
or more in value of the outstanding Common Stock of the Company being owned,
directly or indirectly, by five or fewer individuals. These restrictions can
be waived by the Board of Directors if it were satisfied, based upon the
advice of tax counsel or otherwise, that such action would be in the best
interests of the
Company. Shares acquired or transferred in breach of the limitation may be
redeemed by the Company for the lesser of the price paid or the average closing
price for the ten trading days immediately preceding redemption or may be sold
at the direction of the Company. A transfer of Shares to a person who, as a
result of the transfer, violates the ownership limit will be void and the
Shares will automatically be converted into shares of "Excess Stock", which
is subject to a number of limitations. See "Description of Capital Stock --
Restrictions on Transfer" for additional information regarding the ownership
limits.
CHANGE OF CONTROL
The Articles of Amendment and Restatement of the Articles of
Incorporation, as amended, (the "Articles of Incorporation") authorize the Board
of Directors to issue up to a total of fifty million shares of Common Stock and
ten million shares of preferred stock and to establish the rights and
preferences of any shares issued. No shares of preferred stock are currently
issued or outstanding. Further, under the Articles of Incorporation, the
stockholders do not have cumulative voting rights.
The percentage ownership limit, the issuance of preferred stock in the
future and the absence of cumulative voting rights could have the effect of (i)
delaying or preventing a change of control of the Company even if a change in
control were in stockholders' interest; (ii) deterring tender offers for the
Common Stock that may be beneficial to the stockholders; or (iii) limiting the
opportunity for stockholders to receive a premium for their Common Stock that
might otherwise exist if an investor attempted to assemble a block of Shares in
excess of the percentage ownership limit or otherwise to effect a change of
control of the Company.
POTENTIAL CONFLICTS OF INTEREST
Unlike persons acquiring Common Stock, the Company's executive officers
own most of their interest in the Company through Units. As a result of their
status as holders of Units, the executive officers and other limited partners
may have
interests that conflict with stockholders with respect to business decisions
affecting the Company and the Operating Partnership. In particular, certain
executive officers may suffer different or more adverse tax consequence than the
Company upon the sale or refinancing of some of the Properties as a result of
unrealized gain attributable to certain Properties. Thus, executive officers and
the stockholders may have different objectives regarding the appropriate pricing
and timing of any sale or refinancing of Properties. In addition, executive
officers of the Company, as limited partners of the Operating Partnership, have
the right to approve certain fundamental transactions such as the sale of all or
substantially all of the assets of the Operating Partnership, merger or
consolidation or dissolution of the Operating Partnership and certain amendments
to the Operating Partnership Agreement.
The Company manages multifamily residential properties through the
Operating Partnership and commercial and development properties and certain
multifamily residential properties not owned by the Company through the
Management Companies. As a result, officers of the Company will devote a
significant portion of their business time and efforts to the management of
properties not owned by the Company.
Some officers of the Company have a significant interest in certain of the
managed properties as the only stockholders of the general partners of the
partnerships that own such managed properties and as holders of other ownership
interests. Accordingly, such officers will have conflicts of interest between
their fiduciary obligations to the partnerships that own such managed properties
and their fiduciary obligations as officers and directors of the Company,
particularly with respect to the enforcement of the management contracts and
timing of the sale of the managed properties.
In order to comply with technical requirements of the Code pertaining
to the qualification of REITs, the Operating Partnership owns
all of the outstanding non-voting common stock (990 shares) of one of the
Management Companies, Home Properties Management, Inc., and Norman and Nelson
Leenhouts own all of the outstanding voting common stock (10 shares). The
Operating Partnership also owns all of the outstanding non-voting common stock
(891 shares) of the other Management Company, Conifer Realty Corporation,
and Norman and Nelson Leenhouts and Richard Crossed own all of the outstanding
voting common stock (9 shares). As a result, although the Company will receive
substantially all of the economic benefits of the business carried on by the
Management Companies through the Company's right to receive dividends, the
Company will not be able to elect directors and officers of the Management
Companies and, therefore, the Company's ability to cause dividends to be
declared or paid or influence the day-to-day operations of the Management
Companies will be limited. Furthermore, although the Company will receive a
management fee for managing the managed properties, this fee has not been
negotiated at arm's length and may not represent a fair price for the services
rendered.
SHARES AVAILABLE FOR FUTURE SALE
Sales of substantial amounts of shares of Common Stock in the public
market or the perception that such sales might occur could adversely affect the
market price of the Common Stock. The Operating Partnership has issued an
aggregate of 8,989,512 Units through April 30, 1998 to persons other than the
Company which may be exchanged on a one-for-one basis for shares of Common Stock
under certain circumstances. The Operating Partnership has also issued a Class A
Interest which is presently convertible into 1,666,667 shares of Common Stock
(which number will be adjusted under certain circumstances to prevent such
interest from being diluted). In addition, as of April 30, 1998, the Company has
granted options to purchase an aggregate of 836,102 shares of Common Stock to
certain directors, officers and employees of the Company.
All of the shares of Common Stock issuable upon the exchange of Units or
the exercise of options will be "restricted securities" within the meaning of
Rule 144 under the Securities Act and may not be transferred unless they are
registered under the Securities Act or are otherwise transferrable under Rule
144. The Company has filed or expects to file registration statements with
respect to such shares of Common Stock, thereby allowing shares issuable under
the Company's stock benefit plans and in exchange for Units to be transferred or
resold without restriction under the Securities Act, unless held by directors,
executive officers or other affiliates of the Company.
<TABLE>
<CAPTION>
RATIO OF EARNINGS TO FIXED CHARGES
Original Properties*
-----------------------
Year Ended Year Ended Year Ended August 4- January 1- Year Ended
December 31, December 31, December 31, December 31, August 3 December 31,
------------- ------------- ------------- ------------ ------------ ------------
<C> <C> <C> <C> <C> <C>
1997 1996 1995 1994 1994 1993
2.06 1.52 1.68 2.77 1.23 1.33
</TABLE>
- ------
*Original Properties is not a legal entity but rather a combination of twelve
entities which were owned by the predecessor corporation and its affiliates
prior the Company's initial public offering.
For purposes of computing the ratio of earnings to combined fixed charges,
"earnings" consists of income from operations before Federal income taxes and
fixed charges. "Fixed charges" consists of interest expense, capitalized
interest, amortization of debt expense, such portion of rental expense as can be
demonstrated to be representative of the interest factor in the particular case
and preferred stock dividend requirements.
USE OF PROCEEDS
Unless otherwise described in the applicable Prospectus Supplement, the
Company intends to use the net proceeds from the sale of the Offered Securities
for the acquisition of multifamily residential properties as suitable
opportunities arise, the expansion and improvement of certain properties in the
Company's portfolio, payment of development costs for new multifamily
residential properties, the repayment of certain indebtedness outstanding at
such time and general corporate purposes.
DESCRIPTION OF CAPITAL STOCK
GENERAL
The authorized capital stock of the Company consists of 50 million shares
of Common Stock, par value $.01 per share ("Common Stock"), 10 million shares of
excess stock ("Excess Stock"), par value $.01 per share, and 10 million shares
of preferred stock ("Preferred Stock"), par value $.01 per share. The following
summary description of the Common Stock, the Preferred Stock and the Common
Stock Purchase Rights or Warrants and Debt Securities sets forth certain general
terms and conditions of the capital stock of the Company to which any Prospectus
Supplement may relate. The descriptions below do not purport to be complete and
are qualified entirely by reference to the Company's Articles of Incorporation,
as amended, any certificate of designations with respect to Preferred Stock and
any applicable Prospectus Supplement.
COMMON STOCK
All shares of Common Stock offered will be duly authorized, fully paid,
and nonassessable. Holders of the Common Stock will have no conversion,
redemption, sinking fund or preemptive rights; however, shares of Common Stock
will automatically convert into shares of Excess Stock as described below. Under
the Maryland General Corporation Law ("MGCL"), stockholders are generally not
liable for the Company's' debts or obligations, and the holders of shares will
not be liable for further calls or assessments by the Company. Subject to the
provisions of the Company's Articles of Incorporation regarding Excess Stock
described below, all shares of Common Stock have equal dividend, distribution,
liquidation and other rights and will have no preference or exchange rights.
Subject to the right of any holders of Preferred Stock to receive
preferential distributions, the holders of the shares of Common Stock will be
entitled to receive distributions in the form of dividends if and when declared
by the Board of Directors of the Company out of funds legally available
therefor, and, upon liquidation of the Company, each outstanding share of Common
Stock will be entitled to participate pro rata in the assets remaining after
payment of, or adequate provision for, all known debts and liabilities of the
Company, including debts and liabilities arising out of its status of general
partner of the Operating Partnership, and any liquidation preference of issued
and outstanding Preferred Stock. the Company intends to continue paying
quarterly distributions.
The holder of each outstanding share of Common Stock will be entitled to
one vote on all matters presented to stockholders for a vote, subject to the
provisions of the Company's' Articles of Incorporation regarding Excess Stock
described below. As described below, the Board of Directors of the Company may,
in the future, grant holders of one or more series of Preferred Stock the right
to vote with respect to certain matters when it fixes the attributes of such
series of Preferred Stock. Pursuant to the MGCL, the Company cannot dissolve,
amend its charter, merge with another entity, sell all or substantially all its
assets, engage in a share exchange or engage in similar transactions unless such
action is approved by stockholders holding a majority of the outstanding shares
entitled to vote on such matter. In addition, the Second Amended and Restated
Partnership Agreement of the Operating Partnership, as amended (the "Partnership
Agreement") requires that any merger or sale of all or substantially all of the
assets of Operating Partnership be approved by partners holding a majority of
the outstanding Units, excluding Operating Partnership Units held by the
Company. The Company's Articles of Incorporation provide that its Bylaws may be
amended by its Board of Directors.
The holder of each outstanding share of Common Stock will be entitled to
one vote in the election of directors who serve for terms of one year. Holders
of the shares of Common Stock will have no right to cumulative voting for the
election of directors. Consequently, at each annual meeting of stockholders, the
holders of a majority of the shares entitled to vote in the election of
directors will be able to elect all of the directors. Directors may be removed
only for cause and only with the affirmative vote of the holders of a majority
of the shares entitled to vote in the election of directors. The State
Treasurer of the State of Michigan, as custodian of various public employee
retirement systems (the "Michigan Retirement System"), owns the Class A interest
in the Operating Partnership which is, under certain circumstances,
convertible into 1,666,667 shares of Common Stock (subject to adjustment).
Under the purchase agreement with respect to that Class A interest, the Michigan
Retirement System has the right to nominate one person to stand for election to
the Company's Board of Directors. If the preferred return on the Class A
interest is not paid by the Operating Partnership, the Michigan Retirement
System may nominate additional directors.
PREFERRED STOCK
Preferred Stock may be issued from time to time, in one or more series, as
authorized by the Board of Directors of the Company. The Board of Directors will
fix the attributes of any Preferred Stock that it authorizes for issuance.
Because the Board of Directors has the power to establish the preferences and
rights of each series of Preferred Stock, it may afford the holders of any
series of Preferred Stock preferences, powers and rights, voting or otherwise,
senior to the rights of holders of shares of Common Stock. The issuance of
Preferred Stock could have the effect of delaying or preventing a change in
control of the Company.
The applicable Prospectus Supplement will describe specific terms of the
shares of Preferred Stock offered thereby, including, among other things: (i)
the title or designation of the series of Preferred Stock; (ii) the number of
shares of the series of Preferred Stock offered, the liquidation preference per
share and the offering price of the Preferred Stock; (iii) the dividend rate(s),
period(s) and/or payment date(s) or method(s) of calculation thereof applicable
to the Preferred Stock; (iv) the date from which dividends on such Preferred
Stock shall accumulate, if at all; (v) any restrictions on the issuance of
shares of the same series or of any other class or series; (vi) the provision
for a sinking fund, if any, for such Preferred Stock; (vii) the provision for
redemption, if applicable, of such Preferred Stock; (viii) any listing of such
Preferred Stock on any securities exchange; (ix) the terms and conditions, if
applicable, upon which such Preferred Stock will be convertible into Common
Stock of the Company, including the conversion price (or manner of calculation
thereof); (x) any other specific terms, preferences, rights, limitations or
restrictions of such Preferred Stock, including any voting rights; (xi) a
discussion of federal income tax considerations applicable to such Preferred
Stock; (xii) the relative ranking and preferences of such Preferred Stock as to
dividend rights and rights upon liquidation, dissolution or winding up of the
affairs of the Company; (xiii) any limitations on issuance of any series of
Preferred Stock, ranking senior to or on a parity with such series of Preferred
Stock as to dividend rights and rights upon liquidation, dissolution or winding
of the affairs of the Company; and (xiv) any limitations on direct or beneficial
ownership and restriction on transfer, in each case as may be appropriate to
preserve the status of the Company as a REIT.
Unless otherwise specified in the Prospectus Supplement, the Preferred
Stock will, with respect to dividend rights and rights upon liquidation,
dissolution or winding up of the Company, rank (i) senior to all classes or
series of Common Stock and to all other equity securities ranking junior to such
Preferred Stock, (ii) on a parity with all equity securities issued by the
Company the terms of which specifically provide that such equity securities rank
on a parity with the Preferred Stock, and (iii) junior to all equity securities
issued by the Company the terms of which specifically provide that such equity
securities rank senior to the Preferred Stock. The term "equity securities" does
not include convertible debt securities.
Upon any voluntary or involuntary liquidation, dissolution or winding up
of the affairs of the Company, then, before any distribution or payment shall be
made to the holders of any shares of Common Stock, any Excess Shares or any
other class or series of capital stock of the Company ranking junior to the
Preferred Stock in the distribution of assets upon any liquidation, dissolution
or winding up of the Company, the holders of shares of each series of Preferred
Stock shall be entitled to receive out of assets of the Company legally
available for distribution to stockholders 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 shares of Preferred Stock do not have
cumulative dividend). After payment of the full amount of the liquidating
distributions to which they are entitled, the holders of shares of Preferred
Stock will have no right or claim to any of the remaining assets of the Company.
In the event that, upon any such voluntary or involuntary liquidation,
dissolution or winding up, the available assets of the Company are insufficient
to pay the amount of the liquidating distributions on all outstanding shares of
Preferred Stock and the corresponding amounts payable on all shares of other
classes or series of capital stock of the Company ranking on a parity with such
shares of Preferred Stock in the distribution of assets, then the holders of
such shares of Preferred Stock and all other such classes or series of capital
stock shall share ratably in any such distribution of assets in proportion to
the full liquidating distributions to which they would otherwise be respectively
entitled.
COMMON STOCK PURCHASE RIGHTS
The applicable Prospectus Supplement will describe the specific terms of
any rights or warrants to purchase Common Stock offered thereby, including,
among other things: the duration, offering price and exercise price of the
Common Stock Purchase Rights and any provisions for the reallocation of Purchase
Rights not initially subscribed. The Prospectus Supplement will describe the
persons to whom the Common Stock Purchase Rights will be issued (the Company's
stockholders, the general public or others) and any conditions to the offer and
sale of the Common Stock Purchase Rights offered thereby.
RESTRICTIONS ON TRANSFER
Ownership Limits. The Company's Articles of Incorporation contain certain
restrictions on the number of shares of capital stock that stockholders may own.
For the Company to qualify as a REIT under the Code, no more than 50% in value
of its outstanding shares of capital stock may be owned, directly or indirectly,
by five or fewer individuals (as defined in the Code to include certain
entities) during the last half of a taxable year or during a proportionate part
of a shorter taxable year. The capital stock must also be beneficially owned by
100 or more persons during at least 335 days of a taxable year or during a
proportionate part of a shorter taxable year. Because the Company expects to
continue to qualify as a REIT, its Articles of Incorporation contain
restrictions on the ownership and transfer of shares of its capital stock
intended to ensure compliance with these requirements.
Subject to certain exceptions specified in the Articles of Incorporation,
no holder may own, or be deemed to own by virtue of the attribution provisions
of the Code, more than 8.0% (the "Ownership Limit") of the value of the issued
and outstanding shares of capital stock of the Company. Certain entities, such
as qualified pension plans, are treated as if their beneficial owners were the
holders of the Common Stock held by such entities. Stockholders ("Existing
Holders") whose holdings exceeded the Ownership Limit immediately after the
Company's initial public offering of its Common Stock, assuming that all Units
of the Operating Partnership are counted as shares of Common Stock, are
permitted to continue to hold the number of shares they held on such date and
may acquire additional shares of capital stock upon (i) the exchange of Units
for Shares, (ii) the exercise of stock options or receipt of grants of shares of
capital stock pursuant to a stock benefit plan, (iii) the acquisition of shares
of capital stock pursuant to a dividend reinvestment plan, (iv) the transfer of
shares of capital stock from another Existing Holder or the estate of an
Existing Holder by devise, gift or otherwise, or (v) the foreclosure on a pledge
of shares of capital stock; provided, no such acquisition may cause any Existing
Holder to own, directly or by attribution, more than 17.5% (the "Existing Holder
Limit") of the issued and outstanding Shares, subject to certain additional
restrictions. The Board of Directors of the Company may increase or decrease the
Ownership Limit and Existing Holder Limit from time to time, but may not do so
to the extent that after giving effect to such increase or decrease (i) five
beneficial owners of Shares could beneficially own in the aggregate more than
49.5% of the aggregate value of the outstanding capital stock of the Company or
(ii) any beneficial owner of capital stock would violate the Ownership Limit or
Existing Holder Limit as a result of a decrease. The Board of Directors may
waive the Ownership Limit or the Existing Holder Limit with respect to a holder
if such holder provides evidence acceptable to the Board of Directors that such
holder's ownership will not jeopardize the Company's status as a REIT.
Any transfer of outstanding capital stock of the Company ("Outstanding
Stock") that would (i) cause any holder, directly or by attribution, to own
capital stock having a value in excess of the Ownership Limit or Existing Holder
Limit, (ii) result in shares of capital stock other than Excess Stock, if any,
to be owned by fewer than 100 persons, (iii) result in the Company being closely
held within the meaning of section 856(h) of the Code, or (iv) otherwise prevent
the Company from satisfying any criteria necessary for it to qualify as a REIT,
is null and void, and the purported transferee acquires no rights to such
Outstanding Stock.
Outstanding Stock owned by or attributable to a stockholder or shares of
Outstanding Stock purportedly transferred to a stockholder which cause such
stockholder or any other stockholder to own shares of capital stock in excess of
the Ownership Limit or Existing Holder Limit will automatically convert into
shares of Excess Stock. Such Excess Stock will be transferred by operation of
law to a separate trust, with the Company acting as trustee, for the exclusive
benefit of the person or persons to whom such Outstanding Stock may be
ultimately transferred without violating the Ownership Limit or Existing Holder
Limit. Excess Stock is not treasury stock, but rather constitutes a separate
class of issued and outstanding stock of the Company. While the Excess Stock is
held in trust, it will not be entitled to vote, will not be considered for
purposes of any stockholder vote or the determination of a quorum for such vote
and will not be entitled to participate in dividends or other distributions. Any
record owner or purported transferee of Outstanding Stock which has converted
into Excess Stock (the "Excess Holder") who receives a dividend or distribution
prior to the discovery by the Company that such Outstanding Stock has been
converted into Excess Stock must repay such dividend or distribution upon
demand. While Excess Stock is held in trust, the Company will have the right to
purchase it from the trust for the lesser of (i) the price paid for the
Outstanding Stock which converted into Excess Stock by the Excess Holder (or the
market value of the Outstanding Stock on the date of conversion if no
consideration was given for the Outstanding Stock) or (ii) the market price of
shares of capital stock equivalent to the Outstanding Stock which converted into
Excess Stock (as determined in the manner set forth in the Articles of
Incorporation) on the date the Company exercises its option to purchase. The
Company must exercise this right within the 90-day period beginning on the date
on which it receives written notice of the transfer or other event resulting in
the conversion of Outstanding Stock into Excess Stock. Upon the liquidation of
the Company, distributions will be made with respect to such Excess Stock as if
it consisted of the Outstanding Stock from which it was converted.
Any Excess Holder, with respect to each trust created upon the conversion
of Outstanding Stock into Excess Stock, may designate any individual as a
beneficiary of such trust; provided, such person would be permitted to own the
Outstanding Stock which converted into the Excess Stock held by the trust under
the Ownership Limit or Existing Holder Limit and the consideration paid to such
Excess Holder in exchange for designating such person as the beneficiary is not
in excess of the price paid for the Outstanding Stock which converted into
Excess Stock by the Excess Holder (or the market value of the Outstanding Stock
on the date of conversion if no consideration was given for the Outstanding
Stock). The Company's redemption right must have expired or been waived prior to
such designation. Immediately upon the designation of a permitted beneficiary,
the Excess Stock, if any, will automatically convert into shares of the
Outstanding Stock from which it was converted and the Company as trustee of the
trust will transfer such shares, if any, and any proceeds from redemption or
liquidation to the beneficiary.
If the restrictions on ownership and transfer, conversion provisions or
trust arrangements in the Company's Articles of Incorporation are determined to
be void or invalid by virtue of any legal decision, statute, rule or regulation,
then the Excess Holder of any Outstanding Stock that would have converted into
shares of Excess Stock if the conversion provisions of the Articles of
Incorporation were enforceable and valid shall be deemed to have acted as an
agent on behalf of the Company in acquiring such Outstanding Stock and to hold
such Outstanding Stock on behalf of the Company unless the Company waives its
right to this remedy.
The foregoing ownership and transfer limitations may have the effect of
precluding acquisition of control of the Company without the consent of its
Board of Directors. All certificates representing shares of capital stock will
bear a legend referring to the restrictions described above. The foregoing
restrictions on transferability and ownership will not apply if the Board of
Directors determines, and the stockholders concur, that it is no longer in the
best interests of the Company to attempt to qualify, or to continue to qualify,
as a REIT. Approval of the limited partners of the Operating Partnership to
terminate REIT status is also required.
Ownership Reports. Every owner of more than 5% of the issued and
outstanding shares of capital stock of the Company must file a written notice
with the Company containing the information specified in the Articles of
Incorporation no later than January 31 of each year. In addition, each
stockholder shall, upon demand, be required to disclose to the Company in
writing such information as the Company may request in order to determine the
effect of such stockholder's direct, indirect and attributed ownership of shares
of capital stock on the Company's status as a REIT or to comply with any
requirements of any taxing authority or other governmental agency.
CERTAIN OTHER PROVISIONS OF MARYLAND LAW AND CHARTER DOCUMENTS
THE FOLLOWING DISCUSSION SUMMARIZES CERTAIN PROVISIONS OF MGCL AND THE
COMPANY'S ARTICLES OF INCORPORATION AND BYLAWS. THIS SUMMARY DOES NOT PURPORT TO
BE COMPLETE AND IS SUBJECT TO AND QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
ARTICLES OF INCORPORATION AND BYLAWS, COPIES OF WHICH ARE FILED AS EXHIBITS TO
THE REGISTRATION STATEMENT OF WHICH THIS PROSPECTUS CONSTITUTES A PART. SEE
"ADDITIONAL INFORMATION."
Limitation of Liability and Indemnification. The Articles of Incorporation
and Bylaws limit the liability of directors and officers to the Company and its
stockholders to the fullest extent permitted from time to time by the MGCL and
require the Company to indemnify its directors, officers and certain other
parties to the fullest extent permitted from time to time by the MGCL.
Business Combinations. Under the MGCL, certain "business combinations"
(including a merger, consolidation, share exchange or, in certain circumstances,
an asset transfer or issuance or reclassification of equity securities) between
a Maryland corporation and any person who beneficially owns 10% or more of the
voting power of the outstanding voting stock of the corporation or an affiliate
or associate of the corporation who, at any time within the two-year period
immediately prior to the date in question, was the beneficial owner, directly or
indirectly, of 10% or more of the voting power of the then-outstanding voting
stock of the corporation (an "Interested Stockholder") or an affiliate thereof,
are prohibited for five years after the most recent date on which the Interested
Stockholder became an Interested Stockholder. Thereafter, in addition to any
other required vote, any such business combination must be recommended by the
board of directors of such corporation and approved by the affirmative vote of
at least (i) 80% of the votes entitled to be cast by holders of outstanding
shares of voting stock of the corporation, voting together as a single voting
group, and (ii) two-thirds of the votes entitled to be cast by holders of voting
stock of the corporation (other than voting stock held by the Interested
Stockholder who will, or whose affiliate will, be a party to the business
combination or by an affiliate or associate of the Interested Stockholder)
voting together as a single voting group. The extraordinary voting provisions do
not apply if, among other things, the corporation's stockholders receive a price
for their shares determined in accordance with the MGCL and the consideration is
received in cash or in the same form as previously paid by the Interested
Stockholder for its shares. These provisions of the MGCL do not apply, however,
to business combinations that are approved or exempted by the board of directors
of the corporation prior to the time that the Interested Stockholder becomes an
Interested Stockholder. The Articles of Incorporation of the Company contain a
provision exempting from these provisions of the MGCL any business combination
involving the Leenhoutses (or their affiliates) or any other person acting in
concert or as a group with any of the foregoing persons.
Control Share Acquisitions. The MGCL provides that "control shares" of a
Maryland corporation acquired in a "control share acquisition" have no voting
rights except to the extent approved by the affirmative vote of two-thirds of
the votes entitled to be cast on the matter other than "interested shares"
(shares of stock in respect of which any of the following persons is entitled to
exercise or direct the exercise of the voting power of shares of stock of the
corporation in the election of directors: an "acquiring person," an officer of
the corporation or an employee of the corporation who is also a director).
"Control shares" are shares of stock which, if aggregated with all other such
shares of stock owned by the acquiring person, or in respect of which such
person is entitled to exercise or direct the exercise of voting power of shares
of stock of the corporation in electing directors within one of the following
ranges of voting power: (i) one-fifth or more but less than one-third, (ii)
one-third or more but less than a majority, or (iii) a majority of more of all
voting power. Control shares do not include shares the acquiring person is
entitled to vote as a result of having previously obtained stockholder approval.
The control share acquisition statute does not apply to shares acquired in a
merger, consolidation or share exchange if the corporation is a party to the
transaction, or to acquisitions approved or exempted by the charter or bylaws of
the corporation.
A person who has made or proposes to make a control share acquisition,
under certain conditions (including an undertaking to pay expenses), may compel
the board of directors to call a special meeting of stockholders to be held
within 50 days of demand to consider the voting rights of the control shares
upon delivery of an acquiring person statement containing certain information
required by the MGCL, including a representation that the acquiring person has
the financial capacity to make the proposed control share acquisition, and a
written undertaking to pay the corporation's expenses of the special meeting
(other than the expenses of those opposing approval of the voting rights). If no
request for a meeting is made, the corporation may itself present the question
at any stockholders meeting.
If voting rights are not approved at the meeting or if the acquiring
person does not deliver an acquiring person statement as required by the MGCL,
then, subject to certain conditions and limitations, the corporation may redeem
any or all of the control shares (except those for which voting rights have
previously been approved) for fair value, determined without regard to the
absence of voting rights for control shares, as of the date of the last control
share acquisition or, if a stockholder meeting is held, as of the date of the
meeting of stockholders at which the voting rights of such shares are considered
and not approved. If voting rights for control shares are approved at a
stockholders' meeting before the control share acquisition and the acquiring
person becomes entitled to exercise or direct the exercise of a majority or more
of all voting power, all other stockholders may exercise rights of objecting
stockholders under Maryland law to receive the fair value of their Shares. The
fair value of the Shares for such purposes may not be less than the highest
price per share paid by the acquiring person in the control share acquisition.
Certain limitations and restrictions otherwise applicable to the exercise of
objecting stockholders' rights do not apply in the context of a control share
acquisition.
The Articles of Incorporation contain a provision exempting from the
control share acquisition statute any and all acquisitions to the extent that
such acquisitions would not violate the Ownership Limit or Existing Owner Limit.
There can be no assurance that such provision will not be amended or eliminated
at any point in the future.
DESCRIPTION OF DEBT SECURITIES
The following description of the terms of the Debt Securities 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 Debt Securities are to be issued in one or more series under an
Indenture, a copy of which is incorporated as an Exhibit to the Registration
Statement of which this Prospectus forms a part, as amended or supplemented by
one or more supplemental indentures (the "Indenture"), to be entered into
between the Company and a financial institution as Trustee (the "Trustee").
The statements herein relating to the Debt Securities and the Indenture are
summaries and are subject to the detailed provisions of the applicable
Indenture. The following summaries of certain provisions of the Indenture do
not purport to be complete and are subject to, and are qualified in their
entirety by reference to, all of the provisions of the Indenture, including the
definitions therein of certain terms capitalized in this Prospectus.
GENERAL
The Indenture does not limit the aggregate amount of Debt Securities which
may be issued thereunder, nor does it limit the incurrence or issuance of other
secured or unsecured debt of the Company.
The Debt Securities will be unsecured general obligations of the Company
and will rank with all other unsecured and unsubordinated obligations of the
Company as described in the applicable Prospectus Supplement. The Indenture
provides that the Debt Securities may be issued from time to time in one or more
series. The Company may authorize the issuance and provide for the terms of a
series of Debt Securities pursuant to a supplemental indenture.
Reference is made to the Prospectus Supplement relating to the particular
series of Debt Securities being offered thereby for the terms of such Debt
Securities, including, where applicable: (1) the specific designation of such
Debt Securities; (2) any limit upon the aggregate principal amount of such Debt
Securities; (3) the date or dates on which the principal of and premium, if any,
on such Debt Securities will mature or the method of determining such date or
dates; (4) the rate or rates (which may be fixed, variable or zero) at which
such Debt Securities will bear interest, if any, or the method of calculating
such rate or rates; (5) the date or dates from which interest, if any, will
accrue or the method by which such date or dates will be determined; (6) the
date or dates on which interest, if any, will be payable and the record date or
dates therefor; (7) the place or places where principal of, premium, if any, and
interest, if any, on such Debt Securities may be redeemed, in whole or in part,
at the option of the Company; (8) the obligation, if any, of the Company to
redeem or purchase such Debt Securities pursuant to any sinking fund or
analogous provisions or upon the happening of a specified event and the period
or periods within which, the price or prices at which and the other terms and
conditions upon which, such Debt Securities shall be redeemed or purchased, in
whole or in part, pursuant to such obligations; (9) the denominations in which
such Debt Securities are authorized to be issued; (10) the currency or currency
unit for which Debt Securities may be purchased or in which Debt Securities may
be denominated and/or the currency or currencies (including currency unit or
units) in which principal of, premium, if any, and interest, if any, on such
Debt Securities will be payable and whether the Company or the holders of any
such Debt Securities may elect to receive payments in respect of such Debt
Securities in a currency or currency unit other than that in which such Debt
Securities are stated to be payable; (11) if the amount of payments of principal
of and premium, if any, or any interest, if any, on such Debt Securities may be
determined with reference to an index based on a currency or currencies other
than that in which such Debt Securities are stated to be payable, the manner in
which such amount shall be determined; (12) if the amount of payments of
principal of and premium, if any, or interest, if any, on such Debt Securities
may be determined with reference to changes in the prices of particular
securities or commodities or otherwise by application of a formula, the manner
in which such amount shall be determined; (13) if other than the entire
principal amount thereof, the portion of the principal amount of such Debt
Securities which will be payable upon declaration of the acceleration of the
maturity thereof or the method by which such portion shall be determined; (14)
the person to whom any interest on any such Debt Security shall be payable if
other than the person in whose name such Debt Security is registered on the
applicable record date; (15) any addition to, or modification or deletion of,
any Event of Default or any covenant of the Company specified in the Indenture
with respect to such Debt Securities; (16) the application, if any, of such
means of defeasance as may be specified for such Debt Securities; and (17) any
other special terms pertaining to such Debt Securities. Unless otherwise
specified in the applicable Prospectus Supplement, the Debt Securities will not
be listed on any securities exchange.
Unless otherwise specified in the applicable Prospectus Supplement, Debt
Securities will be issued only in fully registered form without coupons. Unless
the Prospectus Supplement relating thereto specifies otherwise, Debt Securities
will be denominated in U.S. dollars and will be issued only in denominations of
U.S. $1,000 and any integral multiple thereof.
Debt Securities may be sold at a substantial discount below their stated
principal amount and may bear no interest or interest at a rate which at the
time of issuance is below market rates. Certain federal income tax consequences
and special considerations applicable to any such Debt Securities will be
described in the applicable Prospectus Supplement.
If the amount of payments of principal of and premium, if any, or any
interest on Debt Securities of any series is determined with reference to any
type of index or formula or changes in prices of particular securities or
commodities, the federal income tax consequences, specific terms and other
information with respect to such Debt Securities and such index or formula and
securities or commodities will be described in the applicable Prospectus
Supplement.
If the principal of and premium, if any, or any interest on Debt
Securities of any series are payable in a foreign or composite currency, the
restrictions, elections, federal income tax consequences, specific terms and
other information with respect to such Debt Securities and such currency will be
described in the applicable Prospectus Supplement.
The Prospectus Supplement, with respect to any particular series of Debt
Securities being offered thereby which provide for optional redemption,
prepayment or conversion of such Debt Securities on the occurrence of certain
event, such as a change of control of the Company, will provide: (1) a
discussion of the effects that such provisions may have in deterring certain
mergers, tender offers or other takeover attempts, as well as any possible
adverse effect on the market price of the Company's securities or the ability to
obtain additional financing in the future; (2) a statement the Company will
comply with any applicable provisions of the requirements of Rule 14e-1 under
the Securities Exchange Act of 1934 and any other applicable securities laws in
connection with any optional redemption, prepayment or conversion provisions and
any related offers by the Company (including, if such Debt Securities are
convertible, Rule 13e-4); (3) a disclosure of any cross-defaults in other
indebtedness which may result as a consequence of the occurrence of certain
events so that the payments on such Debt Securities would be effectively
subordinated; (4) a disclosure of effect of any failure to repurchase under the
applicable Indenture, including in the event of a change of control of the
Company; (5) a disclosure of any risk that sufficient funds may not be available
at the time of any event resulting in a repurchase obligation; and (6) a
discussion of any definition of "change of control" contained in the applicable
Indenture.
PAYMENT, REGISTRATION, TRANSFER AND EXCHANGE
Unless otherwise provided in the applicable Prospectus Supplement,
payments in respect of the Debt Securities will be made in the designated
currency at the office or agency of the Company maintained for that purpose as
the Company may designate from time to time, except that, at the option of the
Company, interest payments, if any, on Debt Securities in registered form may be
made by checks mailed to the holders of Debt Securities entitled thereto at
their registered addresses. Unless otherwise indicated in an applicable
Prospectus Supplement, payment of any installment of interest on Debt Securities
in registered form will be made to the person in whose name such Debt Security
is registered at the close of business on the regular record date for such
interest.
Unless otherwise provided in the applicable Prospectus Supplement, Debt
Securities in registered form will be transferable or exchangeable at the agency
of the Company maintained for such purpose as designated by the Company from
time to time. Debt Securities may be transferred or exchanged without service
charge, other than any tax or other governmental charge imposed in connection
therewith.
CONSOLIDATION, MERGER OR SALE BY THE COMPANY
Under the terms of the Indenture, the Company shall not be consolidated
with or merge into any other corporation or transfer or lease its assets
substantially as an entirety, unless (i) the corporation formed by such
consolidation or into which the Company is merged or the corporation which
acquires its assets is organized in the United States and expressly assumes all
of the obligations of the Company under the Debt Securities and all Indentures
and (ii) immediately after giving effect to such transaction, no Default or
Event of Default shall have occurred and be continuing. Upon any such
consolidation, merger or transfer, the successor corporation formed by such
consolidation, or into which the Company is merged or to which such sale is made
shall succeed to, and be substituted for the Company under the Indenture.
The Indenture contains no covenants or other specific provisions to afford
protection to holders of the Debt Securities in the event of a highly leveraged
transaction or a change in control of the Company, except to the limited extent
described above. Such covenants or provisions are not subject to waiver by the
Company's Board of Directors without the consent of the holders of not less than
a majority in principal amount of the outstanding Debt Securities of each series
affected by the waiver as described under "Modification of the Indenture" below.
EVENTS OF DEFAULT, NOTICE AND CERTAIN RIGHTS ON DEFAULT
The Indenture provides that, if an Event of Default specified therein
occurs with respect to the Debt Securities of any series and is continuing, the
Trustee for such series or the holders of 25% in aggregate principal amount of
all of the outstanding Debt Securities of that series, by written notice to the
Company (and to the Trustee for such series, if notice is given by such holders
of Debt Securities), may declare the principal of (or, if the Debt Securities of
that series are Original Issue Discount Securities, such portion of the
principal amount specified in the Prospectus Supplement) and accrued interest on
all the Debt Securities of that series to be immediately due and payable.
The Indenture provides that the Trustee will, subject to certain
exceptions, within a specified number of days after the occurrence of a Default
with respect to the Debt Securities of any series, give to the holders of the
Debt Securities of that series notice of all Defaults known to it unless such
Default shall have been cured or waived. "Default" means any event which is or
after notice or passage of time or both, would be an Event of Default.
The Indenture provides that the holders of a majority in aggregate
principal amount of the Debt Securities of each series affected (with each such
series voting as a class) may direct the time, method and place of conducting
any proceeding for any remedy available to the Trustee for such series, or
exercising any trust or power conferred on such Trustee.
The Indenture includes a covenant that the Company will file annually with
the Trustee a certificate as to the Company's compliance with all conditions and
covenants of the Indenture.
The holders of a majority in aggregate principal amount of any series of
Debt Securities by notice to the Trustee may waive on behalf of the holders of
all Debt Securities of such series, any past Default or Event of Default with
respect to that series and its consequences, except a Default or Event of
Default in the payment of the principal of, premium, if any, or interest, if
any, on any Debt Security or a provision of the Indenture which cannot be
amended without the consent of the holder of each Outstanding Security of such
series adversely affected.
MODIFICATION OF THE INDENTURE
The Indenture contains provisions permitting the Company and the Trustee
to enter into one or more supplemental indentures without the consent of the
holders of any of the Debt Securities in order (i) to evidence the succession of
another corporation to the Company and the assumption of the covenants of the
Company by a successor to the Company; (ii) to add to the covenants of the
Company or surrender any right or power of the Company; (iii) to add additional
Events of Default with respect to any series of Debt Securities; (iv) to add or
change any provisions to such extent as necessary to permit or facilitate the
issuance of Debt Securities in book entry form or, if allowed without penalty
under applicable laws and regulations, to permit payment in respect of Debt
Securities in bearer form in the United States; (v) to change or eliminate any
provision affecting Debt Securities not yet issued; (vi) to secure the Debt
Securities; (vii) to establish the form or terms of Debt Securities; (viii) to
cure any ambiguity, to correct or supplement any provision of the Indenture
which may be inconsistent with any other provision thereof, provided that such
action does not adversely affect the interests of any holder of Debt Securities
of any series; (ix) to make provision with respect to the conversion rights of
holders of Debt Securities; or (x) to conform to any mandatory provisions of
law.
The Indenture also contains provisions permitting the Company and the
Trustee, with the consent of the holders of a majority in aggregate principal
amount of the outstanding Debt Securities affected by such supplemental
indenture (with the Debt Securities of each series voting as a class), to
execute supplemental indentures adding any provisions to or changing or
eliminating any of the provisions of the Indenture or any supplemental indenture
or modifying the rights of the holders of Debt Securities of such series, except
that no such supplemental indenture may, without the consent of the holder of
each Debt Security so affected, (i) change the time for payment of principal or
premium, if any, or interest on any Debt Security; (ii) reduce the principal of,
or any installment of principal of, or premium, if any, or interest on any Debt
Security, or change the manner in which the amount of any of the foregoing is
determined; (iii) reduce the amount of premium, if any, payable upon the
redemption of any Debt Security; (iv) reduce the amount of principal payable
upon acceleration of the maturity of any Original Issue Discount Security; (v)
reduce the percentage in principal amount of the outstanding Debt Securities
affected thereby, the consent of whose holders is required for modification or
amendment of the Indenture or for waiver or compliance with certain provisions
of the Indenture or for waiver of certain defaults; (vi) make any change which
adversely affects the right to convert convertible Debt Securities or decrease
the conversion rate or increase the conversion price; or (vii) modify the
provisions relating to waiver of certain defaults or any of the foregoing
provisions.
DEFEASANCE
If so described in the Prospectus Supplement relating to Debt Securities
of a specific series, the Company may discharge its indebtedness and its
obligations or terminate certain of its obligations and covenants under the
Indenture with respect to the Debt Securities of such series by depositing funds
or obligations issued or guaranteed by the United States government with the
Trustee. The Prospectus Supplement will more fully describe the provisions, if
any, relating to such discharge or termination of obligations.
THE TRUSTEE
The Prospectus Supplement will identify the Trustee under the applicable
Indenture. The Company may also maintain banking and other commercial
relationships with any Trustee and its affiliates in the ordinary course of
business.
FEDERAL INCOME TAX CONSIDERATIONS
INTRODUCTORY NOTES
The following is a general summary of certain federal income tax
considerations that may be relevant to a prospective holder of shares of Common
Stock. Any Prospectus Supplement which relates to a series of Preferred Stock or
of Debt Securities will set forth the federal income tax consequences of that
Preferred Stock to a prospective holder. Nixon, Hargrave, Devans & Doyle LLP has
acted as tax counsel to the Company in connection with its formation and its
election to be taxed as a REIT, has reviewed the following discussion and is of
the opinion that it fairly summarizes the federal income tax considerations that
are likely to be material to a holder of Shares. The following discussion is not
exhaustive of all possible tax considerations and does not give a detailed
discussion of any state, local or foreign tax considerations. This discussion
does not address all of the aspects of federal income taxation that may be
relevant to stockholders in light of their particular circumstances or to
certain types of stockholders subject to special treatment under the federal
income tax laws (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).
This discussion contains a general summary of certain Code sections that
govern the federal income tax treatment of a REIT and its stockholders. These
sections of the Code are highly technical and complex. This summary is qualified
in its entirety by the applicable Code provisions, the Treasury Regulations
promulgated thereunder and administrative and judicial interpretations thereof,
all of which are subject to change prospectively or retroactively. The Company
has not sought or obtained any ruling from the Internal Revenue Service or any
opinions of counsel specifically related to the tax matters described below.
EACH PROSPECTIVE PURCHASER IS ADVISED TO CONSULT WITH HIS OR HER OWN TAX
ADVISOR REGARDING THE SPECIFIC TAX CONSEQUENCES TO HIM OR HER OF THE PURCHASE,
OWNERSHIP AND SALE OF SHARES OF COMMON STOCK AND THE ELECTION BY THE COMPANY 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 COMPANY AS A REIT
The Company has elected to be taxed as a REIT under Sections 856 through
860 of the Code commencing with its taxable year ending December 31, 1994. The
Company believes that it was organized and has operated in such a manner as to
qualify for taxation as a REIT under the Code, and the Company intends to
continue to operate in such a manner. No assurance, however, can be given that
the Company has operated or will operate in a manner so as to qualify or remain
qualified as a REIT.
In the opinion of Nixon, Hargrave, Devans & Doyle LLP, commencing with the
Company's taxable year ending December 31, 1994, the Company was organized in
conformity with the requirements for qualification as a REIT, and its method of
operation has enabled it to meet the requirements for qualification and taxation
as a REIT under the Code. This opinion is based on certain assumptions and is
conditioned upon certain representations made by the Company as to certain
factual matters relating to the Company's organization, manner of operation,
income and assets. Nixon, Hargrave, Devans & Doyle LLP is not aware of any facts
or circumstances that are inconsistent with these assumptions and
representations. the Company's qualification and taxation as a REIT will depend
upon satisfaction of the requirements necessary to be classified as a REIT,
discussed below, on a continuing basis. Nixon, Hargrave, Devans & Doyle LLP will
not review compliance with these tests on a continuing basis. Therefore, no
assurance can be given that the Company will satisfy such tests on a continuing
basis. See "- Requirements for Qualification - FAILURE TO QUALIFY" below.
If the Company qualifies for taxation as a REIT, it generally will not be
subject to federal corporate income taxes on net income that it currently
distributes to its stockholders. This treatment substantially eliminates the
"double taxation" (at the corporate and stockholder levels) that generally
results from investment in a regular corporation. However, the Company will be
subject to federal income tax in the following circumstances. First, the Company
will be taxed at regular corporate rates on any undistributed REIT taxable
income, including undistributed net capital gains. Second, under certain
circumstances, the Company may be subject to the "alternative minimum tax" on
its items of tax preference. Third, if the Company has (i) net income from the
sale or other disposition of "foreclosure property" (which is, in general,
property acquired by the Company by foreclosure or otherwise on default on a
loan secured by the property) 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 rate on
such income. Fourth, if the Company has net income from prohibited transactions
(which are, in general, certain sales or other dispositions of property (other
than foreclosure property) held primarily for sale to customers in the ordinary
course of business), such income will be subject to a 100% tax. Fifth, if the
Company should fail to satisfy the 75% gross income test or the 95% gross income
test (as discussed in "Requirements for Qualification - INCOME TESTS" below),
and has nonetheless maintained its qualification as a REIT because certain other
requirements have been met, it will be subject to a 100% tax on the net income
attributable to the greater of the amount by which the Company fails the 75% or
95% test, multiplied by a fraction intended to reflect the Company's
profitability. Sixth, if the Company should fail to distribute during each
calendar year at least the sum of (i) 85% of its REIT ordinary income for such
year, (ii) 95% of its REIT capital gain net income for such year, and (iii) any
undistributed taxable income from prior years, the Company would be subject to a
4% excise tax on the excess of such required distribution over the amounts
actually distributed. Seventh, if the Company disposes of any asset acquired
from a C corporation (i.e., a corporation generally subject to full corporate
level tax) in a transaction in which the basis of the asset in the Company's
hands is determined by reference to the basis of the asset (or any other
property) in the hands of the C corporation, and the Company recognizes gain on
the disposition of such asset during the 10-year period beginning on the date on
which such asset was acquired by the Company, then, to the extent of such
property's "built-in" gain (i.e., the excess of the fair market value of such
property at the time of acquisition by the Company over the adjusted basis in
such property at such time), such gain will be subject to tax at the highest
regular corporate rate applicable (as provided in Treasury Regulations that have
not yet been promulgated). The results described above with respect to the tax
on "built-in-gain" assume that the Company will elect pursuant to IRS Notice
88-19 to be subject to the rules described in the preceding sentence if it were
to make any such acquisition.
REQUIREMENTS FOR QUALIFICATION.
GENERALLY. To qualify as a REIT, an entity must be a corporation, trust or
association: (1) which is managed by one or more trustees or directors; (2) the
beneficial ownership of which is evidenced by transferable shares or by
transferable certificates of beneficial interest; (3) which would be taxable as
a domestic corporation but for Sections 856 through 859 of the Code; (4) which
is neither a financial institution nor an insurance company subject to certain
provisions of the Code; (5) the beneficial ownership of which is held by 100 or
more persons; (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);
(7) that makes an election to be a REIT (or has made such election for a
previous taxable year) and satisfies all relevant filing and other
administrative requirements established by the Service that must be met in order
to elect and maintain REIT status; and (8) 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. Electing REIT treatment requires that the entity adopt a
calendar year accounting period.
The Company satisfies the requirements set forth above. In addition, the
Company's Articles of Incorporation provide restrictions regarding the transfer
of its shares that are intended to assist the Company in continuing to satisfy
the share ownership requirements described in (5) and (6) above. See
"Description of Capital Stock -- Restrictions on Transfer."
In the case of a REIT which is a partner in a partnership, Treasury
Regulations provide that the REIT is deemed to own its proportionate share of
the assets of the partnership and is 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 asset tests. Thus, the Company's proportionate share of the
assets, liabilities and items of income of the Operating Partnership and the
partnerships, if any, in which the Operating Partnership will have an interest
will be treated as assets, liabilities and items of the Company for purposes of
applying the requirements described herein.
INCOME TESTS. In order to maintain qualification as a REIT, there are
three gross income requirements that must be satisfied annually. First, at least
75% of the REIT's gross income (excluding gross income from prohibited
transactions) for each taxable year must be 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 from
certain types of temporary investments. Second, at least 95% of the REIT's gross
income (excluding gross income from prohibited transactions) for each taxable
year must be derived from such real property investments, and from dividends,
interest and gain from the sale or disposition of stock or securities, or from
any combination of the foregoing. Third, short-term gain from the sale or other
disposition of stock or securities, gain from prohibited transactions and gain
on the sale or other disposition of real property held for less than four years
(apart from involuntary conversions and sales of foreclosure property) must
represent less than 30% of the REIT's gross income (including gross income from
prohibited transactions) for each taxable year.
Rents received by the Company will qualify as "rents from real property"
in satisfying the gross income requirements for a REIT described above only if
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. However, an amount received
or accrued generally will not be excluded from the term "rents from real
property" solely by reason of being based on a fixed percentage or percentages
of receipts of sales. Second, the Code provides that rents received from a
resident will not qualify as "rents from real property" in satisfying the gross
income tests if the Company, or an owner of 10% or more of the Company, directly
or constructively owns 10% or more of such tenant (a "Related Party Tenant").
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, then the portion of rent attributable to such personal property will not
qualify as "rents from real property." Finally, for rents received to qualify as
"rents from real property," the Company generally must not operate or manage the
property or furnish or render services to tenants, other than through an
"independent contractor" who is adequately compensated and from whom the Company
derives no revenue. The "independent contractor" requirement, however, does not
apply to the extent the services provided by the Company are "usually or
customarily rendered" in connection with the rental of space for occupancy only
(such as furnishing water, heat, light and air conditioning, and cleaning
windows, public entrances and lobbies) and are not otherwise considered
"rendered to the occupant." However, all of the rental income derived by the
Company with respect to a property will not cease to qualify as "rents from real
property" if any impermissible tenant services income from such property (which
is deemed to be an amount that is no less than 150% of the Company's direct
costs of furnishing or rendering the service or providing the management or
operation) does not exceed 1% of all amounts received or accrued during the
taxable year directly or indirectly by the Company with respect to such
property.
REITs generally are subject to tax at the maximum corporate rate on any
income from foreclosure property (other than income that would be qualifying
income for purposes of the 75% gross income test), less expense directly
connected with the production of such income. "Foreclosure property" is defined
as any real property (including interests in real property) and any personal
property incident to such real property (i) that is acquired by a REIT as the
result of such REIT having bid in such property at foreclosure, or having
otherwise reduced such property to ownership or possession by agreement or
process of law, after there was a default (or default was imminent) on a lease
of such property or on an indebtedness owed to the REIT that such property
secured, (ii) for which the related loan was acquired by the REIT at a time when
default was not imminent or anticipated, and (iii) for which such REIT makes a
proper election to treat such property as foreclosure property. The Company does
not anticipate that it will receive significant income from foreclosure property
that is not qualifying income for purposes of the 75% gross income test, but, if
election to treat the related property as foreclosure property.
If property is not eligible for the election to be treated as foreclosure
property ("Ineligible Property") because the related loan was acquired by the
REIT at a time when default was imminent or anticipated, income received with
respect to such Ineligible Property may not be qualifying income for purposes of
receives with respect to Ineligible Property will be qualifying income for
purposes of the 75% and 95% gross income tests.
It is expected that the Company's real estate investments will continue to
give rise to income that will enable it to satisfy all of the income tests
described above. Substantially all of the Company's income will be derived from
its interest in the Operating Partnership, which will, for the most part,
qualify as "rents from real property" for purposes of the 75% and the 95% gross
income tests.
The Operating Partnership does not and does not anticipate charging more
than a de minimis amount of rent that is based in whole or in part on the income
or profits of any person (except by reason of being based on a percentage of
receipts or sales, as described above). The Operating Partnership does not
anticipate receiving rents in excess of a de minimis amount from Related Party
Tenants. The Operating Partnership does not anticipate holding a lease on any
property in which rents attributable to personal property constitute greater
than 15% of the total rents received under the lease. Neither the Company nor
the Operating Partnership will knowingly directly perform services considered to
be rendered to the occupant of property. The Operating Partnership will perform
all development, construction and leasing services for, and will operate and
manage, the properties owned by it directly without using an "independent
contractor." Management believes that the only material services to be provided
to lessees of these properties will be those usually or customarily rendered in
connection with the rental of space for occupancy only. The Company does not
anticipate that the Operating Partnership will provide services that might be
considered rendered primarily for the convenience of the occupants of the
property.
The Operating Partnership owns all of the non-voting common stock of the
Management Companies, corporations that are taxable as regular corporations. The
Management Companies will perform management, development, construction and
leasing services for certain properties not owned by the Company. The income
earned by and taxed to the Management Companies would be nonqualifying income if
earned by the Company through the Operating Partnership. As a result of the
corporate structure, the income will be earned by and taxed to the Management
Companies and will be received by the Operating Partnership only indirectly as
dividends that qualify under the 95% test.
To the extent the Operating Partnership does not immediately use the
proceeds of the Offering, these funds will be invested in interest-bearing
accounts and short-term, interest-bearing securities. The interest income earned
on those funds is expected to be includible under the 75% test as "qualified
temporary investment income" (which includes income earned on stock or debt
instruments acquired with the proceeds of a stock offering, not including
amounts received under a dividend reinvestment plan). Qualified temporary
investment income treatment only applies during the one-year period beginning on
the date the Company receives the new capital.
If the Company fails to satisfy one or both of the 75% or 95% gross income
tests for any taxable year, it may nevertheless qualify as a REIT for such year
if it is entitled to relief under certain provisions of the Code. These relief
provisions generally will be available if the Company's failure to meet such
tests was due to reasonable cause and not due to willful neglect, the Company
attaches a schedule of the sources of its income to its return, and any income
information on the schedules was not due to fraud with intent to evade tax. It
is not possible, however, to state whether in all circumstances the Company
would be entitled to the benefit of these relief provisions. As discussed above
in "GENERALLY," even if these relief provisions apply, a 100% tax would be
imposed on the net income attributable to the greater of the amount by which the
Company fails the 75% or 95% gross income test.
Although not an income test for REIT qualification, the "prohibited
transaction" penalty tax is imposed on certain types of REIT income. As
discussed below, any gain realized by the Company on the sale of any property
held as inventory or other property held primarily for sale to customers in the
ordinary course of its trade or business will be treated as income from a
prohibited transaction that is subject to a 100% penalty tax.
ASSET TESTS. The Company, at the close of each quarter of its taxable
year, must also satisfy two tests relating to the nature of its assets. First,
at least 75% of the value of the Company's total assets must be represented by
real estate assets, cash and cash items (including certain receivables) and
government securities. For this purpose real estate assets include (i) the
Company's allocable share of real estate assets held by the Operating
Partnership and partnerships in which the Operating Partnership owns an interest
or held by "qualified REIT subsidiaries" of the Company 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-year) debt offering of the Company.
For purposes of the 75% asset test, the term "interest in real property"
includes an interest in mortgage loans or land and improvements thereon, such as
buildings or other inherently permanent structures (including items that are
structural components of such buildings or structures), a leasehold of real
property, and an option to acquire real property (or a leasehold of real
property). An "interest in real property" also generally includes an interest in
mortgage loans secured by controlling equity interests in entities treated as
partnerships for federal income tax purposes that own real property, to the
extent that the principal balance of the mortgage does not exceed the fair
market value of the real property that is allocable to the equity interest.
The second asset test requires that, of the investments not included in
the 75% asset class, the value of any one issuer's securities owned by the
Company may not exceed 5% of the value of the Company's total assets, and the
Company may not own more than 10% of any one issuer's outstanding voting
securities (except for its interests in the Operating Partnership, the Trust,
any other interests in any qualified REIT subsidiary or in any other
entity that is disregarded as a separate entity under Treasury
Regulations dealing with entity classification). The 1998 Budget Proposal would
prohibit REITs from holding stock possessing more than 10% of the vote or value
of all classes of stock of a corporation. This proposal would be effective with
respect to stock acquired on or after the date of first committee action. In
addition, to the extent that a REIT's stock ownership is grandfathered by virtue
of this effective date, that grandfathered status will terminate if the
subsidiary corporation engages in a trade or business that is not engaged in on
the date of first committee action or acquires substantial new assets on or
after such date. Reference to these provisions was excluded from the final
language included in the U.S. Senate Budget Committee's proposal for the 1998
budget, but it still could be included in any number of steps required for final
budget approval.
The Company anticipates that it will continue to be able to comply with these
asset tests. The Company is deemed to hold directly its proportionate share of
all real estate and other assets of the Operating Partnership and should be
considered to hold its proportionate share of all assets deemed owned by the
Operating Partnership through its ownership of partnership interests in other
partnerships. As a result, the Company plans to hold more than 75% of its assets
as real estate assets. In addition, the Company does not plan to hold any
securities representing more than 10% of any one issuer's voting securities,
other than any qualified REIT subsidiary, nor securities of any one issuer
exceeding 5% of the value of the Company's gross assets (determined in
accordance with generally accepted accounting principles). As previously
discussed, the Company is deemed to own its proportionate share of the assets of
a partnership in which it is a partner so that the partnership interest, itself,
is not a security for purposes of this asset test.
The Operating Partnership owns all of the nonvoting common stock of the
Management Companies. The Operating Partnership does not own any of the voting
securities of the Management Companies. Management believes that the Company's
interest in the securities of the Management Companies through the Operating
Partnership does not exceed 5% of the total value of the Company's assets. No
independent appraisals have been obtained. Counsel, in rendering its opinion as
to the qualification of the Company as a REIT, is relying on the conclusions of
management regarding the value of such securities of the Management Companies.
After initially meeting the asset tests at the close of any quarter, the
Company 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 nonqualifying assets within 30 days after the close of
that quarter. The Company intends to maintain adequate records of the value of
its assets to ensure compliance with the asset tests, and to take such other
action within 30 days after the close of any quarter as may be required to cure
any noncompliance. However, there can be no assurance that such other action
will always be successful.
OPERATING PARTNERSHIP
In the case of a REIT that is a partner in a partnership, Treasury
Regulations provide that the REIT will be deemed to own its proportionate share
of the assets of the partnership and will be deemed to be entitled to the gross
income of the partnership attributable to such share. In addition, the assets
and gross income of the partnership will retain the same character in the hands
of the REIT for purposes of Section 856 of the Code, including satisfying the
gross income and asset tests described below.
ANNUAL DISTRIBUTION REQUIREMENTS. The Company, in order to avoid corporate
income taxation of the earnings that it distributes, is required to distribute
dividends (other than capital gain dividends) to its stockholders in an amount
at least equal to (a) the sum of (i) 95% of the Company's "REIT taxable income"
(computed without regard to the dividends paid deduction and the REIT's net
capital gain) and (ii) 95% of the net income (after tax), if any, from
foreclosure property, minus (b) the sum of certain items of 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 Company timely files its tax
return for such year and if paid on or before the first regular dividend payment
after such declaration.
To the extent that the Company does not distribute of its "REIT taxable
income," as adjusted, it will be subject to tax on the undistributed amount at
regular capital gains and ordinary corporate tax rates. The Company may elect,
however, to pay the tax on its undistributed long-term capital gains on behalf
of its stockholders, in which case the stockholders would include in income
their proportionate share of the undistributed long-term capital gains and
receive a credit or refund for their share of the tax paid by the Company.
Furthermore, if the Company should fail to distribute during each calendar
year at least the sum of (i) 85% of its REIT ordinary income for such year; (ii)
95% of its REIT capital gain income for such year, and (iii) any undistributed
taxable income from prior periods, the Company would be subject to a 4%
nondeductable excise tax on the excess of such required distribution over the
amounts actually distributed (apparently regardless of whether the Company
elects (as described above) to pay the capital gains tax on undistributed
capital gains).
The Company intends to continue to make timely distributions sufficient to
satisfy the annual distribution requirements. In this regard, the Partnership
Agreement of the Operating Partnership authorizes the Company, as general
partner, to take such steps as may be necessary to cause the Operating
Partnership to distribute to its partners an amount sufficient to permit the
Company to meet these distribution requirements. It is possible, however, that
the Company, from time to time, may not have sufficient cash or other liquid
assets to meet the 95% distribution requirement due to timing differences
between the actual receipt of income and actual payment of deductible expenses
and the inclusion of such income and deduction of such expenses in arriving at
taxable income of the Company, or if the amount of nondeductible expenses such
as principal amortization or capital expenditures exceed the amount of noncash
deductions. In the event that such timing differences occur, in order to meet
the 95% distribution requirement, the Company may cause the Operating
Partnership to arrange for short-term, or possibly long-term, borrowing to
permit the payment of required dividends. If the amount of nondeductible
expenses exceeds noncash deductions, the Operating Partnership may refinance its
indebtedness to reduce principal payments and borrow funds for capital
expenditures.
Under certain circumstances, the Company may be able to rectify a failure
to meet the distribution requirement for a year by paying "deficiency dividends"
to stockholders in a later year that may be included in the Company's deduction
for dividends paid for the earlier year. Thus, the Company may be able to avoid
being taxed on amounts distributed as deficiency dividends; however, the Company
will be required to pay interest to the Service based upon the amount of any
deduction taken for deficiency dividends.
RECORDKEEPING REQUIREMENTS
Pursuant to applicable Treasury Regulations, in order to be able to elect
to be taxed as a REIT, the Company must maintain certain records and request on
an annual basis certain information from its stockholders designed to disclose
the actual ownership of its outstanding stock. The Company intends to comply
with such requirements. A REIT's failure to comply with such requirements would
result in a monetary fine imposed on such REIT. However, no penalty would be
imposed if such failure is due to reasonable cause and not to willful neglect.
FAILURE TO QUALIFY. If the Company fails to qualify for taxation as a REIT
in any taxable year and the relief provisions do not apply, the Company will be
subject to tax (including any applicable alternative minimum tax) on its taxable
income at regular corporate rates. Distributions to stockholders in any year in
which the Company fails to qualify will not be deductible by the Company, nor
will they be required to be made. In such event, to the extent of current and
accumulated earnings and profits, distributions to stockholders will be taxable
as ordinary income to the extent of current and accumulated earnings and
profits, and, subject to certain limitations in the Code, corporate distributees
may be eligible to claim the dividends received deduction. Unless entitled to
relief under specific statutory provisions, the Company also will be
disqualified from taxation as a REIT for the four taxable years following the
year during which qualification was lost. If is not possible to state whether in
all circumstances the Company would be entitled to such statutory relief.
TAXATION OF STOCKHOLDERS
TAXATION OF TAXABLE DOMESTIC STOCKHOLDERS. As long as the Company
qualifies as a REIT, distributions made to the Company's taxable domestic
stockholders out of current or accumulated earnings and profits (and not
designated as capital gain dividends) will be taken into account by them as
ordinary income and will not be eligible for the dividends received deduction
for corporations. As used herein, the term "U.S. Stockholder" means a holder of
Common Stock that for U.S. federal income tax purposes is (i) a citizen or
resident of the United States, (ii) a corporation, partnership, or other entity
taxable as such created or organized in or under the laws of the United States
or of any State (including the District of Columbia), (iii) an estate whose
income from sources without the United States is includible in gross income for
U.S. federal income tax purposes, regardless of its connection with the conduct
of a trade or business within the United States, or (iv) any trust with respect
to which (A) a U.S. court is able to exercise primary supervision over the
administration of such trust and (B) one or more U.S. fiduciaries have the
authority to control all substantial decisions of the trust.
Distributions that are properly designated by the Company as capital gain
dividends are subject to special treatment. According to a notice published by
the Service, until further guidance is issued, if the Company designates a
dividend as a capital gain dividend, it may also designate the dividend as (i) a
20% rate gain distribution, (ii) an unrecaptured Section 1250 gain distribution
(25% rate) or (iii) a 28% rate gain distribution. The maximum amount which may
be designated in each class of capital gain dividends is determined by treating
the Company as an individual with capital gains that may be subject to the
maximum 20% rate, the maximum 25% rate, and the maximum 28% rate. If the Company
does not designate all or part of a capital gain dividend as within such
classes, the undesignated portion will be considered as a 28% rate gain
distribution. Such designations are binding on each stockholder, without regard
to the period for which the stockholder has held its Common Stock. However,
corporate stockholders may be required to treat up to 20% of certain capital
gain dividends as ordinary income. Capital gain dividends are not eligible for
the dividends received deduction for corporations.
Distributions in excess of current and accumulated earnings and profits
will not be taxable to a stockholder to the extent that they do not exceed the
adjusted basis of the stockholder's Common Stock, but rather will reduce the
adjusted basis of such stock. To the extent that such distributions in excess of
current and accumulated earnings and profits exceed the adjusted basis of a
stockholder's Common Stock, such distributions will be included in income as
long-term capital gain (or short-term capital gain if the Common Stock had been
held for one year or less), assuming the Common Stock is a capital asset in the
hands of the stockholder. In addition, any distribution declared by the Company
in October, November, or December of any year and payable to a stockholder of
record on a specified date in any such month shall be treated as both paid by
the Company and received by the stockholder on December 31 of such year,
provided that the distribution is actually paid by the Company during January of
the following calendar year.
Stockholders may not include in their individual income tax returns any net
operating losses or capital losses of the Company. Instead, such losses would be
carried over by the Company for potential offset against its future income
(subject to certain limitations). Taxable distributions from the Company and
gain from the disposition of the Common Stock will not be treated as passive
activity income and, therefore, stockholders generally will not be able to apply
any passive activity losses (such as losses from certain types of limited
partnerships in which a stockholder is a limited partner) against such income.
In addition, taxable distributions from the Company generally will be treated as
investment income for purposes of the investment interest limitations. Capital
gains from the disposition of Common Stock (or distributions treated as such),
however, will be treated as investment income only if the stockholder so elects,
in which case such capital gains will be taxed at ordinary income rates. The
Company will notify stockholders after the close of the Company's taxable year
as to the portions of the distributions attributable to that year that
constitute ordinary income or capital gain dividends.
CAPITAL GAINS AND LOSSES. A capital asset generally must be held for more
than one year in order for gain or loss derived from its sale or exchange to be
treated as long-term capital gain or loss. The highest marginal individual
income tax rate is 39.6% and the tax rate on long-term capital gains applicable
to non-corporate taxpayers is 28% for sales and exchanges of assets held for
more than one year but not more than eighteen months, and 20% for sales and
exchanges of assets held for more than eighteen months. Thus, the tax rate
differential between capital gain and ordinary income for non-corporate
taxpayers may be significant. In addition, the characterization of income as
capital gain or ordinary income may affect the deductibility of capital losses.
All or a portion of any loss realized upon a taxable disposition of the Common
Stock may be disallowed if other shares of Common Stock are purchased within 30
days before or after the disposition. Capital losses not offset by capital gains
may be deducted against a non-corporate taxpayer's ordinary income only up to a
maximum annual amount of $3,000. Unused capital losses may be carried forward
indefinitely by non-corporate taxpayers. All net capital gain of a corporate
taxpayer is subject to tax at ordinary corporate rates. A corporate taxpayer can
deduct capital losses only to the extent of capital gains, with unused losses
being carried back three years and forward five years.
Recently enacted legislation reduces the maximum rate on long-term capital
gains of non-corporate taxpayers from 28% to 20% (10% for taxpayers in the 15%
tax bracket). However, the reduced long-term capital gains rates are only
available for sales or exchanges of capital assets held for more than 18 months.
Any long-term capital gains from the sale or exchange of depreciable real
property that would be subject to ordinary income taxation (i.e., "depreciation
recapture") if it were treated as personal property will be subject to a maximum
tax rate of 25% instead of the 20% maximum rate for gains taken into account
after July 28, 1997. Also, under the legislation, for taxable years beginning
after December 31, 2000 the maximum capital gains rates for assets which are
held more than five years are 18% and 8% (rather than 20% and 10%). These rates
will generally only apply to assets for which the holding period begins after
December 31, 2000.
The capital gains provisions in the legislation authorize the Service to
issue regulations (including regulations requiring reporting) applying the
provisions to any "pass-through entity" including a REIT and interests in such
an entity. No assurance can be given concerning the content of any such
regulations. Generally, the determination of when gain is properly taken into
account will be made at the entity level.
Distributions from the Company and gain from the disposition of shares
will not ordinarily be treated as passive activity income, and therefore,
stockholders generally will not be able to apply any "passive losses" against
such income. Dividends from the Company (to the extent they do not constitute a
return of capital) and gain from the disposition of shares generally will be
treated as investment income for purposes of the investment interest limitation.
The Company will report to its domestic stockholders and the Service the
amount of dividends paid during each calendar year, and the amount of tax
withheld, if any, with respect thereto. Under the backup withholding rules, a
stockholder may be subject to backup withholding at the rate of 31% with respect
to dividends paid unless such holder (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 stockholder who does not provide
the Company with its 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 stockholder's income tax liability. In addition, the
Company may be required to withhold a portion of capital gain distributions made
to any stockholders who fail to certify their non-foreign status to the Company.
See "TAXATION OF FOREIGN STOCKHOLDERS" below.
Tax-exempt entities, including qualified employee pension and profit
sharing trusts and individual retirement accounts ("Exempt Organizations"),
generally are exempt from federal income taxation. However, they are subject to
taxation on their unrelated business taxable income ("UBTI"). While many
investments in real estate generate UBTI, the Service has issued a published
ruling that dividend distributions from a REIT to an exempt employee pension
trust do not constitute UBTI, provided that the shares of the REIT are not
otherwise used in an unrelated trade or business of the exempt employee pension
trust. Based on that ruling, amounts distributed by the Company to Exempt
Organizations generally should not constitute UBTI. However, if an Exempt
Organization finances its acquisition of the Common Stock with debt, a portion
of its income from the Company will constitute UBTI pursuant to the
"debt-financed property" rules. Furthermore, social clubs, voluntary employee
benefit associations, supplemental unemployment benefit trusts, and qualified
group legal services plans that are exempt from taxation under paragraphs (7),
(9), (17), and (20), respectively, of Section 501(c) of the Code are subject to
different UBTI rules, which generally will require them to characterize
distributions from the Company as UBTI. See "ERISA CONSIDERATIONS."
TAXATION OF FOREIGN STOCKHOLDERS. The rules governing United States federal
income taxation of nonresident alien individuals, foreign corporations, foreign
partnerships and other foreign stockholders (collectively, "Non-U.S.
Stockholders") are complex, and no attempt will be made herein to provide more
than a limited summary of such rules. Prospective Non-U.S. Stockholders should
consult with their own tax advisors to determine the impact of U.S. federal,
state and local income tax laws with regard to an investment in the capital
stock of the Company, including any reporting requirements, as well as the tax
treatment of such an investment under their home country laws.
Distributions that are not attributable to gain from sales or exchanges by
the Company of a U.S. real property interest and not designated by the Company
as capital gain 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 Company. 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 that tax. However, if income from the investment in the
shares is treated as effectively connected with the Non-U.S. Stockholder's
conduct of a United States trade or business, the Non-U.S. Stockholder generally
will be subject to a tax at graduated rates, in the same manner as U.S.
stockholders are taxed with respect to such dividends (and may also be subject
to the 30% branch profits tax if the stockholder is a foreign corporation). The
Company expects to withhold United States income tax at the rate of 30% on the
gross amount of any dividends paid to a Non-U.S. Stockholder (31% if appropriate
documentation evidencing such Non-U.S. Stockholders' foreign status has not been
provided) unless (1) a lower treaty rate applies and the required form
evidencing eligibility for that reduced rate is filed with the Company or (2)
the Non-U.S. Stockholder files an Service Form 4224 with the Company claiming
that the distribution is "effectively connected" income. The Treasury Department
issued final regulations in October 1997 that modify the manner in which the
Company complies with the withholding requirements, generally effective for
distributions after December 31, 1998.
Distributions in excess of current and accumulated earnings and profits of
the Company will not be taxable to a stockholder to the extent that they do not
exceed the adjusted basis of the stockholder's shares, but rather will reduce
the adjusted basis of such shares. To the extent that such distributions exceed
the adjusted basis of a Non-U.S. Stockholder's shares, they will give rise to
tax liability if the Non-U.S. Stockholder would otherwise be subject to tax on
any gain from the sale or disposition of his shares as described below. Because
it generally 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, amounts in excess thereof may be withheld by the Company. However, any
such excess amount withheld would be refundable to the extent it is determined
subsequently that such distribution was, in fact, in excess of current and
accumulated earnings and profits of the Company. Under a separate provision, the
Company is required to withhold 10% of any distribution in excess of the
Company's current and accumulated earnings and profits. Consequently, although
the Company intends to withhold at a rate of 30% (or 31%, if applicable) on the
entire amount of any distribution, to the extent that the Company does not do
so, any portion of a distribution not subject to withholding at a rate of 30%
(or 31%, if applicable) will be subject to withholding at a rate of 10%.
For any year in which the Company qualifies as a REIT, distributions that
are attributable to gain from sales or exchanges by the Company of U.S. real
property interests will be taxed to a Non-U.S. Stockholder 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. Stockholder as if such gain
were effectively connected with a U.S. business. Thus, Non-U.S. Stockholders
would be taxed at the normal capital gain rates applicable to U.S. stockholders
(subject to applicable alternative minimum tax and a special alternative minimum
tax in the case of nonresident alien individuals). Distributions subject to
FIRPTA may also be subject to a 30% branch profits tax in the hands of a
corporate Non-U.S. Stockholder not entitled to treaty relief or exemption. The
Company is required to withhold 35% of any distribution that is designated by
the Company as a capital gains dividend. The amount withheld is creditable
against the Non-U.S. Stockholder's FIRPTA tax liability.
The Company will be required to withhold from distributions to Non-U.S.
Stockholders, and remit to the IRS, (a) 35% of designated capital gain dividends
(or, if greater, 35% of the amount of any distributions that could be designated
as capital gain dividends) and (b) 30% of ordinary dividends paid out of
earnings and profits. In addition, if the Company designates prior distributions
as capital gain dividends, subsequent distributions, up to the amount of such
prior distributions, will be treated as capital gain dividends for purposes of
withholding. A distribution in excess of the Company's earnings and profits may
be subject to 30% dividend withholding if at the time of the distribution it
cannot be determined whether the distribution will be in an amount in excess of
the Company's current or accumulated earnings and profits. Tax treaties may
reduce the Company's withholding obligations. If the amount withheld by the
Company with respect to a distribution to a Non-U.S. Stockholder exceeds the
stockholder's United States tax liability with respect to such distribution (as
determined under the rules described above), the Non-U.S. Stockholder may file
for a refund of such excess from the IRS. It should be noted that the 35%
withholding tax rate on capital gain dividends currently corresponds to the
maximum income tax rate applicable to corporations, but is higher than the 28%
maximum rate on capital gains of individuals.
Gain recognized by a Non-U.S. Stockholder upon a sale of shares of capital
stock generally will not be taxed under FIRPTA if a REIT 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. It is currently anticipated that the Company
will be a "domestically controlled REIT," and therefore the sale of shares will
not be subject to taxation under FIRPTA. However, gain not subject to FIRPTA
will be taxable to a Non-U.S. Stockholder if (i) investment in the shares of
capital stock is "effectively connected" with the Non-U.S. Stockholder's U.S.
trade or business, in which case the Non-U.S. Stockholder will be subject to the
same treatment as United States stockholders with respect to such gain, or (ii)
the Non-U.S. Stockholder 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, in which case the nonresident alien individual who
was present in the U.S. 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. Stockholder would be subject to the same treatment as U.S.
stockholders with respect to such gain (subject to applicable alternative
minimum tax, possible withholding tax and a special alternative minimum tax in
the case of nonresident alien individuals). A purchaser of shares of capital
stock from a Non-U.S. Stockholder will not be required under FIRPTA to withhold
on the purchase price if the purchased shares are "regularly traded" on an
established securities market or if the Company is a domestically controlled
REIT. Otherwise, under FIRPTA the purchaser of shares may be required to
withhold 10% of the purchase price and remit such amount to the IRS.
INCOME TAXATION OF THE OPERATING PARTNERSHIP,
THE UNDERLYING PARTNERSHIPS AND THEIR PARTNERS
The following discussion summarizes certain federal income tax
considerations applicable to the Company's investment in the Operating
Partnership.
CLASSIFICATION OF THE OPERATING PARTNERSHIP. the Company will be entitled
to include in its income its distributive share of the income and to deduct its
distributive share of the losses of the Operating Partnership (including the
Operating Partnership's share of the income or losses of any partnerships in
which it owns an interest) only if the Operating Partnership is classified for
federal income tax purposes as a partnership rather than an association taxable
as a corporation. On December 17, 1996, the Service issued final Treasury
Regulations regarding the classification of business entities (known as the
"check-the-box" rules) which changed the process for electing business tax
status.
The new Treasury Regulations, which were effective January 1, 1997,
replaced the former rules for classifying business organizations with a simpler
elective classification system that generally allows eligible entities to choose
to be taxed as partnerships or corporations. Under the Treasury Regulations, a
limited partnership which qualifies as an eligible entity will generally be
allowed to choose to be taxed as a partnership or a corporation. The default
classification for an existing entity is the classification that the entity
claimed immediately prior to January 1, 1997. Alternatively, an eligible entity
may affirmatively elect its classification. An entity's default classification
continues until the entity elects to change its classification by means of an
affirmative election. Because the Operating Partnership was classified as a
partnership as of December 31, 1996, the Operating Partnership will be treated
as a partnership for federal income tax purposes for periods after December 31,
1996 pursuant to the new Treasury Regulations. The Operating Partnership
confirmed this tax treatment by electing to be treated as a partnership under
the Treasury Regulations.
The Treasury Regulations state that the Service will not challenge the
prior classification of an existing eligible entity for periods before January
1, 1997 if: (1) the entity had a reasonable basis for its claimed
classification;(2) the entity and all of its partners recognized the tax
consequences of any change in the entity's classification within 60 months
before January 1, 1997; and (3) neither the entity nor any member had been
notified in writing on or before May 8, 1996, that the classification was under
examination by the IRS. Requirements (2) and (3) described in this paragraph are
either not relevant to, or have been satisfied by, the Operating Partnership.
Accordingly, the Operating Partnership's claimed classification as a partnership
for periods prior to January 1, 1997 should be respected if the Operating
Partnership had a reasonable basis for such classification.
In determining whether a reasonable basis for partnership classification
existed for periods prior to January 1, 1997, it is necessary to review the
former classification rules, under which an organization formed as a partnership
will be treated as a partnership for federal income tax purposes rather than as
a corporation only if it has no more than two of the four corporate
characteristics that the Treasury Regulations use to distinguish a partnership
from a corporation for tax purposes. These four characteristics are continuity
of life, centralization of management, limited liability, and free
transferability of interests.
The Operating Partnership has not requested, nor does it intend to
request, a ruling from the Service that it will be treated as a partnership for
federal income tax purposes. In the opinion of Nixon, Hargrave, Devans & Doyle
LLP, which is based on the provisions of the partnership agreement of the
Operating Partnership and on certain factual assumptions and representations of
the Company, the Operating Partnership has a reasonable basis for its claim to
be classified as a partnership for federal income tax purposes and therefore
should be taxed as a partnership rather than an association taxable as a
corporation for periods prior to January 1, 1997. Nixon, Hargrave, Devans &
Doyle LLP's opinion is not binding on the Service or the courts.
If for any reason the Operating Partnership was taxable as a corporation
rather than as a partnership for federal income tax purposes, the Company would
not be able to satisfy the income and asset requirements for REIT status. See "-
Requirements for Qualification -Income Tests" and "- Requirements for
Qualification - Asset Tests." In addition, any change in the Operating
Partnership's status for tax purposes might be treated as a taxable event, in
which case the Company might incur a tax liability without any related cash
distribution. See "- Requirements for Qualification - Annual Distribution
Requirements." Further, items of income and deduction of the Operating
Partnership would not pass through to its partners, and its partners would be
treated as stockholders for tax purposes. The Operating Partnership would be
required to pay income tax at corporate tax rates on its net income, and
distributions to its partners would constitute dividends that would not be
deductible in computing the Operating Partnership's taxable income.
PARTNERS, NOT PARTNERSHIPS, SUBJECT TO TAX. A partnership is not a taxable
entity for federal income tax purposes. Rather, a partner is required to take
into account its allocable share of a partnership's income, gains, losses,
deductions and credits for any taxable year of the partnership ending within or
with the taxable year of the partner, without regard to whether the partner has
received or will receive any distributions from the partnership.
PARTNERSHIP ALLOCATIONS. Although a partnership agreement will generally
determine the allocation of income and losses among partners, such allocations
may be disregarded for tax purposes under section 704(b) of the Code if they do
not have substantial economic effect. 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 Operating Partnership's allocations of taxable income and loss are intended
to comply with the requirements of section 704(b) of the Code and the Treasury
Regulations promulgated thereunder.
TAX ALLOCATIONS WITH RESPECT TO THE PROPERTIES. When property is
contributed to a partnership in exchange for an interest in the partnership, the
partnership generally takes a carryover basis in that property for tax purposes
equal to the adjusted basis of the contributing partners in the property, rather
than a basis equal to the fair market value of the property at the time of
contribution. Pursuant to section 704(c) of the Code, income, gain, loss and
deduction attributable to such contributed property must be allocated in a
manner such that the contributing partner is charged with, or benefits from,
respectively, the unrealized gain or unrealized loss associated with the
property at the time of the contribution. The amount of such unrealized gain or
unrealized loss is generally equal to the difference between the fair market
value of the contributed property at the time of contribution and the adjusted
tax basis of such property at the time of contribution (a "Book-Tax
Difference"). Such allocations are solely for federal income tax purposes and do
not affect the book capital accounts or other economic or legal arrangements
among the partners.
The partners of the Operating Partnership other than the Company (the
"Contributing Partners") are deemed to have contributed general or limited
partnership interests in other partnerships owning multifamily residential
properties which were acquired by Operating Partnership and which may have had
an adjusted tax basis which is less than the fair market value of such interests
(the "Contributed Interests"). Upon the merger or dissolution of the such
partnerships and the transfer of the properties to the Operating Partnership,
the Contributing Partners were deemed to have contributed the portion of the
properties represented by the Contributed Interests (the "Contributed Property")
to the Operating Partnership, and the Operating Partnership's tax basis in the
Contributed Property will be the tax basis of the Contributing Partners in the
Contributed Interests. Because the Contributed Property has a Book-Tax
Difference, the Operating Partnership Agreement will require allocations to be
made in a manner consistent with section 704(c) of the Code.
Under these special rules, the Contributing Partners may be allocated
lower amounts of depreciation deductions for tax purposes with respect to the
Contributed Property than the amount of such deductions that would be allocated
to them if such Contributed Property had a tax basis equal to its fair market
value at the time of contribution. In addition, in the event of the disposition
of any of the Contributed Property, all income attributable to the Book-Tax
Difference of such Contributed Property generally will be allocated to the
Contributing Partners, and the Company generally will be allocated only its
share of capital gains attributable to appreciation, if any, occurring after the
contribution of the Contributed Property. These allocations will tend to
eliminate the Book-Tax Differences with respect to the Contributed Property over
the life of the Operating Partnership. However, the special allocation rules of
Section 704(c) may not entirely eliminate the Book-Tax Difference on an annual
basis or with respect to a specific taxable transaction such as a sale. Thus,
the carryover basis of the Contributed Property in the hands of the Operating
Partnership could cause the Company (i) to be allocated lower amounts of
depreciation and other deductions for tax purposes than would be allocated to
the Company if the Contributed Property had a tax basis equal to its fair market
value at the time of contribution, and (ii) possibly to be allocated taxable
gain in the event of a sale of Contributed Property in excess of the economic or
book income allocated to the Company as a result of such sale. These allocations
possibly could cause the Company to recognize taxable income in excess of cash
proceeds, which might adversely affect its ability to comply with the REIT
distribution requirements. See " - Requirements for Qualification - ANNUAL
DISTRIBUTION REQUIREMENTS."
DEPRECIATION. The Operating Partnership's assets other than cash will
consist largely of property treated as purchased by the Operating Partnership.
The Operating Partnership has an aggregate basis in the assets of each
partnership it acquires equal to the sum of the purchase price paid for the
partnership interests. To the extent that the Operating Partnership's basis in a
piece of depreciable property exceeds the basis of the property when it was held
by the acquired partnership, such basis should in effect be treated as a newly
acquired, separate asset and entitled to 39-year depreciation.
Section 704(c) of the Code requires that depreciation as well as gain and
loss be allocated in a manner so as to take into account the variation between
the fair market value and tax basis of the property contributed. Similarly,
amortization on intangible contracts for services contributed to the Operating
Partnership will be allocated as required by section 704(c) of the Code.
Depreciation with respect to any property purchased by the Operating Partnership
subsequent to the admission of its partners will be allocated among the partners
in accordance with their respective percentage interests in the Operating
Partnership.
SALE OF PARTNERSHIP PROPERTY. Generally, any gain realized by a
partnership on the sale of property held by the partnership 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. However, under the REIT
Requirements, the Company's share as a partner of any gain realized by the
Operating Partnership on the sale of any property held as inventory or other
property held primarily for sale to customers in the ordinary course of a trade
or business will be treated as income from a prohibited transaction that is
subject to a 100% penalty tax. See "- Taxation of the Company as a REIT." Such
prohibited transaction income will also have an adverse effect upon the
Company's ability to satisfy the income tests for REIT status. See "-
Requirements for Qualification - INCOME TESTS." 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. A safe
harbor to avoid classification as a prohibited transaction exists as to real
estate assets held for the production of rental income by a REIT for at least
four years where in any taxable year the REIT has made no more than seven sales
of property or, in the alternative, the aggregate of the adjusted bases of all
properties sold does not exceed 10% of the adjusted bases of all of the REIT's
properties during the year and the expenditures includible in a property's basis
made during the four-year period prior to disposition must not exceed 30% of the
property's net sales price. The Operating Partnership to holds its properties
for investment with a view to long-term appreciation, to engage in the business
of acquiring, developing, owning, and operating and leasing the properties and
to make such occasional sales of the properties, including adjoining land, as
are consistent with the Company's and the Operating Partnership's investment
objectives. No assurance can be given, however, that every property sale by the
Operating Partnership will constitute a sale of property held for investment.
OTHER TAX CONSIDERATIONS
THE MANAGEMENT COMPANIES. A portion of the amounts to be used to fund
distributions to stockholders is expected to come from the Management Companies
through dividends on stock of the Management Companies to be held by the
Operating Partnership. The Management Companies do not qualify as REITs and will
pay federal, state and local tax income taxes on its net income at normal
corporate tax rates. The Company expects that the Management Companies' income,
after deducting its expenses, will not give rise to significant corporate tax
liabilities. The amount of corporate tax liability will increase if the Service
disallows the items of expense which the Company expects to be allocated to the
Management Companies.
THE TRUST. The Trust was formed as a "qualified REIT subsidiairy." As
such it is treated together with the Company as a single entity for federal
income tax purposes.
STATE AND LOCAL TAX CONSIDERATIONS. The Company and the Management
Companies will, and the Company's stockholders may, be subject to state or local
taxation in various states or local jurisdictions, including those in which the
Company, its stockholders or the Operating Partnership transact business or
reside. The state and local tax treatment of the Company and its stockholders
may not conform to the federal income tax consequences discussed above.
Consequently, prospective stockholders should consult their own tax advisors
regarding the effect of state and local tax laws on their investment in the
Company.
POSSIBLE FEDERAL TAX DEVELOPMENTS. The rules dealing with federal income
taxation are constantly under review by the IRS, the Treasury Department and
Congress. New federal tax legislation or other provisions may be enacted into
law or new interpretations, rulings or Treasury Regulations could be adopted,
all of which could affect the taxation of the Company or of its stockholders. No
prediction can be made as to the likelihood of passage of any new tax
legislation or other provisions either directly or indirectly affecting the
Company or its stockholders. Consequently, the tax treatment described herein
may be modified prospectively or retroactively by legislative, judicial or
administrative action.
ERISA CONSIDERATIONS
A fiduciary of a pension, profit-sharing, retirement or other employee
benefit plan ("Plan") subject to the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), should consider the fiduciary standards under ERISA
in the context of the Plan's particular circumstances before authorizing an
investment of any of such Plan's assets in shares of the Company's capital
stock. Accordingly, such fiduciary should consider whether the investment (i)
satisfies the diversification requirements of section 404(a)(1)(C) of ERISA,
(ii) is in accordance with the documents and instruments governing the Plan to
the extent consistent with ERISA, (iii) is prudent and an appropriate investment
for the Plan, based on examination of the Plan's overall investment portfolio
and (iv) is for the exclusive benefit of Plan participants and beneficiaries, as
required by ERISA.
In addition to the imposition of general fiduciary standards, ERISA and
the corresponding provisions of the Code prohibit a wide range of transactions
involving Plans and persons who have certain relationships to Plans ("parties in
interest" within the meaning of ERISA, "disqualified persons" within the meaning
of the Code). The Code's prohibited transaction rules also apply to certain
direct or indirect transactions between "disqualified persons" and individual
retirement accounts or annuities ("IRAs"), as defined in section 408(a) and (b)
of the Code. Thus, a Plan fiduciary and an IRA considering an investment in
shares also should consider whether the acquisition or the continued holding of
shares might constitute or give rise to a prohibited transaction.
Those persons proposing to invest on behalf of Plans should also consider
whether a purchase of one or more shares of capital stock will cause the assets
of the Company to be deemed assets of the Plan for purposes of the fiduciary
responsibility and prohibited transaction provisions of ERISA and the Code. The
Department of Labor (the "DOL") has issued regulations (the "DOL Regulations")
as to what constitutes assets of a Plan under ERISA. Under the DOL Regulations,
if a Plan acquires an equity interest in an entity, the Plan's assets would
include, for purposes of the fiduciary responsibility provisions of ERISA and
the prohibited transaction rules of ERISA and the Code, both the equity interest
and an undivided interest in each of the entity's underlying assets unless (a)
such interest is a "publicly offered security," (b) such interest is a security
issued by an investment company registered under the Investment Company Act of
1940, as amended, or (c) another specified exception applies.
PLAN OF DISTRIBUTION
The Company may sell the Offered Securities through underwriters or
dealers, directly to one or more purchasers, through agents or through a
combination of any such methods of sale. Any such underwriter or agent involved
in the offer and sale of the Offered Securities will be named in the applicable
Prospectus Supplement.
The distribution of the Common Stock by the Company may be affected
from time to time in one or more transactions (which may involve block
transactions) on the NYSE or otherwise pursuant to and in accordance with the
applicable rules of the NYSE, in the over-the-counter market, in negotiated
transactions, through the writing of Common Stock Warrants or through the
issuance of Preferred Stock convertible into Common Stock (whether such Common
Stock Warrants or Preferred Stock is listed on a securities exchange or
otherwise), or a combination of such methods of distribution, at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or at negotiated prices.
In connection with the sale of the Offered Securities, underwriters or
agents may receive compensation from the Company or from purchasers of the
Offered Securities, for whom they may act as agents, in the form of discounts,
concessions or commissions. Underwriters may sell the Offered Securities to or
through dealers, and such dealers may receive compensation in the form of
discounts, concessions or commissions from the underwriters and/or commissions
from the purchasers for whom they may act as agents. Underwriters, dealers and
agents that participate in the distribution of the Offered Securities may be
deemed to be underwriters under the Securities Act, and any discounts or
commissions they receive from the Company and any profit on the sale of the
Offered Securities they realize may be deemed to be underwriting discounts and
commissions under the Securities Act. Any such underwriter or agent will be
identified, and any such compensation received from the Company will be
described, in the applicable Prospectus Supplement.
Any Common Stock sold pursuant to a Prospectus Supplement will be listed
on the New York Stock Exchange, subject to official notice of issuance. Unless
otherwise specified in the applicable Prospectus Supplement, each series of
Offered Securities other than Common Stock will be a new issue with no
established trading market. The Company may elect to list any series of
Preferred Stock or other securities on an exchange, but is not obligated to do
so. It is possible that one or more underwriters may make a market in a series
of Offered Securities, but will not be obligated to do so and may discontinue
any market making at any time without notice. Therefore, no assurance can be
given as to the liquidity of, or the trading market for, the Offered Securities.
Under agreements into which the Company may enter, underwriters, dealers
and agents who participate in the distribution of the Offered Securities may be
entitled to indemnification by the Company against certain liabilities,
including liabilities under the Securities Act.
Underwriters, dealers and agents may engage in transactions with, or
perform services for, or be tenants of, the Company in the ordinary course of
business.
In order to comply with the securities laws of certain states, if
applicable, the Offered Securities will be sold in such jurisdictions only
through registered or licensed brokers or dealers. In addition, in certain
states the Offered Securities may not be sold unless they have been registered
or qualified for sale in the applicable state or an exemption from the
registration or qualification requirement is available and is complied with.
LEGAL MATTERS
The legality of the Offered Securities issued pursuant to any Prospectus
Supplement will be passed upon by Nixon, Hargrave, Devans & Doyle LLP. In
addition, Nixon, Hargrave, Devans & Doyle LLP will provide an opinion with
respect to certain tax matters which form the basis of the discussion under
"Federal Income Tax Considerations".
EXPERTS
The financial statements incorporated by reference in this Prospectus or
elsewhere in the Registration Statement have been incorporated herein in
reliance on the reports audited by Coopers & Lybrand LLP, independent
accountants, given on the authority of that firm as experts in accounting and
auditing.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table is an itemized listing of expenses to be incurred
by the Company in connection with the issuance and distribution of the shares of
Common Stock being registered hereby, other than discounts and commissions:
SEC Registration Fee $118,000
NYSE Listing Fee 28,500*
Printing and Engraving Costs 20,000*
Legal Fees and Expenses 50,000*
Accounting Fees and Expenses 50,000*
Miscellaneous 5,000*
---------
Total $271,500*
*Estimate
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
See original filing.
ITEM 16. EXHIBITS
NUMBER DESCRIPTION
1.1 Form of Underwriting Agreement (Common Stock)
1.2 Form of Underwriting Agreement (Preferred Stock)
1.3 Form of Underwriting Agreement (Common Stock Purchase Rights)
1.4 Form of Underwriting Agreement (Debt Securities)
3.1 Articles of Amendment and Restatement of Articles of Incorporation of
Home Properties of New York, Inc. (the "Company")
3.2 Amendment to the Articles of Incorporation*
3.3 Amended and Restated By-Laws of Home Properties (Revised 12/30/96)
4.1 Form of certificate representing shares of Common Stock of the Company
4.2 Partnership Interest Purchase Agreement among the Company, Home
Properties of New York, L.P. (the "Operating Partnership") and the State
of Michigan Retirement Systems.
II-2
4.3 Form of Indenture for Debt Securities
5.1 Opinion of Nixon, Hargrave, Devans & Doyle LLP regarding the legality of
the Common Stock being registered*
8.1 Opinion of Nixon, Hargrave, Devans & Doyle LLP regarding certain tax
matters**
10.1 Second Amended and Restated Agreement of Limited Partnership of the
Operating Partnership
10.2 Amendments No. One through Eight to the Second Amended and Restated
Agreement of Limited Partnership of the Operating Partnership
10.3 Amendment No. Nine to the Second Amended and Restated Agreement of
Limited Partnership of the Operating Partnership*
12.1 Statement of Computation of Ratios of Earnings to Combined
Fixed Charges*
23.1 Consent of Nixon, Hargrave, Devans & Doyle LLP (included as part of
Exhibits 5.1 and 8.1)
23.2 Consent of Coopers & Lybrand LLP*
25 Power of Attorney (included on signature page)
* Included with this filing.
** To be filed by amendment or by a Current Report on Form 8-K incorporated by
reference herein.
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange 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 Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant 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 of
1933, 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.
(3) For purposes of determining any liability under the Securities Act of
1933, each filing of the Registrant's annual report pursuant to Section 13(a) or
Section 15(d) of the Securities Exchange Act of 1934 (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to Section
15(d) of the Securities Exchange Act of 1934) 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.
(4) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement 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.
The undersigned registrant hereby undertakes, at the time of any proposed
offer of Debt Securities pursuant to a Prospectus Supplement, 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 in accordance
with the rules and regulations prescribed by the Commission under Section
305(b)(2) of the Trust Indenture Act.
The undersigned registrant hereby undertakes, at the time of any proposed
offer of any Common Stock Purchase Rights pursuant to a Prospectus Supplement,
to further supplement the prospectus, after the expiration of the subscription
period, to set forth the results of the subscription offer, the transactions by
the underwriters, if any, during the subscription period, the amount of any
unsubscribed securities to be purchased by the underwriters, and the terms of
any subsequent reoffering thereof. If any public offering by the underwriters is
to be made on terms differing from those set forth on the cover page of the
applicable Prospectus Supplement, a post-effective amendment will be filed to
set forth the terms of such offering.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
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 Rochester, New York, on the 13th day of May,
1998.
HOME PROPERTIES OF NEW YORK, INC.
By: /S/ Amy L. Tait
Amy L. Tait
Executive Vice President
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below hereby severally constitutes and appoints Norman P. Leenhouts, Amy L.
Tait, Ann M. McCormick, David P. Gardner and each of them, his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments (including post-effective amendments) to the Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto such attorney-in-fact and agents, and each of them, full power and
authority to do and person each and every act and thing requisite or necessary
that he might do in person.
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
SIGNATURE TITLE DATE
/S/Norman P. Leenhouts Director, Chairman May 5, 1998
Norman P. Leenhouts and Co-Chief Executive Officer
(Principal Executive Officer)
/S/Nelson B. Leenhouts Director, President May 5, 1998
Nelson B. Leenhouts and Co-Chief Executive Officer
(Principal Executive Officer)
/S/Richard J. Crossed Director, Executive Vice May 5, 1998
Richard J. Crossed President
/S/ Amy L. Tait Director, Executive Vice May 5, 1998
Amy L. Tait President and Chief Operating
Officer
/S/ David P. Gardner Vice President, Chief May 5, 1998
David P. Gardner Financial Officer and
Treasurer
(Principal Financial
and Accounting Officer
/S/ Burton S. August, Sr. Director May 5, 1998
Burton S. August, Sr.
/S/ William Balderston, III Director May 5, 1998
William Balderston, III
/S/ Alan L. Gosule Director May 5, 1998
Alan L. Gosule
/S/Leonard F. Helbig, III Director May 5, 1998
Leonard F. Helbig, III
/S/Roger W. Kober Director May 5, 1998
Roger W. Kober
/S/Clifford W. Smith, Jr Director May 5, 1998
Clifford W. Smith, Jr.
/S/Paul L. Smith Director May 5, 1998
Paul L. Smith
EXHIBIT INDEX
The Company of New York, Inc. (the "Company")
Registration Statement on Form S-3 No. 333-_____
NUMBER DESCRIPTION LOCATION
1.1 Form of Underwriting Agreement (Common Stock) *
1.2 Form of Underwriting Agreement (Preferred Stock) *
1.3 Form of Underwriting Agreement (Common Stock *
Purchase Rights)
1.4 Form of Underwriting Agreement (Debt Securities) *
3.1 Articles of Amendment and Restatement Filed herewith
of Articles of Incorporation of the
Company
3.2 Amendment to Articles of Incorporation Filed herewith
3.3 Amended and Restated By-Laws of the Company Form 8-K dated
12/31/96 and filed
on 1/7/97 (File
No. 1-13136)
("12/96 8-K")
4.1 Form of certificate representing shares Form S-11, File
of Common Stock of the Company No. 33-78862
4.2 Partnership Interest Purchase Agreement among 12/96 8-K
the Company, Home Properties of New York, L.P.
(the "Operating Partnership") and the State
of Michigan Retirement Systems.
4.3 Form of Indenture for Debt Securities Form S-3, File No.
333-2674 ("Prior
Shelf S-3")
5.1 Opinion of Nixon, Hargrave, Devans & Doyle Filed herewith
LLP regarding the legality of the Common
Stock being registered
8.1 Opinion of Nixon, Hargrave, Devans & Doyle *
LLP regarding certain tax matters
10.1 Second Amended and Restated Agreement of Limited Form 8-K dated
Partnership of the Operating Partnership 9/26/97 (File
No. 1-13136
10.2 Amendments No. One through Eight to the Form 10-K for
Second Amended and Restated Agreement of year ended
Limited Partnership of the Operating Partnership December 31, 1997
(File No. 1-13136)
10.3 Amendment No. Nine to the Second Amended and
Restated Agreement of Limited
Partnership of the Operating Partnership Filed herewith
12.1 Computation of Ratios of Earnings to Combined
Fixed Charges Filed herewith
23.1 Consent of Nixon, Hargrave, Devans & Included with
Doyle LLP Exhibits 5.1 and
8.1
23.2 Consent of Coopers & Lybrand LLP Filed herewith
24 Power of Attorney Included on
signature page
* To be filed by amendment or on a Current Report on Form 8-K incorporated
herein by reference.
<PAGE>
Exhibit 3.1
ARTICLES OF AMENDMENT AND RESTATEMENT
OF
ARTICLES OF INCORPORATION
OF
HOME PROPERTIES OF NEW YORK, INC.
Home Properties of New York, Inc., a Maryland corporation (the
"Corporation"), for the purpose of amending and restating its Articles of
Incorporation ("Charter") pursuant to Section 2-609 of the Maryland General
Corporation Law (the "Act"), hereby certifies that:
FIRST: The Corporation desires to amend its Charter as set forth in
these Articles of Amendment and Restatement and to restate its Charter as
currently in effect after giving effect to such amendments.
SECOND: The following provisions are all of the provisions of the
Charter currently in effect after giving effect to the amendments effected
hereby:
ARTICLE I
INCORPORATION
Norman P. Leenhouts and Nelson B. Leenhouts, being at least eighteen
(18) years of age, formed the Corporation under the Act.
ARTICLE II
NAME
The name of the Corporation is Home Properties of New York, Inc.
ARTICLE III
PURPOSES
The Corporation is formed for the purpose of engaging in any lawful
act or activity for which corporations may be organized under the Act.
ARTICLE IV
PRINCIPAL OFFICE, REGISTERED OFFICE AND AGENT
The address of the principal office of the Corporation is 850 Clinton
Square, Rochester, New York 14604. The address of the Corporation's
principal office and registered office in the State of Maryland is 11 East
Chase Street, Baltimore, Maryland 21202, and the name of its registered
agent at such address is The Prentice-Hall Corporation System, Maryland.
ARTICLE V
DIRECTORS
The number of directors of the Corporation shall be three, which
number may be increased or decreased to not fewer than three in accordance
with the Bylaws of the Corporation. The directors currently in office are:
Norman P. Leenhouts
Nelson B. Leenhouts
Amy L. Tait
ARTICLE VI
AUTHORIZED CAPITAL STOCK; RIGHTS AND PREFERENCES; ISSUANCE OF STOCK
6.1 AUTHORIZED CAPITAL STOCK. The total number of shares of stock (the
"Stock") which the Corporation has authority to issue is fifty million
(50,000,000) shares, consisting of (A) thirty million (30,000,000) shares of
common stock, par value $.01 per share ("Common Stock"); (B) ten million
(10,000,000) shares of excess stock, par value $.01 per share ("Excess Stock");
and (C) ten million (10,000,000) shares of preferred stock, par value $.01 per
share ("Preferred Stock"). The aggregate par value of all the shares of all
classes of Stock is $500,000.
6.2 PREFERRED STOCK. The Board of Directors may issue the Preferred
Stock in one or more series consisting of such numbers of shares and having
such preferences, conversion and other rights, voting powers, restrictions and
limitations as to dividends, qualifications and terms and conditions of
redemption of stock as the Board of Directors may from time to time determine
when designating such series.
6.2.1 BOARD AUTHORITY. The authority of the Board of Directors
with respect to each series shall include, but not be limited to,
determination of the following:
(A) the designation of the series, which may be by
distinguishing number, letter or title;
(B) the number of shares of the series, which number the
Board of Directors may thereafter increase or decrease (but
not below the number of shares thereof then outstanding);
(C) whether dividends, if any, shall be cumulative or
noncumulative and the dividend rate of the series;
(D) the dates at which dividends, if any, shall be
payable;
(E) the redemption rights and price or prices, if any,
for shares of the series;
(F) the terms and amounts of any sinking fund to be
established for the purchase or redemption of shares of the
series;
(G) the amounts payable on shares of the series in the event
of any voluntary or involuntary liquidation, dissolution or
winding up of the affairs of the Corporation;
(H) whether the shares of the series shall be convertible
into shares of any other class or series, or any other
security, of the Corporation or any other corporation, and,
if so, the specification of such other class or series or
such other security, the conversion price or rate, any
adjustments thereof, the date or dates on which such shares
shall be convertible and all other terms and conditions upon
which such conversion may be made;
(I) restrictions on the issuance of shares of the same
series or of any other class or series;
(J) the voting rights, if any, of the holders of shares
of the series; and
(K) ownership and transfer restrictions which are
consistent with Article VII hereof.
6.2.2 RIGHTS UPON LIQUIDATION. Unless the terms of a series of
Preferred Stock provide otherwise, with respect to any distribution
of the assets of the Corporation following the voluntary or
involuntary liquidation, dissolution or winding up of the
Corporation, the portion of the assets distributed to each holder
of shares of each series of Preferred Stock shall be determined in
accordance with the terms of such series assuming that any shares
of Excess Preferred Stock (as defined in Subsection 7.5.4) which
resulted from the conversion of shares of such series of Preferred
Stock are outstanding shares of Preferred Stock of such series.
6.2.3 EXCHANGE. Notwithstanding any provision of the terms of a
series of Preferred Stock, shares of Preferred Stock shall
automatically and without further action convert into shares of
Excess Preferred Stock, and shares of Excess Preferred Stock shall
automatically and without further action convert into shares of
Preferred Stock, at the times and in the manner provided in
Section 7.5 hereof.
6.3 COMMON STOCK. The Common Stock shall be subject to the express terms
of the Preferred Stock and every series thereof. Each share of Common Stock
shall be equal to every other share of Common Stock.
6.3.1 DIVIDEND RIGHTS. The holders of shares of Common Stock
shall be entitled to receive such dividends as may be declared by
the Board of Directors out of funds legally available therefor.
6.3.2 RIGHTS UPON LIQUIDATION. With respect to any distribution
of the assets of the Corporation following the voluntary or
involuntary liquidation, dissolution or winding up of the
Corporation, each holder of shares of Common Stock shall be
entitled to receive, ratably with each other holder of shares of
Common Stock or Excess Common Stock (as defined in
Subsection 7.5.4), that portion of the assets of the Corporation
available for distribution to the holders of its Common Stock and
Excess Common Stock as the number of shares of Common Stock held by
such holder bears to the total number of shares of Common Stock and
Excess Common Stock then outstanding.
6.3.3 VOTING RIGHTS. The holders of shares of Common Stock shall
be entitled to vote on all matters submitted to the holders of
Common Stock for a vote at all meetings of the stockholders, and
each holder of shares of Common Stock shall be entitled to one vote
for each share of Common Stock held by such stockholder.
6.3.4 EXCHANGE. Shares of Common Stock shall automatically and
without further action convert into shares of Excess Common Stock,
and shares of Excess Common Stock shall automatically and without
further action convert into shares of Common Stock, at the times
and in the manner provided in Section 7.5 hereof.
6.4 EXCESS STOCK. The voting, distribution, redemption and certain other
rights, qualifications and limitations of shares of Excess Stock are set forth
in Section 7.5 hereof.
6.5 PREEMPTIVE RIGHTS. Except as may be provided in the terms of any
series of Preferred Stock as designated by the Board of Directors, no
stockholder shall have any preferential or preemptive right to acquire
additional shares of Stock.
6.6 CLASSIFICATION OF STOCK. The Board of Directors may classify or
reclassify any unissued shares of Stock from time to time by setting or
changing the preferences, conversion and other rights, voting powers,
restrictions and limitations as to dividends, qualifications, and the terms and
conditions of redemption of those shares of Stock, including, but not limited
to, the reclassification of (A) unissued shares of Common Stock to shares of
Preferred Stock or Excess Stock, (B) unissued shares of Preferred Stock to
shares of Common Stock or Excess Stock, (C) unissued shares of Excess Stock to
shares of Common Stock or Preferred Stock or (D) the issuance of any rights
plan or similar plan.
6.7 ISSUANCE OF STOCK. The Board of Directors may authorize the issuance
from time to time of shares of Stock of any class, whether now or hereafter
authorized, or securities or rights convertible into shares of Stock, for such
consideration as the Board of Directors may deem advisable (or without
consideration in the case of a share split or dividend), subject to such
restrictions or limitations, if any, as may be set forth in the Bylaws of the
Corporation.
ARTICLE VII
LIMITATIONS ON TRANSFER AND OWNERSHIP
7.1 LIMITATIONS ON TRANSFER. The shares of Stock (other than Excess
Stock) shall be freely transferable by the record owner thereof, provided that
if any purported transfer of Stock, if effective, would (A) cause all shares of
Common Stock and Preferred Stock to be owned by fewer than 100 persons,
(B) result in the Corporation being closely held within the meaning of
Section 856(h) of the Internal Revenue Code of 1986, as amended (the "Code"),
(C) otherwise result in the Corporation failing to satisfy any of the
requirements (without considering provisions allowing the Corporation to cure
such failure) necessary for the Corporation to qualify as a Real Estate
Investment Trust (a "REIT") under the Code or (D) result in a violation of
Section 7.2 by the purported transferee or any other person, then such
purported transfer shall be void AB INITIO with respect to the portion of the
shares of Stock purported to be transferred as is necessary to prevent such
result, except to the extent necessary to give effect to Section 7.10 hereof.
The intended transferee of such shares (whether or not such intended transferee
is the stockholder who would be in violation of Section 7.2 if the purported
transfer were effected) shall acquire no rights therein, and the transfer of
such shares will not be reflected on the Corporation's stock record books. For
purposes of this Article VII, (X) a "transfer" of shares of Stock shall mean
any sale, transfer, gift, hypothecation, pledge, assignment, or other
disposition, whether voluntary or involuntary, by operation of law or otherwise
and (Y) a person (which includes natural persons, corporations, trusts,
partnerships, and other entities) shall be deemed to be the beneficial owner of
the Stock ("Beneficial Ownership") that such person: (1) actually owns, (2)
constructively owns after applying the rules of Section 544 of the Code as
modified in the case of a REIT by Section 856(h) of the Code, or (3) has the
right to acquire upon exercise of outstanding rights, options or warrants, or
upon conversion of any securities convertible into Stock, if any. Each
certificate representing shares of Stock shall bear an appropriate legend
reflecting the provisions of this Article VII.
7.2 LIMITATIONS ON OWNERSHIP. Commencing on the date of the sale of
shares of Common Stock pursuant to the Corporation's first effective
registration statement for Common Stock filed with the Securities and Exchange
Commission under the Securities Act of 1933 (the "Initial Public Offering
Date"), or such earlier time as the Board of Directors may determine, and
except as provided by Section 7.6 hereof, no person shall at any time have
Beneficial Ownership of shares of Stock with an aggregate value in excess of
the amounts specified in this Section 7.2.
7.2.1 OWNERSHIP LIMIT. Any person, other than an Existing Holder
as defined in Subsection 7.2.2 below, may have Beneficial Ownership
of up to 8% of the aggregate value of all outstanding Stock of the
Corporation (the "Ownership Limit").
7.2.2 EXISTING HOLDER LIMIT. Stockholders who would exceed the
Ownership Limit on the day immediately following the Initial Public
Offering Date, assuming that all units of Home Properties of New
York, L.P. ("Units") are counted as shares of Common Stock, and any
stockholder who would exceed the Ownership Limit as a result of
receiving Stock from any of the foregoing by devise, gift or
otherwise (each, an "Existing Holder"), may continue to hold the
number of shares of Stock they hold on such date and may acquire
additional Stock upon (A) the exchange of Units for shares of
Common Stock, (B) the exercise of stock options or receipt of
grants of Stock pursuant to a stock benefit plan, (C) the
acquisition of Stock pursuant to a dividend reinvestment plan, (D)
the transfer of Stock from an Existing Holder or the estate of an
Existing Holder by devise, gift or otherwise, or (E) the
foreclosure on a pledge of Stock; provided, no such acquisition may
cause any Existing Holder to have Beneficial Ownership of more than
17.5% of the aggregate value of all outstanding Stock of the
Corporation or any two Existing Holders whose Stock is not
attributable to the other under Section 544 of the Code to have
Beneficial Ownership of more than 25.5% of the aggregate value of
all the outstanding Stock of the Corporation (the "Existing Holder
Limit").
7.2.3 ADJUSTMENTS TO LIMITATIONS. The Board of Directors may from
time to time increase or decrease either the Ownership Limit or
Existing Holder Limit, subject to the following limitations:
(A) after giving effect to such increase or decrease, five Persons
who are considered individuals pursuant to Section 542(a)(2) of the
Code must not be able to Beneficially Own, in the aggregate, more
than 49.5% in value of the outstanding Stock, (B) no decrease in
the Ownership Limit or Existing Holder Limit may cause any
stockholder who was not already in violation of this Section 7.2 to
become in violation of this Section 7.2, and (C) prior to such
increase, the Board of Directors may require such opinions of
counsel, affidavits, undertakings or agreements as it may deem
necessary or advisable in order to determine or ensure the
Corporation's status as a REIT.
7.3 STOCKHOLDER INFORMATION. Each person having Beneficial Ownership of
Stock shall disclose the following information to the Corporation:
7.3.1 INFORMATION REQUESTED. Upon demand of the Corporation, such
information with respect to such stockholder's direct and indirect
Beneficial Ownership of Stock as the Board of Directors in its
discretion deems necessary or appropriate in order that the
Corporation may fully comply with all provisions of the Code
relating to REITs and all regulations, rules and cases promulgated
or decided thereunder (the "REIT Provisions") and to comply with
the requirements of any taxing authority or governmental agency;
and
7.3.2 SIGNIFICANT INTERESTS. If a person Beneficially Owns 5% or
more of the aggregate value of all outstanding Stock of the
Corporation, such person shall, no later than January 31 of each
year, give the Corporation written notice of such person's name and
address and the number of shares of Stock Beneficially Owned by
such person and the manner in which such shares are held.
7.4 TRANSFEREE INFORMATION. Whenever the Board of Directors deems it
reasonably necessary to protect the tax status of the Corporation as a REIT
under the REIT Provisions, the Board of Directors may require a statement or
affidavit from each proposed transferee of Stock setting forth the number of
shares of Stock already Beneficially Owned by such proposed transferee and any
related person specified by the Board of Directors. If, in the opinion of the
Board of Directors, any proposed transfer may jeopardize the qualification of
the Corporation as a REIT, the Board of Directors shall have the right, but not
the duty, to refuse to permit the transfer of such Stock to the proposed
transferee. Except as provided in Section 7.10 hereof, all contracts for the
transfer of Stock shall be subject to this Section 7.4.
7.5 EXCESS STOCK.
7.5.1 CONVERSION INTO EXCESS STOCK. If, notwithstanding the other
provisions contained in this Article VII, at any time after the
Initial Public Offering Date there is a purported transfer of Stock
or a change in the capital structure of the Corporation (including
any redemption of Excess Stock pursuant to Subsection 7.5.7) as a
result of which any person would Beneficially Own Stock in excess
of the Ownership Limit or Existing Holder Limit, as applicable,
then the shares of Stock in excess of the Ownership Limit or
Existing Holder Limit (rounded up to the nearest whole share) shall
automatically and without further action convert into an equal
number of shares of Excess Stock. Such conversion shall be
effective as of the close of business on the business day prior to
the date of the purported transfer of Stock or the change in
capital structure, and no cancellation of the certificates
representing shares of converted Stock or issuance of certificates
representing shares of Excess Stock shall be necessary to document
such conversion. Automatically upon conversion, the shares of
Excess Stock shall be issued and outstanding Stock of the
Corporation under the Act and shares of Stock converted into such
Excess Stock shall no longer be issued and outstanding. In the
case where a purported transfer of Stock causes a stockholder other
than the purported transferee to Beneficially Own shares of Stock
in excess of the Ownership Limit or Existing Holder Limit, the
shares of Stock purportedly transferred in the amount of such
excess shall convert into Excess Stock rather than Stock already
held by the non-transferee stockholder, notwithstanding the fact
that the purported transferee would not Beneficially Own Stock in
excess of the Ownership Limit or Existing Holder Limit applicable
to such transferee.
7.5.2 OWNERSHIP IN TRUST. Upon any purported transfer of Stock or
change in the capital structure of the Corporation that results in
a conversion of shares of Stock into Excess Stock pursuant to
Subsection 7.5.1, such shares of Excess Stock shall be deemed to
have been transferred to a separate trust for the exclusive benefit
of the person or persons to whom such Excess Stock can ultimately
be transferred without resulting in a violation of Section 7.2
hereof, the trustee of which shall be the Corporation. The
purported transferee of stock which converts into Excess Stock as a
result of a purported transfer, or the record owner of Stock which
converts into Excess Stock as a result of a change in the capital
structure of the Corporation (each an "Excess Holder"), shall have
no rights in such Excess Stock, except the right to designate a
beneficiary of the trust created under this Subsection 7.5.2 in
accordance with the terms specified in Subsection 7.5.6.
7.5.3 DIVIDEND RIGHTS. Except as provided in Subsection 7.5.4,
Excess Stock shall not be entitled to any dividends or other
distributions. Any dividend or distribution paid with respect to
Stock which has converted into Excess Stock prior to the discovery
by the Corporation that such conversion has occurred shall be
repaid by the recipient thereof to the Corporation upon demand, and
any dividend or distribution declared but unpaid shall be rescinded
as void AB INITIO with respect to such shares of Excess Stock.
7.5.4 RIGHTS UPON LIQUIDATION. With respect to any distribution
of the assets of the Corporation following the voluntary or
involuntary liquidation, dissolution or winding up of the
Corporation, each trust holding shares of Excess Stock resulting
from the conversion of Common Stock ("Excess Common Stock") shall
be entitled to receive, ratably with each other holder of shares of
Common Stock or Excess Common Stock, that portion of the assets of
the Corporation available for distribution to the holders of Common
Stock and Excess Common Stock as the number of shares of Excess
Common Stock held by such trust bears to the total number of shares
of Common Stock and Excess Common Stock then outstanding. With
respect to any distribution of the assets of the Corporation
following the voluntary or involuntary liquidation, dissolution or
winding up of the Corporation, each trust holding shares of Excess
Stock resulting from the conversion of Preferred Stock ("Excess
Preferred Stock") shall be entitled to receive the pro rata share
of the assets of the Corporation available for distribution to the
holders of Preferred Stock of the series from which such shares of
Excess Preferred Stock were converted which such trust of Excess
Preferred Stock would be entitled to receive if such shares of
Excess Preferred Stock were shares of Preferred Stock of the series
from which such shares of Excess Preferred Stock were converted.
7.5.5 VOTING RIGHTS. No stockholder may vote any shares of Excess
Stock. The shares of Excess Stock will not be considered to be
issued or outstanding for the purpose of any stockholder vote or
for the purpose of determining whether a quorum for such a vote is
present.
7.5.6 RESTRICTIONS ON TRANSFER. Excess Stock shall not be
transferable. The Excess Holder of shares of Stock which convert
into Excess Stock may freely designate a beneficiary of the trust
holding such shares of Excess Stock if: (A) the shares of Excess
Stock held in the trust, if any, would not be Excess Stock in the
hands of the proposed beneficiary and (B) the Excess Holder does
not receive a price for designating a person as beneficiary which
is in excess of the following (the "Maximum Consideration"): (i)
in the case of Excess Stock held by such trust which resulted from
a purported transfer where value was given, the price the Excess
Holder paid for the Stock which converted into the Excess Stock
held by the trust or (ii) in the case where Excess Stock resulted
from a change in the capital structure of the Corporation or a
purported transfer where value was not given (e.g., the shares were
received through a devise, gift or other transaction), a price
equal to the aggregate Market Price (as defined in
Subsection 7.5.7) of all shares of the Stock that were converted
into Excess Stock, as of the date of the purported transfer or
change in the capital structure of the Corporation that resulted in
the Excess Stock. No designation of a beneficiary shall be
effective unless the Excess Holder has given advance notice to the
Corporation of the intended beneficiary and, unless such rights
have expired, the Corporation has agreed in writing to waive its
redemption rights under Subsection 7.5.7. Upon the designation of
a beneficiary of a trust in compliance with this Subsection 7.5.6,
any shares of Excess Stock held by the trust shall automatically
and without further action convert into an equal number of shares
of Stock of the same class and series from which they were
originally converted and such shares of Stock shall be transferred
of record to the designated beneficiary. If, prior to the
designation of a beneficiary of a trust, the shares of Excess Stock
held by such trust have been redeemed by the Corporation pursuant
to Subsection 7.5.7 or the Corporation has been liquidated and
payments have been made to such trust pursuant to Subsection 7.5.4,
the sole right of the beneficiary of the trust shall be to receive
the proceeds of such redemption or liquidation, without interest.
Upon the transfer of the property held by the trust to the
beneficiary, the trust shall automatically terminate.
7.5.7 CORPORATION'S REDEMPTION RIGHT. All shares of Excess Stock
shall be deemed to have been offered for sale to the Corporation,
or its designee, at a price equal to the lesser of (A) the Maximum
Consideration or (B) the Market Price the Excess Stock would have
if it consisted of the shares of Stock from which it was converted,
as of the date the Corporation, or its designee, accepts such offer
. The Corporation shall have the right to accept such offer at any
time until the date ninety (90) days after the date on which the
Excess Holder gives written notice to the Corporation of any event
(including without limitation redemptions or repurchases of Stock
by the Corporation) or any purported transfer that results in the
conversion of Stock into Excess Stock, which notice specifies the
amount of all Stock Beneficially Owned by such Excess Holder and
the manner in which such Stock is held. For purposes of this
Article VII, "Market Price" means for any share of Stock, the
average daily per share closing sales price of a share of such
Stock if shares of such Stock are listed on a national securities
exchange or quoted on the National Association of Securities
Dealers Automated Quotation National Market System (the "NASDAQ
NMS"), and if such shares are not so listed or quoted, the Market
Price shall be the mean between the average per share closing bid
prices and the average per share closing asked prices, in each case
during the 30-day period ending on the business day prior to the
date for which the Market Price is being determined, or if there
have been no sales on a national securities exchange or on the
NASDAQ NMS and no published bid and asked quotations with respect
to shares of such Stock during such 30-day period, the Market Price
shall be the price determined by the Board of Directors in good
faith.
7.6 EXCEPTIONS TO CERTAIN OWNERSHIP AND TRANSFER LIMITATIONS. The
Ownership Limit or Existing Holder Limit set forth in Section 7.2 shall not
apply to the following shares of Stock and such shares shall not be deemed to
be Excess Stock at the times and subject to the terms and conditions set forth
in this Section 7.6:
7.6.1 Subject to the provisions of Section 7.7, shares of Stock
which the Board of Directors in its sole discretion may exempt from
the Ownership Limit or Existing Holder Limit (either before or
after their conversion into Excess Stock) while owned by a person
who has provided the Corporation with evidence and assurances
acceptable to the Board of Directors that the qualification of the
Corporation as a REIT would not be jeopardized thereby.
7.6.2 Subject to the provisions of Section 7.7, shares of Stock
acquired and held by an underwriter in a public offering of Stock,
or in any transaction involving the issuance of Stock by the
Corporation, in which the Board of Directors determines that the
underwriter initially acquiring such Stock will make a timely
distribution of such Stock to or among other persons so that,
following such distribution, the Corporation will continue to be in
compliance with the REIT Provisions and no transferee of such
Stock, or person to whom the ownership of any of such Stock is
attributable under Section 544 of the Code, will be in violation of
Section 7.2 hereof.
7.6.3 Shares of Stock acquired pursuant to an all cash tender
offer made for all outstanding shares of Stock of the Corporation
in conformity with applicable federal and state securities laws
where not fewer than two-thirds of the outstanding shares of Stock
(not including Stock or securities convertible into Stock held by
the tender offeror and/or any "affiliates" or "associates" thereof
within the meaning of the Securities Exchange Act of 1934) are duly
tendered and accepted pursuant to the cash tender offer and where
the tender offeror commits in such tender offer, if the tender
offer is so accepted by the holders of such two-thirds of the
outstanding Stock, as promptly as practicable thereafter to give
any holders who did not accept such tender offer a reasonable
opportunity to put their Stock to the tender offeror at a price not
less than the price per share paid for Stock tendered pursuant to
the tender offer.
7.7 AUTHORITY TO REVOKE EXEMPTIONS TO LIMITATIONS. The Board of
Directors, in its sole discretion, may at any time revoke any exemption
pursuant to Subsections 7.6.1 or 7.6.2 in the case of any stockholder, and upon
such revocation, the provisions of Section 7.2 and 7.5 shall immediately become
applicable to such stockholder and all Stock of which such stockholder may have
Beneficial Ownership. A decision to exempt or refuse to exempt from the
Ownership Limit or Existing Holder Limit the ownership of certain designated
shares of Stock, or to revoke an exemption previously granted, shall be made by
the Board of Directors in its sole discretion, on any basis whatsoever,
including, but not limited to, the preservation of the Corporation's
qualification as a REIT.
7.8 SEVERABILITY. If any provision of this Article VII or any
application of any such provision is determined to be invalid by any federal or
state court having jurisdiction, the validity of the remaining provisions of
this Article VII shall not be affected and other applications of such
provisions shall be affected only to the extent necessary to comply with the
determination of such court. To the extent this Article VII may be
inconsistent with any other provision of this Charter, this Article VII shall
be controlling.
7.9 AUTHORITY OF THE BOARD OF DIRECTORS. Subject to Section 7.10 hereof,
nothing contained in this Article VII or in any other provision of this Charter
shall limit the authority of the Board of Directors to take such action as it
deems necessary or advisable to protect the Corporation and the interest of the
stockholders by preserving the Corporation's qualification as a REIT under the
REIT Provisions. In applying the provisions of this Article VII, the Board of
Directors may take into account the lack of certainty in the REIT Provisions
relating to the ownership of stock that may prevent a corporation from
qualifying as a REIT and may make interpretations concerning the Ownership
Limit, Existing Holder Limit, Excess Stock, Beneficial Ownership and related
matters on as conservative a basis as the Board of Directors deems advisable to
minimize or eliminate uncertainty as to the Corporation's continued
qualification as a REIT.
7.10 NEW YORK STOCK EXCHANGE. Nothing in this Charter shall preclude the
settlement of any transaction entered into through the facilities of the New
York Stock Exchange.
7.11 AMBIGUITY. In the case of any ambiguity in the application of any
provision of this Article VII, such provision shall be applied in the manner
determined by the Board of Directors to be most likely to preserve the status
of the Corporation as a REIT.
7.12 CONTINGENCY ARRANGEMENT. If any of the restrictions on ownership or
transfer, conversion provisions or trust arrangements set forth in this Article
VII are determined to be void, invalid or unenforceable by virtue of any legal
decision, statute, rule or regulation, then the Excess Holder of any Stock
which would convert into Excess Stock pursuant to Section 7.5 hereof if
enforceable shall be deemed to have acted as an agent on behalf of the
Corporation in acquiring such Stock and to be holding it on behalf of the
Corporation unless the Corporation, after learning of the fact that such Stock
would have converted into Excess Stock, notifies the Excess Holder that it
waives its rights as principal under this Section 7.12. The Excess Holder
shall transfer such Stock to the Corporation upon request, and, upon such
transfer, the Corporation shall reimburse the Excess Holder for the purchase
price of such Stock, net of any dividends paid to the Excess Holder with
respect thereto.
7.13 TERMINATION OF EFFECTIVENESS. Notwithstanding any other provision
of this Charter, if the Corporation's status as a REIT is voluntarily revoked
or terminated by the Corporation, this Article VII shall have no further force
and effect.
ARTICLE VIII
RIGHTS AND POWERS OF CORPORATION, BOARD OF DIRECTORS AND OFFICERS
In carrying on its business, or for the purpose of attaining or
furthering any of its objects, the Corporation shall have all of the
rights, powers and privileges granted to corporations by the laws of the
State of Maryland, as well as the power to do any and all acts and things
that a natural person or partnership could do as now or hereafter
authorized by law, either alone or in partnership or conjunction with
others. In furtherance and not in limitation of the powers conferred by
statute, the powers of the Corporation and of the Directors and
stockholders shall include the following:
8.1 INTERESTED TRANSACTIONS. Any director or officer individually, or
any firm of which any director or officer may be a member, or any corporation
or association of which any director or officer may be a director or officer or
in which any director or officer may be interested as the holder of any amount
of its capital stock or otherwise, may be a party to, or may be pecuniarily or
otherwise interested in, any contract or transaction of the Corporation, and,
in the absence of fraud, no contract or other transaction shall be thereby
affected or invalidated; provided, however, that (A) such fact shall have been
disclosed or shall have been known to the Board of Directors or the committee
thereof that approved such contract or transaction and such contract or
transaction shall have been approved or satisfied by the affirmative vote of a
majority of the disinterested directors, or (B) such fact shall have been
disclosed or shall have been known to the stockholders entitled to vote, and
such contract or transaction shall have been approved or ratified by a majority
of the votes cast by the stockholders entitled to vote, other than the votes of
shares owned of record or beneficially by the interested director, officer,
corporation, firm or other entity, or (C) the contract or transaction is fair
and reasonable to the Corporation. Any director of the Corporation who is also
a director or officer of, or holds an interest in such other corporation or
association, or who, or the firm of which he is a member, is so interested, may
be counted in determining the existence of a quorum at any meeting of the Board
of Directors of the Corporation which shall authorize any such contract or
transaction, with like force and effect as if he were not such director or
officer of such other corporation or association or were not so interested or
were not a member of a firm so interested.
8.2 CHARTER AMENDMENTS. The Corporation reserves the right, from time to
time, to make any amendment to this Charter, now or hereafter authorized by
law, including any amendment which alters the contract rights, as expressly set
forth in this Charter, of any outstanding Stock.
8.3 OTHER POWERS. Except as otherwise provided in this Charter or the
Bylaws of the Corporation, as amended from time to time, the business of the
Corporation shall be managed by its Board of Directors. The Board of Directors
shall have and may exercise all the rights, powers and privileges of the
Corporation except those that are by law, this Charter or the Bylaws of the
Corporation, conferred upon or reserved to the stockholders. Additionally, the
Board of Directors is hereby specifically authorized and empowered from time to
time in its discretion:
8.3.1 DEBT. To borrow and raise money, without limit and upon any
terms, for any corporate purposes; and, subject to applicable law,
to authorize the creation, issuance, assumption or guaranty of
bonds, debentures, notes, or other evidences of indebtedness for
money so borrowed, to include therein such provisions as to
redeemability, convertibility, or otherwise, as the Board of
Directors, in its sole discretion, determines, and to secure the
payment of principal, interest, or sinking fund in respect thereof
by mortgage upon, or the pledge of, or the conveyance or assignment
in trust of, all or any part of the properties, assets and goodwill
of the Corporation then owned or thereafter acquired.
8.3.2 BYLAW AMENDMENTS. The Board of Directors shall have the
power to make, alter, amend, change, add to or repeal the Bylaws of
the Corporation.
8.3.3 DIVIDENDS. To the extent permitted by law, to declare and
pay dividends or other distributions to the stockholders from time
to time out of the earnings, earned surplus, paid-in surplus or
capital of the Corporation, notwithstanding that such declaration
or payment may result in the reduction of the capital of the
Corporation. In connection with any dividends or other
distributions upon the Stock, the Corporation need not reserve any
amount from such dividend or other distributions to satisfy any
preferential rights of any stockholder.
ARTICLE IX
SPECIAL VOTING REQUIREMENTS
9.1 MAJORITY VOTE REQUIRED. Except as otherwise specifically provided
in this Charter, any vote of stockholders required by the Act to approve any
amendment or restatement of this Charter, consolidation, merger, share exchange
or transfer of assets shall be satisfied by the affirmative vote of a majority
of the votes entitled to be cast on the matter.
9.2 INTERESTED STOCKHOLDER TRANSACTIONS. Pursuant to Section 3-
603(e)(1)(iii) of the Act, the Corporation expressly elects not to be governed
by the provisions of Section 3-602 of the Act with respect to any business
combination (as defined in Section 3-601 of the Act) involving Norman P.
Leenhouts, Nelson B. Leenhouts or any present or future affiliates or
associates (as such terms are defined in Section 3-601 of the Act), or any
other person acting in concert or as a group with, either or both of them.
9.3 TERMINATION OF REIT STATUS. The Board of Directors shall take no
action to terminate the Corporation's status as a REIT or to amend the
provisions of Article VII hereof until such time as (A) the Board of Directors
adopts a resolution recommending that the Corporation terminate its status as a
REIT or amend Article VII hereof, as the case may be, (B) the Board of
Directors presents the resolution at an annual or special meeting of the
stockholders and (C) such resolution is approved by at least a majority of all
the votes entitled to be cast on the matter.
9.4 REMOVAL OF DIRECTORS. Any director may be removed only for cause
and only by the affirmative vote of stockholders holding at least a majority of
all the votes entitled to be cast for the election of directors; provided,
however, that in the case of any directors elected by holders of a class or
series of capital stock other than Common Stock and except as otherwise
provided by the terms of such capital stock, such directors may be removed
without cause, but solely by the affirmative vote of stockholders holding at
least a majority of all the votes of that class or series.
9.5 CONTROL SHARES. Pursuant to Section 3-702(b) of the Act, the terms
of Subtitle 7 of Title 3 of the Act shall be inapplicable to any acquisition of
a share of Stock that would not result in a violation of Section 7.2 hereof.
ARTICLE X
LIABILITY
To the fullest extent permitted under the Act or Section 5-349 of the
Courts and Judicial Proceedings Code of Maryland or any successor thereto,
as amended from time to time, no director or officer shall be liable to the
Corporation for money damages for any breach of any duty owed by such
director or officer to the Corporation. Neither the amendment or repeal of
this Article, nor the adoption of any other provision in this Charter
inconsistent with this Article, shall eliminate or reduce the protection
afforded by this Article to a director or officer of the Corporation with
respect to any matter which occurred, or any cause of action, suit or claim
which but for this Article would have accrued or arisen, prior to such
amendment, repeal or adoption.
ARTICLE XI
INDEMNIFICATION
The Corporation, to the fullest extent permitted by Section 2-418 of
the Act or any successor thereto, as amended from time to time, may
indemnify any and all directors, officers, employees and agents of the
Corporation from and against any and all of the expenses, liabilities or
other matters referred to in or covered by said section or successor
thereto. The indemnification provided for herein shall not be deemed
exclusive of any other rights to which those indemnified may be entitled
under any Bylaw, agreement, vote of stockholders or disinterested directors
or otherwise, both as to actions in such person's capacity as a director,
officer, employee or agent and as to actions in another capacity while
holding such position, and shall continue as to a person who has ceased to
be a director, officer, employee or agent and inure to the benefit of the
heirs, executors and administrators of such a person. Neither the
amendment or repeal of this Article XI, nor the adoption of any other
provision in this Charter inconsistent with this Article XI, shall
eliminate or reduce (A) the rights granted to any director, officer,
employee or agent under any Bylaw, agreement, vote of stockholders or
disinterested directors or otherwise or (B) the ability afforded the
Corporation by this Article to indemnify a director, officer, employee or
agent of the Corporation with respect to any matter which occurred, or any
cause of action, suit or claim which accrued or arose, prior to such
amendment, repeal or adoption.
_________________________________________________
THIRD: The amendment to and restatement of the Charter of the
Corporation as hereinabove set forth has been duly advised by the Board of
Directors and has been unanimously approved by the Board of Directors and
the stockholders of the Corporation.
FOURTH: The number of Directors of the Corporation and the names of
those currently in office are set forth in Article VI of paragraph SECOND
of these Articles of Amendment and Restatement.
FIFTH: The amendment effected hereby does not increase the authorized
stock of the Corporation or change the information required by subsection
(6)(2)(i) of Section 2-608 of the Act.
IN WITNESS WHEREOF, the Corporation has caused these Articles of
Amendment and Restatement to be signed in its name and on its behalf by its
President and attested to by its Secretary on this ___ day of July, 1994
and its said President acknowledges under the penalties for perjury that
these Articles of Amendment and Restatement are the corporate act of the
Corporation and that, to the best of his knowledge, information and belief,
the matters and facts set forth herein are true in all material respects.
Home Properties of New York, Inc.
By: /s/ Nelson B. Leenhouts
Nelson B. Leenhouts
President
Attest:
/s/ Ann M. McCormick
Ann M. McCormick
Secretary
<PAGE>
Exhibit 3.2
ARTICLES OF AMENDMENT
OF THE
ARTICLES OF INCORPORATION
OF
HOME PROPERTIES OF NEW YORK, INC.
Home Properties of New York, Inc., a Maryland corporation (the
"Corporation") hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: The charter of the Corporation is hereby amended by striking
out Article 6.1 and inserting in lieu thereof the following:
6.1 AUTHORIZED CAPITAL STOCK. The total number of shares of
stock (the "Stock") which the Corporation has authority to issue is
seventy million (70,000,000) shares, consisting of (A) fifty million
(50,000,000) shares of common stock, par value $.01 per share ("Common
Stock"); (B) ten million (10,000,000) shares of excess stock, par
value $.01 per share ("Excess Stock"); and (C) ten million
(10,000,000) shares of preferred stock, par value $.01 per share
("Preferred Stock"). The aggregate par value of all of the shares of
all classes of Stock is $700,000.
SECOND: The amendment of the charter of the Corporation as
hereinabove set forth has been duly advised by the Board of Directors and
approved by the stockholders of the Corporation.
THIRD: Immediately before the amendment effected by these Articles
of Amendment, the Corporation had the authority to issue 30,000,000 shares
of Common Stock, par value $.01 per share, 10,000,000 shares of Excess
Stock, par value $.01 per share and 10,000,000 shares of Preferred Stock,
par value $.01 per share and the aggregate par value of all the shares of
all the classes the Corporation was authorized to issue was $500,000.
After such amendment, the Corporation has the authority to issue 50,000,000
shares of Common Stock, par value $.01 per share, 10,000,000 shares of
Excess Stock, par value $.01 per share and 10,000,000 shares of Preferred
Stock, par value $.01 per share and the aggregate par value of all the
shares of all the classes the Corporation is authorized to issue is
$700,000. The information required by Section 2-607 (b)(2) ( i) of the
Maryland General Corporation Law was not changed by this amendment.
IN WITNESS WHEREOF: the Corporation has caused these presents to be
signed in its name and on its behalf by its President and attested by its
Secretary on this
6th day of May 1998.
Home Properties of New York, Inc.
By: /s/ Nelson B. Leenhouts
-----------------------
Nelson B. Leenhouts,
President
Attest:
/s/ Ann M. McCormick
- ---------------------------
Ann M. McCormick, Secretary
<PAGE>
Exhibit 5.1
Nixon, Hargrave, Devans & Doyle LLP
Attorneys and Counselors at Law
Clinton Square Post Office Box 1051
Rochester, New York 14604-1051
(716) 263-1000
Fax: (716)263-1600
May 12, 1998
Home Properties of New York, Inc.
850 Clinton Square
Rochester, New York 14604
Gentlemen:
We have acted as counsel to Home Properties of New York,
Inc. (the "Company") in connection with the Registration
Statement on Form S-3, filed on May 12, 1998, by the Company with
the Securities and Exchange Commission under the Securities Act
of 1933, as amended, relating to the offer and sales of up to
$400,000,000 of aggregate initial offering price of (a) shares of
common stock, par value $0.01 per share (the "Common Stock"); (b)
rights or warrants to purchase Common Stock (the "Common Stock
Purchase Rights"); (c) shares or fractional shares of preferred
stock, par value $0.01 per share (the "Preferred Stock"); and (d)
debt securities (the "Debt Securities"). The Common Stock, the
Common Stock Purchase Rights, the Preferred Stock, and the Debt
Securities are referred to as the "Offered Securities. " The
Debt Securities will be issued from time to time pursuant to an
indenture in substantially the form included as an exhibit to the
Registration Statement (the "Indenture"). The Prospectus set
forth in the Registration Statement (the "Prospectus") provides
that the Offered Securities may be offered separately or
together, in separate series, and in amounts, at prices and on
terms to be set forth in one or more supplements to the
Prospectus (each, a "Prospectus Supplement"). This opinion is
being provided to you in connection with the filing of the
Registration Statement.
We have examined the originals or copies, certified or
otherwise identified to our satisfaction, of all such records of
the Company and all such agreements, certificates of public
officials, certificates of officers or other representatives of
the Company, and such other documents, certificates and corporate
or other records as we have deemed necessary or appropriate as a
basis for the opinions set forth herein, including (i) the
Articles of Amendment and Restatement of the Articles of
Incorporation of the Company, as amended to the date hereof (the
"Articles of Incorporation"), (ii) the Amended and Restated By-
Laws of the Company, as amended to the date hereof (the "By-
Laws"), and (iii) certified copies of certain resolutions duly
adopted by the Board of Directors of the Company. As to factual
matters material to the opinions set forth below we have relied,
without investigation, upon the representations and statements of
the Company in the Registration Statement and the Indenture and
in such certificates of government officials and officers of the
Company as we have deemed necessary for the purposed of the
opinions expressed herein.
We have assumed that (i) prior to the issuance of any shares
of Common Stock or Preferred Stock (or Offered Securities
convertible into shares of Common Stock or Preferred Stock), the
Company will have a sufficient number of authorized but unissued
shares of Common Stock or Preferred Stock authorized under its
Articles of Incorporation and will comply with all other
applicable requirements of Maryland law; (ii) the issuance, sale,
amount and terms of the Offered Securities to be sold from time
to time will be authorized by action of the Board of Directors of
the Company (the "Resolutions") and in accordance with its
Articles of Incorporation, By-Laws, the Indenture or any
supplemental indenture with respect thereto ("Supplemental
Indenture"), as the case may be, and applicable Maryland law;
(iii) that the financial institution identified in the Indenture
as trustee (the "Trustee") is duly qualified to engage in the
activities contemplated by the Indenture and has duly authorized,
executed and delivered the Indenture and the Indenture is valid,
binding and enforceable against the Trustee in accordance with
its terms; and (iv) the Common Stock Purchase Rights have been
issued in accordance with the terms of any applicable rights or
warrant agreement.
The opinions stated herein are limited to the federal laws
of the United States, the laws of the State of New York and the
General Corporation Law of the State of Maryland. The opinions
expressed below with respect to the valid and binding nature of
any Offered Securities are subject to the effect of applicable
bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting creditors' rights generally and the application of
general principles of equity, whether in a proceeding in equity
or at law.
Based upon and subject to the conditions and limitations set
forth herein, we are of the opinion that:
1. When the Registration Statement has become effective
under the Act and payment for such shares of Common Stock has
been made (a) in the manner contemplated by the applicable
Resolutions, the Registration Statement, the Prospectus and the
applicable Prospectus Supplement and, if applicable, an
underwriting agreement relating to the issuance of such shares,
or (b) pursuant to the conversion of validly issued and fully
paid and non-assessable shares of Preferred Stock in accordance
with the established terms of such Preferred Stock, the exercise
of validly issued Common Stock Purchase Rights in accordance with
the terms thereof or the conversion of validly issued convertible
Debt Securities in accordance with the terms thereof, and the
certificates representing such shares of Common Stock are
authenticated and delivered, such shares of Common Stock issued
will be duly authorized, validly issued, fully paid and non-
assessable by the Company.
2. When the Registration Statement has become effective
under the Act and a series of the Preferred Stock has been duly
authorized and established in accordance with the applicable
Resolutions, the terms of the Articles of Incorporation and
applicable Maryland law, and upon payment for shares of such
Preferred Stock in the manner contemplated by the applicable
Resolutions, the Registration Statement, the Prospectus and the
applicable Prospectus Supplement and, if applicable, an
underwriting agreement relating to the issuance of such Preferred
Stock, and certificates representing such shares of Preferred
Stock are authenticated and delivered, such shares of Preferred
Stock will be duly authorized, validly issued, fully paid and
non-assessable.
3. When the Registration Statement has become effective
under the Act and the Common Stock Purchase Rights have been duly
established by any applicable rights or warrant agreement and
duly authenticated by any agent required under such agreements
and duly authorized and established by the applicable
Resolutions, and the Common Stock Purchase Rights have been duly
executed and delivered on behalf of the Company against payment
therefor in accordance with the terms and provisions of the
applicable Resolutions, any applicable rights or warrant
agreement and as contemplated by the Registration Statement, the
Prospectus and the applicable Prospectus Supplement and, if
applicable, an underwriting agreement relating to the issuance of
such Common Stock Purchase Rights, the Common Stock Purchase
Rights will be duly authorized and will constitute valid and
binding obligations of the Company.
4. When the Registration Statement has become effective
under the Act and the Debt Securities have been (a) duly
established by the Indenture or a Supplemental Indenture, (b)
duly authenticated by the Trustee, and (c) duly executed and
delivered on behalf of the Company against payment therefor in
accordance with the terms and provisions of the applicable
Resolutions, the Indenture, any applicable Supplemental
Indenture, and as contemplated by the Registration Statement, the
Prospectus and the applicable Prospectus Supplement and, if
applicable, an underwriting agreement relating to the issuance of
such Debt Securities, the Debt Securities will be duly authorized
and will constitute valid and binding obligations of the Company.
We hereby consent to the filing of this opinion as an
exhibit to the above-referenced Registration Statement and to the
use of our name as it appears under the caption "Legal Matters"
in the Prospectus contained in such Registration Statement.
Very truly yours,
/s/ Nixon, Hargrave, Devans & Doyle LLP
<PAGE>
Exhibit 10.3
Home Properties of New York, L.P.
Amendment No. Nine to
Second Amended and Restated
Agreement of Limited Partnership
The Second Amended and Restated Agreement of Limited Partnership of
Home Properties of New York, L.P. (the "Partnership Agreement") is hereby
amended effective April 30, 1998 to substitute the "Schedule A" attached
hereto for the "Schedule A" currently attached to the Partnership Agreement.
"Schedule A" is hereby amended to reflect the exercise of purchase and put
rights by certain partners, and the issuance of Units to the former
partners of certain Maryland partnerships that own collectively 1,589
apartment units in and around Baltimore, Maryland.
GENERAL PARTNER
Home Properties of New York, Inc.
/s/ Ann M. McCormick
- -------------------------------
Ann M. McCormick
Secretary
LIMITED PARTNERS LISTED ON ATTACHED SCHEDULE A
By: Home Properties of New York, Inc.
as attorney in fact
/s/ Ann M. McCormick
- -------------------------------
Ann M. McCormick
Secretary
<TABLE>
<CAPTION>
4/30/98
SCHEDULE A
HOME PROPERTIES OF NEW
YORK, L.P.
PARTNERS, UNITS AND
PERCENTAGE INTERESTS
GENERAL PARTNER
Number of Percentage
Name and Identifying Business or Residence Units Held Interest
Number Address
<S> <C> <C> <C>
Home Properties of New 850 Clinton Square 208,951.050 1.00000%
York, Inc.
Rochester, New York
14604
LIMITED PARTNERS
Home Properties Trust 850 Clinton Square 11,696,641.939 55.97790%
Rochester, New York
14604
Home Leasing Corporation 850 Clinton Square 429,376 2.05491%
Rochester, New York
14604
Leenhouts Ventures 850 Clinton Square 8,010 0.03833%
Rochester, New York
14604
Norman P. Leenhouts 850 Clinton Square 467 0.00223%
Rochester, New York
14604
Nelson B. Leenhouts 850 Clinton Square 219 0.00105%
Rochester, New York
14604
Arlene Z. Leenhouts 850 Clinton Square 50,000 0.23929%
Rochester, New York
14604
Nancy E. Leenhouts 850 Clinton Square 50,000 0.23929%
Rochester, New York
14604
Amy L. Tait 850 Clinton Square 11,195 0.05358%
Rochester, New York
14604
Amy L. Tait and 850 Clinton Square 2,548 0.01219%
Robert C. Tait Rochester, New York
14604
Ann M. McCormick 850 Clinton Square 565 0.00270%
Rochester, New York
14604
Ann M. McCormick and 850 Clinton Square 1,737 0.00831%
Patrick M. McCormick Rochester, New York
14604
David P. Gardner 850 Clinton Square 3,506 0.01678%
Rochester, New York
14604
William E. Beach 850 Clinton Square 2,433 0.01164%
Rochester, New York
14604
William E. Beach and 850 Clinton Square 3,046 0.01458%
Richelle A. Beach Rochester, New York
14604
Paul O'Leary 850 Clinton Square 3,207 0.01535%
Rochester, New York
14604
Richard J. Struzzi 850 Clinton Square 2,363 0.01131%
Rochester, New York
14604
Robert C. Tait 850 Clinton Square 70 0.00034%
Rochester, New York
14604
Timothy A. Florczak 850 Clinton Square 600 0.00287%
Rochester, New York
14604
Laurie Leenhouts 850 Clinton Square 6,033 0.02887%
Rochester, New York
14604
Peter L. Cappuccilli, Sr. 605 Genesee Street 6,250 0.02991%
Syracuse, New York 13204
Rocco M. Cappuccilli 605 Genesee Street 6,250 0.02991%
Syracuse, New York 13204
J. Neil Boger 27 Arlington Drive 1,225 0.00586%
Pittsford, New York
14534
Joyce P. Caldarone 162 Anchor Drive 1,225 0.00586%
Vero Beach, Florida
32963
Linda Wells Davey 17 Green Valley Road 1,225 0.00586%
Pittsford, New York
14534
John G. Dorschel 20 NE Plantation Road 1,225 0.00586%
Stuart, Florida 34996
Richard J. Dorschel 32 Whitestone Lane 1,225 0.00586%
Rochester, New York
14618
Elizabeth Hatch Dunn P.O. Box 14261 2,450 0.01173%
North Palm Beach,
Florida 33408
William T. Uhlen, Jr. 5556 Vardon Drive 2,450 0.01173%
Canandaigua, NY 14424
Jeremy A. Klainer 295 San Gabriel Drive 612 0.00293%
Rochester, New York
14610
J. Robert Maney 506 Panorama Trail 2,450 0.01173%
Rochester, New York
14625
John A. McAlpin 6270 Bopple Hill Road 1,225 0.00586%
Naples, New York 14512-
9771
George E. Mercier 99 Ridgeland Road 1,225 0.00586%
Rochester, New York
14623
Harold S. Mercier Trust c/o Star Bank N.A. 1,225 0.00586%
Trustee
P.O. Box 1118, ML 7193
Cincinnati, OH 45201
Michelle Mercier 99 Ridgeland Road 1,225 0.00586%
Rochester, New York
14623
Jack E. Post 4898 East Lake Road 1,225 0.00586%
Rushville, New York
14544
Robert T. Silkett 3 Dartmouth Court 1,225 0.00586%
Pittsford, New York
14534
Carolyn M. Steklof 144 Dunrovin Lane 1,225 0.00586%
Rochester, New York
14618
Conifer Development, Inc. 850 Clinton Square 20,738 0.09925%
Rochester, New York
14604
C.O.F. Inc. 850 Clinton Square 294,695 1.41035%
Rochester, New York
14604
Richard J. Crossed 850 Clinton Square 68,021 0.32554%
Rochester, New York
14604
Crossed Family Partnership 850 Clinton Square 7,200 0.03446%
Rochester, New York
14604
Lawrence R. Brattain 850 Clinton Square 500 0.00239%
Rochester, New York
14604
C. Terence Butwid 850 Clinton Square 2,000 0.00957%
Rochester, New York
14604
Kathleen M. Dunham 850 Clinton Square 200 0.00096%
Rochester, New York
14604
Peter J. Obourn 850 Clinton Square 30,700 0.14692%
Rochester, New York
14604
John H. Fennessey 850 Clinton Square 30,700 0.14692%
Rochester, New York
14604
Timothy D. Fournier 850 Clinton Square 3,750 0.01795%
Rochester, New York
14604
Barbara Lopa 850 Clinton Square 100 0.00048%
Rochester, New York
14604
John Oster 850 Clinton Square 1,911 0.00915%
Rochester, New York
14604
Eric Stevens 850 Clinton Square 100 0.00048%
Rochester, New York
14604
Tamarack II Associates 850 Clinton Square 2,027 0.00970%
Rochester, New York
14604
Burton S. August 11 Woodbury Place 4,246 0.02032%
Rochester, New York
14618
Charles J. August 355 Ambassador Drive 4,246 0.02032%
Rochester, New York
14610
Robert W. August 35 Woodstone Rise 1,158 0.00554%
Pittsford, New York
14534
John H. Cline 35 Vick Park A 2,316 0.01108%
Rochester, New York
14607
Ralph DeStephano, Sr. 1249-1/2 Long Pond Road 2,316 0.01108%
Rochester, New York
14626
Howard Weinstein, Trustee 70 Woodland Road 2,316 0.01108%
U/T/A
dated June 2, 1994 Short Hills, New Jersey
07078
Gerald A. Fillmore 3800 Delano Road 2,316 0.01108%
F/B/O Living Trust of Oxford, Michigan 48371
G.A.F.
Esther Lowenthal 1400 East Avenue 2,316 0.01108%
Rochester, New York
14610
Richard J. Katz, Jr. 191 Island Drive 2,316 0.01108%
Jupiter, Florida 33477
Anwer Masood, MD 1445 Portland Avenue 2,316 0.01108%
Rochester, New York
14621
Elizabeth W. Pine 1350 Highland Avenue 1,448 0.00693%
Rochester, New York
14620
Hazel E. Reveal Marital c/o J. Harrison 1,340 0.00641%
Trust
#321001860 Chase P.O. Box 1412
Rochester, New York
14603
Ernest Reveal Family Trust c/o J. Harrison
#321001810 Chase P.O. Box 1412 976 0.00467%
Rochester, New York
14603
Gregory J. Riley, MD 9 Beach Flint Way 2,276 0.01089%
Victor, New York 14564
Thomas P. Riley 346 Beach Avenue 2,316 0.01108%
Rochester, New York
14612
Tamarack Associates c/o Mr. Timothy D. 2,316 0.01108%
Fournier
850 Clinton Square
Rochester, New York
14604
William G. vonberg 8 Old Landmark Drive 2,316 0.01108%
Rochester, New York
14618
Stephen C. Whitney 9 Devonwood Lane 869 0.00416%
Pittsford, New York
14534
Mr. and Mrs. Frank Zamiara 136 Mendon-Ionia Road 2,316 0.01108%
Mendon, New York 14506
The Joseph A. Cicci 109 Wyoming Street 70,000 0.33501%
Revocable Trust
Syracuse, New York 13204
Philip J. Solondz 968 Stuyvesant Avenue 236,678 1.13270%
Union, New Jersey 07063
Gaby Solondz 1997 Trust 28 Fordham Road 25,000 0.11965%
dated 9/1/97
Livingston, NJ 07039
Daniel Solondz 968 Stuyvesant Avenue 261,678 1.25234%
Union, New Jersey 07063
Julia Weinstein 308 E. 72nd St., Apt. 3D 56,051 0.26825%
New York, New York 10021
CLASS A LIMITED
PARTNERSHIP INTERESTS
State Treasurer of the 430 West Allegan 1,666,667 7.97635%
State of Michigan,
Custodian of Michigan Lansing, Michigan 48922
Public School
Employees' Retirement
System, Michigan
State Policy Retirement
System and
Michigan Judges'
Retirement System
__________________________
__________________________
_______
Henry A. Quinn 603 Benson House 145,383 0.69578%
Rosemont, PA 19010
James J. Grifferty 57 Woods Lane 23,515 0.11254%
Scarsdale, NY 10583
Jack C. Dixon 16 Lands End Drive 3,589 0.01718%
Greensboro, NC 27408-
3841
Priscilla M. Elder 230 Sundial Court 5,788 0.02770%
Vero Beach, FL 32963-
3469
John J. Ficca, Jr. 415 Lancaster Avenue - 11,393 0.05452%
Unit 8
Haverton, PA 19041
LaVonne B. Graese Trust 5193 Fairway Oaks Drive 49,321 0.23604%
Windermere, FL 34786
Thomas F. Keaveney 1420 Regatta Drive 10,216 0.04889%
Wilmington, NC 28405
Charles T. Hopkins 104 Wood Spring Road 6,202 0.02968%
Box 443
Gwynedd Valley, PA 19437
Janet T. Klion 25 Bailiwick Road 7,608 0.03641%
Greenwich, CT 06831
Louis E. Levy 26 Farmstead Road 15,586 0.07459%
Short Hills, NJ 07078
John T. Shanahan 123 Rotary Drive 16,442 0.07869%
Summit, NJ 07901
Burton M. Mirsky 21 Woodcrest Drive 4,216 0.02018%
Morristown, NJ 07960
Denis J. Taura 90 Montadale Drive 8,892 0.04256%
Princeton, NJ 08540
William Simon KPMG Peat Marwick 12,212 0.05844%
725 South Figueroa
Street
Los Angeles, CA 90017
David M. Seiden 29 Hampton Road 314 0.00150%
Scarsdale, NY 10583
Christopher H. Washburn 910 Malvern Drive 1,333 0.00638%
Pottstown, PA 19465
Edward W. Trott KPMG Peat Marwick 4,176 0.01999%
767 Fifth Avenue
New York, NY 10153
Michael Meltzer 6362 Innsdale Drive 887 0.00425%
Los Angeles, CA 90068
Eugene G. Schorr KPMG Peat Marwick 444 0.00212%
345 Park Avenue
New York, NY 10154
John J. Chopack 202 Hedgemere Drive 444 0.00212%
Devon, PA 19333
Neil J. Miotto KPMG Peat Marwick, LLP 1,679 0.00804%
500 East Middlefield
Road
Mountain View, CA 94043
Alfred W. Fiore 27 Copper Beach Road 444 0.00212%
Greenwich, CT 06830
Dallas E. Smith 78083 Foxbrook Lane 222 0.00106%
Palm Desert, CA 92211-
1229
John M. Guinan 4 Denford Drive 778 0.00372%
Newtown Square, PA 19073
Martin F. Mertz 256 S. Bald Hill Road 7,551 0.03614%
New Canaan, CT 06840
Robert G. McGregor Two Cherry Lane 8,335 0.03989%
Old Greenwich, CT 06870-
1902
Sam Yellen 22433 Oxnard Street 9,938 0.04756%
Woodland, CA 91367
Robert J. Logan, Trustee 16925 Timberlake Drive 2,835 0.01357%
SW
Fort Myers, FL 33908
John D. Collins 2141 Ponus Ridge Road 6,227 0.02980%
New Canaan, CT 06840
Michael A. Conway 15 Berndale Drive 6,227 0.02980%
Westport, CT 06880
John F. Barna 11 Hummingbird Lane 5,977 0.02860%
Darien, CT 06820
David F. Martin 520 Woodland Road 4,511 0.02159%
Sewickley, PA 15143-1086
Charles T. Collins 684 Fernfield Circle 5,942 0.02844%
Wayne, PA 19087
Peter B. Baker 300 Park Street 4,871 0.02331%
Haworth, NJ 07641
Thomas J. Carroll 111 West 67th Street 8,305 0.03975%
Apartment 35E
New York, NY 10023
Lillian D. Walsh 29986 Maple View Drive 2,835 0.01357%
Rainier, OR 97048
Joseph H. Fisher 345 W. Mountain Road 10,600 0.05073%
West Simsbury, CT 06092
James L. Goble 10260 Strait Lane 11,228 0.05374%
Dallas, TX 75229
Harold I. Steinberg 1221 Ranleigh Road 2,855 0.01366%
Revocable
Inter Vivos Trust under McLean, VA 22101
agreement
dated 5/24/91
William J. Cozine 5 Manchester Court 6,663 0.03189%
Morristown, NJ 07960
Andrew J. Capelli 35 Starlight Road 3,344 0.01600%
Staten Island, NY 10301
Howard J. Krongard 9 Cornell Way 8,387 0.04014%
Upper Montclair, NJ
07043
Jerome Lowengrub 7 Lee Terrace 8,411 0.04025%
Short Hills, NJ 07078
Michael C. Lowengrub 3 Shoreham Drive West 100 0.00048%
Custodian for
Robin Lowengrub Dix Hills, NY 11746-6510
Michael C. Lowengrub 3 Shoreham Drive West 200 0.00096%
Custodian for
Jason Lowengrub Dix Hills, NY 11746-6510
United Jewish Appeal of 901 Route 10 100 0.00048%
Metro West
Whippany, NJ 07981-1156
Freedom House Foundation P.O. Box 67 100 0.00048%
Glen Gardner, NJ 08826-
0367
Kelly Lowengrub Custodian 30 Randall Shea Drive 100 0.00048%
for
Kaycee Lowengrub Swansea, MA 02777-2912
Kelly Lowengrub Custodian 30 Randall Shea Drive 100 0.00048%
for
Kate Lowengrub Swansea, MA 02777-2912
Kelly Lowengrub 30 Randall Shea Drive 100 0.00048%
Swansea, MA 02777-2912
Kenneth Lowengrub 30 Randall Shea Drive 100 0.00048%
Swansea, MA 02777-2912
Lavoy Robison 1001 Green Oaks Drive 2,469 0.01182%
Littleton, CO 80121
William F. VanFossan 8576 Woodbriar Drive 1,571 0.00752%
Sarasota, FL 34238
Katharine E. Van Riper 57 Foremost Mountain 9,311 0.04456%
Road
Montville, NJ 07045
Sandra H. Levy 26 Farmstead Road 3,000 0.01436%
Short Hills, NJ 07078
Roderick C. McGeary 1911 Waverly Street 3,710 0.01776%
Palo Alto, CA 94301
Stanley L. Seiden #300 Three Islands 57 0.00027%
Boulevard
The Anchor Bay Club
Hallandale, FL 33009
Shaileen & Timothy Tracy 111 Lampwick Lane 1,100 0.00526%
Fairfield, CT 06430
Robert D. Huth 44 W. Lancaster Avenue 571 0.00273%
Ardmore, PA 19003
Michael C. Plansky 156 Beach Avenue 802 0.00384%
Larchmont, NY 10538
Frank A. Farnesi 6 Woodford Lane 1,496 0.00716%
Malvern, PA 19355
Harris R. Chorney 43 Mountain Brook Road 705 0.00337%
West Hartford, CT 06117
Kenneth Daly 1359 Shadowoak Drive 1,104 0.00528%
Malvern, PA 19355
Thomas L. Holton 12861 Marsh Landing 8,136 0.03894%
Palm Beach Gardens, FL
33418
Richard Isserman 165 W. 66th Street 4,428 0.02119%
Apartment 21B
New York, New York 10023
Patrick W. Kenny 33 Fulton Place 642 0.00307%
West Hartford, CT 06107
Frank Kilkenny 42 Highland Circle 5,884 0.02816%
Bronxville, NY 10708
Robert W. Lambert P.O. Box 8628 355 0.00170%
Horseshoe Bay, TX 78657-
8628
Thomas J. McParland 1117 Ivymont Road 417 0.00200%
Rosemont, PA 19010
S. Thomas Moser KPMG Peat Marwick 3,079 0.01474%
2800 Two First Union
Center
Charlotte, NC 28282
James T. & Dorothy Powers 9870 Huntcliff Trace 4,158 0.01990%
Atlanta, GA 30350
Michael G. Regan 14 Brenner Place 10,984 0.05257%
Demarest, NJ 07627
Edward F. Smith 1031 Lawrence Avenue 2,194 0.01050%
Westfield, NJ 07090
Timothy P. Tracy Pension 111 Lampwick Lane 1,552 0.00743%
Trust
Fairfield, CT 06430
Robert E. & Barbara T. 16846 Glynn Drive 1,282 0.00614%
Buce
Pacific Palisades, CA
90272
Donald P. Kern Brynwood Lane 1,821 0.00871%
Greenwich, CT 06831
F. David Fowler 9450 New Bridge Drive 1,821 0.00871%
Potomac, MD 20854
L. Glenn Perry 123 Harbor Drive, No. 5,392 0.02581%
103
Stamford, CT 06902
Herbert E. Morse 18 Porters Cove Road 897 0.00429%
Hingham, MA 02043
Eileen M. Walsh 3045 Grand Concourse 449 0.00215%
Apartment F-4
Bronx, NY 10468
Thomas J. Yoho 12 Indian Rock Lane 1,572 0.00752%
Greenwich, CT 06830
Vincent J. Cannella Living 14657 Amberleigh Hill 4,635 0.02218%
Trust Court
St. Louis, MO 63017
Dorothy L. Shanahan 123 Rotary Drive 3,711 0.01776%
Summit, NJ 07901
Joan L. Kern Brynwood Lane 2,388 0.01143%
Greenwich, CT 06831
Carol T. Fish 38 Cedar Knoll Road 4,708 0.02253%
Cockeysville, MD 21030
Archibald T. Fort 2418 Stanwick Road 1,748 0.00837%
Phoenix, MD 21131
Ralph W. Clermont 2311 Clifton Forge Drive 1,324 0.00634%
St. Louis, MO 63131
Barbara G. Collins 2141 Ponus Ridge 1,324 0.00634%
New Canaan, CT 06840
Mary Jane & Jay Patchen 9406 Mary Tucker Cove 1,324 0.00634%
Memphis, TN 38133
Susan R. Ross 17 Carthage Lane 1,786 0.00855%
Scarsdale, NY 10583
Thomas J. Coffey 5 Brampton Road 662 0.00317%
Malvern, PA 19355
Marie A. Farnesi 6 Woodford Lane 662 0.00317%
Malvern, PA 19355
M. Candace Guinan 4 Denford Drive 773 0.00370%
Newtown Square, PA 19073
Bernard J. Milano 134 MacIntyre Lane 662 0.00317%
Allendale, NJ 07401
Veronica A. Conway 15 Berndale Drive 3,571 0.01709%
Westport, CT 06880
Mildred M. Cozine 5 Manchester Court 1,986 0.00950%
Morristown, NJ 07960
John & Doris Ficca 415 Lancaster Avenue, 5,295 0.02534%
Unit 8
Haverford, PA 19041
William A. Hasler 102 Golden Gate Avenue 923 0.00442%
Belvedere, CA 94920
Thomas J. Murphy 208 N. Edmonds Avenue 923 0.00442%
Havertown, PA 19083
Peter F. Viera 1950 Montgomery Avenue 923 0.00442%
Villanova, PA 19085
Anthony J. Del Tufo 20 Church Street - A6 462 0.00221%
Greenwich, CT 06830
Bruce R. Lesser 640 Six Sentry Parkway 462 0.00221%
Blue Bell, PA 19422
Doris E. Ficca 415 Lancaster Avenue, 776 0.00371%
Unit 8
Haverford, PA 19041
Joan J. Martin 520 Woodland Road 388 0.00186%
Sewickley, PA 15143-1086
Nadine L. Barna 11 Hummingbird Lane 4,042 0.01934%
Darien, CT 06820
Patricia A. Collins 684 Fernfield Circle 388 0.00186%
Wayne, PA 19087
Maxine S. Holton 12861 Marsh Landing 6,418 0.03072%
Palm Beach Gardens, FL
33418
John A. Flack 89 Perkins Road 642 0.00307%
Grenwich, CT 06830
__________________________
__________________________
_______
Berger/Lewiston Associates 21790 Coolidge Highway 1,076,594 5.15237%
Limited Partnership Oak Park, MI 48237
Stephenson-Madison Heights 21790 Coolidge Highway 104,541 0.50031%
Company
Limited Partnership Oak Park, MI 48237
Kingsley-Moravian Company 21790 Coolidge Highway 376,288 1.80084%
Limited Partnership Oak Park, MI 48237
Woodland Garden Apartments 21790 Coolidge Highway 319,860 1.53079%
Limited Partnership Oak Park, MI 48237
B&L Realty Investments 21790 Coolidge Highway 33,560 0.16061%
Limited Partnership Oak Park, MI 48237
Southpointe Square 21790 Coolidge Highway 155,623 0.74478%
Apartments
Limited Partnership Oak Park, MI 48237
Greentrees Apartments 21790 Coolidge Highway 275,905 1.32043%
Limited Partnership Oak Park, MI 48237
Big Beaver-Rochester 21790 Coolidge Highway 528,348 2.52857%
Properties
Limited Partnership Oak Park, MI 48237
Century Realty Investment 21790 Coolidge Highway 99,195 0.47473%
Company
Limited Partnership Oak Park, MI 48237
__________________________
__________________________
_______
John M. DiProsa 32 Sydenham Road 6,150 0.02943%
Rochester, NY 14609
Claude S. Fedele 12 Beckenham Lane 23,765 0.11373%
Fairport, NY 14450
Gabriel W. Gruttadaro 6 Powder Mill Drive 11,150 0.05336%
Pittsford, NY 14534
Anthony M. Julian 204 Angelus Drive 11,150 0.05336%
Rochester, NY 14622
Joanne M. Lobozzo 756 Rock Beach Road 165,188 0.79056%
Rochester, NY 14617
Geraldine B. Lynch 92 Eagle Ridge Circle 3,922 0.01877%
Rochester, NY 14617
Michael E. McCusker 7974 Oak Brook Circle 31,687 0.15165%
Pittsford, NY 14534
Jack P. Schifano 916 Highland Trails 3,961 0.01896%
Avenue
Henderson, NV 89015
__________________________
__________________________
_______
Donald H. Schefmeyer 63262 Orange Road 92,889 0.44455%
South Bend, IN 46614
Stephen W. Hall 7700 St. Andrews Circle
West
Portage, MI 49024 92,889 0.44455%
__________________________
__________________________
_______
Tower Capital, LLC 11501 Huff Court 279,782 1.33898%
N. Bethesda, MD 20895
Beverly B. Bernstein 3248 N Street, NW 72,304 0.34603%
Washington, DC 20037
Park Shirlington c/o 11501 Huff Court 72,304 0.34603%
Apartments
Limited Partnership N. Bethesda, MD 20895
Leona Libby Feldman 575 Greensward Lane 4,388 0.02100%
Delray Beach, FL 33445
Braddock Lee Apartments c/o 11501 Huff Court 47,282 0.22628%
Limited Partnership N. Bethesda, MD 20895
Sarah Selsky 1801 East Jefferson 42,779 0.20473%
Street
Apartment 608
Rockville, MD 20852
Lane F. Libby 352 Mattison Reservoir 20,000 0.09572%
Avenue
Branchville, NJ 07826
Lauren Libby Pearce 537 Hilarie Road 21,938 0.10499%
St. Davids, PA 19807
Amy S. Rubenstein 2814 Dumbarton Street, 11,627 0.05564%
NW
Washington, DC 20007
Beth Dana Rubenstein 451 29th Street 13,689 0.06551%
San Francisco, CA 94131
Barton S. Rubenstein 4003 Underwood Street 13,689 0.06551%
Chevy Chase, MD 20815
Lee G. Rubenstein 4915 Linnean Avenue, NW 2,808 0.01344%
Washington, DC 20008
Trust U/W Daryl R. c/o David Osnos 2,062 0.00987%
Rubenstein
F/B/O Amy Sara Rubenstein 1050 Connecticut Avenue,
NW
Washington, DC 20036
Steven M. Reich 1976 Trust c/o Stephen A. Bodzin 59,313 0.28386%
Trustee
1156 15th Street, NW
Suite 329
Washington, DC 20005
WHC Associates, LLC 7201 Wisconsin Avenue 83,364 0.39896%
Suite 650
Bethesda, MD 20814
__________________________
__________________________
_______
Merrill Bank 200 Bradley Place 19,783 0.09468%
Apartment 305
Palm Beach, FL 33480
Ariel Golden Behr 151 W. 88th Street 1,469 0.00703%
New York, NY 10027
Doris Berliner 7 Slade Avenue 2,637 0.01262%
Apartment 108
Baltimore, MD 21208
Phillip Chmar 7 Slade Avenue 3,830 0.01833%
Apartment 713
Baltimore, MD 21208
Louis K. Coleman 2508 Guilford Avenue 7,152 0.03423%
Baltimore, MD 21218
Mark Dopkin 6303 Lincoln Avenue 371 0.00178%
Baltimore, MD 21209
Paul Goldberg 7111 Park Heights 509 0.00244%
Avenue,
Apartment 712
Baltimore, MD 21215
Joseph Goldman 5250 Linnean Avenue, NW 3,661 0.01752%
Washington, D.C. 20015
Residuary Trust 3240 Patterson Street, 8,363 0.04002%
N.W.
U/W of Milton Goldman Washington, D.C. 20015-
1661
Emmanuel Greenwald 717 Maiden Choice Lane 1,243 0.00595%
#511
Baltimore, MD 21228
Samuel and Esther Hanik 5800 Nicholson Lane 16,582 0.07936%
Apartment 1-903
Rockville, MD 20852
Muriel Hettleman 1 Slade Avenue 6,906 0.03305%
Apartment 202
Baltimore, MD 21208
Charles Heyman 3409 Old Post Drive 1,406 0.00673%
Baltimore, MD 21208
Samuel Hillman Marital NationsBank 9,758 0.04670%
Trust
c/o Anne Weisner
P.O. Box 830151
Dallas, TX 75283
Samuel Hillman Residuary NationsBank 9,758 0.04670%
Trust
c/o Anne Weisner
P.O. Box 830151
Dallas, TX 75283
Marvin A. Jolson 7812 Ridge Terrace 1,018 0.00487%
Baltimore, MD 21208
Isadore Kaplan Revocable 7111 Park Heights Avenue 15,824 0.07573%
Trust
Apartment 10
Baltimore, MD 21208
Milton Klein 1 Slade Avenue 7,305 0.03496%
Apartment 706
Baltimore, MD 21208
Dr. Lee Kress 417 Barby Lane 7,152 0.03423%
Cherry Hill, NJ 08003
Richard & Cheryl Kress 15 W. Aylesbery Road 7,152 0.03423%
Suite 700
Timonium, MD 21093
William Kress Marital c/o Richard Kress 60,305 0.28861%
Trust Trustee
15 W. Aylesbery Road
Suite 700
Timonium, MD 21093
Elmer W. Leibensperger 1900 Dumont Court 859 0.00411%
Timonium, MD 21093
Merrill & Natalie S. Levy 5906 Eastcliff Drive 2,637 0.01262%
Baltimore, MD 21209
Gertrude Myerberg 2227 Ibis Isle Road East 14,611 0.06993%
Palm Beach, FL 33480
Bertha Pollack 7420 Westlake Terrace, 2,486 0.01190%
#1209
Bethesda, MD 20817
Lawrence E. Putnam Family 3241 Worthington Street, 5,424 0.02596%
Trust NW
Washington, DC 20015
Stephen F. Rosenberg 3 Greenwood Place 367 0.00176%
Suite 307
Baltimore, MD 21208
Carol Sadeh D-93 Ein Kerem 2,486 0.01190%
Jerusalem, Israel 95744
Z. Valeere Sass, Trustee 758 Regency Lakes Drive, 2,637 0.01262%
E501
Boca Raton, FL 33433
Isadore Schnapper 11 Slade Avenue 10,421 0.04987%
Apartment 304
Baltimore, MD 21208
M. Gerald Sellman 2 Yearling Way 18,347 0.08781%
Lutherville, MD 21093
Dr. Albert Shapiro 100 Sunrise Avenue 13,196 0.06315%
Palm Beach, FL 33480
Earle K. Shawe Shawe & Rosenthal 85,085 0.40720%
20 S. Charles Street
Baltimore, MD 21201
Rhoda E. Silverman, R. Silverman Rev. Trust 1,469 0.00703%
Trustee
3211 Worthington Street,
NW
Washington, DC 20015
Herbert J. Siegel 14 Straw Hat Road 417,947 2.00021%
Owings Mills, MD 21117
Siegel Family, LLLP c/o Herbert J. Siegel 31,995 0.15312%
14 Straw Hat Road
Owings Mills, MD 21117
Dr. Edgar Sweren 15 Caveswood Lane 1,018 0.00487%
Owings Mills, MD 21117
Dr. Myra Jody Whitehouse 1 Staffordshire Road 2,085 0.00998%
Cherry Hill, NJ 08003
Ms. Terry Whitehouse 3706 Taylor Street 2,085 0.00998%
Chevy Chase, MD 20815
TOTAL UNITS/INTERESTS 20,895,104.989
</TABLE>
EXHIBIT 12.1
HOME PROPERTIES OF NEW YORK, INC.
CALCULATION OF RATIOS OF EARNGINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDEND
<TABLE>
<CAPTION> Original Properties*
-----------------------
Year Ended Year Ended Year Ended August 4- January 1- Year Ended
December 31, December 31, December 31, December 31, August 3, December 31,
1997 1996 1995 1994 1994 1993
------------ ----------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Income before loss ($000)
on disposition of
property, minority
interest and extra-
ordinary item $12,958 $5,044 $4,500 $2,641 $ 783 $1,797
Interest expense
(including debt
amortization) 11,967 9,208 6,432 1,444 3,126 5,113
------ ----- ----- ----- ----- -----
Adjusted Income $24,925 $14,252 $10,932 $4,085 $3,909 $6,910
======= ======= ======= ====== ====== ======
Fixed Charges:
Interest expense
(including debt
amortization) $11,967 $9,208 $6,432 $1,444 $3,126 $5,113
Capitalized interest - 63 - - - -
Rent expense 129 116 79 32 45 88
------- ------ ------ ------ ------ ----- ------
Total Fixed Charges $12,096 $9,387 $6,511 $1,476 $3,171 $5,201
======= ====== ====== ====== ====== ======
Ratio 2.06 1.52 1.68 2.77 1.23 1.33
<FN>
*Original Properties is not a legal entity but rather a combination of twelve
entities which were owned by the predecessor corporation and its affiliates
prior to the Company's initial public offering on August 4, 1994.
</FN>
</TABLE>
The Company has guaranteed temporary construction financing
totalling $931 associated with one entity and a total of
$2,482 of additional debt associated with five entities where
the Company is the general partner. The fixed charges
associated with these guaranteed debts are not material and
are not included in the above computation
Exhibit 23.2
Consent of Independent Accountants
We consent to the incorporation by reference in this Registration Statement on
this Form S-3 to be filed by Home Properties of New York, Inc. of our reports,
(1) dated February 2, 1998, on our audits of the consolidated
financial statements and financial statement schedule of Home Properties of
New York, Inc. as of December 31, 1997 and 1996, and for the three
years in the period ended December 31, 1997, which report was included in the
1997 Annual Report on Form 10-K; (ii) dated December 23, 1997 on our audit of
the Detroit Acquisition Properties for the year ended December 31, 1996, which
report is included in Form 8-K/A Amendment No. 1 dated October 7, 1997 and
filed on January 12, 1998, (3) dated March 16, 1998 and March 18, 1998 on our
audits of Candlewood Apartments and Park Shirlington and Braddock Lee
Apartments, respectively, for the year ended December 31, 1997, which reports
are included in Form 8-K, dated March 23, 1998 and filed on March 24, 1998. We
also consent to the reference to our firm under the caption "Experts".
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Rochester, New York
May 13, 1998
