<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 4, 1998
NO. 333-61401
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
SECURITY CAPITAL GROUP INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MARYLAND 6719 36-3692698
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION INDUSTRIAL IDENTIFICATION
OF INCORPORATION OR CLASSIFICATION CODE NUMBER)
ORGANIZATION) NUMBER)
125 LINCOLN AVENUE
SANTA FE, NEW MEXICO 87501
(505) 982-9292
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
JEFFREY A. KLOPF, SECRETARY
SECURITY CAPITAL GROUP INCORPORATED
125 LINCOLN AVENUE
SANTA FE, NEW MEXICO 87501
(505) 982-9292
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
COPY TO:
EDWARD J. SCHNEIDMAN
MAYER, BROWN & PLATT
190 SOUTH LASALLE STREET
CHICAGO, ILLINOIS 60603
(312) 782-0600
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]_________
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]_________
---------------
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 THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+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 BUY 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 NOR SHALL THERE BE 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. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION, DATED SEPTEMBER 4, 1998
[LOGO OF SECURITY CAPITAL GROUP APPEARS HERE]
OFFER TO EXCHANGE
6.95% EXCHANGE NOTES DUE 2005 FOR OUTSTANDING 6.95% NOTES DUE 2005,
7.15% EXCHANGE NOTES DUE 2007 FOR OUTSTANDING 7.15% NOTES DUE 2007
AND
7.70% EXCHANGE NOTES DUE 2028 FOR OUTSTANDING 7.70% NOTES DUE 2028
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON OCTOBER 13, 1998, UNLESS EXTENDED.
-----------
Security Capital Group Incorporated, a Maryland corporation ("Security
Capital"), hereby offers (the "Exchange Offer"), upon the terms and subject to
the conditions set forth in this Prospectus and the accompanying Letter of
Transmittal, to exchange (i) $1,000 principal amount of Security Capital's
6.95% Exchange Notes due 2005 (the "New 2005 Notes") for each $1,000 principal
amount of Security Capital's outstanding 6.95% Notes due 2005 (the "Old 2005
Notes" and, together with the New 2005 Notes, the "2005 Notes"); (ii) $1,000
principal amount of Security Capital's 7.15% Exchange Notes due 2007 (the "New
2007 Notes") for each $1,000 principal amount of Security Capital's outstanding
7.15% Notes due 2007 (the "Old 2007 Notes" and, together with the New 2007
Notes, the "2007 Notes"); and (iii) $1,000 principal amount of Security
Capital's 7.70% Exchange Notes due 2028 (the "New 2028 Notes") for each $1,000
principal amount of Security Capital's outstanding 7.70% Notes due 2028 (the
"Old 2028 Notes" and, together with the New 2028 Notes, the "2028 Notes"). See
"The Exchange Offer." As of the date of this Prospectus, there were outstanding
$200,000,000 principal amount of Old 2005 Notes, $100,000,000 principal amount
of Old 2007 Notes and $200,000,000 principal amount of Old 2028 Notes
(collectively, the "Old Notes"). The New 2005 Notes, the New 2007 Notes and the
New 2028 Notes (collectively, the "New Notes" and, together with the Old Notes,
the "Notes") will evidence the same debt as the Old Notes and will be issued
and entitled to the same benefits under the Indenture (as hereinafter defined)
relating to the Old Notes. The terms of the New Notes are identical in all
material respects to the Old Notes, except that the New Notes will have been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
and therefore will not be subject to certain transfer restrictions and will not
have certain registration rights and related terms providing for an increased
interest rate which are applicable to the Old Notes. See "The Exchange Offer--
Purpose of the Exchange Offer" and "Description of Notes--General."
Interest on the Notes is payable semiannually on December 15 and June 15 of
each year, commencing December 15, 1998. Holders who exchange their Old Notes
for New Notes in the Exchange Offer will receive interest accrued on their Old
Notes from June 23, 1998, the date of issuance of the Old Notes, to the
Exchange
(Cover continued on next page)
SEE "RISK FACTORS" BEGINNING ON PAGE 14 FOR A DISCUSSION OF CERTAIN FACTORS
WHICH SHOULD BE CONSIDERED BY HOLDERS BEFORE DECIDING WHETHER OR NOT TO TENDER
THEIR OLD NOTES IN THE EXCHANGE OFFER.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CON-
TRARY IS A CRIMINAL OFFENSE.
-----------
The date of this Prospectus is September , 1998
<PAGE>
(Cover continued from previous page)
Date (as hereinafter defined), together with interest accrued on their New
Notes from the Exchange Date, in the first interest payment on the New Notes,
payable on December 15, 1998. See "Description of Notes--Principal, Maturity
and Interest." The Notes of each series may be redeemed at any time at the
option of Security Capital, in whole or in part, at a redemption price equal
to the sum of (i) the principal amount of the Notes being redeemed plus
accrued interest thereon to the redemption date and (ii) the Make-Whole Amount
(as hereinafter defined), if any. See "Description of Notes--Optional
Redemption." The Notes of each series are senior unsecured obligations of
Security Capital and rank equally with each other and with Security Capital's
other unsecured and unsubordinated indebtedness. The Notes are effectively
subordinated to any secured indebtedness of Security Capital as well as to
indebtedness and other liabilities of Security Capital's subsidiaries. See
"Risk Factors--Ranking of Notes" and "Description of Notes--Principal,
Maturity and Interest."
The Old Notes originally were issued and sold on June 23, 1998 (the "Old
Note Offering") in a transaction not registered under the Securities Act in
reliance on the exemptions provided in Section 4(2) of, and Rule 144A under,
the Securities Act. Security Capital is making the Exchange Offer to satisfy
its obligations under the Registration Rights Agreement dated June 23, 1998
(the "Registration Rights Agreement") among Security Capital and J.P. Morgan
Securities Inc., Goldman, Sachs & Co., Merrill Lynch, Pierce, Fenner and Smith
Incorporated and Chase Securities Inc., as the initial purchasers of the Old
Notes (the "Initial Purchasers"), in reliance on positions of the staff of the
U.S. Securities and Exchange Commission (the "Commission") set forth in
certain no-action letters issued to other parties in other transactions.
Security Capital has not sought its own no-action letter, however, and there
can be no assurance that the Commission staff would make a similar
determination with respect to the Exchange Offer. Based on those positions of
the Commission staff, Security Capital believes that New Notes issued in the
Exchange Offer in exchange for Old Notes may be offered for resale, resold and
otherwise transferred by each holder thereof (other than a holder which is (i)
a broker-dealer, as set forth below, (ii) an Initial Purchaser of Old Notes
which acquired Old Notes directly from Security Capital in order to resell
pursuant to Rule 144A under the Securities Act or any other available
exemption under the Securities Act or (iii) an "affiliate" of Security Capital
within the meaning of Rule 405 under the Securities Act) without compliance
with the registration and prospectus delivery requirements of the Securities
Act, provided that those New Notes are acquired in the ordinary course of that
holder's business and that holder is not engaged in, and does not intend to
engage in, and has no arrangement or understanding with any person to
participate in, the distribution of those New Notes within the meaning of the
Securities Act or resale of those New Notes in violation of the Securities
Act. Each holder of Old Notes which receives New Notes in the Exchange Offer
must represent to Security Capital in the Letter of Transmittal that those
conditions have been met. Each broker-dealer which receives New Notes in the
Exchange Offer must represent to Security Capital in the Letter of Transmittal
that it will receive those New Notes for its own account in exchange for Old
Notes which were acquired by it as a result of market-making or other trading
activities and that it will deliver a prospectus meeting the requirements of
the Securities Act in connection with any resale of those New Notes. The
Letter of Transmittal states that by so representing and so delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a broker-
dealer in connection with resales of New Notes received in exchange for Old
Notes which were acquired by the broker-dealer as a result of market-making or
other trading activities. Security Capital has agreed to make this Prospectus
available to any such broker-dealer for use in connection with any such resale
for such period of time as broker-dealers must deliver a prospectus, up to 180
days after the Expiration Date (as hereinafter defined). See "The Exchange
Offer--Resale of New Notes" and "Plan of Distribution."
Security Capital will accept for exchange any and all Old Notes which are
validly tendered and not withdrawn before 5:00 p.m., New York City time, on
the date the Exchange Offer expires, which will be October 13, 1998 (the
"Expiration Date"), unless the Exchange Offer is extended by Security Capital
in its sole discretion, in which case the term "Expiration Date" will mean the
latest date to which the Exchange Offer is extended. See "The Exchange Offer--
Terms of the Exchange Offer," "--Expiration Date" and "--Acceptance of Old
<PAGE>
(Cover continued from previous page)
Notes for Exchange." Tenders of Old Notes may be withdrawn at any time before
5:00 p.m., New York City time, on the Expiration Date. See "The Exchange
Offer--Withdrawal Rights." Tenders of Old Notes will be accepted only in
denominations of $1,000 and integral multiples thereof. See "The Exchange
Offer--Terms of the Exchange Offer." Only a registered holder of Old Notes may
tender those Old Notes for exchange in the Exchange Offer. See "The Exchange
Offer--Procedures for Tendering Old Notes." The Exchange Offer is not
conditioned on any minimum amount of Old Notes being tendered for exchange,
but the Exchange Offer is subject to certain conditions which may be waived by
Security Capital and to certain other terms and conditions. See "The Exchange
Offer--Conditions to the Exchange Offer."
Any Old Notes not tendered and accepted in the Exchange Offer will remain
subject to the existing restrictions on transfer of the Old Notes, and
Security Capital will have no further obligations to the holders (other than
to the Initial Purchasers) of those Old Notes to provide for their
registration under the Securities Act. See "Risk Factors--Consequences of
Failure to Exchange" and "The Exchange Offer--Effect on Holders of Old Notes."
The Notes of each series will be evidenced by one or more Global Securities
(as hereinafter defined) registered in the name of The Depository Trust
Company ("DTC") or its nominee. Interests in the Global Securities will be
shown on, and transfers thereof will be effected only through, records
maintained by DTC and its participants. Except as provided herein, Notes in
definitive form will not be issued. See "Description of Notes--Global
Securities." Security Capital does not intend to apply for listing of the New
Notes on any securities exchange or for quotation of the New Notes on any
interdealer quotation system. See "Risk Factors--Market for New Notes."
Security Capital will not receive any proceeds from the issuance of New
Notes in the Exchange Offer. See "Use of Proceeds." Security Capital has
agreed to pay the expenses of the Exchange Offer. See "The Exchange Offer--
Fees and Expenses." No underwriter is being used in connection with the
Exchange Offer. See "Plan of Distribution."
SECURITY CAPITAL EXPECTS THAT THIS PROSPECTUS AND THE LETTER OF TRANSMITTAL
WILL FIRST BE SENT TO ALL REGISTERED HOLDERS OF OLD NOTES ON OR ABOUT
SEPTEMBER 11, 1998.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE NEW NOTES OF ANY
SERIES. SPECIFICALLY, THE INITIAL PURCHASERS MAY BID FOR AND PURCHASE THE NEW
NOTES IN THE OPEN MARKET. FOR A DESCRIPTION OF THOSE ACTIVITIES, SEE "PLAN OF
DISTRIBUTION."
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, THAT
INFORMATION OR THOSE REPRESENTATIONS MUST NOT BE RELIED ON AS HAVING BEEN
AUTHORIZED BY SECURITY CAPITAL. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY OF THE NEW NOTES BY ANY
PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR THAT PERSON TO MAKE
SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF SECURITY CAPITAL SINCE THE
DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE
SUBSEQUENT TO THE DATE HEREOF.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THOSE DOCUMENTS ARE AVAILABLE UPON REQUEST FROM
JEFFREY A. KLOPF, SECRETARY, SECURITY CAPITAL GROUP INCORPORATED, 125 LINCOLN
AVENUE, SANTA FE, NEW MEXICO 87501, TELEPHONE
<PAGE>
(Cover continued from previous page)
NUMBER: (505) 982-9292. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS,
ANY REQUEST SHOULD BE MADE BY OCTOBER 6, 1998 (FIVE BUSINESS DAYS PRIOR TO THE
EXPIRATION DATE).
FORWARD-LOOKING STATEMENTS
THE STATEMENTS CONTAINED IN THIS PROSPECTUS AND IN THE DOCUMENTS
INCORPORATED HEREIN BY REFERENCE WHICH ARE NOT HISTORICAL FACTS ARE FORWARD-
LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT AND
SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. THESE FORWARD-
LOOKING STATEMENTS ARE BASED ON CURRENT EXPECTATIONS, MANAGEMENT'S BELIEFS,
AND ASSUMPTIONS MADE BY MANAGEMENT. WORDS SUCH AS "EXPECTS," "ANTICIPATES,"
"INTENDS," "PLANS," "BELIEVES," "SEEKS," "ESTIMATES," VARIATIONS OF THOSE
WORDS AND SIMILAR EXPRESSIONS ARE NOT INTENDED TO IDENTIFY THOSE FORWARD-
LOOKING STATEMENTS. THESE STATEMENTS ARE NOT GUARANTEES OF FUTURE PERFORMANCE
AND INVOLVE CERTAIN RISKS, UNCERTAINTIES AND ASSUMPTIONS WHICH ARE DIFFICULT
TO PREDICT. THEREFORE, ACTUAL OUTCOMES AND RESULTS MAY DIFFER MATERIALLY FROM
WHAT IS EXPRESSED OR FORECASTED IN THOSE FORWARD-LOOKING STATEMENTS. SECURITY
CAPITAL UNDERTAKES NO OBLIGATION TO UPDATE PUBLICLY ANY FORWARD-LOOKING
STATEMENTS, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR
OTHERWISE. SECURITY CAPITAL'S FINANCIAL PERFORMANCE DEPENDS ON THE OPERATING
RESULTS OF ITS CAPITAL DIVISION INVESTEES AND ITS SERVICES DIVISION. AMONG THE
IMPORTANT FACTORS WHICH COULD CAUSE SECURITY CAPITAL'S ACTUAL RESULTS TO
DIFFER MATERIALLY FROM THOSE EXPRESSED IN THE FORWARD-LOOKING STATEMENTS ARE
(I) CHANGES IN GENERAL ECONOMIC CONDITIONS WHICH WOULD AFFECT THE OPERATING
RESULTS OF THE CAPITAL DIVISION INVESTEES OR THE REVENUES EARNED BY THE
SERVICES DIVISION; (II) CHANGES IN FINANCIAL MARKETS AND INTEREST RATES WHICH
COULD ADVERSELY AFFECT SECURITY CAPITAL'S AND THE CAPITAL DIVISION'S
INVESTEES' COSTS OF CAPITAL AND THEIR ABILITY TO MEET THEIR FINANCING NEEDS
AND OBLIGATIONS; (III) INCREASED OR UNEXPECTED COMPETITION FOR THE CAPITAL
DIVISION'S INVESTEES; (IV) CHANGES IN CAPITAL MARKETS GENERALLY OR THE MARKET
FOR REAL ESTATE SECURITIES SPECIFICALLY WHICH COULD AFFECT THE REVENUES EARNED
BY THE SERVICES DIVISION; (V) IMPACT OF RAPID GROWTH ON SECURITY CAPITAL,
INCLUDING MANAGEMENT AND STAFFING; AND (VI) CHANGES IN TAX LAWS WHICH COULD
AFFECT THE CAPITAL DIVISION'S INVESTEES WHICH OPERATE AS REITS.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Prospectus Summary......................................................... 1
Risk Factors............................................................... 14
Use of Proceeds............................................................ 22
Capitalization............................................................. 23
The Exchange Offer......................................................... 24
Description of Notes....................................................... 29
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Certain Federal Income Tax Consequences.................................... 40
Plan of Distribution....................................................... 40
Experts.................................................................... 41
Legal Matters.............................................................. 42
Available Information...................................................... 42
Incorporation by Reference................................................. 43
</TABLE>
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the more
detailed information and financial statements, including the notes thereto,
appearing elsewhere in this Prospectus or incorporated herein by reference.
Unless the context indicates or requires otherwise, references in this
Prospectus and the documents incorporated herein by reference to "Security
Capital" are to Security Capital Group Incorporated and its subsidiaries.
THE COMPANY
SECURITY CAPITAL, a Maryland corporation, is a global real estate research,
investment and operating management company. Security Capital operates its
businesses through two divisions. The Capital Division generates EBDADT
(earnings before depreciation, amortization and deferred taxes) principally
from its pro rata ownership of private and public strategic real estate
operating company investments. The Services Division derives EBDADT through
service fees from the Real Estate Research Group, Global Capital Management
Group and Financial Services Group. In 1997, the Capital Division accounted for
91.9% and the Services Division accounted for 8.1% of Security Capital's
$214.28 million of reported EBDADT for 1997, and for the period from January 1,
1998 to June 30, 1998, the Capital Division accounted for 88.2% and the
Services Division accounted for 11.8% of Security Capital's $141.2 million of
reported EBDADT for that period. At July 31, 1998, Security Capital's equity
market capitalization, based on shares outstanding, was $3.1 billion.
The CAPITAL DIVISION'S Global Strategic Group ("GSG") provides business
strategy and operating and capital deployment oversight to the companies in
which Security Capital has direct and indirect strategic ownership positions.
Since its inception, GSG has directed significant expenditures, both in the
U.S. and internationally, in research and development to create new, fully
integrated, value-added operating companies with proprietary customer-delivery
systems. GSG works closely with the management of affiliated public and private
start-up and public investees to ensure their long-term sustainable cash flow
growth. At July 31, 1998, GSG oversaw strategic investments in 16 public and
private real estate operating companies focused in international distribution,
multifamily communities, neighborhood infill shopping centers, city center
retail, parking, corporate office, self-storage, hotels, corporate extended-
stay lodging, assisted-living residential communities and manufactured housing
communities. GSG also oversees several new niche businesses that are currently
at various stages of research and development. These operating companies had a
combined total equity market capitalization, based on shares outstanding, of
$13.7 billion at July 31, 1998. See "--Security Capital Ownership and Market
Capitalization of Significant Investees."
The SERVICES DIVISION'S Real Estate Research Group ("RERG") conducts
proprietary real estate research and provides analysis of long-term market
conditions and short-term trends to Security Capital's direct and indirect
investees. The Global Capital Management Group ("GCMG") manages capital
invested in real estate securities with both short to intermediate-term and
long-term investment objectives. At July 31, 1998, GCMG provided real estate
securities management for seven entities affiliated with Security Capital with
total assets under management of $4.5 billion. The Financial Services Group
("FSG") provides administrative and capital markets services to various
affiliated operating companies and investment entities.
1
<PAGE>
[LOGO OF SECURITY CAPITAL GROUP APPEARS HERE]
SECURITY CAPITAL GROUP
Incorporated
Real Estate Research, Investment and
Operating Management
<TABLE>
<CAPTION>
CAPITAL DIVISION SERVICES DIVISION
- -------------------------------- -----------------------------------------------------------------------------
<S> <C> <C> <C>
GLOBAL STRATEGIC GROUP REAL ESTATE GLOBAL CAPITAL FINANCIAL SERVICES
Incorporated RESEARCH GROUP MANAGEMENT GROUP GROUP
(GSG) Incorporated Incorporated (FSG)
Business Strategy, Operating (RERG) (GCMG)
and Capital Deployment Administrative and
Oversight of Private and Public Real Estate Research Real Estate Securities Capital Markets Services
Strategic Investments Management
</TABLE>
As of July 31, 1998, Security Capital employed 528 people at the corporate
level, and its affiliated operating companies employed 14,923 people. The
principal offices of Security Capital and its directly owned affiliates are in
Atlanta, Brussels, Chicago, Denver, El Paso, London, Luxembourg, New York, San
Francisco and Santa Fe. Security Capital's principal executive offices are
located at 125 Lincoln Avenue, Santa Fe, New Mexico 87501, telephone number
(505) 982-9292.
Security Capital's operating strategy is intended to maximize EBDADT* as
follows:
Key Business Operating Characteristics
[FLOW CHART OF SECURITY CAPITAL'S OPERATING CHARACTERISTICS APPEARS HERE]
High Sustainable EBDADT Growth
- -- Superior Management Teams/Succession Plans
- -- Continuous Commitment to Research & Development
- -- Highly Focused Business Strategy
- -- Fully Integrated Operating/Development Company
- -- Franchise Value Creation Through Proprietary Costumer Delivery Systems
- -- Research Based Capital Allocation/Retraction
* EBDADT represents earnings before depreciation, amortization and deferred
taxes. EBDADT should not be considered as a substitute for net earnings
computed in accordance with GAAP (as hereinafter defined) in evaluating
operating results or as a substitute for cash flows from operating,
investing or financing activities in evaluating liquidity.
2
<PAGE>
Through July 31, 1998, Security Capital had invested an aggregate of
approximately $2.7 billion in the common shares of Archstone Communities Trust
("Archstone"), ProLogis Trust ("ProLogis"), Homestead Village Incorporated
("Homestead"), Security Capital U.S. Realty ("SC-USREALTY") and Security
Capital Global Realty ("SC-GR"). Those securities had an aggregate market value
of approximately $3.5 billion (based on the closing prices of those securities
on the principal exchanges on which the securities are listed on July 31,
1998).
BUSINESS STRATEGY SUMMARY
Management believes the global real estate industry is in the early stages of
a dramatic transition from ownership in "passive hands" to becoming a
securitized industry with a focus on capital allocation and operating
management. As public real estate investment enterprises become more prevalent,
a greater percentage of the industry's new capital is moving to publicly
traded, fully integrated, value-added operating companies. Securitized holdings
offer significant benefits to institutional and retail investors, including
enhanced liquidity, real-time pricing and the opportunity for optimal growth
and sustainable competitive rates of return.
Security Capital's strategy is to create the optimal organization to lead and
profit from real estate securitization. Security Capital will implement this
strategy by:
. Providing leadership in real estate research conducted on a global basis.
Security Capital's proprietary research, which is available to Security
Capital's affiliates, provides a strong foundation for its capital
deployment and operating strategies.
. Continuing to invest its capital in fully integrated, value-added
operating companies that have strong prospects for sustained growth.
Security Capital plans to utilize the results of its research to identify
opportunities in which it can invest its capital in the start-up of
focused, private operating companies with the objective of becoming
publicly traded and having the prospect of dominating their respective
niches. Security Capital currently is considering several new business
initiatives, both domestically and globally, in which it has recently
made or has agreed to make investments. While none of the new business
initiatives is material at present to Security Capital's results of
operations or financial condition, these initiatives are expected to be
an important component of Security Capital's future growth. In addition,
Security Capital will continue to make investments in public companies in
which it can provide strategic and operating guidance and capital and
thereby enable the companies to pursue an attractive growth strategy.
. Creating a global real estate securities management business.
Security Capital intends to deploy its capital (both its corporate and third-
party managed capital) in enterprises that emulate the operating
characteristics of the leading value-added operating companies in other highly
competitive global industries. As the shift toward securitization of real
estate ownership leads to a more focused system for deploying capital, Security
Capital believes leading real estate companies will commit significant
investment and effort to research and development to create value-added
operating systems for application in target markets. Security Capital believes
leading real estate companies will devote significant capital and energy to
management development programs, creating a strong corporate culture with
succession plans in place. Security Capital also believes leading real estate
companies will consider capital as a precious resource to be deployed utilizing
evaluation processes based on Economic Value-Added (EVA) or similar strategies.
The shift toward securitization creates opportunities for Security Capital and
its operating companies. By building talented management teams, creating fully
integrated operating systems and implementing focused strategies, Security
Capital believes leading real estate companies can achieve sustainable
annualized rates of return which are competitive with other growth industries.
3
<PAGE>
SECURITY CAPITAL OWNERSHIP AND MARKET CAPITALIZATION OF INVESTEES
<TABLE>
<CAPTION>
DIRECT/INDIRECT EQUITY MARKET
INVESTEES OWNERSHIP(1)(2) CAPITALIZATION(1)(2)
- --------- --------------- --------------------
(IN MILLIONS)
<S> <C> <C>
Archstone Communities Trust............... 36% $3,226
ProLogis Trust............................ 35% $3,370
Homestead Village Incorporated(3)......... 43% $ 656
Strategic Hotel Capital Incorporated...... 23% $1,756
BelmontCorp............................... 100% $ 175
SC-USREALTY(4)............................ 30% $2,363
CarrAmerica Realty Corporation(5)....... 35% $2,218
Storage USA, Inc.(5).................... 37% $1,019
Regency Realty Corporation(5)........... 38% $ 737
Pacific Retail Trust(5)................. 68% $ 836
Parking Services International,
Incorporated(5)........................ 9% $ 40
Urban Growth Properties Trust(5)........ 98% $ 300
City Center Retail Trust(5)............. 100% $ 350
CWS Communities Trust(5)................ 83% $ 352
Security Capital Global Realty(6)......... 35% $1,500
City & West End Properties S.A.(7)...... 95% $ 196
Akeler S.A.(7).......................... 81% $ 313
Bernheim-Comofi S.A.(7)................. 99% $ 343
</TABLE>
- --------
(1) Ownership and equity market capitalization are as of July 31, 1998, and
assume contractual commitments by investors have been funded, convertible
instruments have been converted into common shares, and options and
warrants for common shares have been exercised. The resulting number of
common shares is multiplied by the closing price of the common shares on
that date for those companies listed on an exchange or, in the case of
Strategic Hotel Capital Incorporated ("SHC"), BelmontCorp, Pacific Retail
Trust ("PACIFIC RETAIL"), Parking Services International, Incorporated,
Urban Growth Properties Trust, City Center Retail Trust, CWS Communities
Trust ("CWS"), SC-GR, City & West End Properties S.A. ("City & West End"),
Akeler S.A. ("Akeler") and Bernheim-Comofi S.A. ("Bernheim-Comofi"), the
last private equity offering price.
(2) As of July 31, 1998, Security Capital's percentage ownerships of its
investees, based on common shares outstanding on that date, were 38% of
Archstone, 41% of ProLogis, 70% of Homestead, 30% of SHC, 100% of
BelmontCorp, 34% of SC-USREALTY and 35% of SC-GR. Equity market
capitalization, as of July 31, 1998, based on common shares outstanding,
was $3.0 billion for Archstone, $2.9 billion for ProLogis, $407 million for
Homestead, $756 million for SHC, $100,000 for BelmontCorp (total investment
in BelmontCorp was $26.4 million, $26.3 million of which was convertible
debt), $2.1 billion for SC-USREALTY and $563 million for SC-GR. The
combined total equity market capitalization of the 16 operating companies
(excluding SC-USREALTY and SC-GR) at July 31, 1998, based on shares
outstanding and calculated as described in footnote 1 above, was $13.7
billion.
(3 ) Ownership of Homestead assumes that all convertible mortgage notes have
been funded and converted into Homestead common shares. Ownership of
Homestead does not include any ownership Security Capital may obtain in
Homestead upon conversion of convertible mortgage notes owned by Archstone
through a funding commitment agreement. On April 24, 1998, Homestead
renewed its existing revolving line of credit facility for a one-year term
with an increase in total borrowing capacity to $150 million, subject to
collateral requirements, and entered into a separate $50 million line of
credit. In addition on June 15, 1998, Homestead entered into a third
credit facility with a term of eight months and a maximum available
principal amount of $200 million. In connection with the third line of
credit, Security Capital committed, during the eight month term of the
third line of credit, to retain its ownership of Homestead
4
<PAGE>
common shares and to purchase up to $200 million in subordinated
convertible debentures of Homestead under certain circumstances (which
amount may be reduced if Security Capital purchases other Homestead
securities). Homestead has pledged this investment obligation of Security
Capital as security under Homestead's third line of credit.
(4) The European management and Board of Directors of SC-USREALTY receive
operating and investment advice from Security Capital (EU) Management S.A.,
which subcontracts certain research and advisory activities from its
affiliates GCMG and GSG.
(5) This company is an investee of SC-USREALTY through its subsidiary and is
not directly advised by Security Capital. The ownership percentage
reflected is that of SC-USREALTY.
(6) The European management and Board of Directors of SC-GR receive operating
and investment advice from Security Capital Global Management S.A., which
subcontracts certain research and advisory activities from its affiliates
GCMG and GSG.
(7) This company is an investee of SC-GR through its subsidiary and is not
directly advised by Security Capital. The ownership percentage reflected is
that of SC-GR.
RECENT DEVELOPMENTS
In July 1998, Security Capital Atlantic Incorporated ("ATLANTIC") merged with
and into Security Capital Pacific Trust, which survived the merger and changed
its name to Archstone as part of the merger. In the merger, each outstanding
share of ATLANTIC common stock was converted into the right to receive one
Archstone common share and each share of ATLANTIC Series A Cumulative
Redeemable Preferred Stock was converted into the right to receive one
Archstone Series C Cumulative Redeemable Preferred Share. In addition,
Archstone assumed all of ATLANTIC's outstanding debt ($697 million as of June
30, 1998) and other liabilities upon the closing of the merger. As a result of
the merger, Security Capital owned approximately 38% of the outstanding common
shares of Archstone at July 7, 1998. The merger was approved by Archstone's and
ATLANTIC's shareholders at annual meetings on June 29, 1998.
On July 6, 1998, Homestead entered into a mortgage loan purchase agreement
with ATLANTIC and Merrill Lynch Mortgage Capital Inc. ("MLMC") whereby the $98
million of Homestead convertible mortgage notes held by ATLANTIC were modified
to, among other things, eliminate their convertibility feature in exchange for
a payment of $21.4 million from Homestead to ATLANTIC. Homestead funded the
payment with the proceeds received from the sale of 7.5% convertible
subordinated debentures. Also pursuant to the mortgage loan purchase agreement,
ATLANTIC sold such amended notes to MLMC for $98 million. On August 7, 1998,
Homestead converted the $98 million of mortgage notes and $24 million of 7.5%
convertible subordinated debentures into $122 million of mortgage notes of a
newly formed special purpose subsidiary of Homestead. The $122 million of
mortgage notes are due on June 30, 1999, unless extended.
In April 1998, SC-GR received commitments for $1.5 billion in its initial
offering of securities. Of this amount, Security Capital has committed to
invest up to $518 million in SC-GR. SC-GR is a new, European based company
which intends to own strategic control positions in real estate operating
companies outside the United States. As of July 31, 1998, $562.6 million of the
commitments had been funded, of which $194.3 million was funded by Security
Capital (representing a 34.6% ownership interest in SC-GR). Through July 31,
1998, SC-GR had invested approximately $586 million in its first three
investments. These three investments are in private companies, which SC-GR
ultimately plans to take public. Akeler is currently a developer of suburban
office properties and business parks in multiple markets in the United Kingdom.
Its strategy is to serve its multinational customers with suburban office space
on a Pan-European basis. City & West End is a developer of high-end office
infill properties in London's West End. Bernheim-Comofi is an owner and
operator of car parking facilities, self-storage facilities and certain other
real estate businesses.
5
<PAGE>
In May 1998, SC-USREALTY issued $450,000,000 of its 2% Senior Unsecured
Convertible Notes due 2003. The net proceeds of the offering (approximately
$352 million) were used to repay borrowings under SC-USREALTY's line of credit.
In May 1998, Security Capital announced an initial commitment of $175 million
to BelmontCorp, a senior assisted living company which will build, own and
operate assisted living residential communities throughout the United States.
In July 1998, Security Capital Industrial Trust changed its name to ProLogis.
On April 1, 1998, the shares of common stock of Homestead became listed on
the New York Stock Exchange (the "NYSE"). Prior thereto, the shares were listed
on the American Stock Exchange.
On June 3, 1998, Security Capital announced that C. Ronald Blankenship had
been appointed to the newly created position of Vice Chairman of the Board of
Directors of Security Capital (the "Board") and Chief Operating Officer of
Security Capital.
SUMMARY OF FINANCIAL STRATEGY OF SECURITY CAPITAL AND RECENT FINANCING ACTIVITY
Security Capital's objectives are to maximize its return on investment and
its operating cash flows after tax from its Capital Division and Services
Division and to follow a conservative financial policy. In order to achieve its
financial objectives, Security Capital plans to balance its investments between
growth-oriented companies which do not pay a dividend and dividend-paying real
estate entities and in so doing intends to maintain a strong balance sheet.
Security Capital targets a conservative cash flow to fixed charge coverage
ratio of 2.5-3.0 to 1.0 and commits investment capital to companies which also
have financial policies committed to maintaining strong balance sheets with
similar coverage ratios. Financial exposure from any of Security Capital's
investments is limited to committed capital. Security Capital seeks to
prudently use unsecured, fixed rate, long-term debt which is derived from
public debt markets, with staggered maturity dates. Security Capital's current
policy is to use its earnings to meet its financial obligations and fund
investments and to refrain from paying dividends.
In June 1998, Security Capital converted the secured line of credit of SC
Realty Incorporated ("SC Realty"), a wholly owned subsidiary of Security
Capital which holds Security Capital's shares of Archstone, ProLogis,
Homestead, SHC, BelmontCorp, SC-USREALTY, SC-GR, Security Capital U.S. Real
Estate Shares, Security Capital European Real Estate Shares and Security
Capital Preferred Growth Incorporated, into a $650 million revolving unsecured
line of credit (the "Unsecured Line of Credit") between Security Capital, as
borrower, and Wells Fargo Bank, National Association ("Wells Fargo") and The
Chase Bank of Texas, National Association ("Chase"), as agents for a syndicate
of lenders. SC Realty has guaranteed Security Capital's obligations under the
Unsecured Line of Credit. The Unsecured Line of Credit has an initial term
through April 2000 (which may be extended for one-year periods with the consent
of the lenders). The proceeds from the initial borrowing under the Unsecured
Line of Credit were used to pay off and discharge all obligations, including
principal, interest, fees and expenses, owed under the SC Realty secured line
of credit. Security Capital used the net proceeds received from the issuance of
the Old Notes to repay amounts outstanding under the Unsecured Line of Credit.
As of August 31, 1998, there were approximately $205 million of borrowings
outstanding under the Unsecured Line of Credit.
Borrowings under the Unsecured Line of Credit bear interest, at Security
Capital's option, at either (i) LIBOR plus a margin ranging from 0.7% to 1.5%
(depending on Security Capital's senior unsecured long-term debt ratings, but
not less than LIBOR plus 1.0% until April 1999), or (ii) the higher of the
federal funds rate plus a margin of 0.5% or Wells Fargo's prime rate, with
interest payable monthly in arrears. Security Capital will pay a commitment fee
ranging from 0.125% to 0.20% per annum based on the average unfunded amount.
6
<PAGE>
The Unsecured Line of Credit contains several financial covenants restricting
Security Capital, including covenants: requiring a minimum shareholders'
equity; restricting the ratio of total liabilities to market value net worth;
limiting distributions; requiring a minimum ratio of cash flow to fixed
charges; limiting the amount of secured debt; requiring a minimum ratio of
unsecured liabilities to the value of a pool of investments held by Security
Capital and its consolidated subsidiaries; prohibiting the pledging of the
capital stock of SC Realty; requiring the maintenance of Security Capital's
corporate existence and listing of its common shares on the NYSE; and regarding
change of control matters. SC Realty's guarantee of the Unsecured Line of
Credit also limits the ability of SC Realty to incur liabilities and transfer
SC Realty's assets. The ability of Security Capital and SC Realty to comply
with the foregoing provisions may be affected by events beyond Security
Capital's control. Failure to comply with any of these covenants could result
in a default under the Unsecured Line of Credit. At June 30, 1998, Security
Capital and SC Realty were in compliance with the covenants under the Unsecured
Line of Credit.
7
<PAGE>
THE EXCHANGE OFFER
The Exchange Offer.............. Security Capital is offering to exchange
$1,000 principal amount of New 2005 Notes for
each $1,000 principal amount of outstanding
Old 2005 Notes, $1,000 principal amount of
New 2007 Notes for each $1,000 principal
amount of outstanding Old 2007 Notes and
$1,000 principal amount of New 2028 Notes for
each $1,000 principal amount of outstanding
Old 2028 Notes. Security Capital is making
the Exchange Offer to satisfy its obligations
under the Registration Rights Agreement. See
"The Exchange Offer--Purpose of the Exchange
Offer" and "--Terms of the Exchange Offer."
Procedures for Tendering Old To validly tender Old Notes in the Exchange
Notes........................... Offer, the holder must tender the Old Notes
pursuant to the procedures for book-entry
transfer and a book-entry confirmation must
be received by the Exchange Agent before 5:00
p.m., New York City time, on the Expiration
Date, unless the guaranteed delivery
procedures are complied with. See "The
Exchange Offer--Procedures for Tendering Old
Notes," "--Book-Entry Transfer" and "--
Guaranteed Delivery Procedures."
Conditions...................... The Exchange Offer is not conditioned on any
minimum amount of Old Notes being tendered
for exchange, but the Exchange Offer is
subject to certain conditions which may be
waived by Security Capital and to certain
other terms and conditions. See "The Exchange
Offer--Conditions to the Exchange Offer."
Expiration Date................. The Exchange Offer will expire at 5:00 p.m.,
New York City time, on October 13, 1998,
unless the Exchange Offer is extended by
Security Capital in its sole discretion. See
"The Exchange Offer--Expiration Date."
Withdrawal Rights............... Tenders of Old Notes may be withdrawn at any
time before 5:00 p.m., New York City time, on
the Expiration Date. See "The Exchange
Offer--Withdrawal Rights."
Federal Income Tax
Consequences.................... The exchange of an Old Note for a New Note in
the Exchange Offer will not be taxable to an
exchanging holder for Federal income tax
purposes. See "Certain Federal Income Tax
Consequences."
Use of Proceeds................. Security Capital will not receive any
proceeds from the issuance of New Notes in
the Exchange Offer. See "Use of Proceeds."
Exchange Agent.................. State Street Bank and Trust Company is
serving as exchange agent (the "Exchange
Agent") in connection with the Exchange
Offer. See "The Exchange Offer--Exchange
Agent."
Effect on Holders of Old Notes.. Holders of Old Notes not tendered and
accepted in the Exchange Offer will continue
to be entitled to all the rights
8
<PAGE>
applicable thereto under the Indenture, dated
as of June 18, 1998 (the "Indenture"), from
Security Capital to State Street Bank and
Trust Company, as trustee (the "Trustee"),
which relates to both the Old Notes and the
New Notes, and any such Old Notes will remain
outstanding and continue to accrue interest
according to their terms. Any Old Notes not
tendered and accepted in the Exchange Offer
will remain subject to the existing
restrictions on transfer of Old Notes
provided in the Old Notes and in the
Indenture, and Security Capital will have no
further obligations to the holders (other
than to the Initial Purchasers) of those Old
Notes to provide for their registration under
the Securities Act. In addition, the tender
of Old Notes pursuant to the Exchange Offer
will reduce the principal amount of Old Notes
outstanding, which may have an adverse effect
on, and increase the volatility of, the
market prices of Old Notes due to a reduction
of liquidity. See "Risk Factors--Consequences
of Failure to Exchange" and "The Exchange
Offer--Effect on Holders of Old Notes."
Resale of New Notes............. Security Capital believes that, based on
positions taken by the Commission staff, New
Notes issued in the Exchange Offer in
exchange for Old Notes may be offered for
resale, resold and otherwise transferred by
each holder thereof (other than a holder
which is (i) a broker-dealer, as set forth
below, (ii) an Initial Purchaser of Old Notes
which acquired Old Notes directly from
Security Capital in order to resell pursuant
to Rule 144A under the Securities Act or any
other available exemption under the
Securities Act or (iii) an "affiliate" of
Security Capital within the meaning of Rule
405 under the Securities Act) without
compliance with the registration and
prospectus delivery requirements of the
Securities Act, provided that those New Notes
are acquired in the ordinary course of that
holder's business and that holder is not
engaged in, and does not intend to engage in,
and has no arrangement or understanding with
any person to participate in, the
distribution of those New Notes within the
meaning of the Securities Act or resale of
those New Notes in violation of the
Securities Act. This Prospectus, as it may be
amended or supplemented from time to time,
may be used by a broker-dealer in connection
with resales of New Notes received in
exchange for Old Notes which were acquired by
the broker-dealer as a result of market-
making or other trading activities. Security
Capital has agreed to make this Prospectus
available to any such broker-dealer for use
in connection with any such resale for such
period of time as broker-dealers must deliver
a prospectus, up to 180 days after the
Expiration Date. See "The Exchange Offer--
Resale of New Notes" and "Plan of
Distribution."
9
<PAGE>
DESCRIPTION OF NOTES
The New Notes will evidence the same debt as the Old Notes and will be issued
and entitled to the same benefits under the Indenture relating to the Old
Notes. The terms of the New Notes are identical in all material respects
(including principal amount, interest rate, maturity and ranking) to the terms
of the Old Notes for which they will be exchanged, except that the New Notes
will have been registered under the Securities Act and therefore will not be
subject to certain transfer restrictions and will not have certain registration
rights and related terms providing for an increased interest rate which are
applicable to the Old Notes. See "The Exchange Offer--Purpose of The Exchange
Offer" and "Description of Notes--General."
Issuer.......................... Security Capital Group Incorporated.
Securities Offered.............. Up to $200,000,000 aggregate principal amount
of 6.95% Exchange Notes due 2005, up to
$100,000,000 aggregate principal amount of
7.15% Exchange Notes due 2007 and up to
$200,000,000 aggregate principal amount of
7.70% Exchange Notes due 2028.
Maturity Dates.................. The 2005 Notes will mature on June 15, 2005,
the 2007 Notes will mature on June 15, 2007
and the 2028 Notes will mature on June 15,
2028. See "Description of Notes--Principal,
Maturity and Interest."
Interest Payment Dates.......... December 15 and June 15 of each year,
commencing December 15, 1998. Holders who
exchange their Old Notes for New Notes in the
Exchange Offer will receive interest accrued
on their Old Notes from June 23, 1998, the
date of issuance of the Old Notes, to the
consummation of the Exchange Offer (the
"Exchange Date"), together with interest
accrued on their New Notes from the Exchange
Date, in the first interest payment on the
New Notes, payable on December 15, 1998. See
"Description of Notes--Principal, Maturity
and Interest."
Ranking.........................
The Notes of each series are senior unsecured
obligations of Security Capital and rank
equally with each other and with Security
Capital's other unsecured and unsubordinated
indebtedness. See "Description of Notes--
Principal, Maturity and Interest." The Notes
are effectively subordinated to any secured
indebtedness of Security Capital as well as
to indebtedness and other liabilities of
Security Capital's subsidiaries and companies
in which Security Capital has a direct or
indirect investment to the extent of the
assets of those subsidiaries and companies.
As of June 30, 1998, Security Capital and its
Wholly Owned Subsidiaries (as hereinafter
defined) did not have any secured
indebtedness outstanding. See "Risk Factors--
Ranking of Notes" and "Capitalization."
Optional Redemption............. The Notes of each series may be redeemed at
any time at the option of Security Capital,
in whole or in part, at a redemption price
equal to the sum of (i) the principal amount
of the Notes being redeemed plus accrued
interest to the redemption date
10
<PAGE>
and (ii) the Make-Whole Amount, if any. See
"Description of Notes--Optional Redemption."
Certain Covenants............... The Indenture contains certain covenants,
including, but not limited to, covenants: (i)
limiting the incurrence by Security Capital
and its wholly owned subsidiaries of
additional indebtedness; (ii) requiring
Security Capital to maintain a minimum
consolidated tangible net worth; (iii)
limiting the creation of liens securing
indebtedness; (iv) limiting Security
Capital's ability to consolidate or merge
with or into, or to transfer all or
substantially all of its assets to, another
person; and (v) limiting the ability of
Security Capital and its subsidiaries to
enter into and engage in certain lines of
business. See "Description of Notes--Certain
Covenants."
RISK FACTORS
See "Risk Factors" for a discussion of certain factors which should be
considered by holders before deciding whether or not to tender their Old Notes
in the Exchange Offer.
11
<PAGE>
SUMMARY SELECTED FINANCIAL INFORMATION
The following table sets forth selected financial information for Security
Capital as of and for the years ended December 31, 1997, 1996, 1995, 1994 and
1993 and as of June 30, 1998 and for the six-month periods ended June 30, 1998
and 1997 (in thousands, except per share data). Security Capital's consolidated
financial information included below has been derived from Security Capital's
consolidated financial statements, which are incorporated herein by reference.
The following selected financial information should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in Security Capital's most recent annual report on Form 10-K and
quarterly report on Form 10-Q incorporated herein by reference.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEARS ENDED DECEMBER 31,
------------------ ----------------------------------------------
1998 1997 1997(1) 1996 1995(2) 1994 1993
-------- -------- -------- -------- --------- -------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Equity in earnings....... $ 2,983 $ 90,047 $170,576 $168,473 $ 45,685 $ 8,812 $ 6,032
Services Division
revenues(3)............. 48,309 57,943 105,941 77,512 49,404 -- --
Rental revenues.......... 61,238 24,499 58,397 145,907 103,634 55,071 10,916
Total revenues........... 116,027 178,711 367,704 398,122 200,534 156,855 17,503
Services Division
expenses(3)............. 31,646 56,148 87,190 79,296 56,317 -- --
Rental expenses.......... 26,298 10,378 25,089 58,259 40,534 23,052 1,428
General, administrative
and other(3)............ 26,663 23,617 54,940 32,617 20,197 6,172 2,555
Costs incurred in
acquiring Services
Division(3)............. -- -- -- -- 158,444 -- --
Gain on sale of
management companies.... -- -- 93,395 -- -- -- --
Interest expense:
Security Capital:
Convertible
debentures/notes(4)(5). 11,308 54,623 94,749 93,912 78,785 29,647 1,616
Line of credit.......... 11,678 2,625 7,631 6,256 5,977 6,424 1,808
Majority-owned
subsidiaries(6)........ 7,105 -- 2,054 17,056 19,042 8,057 362
-------- -------- -------- -------- --------- -------- -------
Total interest
expense.............. 30,091 57,248 104,434 117,224 103,804 44,128 3,786
Net earnings (loss)
attributable to Class B
Shares.................. $(38,043) $ 2,368 $106,154 $ 32,067 $(201,634) $ (7,685) $ 5,155
PER SHARE DATA:
Series A Preferred Stock
dividends(7)............ $ 27.50 $ 37.50 $ 75.00 $ 56.25 -- -- --
Series B Preferred Stock
dividends............... 9.33 -- -- -- -- -- --
Net earnings (loss) per
Class B Share:
Basic................... (0.31) 0.04 1.39 0.61 $ (4.50) $ (0.33) $ 0.81
Diluted................. $ (0.31) $ 0.03 $ 1.28 $ 0.57 $ (4.50) (0.33) 0.78
Class A Share
distributions paid(8)... -- -- -- -- -- $ 33.50 $ 60.00
Weighted average Class B
Shares outstanding:
Basic................... 122,454 63,099 76,577 52,950 44,834 22,947 6,386
Diluted................. 122,454 67,767 93,054 56,686 44,834 22,947 6,589
</TABLE>
<TABLE>
<CAPTION>
AS OF
JUNE 30, AS OF DECEMBER 31,
----------- ----------------------------------------------------
1998 1997(1) 1996 1995(2)(3) 1994 1993
----------- ---------- ---------- ---------- ---------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Investments, at equity.. $3,016,246 $2,658,748 $1,438,937 $ 930,043 $ 230,756 $161,270
Real estate, net of
accumulated
depreciation........... 961,766 709,229 1,365,373 865,367 2,005,957 478,630
Total assets............ 4,296,383 3,614,239 2,929,284 1,855,056 2,300,613 673,019
Long-term debt:
Security Capital(4)(5). 822,624 323,024 940,197 718,611 514,383 48,970
Majority-owned
subsidiaries(6)....... 319,362 301,606 257,099 118,524 301,787 47,988
Minority interests...... 140,620 107,135 394,537 159,339 554,752 157,545
Total shareholders'
equity................. $2,533,868 $2,548,873 $ 918,702 $ 528,539 $ 359,859 $293,823
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEARS ENDED DECEMBER 31,
---------------- -------------------------------------------
1998 1997 1997(1) 1996 1995(2)(3) 1994 1993
-------- ------- -------- -------- ---------- ------- ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA:
EBDADT(9)......... $141,237 $93,498 $214,276 $137,078 $94,244 $57,533 $5,909
</TABLE>
- --------
(1) Prior to 1997, Security Capital consolidated the accounts of ATLANTIC.
During 1997, Security Capital's ownership of ATLANTIC decreased to less
than 50%. Accordingly, ATLANTIC was deconsolidated effective January 1,
1997.
(2) Prior to 1995, Security Capital consolidated the accounts of ProLogis and
Security Capital Pacific Incorporated ("PACIFIC"). During 1995, Security
Capital's ownership of ProLogis decreased to less than 50% and PACIFIC was
merged into Archstone. Accordingly, these entities were deconsolidated
effective January 1, 1995.
(3) Security Capital resulted from the January 1, 1995 merger of two
affiliated, but not commonly controlled, entities, Security Capital Group
Incorporated, a Delaware corporation, and Security Capital Realty
Incorporated, a Maryland corporation which survived the merger and later
changed its name to Security Capital Group Incorporated.
(4) During 1994, Security Capital made a $757.50 per share of Class A Common
Stock, par value $.01 per share (the "Class A Shares"), distribution of the
Convertible Subordinated Debentures due June 30, 2014 (the "2014
Convertible Debentures") resulting in a total increase of $417.2 million in
outstanding 2014 Convertible Debentures. The 2014 Convertible Debentures
were converted into Class A Shares prior to December 1997.
(5) On June 23, 1998, Security Capital issued $500 million of Old Notes in
three tranches: (i) the Old 2005 Notes, with an original principal amount
of $200 million, net of original issue discount, due June 15, 2005, (ii)
the Old 2007 Notes, with an original principal amount of $100 million, net
of original issue discount, due June 15, 2007 and (iii) the Old 2028 Notes,
with an original principal amount of $200 million, due June 15, 2028.
(6) Security Capital does not guarantee the debt of any of its consolidated or
unconsolidated operating companies.
(7) Excludes a non-cash dividend of $19.8 million which was recorded in
connection with the exchange of Series A Preferred Stock for Series B
Preferred Stock on May 12, 1998.
(8) For the years ended December 31, 1994 and 1993, Security Capital elected to
be taxed as a real estate investment trust ("REIT") and made cash
distributions to its shareholders.
(9) EBDADT represents earnings before depreciation, amortization and deferred
taxes. Security Capital presents EBDADT as a measure of operating
performance. EBDADT should not be considered as a substitute for net
earnings computed in accordance with GAAP in evaluating operating results
or as a substitute for cash flows from operating, investing or financing
activities in evaluating liquidity. EBDADT is presented on a fully
converted basis which assumes conversion of all convertible debentures and
all other securities which are not anti-dilutive. Interest expense
associated with the convertible debentures is not deducted in arriving at
fully converted EBDADT. EBDADT, as calculated above, may not be comparable
to other similarly titled measures of other companies. EBDADT data assumes
the exchange of Security Capital's REIT management and property management
companies for common shares of ProLogis, Archstone and ATLANTIC as of
January 1, 1993. Those merger transactions were completed on September 9,
1997.
13
<PAGE>
RISK FACTORS
In addition to the other information in this Prospectus, the following
factors should be considered by holders before deciding whether or not to
tender their Old Notes in the Exchange Offer.
CONSEQUENCES OF FAILURE TO EXCHANGE
Any Old Notes not tendered and accepted in the Exchange Offer will remain
subject to the existing restrictions on transfer of Old Notes provided in the
Old Notes and in the Indenture, and Security Capital will have no further
obligations to the holders (other than to the Initial Purchasers) of those Old
Notes to provide for their registration under the Securities Act, as those Old
Notes will not retain any rights under the Registration Rights Agreement
(other than Old Notes which represent an unsold allotment for the Old Note
Offering). In general, the Old Notes may not be offered or sold except
pursuant to an exemption from, in a transaction not subject to, or in a
transaction in compliance with the registration requirements of the Securities
Act. Security Capital does not intend to register the Old Notes under the
Securities Act. In addition, the tender of Old Notes pursuant to the Exchange
Offer will reduce the principal amount of Old Notes outstanding, which may
have an adverse effect on, and increase the volatility of, the market prices
of Old Notes due to a reduction of liquidity. See "The Exchange Offer--Effect
on Holders of Old Notes."
RESALE OF NEW NOTES
Security Capital believes that, based on positions taken by the Commission
staff, New Notes issued in the Exchange Offer in exchange for Old Notes may be
offered for resale, resold and otherwise transferred by each holder thereof
(other than a holder which is (i) a broker-dealer, as set forth below, (ii) an
Initial Purchaser of Old Notes which acquired Old Notes directly from Security
Capital in order to resell pursuant to Rule 144A under the Securities Act or
any other available exemption under the Securities Act or (iii) an "affiliate"
of Security Capital within the meaning of Rule 405 under the Securities Act)
without compliance with the registration and prospectus delivery requirements
of the Securities Act, provided that those New Notes are acquired in the
ordinary course of that holder's business and that holder is not engaged in,
and does not intend to engage in, and has no arrangement or understanding with
any person to participate in, the distribution of those New Notes within the
meaning of the Securities Act or resale of those New Notes in violation of the
Securities Act. Each holder of Old Notes which receives New Notes in the
Exchange Offer must represent to Security Capital in the Letter of Transmittal
that those conditions have been met. Each broker-dealer which receives New
Notes in the Exchange Offer must represent to Security Capital in the Letter
of Transmittal that it will receive those New Notes for its own account in
exchange for Old Notes which were acquired by it as a result of market-making
or other trading activities and that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of those New
Notes. The Letter of Transmittal states that by so representing and so
delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act. This Prospectus,
as it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of New Notes received in exchange for
Old Notes which were acquired by the broker-dealer as a result of market-
making or other trading activities. Security Capital has agreed to make this
Prospectus available to any such broker-dealer for use in connection with any
such resale for such period of time as broker-dealers must deliver a
prospectus, up to 180 days after the Expiration Date. To comply with any
applicable securities laws of certain jurisdictions, however, New Notes may
not be offered or sold unless they have been registered or qualified for sale
in those jurisdictions or an exemption from registration or qualification is
available and is complied with. Security Capital currently does not intend to
take any action to register or qualify New Notes for resale in any
jurisdictions. See "The Exchange Offer--Resale of New Notes" and "Plan of
Distribution."
RELIANCE ON DIVIDENDS AND TRANSFERS FROM INVESTEES
Security Capital conducts all of its operations through service businesses
and real estate operating companies in which Security Capital has direct and
indirect ownership positions. As such, Security Capital is
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dependent on dividends and fees from those entities to meet its operating
expense needs and to pay principal and interest on debt, including borrowings
under the Unsecured Line of Credit and the Notes. Although many of the
companies in which Security Capital has direct and indirect ownership
positions are REITs, others are not and Security Capital's ability to obtain
dividends, fees or other funds from those companies depends on the economic
performance of those companies, the prior claims of creditors or holders of
preferred stock of those companies and Security Capital's ability to control
or cause those companies to make distributions or other payments. Although
Security Capital has a significant ownership interest in, and contractual
rights which provide meaningful influence over, many of its real estate
investees, Security Capital has a non-majority interest in many of the
companies in which it has direct and indirect ownership positions; therefore,
Security Capital's ability to control or cause those companies to make
distributions or other payments may be limited.
DEPENDENCE ON KEY PERSONNEL
Security Capital's success depends on attracting and retaining the services
of executive officers, including C. Ronald Blankenship, William D. Sanders and
Thomas G. Wattles, who are members of the Operating Committee, as well as
several senior officers, consisting of the following Managing Directors:
Steven F. Dichter, John H. Gardner, C. Robert Heaton, W. Joseph Houlihan, Jeff
A. Jacobson, Gordon S. Kerr, Anthony R. Manno, Jr., Todd W. Mansfield,
Caroline S. McBride, Daniel F. Miranda, A. Richard Moore, Jeremy J. Plummer,
Mary Lou Rogers, Donald E. Suter, Paul E. Szurek and Robert S. Underhill.
Security Capital has experienced individuals who manage the companies in which
Security Capital has direct and indirect ownership positions, including R.
Scot Sellers and Constance B. Moore, Co-Chairmen of Archstone, K. Dane
Brooksher and Irving F. Lyons, III, Co-Chairmen of ProLogis, Michael D. Cryan
and David C. Dressler, Jr., Co-Chairmen of Homestead, Jeffrey A. Cozad,
Managing Director of SC-USREALTY, and Laurence S. Geller, Chairman of SHC.
Security Capital's success will depend, among other things, on its ability to
retain each of the foregoing individuals. Security Capital's success also
depends on the ability of Security Capital's investees, and any new entities
Security Capital creates, to continue to recruit experienced management. There
is substantial competition for qualified personnel in the real estate and
capital management industries. Security Capital believes it has an effective
succession plan in place and that several of its officers could serve as
Security Capital's senior executive officers and continue Security Capital's
performance. The loss of any of these key personnel could have an adverse
effect on Security Capital.
RANKING OF NOTES
The Notes of each series are direct, senior unsecured obligations of
Security Capital and rank equally with each other and with all other unsecured
and unsubordinated indebtedness of Security Capital from time to time
outstanding. However, the Notes are effectively subordinated to any secured
indebtedness of Security Capital (of which none was outstanding as of June 30,
1998) and to the indebtedness and other liabilities of Security Capital's
subsidiaries and companies in which Security Capital has direct or indirect
ownership positions to the extent of the assets of those subsidiaries and
companies. Subject to limitations on incurring indebtedness, unless certain
financial ratios are satisfied, and on incurring secured indebtedness,
Security Capital may incur additional indebtedness. See "Description of
Notes--Certain Covenants--Limitations on Indebtedness" and "--Limitations on
Liens."
LEVERAGE
Security Capital has debt outstanding and will continue to have debt
outstanding after the Exchange Offer. As of June 30, 1998, Security Capital
had approximately $1,142.0 million of consolidated outstanding long-term
indebtedness (of which $319.4 million represented indebtedness of Security
Capital's consolidated investee companies) and $301.1 million of consolidated
outstanding short-term indebtedness (of which $178.1 million represented
indebtedness of Security Capital's consolidated investee companies). Security
Capital's long-term debt-to-equity ratio (excluding the indebtedness of
Security Capital's consolidated investees, for which Security Capital is not
responsible, and including all outstanding Convertible Subordinated Debentures
due March 29,
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2016 (the "Convertible Debentures") as debt) at that date was 0.32 to 1.0. If
all the Convertible Debentures outstanding on that date were converted into
Class A Shares (at a conversion price of $1,153.90 principal amount of
Convertible Debentures per Class A Share), that long-term debt-to-equity ratio
would have been 0.17 to 1.0. As of September 2, 1998, the closing price of the
Class A Shares was $1,060 per share. Of the $1,142.0 million of consolidated
outstanding long-term indebtedness, approximately $323.0 million consisted of
the Convertible Debentures. If the Convertible Debentures were converted, the
outstanding long-term indebtedness would be reduced to approximately $819.0
million (of which $319.4 million would be indebtedness of Security Capital's
consolidated investee companies). Security Capital does not guarantee the debt
of any of the companies in which Security Capital has a direct or indirect
investment. In addition, the companies in which Security Capital has a direct
or indirect investment have a substantial amount of indebtedness and, in
certain cases, have issued preferred stock to third parties.
In June 1998, Security Capital converted the secured line of credit of SC
Realty, a wholly owned subsidiary of Security Capital, into the $650 million
revolving Unsecured Line of Credit between Security Capital, as borrower, and
Wells Fargo and Chase, as agents for a syndicate of lenders. SC Realty has
guaranteed Security Capital's obligations under the Unsecured Line of Credit.
The proceeds from the initial borrowing under the Unsecured Line of Credit
were used to pay off and discharge all obligations, including principal,
interest, fees and expenses, owed under the SC Realty secured line of credit.
As of August 31, 1998, there were approximately $205 million of borrowings
outstanding under the Unsecured Line of Credit. See "Summary--Recent
Developments."
Based on Security Capital's current level of operations and anticipated
growth as a result of new business initiatives, Security Capital expects that
cash flow from operations, the proceeds of the Old Note Offering and funds
available under the Unsecured Line of Credit will be sufficient to enable
Security Capital to satisfy its anticipated cash requirements for operating
and investing activities for existing businesses for the next twelve months.
Security Capital intends to finance its long-term business activities
(including investments in new business initiatives) through the proceeds of
the Old Note Offering and borrowings under the Unsecured Line of Credit. In
addition, Security Capital anticipates that its operating companies will
separately finance their activities through cash flow from operations, sales
of equity and debt securities and the incurrence of mortgage debt or line of
credit borrowings. The degree to which Security Capital is leveraged and to
which it is able to meet its financial obligations could affect its ability to
obtain additional financing in the future for refinancing indebtedness,
working capital, capital expenditures, acquisitions, investments in new
businesses, general corporate purposes or other purposes.
On a historical basis, the Fixed Charge Coverage Ratios (as defined in
"Description of Notes--Certain Definitions--Fixed Charge Coverage Ratio") for
the six-month period ended June 30, 1998, and for each of the years ended
December 31, 1997, 1996, 1995, 1994 and 1993 were 3.71, 1.21, 1.16, 1.09, 1.44
and 3.28, respectively. Prior to December 1997, Security Capital shareholders
also owned $715.8 million of 2014 Convertible Debentures, which were reflected
in this ratio. These 2014 Convertible Debentures were converted into Class A
Shares prior to December 1997. On a pro forma basis, after giving effect to
the Old Note Offering and the application of the proceeds therefrom, the Fixed
Charge Coverage Ratios for the six-month period ended June 30, 1998 and the
year ended December 31, 1997 would have been 3.1 and 3.4, respectively.
On a historical basis, the ratios of earnings to fixed charges, including
interest on the 2014 Convertible Debentures which were converted, for Security
Capital and its consolidated subsidiaries for the six-month period ended June
30, 1998, and for each of the years ended December 31, 1997, 1996, 1995, 1994
and 1993 were 2.0, 0.8, 0.8, 0.8, 1.2 and 3.1, respectively. For this purpose,
earnings consist of income (loss) from continuing operations reduced by equity
in earnings of investees and increased by dividend income from investees; for
the year ended December 31, 1995, earnings exclude a one-time non-cash expense
of $158.4 million incurred in
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acquiring the Services Division from a related party. Fixed charges consist of
interest expense, the amortization of debt issuance costs and capitalized
interest. On a pro forma basis, after giving effect to the Old Note Offering
and the application of the proceeds therefrom, the ratios of earnings to fixed
charges for the six-month period ended June 30, 1998 and the year ended
December 31, 1997 would have been 1.9 and 1.1, respectively.
BORROWING RISKS
Debt Financing Risks
To the extent Security Capital or its subsidiaries incur debt, such as the
Notes, Security Capital will be subject to the risks associated with debt
financing, including the risks that Security Capital's cash flow from
operations will be insufficient to meet required payments of principal and
interest, that Security Capital will be unable to refinance the Unsecured Line
of Credit or current or future indebtedness, including indebtedness
represented by the Notes, that the terms of any refinancing will not be as
favorable as the terms of existing indebtedness and that Security Capital will
be unable to make necessary investments in new business initiatives due to
lack of available funds. If securities of the companies in which Security
Capital has direct and indirect investments are used to secure Security
Capital's indebtedness and Security Capital is unable to make required
payments on that indebtedness, the securities could be transferred to the
lender with a consequent loss of income and asset value to Security Capital.
Security Capital's policy will be generally to arrange unsecured, fixed rate
long-term debt, such as the Notes.
Variable Interest Rate Risk
Increases in interest rates could increase Security Capital's interest
expense, which would adversely affect Security Capital's net earnings and cash
available for payment of obligations, including indebtedness represented by
the Notes. At August 31, 1998, Security Capital and its Wholly Owned
Subsidiaries had $205 million of variable interest rate debt outstanding, all
of which was under the Unsecured Line of Credit. See "Summary--Summary of
Financial Strategy of Security Capital and Recent Financing Activity."
CONFLICTS OF INTEREST
Allocation of New Business Opportunities
Security Capital will deploy its capital (both its corporate and third-party
managed capital) through the direct and indirect ownership of public and
private companies with highly focused business strategies which are engaged in
real estate related activities. The allocation of new business opportunities
may present conflicts between Security Capital and its direct and indirect
investees. New opportunities in existing property types within the United
States, for example, multifamily communities or distribution space, will be
presented to existing direct or indirect investees which are engaged in owning
and operating those types of properties. Long-term strategic investment
opportunities in equity oriented REITs located in the United States, which are
not engaged in operating property types in which Security Capital currently
owns a strategic position, generally will be allocated to SC-USREALTY. All
other investment opportunities in unrelated real estate operating companies
located in the United States are expected to be allocated to Security Capital,
which may form new entities to develop those opportunities. These new business
initiatives, to the extent they are developed into new businesses, may be
subject to a greater risk of failure as a new business initiative than
generally would be associated with a mature business. As a result, there can
be no assurance that these new business initiatives will be completed, or if
completed, will prove to be successful or viable. While none of the new
business initiatives is material at present to Security Capital's results of
operations or financial condition, these initiatives are expected to be an
important component of Security Capital's future growth.
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Interests of Certain Directors and Officers of Security Capital in Direct and
Indirect Investees
Several directors and officers of Security Capital are directors or officers
of direct or indirect investees of Security Capital and own shares of Security
Capital and direct and indirect investees of Security Capital. As of March 12,
1998, directors and executive officers of Security Capital as a group
beneficially owned 138,621 Class A Shares and 7,536,674 shares of Class B
Common Stock, par value $.01 per share (the "Class B Shares"), representing
approximately 7.66% of the Class A Shares and 17.36% of the Class B Shares,
assuming exercise of warrants and options to purchase 40,305 additional Class
A Shares held by such group. At that same date, those directors and officers
as a group beneficially owned 39,380 common shares of ATLANTIC (less than 1%),
346,828 common shares of Homestead (less than 1%), 798,767 common shares of
Archstone (less than 1%), 634,787 common shares of ProLogis (less than 1%) and
3,042,221 common shares of SC-USREALTY (less than 2%). William D. Sanders is
Chairman, Chief Executive Officer and a director of Security Capital, a
director of CarrAmerica Realty Corporation, SC-USREALTY, SC-GR, Storage USA,
Inc. and SHC and an advisory director of REGENCY. C. Ronald Blankenship is
Vice Chairman, Chief Operating Officer and a director of Security Capital, a
director of SHC and Storage USA, Inc. and an advisory director of Homestead.
John T. Kelley, III is a director of Security Capital, a trustee of Archstone,
an advisory trustee of ProLogis and Chairman of PACIFIC RETAIL. John P.
Frazee, Jr. is a director of Security Capital and a director of Homestead.
Thomas G. Wattles is a Managing Director of Security Capital, a director of
SHC and a trustee of ProLogis and CWS. Caroline S. McBride is a Managing
Director of GSG, a director of CarrAmerica Realty Corporation and Storage USA,
Inc. and a trustee of CWS. Jeffrey A. Klopf is Senior Vice President and
Secretary of Security Capital and holds similar positions in ProLogis,
Archstone and Homestead.
Each of Messrs. Blankenship, Wattles, Frazee and Kelley hold their
directorships in direct investees of Security Capital as nominees of Security
Capital pursuant to Investor Agreements between Security Capital and the
respective investee. Mr. Sanders, Mr. Wattles and Ms. McBride hold their
directorships in indirect investees of Security Capital as nominees of SC-
USREALTY under agreements between SC-USREALTY and the respective indirect
investee.
From time to time there may be transactions between Security Capital and its
direct investees, or among its direct and indirect investees, or between
Security Capital and its indirect investees. The interests of the foregoing
persons may differ from the interests of shareholders of Security Capital as a
result of their positions in the direct or indirect investees or their
ownership of securities of the direct or indirect investees and, as a result,
those persons may have an incentive to place the interests of the direct or
indirect investees over those of Security Capital.
Principal Transactions with Officers, Directors and Direct and Indirect
Investees
Security Capital has engaged in principal transactions with certain officers
and directors or companies in which a director may have a material interest.
Security Capital will not borrow from or make loans to affiliates, other than
loans to officers or loans to affiliates in which Security Capital owns a
substantial economic interest, or where the Board believes that the loans are
in the best long-term interests of Security Capital and its shareholders. In
those cases where Security Capital engages in these types of transactions, it
has obtained or will obtain, after appropriate disclosure of all material
interests, Board approval for officer transactions, disinterested director
approval for interested director transactions and, where appropriate under
Maryland law or required by its charter (the "Charter") or bylaws (the
"Bylaws"), shareholder approval.
Neither Security Capital's Charter nor its Bylaws contain any restrictions
on interested party transactions with directors and officers. Under the laws
of Maryland (where Security Capital is organized), each director is obligated
to offer to Security Capital any opportunity (with certain limited exceptions)
which comes to him and which Security Capital could reasonably be expected to
have an interest in developing. In addition, under Maryland law, any contract
or other transaction between Security Capital and any director or any entity
in which
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the director has a material financial interest is voidable unless (i) it is
approved, after disclosure of the interest, by the affirmative vote of a
majority of disinterested directors or by the affirmative vote of a majority of
the votes cast by disinterested shareholders or (ii) it is fair and reasonable
to Security Capital.
Transactions with direct investees have been and will be considered, after
appropriate disclosure of all material interests, by the entire Board. Security
Capital owns substantial positions in its direct investees which, together with
certain investor agreements, advisory agreements, board representation or other
control rights, allow Security Capital to exert significant influence over the
operations of each of these entities. SC-USREALTY generally has investor
agreements and board representation for indirect investees of Security Capital.
CERTAIN RISKS RELATING TO THE INVESTMENT COMPANY ACT
Security Capital is not registered under the Investment Company Act of 1940,
as amended (the "Investment Company Act"), in reliance on an exemption provided
by Rule 3a-1 promulgated under the Investment Company Act. Security Capital is
not required to register as an investment company because it is principally
engaged in the real estate business through companies which it primarily
controls. As of July 31, 1998, Security Capital owned approximately 38% of
Archstone, 41% of ProLogis, 70% of Homestead, 30% of SHC, 34% of
SC-USREALTY and 35% of SC-GR (based in each case on outstanding common shares
at that date) which, together with certain investor agreements, advisory
agreements, board representation or other control rights, allows Security
Capital to exert significant influence over the operations of each of these
entities. Security Capital currently intends to exert similar influence over
any other operating company in which it makes future investments. However, to
the extent Security Capital and its affiliates do not elect to participate in
future equity offerings by the companies in which Security Capital has a direct
or indirect investment, its ownership interest in and control over those
companies could diminish, and Security Capital could potentially be required to
register as an investment company under the Investment Company Act. Security
Capital would be materially adversely affected if it were required to register
as an investment company under the Investment Company Act.
MARKET FOR NEW NOTES
There is currently no public market for the New Notes and there can be no
assurance that an active public market for the New Notes will develop. Security
Capital does not intend to apply for listing of the New Notes on any securities
exchange or for quotation on any interdealer quotation system. If the New Notes
are traded after their initial issuance, they may trade at a discount,
depending on prevailing interest rates, the market for similar securities and
other factors. Accordingly, no assurance can be given that a holder of New
Notes will be able to sell the New Notes in the future or that any sale will be
at a price equal to or higher than their principal amount.
Although the Initial Purchasers have advised Security Capital that they
currently intend to make a market in the New Notes of each series after the
Exchange Offer, they are not obligated to do so and may discontinue their
market-making at any time without notice. In addition, their market-making
activity will be subject to the limits imposed by the Securities Act and the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). Accordingly,
there can be no assurance as to the development or liquidity of any market for
the New Notes.
REAL ESTATE INVESTMENT RISKS AFFECTING SECURITY CAPITAL
General
Although Security Capital owns no real estate, the companies in which
Security Capital has a direct or indirect investment own real estate. The
return which Security Capital achieves from the companies in which Security
Capital has a direct or indirect investment is dependent on the performance of
the real property investments held by those companies, which are subject to
varying degrees of risk. Real estate cash flows and
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values are affected by a number of factors, including changes in the general
economic climate, local, regional or national conditions (such as an oversupply
of properties or a reduction in rental demand in a specific area), the quality
and philosophy of management, competition from other available properties and
the ability to provide adequate maintenance and insurance and to control
operating costs. Although Security Capital seeks to minimize these risks
through its market research and asset and property management capabilities,
these risks cannot be eliminated entirely. Real estate cash flows and values
are also affected by such factors as government regulations, including zoning,
usage and tax laws, interest rate levels, the availability of financing, the
possibility of bankruptcies of tenants and potential liability under, and
changes in, environmental and other laws. Since a significant portion of the
income from Security Capital's direct and indirect REIT investees is derived
from rental income and other payments from real property, their respective
income and distributable cash flow, and accordingly Security Capital's, would
be adversely affected if a significant number of tenants were unable to meet
their obligations, or if those companies were unable to lease properties on
economically favorable terms.
Debt Financing
To the extent Security Capital or one of the companies in which Security
Capital has a direct or indirect investment incurs debt, that company will be
subject to the risks associated with debt financing, including the risks that
cash flow from operations will be insufficient to meet required payments of
principal and interest, that the company will be unable to refinance any
revolving line of credit or any current or future indebtedness on its
properties, that the terms of any refinancings may not be as favorable as the
terms of existing indebtedness and that, due to a lack of funds, the company
may be unable to make necessary capital expenditures for purposes such as
renovations or re-leasing properties. If a property owned by one of the
companies in which Security Capital has a direct or indirect investment is
mortgaged to secure indebtedness and the company is unable to make its required
payments on that indebtedness, the property would be transferred to the
mortgagee with a consequent loss of income and asset value to that company.
Risks of Real Estate Development
Certain companies in which Security Capital has a direct or indirect
investment have developed or commenced development on properties (e.g.,
international distribution facilities, multifamily communities, neighborhood
infill shopping centers, city center retail facilities, parking facilities,
corporate office space, self-storage facilities, hotels, extended-stay lodging
facilities, assisted-living residential communities and manufactured housing
communities) and expect to develop additional properties in the future. Real
estate development involves significant risks in addition to those involved in
the ownership and operation of established properties, including the risks that
financing, if needed, may not be available on favorable terms for development
projects, that construction may not be completed on schedule (resulting in
increased debt service expense and construction costs), that estimates of the
costs of construction may prove to be inaccurate and that properties may not be
leased or rented on profitable terms and therefore will fail to perform in
accordance with expectations. Timely construction may be affected by local
weather conditions, local or national strikes and by local or national
shortages in materials, insulation, building supplies and energy and fuel for
equipment.
Renewal of Leases and Re-leasing of Space
Certain of the companies in which Security Capital has a direct or indirect
investment, particularly those which invest in multifamily communities and
distribution facilities, are subject to the risks that leases may not be
renewed, space may not be re-leased or the terms of the renewal or re-leasing
may be less favorable than current lease terms. If those companies were unable
to promptly renew leases or re-lease or if the rental rates upon the renewal or
re-lease were significantly lower than expected, their cash flow, and
accordingly Security Capital's cash flow, may be adversely affected.
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Illiquidity of Real Estate Investments
Equity real estate investments are relatively illiquid and therefore may
tend to limit the ability of the companies in which Security Capital has a
direct or indirect investment to react promptly to changes in economic or
other conditions. In addition, certain significant expenditures associated
with equity investments (such as mortgage payments, real estate taxes and
operating and maintenance costs) are generally not reduced when circumstances
cause a reduction in income from the investments. Further, the companies in
which Security Capital has a direct or indirect investment which are REITs
must comply with safe harbor rules which enable a REIT to avoid punitive
taxation. Thus, the ability of those companies which are REITs to sell assets
to change their asset base is restricted by tax rules which impose holding
periods for assets and potential disqualification as a REIT upon certain asset
sales.
Regulation
Governmental authorities at the federal, state and local levels are actively
involved in the issuance and enforcement of regulations relating to land use
and zoning restrictions. Regulations may be issued which could have the effect
of restricting or curtailing certain uses of existing structures or requiring
that the structures be renovated or altered in some fashion. The issuance of
any such regulations could have the effect of increasing the expenses and
lowering the profitability of any of the properties affected thereby. Security
Capital does not believe that any of these regulations will have a material
impact on Security Capital or its direct or indirect investees.
Changes in Laws
Increased costs resulting from increases in real estate, income or transfer
taxes or other governmental requirements generally may not be passed through
directly to residents, tenants or lessees, inhibiting the ability of the
companies in which Security Capital has a direct or indirect investment to
recover those costs. Substantial increases in rents, as a result of those
increased costs, may affect the ability of a resident, tenant or lessee to pay
rent, causing increased vacancy. Changes in laws increasing potential
liability for environmental conditions or increasing the restrictions on
discharges or other conditions may result in significant unanticipated
expenditures. No assurance can be given that new legislation, regulations,
administrative interpretations or court decisions will not significantly
change the laws with respect to the qualification of certain of Security
Capital's direct and indirect investees as REITs or the federal income tax
consequences of that qualification to those investees.
Uninsured Loss
The companies in which Security Capital has a direct or indirect investment
carry comprehensive liability, fire, flood, earthquake, extended coverage and
rental loss insurance with respect to their properties with policy
specifications and insured limits customarily carried for similar properties
and which the operating companies believe are appropriate under the
circumstances. There are, however, certain types of losses (such as from wars)
which may be uninsurable or not economically insurable. Should an uninsured
loss or a loss in excess of insured limits occur, the operating company could
lose both its capital invested in and anticipated profits from one or more
properties.
HIGHLY COMPETITIVE BUSINESSES
There are numerous commercial developers, real estate companies and other
owners of real estate, including those which operate in the regions in which
the properties of Security Capital's direct and indirect investees are
located, which compete with the companies in which Security Capital has a
direct or indirect investment in seeking land for development, properties for
acquisition and disposition and tenants for properties. The companies in which
Security Capital has a direct or indirect investment compete on a regional,
national and global basis with no single market being material to Security
Capital as a whole.
All of the properties of the companies in which Security Capital has a
direct or indirect investment are located in developed areas which include
other similar properties. The number of competitive properties in a
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particular area could have a material adverse effect on those companies'
ability to lease units and on the rents charged. In addition, other forms of
properties provide alternatives to tenants of those companies' properties (for
example, single family residential housing may be an alternative to
multifamily housing).
From December 31, 1995 to July 31, 1998, Security Capital's equity market
capitalization, based on shares outstanding, grew from $1.0 billion to $3.1
billion. The global real estate securities management business of Security
Capital competes for capital and investment opportunities with a large number
of investment management firms as well as certain insurance companies,
commercial banks and other financial institutions, some of which may have
greater access to capital and other resources and which may offer a wider
range of services than Security Capital. Real estate investment management
firms can be formed with relatively small amounts of capital and depend most
significantly on the continued involvement of their professional staff.
Security Capital believes that competition among real estate investment
management firms is affected principally by investment performance,
development and implementation of investment strategies, information
technologies and databases and client service performance.
IMPACT OF ENVIRONMENTAL REGULATIONS
Security Capital, through certain of its direct and indirect investees, is
subject to environmental and health and safety laws and regulations related to
the ownership, operation, development and acquisition of real estate. Under
those laws and regulations, Security Capital may be liable for, among other
things, the costs of removal or remediation of certain hazardous substances,
including asbestos-related liability. Those laws and regulations often impose
liability without regard to fault.
As part of their due diligence procedures, Security Capital's direct and
indirect investees have conducted Phase I environmental assessments on each of
their respective properties prior to their acquisition; however, there can be
no assurance that those assessments have revealed all potential environmental
liabilities. Security Capital is not aware of any environmental condition on
any of its direct and indirect investees' properties which is likely to have a
material adverse effect on Security Capital's financial position or results of
operations; however, there can be no assurance that any such condition does
not exist or may not arise in the future.
USE OF PROCEEDS
Security Capital will not receive any proceeds from the issuance of New
Notes in the Exchange Offer.
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CAPITALIZATION
The following table sets forth the capitalization of Security Capital and
its Wholly Owned Subsidiaries as of June 30, 1998. The table should be read in
conjunction with Security Capital's consolidated financial statements and
notes thereto incorporated herein by reference.
<TABLE>
<CAPTION>
JUNE 30, 1998(1)
----------------
(UNAUDITED)
<S> <C>
Long-term debt:
6.95% Notes due 2005........................................ $ 200,000
Original issue discount on 6.95% Notes.................... (213)
7.15% Notes due 2007........................................ 100,000
Original issue discount on 7.15% Notes.................... (187)
7.70% Notes due 2028........................................ 200,000
2016 Convertible Debentures(2).............................. 323,024
----------
Total long-term debt.................................... 822,624
----------
Minority interests............................................ 7,818
Shareholders' equity:
Series B Preferred Stock, par value $.01 per share; 257,642
shares issued and outstanding; stated liquidation
preference of $1,000 per share(3).......................... 257,642
Class A Shares, par value $.01 per share; 20,000,000 shares
authorized; 1,592,265 shares issued and outstanding(4)..... 16
Class B Shares, par value $.01 per share; 229,861,000 shares
authorized; 42,140,884 shares issued and outstanding(5).... 421
Additional paid-in capital.................................. 2,413,380
Accumulated deficit......................................... (132,388)
----------
Total shareholders' equity.............................. 2,539,071
----------
Total capitalization.................................... $3,369,513
==========
</TABLE>
- --------
(1) As of June 30, 1998, there were $123.0 million of borrowings outstanding
under the Unsecured Line of Credit. This table assumes that Homestead is
accounted for on the equity method of accounting and does not include any
balances for Homestead, a 70%-owned subsidiary of Security Capital as of
June 30, 1998, as Security Capital does not guarantee the debt of any of
its consolidated or unconsolidated investees in which it has a direct or
indirect investment. As of June 30, 1998, Homestead had $178.1 million of
borrowings outstanding under its lines of credit and $319.4 million of
mortgage notes payable outstanding.
(2) Convertible into 279,941 Class A Shares.
(3) Convertible into 6,606,205 Class B Shares.
(4) Does not include an aggregate of 494,199 Class A Shares reserved for
issuance upon exercise of outstanding options or warrants or upon
conversion of the Convertible Debentures.
(5) Does not include 79,613,250 Class B Shares reserved for issuance upon
conversion of Class A Shares, 8,839,949 Class B Shares reserved for
issuance upon exercise of warrants (the "Warrants") or 6,606,205 Class B
Shares reserved for issuance upon conversion of the Series B Preferred
Stock.
On May 12, 1998, Security Capital issued 257,642 shares of Series B
Preferred Stock in exchange for 139,000 shares of Series A Preferred Stock and
3,293,288 Class B Shares held by an investor. The exchange of the Series A
Preferred Stock and the Class B Shares for the Series B Preferred Stock was
structured as a tax free recapitalization. The exchange of the Series B
Preferred Stock (which is initially convertible into 6,606,205 Class B Shares)
for the Series A Preferred Stock (which was convertible into 5,294,800 Class B
Shares), and the 3,293,288 Class B Shares resulted in 1,981,883 fewer Class B
Shares outstanding on a fully converted basis. The exchange of the Series A
Preferred Stock and the Class B Shares for the Series B Preferred Stock was
based on the fair value of these securities at the date of the Exchange
Agreement.
23
<PAGE>
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
In connection with the sale of the Old Notes, Security Capital entered into
the Registration Rights Agreement with the Initial Purchasers. Security
Capital is making the Exchange Offer to satisfy its obligations under the
Registration Rights Agreement. Pursuant to the Registration Rights Agreement,
Security Capital agreed that it would use its best efforts to cause the
registration statement (of which this Prospectus forms a part) (the
"Registration Statement") to be filed on or prior to September 21, 1998, to
have the Registration Statement declared effective by the Commission on or
prior to December 20, 1998 and to remain effective until the closing of the
Exchange Offer and to consummate the Exchange Offer on or prior to January 19,
1999. If Security Capital defaults in any of those obligations, then (unless
Security Capital files a shelf registration statement providing for resales of
the Old Notes), the Old Notes provide that additional interest will accrue on
the Old Notes following each such default at a rate of 0.50% per annum. The
additional interest would cease accruing with respect to any such default when
that default is cured. The above summary of certain provisions of the
Registration Rights Agreement does not purport to be complete and is qualified
in its entirety by reference to the Registration Rights Agreement, which has
been filed as an exhibit to the Registration Statement.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal, Security Capital is offering to
exchange $1,000 principal amount of New 2005 Notes for each $1,000 principal
amount of outstanding Old 2005 Notes, $1,000 principal amount of New 2007
Notes for each $1,000 principal amount of outstanding Old 2007 Notes and
$1,000 principal amount of New 2028 Notes for each $1,000 principal amount of
outstanding Old 2028 Notes. Security Capital will accept for exchange any and
all Old Notes which are validly tendered before 5:00 p.m., New York City time,
on the Expiration Date and not withdrawn as permitted below. Tenders of Old
Notes will be accepted only in denominations of $1,000 and integral multiples
thereof. Security Capital's obligation to accept Old Notes for exchange in the
Exchange Offer is subject to certain conditions as described under
"--Conditions to the Exchange Offer" below.
Holders of Old Notes do not have any appraisal or dissenters' rights under
the Maryland General Corporation Law or the Indenture in connection with the
Exchange Offer. Security Capital intends to conduct the Exchange Offer in
accordance with the applicable requirements of the Securities Act, the
Exchange Act and the rules and regulations of the Commission thereunder.
EXPIRATION DATE
As used herein, the term "Expiration Date" means October 13, 1998, unless the
Exchange Offer is extended by Security Capital in its sole discretion, in
which case the term "Expiration Date" will mean the latest date to which the
Exchange Offer is extended. Security Capital expressly reserves the right, at
any time or from time to time, to extend the period of time during which the
Exchange Offer is open, and thereby to delay accepting any Old Notes for
exchange, by giving oral or written notice of the extension to the Exchange
Agent and notice of the extension to the holders by means of a press release
or other public announcement before 9:00 a.m., New York City time, on the next
business day after the previously scheduled Expiration Date. During any such
extension, all Old Notes previously tendered will remain subject to the
Exchange Offer and may be accepted for exchange by Security Capital.
PROCEDURES FOR TENDERING OLD NOTES
To validly tender Old Notes in the Exchange Offer, the holder must tender
those Old Notes pursuant to the procedures for book-entry transfer described
below and a book-entry confirmation, including an Agent's Message (as
hereinafter defined) must be received by the Exchange Agent before 5:00 p.m.
New York City time, on the Expiration Date, unless the guaranteed delivery
procedures described below are complied with. See "--Book-Entry Transfer" and
"--Guaranteed Delivery Procedures."
24
<PAGE>
Only a registered holder of Old Notes may tender those Old Notes in the
Exchange Offer. Any beneficial holder of Old Notes whose Old Notes are
registered in the name of a broker, dealer, commercial bank, trust company or
other nominee and who wishes to tender those Old Notes in the Exchange Offer
should contact that registered holder promptly and instruct that registered
holder to tender those Old Notes. If the beneficial holder wishes to tender
directly, the beneficial holder must, prior to tendering Old Notes, make
appropriate arrangements to register ownership of those Old Notes in the
beneficial holder's name.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of Old Notes tendered for exchange will be
determined by Security Capital in its sole discretion, which determinations
shall be final and binding on all parties. Security Capital reserves the
absolute right to reject any or all tenders of Old Notes which are not in
proper form or the acceptance of which might, in the judgment of Security
Capital or its counsel, be unlawful. Security Capital also reserves the
absolute right in its sole discretion to waive any defects, irregularities or
conditions of the Exchange Offer with respect to any Old Notes, either before
or after the Expiration Date (including the right to waive the ineligibility
of any holder which seeks to tender Old Notes in the Exchange Offer). Security
Capital's interpretation of the terms and conditions of the Exchange Offer
(including the Letter of Transmittal and the instructions thereto) will be
final and binding on all parties. Unless waived, any defects or irregularities
in connection with tenders of Old Notes for exchange must be cured within such
period of time as Security Capital determines. Neither Security Capital, the
Exchange Agent nor any other person is under any duty to give notification of
any defect or irregularity in connection with tenders of Old Notes for
exchange or will incur any liability for failure to give any such
notification.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account at DTC for
purposes of the Exchange Offer promptly after the date of this Prospectus. All
tenders of Old Notes must be made by book-entry transfer to the Exchange
Agent's DTC account. Any holder of Old Notes which is a DTC participant may
use DTC's Automated Tender Offer Program ("ATOP") to tender Old Notes by
causing DTC to transfer those Old Notes into the Exchange Agent's account in
accordance with DTC's procedures. The Old Notes will be deemed tendered only
after the Exchange Agent receives confirmation of the book-entry transfer of
the Old Notes into the Exchange Agent's account (including an Agent's
Message).
The term "Agent's Message" means a message transmitted by DTC to, and
received by, the Exchange Agent and forming a part of a book-entry
confirmation, which states that DTC has received an express acknowledgment
from the tendering participant that the participant has received and agrees to
be bound by the terms of the Letter of Transmittal and that Security Capital
may enforce the Letter of Transmittal against the participant.
GUARANTEED DELIVERY PROCEDURES
If a registered holder of Old Notes wishes to tender those Old Notes and the
procedures for book-entry transfer cannot be completed before the Expiration
Date, a tender may be effected if (i) the tender is made through an "eligible
guarantor institution" as defined in Rule 17Ad-15 under the Exchange Act,
including (as those terms are defined therein): (a) a bank; (b) a broker,
dealer, municipal securities broker or dealer or government securities broker
or dealer; (c) a credit union; (d) a national securities exchange, registered
securities association or clearing agency; or (e) a savings association which
is a participant in a Securities Transfer Association (an "Eligible
Institution"); (ii) before 5:00 p.m., New York City time, on the Expiration
Date, the Exchange Agent receives from that Eligible Institution a properly
completed and duly executed Notice of Guaranteed Delivery substantially in the
form provided by Security Capital (by mail, courier, hand delivery or
facsimile), setting forth the name and address of the holder of the Old Notes
and the principal amount of Old Notes being tendered, stating that the Old
Notes are being tendered thereby and guaranteeing that within three NYSE
trading days after the date of execution of the Notice of Guaranteed Delivery,
a book-entry confirmation will be received by the Exchange Agent; and (iii) a
book-entry confirmation (including an Agent's Message) is received by the
Exchange Agent within three NYSE trading days after the date of execution of
the Notice of Guaranteed Delivery.
25
<PAGE>
If the Notice of Guaranteed Delivery or any other documents are signed by a
trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
that person should so indicate when signing and, unless waived by Security
Capital, submit proper evidence satisfactory to Security Capital of that
person's authority to so act.
THE METHOD OF DELIVERY OF THE NOTICE OF GUARANTEED DELIVERY IS AT THE
ELECTION AND RISK OF EACH HOLDER. DELIVERY WILL BE DEEMED MADE ONLY WHEN
ACTUALLY RECEIVED OR CONFIRMED BY THE EXCHANGE AGENT. IN ALL CASES, SUFFICIENT
TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY. THE NOTICE OF GUARANTEED
DELIVERY SHOULD NOT BE SENT TO SECURITY CAPITAL.
WITHDRAWAL RIGHTS
Tenders of Old Notes may be withdrawn at any time before 5:00 p.m., New York
City time, on the Expiration Date. For a withdrawal to be effective, a written
notice of withdrawal must be received by the Exchange Agent by telegram,
telex, facsimile or letter at one of the addresses set forth below under
"Exchange Agent." Any such notice of withdrawal must specify the name of the
holder which tendered the Old Notes to be withdrawn, identify the Old Notes to
be withdrawn (including the principal amount of the Old Notes), include a
statement that the holder is withdrawing its election to have those Old Notes
exchanged, and must be signed by the registered holder of the Old Notes or be
accompanied by evidence satisfactory to Security Capital that the person
withdrawing the tender has succeeded to the registered ownership of those Old
Notes. Any notice of withdrawal must specify the name and number of the
account at DTC to be credited with the withdrawn Old Notes and must otherwise
comply with the procedures of DTC. All questions as to the validity, form and
eligibility (including time of receipt) of notices of withdrawal will be
determined by Security Capital, which determinations will be final and binding
on all parties. Any Old Notes properly withdrawn will thereafter be deemed not
to have been validly tendered for exchange for purposes of the Exchange Offer.
Properly withdrawn Old Notes may be tendered again by following the procedures
described under "--Procedures for Tendering" above at any time before 5:00
p.m., New York City time, on the Expiration Date.
DELIVERY OF NEW NOTES AND RETURN OF OLD NOTES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
Security Capital will accept, as soon as practicable after the Expiration
Date, all Old Notes validly tendered and not withdrawn and will issue the New
Notes as soon as practicable after acceptance of the Old Notes. See "--
Conditions to the Exchange Offer" below. Security Capital will be deemed to
have accepted validly tendered Old Notes for exchange if and when Security
Capital gives oral or written notice of that acceptance to the Exchange Agent.
The Exchange Agent will act as agent for the tendering holders for purposes of
receiving New Notes from Security Capital. In all cases, delivery of New Notes
in exchange for Old Notes which are tendered and accepted for exchange in the
Exchange Offer will be made only after the Exchange Agent receives a
confirmation of a book-entry transfer of Old Notes into the Exchange Agent's
account at DTC (including an Agent's Message). If any tendered Old Notes are
withdrawn or are not accepted for any reason, those Old Notes will be returned
without expense to the tendering holder by book-entry transfer to that
holder's DTC account as soon as practicable after the expiration or
termination of the Exchange Offer.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provisions of the Exchange Offer, Security Capital
will not be required to accept for exchange, or to issue New Notes in exchange
for, any Old Notes and may terminate or amend the Exchange Offer by means of a
press release or other public announcement, if at any time before the
acceptance of Old Notes for exchange or the issuance of New Notes in exchange
for those Old Notes, Security Capital determines that the acceptance or
issuance would violate applicable law or any interpretation of the Commission
staff. If the Exchange Offer is amended in a manner determined by Security
Capital to constitute a material change, Security Capital will promptly
disclose the amendment in a supplement to this Prospectus which will be
distributed to the
26
<PAGE>
registered holders of Old Notes, and Security Capital will extend the
Expiration Date for a period of five to ten business days, depending on the
significance of the amendment and the method of delivery to the registered
holders, if the Exchange Offer would otherwise expire during that period. The
foregoing condition is for the sole benefit of Security Capital and may be
asserted by Security Capital regardless of the circumstances giving rise to
the condition or may be waived by Security Capital in whole or in part at any
time and from time to time in its sole discretion. The failure by Security
Capital at any time to assert its rights shall not be deemed a waiver of its
rights.
In addition, Security Capital will not accept for exchange, or issue New
Notes in exchange for, any Old Notes if at that time any stop order is
threatened or in effect with respect to the Registration Statement or the
qualification of the Indenture under the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act").
EXCHANGE AGENT
State Street Bank and Trust Company has been appointed as the Exchange Agent
for the Exchange Offer. All executed Notices of Guaranteed Delivery and
notices of withdrawal should be delivered to the Exchange Agent as indicated
below. Questions and requests for assistance or for additional copies of this
Prospectus or of the Letter of Transmittal and requests for Notices of
Guaranteed Delivery should be directed to the Exchange Agent at the Corporate
Trust Division, Two International Place, Boston, MA 02110, attention: Lena D.
Altomare (telephone number: (617) 664-5607).
Deliver to: State Street Bank and Trust Company, the Exchange Agent for the
Exchange Offer:
By Mail: By Overnight Courier or Hand:
State Street Bank and Trust Company State Street Bank and Trust Company
Corporate Trust Division Corporate Trust Division
P.O. Box 778 Two International Place
Boston, MA 02102-0078 Boston, MA 02110
Attn: Kelly Mullen Attn: Kelly Mullen
(registered or certified mail
recommended)
By Facsimile for Eligible Institutions:
(617) 664-5290
(Confirm by Telephone: (617) 664-5587)
DELIVERY OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
FEES AND EXPENSES
Security Capital has agreed to pay the expenses of the Exchange Offer. The
principal solicitation of tenders of Old Notes for exchange in the Exchange
Offer is being made by mail; however, additional solicitations may be made by
telegraph, telephone or in person by officers and employees of Security
Capital and their affiliates. No additional compensation will be paid to any
such officers and employees who engage in soliciting tenders. Security Capital
will not make any payment to brokers, dealers or others soliciting tenders.
Security Capital will, however, upon request, reimburse brokers, dealers,
commercial banks and trust companies for reasonable and necessary costs and
expenses incurred by them in forwarding the Prospectus and the related
documents to the beneficial owners of Old Notes held by them as nominee or in
a fiduciary capacity. Also, Security Capital will pay the Exchange Agent
reasonable and customary fees for its services and will reimburse it for
reasonable and necessary costs and expenses incurred by it in connection
therewith.
TRANSFER TAXES
Security Capital will pay all transfer taxes, if any, applicable to the
exchange of Old Notes pursuant to the Exchange Offer. If, however, a transfer
tax is imposed for any reason other than the exchange of Old Notes
27
<PAGE>
pursuant to the Exchange Offer, the amount of any such transfer taxes (whether
imposed on the registered holder or any other persons) will be payable by the
tendering holder. If satisfactory evidence of payment of those taxes or an
exemption therefrom is not submitted, the amount of those transfer taxes will
be billed directly to the tendering holder.
ACCOUNTING TREATMENT
The New Notes will be recorded at the same book value as the Old Notes on
Security Capital's records on the date of exchange. Accordingly, no gain or
loss for accounting purposes will be recognized by Security Capital due to the
Exchange Offer. The expenses of the Exchange Offer which are paid by Security
Capital will be amortized by Security Capital over the term of the New Notes
in accordance with GAAP.
EFFECT ON HOLDERS OF OLD NOTES
Holders of Old Notes not tendered and accepted in the Exchange Offer will
continue to be entitled to all the rights applicable thereto under the
Indenture, which relates to both the Old Notes and the New Notes, and any such
Old Notes will remain outstanding and continue to accrue interest according to
their terms. Any Old Notes not tendered and accepted in the Exchange Offer
will remain subject to the existing restrictions on transfer of Old Notes
provided in the Old Notes and in the Indenture, and Security Capital will have
no further obligations to the holders (other than to the Initial Purchasers)
of those Old Notes to provide for their registration under the Securities Act,
as those Old Notes will not retain any rights under the Registration Rights
Agreement (other than Old Notes which represent an unsold allotment for the
Old Note Offering). In general, the Old Notes may not be offered or sold
except pursuant to an exemption from, in a transaction not subject to or in a
transaction in compliance with the registration requirements of the Securities
Act. Security Capital does not intend to register the Old Notes under the
Securities Act. In addition, the tender of Old Notes pursuant to the Exchange
Offer will reduce the principal amount of Old Notes outstanding, which may
have an adverse effect on, and increase the volatility of, the market prices
of Old Notes due to a reduction of liquidity.
RESALE OF NEW NOTES
Security Capital believes that, based on positions taken by the Commission
staff, New Notes issued in the Exchange Offer in exchange for Old Notes may be
offered for resale, resold and otherwise transferred by each holder thereof
(other than a holder which is (i) a broker-dealer, as set forth below, (ii) an
Initial Purchaser of Old Notes which acquired Old Notes directly from Security
Capital in order to resell pursuant to Rule 144A under the Securities Act or
any other available exemption under the Securities Act or (iii) an "affiliate"
of Security Capital within the meaning of Rule 405 under the Securities Act)
without compliance with the registration and prospectus delivery requirements
of the Securities Act, provided that those New Notes are acquired in the
ordinary course of that holder's business and that holder is not engaged in,
and does not intend to engage in, and has no arrangement or understanding with
any person to participate in, the distribution of those New Notes within the
meaning of the Securities Act or resale of those New Notes in violation of the
Securities Act. Each holder of Old Notes which receives New Notes in the
Exchange Offer must represent to Security Capital in the Letter of Transmittal
that those conditions have been met. Each broker-dealer which receives New
Notes in the Exchange Offer must represent to Security Capital in the Letter
of Transmittal that it will receive those New Notes for its own account in
exchange for Old Notes which were acquired by it as a result of market-making
or other trading activities and that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of those New
Notes. The Letter of Transmittal states that by so representing and so
delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act. This Prospectus,
as it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of New Notes received in exchange for
Old Notes which were acquired by the broker-dealer as a result of market-
making or other trading activities. Security Capital has agreed to make this
Prospectus available to any such broker-dealer for use in connection with any
such resale for such period of time as broker-dealers must deliver a
prospectus, up to 180 days after the Expiration Date. To comply with any
28
<PAGE>
applicable securities laws of certain jurisdictions, however, New Notes may
not be offered or sold unless they have been registered or qualified for sale
in those jurisdictions or an exemption from registration or qualification is
available and is complied with. Security Capital currently does not intend to
take any action to register or qualify New Notes for resale in any
jurisdictions. See "Plan of Distribution."
DESCRIPTION OF NOTES
GENERAL
The Old Notes have been issued, and the New Notes will be issued, pursuant
to the Indenture. The New Notes will evidence the same debt as the Old Notes
and will be issued and entitled to the same benefits under the Indenture
relating to the Old Notes. The terms of the New Notes are identical in all
material respects (including principal amount, interest rate, maturity and
ranking) to the terms of the Old Notes for which they are exchanged, except
that the New Notes will have been registered under the Securities Act and
therefore will not be subject to the existing restrictions on transfer of the
Old Notes described under "The Exchange Offer--Effect on Holders of Notes,"
but will be freely transferable by their holders, except as described under
"The Exchange Offer--Resale of New Notes." In addition, the New Notes will not
have the registration rights and related terms providing for an increased
interest rate if Security Capital defaults in its registration obligations
which are applicable to the Old Notes. See "The Exchange Offer--Purpose of the
Exchange Offer."
The terms of the Notes include those stated in the Indenture and those made
part of the Indenture by reference to the Trust Indenture Act. The Notes are
subject to all of those terms, and holders of Notes are referred to the
Indenture and the Trust Indenture Act for a statement thereof. A copy of the
Indenture has been filed as an exhibit to the Registration Statement of which
this Prospectus is a part. See "Available Information." The statements under
this caption relating to the Notes and the Indenture are summaries and do not
purport to be complete, and where reference is made to particular provisions
of the Indenture, those provisions, including the definitions of certain
terms, are qualified in their entirety by that reference. The definitions of
certain terms used in the following summary are set forth below under "Certain
Definitions."
PRINCIPAL, MATURITY AND INTEREST
The Notes of each series are senior unsecured obligations of Security
Capital and rank pari passu in priority of payment and in all other respects
among themselves and with Security Capital's other unsecured and
unsubordinated indebtedness. The 2005 Notes are limited to $200 million, the
2007 Notes are limited to $100 million and the 2028 Notes are limited to $200
million of their respective aggregate principal amounts. The 2005 Notes mature
on June 15, 2005, the 2007 Notes mature on June 15, 2007 and the 2028 Notes
mature on June 15, 2028, each at 100% of their principal amount. Each Note
bears interest at the rate per annum shown on the front cover of this
Prospectus from June 23, 1998 or from the most recent Interest Payment Date to
which interest has been paid or provided for, payable semiannually (to holders
of record at the close of business on the December 1 or June 1 immediately
preceding the Interest Payment Date) on December 15 and June 15 of each year,
commencing December 15, 1998. Holders who exchange their Old Notes for New
Notes in the Exchange Offer will receive interest accrued on their Old Notes
from June 23, 1998, the date of issuance of the Old Notes, to the Exchange
Date, together with interest accrued on their New Notes from the Exchange
Date, in the first interest payment on the New Notes. Consequently, holders
who exchange their Old Notes for New Notes will receive the same interest
payment on December 15, 1998 (the first Interest Payment Date for the Old
Notes and the New Notes) which they would have received had they not accepted
the Exchange Offer. Old Notes tendered and accepted for exchange will cease to
accrue interest from and after the Exchange Date.
Interest on the Notes is computed on the basis of a 360-day year comprised
of twelve 30-day months. Principal of, premium, if any, and interest on the
Notes are payable at the principal corporate trust office of the Trustee
presently maintained in Boston, Massachusetts. The Notes may be presented for
payment, transfer or exchange at the office or agency of Security Capital
maintained for that purpose within the city of Boston,
29
<PAGE>
Massachusetts. At the option of Security Capital, payment of interest may be
made by check mailed to holders of Notes at their respective addresses set
forth in the register of holders of Notes; provided that all payments with
respect to Global Notes, the holders of which have given wire transfer
instructions on or prior to the relevant record date to the paying agent, will
be required to be made by wire transfer of immediately available funds to the
accounts specified by those holders. Until otherwise designated by Security
Capital, Security Capital's office or agency in New York will be the office of
an affiliate of the Trustee maintained for that purpose. The Notes of each
series are issuable in denominations of $1,000 and integral multiples thereof.
CERTAIN COVENANTS
Limitations on Indebtedness
The Indenture provides that Security Capital will not, and will not permit
any of its Wholly Owned Subsidiaries to, directly or indirectly, Incur, any
Indebtedness (including Acquired Indebtedness), if, immediately after that
Indebtedness is incurred, the total aggregate Indebtedness of Security Capital
and its Wholly Owned Subsidiaries exceeds 50% of the Adjusted Total Assets of
Security Capital and its Wholly Owned Subsidiaries.
At June 30, 1998, the Indebtedness of Security Capital and its Wholly Owned
Subsidiaries aggregated $949 million and the Adjusted Total Assets of Security
Capital and its Wholly Owned Subsidiaries aggregated $4.5 billion.
In addition, the Indenture provides that Security Capital will not, and will
not permit any of its Wholly Owned Subsidiaries to, directly or indirectly,
Incur any Indebtedness (including Acquired Indebtedness), if, immediately
after that Indebtedness is Incurred, the Fixed Charge Coverage Ratio for
Security Capital and its Wholly Owned Subsidiaries for the most recently ended
four fiscal quarters for which internal financial statements are available
immediately preceding the date on which that additional Indebtedness is
incurred would have been less than 1.5 to 1.0, determined on a pro forma basis
as if that Indebtedness had been incurred on the first day of that four-
quarter period.
At June 30, 1998, on a pro forma basis, after giving effect to the Old Note
Offering, the Fixed Charge Coverage Ratio for Security Capital and its Wholly
Owned Subsidiaries was 2.7 to 1.0.
Required Minimum Consolidated Tangible Net Worth
The Indenture provides that Security Capital will not at any time permit its
Consolidated Tangible Net Worth to be less than $1,500,000,000.
Limitations on Liens
The Indenture provides that Security Capital will not, and will not permit
any of its Subsidiaries to, directly or indirectly, create, incur, assume or
suffer to exist any Lien (other than Permitted Liens) which secures
obligations under any Indebtedness of Security Capital or any of its Wholly
Owned Subsidiaries on any asset now owned or hereafter acquired by Security
Capital or any of its Subsidiaries, or any income or profits therefrom, or
assign or convey any right to receive income therefrom.
Merger, Consolidation or Sale of Assets
The Indenture provides that Security Capital will not consolidate or merge
with or into (whether or not Security Capital is the surviving corporation),
or sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of the properties or assets of Security Capital in one or
more related transactions, to another Person unless (i) the surviving Person
or the Person formed by or surviving that consolidation or merger (if other
than Security Capital) or to which that sale, assignment, transfer, lease,
conveyance or other disposition was made (the "Surviving Entity") is a
corporation organized or existing under the laws of the United States, any
state thereof or the District of Columbia; (ii) the Surviving Entity assumes
all the obligations of Security Capital
30
<PAGE>
under the Notes and the Indenture pursuant to a supplemental indenture in form
reasonably satisfactory to the Trustee; (iii) immediately before and after
giving effect to that transaction and treating any Indebtedness which becomes
an obligation of Security Capital as a result of that transaction as having
been incurred by Security Capital at the time of the transaction, no Default
or Event of Default has occurred and is continuing; and (iv) Security Capital
or the Surviving Entity will, at the time of that transaction and after giving
pro forma effect thereto as if that transaction had occurred at the beginning
of the applicable four-quarter period, be permitted to Incur at least $1.00 of
additional Indebtedness pursuant to the covenants in the Indenture described
under the caption "Limitations on Indebtedness" above.
The sale, assignment, transfer, lease, conveyance or other disposition by
Security Capital of all or substantially all of its property or assets to one
or more of its Subsidiaries will not relieve Security Capital from its
obligations under the Indenture and the Notes.
Restrictions on Lines of Business
The Indenture provides that Security Capital will not, and will not permit
any of its Subsidiaries to, make Investments in any business other than the
business conducted by Security Capital and its Subsidiaries on the Issue Date
and any other business related to, or servicing, the real estate industry
unless the aggregate amount of those Investments is less than 10% of the
Consolidated Assets of Security Capital.
OPTIONAL REDEMPTION
Each series of the Notes may be redeemed at any time at the option of
Security Capital, in whole or in part, at a redemption price equal to the sum
of (i) the principal amount of the Notes being redeemed plus accrued interest
thereon to the redemption date and (ii) the Make-Whole Amount, if any, with
respect to those Notes (the "Redemption Price").
If notice has been given as provided in the Indenture and funds for the
redemption of any Notes called for redemption have been made available on the
redemption date referred to in the notice, the Notes being redeemed will cease
to bear interest on the date fixed for the redemption specified in the notice
and the only right of the holders of the Notes being redeemed will be to
receive payment of the Redemption Price.
Notice of any optional redemption of Notes of any series will be given to
holders thereof at their addresses, as shown in the Security Register, not
more than 60 nor less than 45 days prior to the date fixed for redemption. The
notice of redemption is required to specify, among other items, the Redemption
Price and the principal amount of the Notes to be redeemed held by the holder.
If less than all of the Notes of any series are to be redeemed at the option
of Security Capital, Security Capital will notify the Trustee at least 45 days
prior to the giving of the notice of redemption to the holders of the Notes of
that series (or such shorter period as is satisfactory to the Trustee) of the
aggregate principal amount of Notes of that series to be redeemed and their
redemption date. The Trustee is required to select, in such manner as it deems
fair and appropriate, Notes of that series to be redeemed in part. Each series
of the Notes may be redeemed, in part, in the minimum authorized denomination
for Notes of that series or in any integral multiple of $1,000 in excess
thereof.
As used herein, and in the Indenture:
"Make-Whole Amount" means, in connection with any optional redemption or
accelerated payment of any Notes of any series, the excess, if any, of (i) the
aggregate present value as of the date of the redemption or accelerated
payment of each dollar of principal being redeemed or paid and the amount of
interest (exclusive of interest accrued to the date of redemption or
accelerated payment) which would have been payable in respect of the dollar of
principal if the redemption or accelerated payment had not been made,
determined by discounting, on a semi-annual basis, the principal and interest
at the Reinvestment Rate (determined on the third Business Day preceding the
date the notice of redemption is given or declaration of acceleration is made)
from the
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respective dates on which the principal and interest would have been payable
if the redemption or accelerated payment had not been made, over (ii) the
aggregate principal amount of the Notes of that series being redeemed or paid.
"Reinvestment Rate" means with respect to each series of Notes, 0.25%
(twenty-five one hundredths of one percent), plus the arithmetic mean of the
yields under the respective headings "This Week" and "Last Week" published in
the Statistical Release under the caption "Treasury Constant Maturities" for
the maturity (rounded to the nearest month) corresponding to the remaining
life to maturity of the Notes of the relevant series, as of the payment date
of the principal being redeemed or paid. If no maturity exactly corresponds to
that maturity, yields for the two published maturities most closely
corresponding to that maturity will be calculated pursuant to the immediately
preceding sentence and the Reinvestment Rate will be interpolated or
extrapolated from those yields on a straight-line basis, rounding in each of
the relevant periods to the nearest month. For purposes of calculating the
Reinvestment Rate, the most recent Statistical Release published prior to the
date of determination of the Make-Whole Amount is to be used.
"Statistical Release" means the statistical release designated "H.15(519)"
or any successor publication which is published weekly by the Federal Reserve
System and which establishes yields on actively traded United States
government securities adjusted to constant maturities or, if the statistical
release is not published at the time of any determination as described herein,
then such other reasonably comparable index which shall be designated by
Security Capital.
REPORTS
The Indenture provides that, whether or not required by the rules and
regulations of the Commission, so long as any Notes of any series are
outstanding, Security Capital will furnish to holders of Notes of that series
(i) all quarterly and annual financial information which would be required to
be contained in a filing with the Commission on Forms 10-Q and 10-K if
Security Capital were required to file those Forms, including a "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and,
with respect to the annual information only, a report thereon by Security
Capital's certified independent accountants and (ii) all current reports which
would be required to be filed with the Commission on Form 8-K if Security
Capital were required to file those reports. In addition, whether or not
required by the rules and regulations of the Commission, Security Capital will
file a copy of all of those information and reports with the Commission for
public availability and make that information available to securities analysts
and prospective investors upon request.
GLOBAL SECURITIES
The Notes of each series may be issued in fully-registered form only.
Each series of the New Notes will be evidenced by one or more global Notes
(the "Global Securities"), which will be deposited with, or on behalf of, DTC
and registered in the name of Cede & Co. ("Cede"), as DTC's nominee.
Holders of the New Notes may hold their interests in any of the Global
Securities directly through DTC, or indirectly through organizations which are
participants in DTC ("Participants"). Transfers between Participants will be
effected in the ordinary way in accordance with DTC rules and will be settled
in immediately available funds.
Holders of the New Notes who are not Participants may beneficially own
interests in a Global Security held by DTC only through Participants,
including certain banks, brokers, dealers, trust companies and other parties
which clear through or maintain a custodial relationship with a Participant,
either directly or indirectly, and have indirect access to the DTC system
("Indirect Participants"). So long as Cede, as the nominee of DTC, is the
registered owner of any Global Security, Cede for all purposes will be
considered the sole holder of that Global Security. Except as provided below,
owners of beneficial interests in a Global Security will not be entitled to
have certificates registered in their names, will not receive or be entitled
to receive physical delivery of certificates in definitive form, and will not
be considered the holder thereof.
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Neither Security Capital nor the Trustee (nor any registrar or paying agent)
will have any responsibility for the performance by DTC or its Participants or
Indirect Participants of their respective obligations under the rules and
procedures governing their operations. DTC has advised Security Capital that
it will take any action permitted to be taken by a holder of Notes only at the
direction of one or more Participants whose accounts are credited with DTC
interests in a Global Security.
DTC has advised Security Capital as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a "banking
organization" within the meaning of the New York Banking Law, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the New
York Uniform Commercial Code and a "clearing agency" registered pursuant to
the provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its Participants and to facilitate the clearance and settlement
of securities transactions, such as transfers and pledges, among Participants
in deposited securities through electronic book-entry changes to accounts of
its Participants, thereby eliminating the need for physical movement of
securities certificates. Participants include securities brokers and dealers,
banks, trust companies, clearing corporations and certain other organizations.
Certain of those Participants (or their representatives), together with other
entities, own DTC. The rules applicable to DTC and its Participants are on
file with the Commission.
Purchases of Notes under the DTC system must be made by or through
Participants, which will receive a credit for the Notes on DTC's records. The
ownership interest of each actual purchaser of each Note (a "Beneficial
Owner") is in turn to be recorded on the Participants' and Indirect
Participants' records. Beneficial Owners will not receive written confirmation
from DTC of their purchase, but Beneficial Owners are expected to receive
written confirmations providing details of the transaction, as well as
periodic statements of their holdings, from the Participant or Indirect
Participant through which the Beneficial Owner entered into the transaction.
Transfers of ownership interests in the Notes are to be accomplished by
entries made on the books of Participants acting on behalf of Beneficial
Owners. Beneficial Owners will not receive certificates representing their
ownership interests in Notes, except if use of the book-entry system for the
Notes is discontinued.
The deposit of Notes with DTC and their registration in the name of Cede
effect no change in beneficial ownership. DTC has no knowledge of the actual
Beneficial Owners of the Notes; DTC's records reflect only the identity of the
Participants to whose accounts those Notes are credited, which may or may not
be the Beneficial Owners. The Participants will remain responsible for keeping
account of their holdings on behalf of their customers.
The laws of some jurisdictions require that certain purchasers of securities
take physical delivery of securities in definitive form. Those laws may impair
the ability to transfer beneficial interests in the Global Security.
Conveyance of notices and other communications by DTC to Participants, by
Participants to Indirect Participants and by Participants and Indirect
Participants to Beneficial Owners will be governed by arrangements among them,
subject to any statutory or regulatory requirements which may be in effect
from time to time.
Principal and interest payments on the Notes will be made to DTC by wire
transfer of immediately available funds. DTC's practice is to credit
Participants' accounts on the payable date in accordance with their respective
holdings shown on DTC's records unless DTC has reason to believe that it will
not receive payment on the payable date. Payments by Participants to
Beneficial Owners will be governed by standing instructions and customary
practices, as is the case with securities held for the accounts of customers
in bearer form or registered in "street name" and will be the responsibility
of that Participant and not of DTC or Security Capital, subject to any
statutory or regulatory requirements as may be in effect from time to time.
Payment of principal and interest to DTC is the responsibility of Security
Capital, disbursement of those payments to Participants is the responsibility
of DTC, and disbursement of those payments to the Beneficial Owners is the
responsibility of Participants and Indirect Participants. Neither Security
Capital nor the Trustee will have any responsibility or liability for any
aspect of the records relating to or payments made on account of beneficial
ownership interests in the Global Securities or for maintaining, supervising
or reviewing any records relating to those beneficial ownership interests.
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DTC may discontinue providing its services as securities depositary with
respect to the Notes at any time by giving reasonable notice to Security
Capital. If DTC notifies Security Capital that it is unwilling or unable to
continue as depositary for any Global Security or if at any time DTC ceases to
be a clearing agency registered as such under the Exchange Act when DTC is
required to be so registered to act as that depositary and no successor
depositary has been appointed within 90 days of that notification or of
Security Capital becoming aware of DTC's ceasing to be so registered, as the
case may be, certificates for the relevant Notes will be printed and delivered
in exchange for interests in that Global Security. Any Global Security which
is exchangeable pursuant to the preceding sentence will be exchangeable for
relevant Notes registered in such names as DTC directs. It is expected that
those instructions will be based on directions received by DTC from its
Participants with respect to ownership of beneficial interests in that Global
Security.
Security Capital may decide to discontinue use of the system of book-entry
transfers through DTC (or a successor securities depositary). In that event,
or if the book-entry system is no longer available for the Notes of any
series, certificates representing the Notes of that series will be printed and
delivered.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources which Security Capital believes to be reliable,
but Security Capital does not take responsibility for the accuracy thereof.
EVENTS OF DEFAULT
The Indenture provides that the following events are "Events of Default"
with respect to the Notes of any series: (i) default for 30 days in the
payment of any interest due and payable on any Notes of that series; (ii)
default in the payment of the principal of any Notes of that series when due
and payable; (iii) default in the performance, or breach, of any other
covenant or warranty of Security Capital contained in the Indenture with
respect to the Notes of that series, which continues for 60 days after written
notice as provided in the Indenture; (iv) any default occurs under any
mortgage, indenture or instrument under which there may be issued or by which
there may be secured or evidenced any Indebtedness for money borrowed by
Security Capital or any Significant Subsidiary of Security Capital (or the
payment of which is Guaranteed by Security Capital or any Significant
Subsidiary of Security Capital), whether that Indebtedness or Guarantee exists
on the date of the Indenture or is thereafter created, which default after the
termination of any applicable grace or cure period, (a) constitutes a Payment
Default or (b) results in the acceleration of that Indebtedness prior to its
express maturity and, in each case, the principal amount of any Indebtedness,
together with the principal amount of any other such Indebtedness under which
there has been a Payment Default or which has been so accelerated, aggregates
$15 million or more; provided that, in calculating the aggregate principal
amount of any such Indebtedness, the Hedging Obligations of any Person under
which there has been a Payment Default or which has been so accelerated shall
not be netted against any other Hedging Obligation of that Person; (v) failure
by Security Capital or any Significant Subsidiary of Security Capital to pay
final judgments aggregating in excess of $15 million, which judgments are not
paid, discharged or stayed for a period of 60 days; and (vi) certain events of
bankruptcy or insolvency with respect to Security Capital or any Significant
Subsidiary of Security Capital. The term "Significant Subsidiary" means a
Subsidiary which otherwise meets the tests ascribed to the term in Regulation
S-X promulgated by the Commission under the Securities Act, except that the
tests therein shall be based on 20% of total assets or income instead of 10%,
unless Security Capital owns or controls, directly or indirectly, at least 75%
of the total voting power of the Subsidiary's shares of Capital Stock entitled
(without regard to the occurrence of any contingency) to vote in the election
of directors, managers or trustees thereof (with that percentage to be
calculated on a fully diluted basis), in which case the tests shall be based
on 10% of total assets or income.
If an Event of Default specified in clause (vi) above relating to Security
Capital or any Significant Subsidiary occurs, the principal amount of all
outstanding Notes of each series will become due and payable without any
declaration or other act on the part of the Trustee or the holders.
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DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
Security Capital may discharge any and all of its obligations to holders of
any series of the Notes, at any time ("defeasance"), but may not thereby avoid
its duty to register the transfer or exchange of the Notes, to replace any
temporary, mutilated, destroyed, lost or stolen Notes or to maintain an office
or agency in respect of the Notes. Security Capital may instead be released
from the obligations imposed by certain provisions of the Indenture (which
contain the covenants described above limiting incurrence of Indebtedness and
other matters) and omit to comply with those provisions without creating an
Event of Default ("covenant defeasance"). Defeasance or covenant defeasance
may be effected only if, among other things: (i) Security Capital irrevocably
deposits with the Trustee cash or Government Obligations, as trust funds, in
an amount certified to be sufficient to pay at maturity (or upon redemption)
the principal, premium, if any, and interest on the outstanding Notes of the
series being defeased; and (ii) Security Capital delivers to the Trustee an
opinion of counsel to the effect that the holders of the Notes of that series
will not recognize income, gain or loss for United States federal income tax
purposes as a result of the defeasance or covenant defeasance and that the
defeasance or the covenant defeasance will not otherwise alter the holders'
United States federal income tax treatment of principal, premium and interest
payments on the Notes of the relevant series. In the case of a defeasance,
that opinion must be based on a ruling of the Internal Revenue Service or a
change in United States federal income tax law occurring after the date of the
Indenture, since such a result would not occur under current tax law.
NO PERSONAL LIABILITY OF SHAREHOLDERS, OFFICERS OR DIRECTORS
The Indenture provides that no recourse may be had against any past, present
or future stockholder, officer or director of Security Capital, or any
successor entity under or on any obligation, covenant or agreement contained
in the Indenture or in any Note of any series, or because of any Indebtedness
evidenced thereby.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for full disclosure of all of those terms, as well as
any other capitalized terms used herein for which no definition is provided.
"Adjusted Fixed Charges" means, with respect to any Person for any period,
the sum, without duplication, of the total amount of accrued or paid interest
(including, without limitation, interest expense attributable to Capitalized
Lease Obligations, but excluding amortization of original issue discount
("OID") on any Indebtedness, the interest portion of any deferred payment
obligation and non-cash interest which is payable in kind with additional
Indebtedness and dividend payments on any series of Disqualified Stock) with
regard to Indebtedness of that Person and its Wholly Owned Subsidiaries for
that period.
"Acquired Indebtedness" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time that other Person is
merged with or into the specified Person, including, without limitation,
Indebtedness incurred in connection with, or in contemplation of, that other
Person merging with or into the specified Person, and (ii) Indebtedness
secured by a Lien encumbering any asset acquired by the specified Person.
"Adjusted Net Income" means, with respect to any Person for any period, the
aggregate Net Income of that Person for that period, provided that (i)
amortization of OID on any Indebtedness will be excluded; (ii) the Net Income
of any Person which is not a Wholly Owned Subsidiary or which is accounted for
by the equity method of accounting will be included only to the extent of the
amount of dividends or other distributions paid in cash to that Person; (iii)
the Net Income attributable to any Person will be excluded to the extent that
the declaration or payment of dividends or similar distributions by that
Person to Security Capital is not at the date of determination permitted by
operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to that
Person or its shareholders; and (iv) the cumulative effect of any change in
accounting principles will be excluded.
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"Adjusted Total Assets" means, with respect to any Person as of any date,
the sum, without duplication, of (i) that Person's cash, (ii) the Market Value
of Publicly Traded Securities owned by that Person and (iii) the net book
value of all other assets of that Person.
"Adjusted Total Tangible Assets" means, with respect to any Person as of any
date, Adjusted Total Assets less Intangible Assets.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with the specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling" "controlled by"
and "under common control with"), as used with respect to any Person, means
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of that Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the voting securities of a Person will
be deemed to be control.
"Board of Directors" means, with respect to any Person, the Board of
Directors of that Person, or any authorized committee of the Board of
Directors of that Person.
"Business Day" means any day except a Saturday, Sunday or other day on which
commercial banks in New York, New York or Boston, Massachusetts are authorized
by law to close.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease which
would at that time be required to be capitalized on a balance sheet in
accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate stock;
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock; (iii) in the case of a partnership, partnership interests
(whether general or limited); and (iv) any other interest or participation
which confers on a Person the right to receive a share of the profits and
losses of, or distributions of assets of, the issuing Person.
"Cash Flow" means, with respect to any Person for any period, the Adjusted
Net Income of that Person for that period plus (i) provisions for taxes based
on income or profits of that Person for that period, to the extent those
provisions for taxes were included in computing Adjusted Net Income, plus (ii)
Adjusted Fixed Charges of that Person for that period, to the extent those
Adjusted Fixed Charges were deducted in computing Adjusted Net Income, plus
(iii) depreciation and amortization of that Person for that period, to the
extent that those charges were deducted in computing Adjusted Net Income.
"Consolidated Assets" means, with respect to any Person at any date, the
consolidated assets of that Person at that date determined in accordance with
GAAP.
"Consolidated Subsidiary" means, with respect to any Person, at any date,
any Subsidiary the accounts of which would be consolidated with those of that
Person in its consolidated financial statements in accordance with GAAP if
those statements were prepared as of that date.
"Consolidated Tangible Net Worth" means, with respect to any Person as of
any date, the consolidated stockholders' equity of that Person and its
Consolidated Subsidiaries less their consolidated Intangible Assets (to the
extent reflected in determining consolidated stockholders' equity), and
excluding the cumulative effect of any change in accounting principles.
"Default" means any event which is or with the passage of time or the giving
of notice or both would be an Event of Default.
"Disqualified Stock" means Capital Stock which, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
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redeemable, pursuant to a sinking fund obligation or otherwise, or is
redeemable at the option of the holder thereof, in whole or in part, on or
prior to the date on which the Notes of the relevant series mature.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security which is
convertible into, or exchangeable for, Capital Stock).
"Fixed Charge Coverage Ratio" means, with respect to any Person for any
period, the ratio of the Cash Flow of that Person for that period to the
Adjusted Fixed Charges of that Person for that period. If a Person Incurs or
redeems any Indebtedness (other than revolving credit borrowings) during or
after the period for which the Fixed Charge Coverage Ratio is being
calculated, but prior to the date on which the event for which the calculation
of the Fixed Charge Coverage Ratio is made (the "Calculation Date"), then the
Fixed Charge Coverage Ratio will be calculated giving pro forma effect to that
Incurrence or redemption, as if the same had occurred on the first day of that
period. In addition, for purposes of making the computation referred to above,
(i) acquisitions which have been made by the Person, including through mergers
or consolidations and including any related financing transactions, during or
after the period, but prior to the Calculation Date will be deemed to have
occurred on the first day of the period for which the Fixed Charge Coverage
Ratio is being calculated; (ii) the Cash Flow attributable to discontinued
operations, as determined in accordance with GAAP, and operations or
businesses disposed of prior to the Calculation Date, will be excluded; (iii)
the interest expense attributable to any Indebtedness (whether existing or
being incurred) bearing a floating interest rate will be computed as if the
rate in effect on the Calculation Date had been the applicable rate for the
entire period; and (iv) the Adjusted Fixed Charges attributable to
discontinued operations, as determined in accordance with GAAP, and operations
or businesses disposed of prior to the Calculation Date, will be excluded, but
only to the extent that the obligations giving rise to those Adjusted Fixed
Charges will not be obligations of the Person following the Calculation Date.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entities as have been approved by a significant segment of the
accounting profession, as in effect from time to time.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Hedging Obligations" means, with respect to any Person, the greater of (a)
the net obligations of that Person under (i) interest rate swap agreements,
interest rate cap agreements and interest rate collar agreements, (ii) foreign
exchange contracts or currency swap agreements and (iii) other agreements or
arrangements designed to protect that Person against fluctuations in interest
rates or currency values or (b) zero.
"Incurs" (including, with correlative meanings, the term "Incurrence")
means, with respect to any Indebtedness, create, incur, issue, assume,
guarantee or otherwise become directly or indirectly liable, contingently or
otherwise, with respect to that Indebtedness (including Acquired
Indebtedness).
"Indebtedness" is defined to mean, with respect to any Person at any date of
determination (without duplication), (i) all indebtedness of that Person for
borrowed money, (ii) all obligations of that Person evidenced by bonds,
debentures, notes or other similar instruments, (iii) all obligations of that
Person in respect of letters of credit or bankers' acceptance or other similar
instruments (or reimbursement obligations with respect thereto), (iv) all
obligations of that Person to pay the deferred purchase price of property or
services, except Trade Payables, (v) all obligations of that Person as lessee
under Capital Lease Obligations, (vi) all Indebtedness of others secured by a
Lien on any asset of that Person, whether or not that Indebtedness is assumed
by that Person, provided that, for purposes of determining the amount of any
Indebtedness of the type described in this clause, if recourse with respect to
that Indebtedness is limited to the asset, the amount of that Indebtedness
will be limited to the lesser of the fair market value of that asset or the
amount of that Indebtedness, (vii) all Indebtedness of
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others Guaranteed by that Person to the extent that Indebtedness is Guaranteed
by that Person, (viii) all Disqualified Stock valued at the greater of its
voluntary or involuntary liquidation preference plus accrued and unpaid
dividends and (ix) to the extent not otherwise included in this definition,
all obligations of that Person under Hedging Obligations.
"Intangible Assets" means, with respect to any Person, the intangible assets
of that Person determined in accordance with GAAP.
"Investments" means, with respect to any Person, all investments by that
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including Guarantees of Indebtedness or other obligations),
advances or capital contributions, purchases or other acquisitions for
consideration of Indebtedness, Equity Interests or other securities and all
other items which are or would be classified as investments on a balance sheet
prepared in accordance with GAAP.
"Issue Date" means the original issue date of the Notes.
"Lien" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of that asset given to
secure Indebtedness, whether or not filed, recorded or otherwise perfected
under applicable law (including any conditional sale or other title retention
agreement, any lease in the nature thereof, any option or other agreement to
sell or give a security interest in and any filing of or agreement to give any
financing statement under the Uniform Commercial Code (the "UCC") (or
equivalent statutes) of any jurisdiction with respect to any such lien,
pledge, charge or security interest).
"Market Value" means, with respect to a Publicly Traded Security and on the
date of determination thereof, (i) if that Publicly Traded Security is listed
on the NYSE, the American Stock Exchange or some other principal national
securities exchange in the United States of America, the reported last sale
price of a unit of that Publicly Traded Security regular way on a given day,
or, in case no sale takes place on that day, the average of the reported
closing bid and asked prices regular way, in each case on the NYSE Composite
Tape, the American Stock Exchange Composite Tape or the principal national
securities exchange in the United States of America on which that Publicly
Traded Security is listed or admitted to trading, as applicable, (ii) if that
Publicly Traded Security is not listed or admitted to trading on any national
securities exchange in the United States of America, but prices for that
Publicly Traded Security are disseminated by means of an automated quotation
system by the National Association of Securities Dealers, Inc., the closing
sales price, or if there is no closing sales price, the average of the closing
bid and asked prices, in the automated quotation system, or (iii) with respect
to a Publicly Traded Security listed on a principal national securities
exchange in Luxembourg, Amsterdam or other European country, the price of that
Publicly Traded Security as reported on that exchange by the most widely
recognized reporting method customarily relied on by financial institutions in
that country and if that Publicly Traded Security is listed on more than one
such exchange, the principal securities exchange on which that Publicly Traded
Security is listed. Any determination of the "Market Value" of a Publicly
Traded Security pursuant to this definition will be based on the assumption
that offers of that Publicly Traded Security are exempt from registration
under the Securities Act.
"Net Income" of any Person for any period means the net income (loss) of
that Person for that period, determined in accordance with GAAP, excluding (i)
any gain or loss, together with any related provision for taxes on that gain
or loss, realized in connection with (a) any sale, lease, conveyance or other
disposition of any Strategic Investments (including, without limitation,
dispositions pursuant to sale and leaseback transactions) by that Person, (b)
the disposition of any securities (other than Portfolio Securities) by that
Person or (c) the extinguishment of any Indebtedness of that Person; (ii) any
extraordinary or nonrecurring gain or loss, together with any related
provision for taxes on that extraordinary or nonrecurring gain or loss; and
(iii) any unrealized gain or loss caused by the increase or decrease in the
Market Value of any Publicly Traded Security held, directly or indirectly, by
that Person. In addition, for the calculation of Net Income for any Person for
any period, (i) capital management fees based on assets under management
accruing to that Person for that period shall be calculated as if the fees
accruing and assets under management on the last day of that period (or the
closest
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<PAGE>
practicable date of determination) were the fees accruing and assets under
management as of the beginning of that period; (ii) capital market fees
accruing to that Person for that period shall be calculated as if the amount
of those fees accrued during that period was equal to the amount of those fees
accrued during the six month period immediately preceding the last day of that
period (or the closest practicable date of determination), adjusted for the
duration of that period; and (iii) the dividend rates and interest rates in
effect with respect to payments accruing to that Person from its investees as
of the last day of that period (or the closest practicable date of
determination) shall be deemed to have been in effect as of the beginning of
that period.
"Non-Recourse" to a Person as applied to any Indebtedness (or portion
thereof) means that the Person is not directly or indirectly liable to make
any payments with respect to that Indebtedness (or portion thereof) and that
no Guarantee of that Indebtedness (or portion thereof) has been made by that
Person.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Payment Default" means any failure to pay any scheduled installment of
principal of, premium, if any, or interest on any Indebtedness within the
grace period provided for that payment in the documentation governing that
Indebtedness.
"Permitted Liens" means (i) Liens on real property securing Indebtedness
which is Non-Recourse to Security Capital or any of its Subsidiaries; or (ii)
Liens on any asset securing Indebtedness (other than Indebtedness referred to
in clause (i) above), provided that, after giving effect to the Incurrence of
that Indebtedness (a) the aggregate principal amount of Indebtedness secured
pursuant to this clause (ii) is less than 10% of the Total Capitalization of
Security Capital and its Consolidated Subsidiaries and (b) the aggregate net
book value of the assets of Security Capital and its Subsidiaries securing
that Indebtedness will not be greater than 200% of the principal amount of
that secured Indebtedness. For purposes of the definition of Permitted Lien,
the aggregate principal amount of Indebtedness will mean the principal amount
of that Indebtedness at maturity.
"Person" means an individual, a corporation, a partnership, an association,
a trust or any other entity or organization, including a government or
political subdivision or an agency or instrumentality thereof.
"Portfolio Securities" means Securities (a) issued by a fund or company (an
"Investment Company") either (i) registered under the Investment Company Act,
or (ii) which makes passive investments in companies or funds in which the
Investment Company does not have representation on the board of directors or
similar body or participate on a regular basis in the management ("Portfolio
Investees") and which is exempt from registration under the Investment Company
Act or (b) issued by Portfolio Investees.
"Publicly Traded Security" means a Security which is listed on the NYSE, the
American Stock Exchange or any other principal national securities exchange in
the United States, Luxembourg, Amsterdam or other European country or whose
prices are disseminated by means of an automated quotation system by the
National Association of Securities Dealers, Inc.
"Security" has the meaning given that term in Article 8 of the UCC.
"Strategic Investment" of any specified Person means any other Person in
which an Investment has been made by the specified Person, other than
Portfolio Securities, where either (i) the undepreciated book value or (ii) if
the Strategic Investment is a Publicly Traded Security, the Market Value of
the Investment exceeds $100 million.
"Subordinated Debt" means any Indebtedness (whether outstanding on the Issue
Date or hereafter Incurred) which is by its terms expressly subordinate or
junior in right of payment to the Notes.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total
voting power of shares of Capital Stock entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers
or trustees thereof is at the time
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<PAGE>
owned or controlled, directly or indirectly, by that Person or one or more of
the other Subsidiaries of that Person (or a combination thereof) and (ii) any
partnership (a) the sole general partner or the managing general partner of
which is that Person or a Subsidiary of that Person or (b) the only general
partners of which are that Person or one or more Subsidiaries of that Person
(or any combination thereof).
"Total Capitalization" means, with respect to any Person as of any date, the
consolidated long-term Indebtedness and consolidated stockholders' equity of
that Person and its Consolidated Subsidiaries less their consolidated
Intangible Assets (to the extent reflected in determining consolidated
stockholders' equity), all determined as of that date in accordance with GAAP,
and excluding the cumulative effect of a change in accounting principles.
"Trade Payables" means, with respect to any Person, (i) any accounts payable
or any other indebtedness or monetary obligation to trade creditors created,
assumed or Guaranteed by that Person arising in the ordinary course of
business in connection with the acquisition of goods or services, (ii)
obligations incurred in the ordinary course to pay the purchase price of
securities so long as those obligations are paid within customary settlement
periods and (iii) obligations to purchase securities pursuant to subscription
or stock purchase agreements in the ordinary course of business.
Notwithstanding the foregoing, for purposes of calculating Security Capital's
compliance with the covenants in the Indenture described in the first
paragraph under the caption "Limitations on Indebtedness" above, accounts
payables (other than deferred compensation) of Security Capital in excess of
3.0% of the undepreciated book value (determined in accordance with GAAP) of
the assets of Security Capital at any time outstanding will be treated as
Indebtedness to the extent of that excess.
"Wholly Owned Subsidiary" means a Subsidiary of any Person all of the
outstanding Capital Stock or other ownership interests of which (other than
directors' qualifying shares or minimal interests issued to other Persons to
satisfy legal requirements) are at the time owned by that Person or by one or
more Wholly Owned Subsidiaries of that Person or by that Person and one or
more Wholly Owned Subsidiaries of that Person.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion is based on the Internal Revenue Code of 1986, as
amended, the Treasury regulations thereunder, its legislative history,
administrative pronouncements, and judicial decisions, all of which are
subject to change, which change may be retroactive. Potential holders should
consult their own tax advisors to determine the state, local and non-U.S.
consequences of the Exchange Offer.
The exchange of an Old Note for a New Note in the Exchange Offer will not be
taxable to an exchanging holder for Federal income tax purposes. As a result
(i) an exchanging holder will not recognize any gain or loss on the exchange,
(ii) the holding period for the New Note will include the holding period for
the Old Note and (iii) the basis of the New Note will be the same as the basis
for the Old Note. The Exchange Offer will result in no Federal income tax
consequences to a nonexchanging holder of Old Notes.
PLAN OF DISTRIBUTION
Each broker-dealer which receives New Notes in the Exchange Offer must
represent to Security Capital in the Letter of Transmittal that it will
receive those New Notes for its own account in exchange for Old Notes which
were acquired by it as a result of market-making or other trading activities
and that it will deliver a prospectus meeting the requirements of the
Securities Act in connection with any resale of those New Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales of New Notes received in
exchange for Old Notes which were acquired by the broker-dealer as a result of
market-making or other trading activities. Security Capital has agreed to make
this Prospectus available to any such broker-dealer for use in connection with
any such resale for such period of time as broker-dealers must deliver a
prospectus, up to 180 days after the Expiration Date.
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<PAGE>
Security Capital will not receive any proceeds from resales of New Notes by
broker-dealers. New Notes received by broker-dealers for their own accounts
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the New Notes or in a combination of those
methods of resale, at market prices prevailing at the time of resale, at
prices related to the prevailing market prices or at negotiated prices. Any
such resales may be made directly to purchasers or to or through brokers or
dealers who may receive compensation in the form of commissions or concessions
from any such broker-dealer and/or the purchasers of any such New Notes. Any
broker-dealer which resells New Notes which were received by it for its own
account in the Exchange Offer and any broker or dealer which participates in a
distribution of those New Notes may be deemed to be an "underwriter" within
the meaning of the Securities Act and any profit on any resale of those New
Notes and any commissions or concessions received by those persons may be
deemed to be underwriting compensation under the Securities Act. The Letter of
Transmittal states that by representing that it will deliver and by delivering
a prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For such period of time as broker-dealers must deliver a prospectus, up to
180 days after the Expiration Date, Security Capital will provide additional
copies of this Prospectus and any amendment or supplement to this Prospectus
to any broker-dealer which requests those documents in the Letter of
Transmittal.
Although the Initial Purchasers have advised Security Capital that they
currently intend to make a market in the New Notes of each series after the
Exchange Offer, they are not obligated to do so and may discontinue their
market-making at any time without notice. In addition, their market-making
activity will be subject to the limits imposed by the Securities Act and the
Exchange Act. Accordingly, there can be no assurance as to the development or
liquidity of any market for the New Notes.
Security Capital has agreed in the Registration Rights Agreement to
indemnify each broker-dealer reselling New Notes pursuant to this Prospectus,
and their officers, directors and controlling persons, against certain
liabilities in connection with the offer and sale of New Notes, including
liabilities under the Securities Act, or to contribute to payments that those
persons may be required to make in respect thereof.
EXPERTS
The consolidated financial statements and related schedules of Security
Capital and ProLogis (formerly known as Security Capital Industrial Trust)
incorporated herein by reference, as included in Security Capital's annual
report on Form 10-K, and the financial statements and related schedules of
Homestead as of December 31, 1997, consolidated into the financial statements
of Security Capital, have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their reports with respect thereto, and
are incorporated herein in reliance upon the authority of such firm as experts
in giving such reports.
The financial statements of Security Capital Pacific Trust as December 31,
1997 and 1996, and for each of the years in the three-year period ended
December 31, 1997, have been incorporated by reference herein and in the
Registration Statement in reliance upon KPMG Peat Marwick LLP, independent
certified public accountants, incorporated by reference herein and upon the
authority of such firm as experts in accounting and auditing.
The financial statements and related schedules of ATLANTIC as of December
31, 1996 and December 31, 1995 and for the three years then ended and the
financial statements and related schedules of Homestead as of December 31,
1996 and for the year then ended consolidated into the financial statements of
Security Capital incorporated herein by reference have been audited by Ernst &
Young LLP, independent auditors, to the extent indicated in their reports
thereon also incorporated herein by reference. Those financial statements have
been consolidated in reliance on those reports given on the authority of that
firm as experts in accounting and auditing.
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<PAGE>
The financial statements of SC-USREALTY, incorporated in this Prospectus by
reference to the Annual Report on Form 10-K of Security Capital for the year
ended December 31, 1997, have been audited by Price Waterhouse Sarl,
independent accountants, as indicated in their reports thereon, also
incorporated by reference. Such financial statements, to the extent they have
been included in the consolidated financial statements of Security Capital,
have been so included in reliance on their reports given on the authority of
such firm as experts in auditing and accounting.
With respect to the unaudited condensed interim financial statements of
Security Capital for the quarters ended June 30, 1998 and 1997, incorporated
herein by reference, Arthur Andersen LLP has applied limited procedures in
accordance with professional standards for a review of that information.
However, their separate report thereon states that they did not audit and they
do not express an opinion on that interim financial information. Accordingly,
the degree of reliance on their report on that information should be
restricted in light of the limited nature of the review procedures applied. In
addition, the accountants are not subject to the liability provisions of
Section 11 of the Securities Act for their report on the unaudited interim
financial information because their report is not a "report" or a "part" of
the Registration Statement prepared or certified by the accountants within the
meaning of Sections 7 and 11 of the Securities Act.
LEGAL MATTERS
Certain legal matters in respect of the validity of the issuance of the New
Notes offered hereby will be passed on for Security Capital by Mayer, Brown &
Platt, Chicago, Illinois. Mayer, Brown & Platt has in the past represented and
is currently representing Security Capital and certain of its affiliates. As
to certain matters of Maryland law, Mayer, Brown & Platt may rely on the
opinion of Ballard Spahr Andrews & Ingersoll, LLP, Baltimore, Maryland.
AVAILABLE INFORMATION
Security Capital is subject to the informational requirements of the
Exchange Act, and, in accordance therewith, files reports, proxy statements
and other information with the Commission. Those reports, proxy statements and
other information filed by Security Capital with the Commission can be
inspected and copied at the Commission's Public Reference Room at 450 Fifth
Street, N.W., Washington, D.C. 20549, or at the public reference facilities of
the Commission's regional offices in New York and Chicago. The addresses of
these regional offices are as follows: 7 World Trade Center, Suite 1300, New
York, NY 10048; and 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. Copies of that material also can be obtained by mail from the Public
Reference Room of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, upon receipt of the fees prescribed by the rules and regulations of the
Commission. That material may also be accessed electronically by means of the
Commission's web site on the Internet at http://www.sec.gov. Reports, proxy
statements and other information concerning Security Capital may also be
inspected at the offices of the NYSE at 20 Broad Street, New York, New York
10005. Security Capital's Class A Shares, Class B Shares and Warrants are
listed on the NYSE.
Security Capital has filed with the Commission the Registration Statement
under the Securities Act with respect to the securities offered hereby. This
Prospectus does not contain all of the information set forth in the
Registration Statement, certain portions of which have been omitted as
permitted by the rules and regulations of the Commission. Statements contained
in this Prospectus as to the content of any contract or other document are not
necessarily complete, and in each instance reference is made to the copy of
that contract or other document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respect by that
reference and the exhibits and schedules hereto. For further information
regarding Security Capital and the New Notes offered hereby, reference is
hereby made to the Registration Statement and those exhibits and schedules.
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INCORPORATION BY REFERENCE
The documents listed below have been filed by Security Capital with the
Commission pursuant to the Exchange Act and are hereby incorporated herein by
reference:
1. Security Capital's Annual Report on Form 10-K for the year ended
December 31, 1997 (File No. 001-13355).
2. Security Capital's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1998 and June 30, 1998 (File No. 001-13355).
3. The information under the caption "Policies with Respect to Certain
Activities" in Security Capital's Prospectus dated September 17, 1997,
which was filed with the Commission on September 18, 1997 (File No. 333-
26037).
All documents filed by Security Capital pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the date the Exchange Offer is terminated shall be deemed to be
incorporated herein by reference and to be part hereof from the date of filing
of those documents. Any statement contained in a document incorporated or
deemed to be incorporated herein by reference shall be deemed to be modified
or superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is or
is deemed to be incorporated herein by reference modifies or supersedes that
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
Security Capital will provide without charge to each person, upon the
written or oral request of that person, a copy of any or all of the foregoing
documents incorporated herein by reference, other than exhibits to those
documents (unless those exhibits are specifically incorporated by reference
into those documents). Requests for those documents should be directed to
Jeffrey A. Klopf, Secretary, Security Capital Group Incorporated, 125 Lincoln
Avenue, Santa Fe, N.M. 87501 (telephone number (505) 982-9292).
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<PAGE>
PART II.
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article EIGHTH of the Registrant's Charter provides as follows with respect
to the indemnification of directors and officers of the Registrant:
"The Corporation shall have the power, to the maximum extent permitted by
Maryland law in effect from time to time, to obligate itself to indemnify
and to pay or reimburse reasonable expenses in advance of final disposition
of a proceeding to (a) any individual who is a present or former director
or officer of the Corporation or (b) any individual who, while a director
or officer of the Corporation and at the request of the Corporation, serves
or has served as a director, officer, partner or trustee of another
corporation, partnership, joint venture, trust, employee benefit plan or
any other enterprise from and against any claim or liability to which such
person may become subject or which such person may incur by reason of his
or her status as a present or former director or officer of the
Corporation. The Corporation shall have the power, with the approval of the
Board of Directors, to provide such indemnification and advancement of
expenses to a person who served a predecessor of the Corporation in any of
the capacities described in (a) or (b) above and to any employee or agent
of the Corporation or a predecessor of the Corporation."
Article NINTH of the Registrant's Charter provides as follows with respect
to limitation of liability of its directors and officers:
"To the maximum extent that Maryland law in effect from time to time
permits limitation of the liability of directors and officers of a Maryland
corporation, no director or officer of the Corporation shall be liable to
the Corporation or its stockholders for money damages. Neither the
amendment nor repeal of this Article NINTH, nor the adoption or amendment
of any other provision of the charter or Bylaws of the Corporation
inconsistent with this Article NINTH, shall apply to or affect in any
respect the applicability of the preceding sentence with respect to any act
or failure to act which occurred prior to such amendment, repeal or
adoption."
Article XIII of the Registrant's Bylaws provides as follows with respect to
indemnification of its directors and officers and advances for expenses:
"To the maximum extent permitted by Maryland law in effect from time to
time, the Corporation shall indemnify and, without requiring a preliminary
determination of the ultimate entitlement to indemnification, shall pay or
reimburse reasonable expenses in advance of final disposition of a
proceeding to (a) any individual who is a present or former director or
officer of the Corporation and who is made a party to the proceeding by
reason of his service in that capacity or (b) any individual who, while a
director of the Corporation and at the request of the Corporation, serves
or has served another corporation, partnership, joint venture, trust,
employee benefit plan or any other enterprise as a director, officer,
partner or trustee of such corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise and who is made a party to the
proceeding by reason of his or her service in that capacity. The
Corporation may, with the approval of its Board of Directors, provide such
indemnification and advance for expenses to a person who served a
predecessor of the Corporation in any of the capacities described in (a) or
(b) above and to any employee or agent of the Corporation or a predecessor
of the Corporation."
"Neither the amendment nor repeal of this Article, nor the adoption or
amendment of any other provision of the Bylaws or charter of the
Corporation inconsistent with this Article, shall apply to or affect in any
respect the applicability of the preceding paragraph with respect to any
act or failure to act which occurred prior to such amendment, repeal or
adoption."
Maryland law permits a Maryland corporation to include in its charter a
provision limiting the liability of its directors and officers to the
corporation and its stockholders for money damages except for liability
resulting from (a) actual receipt of an improper benefit or profit in money,
property or services or (b) active and deliberate
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<PAGE>
dishonesty established by a final judgment as being material to the cause of
action. The Charter contains such a provision which limits that liability to
the maximum extent permitted by Maryland law.
Maryland law requires a corporation (unless its charter requires otherwise,
which the Charter does not) to indemnify a director or officer who has been
successful, on the merits or otherwise, in the defense of any proceeding to
which he or she is made a party by reason of his or her service in that
capacity. Maryland law permits a corporation to indemnify its present and
former directors and officers, among others, against judgments, penalties,
fines, settlements and reasonable expenses actually incurred by them in
connection with any proceeding to which they may be made party by reason of
their service in those or other capacities unless it is established that (a)
the act or omission of the director or officer was material to the matter
giving rise to the proceeding and (i) was committed in bad faith or (ii) was
the result of active and deliberate dishonesty, (b) the director or officer
actually received an improper personal benefit in money, property or services
or (c) in the case of any criminal proceeding, the director or officer had
reasonable cause to believe that the act or omission was unlawful. However, a
Maryland corporation may not indemnify for an adverse judgment in a suit by or
in the right of the corporation or for a judgment of liability on the basis
that personal benefit was improperly received, unless in either case a court
orders indemnification and then only for expenses. In addition, Maryland law
permits a corporation to advance reasonable expenses to a director or officer
upon the corporation's receipt of (a) a written affirmation by the director of
officer of his or her good faith belief that he or she has met the standard of
conduct necessary for indemnification by the corporation and (b) a written
order taking by him or her or on his or her behalf to repay the amount paid or
reimbursed by the corporation if it shall ultimately be determined that the
standard of conduct was not met.
The Registrant has entered into indemnity agreements with each of its
officers and directors which provide for reimbursement of all expenses and
liabilities of that officer or director, arising out of any lawsuit or claim
against that officer or director due to the fact that he or she was or is
serving as an officer or director, except for liabilities and expenses (a) the
payment of which is judicially determined to be unlawful, (b) relating to
claims under Section 16(b) of the Securities Exchange Act of 1934 or (c)
relating to judicially determined criminal violations.
The Registration Rights Agreement filed as an exhibit to this Registration
Statement provides for the reciprocal indemnifications by the holders of the
securities registered on this Registration Statement of the Registrant, and
its directors, officers and controlling persons, and by the Registrant of
those holders, and their respective directors, officers and controlling
persons, against certain liabilities under the Securities Act.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS
The exhibits to this Registration Statement are listed in the Exhibit Index,
which appears immediately after the signature page and is incorporated herein
by this reference.
(b) FINANCIAL STATEMENT SCHEDULES
Not applicable.
(c) REPORTS, OPINIONS AND APPRAISALS
Not applicable.
ITEM 22. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933.
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<PAGE>
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high and of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective Registration Statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement.
(2) That for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned Registrant hereby undertakes that, 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 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.
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 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 of whether such indemnification
by it is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Prospectus pursuant to
Item 4, 10(b), 11 or 13 of this form within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed after the effective date of this Registration Statement through the date
of responding to the request.
The undersigned Registrant hereby undertakes to supply by means of a post-
effective amendment all information concerning a transaction, and the company
being acquired involved therein, that was not the subject of and included in
this Registration Statement when it became effective.
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SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS AMENDMENT TO THE REGISTRATION STATEMENT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF SANTA
FE, STATE OF NEW MEXICO, ON THE 3RD DAY OF SEPTEMBER, 1998.
Security Capital Group Incorporated
/s/ Jeffrey A. Klopf
By: ____________________________
----------------------------------
Name: Jeffrey A. Klopf
Title: Senior Vice President and
Secretary
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
NAME AND SIGNATURE TITLE DATE
------------------ ----- ----
<S> <C> <C>
/s/ William D. Sanders* Chairman, Director and September 3, 1998
____________________________________ Chief Executive Officer
William D. Sanders (Principal Executive
Officer)
/s/ Paul E. Szurek* Chief Financial Officer September 3, 1998
____________________________________ (Principal Financial
Paul E. Szurek Officer)
/s/ James C. Swaim* Vice President September 3, 1998
____________________________________ (Principal Accounting
James C. Swaim Officer)
/s/ C. Ronald Blankenship* Director September 3, 1998
____________________________________
C. Ronald Blankenship
/s/ Samuel W. Bodman* Director September 3, 1998
____________________________________
Samuel W. Bodman
/s/ Hermann Buerger* Director September 3, 1998
____________________________________
Hermann Buerger
/s/ John P. Frazee, Jr.* Director September 3, 1998
____________________________________
John P. Frazee, Jr.
/s/ Cyrus F. Freidheim, Jr.* Director September 3, 1998
____________________________________
Cyrus F. Freidheim, Jr.
/s/ H. Laurance Fuller* Director September 3, 1998
____________________________________
H. Laurance Fuller
/s/ Ray L. Hunt* Director September 3, 1998
____________________________________
Ray L. Hunt
/s/ John T. Kelley, III* Director September 3, 1998
____________________________________
John T. Kelley, III
/s/ Peter S. Willmott* Director September 3, 1998
____________________________________
Peter S. Willmott
</TABLE>
/s/ Jeffrey A. Klopf
*By: _____________________
Jeffrey A. Klopf
Attorney-in-fact
II-4
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INDEX TO EXHIBITS
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<CAPTION>
EXHIBIT NO. DOCUMENT DESCRIPTION
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<C> <S> <C>
*4.1 Indenture, dated June 18, 1998, from Security Capital to
State Street Bank and Trust Company, as Trustee
*4.2 Form of 6.95% Exchange Notes due 2005
*4.3 Form of 7.15% Exchange Notes due 2007
*4.4 Form of 7.70% Exchange Notes due 2028
*5 Opinion of Mayer, Brown & Platt as to the legality of
the Notes being registered
*8 Opinion of Mayer, Brown & Platt as to federal income tax
consequences
*10.1 Credit Agreement, dated as of June 5, 1998, among Secu-
rity Capital and Chase Bank of Texas, National Associa-
tion and Wells Fargo Bank, National Association, as
agents for the financial institutions identified therein
*10.2 Registration Rights Agreement, dated June 23, 1998,
among Security Capital and J.P. Morgan Securities Inc.,
Goldman, Sachs & Co., Merrill Lynch, Pierce, Fenner and
Smith Incorporated and Chase Securities Inc.
12 Computation of Ratio of Earnings to Fixed Charges (in-
corporated by reference to exhibit 12.1 to the Regis-
trant's Form 10-Q for the period ended June 30, 1998)
15 Letter of Arthur Andersen LLP
*21 Subsidiaries of Security Capital
*23.1 Consents of Mayer, Brown & Platt (included in the opin-
ions filed as Exhibits 5 and 8)
*23.2 Consent of Ballard Spahr Andrews & Ingersoll, LLP (in-
cluded in the opinion filed as a part of Exhibit 5)
23.3 Consent of Arthur Andersen LLP
23.4 Consent of KPMG Peat Marwick LLP
23.5 Consent of Price Waterhouse Sarl
23.6 Consent of Ernst & Young LLP
23.7 Consent of Ernst & Young LLP
*24 Power of Attorney pursuant to which amendments to this
Registration Statement may be filed
*25 Statement of Eligibility of Trustee on Form T-1
*99.1 Form of Letter of Transmittal
*99.2 Form of Notice of Guaranteed Delivery
*99.3 Form of Letter to Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees
*99.4 Form of Letter to Clients
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* Previously filed.
II-5
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Exhibit 15
September 2, 1998
Board of Directors and Shareholders of
Security Capital Group Incorporated:
We are aware that Security Capital Group Incorporated has incorporated by
reference in its Amendment No. 1 to the Registration Statement on Form S-4, its
Form 10-Q's for the quarters ended March 31, 1998 and June 30, 1998 which
include our reports dated May 12, 1998 and August 14, 1998 covering the
unaudited interim financial information contained therein. Pursuant to
Regulation C of the Securities Act of 1933 (the "Act"), those reports are not
considered a part of such registration statement or a report prepared or
certified by our firm within the meaning of Sections 7 and 11 of the Act.
Very Truly Yours,
ARTHUR ANDERSEN LLP
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Exhibit 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this Amendment No. 1 to the Registration Statement on Form S-4
of our Security Capital Group Incorporated report dated March 18, 1998, our
ProLogis Trust (formerly known as Security Capital Industrial Trust) reports
dated March 13, 1998 and to all references to our Firm included in or made a
part of this Registration Statement.
ARTHUR ANDERSEN LLP
Chicago, Illinois
September 2, 1998
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Exhibit 23.4
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in this Amendment No. 1 to the
Registration Statement on Form S-4 of Security Capital Group Incorporated of our
report dated January 31, 1998, except as to Note 13 which is as of March 6,
1998, relating to the balance sheets of Security Capital Pacific Trust as of
December 31, 1997 and 1996, the related statements of earnings, shareholders'
equity, and cash flows for each of the years in the three-year period ended
December 31, 1997, and the related schedule as of December 31, 1997, which
report appears in the December 31, 1997 annual report on Form 10-K of Security
Capital Group Incorporated, and to the reference to our firm under the heading
"Experts" in the Registration Statement.
KPMG Peat Marwick LLP
Chicago, Illinois
September 4, 1998
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Exhibit 23.5
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Amendment No. 1 to the Registration Statement on Form
S-4 of our reports dated February 28, 1997 and February 25, 1998 related to the
consolidated financial statements of Security Capital U.S. Realty, appearing in
Security Capital's Form 10-K for the year ended December 31, 1997. We also
consent to the reference to us under the heading "Experts" in such Prospectus.
PRICE WATERHOUSE SARL
Luxembourg
September 2, 1998
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Exhibit 23.6
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated February 3, 1997 with respect to the financial
statements at December 31, 1996 and 1995 and for each of the three years in the
period ended December 31, 1996 of Security Capital Atlantic Incorporated, which
is incorporated by reference in Amendment No. 1 to the Registration Statement on
Form S-4 (No. 333-61401) and related Prospectus of Security Capital Group
Incorporated for the registration of its Exchange Notes due 2005, 2007 and 2028.
ERNST & YOUNG LLP
Dallas, Texas
September 4, 1998
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Exhibit 23.7
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated February 24, 1997 with respect to the financial
statements at December 31, 1996 and for the year ended December 31, 1996 of
Homestead Village Incorporated, which is incorporated by reference in Amendment
No. 1 to the Registration Statement on Form S-4 (No. 333-61401) and related
Prospectus of Security Capital Group Incorporated for the registration of its
Exchange Notes due 2005, 2007 and 2028.
ERNST & YOUNG LLP
Dallas, Texas
September 4, 1998
