<PAGE> 1
As filed with the Securities and Exchange Commission on November 15, 1996
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
STORAGE TRUST REALTY
(Exact name of Registrant as specified in its charter)
MARYLAND 43-1689825
(State of organization) (I.R.S. Employer Identification Number)
2407 RANGELINE STREET MICHAEL G. BURNAM COPY TO:
COLUMBIA, MISSOURI 65202 2407 RANGELINE STREET Edward J. Schneidman
(573) 499-4799 COLUMBIA, MISSOURI 65202 Mayer, Brown & Platt
(Address, including zip code, (573) 499-4799 190 South LaSalle Street
and telephone number, (Name, address, including Chicago, Illinois
including area code, of zip code, and telephone 60603
Registrant's principal number, including area
executive offices) code, of agent for service)
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
FROM TIME TO TIME AFTER THE REGISTRATION STATEMENT BECOMES EFFECTIVE.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box: / /
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box: /X/
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: / / --------------------
If this form is a post-effective amendment filed pursuant to Rule
462(e) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering: / / ------------------------------
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box: / /
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<TABLE>
CALCULATION OF REGISTRATION FEE
===================================================================================================================================
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE AGGREGATE PRICE AGGREGATE OFFERING REGISTRATION
SECURITY TO BE REGISTERED REGISTERED PER SECURITY <F1> PRICE <F1> FEE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Shares of Beneficial Interest,
par value $0.01 per share <F2> <F2><F3> <F2> --
- ------------------------------------------------------------------------------------------------------------------------------------
Common Share Warrants <F2><F3> <F2><F3> <F2><F3> --
- ------------------------------------------------------------------------------------------------------------------------------------
Shareholder Purchase Rights <F4> N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Total $150,000,000 <F2><F3> $150,000,000 $45,713
====================================================================================================================================
<FN>
<F1> Estimated solely for purposes of determining the registration fee.
<F2> In no event will the aggregate initial price of Common Shares of
Beneficial Interest and Common Share Warrants registered under this
registration statement exceed $150,000,000 or the equivalent thereof in
one or more foreign currencies or composite currencies including
European Currency Units.
<F3> Subject to Footnote <F2>, there is being registered hereunder an
indeterminate number of Common Share Warrants representing rights to
purchase Common Shares of Beneficial Interest registered pursuant to
this Registration Statement.
<F4> There are hereby registered such indeterminate number of Shareholder
Purchase Rights as may be issued as a dividend, for which no separate
consideration will be received, to holders of Common Shares of
Beneficial Interest entitling such holders to subscribe for and
purchase Common Shares of Beneficial Interest registered hereunder.
<F5> Of the $150,000,000 of securities registered hereby, $6,165,000 Common
Shares of Beneficial Interest were registered pursuant to Registration
Statement No. 333-5363, are unissued as of the date hereof and will
remain designated for Common Shares of Beneficial Interest. A
registration fee of $2,126 was previously paid with respect to such
securities and is included in the amount stated above.
</TABLE>
Pursuant to Rule 429 under the Securities Act, the Prospectus filed as
part of this Registration Statement relates to the securities registered
hereby, including the remaining unsold $6,165,000 of Common Shares of
Beneficial Interest previously registered by the Registrant under its
Registration Statement on Form S-3 (File No. 333-5363). Such Registration
Statement is amended to reflect the information contained herein.
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 SECURITIES AND EXCHANGE
COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
===============================================================================
<PAGE> 2
PROSPECTUS
----------
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED NOVEMBER 15, 1996
*******************************************************************************
* 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. *
*******************************************************************************
STORAGE TRUST REALTY
$150,000,000
COMMON SHARES AND COMMON SHARE WARRANTS
Storage Trust Realty (the "Company") may from time to time offer and
sell in one or more series (i) common shares of beneficial interest, par
value $.01 per share (the "Common Shares"), and (ii) warrants to purchase
Common Shares (the "Common Share Warrants"), with an aggregate public
offering price of up to $150,000,000, on terms to be determined by market
conditions at the time of offering. The Common Shares and Common Share
Warrants (collectively, the "Offered Securities") may be offered separately
or together, in separate series, in amounts and at prices and terms to be set
forth in an accompanying supplement to this Prospectus (each, a "Prospectus
Supplement").
The specific terms of the Offered Securities in respect of which this
Prospectus is being delivered will be set forth in the applicable Prospectus
Supplement and will include, where applicable, (i) in the case of Common
Shares, any initial public offering price, and (ii) in the case of Common
Share Warrants, the duration, offering price, exercise price and
detachability, if applicable, along with any other relevant specific terms.
In addition, such specific terms may include limitations on direct or
indirect beneficial ownership and restrictions on transfer of the Offered
Securities, in each case as may be appropriate in the judgment of the
Company's Board of Trustees to preserve the status of the Company as a real
estate investment trust ("REIT") for Federal income tax purposes.
The applicable Prospectus Supplement will also contain information,
where applicable, about certain United States Federal income tax
considerations relating to, and any listing on a securities exchange of, the
Offered Securities covered by such Prospectus Supplement.
The Offered Securities may be offered directly by the Company, or
through agents designated from time to time by the Company, or to or through
underwriters or dealers. As set forth under "Description of Shareholder
Purchase Rights" and "Plan of Distribution," the Company may sell the Offered
Securities to investors directly through subscription rights ("Shareholder
Purchase Rights"). If any agents or underwriters are involved in the sale of
any of the Offered Securities, their names, and any applicable purchase
price, fee, commission or discount arrangement between or among them, will be
set forth, or will be calculable from the information set forth, in the
applicable Prospectus Supplement. See "Description of Shareholder Purchase
Rights" and "Plan of Distribution." No Offered Securities may be sold
without delivery of the applicable Prospectus Supplement describing the
method and terms of the offering of such series of Offered Securities.
-----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
-----------------
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR
ENDORSED THE MERITS OF THIS OFFERING. ANY REPRESENTATION
TO THE CONTRARY IS UNLAWFUL.
-----------------
The date of this Prospectus is-------, 1996.
<PAGE> 3
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports and other information with the Securities
and Exchange Commission (the "Commission"). Reports, proxy material and
other information concerning the Company can be inspected and copied at the
offices of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549
or at its regional offices, Citicorp Center, 500 West Madison Street,
Chicago, Illinois 60661 and Seven World Trade Center, New York, New York
10048. Copies of such material can be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549
at prescribed rates. In addition, such material can be obtained from the
Commission's Web site at http://www.sec.gov. The Company's outstanding
Common Shares are listed on the New York Stock Exchange (the "NYSE") under
the symbol "SEA", and all such reports, proxy material and other information
filed by the Company with the NYSE may be inspected at the offices of the
NYSE at 20 Broad Street, New York, New York 10005.
The Company has filed with the Commission a registration statement on
Form S-3 (together with all amendments and exhibits, the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities
Act"), with respect to the securities offered hereby. This prospectus
("Prospectus"), which constitutes a part of the Registration Statement, does
not contain all the information set forth in the Registration Statement,
certain parts of which are omitted as permitted by the rules and regulations
of the Commission. Statements made in this Prospectus as to the content of
any contract, agreement or other document referred to are not necessarily
complete. With respect to each such contract, agreement or other document
filed or incorporated by reference as an exhibit to the Registration
Statement, reference is made to the exhibit for a more complete description
of the matter involved, and each such statement shall be deemed qualified in
its entirety by such reference.
INCORPORATION BY REFERENCE
The following documents filed by the Company with the Commission (File
No. 1-13462) pursuant to the Exchange Act are incorporated by reference in
this Prospectus:
(1) The Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995;
(2) The Company's Quarterly Reports on Form 10-Q for the quarters
ended March 31, 1996, June 30, 1996 and September 30, 1996; and
(3) The Company's Current Reports on Form 8-K dated March 5, 1996
(filed March 13, 1996), May 24, 1996 (filed June 7, 1996), June
25, 1996 (filed June 25, 1996) and September 16, 1996 (filed
October 29, 1996);
(4) Description of the Common Shares included in the Registration
Statement on Form 8-A dated October 14, 1994 (filed October 14,
1994).
All documents filed by the Company 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 termination of the offering made hereby shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent
that a statement contained herein, or in any subsequently filed document
which is or is deemed to be incorporated by reference herein, modifies or
supersedes any such statement. Any such statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a
part of this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon written or oral
request of such person, a copy of any of the foregoing documents incorporated
herein by reference (other than the exhibits to such documents unless such
exhibits are specifically incorporated by reference into such documents).
Requests should be directed to Storage Trust Realty, 2407
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Rangeline Street, Columbia, Missouri 65202, Attention: Secretary, telephone
(573) 499-4799.
THE COMPANY
The Company and its affiliates constitute a self-administered and
self-managed real estate investment trust (a "REIT") which was organized in
November 1994 to continue and expand the self-storage facility business
conducted by Burnam Holding Companies Co. and certain of its affiliates
(collectively, "BHC" or the "Predecessor Company") since 1974. The Company
and its affiliates own, manage, lease, acquire and develop self-storage
facilities. The Company owns and operates self-storage facilities
("Facilities") in the Southern, Mid-Atlantic, Midwestern and Western regions
of the United States. The Company offers a broad range of features and
amenities to its customers, including uniformed customer service-oriented
facility managers, door alarms, lighting systems, video cameras, twenty-four
hour computer-controlled access, climate-controlled storage spaces,
attractive buildings and wide drive aisles.
The business of the Company is operated through Storage Trust
Properties, L.P. (the "Operating Partnership") and Storage Realty Management
Co. (the "Subsidiary Company"). Substantially all of the Company's assets
and interest in self-storage facilities are held by, and all of its
operations are conducted through, the Operating Partnership. The Company is
the sole general partner of, and thereby controls the operations of, the
Operating Partnership, holding an approximately 93.8% (as of October 31,
1996) ownership interest therein. The remaining ownership interests in the
Operating Partnership (the "Units") are primarily held by certain owners of
the Predecessor Company, including BHC (collectively, "Original Investors"),
and certain former owners of assets acquired by the Operating Partnership
subsequent to the Company's initial public offering of Common Shares. The
Subsidiary Company manages Facilities owned by unrelated third parties and
conducts various other businesses, such as the sale of locks and the
processing of customer property insurance, at various Facilities. Through
its ownership of the preferred stock of the Subsidiary Company, the Operating
Partnership enjoys substantially all of the economic benefit of the
businesses carried on by the Subsidiary Company.
The Company was formed as a Maryland real estate investment trust on
July 12, 1994. The Company's executive offices are located at 2407 Rangeline
Street, Columbia, Missouri 65202 and its telephone number is (573) 499-4799.
USE OF PROCEEDS
Unless otherwise described in the Prospectus Supplement which
accompanies this Prospectus, the Company intends to use the net proceeds from
the sale of the Offered Securities for the acquisition and development of
self-storage facilities as suitable opportunities arise, improvement of the
Facilities owned by the Company, repayment of certain then-outstanding
secured or unsecured indebtedness and for general corporate purposes.
DESCRIPTION OF COMMON SHARES
GENERAL
The Second Amended and Restated Declaration of Trust of the Company
(the "Declaration of Trust") provides that the Company may issue up to
150,000,000 shares of beneficial interest, $.01 par value per share,
consisting of common shares and such other types or classes of securities of
the Company as the Trustees may create and authorize from time to time and
designate as representing a beneficial interest in the Company. No holder of
any class of shares of beneficial interest of the Company has any preemptive
right to subscribe to any securities of the Company except as may be granted
by the Board of Trustees in authorizing the issuance or reclassification of a
class of shares of beneficial interest. For a description of certain
provisions that could have the effect of delaying, deferring or preventing a
change in control, see "Certain Provisions of Maryland Law and of the
Company's Declaration of Trust and Bylaws."
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The following description sets forth certain general terms and
provisions of the Common Shares to which any Prospectus Supplement may
relate, including a Prospectus Supplement which provides for Common Shares
issuable pursuant to subscription offerings or rights offerings. The
statements below describing the Common Shares are in all respects subject to
and qualified in their entirety by reference to the applicable provisions of
the Declaration of Trust and the Amended and Restated Bylaws of the Company
(the "Bylaws"). For further information regarding the Common Shares, see
"Certain Provisions of Maryland Law and of the Company's Declaration of Trust
and Bylaws."
All the Common Shares covered by the Registration Statement of which
this Prospectus is a part will be, when issued, duly authorized, fully paid
and, except as described under "Shareholder Liability" below, non-assessable.
Subject to the provisions of the Declaration of Trust regarding Excess Shares
(as defined therein), each outstanding Common Share entitles the holder
thereof to one vote on all matters voted on by shareholders, including the
election of Trustees. Holders of Common Shares do not have the right to
cumulate their votes in the election of Trustees, which means that the
holders of a majority of the outstanding Common Shares can elect all of the
Trustees then standing for election. Distributions may be paid to the
holders of Common Shares if and when declared by the Board of Trustees of the
Company out of funds legally available therefor, subject to the provisions of
the Declaration of Trust regarding Excess Shares. The Company currently pays
regular quarterly dividends. Holders of Common Shares have no conversion,
redemption, preemptive or exchange rights to subscribe to any securities of
the Company. If the Company is liquidated, each outstanding Common Share
will be entitled to participate pro rata in the assets remaining after
payment of, or adequate provision for, all known debts and liabilities of the
Company and the rights of holders of any preferred shares of beneficial
interest of the Company. The rights of holders of Common Shares are subject
to the rights and preferences established by the Board of Trustees for any
preferred shares of beneficial interest which may subsequently be issued by
the Company.
RESTRICTIONS ON TRANSFER
Ownership Limits. The Declaration of Trust contains certain
restrictions on the number of Common Shares that individual shareholders may
own. For the Company to qualify as a REIT under the Code, no more than 50%
in value of its shares of beneficial interest (after taking into account
options to acquire shares of beneficial interest and shares of beneficial
interest issuable on conversion of convertible securities) may be owned,
directly or indirectly, by five or fewer individuals (as defined in the Code
to include certain entities and constructive ownership among specified family
members) during the last half of a taxable year (other than the first taxable
year) or during a proportionate part of a short taxable year. The Common
Shares must also be beneficially owned (other than during the first taxable
year) by 100 or more persons during at least 335 days of a taxable year or
during a proportionate part of a shorter taxable year. Because the Company
expects to qualify as a REIT, the Declaration of Trust contains restrictions
on the acquisition of Common Shares intended to ensure compliance with these
requirements.
Subject to certain exceptions specified in the Declaration of Trust, no
holder may own, or be deemed to own by virtue of the attribution provisions
of the Code, more than 6% (the "Ownership Limit") of the number or value of
the issued and outstanding shares of beneficial interest of the Company. The
Company's Board of Trustees, upon receipt of a ruling from the Internal
Revenue Service (the "Service") or an opinion of counsel or other evidence
satisfactory to the Board of Trustees and upon such other conditions as the
Board of Trustees may direct, may also exempt a proposed transferee from the
Ownership Limit. As a condition of such exemption, the proposed transferee
must give written notice to the Company of the proposed transfer no later
than the fifteenth day prior to any transfer which, if consummated, would
result in the intended transferee owning shares in excess of the Ownership
Limit. The Board of Trustees of the Company may require such opinions of
counsel, affidavits, undertakings or agreements as it may deem necessary or
advisable in order to determine or ensure the Company's status as a REIT.
Any transfer of shares that would (i) create a direct or indirect ownership
of shares in excess of the Ownership Limit, (ii) result in the shares being
beneficially owned by fewer than 100 persons (determined without reference to
any rules of attribution) as provided in Section 856(a) of the Code, or (iii)
result in the Company being "closely held" within the meaning of Section
856(h) of the Code, shall be null and void ab initio, and the intended
transferee will acquire no rights to the shares. The foregoing restrictions
on transferability and ownership will not apply if the Board of Trustees
determines, which determination must be approved by the
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shareholders, that it is no longer in the best interests of the Company to
attempt to qualify, or to continue to qualify, as a REIT.
The Company's Board of Trustees has, by resolution, excluded from the
foregoing ownership restriction BHC and Gordon Burnam, Bonnie Burnam,
Kimberly Flower, P. Crismon Burnam, Michael G. Burnam, Timothy B. Burnam, any
member of their respective immediate families and any of their respective
affiliates, heirs, devisees, legal representatives, successors or
beneficiaries (the "Burnam Family"), who collectively may own up to 25% of
the outstanding shares of beneficial interest of the Company as a group.
Additionally, the Declaration of Trust excludes from the foregoing ownership
restriction certain Original Investors (and their transferees) who would
exceed the Ownership Limit as a result of the exchange of Units for Common
Shares. In no event will such persons be entitled to acquire additional
shares of beneficial interest of the Company such that the five largest
beneficial owners of shares of beneficial interest of the Company hold more
than 50% of the total outstanding shares.
Any shares the purported transfer of which would result in a person
owning shares of beneficial interest in excess of the Ownership Limit or
cause the Company to become "closely held" under Section 856(h) of the Code
that is not otherwise permitted as provided above will constitute excess
shares ("Excess Shares"), which will be transferred pursuant to the
Declaration of Trust to a party not affiliated with the Company designated by
the Company as the trustee of a trust for the exclusive benefit of an
organization or organizations described in Sections 170(b)(1)(A) and 170(c)
of the Code and identified by the Board of Trustees as the beneficiary or
beneficiaries of the trust (the "Charitable Beneficiary"), until such time as
the Excess Shares are transferred to a person whose ownership will not
violate the restrictions on ownership. While these Excess Shares are held in
trust, they will not be entitled to share in any distributions which will be
paid to the trust for the benefit of the Charitable Beneficiary and may only
be voted by the trustee for the benefit of the Charitable Beneficiary.
Subject to the Ownership Limit, the Excess Shares shall be transferred by the
trustee at the direction of the Company to any person (if the Excess Shares
would not be Excess Shares in the hands of such person). The purported
transferee will receive the lesser of (i) the price paid by the purported
transferee for the Excess Shares (or, if no consideration was paid, fair
market value on the day of the event causing the Excess Shares to be held in
trust) and (ii) the price received from the sale or other disposition of the
Excess Shares held in trust. Any proceeds in excess of the amount payable to
the purported transferee will be paid to the Charitable Beneficiary. In
addition, such Excess Shares held in trust are subject to purchase by the
Company for a 90 day period at a purchase price equal to the lesser of (i)
the price paid for the Excess Shares by the purported transferee (or, if no
consideration was paid, fair market value at the time of the event causing
the shares to be held in trust) and (ii) the fair market value of the Excess
Shares on the date the Company elects to purchase. Fair market value, for
these purposes, means the last reported sales price reported on the NYSE on
the trading day immediately preceding the relevant date, or if not then
traded on the NYSE, the last reported sales price on the trading day
immediately preceding the relevant date as reported on any exchange or
quotation system over or through which the relevant class of shares of
beneficial interest may be traded, or if not then traded over or through any
exchange or quotation system, then the market price on the relevant date as
determined in good faith by the Board of Trustees of the Company.
From and after the purported transfer to the purported transferee of
the Excess Shares, the purported transferee shall cease to be entitled to
distributions, voting rights and other benefits with respect to the Excess
Shares except the right to payment on the transfer of the Excess Shares as
described above. Any distribution paid to a purported transferee on Excess
Shares prior to the discovery by the Company that such Excess Shares have
been transferred in violation of the provisions of the Declaration of Trust
shall be repaid, upon demand, to the Company, which shall pay any such
amounts to the trust for the benefit of the Charitable Beneficiary. If the
foregoing transfer restrictions are determined to be void, invalid or
unenforceable by any court of competent jurisdiction, then the purported
transferee of any Excess Shares may be deemed, at the option of the Company,
to have acted as an agent on behalf of the Company in acquiring such Excess
Shares and to hold such Excess Shares on behalf of the Company.
All certificates representing shares of beneficial interest will bear a
legend referring to the restrictions described above.
All persons who own, directly or by virtue of the attribution
provisions of the Code, more than 5% (or such
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<PAGE> 7
other percentage between 1/2 of 1% and 5%, as provided in the rules and
regulations promulgated under the Code) of the number or value of the
outstanding shares of beneficial interest of the Company must give a written
notice containing certain information to the Company by January 31 of each year.
In addition, each shareholder shall upon demand be required to disclose to the
Company in writing such information with respect to the direct, indirect and
constructive ownership of shares of beneficial interest as the Board of Trustees
deems reasonably necessary to comply with the provisions of the Code applicable
to a REIT, to determine the Company's status as a REIT, to comply with the
requirements of any taxing authority or governmental agency or to determine any
such compliance.
These ownership limitations could have the effect of discouraging a
takeover or other transaction in which holders of some, or a majority, of the
Common Shares might receive a premium for their shares over the then
prevailing market price or which such holders might believe to be otherwise
in their best interest.
SHAREHOLDER LIABILITY
Both Maryland statutory law governing real estate investment trusts
organized under the laws of that state and the Declaration of Trust provide
that no shareholder of the Company will be personally liable for any
obligations of the Company (other than the obligation to pay to the Company
the consideration for which shares were or are to be issued) solely by virtue
of his status as a shareholder. The Declaration of Trust further provides
that the Company shall indemnify each shareholder against claims or
liabilities to which the shareholder may become subject by reason of his
being or having been a shareholder, and that the Company shall reimburse each
shareholder for all legal and other expenses reasonably incurred by him in
connection with any such claim or liability, unless such claim or liability
arises out of the shareholder's bad faith, willful misconduct or gross
negligence, and provided that the shareholder gives prompt notice as to any
such claims or liabilities and takes such action as will permit the Company
to conduct the defense thereof. In addition, it is the Company's policy to
include a clause in its contracts which provides that shareholders assume no
personal liability for obligations entered into on behalf of the Company.
However, with respect to tort claims, contractual claims where shareholder
liability is not so negated, claims for taxes and certain statutory
liability, a shareholder may, in some jurisdictions, be personally liable to
the extent that such claims are not satisfied by the Company. Inasmuch as
the Company carries public liability insurance which it considers adequate,
any risk of personal liability to shareholders is limited to situations in
which the Company's assets plus its insurance coverage would be insufficient
to satisfy the claims against the Company and its shareholders.
TRANSFER AGENT AND REGISTRAR
Boatmen's Trust Company (510 Locust Street, St. Louis, Missouri 63178)
has been appointed as transfer agent and registrar for the Common Shares.
DESCRIPTION OF COMMON SHARE WARRANTS
The Company may issue Common Share Warrants for the purchase of Common
Shares. Common Share Warrants may be issued independently or together with
any other Offered Securities offered by any Prospectus Supplement and may be
attached to or separate from such Offered Securities. Each series of Common
Share Warrants will be issued under a separate warrant agreement (each, a
"Warrant Agreement") to be entered into between the Company and a warrant
agent specified in the applicable Prospectus Supplement (the "Warrant
Agent"). The Warrant Agent will act solely as an agent of the Company in
connection with the Common Share Warrants of such series and will not assume
any obligation or relationship of agency or trust for or with any holders or
beneficial owners of Common Share Warrants. The following summaries of
certain provisions of the Warrant Agreement and the Common Share Warrants do
not purport to be complete and are subject to, and are qualified in their
entirety by reference to, all the provisions of the Warrant Agreement and the
Common Share Warrant certificates relating to each series of Common Share
Warrants, which will be filed, at or prior to the time of the issuance of
such series of Common Share Warrants, with the Commission as exhibits to a
document incorporated by reference in this Prospectus.
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<PAGE> 8
If Common Share Warrants are offered, the applicable Prospectus
Supplement will describe the terms of such Common Share Warrants, including
the following where applicable: (i) the offering price; (ii) the aggregate
number of Common Shares purchasable upon exercise of such Common Share
Warrants and the exercise price; (iii) whether such Common Share Warrants are
being offered with Common Shares and the number of such Common Share Warrants
being offered with such Common Shares; (iv) the date, if any, on and after
which such Common Share Warrants and the related Common Shares will be
transferable separately; (v) the date on which the right to exercise such
Common Share Warrants shall commence and the date on which such right shall
expire (the "Expiration Date"); (vi) any special United States Federal income
tax consequences; and (vii) any other material terms of such Common Share
Warrants.
Common Share Warrant certificates may be exchanged for new Common Share
Warrant certificates of different denominations, may (if in registered form)
be presented for registration of transfer, and may be exercised at the
corporate trust office of the Warrant Agent or any other office indicated in
the applicable Prospectus Supplement. Prior to the exercise of any Common
Share Warrants to purchase Common Shares, holders of such Common Share
Warrants will not have any rights of holders of such Common Shares, including
the right to receive payments of dividends, if any, on such Common Shares, or
to exercise any applicable right to vote.
To protect the Company's status as a REIT, restrictions on ownership of
Common Share Warrants similar to the restrictions on ownership of Common
Shares will be imposed and enforced. See "Description of Common
Shares--Restrictions on Transfer."
EXERCISE OF COMMON SHARE WARRANTS
Each Common Share Warrant will entitle the holder thereof to purchase
such number of Common Shares at such exercise price as shall in each case be
set forth in, or calculable from, the Prospectus Supplement relating to the
offered Common Share Warrants. After the close of business on the Expiration
Date (or such later date to which such Expiration Date may be extended by the
Company), unexercised Common Share Warrants will become void.
Common Share Warrants may be exercised by delivering to the Warrant
Agent payment as provided in the applicable Prospectus Supplement of the
amount required to purchase the Common Shares purchasable upon such exercise
together with certain information set forth on the reverse side of the Common
Share Warrant certificate. Common Share Warrants will be deemed to have been
exercised upon receipt of payment of the exercise price, subject to the
receipt within five (5) business days of the Common Share Warrant certificate
evidencing such Common Share Warrants. Upon receipt of such payment and the
Common Share Warrant certificate properly completed and duly executed at the
corporate trust office of the Warrant Agent or any other office indicated in
the applicable Prospectus Supplement, the Company will, as soon as
practicable, issue and deliver the Common Shares purchasable upon such
exercise. If fewer than all of the Common Share Warrants represented by such
Common Share Warrant certificate are exercised, a new Common Share Warrant
certificate will be issued for the remaining amount of Common Share Warrants.
AMENDMENTS AND SUPPLEMENTS TO WARRANT AGREEMENT
The Warrant Agreements may be amended or supplemented without the
consent of the holders of the Common Share Warrants issued thereunder to
effect changes that are not inconsistent with the provisions of the Common
Share Warrants and that do not adversely affect the interests of the holders
of the Common Share Warrants.
ADJUSTMENTS
Unless otherwise indicated in the applicable Prospectus Supplement, the
exercise price of, and the number of Common Shares covered by, a Common Share
Warrant are subject to adjustment in certain events, including (i) payment of
a dividend on the Common Shares payable in shares of beneficial interest and
share splits, combinations or reclassifications of the Common Shares; (ii)
issuance to all holders of Common Shares of rights or warrants to
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subscribe for or purchase Common Shares at less than their current market price
(as defined in the Warrant Agreement for such series of Common Share Warrants);
and (iii) certain distributions of evidences of indebtedness or assets
(including securities but excluding cash distributions paid out of
consolidated earnings or retained earnings or dividends payable in Common
Shares) or of subscription rights and warrants (excluding those referred to
above).
No adjustment in the exercise price of, and the number of Common Shares
covered by, a Common Share Warrant will be made for regular quarterly or
other periodic or recurring cash dividends or distributions or for cash
dividends or distributions to the extent paid from consolidated earnings or
retained earnings. No adjustment will be required unless such adjustment
would require a change of at least 1% in the exercise price then in effect.
Except as stated above, the exercise price of, and the number of Common
Shares covered by, a Common Share Warrant will not be adjusted for the
issuance of Common Shares or any securities convertible into or exchangeable
for Common Shares, or carrying the right or option to purchase or otherwise
acquire the foregoing, in exchange for cash, other property or services.
In the event of any (i) consolidation or merger of the Company with or
into any entity (other than a consolidation or a merger that does not result
in any reclassification, conversion, exchange or cancellation of outstanding
Common Shares); (ii) sale, transfer, lease or conveyance of all or
substantially all of the assets of the Company; or (iii) reclassification,
capital reorganization or change of the Common Shares (other than solely a
change in par value or from par value to no par value), then any holder of a
Common Share Warrant will be entitled, on or after the occurrence of any such
event, to receive on exercise of such Common Share Warrant the kind and
amount of shares of beneficial interest or other securities, cash or other
property (or any combination thereof) that the holder would have received had
such holder exercised such holder's Common Share Warrant immediately prior to
the occurrence of such event. If the consideration to be received upon
exercise of the Common Share Warrant following any such event consists of
common shares of the surviving entity, then from and after the occurrence of
such event, the exercise price of such Common Share Warrant will be subject
to the same anti-dilution and other adjustments described in the second
preceding paragraph, applied as if such common shares were Common Shares.
DESCRIPTION OF SHAREHOLDER PURCHASE RIGHTS
As set forth under "Plan of Distribution" below, the Company may sell
the Offered Securities to investors directly through Shareholder Purchase
Rights. If Offered Securities are to be sold through Shareholder Purchase
Rights, such Shareholder Purchase Rights will be distributed as a dividend to
the Company's shareholders for which shareholders will pay no separate
consideration. The Prospectus Supplement with respect to the offer of
Offered Securities pursuant to Shareholder Purchase Rights will set forth the
relevant terms of the Shareholder Purchase Rights, including (i) whether
Common Shares or Common Share Warrants, or both, will be offered pursuant to
the Shareholder Purchase Rights and the number of Common Shares and Common
Share Warrants, as applicable, which will be offered pursuant to the
Shareholder Purchase Rights, (ii) the period during which and the price at
which the Shareholder Purchase Rights will be exercisable, (iii) the number
of Shareholder Purchase Rights then outstanding, (iv) any provisions for
changes to or adjustments in the exercise price of the Shareholder Purchase
Rights and (v) any other material terms of the Shareholder Purchase Rights.
See "Plan of Distribution."
CERTAIN PROVISIONS OF MARYLAND LAW AND OF
THE COMPANY'S DECLARATION OF TRUST AND BYLAWS
The following paragraphs summarize material provisions of Maryland law,
the Declaration of Trust and the Bylaws. The summary does not purport to be
complete and reference is made to Maryland law as well as the Declaration of
Trust and the Bylaws, which are filed as exhibits to the Registration
Statement of which this Prospectus is a part.
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BOARD OF TRUSTEES
The Declaration of Trust and the Bylaws provide that the number of
Trustees of the Company may be established by a majority of a quorum of the
entire Board of Trustees but may not be fewer than three nor more than
fifteen. The Declaration of Trust provides that a majority of the Trustees
must be persons who are not affiliated with any member of the Burnam Family
or officers or employees of the Company ("Independent Trustees"). Any vacancy
on the Board of Trustees will be filled, at any regular meeting or at any
special meeting called for that purpose, by a majority of the remaining
Trustees (even if less than a quorum), except that a vacancy resulting from
an increase in the number of Trustees will be filled by a majority of the
entire Board of Trustees and, in the event that a majority of the Board of
Trustees are not Independent Trustees by reason of the resignation or removal
of one or more Independent Trustees or otherwise, the remaining Independent
Trustees (or, if there are no Independent Trustees, the remaining members of
the Board of Trustees) shall promptly elect that number of Independent
Trustees necessary to cause the Board of Trustees to include a majority of
Independent Trustees.
Pursuant to the terms of the Declaration of Trust, the Trustees are
divided into three classes, holding office initially for one-year, two-year
and three-year terms, respectively. As these initial terms expire, Trustees
in each class are elected for terms of three years and until their successors
are duly elected and qualified. The Company believes that classification of
the Board of Trustees will help to assure the continuity and stability of the
Company's business strategies and policies as determined by the Board of
Trustees.
The classified Trustee provision could have the effect of making the
removal of incumbent Trustees more time-consuming and difficult, which could
discourage a third party from making a tender offer or otherwise attempting
to obtain control of the Company, even though such an attempt might be
beneficial to the Company and its shareholders. At least two annual meetings
of shareholders, instead of one, will generally be required to effect a
change in a majority of the Board of Trustees.
Holders of Common Shares have no right to cumulative voting for the
election of Trustees. Consequently, at each annual meeting of shareholders,
the holders of a majority of Common Shares voting together as a single class
will be able to elect all of the successors of the Trustees whose terms
expire at that meeting. Trustees may be removed at any time by the
affirmative vote of the holders of two-thirds of the Common Shares.
BUSINESS COMBINATIONS
Under the Maryland General Corporation Law, as amended from time to
time (the "MGCL"), as applicable to Maryland real estate investment trusts,
certain "business combinations" (including a merger, consolidation, share
exchange, or, in certain circumstances, an asset transfer or issuance or
reclassification of equity securities) between a Maryland real estate
investment trust and any person who beneficially owns 10% or more of the
voting power of the shares of the trust or an affiliate of the trust who, at
any time within the two-year period prior to the date in question, was the
beneficial owner of 10% or more of the voting power of the then-outstanding
voting shares of beneficial interest of the trust (an "Interested
Shareholder") or an affiliate thereof are prohibited for five years after the
most recent date on which the Interested Shareholder became an Interested
Shareholder. Thereafter, any such business combination must be (a)
recommended by the Board of Trustees of such trust and (b) approved by the
affirmative vote of at least (i) 80% of the votes entitled to be cast by
holders of outstanding voting shares of the trust and (ii) two-thirds of the
votes entitled to be cast by holders of outstanding voting shares (other than
voting shares held by the Interested Shareholder with whom the business
combination is to be effected or by an affiliate or associate thereof),
voting together as a single group, unless, among other things, the company's
common shareholders receive a minimum price (as defined in the statute) for
their shares and the consideration is received in cash or in the same form as
previously paid by the Interested Shareholder for his shares. These
provisions of Maryland law do not apply, however, to business combinations
with a particular Interested Shareholder or its existing or future affiliates
that are approved or exempted by the board of trustees of the trust prior to
the time that the Interested Shareholder becomes an Interested Shareholder or
if the original declaration of trust includes a provision electing not to be
governed, in whole or in part, as to business combinations generally,
specifically or generally by types, as to identified or unidentified existing
or future Interested Shareholders or their affiliates. The
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Declaration of Trust, in accordance with Maryland law, exempts the Burnam Family
from the foregoing restrictions. As a result, members of the Burnam Family may
be able to enter into business combinations with the Company, which may not be
in the best interests of the shareholders, without compliance by the Company
with the super-majority voting requirements and the other provisions of the
statute.
CONTROL SHARE ACQUISITIONS
The MGCL, as applicable to Maryland real estate investment trusts,
imposes limitations on the voting rights of shares acquired in a "control
share acquisition" relating to a Maryland real estate investment trust. The
MGCL defines a "control share acquisition" as the acquisition of "control
shares," which is defined as voting shares that would entitle the acquiror to
exercise voting power in electing trustees in excess of the following levels
of voting power: 20%, 33 1/3%, and 50%. The MGCL requires a two-thirds
shareholder vote (excluding shares owned by the acquiring person and certain
members of management) to accord voting rights to shares acquired in a
control share acquisition. The MGCL also requires a Maryland real estate
investment trust to hold a special meeting at the request of an actual or
proposed control share acquiror generally within 50 days after a request is
made with the submission of an "acquiring person statement," but only if the
acquiring person (a) delivers a written undertaking to pay the expenses of
such special meeting or, if required by the Board of Trustees, posts a bond
for the cost of the meeting and (b) submits a definitive financing agreement
to the extent that financing is not provided by the acquiring person. In
addition, unless the charter or bylaws provide otherwise, the MGCL gives a
Maryland real estate investment trust, within certain time limitations,
various redemption rights if there is a shareholder vote on the issue and the
grant of voting rights is not approved, or if an "acquiring person statement"
is not delivered to the target company within 10 days following a control
share acquisition. Moreover, unless the charter or bylaws provide otherwise,
the MGCL provides that if, before a control share acquisition occurs, voting
rights are accorded to the control shares which results in the acquiring
person having a majority of voting power, then minority shareholders are
entitled to appraisal rights. The fair value of the shares as determined for
purposes of such appraisal rights may not be less than the highest price per
share paid by the acquiror in the control share acquisition. The control
share acquisition statute does not apply (a) to shares acquired in a merger,
consolidation or share exchange if the trust is a party to the transaction or
(b) to acquisitions approved or exempted by the declaration of trust or
bylaws of the trust. The Declaration of Trust, in accordance with Maryland
law, contains a provision exempting acquisitions of shares by the Burnam
Family from the foregoing provisions.
AMENDMENT TO THE DECLARATION OF TRUST
The Declaration of Trust may be amended only by the affirmative vote or
written consent of the holders of not less than a majority of all of the
shares of beneficial interest entitled to vote on the matter, except that the
Trustees by a two-thirds vote may amend provisions of the Declaration of
Trust from time to time to qualify as a real estate investment trust under
the Code and the Maryland REIT Law.
TERMINATION OF THE COMPANY
The Declaration of Trust permits the termination of the Company and the
discontinuation of the operations of the Company by the affirmative vote or
written consent of the holders of not less than two-thirds of the outstanding
shares of beneficial interest.
ADVANCE NOTICE OF TRUSTEE NOMINATIONS AND NEW BUSINESS
The Bylaws provide that (a) with respect to an annual meeting of
shareholders, nominations of persons for election to the Board of Trustees
and the proposal of business to be considered by shareholders may be made
only (i) pursuant to the Company's notice of the meeting, (ii) by or at the
direction of the Board of Trustees, or (iii) by a shareholder who is entitled
to vote at the meeting and has complied with the advance notice procedures
set forth
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in the Bylaws, and (b) with respect to special meetings of shareholders, only
the business specified in the Company's notice of meeting may be brought before
the meeting of shareholders, and, if the Board of Trustees has determined that
Trustees shall be elected at any such meeting, nominations of persons for
election to the Board of Trustees may be made only on terms similar to those for
annual meetings.
ANTI-TAKEOVER EFFECT OF CERTAIN PROVISIONS OF MARYLAND LAW AND OF THE
DECLARATION OF TRUST AND BYLAWS
The business combination provisions and the control share acquisition
provisions of the MGCL, the provisions of the Declaration of Trust on
classification of the Board of Trustees and removal of Trustees and the
advance notice provisions of the Bylaws could delay, defer or prevent a
transaction or a change in control of the Company that might involve a
premium price for holders of Common Shares or otherwise be in their best
interest.
FEDERAL INCOME TAX CONSIDERATIONS
The following is a description of the material Federal income tax
consequences to the Company and its shareholders of the treatment of the
Company as a REIT. The discussion is general in nature and not exhaustive of
all possible tax considerations, nor does the discussion give a detailed
description of any state, local, or foreign tax considerations. The
discussion does not discuss all aspects of Federal income tax law that may be
relevant to a prospective shareholder in light of his particular
circumstances or to certain types of shareholders (including insurance
companies, financial institutions or broker-dealers, tax exempt
organizations, foreign corporations and persons who are not citizens or
residents of the United States) subject to special treatment under the
Federal income tax laws nor does the discussion address special
considerations, if any, which may relate to the purchase of Common Share
Warrants.
THIS DISCUSSION IS NOT INTENDED AS A SUBSTITUTE FOR CAREFUL TAX
PLANNING, AND EACH PROSPECTIVE INVESTOR IS ADVISED TO CONSULT WITH ITS TAX
ADVISOR REGARDING THE SPECIFIC TAX CONSEQUENCES TO IT OF THE PURCHASE,
OWNERSHIP AND SALE OF THE SECURITIES OFFERED HEREBY, INCLUDING THE FEDERAL,
STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES OF SUCH PURCHASE, OWNERSHIP
AND SALE, AND OF POTENTIAL CHANGES IN APPLICABLE TAX LAWS.
If certain detailed conditions imposed by the REIT provisions of the
Code are met, entities, such as the Company, that invest primarily in real
estate and that otherwise would be treated for Federal income tax purposes as
corporations, are generally not taxed at the corporate level on their "REIT
taxable income" that is currently distributed to shareholders. This
treatment substantially eliminates the "double taxation" (i.e., at both the
corporate and shareholder levels) that generally results from the use of
corporations.
If the Company fails to qualify as a REIT in any year, however, it will
be subject to Federal income taxation as if it were a domestic corporation,
and its shareholders will be taxed in the same manner as shareholders of
ordinary corporations. In this event, the Company could be subject to
potentially significant tax liabilities, and therefore the amount of cash
available for distribution to its shareholders would be reduced or
eliminated.
The Company has elected REIT status effective for the taxable year
ended December 31, 1994, and the Board of Trustees of the Company believes
that the Company has operated and expects that the Company will continue to
operate in a manner that has enabled the Company to qualify as a REIT and
will permit the Company to maintain its REIT status in each taxable year
thereafter. There can be no assurance, however, that this belief or
expectation will be fulfilled, since qualification as a REIT depends on the
Company continuing to satisfy numerous asset, income and distribution tests
described below, which in turn will be dependent in part on the Company's
operating results.
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TAXATION OF THE COMPANY
General. In any year in which the Company qualifies as a REIT it will
not, in general, be subject to Federal income tax on that portion of its REIT
taxable income or capital gain which is distributed to shareholders. The
Company may, however, be subject to tax at normal corporate rates upon any
taxable income or capital gain not distributed.
Notwithstanding its qualification as a REIT, the Company may also be
subject to taxation in certain other circumstances. If the Company should
fail to satisfy either the 75% or the 95% gross income test (as discussed
below), and nonetheless maintains its qualification as a REIT because certain
other requirements are met, it will be subject to a 100% tax on the greater
of the amount by which the Company fails either the 75% or the 95% test,
multiplied by a fraction intended to reflect the Company's profitability.
The Company will also be subject to a tax of 100% on net income from any
"prohibited transaction" as described below, and if the Company has (i) net
income from the sale or other disposition of "foreclosure property" which is
held primarily for sale to customers in the ordinary course of business or
(ii) other non-qualifying income from foreclosure property, it will be
subject to tax on such income from foreclosure property at the highest
corporate rate. In addition, if the Company should fail to distribute during
each calendar year at least the sum of (i) 85% of its REIT ordinary income
for such year, (ii) 95% of its REIT capital gain net income for such year,
and (iii) any undistributed taxable income from prior years, the Company
would be subject to a 4% excise tax on the excess of such required
distribution over the amounts actually distributed. The Company may also be
subject to the corporate alternative minimum tax, as well as tax in certain
situations not presently contemplated. The Subsidiary Company will be taxed
on its income at regular corporate rates. The Company will use the calendar
year both for Federal income tax purposes and for financial reporting
purposes.
In order to qualify as a REIT, the Company must meet, among others, the
following requirements:
Share Ownership Tests. The Company's shares of beneficial interest
must be held by a minimum of 100 persons for at least 335 days in each
taxable year (or a proportional number of days in any short taxable year).
In addition, at all times during the second half of each taxable year, no
more than 50% in value of the outstanding shares of beneficial interest of
the Company may be owned, directly or indirectly and by applying certain
constructive ownership rules, by five or fewer individuals, which for this
purpose includes certain tax-exempt entities. However, for purposes of this
test, any shares of beneficial interest held by a qualified domestic pension
or other retirement trust will be treated as held directly by its
beneficiaries in proportion to their actuarial interest in such trust rather
than by such trust. These share ownership requirements need not be met until
the second taxable year of the Company for which a REIT election is made.
In order to attempt to ensure compliance with the foregoing share
ownership tests, the Company has placed certain restrictions on the transfer
of its shares of beneficial interest to prevent additional concentration of
share ownership. Moreover, to evidence compliance with these requirements,
under Treasury regulations the Company must maintain records which disclose
the actual ownership of its outstanding shares of beneficial interest. In
fulfilling its obligations to maintain records, the Company must and will
demand written statements each year from the record holders of designated
percentages of its shares of beneficial interest disclosing the actual owners
of such shares of beneficial interest (as prescribed by Treasury
regulations). A list of those persons failing or refusing to comply with
such demand must be maintained as a part of the Company's records. A
shareholder failing or refusing to comply with the Company's written demand
must submit with his tax return a similar statement disclosing the actual
ownership of Company shares of beneficial interest and certain other
information. In addition, the Declaration of Trust provides restrictions
regarding the transfer of its shares of beneficial interest that are intended
to assist the Company in continuing to satisfy the share ownership
requirements. See "Description of Common Shares--Restrictions on Transfer."
Asset Tests. At the close of each quarter of the Company's taxable
year, the Company must satisfy two tests relating to the nature of its assets
(with "assets" being determined in accordance with generally accepted
accounting principles). First, at least 75% of the value of the Company's
total assets must be represented by interests in real property, interests in
mortgages on real property, shares in other REITs, cash, cash items,
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government securities and qualified temporary investments. Second, although
the remaining 25% of the Company's assets generally may be invested without
restriction, securities in this class may not exceed (i) in the case of
securities of any one non-government issuer, 5% of the value of the Company's
total assets or (ii) 10% of the outstanding voting securities of any one such
issuer. Where the Company invests in a partnership (such as the Operating
Partnership), it will be deemed to own a proportionate share of the
partnership's assets. See "--Tax Aspects of the Company's Investments in
Partnerships--General." Accordingly, the Company's investment in the
Facilities through its interest in the Operating Partnership is intended to
constitute an investment in qualified assets for purposes of the 75% asset
test.
The Operating Partnership owns 100% of the non-voting preferred stock
and 5% of the voting stock of the Subsidiary Company. See "The Company." By
virtue of its partnership interest in the Operating Partnership, the Company
is deemed to own its pro rata share of the assets of the Operating
Partnership, including the securities of the Subsidiary Company, as described
above. Because the Operating Partnership owns only 5% of the voting
securities of the Subsidiary Company, and the preferred stock's approval
right is limited to certain fundamental corporate actions that could
adversely affect the preferred stock as a class, the 10% limitation on
holdings of voting securities of any one issuer should not be exceeded.
Based upon its analysis of the total estimated value of the Subsidiary
Company stock owned by the Operating Partnership relative to the estimated
value of the total assets owned by the Operating Partnership and the other
assets of the Company, the Company believes that the Company's pro rata share
of the stock of the Subsidiary Company owned by the Operating Partnership
does not exceed, on the date of this Prospectus, 5% of the value of the
Company's total assets. This 5% limitation must be satisfied not only as of
the date that the Company (directly or through the Operating Partnership)
acquired securities of the Subsidiary Company, but also at the end of any
quarter in which the Company increases its interest in the Subsidiary Company
or so acquires other property. In this respect, if the holder of a right to
exchange Units for Common Shares, including BHC or an Original Investor,
exercises such rights, the Company will thereby increase its proportionate
(indirect) ownership interest in the Subsidiary Company, thus requiring the
Company to meet the 5% test in any quarter in which such conversion option is
exercised. A similar result will follow in the case of any exchange of Units
by Operating Partnership or Subsidiary Company employees that they received
pursuant to the option plan established by the Company. Although the Company
plans to take steps to ensure that it satisfies the 5% value test for any
quarter with respect to which retesting is to occur, there can be no
assurance that such steps will always be successful or will not require a
reduction in the Operating Partnership's overall interest in the Subsidiary
Company.
Gross Income Tests. There are three separate percentage tests relating
to the sources of the Company's gross income which must be satisfied for each
taxable year. For purposes of these tests, where the Company invests in a
partnership, the Company will be treated as receiving its share of the income
and loss of the partnership, and the gross income of the partnership will
retain the same character in the hands of the Company as it has in the hands
of the partnership. See "--Tax Aspects of the Company's Investments in
Partnerships--General" below. The three tests are as follows:
The 75% Test. At least 75% of the Company's gross income for the
taxable year must be "qualifying income." Qualifying income generally
includes (i) rents from real property (except as modified below);
(ii) interest on obligations secured by mortgages on, or interests in, real
property; (iii) gains from the sale or other disposition of interests in real
property and real estate mortgages, other than gain from property held
primarily for sale to customers in the ordinary course of the Company's trade
or business ("dealer property"); (iv) dividends or other distributions on
shares in other REITs, as well as gain from the sale of such shares;
(v) abatements and refunds of real property taxes; (vi) income from the
operation, and gain from the sale, of property acquired at or in lieu of a
foreclosure of the mortgage secured by such property ("foreclosure
property"); (vii) commitment fees received for agreeing to make loans secured
by mortgages on real property or to purchase or lease real property; and
(viii) certain qualified temporary investment income attributable to the
investment of new capital received by the Company in exchange for its shares
during the one-year period following the receipt of such capital.
Rents received from a customer will not, however, qualify as rents from
real property in satisfying the 75% test (or the 95% gross income test
described below) if the Company, or an owner of 10% or more of the Company,
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directly or constructively owns 10% or more of such tenant. In addition, if
rent attributable to personal property leased in connection with a lease of
real property is greater than 15% of the total rent received under the lease,
then the portion of rent attributable to such personal property will not
qualify as rents from real property. Moreover, an amount received or accrued
will not qualify as rents from real property (or as interest income) for
purposes of the 75% and 95% gross income tests if it is based in whole or in
part on the income or profits of any person, although an amount received or
accrued generally will not be excluded from "rents from real property" solely
by reason of being based on a fixed percentage or percentages of receipts or
sales. Finally, for rents received to qualify as rents from real property
for purposes of the 75% and 95% gross income tests, the Company generally
must not operate or manage the property or furnish or render services to
tenants, other than through an "independent contractor" from whom the Company
derives no income, except that the "independent contractor" requirement does
not apply to the extent that the services provided by the Company are
"usually or customarily rendered" in connection with the rental of space for
occupancy only, or are not otherwise considered "rendered to the occupant for
his convenience."
The Company intends to monitor its operations in the context of these
standards so as to satisfy the 75% and 95% gross income tests. The Operating
Partnership provides certain services at the Facilities it owns and may
provide certain services at any newly acquired self-storage facilities of the
Operating Partnership. The Company believes for purposes of the 75% and 95%
gross income tests, that the services provided at such facilities and any
other services and amenities provided by the Operating Partnership or its
agents with respect to such facilities are and will continue to be of the
type usually or customarily rendered in connection with the rental of space
for occupancy only. The Company intends that services that cannot be
provided directly by the Operating Partnership, the Subsidiary Company or
other agents will be performed by independent contractors.
The 95% Test. In addition to deriving 75% of its gross income from the
sources listed above, at least 95% of the Company's gross income for the
taxable year must be derived from the above-described qualifying income, or
from dividends, interest, or gains from the sale or other disposition of
stock or other securities that are not dealer property. Dividends and
interest on any obligations not collateralized by an interest in real
property are included for purposes of the 95% test, but not for purposes of
the 75% test. The Company intends to closely monitor its non-qualifying
income and anticipates that non-qualifying income from its other activities
will not result in the Company failing to satisfy either the 75% or 95% gross
income test. The Operating Partnership owns partnership interests in certain
joint ventures which own certain Facilities. No assurance can be given that
such partnerships will not realize non-qualifying income, in which case the
Operating Partnership's distributive share of such income would be
non-qualifying income.
For purposes of determining whether the Company complies with the 75%
and the 95% gross income tests, gross income does not include income from
prohibited transactions. A "prohibited transaction" is a sale of dealer
property (excluding foreclosure property); however, it does not include a
sale of property if such property is held by the Company for at least four
years and certain other requirements (relating to the number of properties
sold in a year, their tax bases, and the cost of improvements made thereto)
are satisfied. See "--Taxation of the Company--General" and "--Tax Aspects
of the Company's Investments in Partnerships--Sale of the Facilities."
The Company believes that, for purposes of both the 75% and the 95%
gross income tests, its investment in the Facilities through the Operating
Partnership will in major part give rise to qualifying income in the form of
rents, and that gains on sales of the Facilities, or of the Company's
interest in the Operating Partnership, generally will also constitute
qualifying income.
Even if the Company fails to satisfy one or both of the 75% or 95%
gross income tests for any taxable year, it may still qualify as a REIT for
such year if it is entitled to relief under certain provisions of the Code.
These relief provisions will generally be available if: (i) the Company's
failure to comply was due to reasonable cause and not to willful neglect;
(ii) the Company reports the nature and amount of each item of its income
included in the tests on a schedule attached to its tax return; and (iii) any
incorrect information on this schedule is not due to fraud with intent to
evade tax. If these relief provisions apply, however, the Company will
nonetheless be subject to a 100% tax on the greater of the amount by which it
fails either the 75% or 95% gross income test, multiplied by a fraction
intended to reflect the Company's profitability.
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The 30% Test. The Company must derive less than 30% of its gross
income for each taxable year from the sale or other disposition of (i) real
property held for less than four years (other than foreclosure property and
involuntary conversions); (ii) stock or securities (including an interest
rate swap or cap agreement) held for less than one year; and (iii) property
in a prohibited transaction. The Company does not anticipate that it will
have difficulty in complying with this test. However, if extraordinary
circumstances were to occur that give rise to dispositions of self-storage
facilities held for less than four years (for example, on account of the
inability to obtain refinancing), the 30% test could become an issue.
Annual Distribution Requirements. In order to qualify as a REIT, the
Company is required to distribute dividends (other than capital gain
dividends) to its shareholders each year in an amount at least equal to
(A) the sum of (i) 95% of the Company's REIT taxable income (computed without
regard to the dividends paid deduction and the Company's net capital gain)
and (ii) 95% of the net income (after tax), if any, from foreclosure
property, minus (B) the sum of certain items of non-cash income. Such
distributions must be paid in the taxable year to which they relate, or in
the following taxable year if declared before the Company timely files its
tax return for such year and if paid on or before the first regular dividend
payment after such declaration. To the extent that the Company does not
distribute all of its net capital gain or distributes at least 95%, but less
than 100%, of its REIT taxable income, as adjusted, it will be subject to tax
on the undistributed amount at regular capital gains or ordinary corporate
tax rates, as the case may be.
The Company intends to make timely distributions sufficient to satisfy
the annual distribution requirements described in the first sentence of the
preceding paragraph. In this regard, the Partnership Agreement authorizes
the Company, as general partner, to take such steps as may be necessary to
cause the Operating Partnership to distribute to its partners an amount
sufficient to permit the Company to meet these distribution requirements. It
is possible that the Company may not have sufficient cash or other liquid
assets to meet the 95% distribution requirement, due to timing differences
between the actual receipt of income and actual payment of expenses on the
one hand, and the inclusion of such income and deduction of such expenses in
computing the Company's REIT taxable income on the other hand; due to the
Operating Partnership's inability to control cash distributions with respect
to any properties as to which it does not have decision making control; or
for other reasons. To avoid a problem with the 95% distribution requirement,
the Company will closely monitor the relationship between its REIT taxable
income and cash flow and, if necessary, intends to borrow funds (or cause the
Operating Partnership or other affiliates to borrow funds) in order to
satisfy the distribution requirement. However, there can be no assurance
that such borrowing would be available at such time.
If the Company fails to meet the 95% distribution requirement as a
result of an adjustment to the Company's tax return by the Service, the
Company may retroactively cure the failure by paying a "deficiency dividend"
(plus applicable penalties and interest) within a specified period.
Failure to Qualify. If the Company fails to qualify for taxation as a
REIT in any taxable year and the relief provisions do not apply, the Company
will be subject to tax (including any applicable alternative minimum tax) on
its taxable income at regular corporate rates. Distributions to shareholders
in any year in which the Company fails to qualify as a REIT will not be
deductible by the Company, nor generally will they be required to be made
under the Code. In such event, to the extent of current and accumulated
earnings and profits, all distributions to shareholders will be taxable as
ordinary income, and, subject to certain limitations in the Code, corporate
distributees may be eligible for the dividends received deduction. Unless
entitled to relief under specific statutory provisions, the Company also will
be disqualified from re-electing taxation as a REIT for the four taxable
years following the year during which qualification was lost.
TAX ASPECTS OF THE COMPANY'S INVESTMENTS IN PARTNERSHIPS
General. The Company holds a partnership interest in the Operating
Partnership. See "The Company." In addition, the Operating Partnership owns
partnership interests in several joint venture partnerships which own certain
Facilities. In general, a partnership is a "pass-through" entity which is
not subject to Federal income tax. Rather, partners are allocated their
proportionate shares of the items of income, gain, loss, deduction and credit of
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a partnership, and are potentially subject to tax thereon, without regard
to whether the partners receive a distribution from the partnership. The
Company will include its proportionate share of the foregoing partnership
items for purposes of the various REIT gross income tests and in the
computation of its REIT taxable income. See "--Taxation of the
Company--General" and "--Gross Income Tests."
Each partner's share of a partnership's tax attributes is determined in
accordance with the partnership agreement, although the allocations will be
adjusted for tax purposes if they do not comply with the technical provisions
of Code Section 704(b) and the regulations thereunder. The Operating
Partnership's allocations of tax attributes are intended to comply with these
provisions. Notwithstanding these allocation provisions, for purposes of
complying with the gross incomes tests discussed above, the Company will be
deemed to have received a share of the income of the Partnership based on its
capital interest in the Operating Partnership.
Also, any resultant increase in the Company's REIT taxable income from
its interest in the Operating Partnership (whether or not a corresponding
cash distribution is also received from the Operating Partnership) will
increase its distribution requirements (see "--Taxation of the Company--Annual
Distribution Requirements"), but will not be subject to Federal income tax in
the hands of the Company provided that an amount equal to such income is
distributed by the Company to its shareholders. Moreover, for purposes of the
REIT asset tests (see "--Taxation of the Company--Asset Tests"), the Company
will include its proportionate share of assets held by the Operating Partnership
(including the Operating Partnership's share of assets held through its
interests in the joint venture partnerships).
Entity Classification. The Company's interest in the Operating
Partnership involves special tax considerations, including the possibility of
a challenge by the Service of the status of the Operating Partnership as a
partnership (as opposed to an association taxable as a corporation for
Federal income tax purposes). If the Operating Partnership were to be
treated as an association, it would be taxable as a corporation and therefore
subject to an entity-level tax on its income. In such a situation, the
character of the Company's assets and items of gross income would change,
which would preclude the Company from satisfying the REIT asset tests and the
REIT gross income tests (see "--Taxation of the Company--Asset Tests" and
"--Gross Income Tests"), which in turn would prevent the Company from qualifying
as a REIT. (See "--Taxation of the Company--Failure to Qualify" above, for a
discussion of the effect of the Company's failure to meet such tests.) A
similar result could occur if any of the joint venture partnerships in which
the Operating Partnership owns a partnership interest were classified as
associations taxable as corporations.
Tax Allocations with Respect to the Facilities. Pursuant to Section
704(c) of the Code, income, gain, loss and deduction attributable to appreciated
or depreciated property that is contributed to a partnership in exchange for an
interest in the partnership (such as certain of the Facilities or interests
therein), must be allocated in a manner such that the contributing partner is
charged with, or benefits from, respectively, the unrealized gain or unrealized
loss associated with the property at the time of the contribution. The amount
of such unrealized gain or unrealized loss is generally equal to the difference
between the fair market value of the contributed property at the time of
contribution, and the adjusted tax basis of such property at the time of
contribution (a "Book-Tax Difference"). Such allocations are solely for Federal
income tax purposes and do not affect the book capital accounts or other
economic arrangements among the partners. The formation of the Operating
Partnership included contributions of appreciated property (including certain of
the Facilities or interests therein). Consequently, the Partnership Agreement
requires certain allocations to be made in a manner consistent with Section
704(c) of the Code.
In general, certain contributors of certain of the Facilities or
interests therein will be allocated lower amounts of depreciation deductions
for tax purposes and increased taxable income and gain on sale by the
Operating Partnership on the contributed assets (including certain of such
Facilities). This will tend to eliminate the Book-Tax Difference over the
life of the Operating Partnership. However, the special allocation rules of
Section 704(c) do not always entirely rectify the Book-Tax Difference on an
annual basis or with respect to a specific taxable transaction such as a sale
or a deemed sale, and accordingly variations from normal Section 704(c)
principles may arise, which could result in the allocation of additional
taxable income to the Company in excess of corresponding cash proceeds in
certain circumstances.
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Treasury regulations issued under Section 704(c) of the Code provide
partnerships with a choice of several methods of accounting for Book-Tax
Differences, including retention of the method under current law. The
Operating Partnership and the Company will use the traditional method for
making allocations under Section 704(c) with respect to the existing
Facilities.
With respect to any property purchased by the Operating Partnership
subsequent to the admission of the Company to the Operating Partnership as
well as certain Facilities acquired in taxable transactions, in general, such
property will initially have a tax basis equal to its fair market value and
Section 704(c) of the Code will not apply.
Sale of the Facilities. The Company's share of any gain realized by
the Operating Partnership on the sale of any dealer property generally will
be treated as income from a prohibited transaction that is subject to a 100%
penalty tax. See "Taxation of the Company--General" and "Gross Income Tests--
The 95% Test." Under existing law, whether property is dealer property is a
question of fact that depends on all the facts and circumstances with respect
to the particular transaction. The Operating Partnership intends to hold
(and, to the extent within its control, to have any joint venture in which
the Operating Partnership is a partner so hold) the Facilities for investment
with a view to long-term appreciation, to engage in the business of acquiring,
owning, operating and developing the Facilities and other self-storage
facilities, and to make such occasional sales of the Facilities and other
facilities acquired subsequent to the date hereof as are consistent with the
Company's investment objectives. Based upon the Company's investment
objectives, the Company believes that overall the Facilities should not be
considered dealer property and that the amount of income from prohibited
transactions, if any, will not be material.
TAXATION OF SHAREHOLDERS
Taxation of Taxable Domestic Shareholders. As long as the Company
qualifies as a REIT, distributions made to the Company's taxable domestic
shareholders out of current or accumulated earnings and profits (and not
designated as capital gain dividends) will be taken into account by them as
ordinary income and will not be eligible for the dividends received deduction
for corporations. Distributions that are designated as capital gain
dividends will be taxed as long-term capital gains (to the extent they do not
exceed the Company's actual net capital gain for the taxable year) without
regard to the period for which the shareholder has held its shares of
beneficial interest of the Company. However, corporate shareholders may be
required to treat up to 20% of certain capital gain dividends as ordinary
income. To the extent that the Company makes distributions in excess of
current and accumulated earnings and profits, these distributions are treated
first as a tax-free return of capital to the shareholder, reducing the tax
basis of a shareholder's Common Shares by the amount of such excess
distribution (but not below zero), with distributions in excess of the
shareholder's tax basis being taxed as capital gains (if the Common Shares
are held as a capital asset). In addition, any dividend declared by the
Company in October, November or December of any year and payable to a
shareholder of record on a specific date in any such month shall be treated
as both paid by the Company and received by the shareholder on December 31 of
such year, provided that the dividend is actually paid by the Company during
January of the following calendar year. Shareholders may not include in
their individual income tax returns any net operating losses or capital
losses of the Company. Federal income tax rules may also require that
certain minimum tax adjustments and preferences be apportioned to Company
shareholders.
In general, any loss upon a sale or exchange of Common Shares by a
shareholder who has held such Common Shares for six months or less (after
applying certain holding period rules) will be treated as a long-term capital
loss, to the extent of distributions from the Company required to be treated
by such shareholder as long-term capital gains.
Backup Withholding. The Company will report to its domestic
shareholders and to the Service the amount of dividends paid for each
calendar year, and the amount of tax withheld, if any, with respect thereto.
Under the backup withholding rules, a shareholder may be subject to backup
withholding at the rate of 31% with respect to dividends paid unless such
shareholder (i) is a corporation or comes within certain other exempt
categories and, when required, demonstrates this fact or (ii) provides a
taxpayer identification number, certifies as to no loss of exemption from
backup withholding, and otherwise complies with applicable requirements of
the backup withholding rules. A shareholder that does not provide the
Company with its correct taxpayer identification number may also
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be subject to penalties imposed by the Service. Any amount paid as backup
withholding is available as a credit against the shareholder's income tax
liability. In addition, the Company may be required to withhold a portion of
capital gain distributions made to any shareholders who fail to certify their
non-foreign status to the Company. See "Certain United States Tax
Considerations for Non-U.S. Shareholders--Distributions from the Company--
Capital Gain Dividends" below.
Taxation of Tax-Exempt Shareholders. The Service has issued a revenue
ruling in which it held that amounts distributed by a REIT to a tax-exempt
employees' pension trust do not constitute unrelated business taxable income
("UBTI"). Subject to the discussion below regarding a "pension-held REIT,"
based upon such ruling and the statutory framework of the Code, distributions
by the Company to a shareholder that is a tax-exempt entity should not
constitute UBTI, provided that the tax-exempt entity has not financed the
acquisition of its shares with "acquisition indebtedness" within the meaning
of the Code, that the shares are not otherwise used in an unrelated trade or
business of the tax-exempt entity, and that the Company, consistent with its
present intent, does not hold a residual interest in a REMIC.
However, if any pension or other retirement trust that qualifies under
Section 401(a) of the Code ("qualified pension trust") holds more than 10% by
value of the interests in a "pension-held REIT" at any time during a taxable
year, a portion of the dividends paid to the qualified pension trust by such
REIT may constitute UBTI. For these purposes, a "pension-held REIT" is
defined as a REIT if (i) such REIT would not have qualified as a REIT but for
the provisions of the Code which look through such a qualified pension trust
in determining ownership of shares of the REIT and (ii) at least one
qualified pension trust holds more than 25% by value of the interests of such
REIT or one or more qualified pension trusts (each owning more than a 10%
interest by value in the REIT) hold in the aggregate more than 50% by value
of the interests in such REIT. The Company does not expect to be a
"pension-held REIT."
OTHER TAX CONSIDERATIONS
Subsidiary Company. The income of the Subsidiary Company is subject to
Federal and state income tax at full corporate rates, and the Subsidiary
Company cannot claim a deduction for the dividends it pays to its
shareholders, including the Company. To the extent that the Subsidiary
Company pays Federal, state or local taxes, it will have less cash available
to distribute to its shareholders, thereby reducing cash available for
distribution by the Company to its shareholders. The Subsidiary Company will
attempt to minimize the amount of such taxes, but there can be no assurance
whether or the extent to which measures taken to minimize taxes will be
successful.
Possible Legislative or Other Actions Affecting Tax
Consequences. Prospective shareholders should recognize that the present
Federal income tax treatment of investment in the Company may be modified by
legislative, judicial or administrative action at any time and that any such
action may affect investments and commitments previously made. The
rules dealing with Federal income taxation are constantly under review by
persons involved in the legislative process and by the Service and the
Treasury Department, resulting in revisions of regulations and revised
interpretations of established concepts as well as statutory changes. No
assurance can be given as to the form or content (including with respect to
effective dates) of any tax legislation which may be enacted. Revisions in
Federal tax laws and interpretations thereof could adversely affect the tax
consequences of investment in the Company.
In particular, the Treasury Department promulgated regulations on
December 29, 1994 that would permit the Service to recharacterize
transactions involving partnerships purporting to create tax advantages
inconsistent with the intent of the partnership provisions of the Code. The
intended application of these regulations is uncertain. Nonetheless,
although the matter is not free from doubt, it is believed that these
regulations will not adversely affect the Company's ability to qualify as a
REIT.
State and Local Taxes. The Company and its shareholders may be subject
to state or local taxation, and the Company and the Operating Partnership may
be subject to state or local tax withholding requirements, in various
jurisdictions, including those in which it or they transact business or
reside. The state and local tax treatment of the Company and its
shareholders may not conform to the Federal income tax consequences discussed
above.
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Consequently, prospective shareholders should consult their own tax advisors
regarding the effect of state and local tax laws on an investment in Common
Shares.
CERTAIN UNITED STATES TAX CONSIDERATIONS
FOR NON-U.S. SHAREHOLDERS
The following is a discussion of certain anticipated U.S. Federal
income and U.S. Federal estate tax consequences of the ownership and
disposition of shares of beneficial interest applicable to Non-U.S.
Shareholders of such shares. A "Non-U.S. Shareholder" is (i) any individual
who is neither a citizen nor resident of the United States, (ii) any
corporation or partnership other than a corporation or partnership created or
organized in the United States or under the laws of the United States or any
state thereof or under the laws of the District of Columbia, (iii) any estate
the income of which, from sources without the United States which is not
effectively connected with the conduct of a trade or business within the
United States, is not includable in gross income for United States Federal
income tax purposes or (iv) any trust which is not a "United States Trust".
A United States Trust is (a) for taxable years beginning after December 31,
1996, or if the trustee of a trust elects to apply the following definition
to an earlier taxable year, any trust if, and only if, (i) a court within the
United States is able to exercise primary supervision over the administration
of the trust and (ii) one or more U.S. trustees have the authority to control
all substantial decisions of the trust, and (b) for all other taxable years,
any trust whose income is includable in gross income for United States
Federal income tax purposes regardless of its source. The discussion is
based on current law and is for general information only. The discussion
does not address other aspects of U.S. Federal taxation other than income and
estate taxation or all aspects of U.S. Federal income and estate taxation.
The discussion does not consider any specific facts or circumstances that may
apply to a particular Non-U.S. Shareholder.
PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR TAX ADVISORS REGARDING
THE U.S. FEDERAL, STATE, LOCAL AND NON-U.S. INCOME, ESTATE AND OTHER TAX
CONSEQUENCES OF HOLDING AND DISPOSING OF SHARES OF BENEFICIAL INTEREST.
DISTRIBUTIONS FROM THE COMPANY
Ordinary Dividends. The portion of dividends received by Non-U.S.
Shareholders payable out of the Company's earnings and profits that are not
attributable to capital gains of the Company and that are not effectively
connected with a U.S. trade or business of the Non-U.S. Shareholder will be
subject to U.S. withholding tax at the rate of 30% (unless reduced by treaty
or the Non-U.S. Shareholder files an Internal Revenue Service Form 4224 with
the Company certifying that the investment to which the distribution relates
is effectively connected to a United States trade or business of such Non-U.S.
Shareholder). Under certain limited circumstances, the amount of tax withheld
may be refundable, in whole or in part, because of the tax status of certain
partners or beneficiaries of Non-U.S. Shareholders that are either foreign
partnerships or foreign estates or trusts. In general, Non-U.S. Shareholders
will not be considered engaged in a U.S. trade or business solely as a result of
their ownership of shares of beneficial interest. In cases where the dividend
income from a Non-U.S. Shareholder's investment in shares of beneficial interest
is (or is treated as) effectively connected with the Non-U.S. Shareholder's
conduct of a U.S. trade or business, the Non-U.S. Shareholder generally will be
subject to U.S. tax at graduated rates, in the same manner as U.S. shareholders
are taxed with respect to such dividends (and may also be subject to the 30%
branch profits tax (unless reduced by treaty) in the case of a Non-U.S.
Shareholder that is a foreign corporation).
Under currently applicable Treasury regulations, withholding agents are
required to determine the applicable withholding rate pursuant to the
appropriate tax treaty, and withhold the appropriate amount. Treasury
regulations proposed in 1996, which have not been adopted, and are,
therefore, not currently effective, would, if and when they become effective,
require Non-U.S. Shareholders to file a form W-8 to obtain the benefit of any
applicable tax treaty providing for a lower rate of withholding tax on
dividends paid after December 31, 1997. Such form would require a
representation by the holder as to foreign status, the holder's name and
permanent residence address, the basis for a reduced withholding rate (e.g.,
the relevant tax treaty) and other pertinent information, to be certified by
such holder under penalties of perjury. Such information is subject to being
reported to the Internal Revenue Service. A permanent resident address for
this purpose generally is the address in the country where the person
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claims to be a resident for the purpose of the country's income tax. If the
beneficial holder is a corporation, then the address is where the corporation
maintains its principal office in its country of incorporation.
Capital Gain Dividends. Under the Foreign Investment in Real Property
Tax Act of 1980 ("FIRPTA"), any distribution made by the Company to a Non-U.S.
Shareholder, to the extent attributable to gains from dispositions of United
States Real Property Interests ("USRPIs") by the Company ("USRPI Capital
Gains"), will be considered effectively connected with a U.S. trade or business
of the Non-U.S. Shareholder and subject to U.S. income tax at the rates
applicable to U.S. individuals or corporations, without regard to whether such
distribution is designated as a capital gain dividend. In addition, the Company
will be required to withhold tax equal to 35% of the amount of such distribution
to the extent it constitutes USRPI Capital Gains. Such distribution may also be
subject to the 30% branch profits tax (unless reduced by treaty) in the case of
a Non-U.S. Shareholder that is a foreign corporation.
Non-Dividend Distributions. Any distributions by the Company that
exceed both current and accumulated earnings and profits of the Company will
not be taxed as either ordinary dividends or capital gain dividends. See
"Federal Income Tax Considerations--Taxation of Shareholders--Taxation of
Taxable Domestic Shareholders." However, if it cannot be determined at the
time a distribution is made whether or not such distribution will be in
excess of current and accumulated earnings and profits, the distribution will
be subject to withholding. Should this occur, the Non-U.S. Shareholder may
seek a refund of overwithholding from the Service once it is subsequently
determined that such distribution was, in fact, in excess of current and
accumulated earnings and profits of the Company.
DISPOSITIONS OF SHARES OF BENEFICIAL INTEREST
Unless the shares of beneficial interest constitute USRPIs, a sale or
exchange of shares of beneficial interest by a Non-U.S. Shareholder generally
will not be subject to U.S. taxation under FIRPTA. The shares of beneficial
interest will not constitute USRPIs if the Company is a "domestically
controlled REIT." A domestically controlled REIT is a REIT in which, at all
times during a specified testing period, less than 50% in value of its shares
is held directly or indirectly by Non-U.S. Shareholders. It is currently
anticipated that the Company will be a domestically controlled REIT and,
therefore, that the sale of shares of beneficial interest will not be subject
to taxation under FIRPTA. No assurance can be given that the Company will
continue to be a domestically controlled REIT.
If the Company does not constitute a domestically controlled REIT, a
Non-U.S. Shareholder's sale or exchange of shares of beneficial interest
generally will still not be subject to tax under FIRPTA as a sale of USRPIs
provided that (i) the Company's shares of beneficial interest are "regularly
traded" (as defined by applicable Treasury regulations) on an established
securities market (e.g., the NYSE, on which the Common Shares are listed) and
(ii) the selling Non-U.S. Shareholder held 5% or less of the Company's
outstanding shares of beneficial interest at all times during a specified
testing period.
If gain on the sale or exchange of shares of beneficial interest were
subject to taxation under FIRPTA, the Non-U.S. Shareholder would be subject
to U.S. income tax at the rates applicable to U.S. individuals or corporations,
and the purchaser of shares of beneficial interest could be required to withhold
10% of the purchase price and remit such amount to the Service. The branch
profits tax would not apply to such sales or exchanges.
Capital gains not subject to FIRPTA will nonetheless be taxable in the
United States to a Non-U.S. Shareholder in two cases: (i) if the Non-U.S.
Shareholder's investment in shares of beneficial interest is effectively
connected with a U.S. trade or business conducted by such Non-U.S. Shareholder,
the Non-U.S. Shareholder will be subject to the same treatment as U.S.
shareholders with respect to such gain or (ii) if the Non-U.S. Shareholder is a
nonresident alien individual who was present in the United States for 183 days
or more during the taxable year and has a "tax home" in the United States, the
nonresident alien individual will be subject to 30% tax on the individual's
capital gain (unless reduced or eliminated by treaty).
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FEDERAL ESTATE TAX
Shares of beneficial interest owned or treated as owned by an
individual who is not a citizen or "resident" (as specifically defined for
U.S. Federal estate tax purposes) of the United States at the time of death
will be includable in the individual's gross estate for U.S. Federal estate
tax purposes, unless an applicable estate tax treaty provides otherwise.
Such individual's estate may be subject to U.S. Federal estate tax on the
property includable in the estate for U.S. Federal estate tax purposes.
INFORMATION REPORTING AND BACKUP WITHHOLDING
The Company must report annually to the Service and to each Non-U.S.
Shareholder the amount of dividends (including any capital gain dividends)
paid to, and the tax withheld with respect to, each Non-U.S. Shareholder.
These reporting requirements apply regardless of whether withholding was
reduced or eliminated by an applicable tax treaty. Copies of these returns
may also be made available under the provisions of a specific treaty or
agreement with the tax authorities in the country in which the Non-U.S.
Shareholder resides.
U.S. backup withholding (which generally is imposed at the rate of 31%
on certain payments to persons that fail to furnish the information required
under the U.S. information reporting requirements) and information reporting
will generally not apply to dividends (including any capital gain dividends)
paid on shares of beneficial interest to a Non-U.S. Shareholder at an address
outside the United States. The proposed Treasury regulations referred to
under "--Distributions from the Company--Ordinary Dividends," in general,
would similarly require a Non-U.S Shareholder to provide the form W-8
previously referred to in order for dividends paid after December 31, 1997 to
be exempt from backup withholding and information reporting.
The payment of the proceeds from the disposition of shares of
beneficial interest to or through a U.S. office of a broker will be subject
to information reporting and backup withholding unless the owner, under
penalties of perjury, certifies, among other things, its status as a Non-U.S.
Shareholder, or otherwise establishes an exemption. The payment of the
proceeds from the disposition of shares of beneficial interest to or through
a non-U.S. office of a non-U.S. broker generally will not be subject to
backup withholding and information reporting, except as noted below. In the
case of a payment of proceeds from the disposition of shares of beneficial
interest to or through a non-U.S. office of a broker which is (i) a U.S.
person, (ii) a "controlled foreign corporation" for U.S. Federal income tax
purposes or (iii) a foreign person 50% or more of whose gross income for
certain periods is derived from a U.S. trade or business, information
reporting (but not backup withholding) will apply unless the broker has
documentary evidence in its files that the holder is a Non-U.S. Shareholder
(and the broker has no actual knowledge to the contrary) and certain other
conditions are met, or the holder otherwise establishes an exemption. Under
proposed Treasury regulations, a payment of the proceeds from the disposition
of shares of beneficial interest to or through such broker will be subject to
backup withholding if such broker has actual knowledge that the holder is a
U.S. person.
Backup withholding is not an additional tax. Any amounts withheld
under the backup withholding rules will be refunded or credited against the
Non-U.S. Shareholder's U.S. Federal income tax liability, provided that
required information is furnished to the Service.
These backup withholding and information reporting rules are currently
under review by the Treasury Department, and their application to shares of
beneficial interest is subject to change.
PLAN OF DISTRIBUTION
The Company may sell the Offered Securities to one or more underwriters
for public offering and sale by them or may sell the Offered Securities to
investors directly or through agents. Direct sales to investors may be
accomplished through subscription offerings or through Shareholder Purchase
Rights distributed to the Company's shareholders. See "Description of
Shareholder Purchase Rights." In connection with subscription offerings or
the distribution of Shareholder Purchase Rights to shareholders, if all of
the underlying Offered Securities are not
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subscribed for, the Company may sell such unsubscribed Offered Securities to
third parties directly or through underwriters or agents and, in addition,
whether or not all of the underlying Offered Securities are subscribed for, the
Company may concurrently offer additional Offered Securities to third parties
directly or through underwriters or agents. Any such underwriter or agent
involved in the offer and sale of the Offered Securities will be named in the
applicable Prospectus Supplement.
The distribution of the Offered Securities may be effected from time to
time in one or more transactions at a fixed price or prices, which may be
changed, or at prices related to the prevailing market prices at the time of
sale or at negotiated prices (any of which may represent a discount from the
prevailing market prices). The Company also may, from time to time,
authorize underwriters acting as the Company's agents to offer and sell the
Offered Securities upon the terms and conditions as are set forth in the
applicable Prospectus Supplement. In connection with the sale of Offered
Securities, underwriters may be deemed to have received compensation from the
Company in the form of underwriting discounts or commissions and may also
receive commissions from purchasers of Offered Securities for whom they may
act as agent. Underwriters may sell Offered Securities to or through
dealers, and such dealers may receive compensation in the form of discounts,
concessions or commissions from the underwriters and/or commissions from the
purchasers for whom they may act as agent.
Any underwriting compensation paid by the Company to underwriters or
agents in connection with the offering of Offered Securities, and any
discounts, concessions or commissions allowed by underwriters to
participating dealers, will be set forth in the applicable Prospectus
Supplement. Underwriters, dealers and agents participating in the
distribution of the Offered Securities may be deemed to be underwriters, and
any discounts and commissions received by them and any profit realized by
them on resale of the Offered Securities may be deemed to be underwriting
discounts and commissions, under the Securities Act. Underwriters, dealers
and agents may be entitled, under agreements entered into with the Company,
to indemnification against and contribution toward certain civil liabilities,
including liabilities under the Securities Act.
If so indicated in the applicable Prospectus Supplement, the Company
will authorize dealers acting as the Company's agents to solicit offers by
certain institutions to purchase Offered Securities from the Company at the
public offering price set forth in such Prospectus Supplement pursuant to
Delayed Delivery Contracts ("Contracts") providing for payment and delivery
on the date or dates stated in such Prospectus Supplement. Each Contract
will be for an amount not less than, and the aggregate principal amount of
Offered Securities sold pursuant to Contracts shall be not less nor more
than, the respective amounts stated in the applicable Prospectus Supplement.
Institutions with whom Contracts, when authorized, may be made include
commercial and savings banks, insurance companies, pension funds, investment
companies, educational and charitable institutions, and other institutions
but will in all cases be subject to the approval of the Company. Contracts
will not be subject to any conditions except (i) the purchase by an
institution of the Offered Securities covered by its Contracts shall not at
the time of delivery be prohibited under the laws of any jurisdiction in the
United States to which such institution is subject; and (ii) if the Offered
Securities are being sold to underwriters, the Company shall have sold to
such underwriters the total principal amount of the Offered Securities less
the principal amount thereof covered by Contracts.
Certain of the underwriters and their affiliates may be customers of,
engage in transactions with and perform services for the Company and its
subsidiaries in the ordinary course of business.
EXPERTS
The consolidated and combined financial statements and related schedule
of Storage Trust Realty and Predecessor Company (as defined in such financial
statements) at December 31, 1995 and 1994, and for each of the three years in
the period ended December 31, 1995, incorporated by reference in this
Prospectus and the Registration Statement of which this Prospectus is a part,
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their report thereon included therein and incorporated herein by reference.
The Historical Summaries of Combined Gross Revenue and Direct Operating
Expenses with respect to two facilities acquired since December 31, 1995 for
the year ended December 31, 1995, included in the Company's Current Report on
Form 8-K dated May 24, 1996 (filed June 7, 1996) and incorporated by
reference in this Prospectus and the Registration
22
<PAGE> 24
Statement of which this Prospectus is a part, have been audited by Ernst & Young
LLP, independent auditors, as set forth in their report thereon included therein
and incorporated herein by reference. The Historical Summaries of Combined
Gross Revenue and Direct Operating Expenses with respect to nine facilities
acquired since December 31, 1995 for the year ended December 31, 1995,
included in the Company's Current Report on Form 8-K dated September 16, 1996
(filed October 29, 1996) and incorporated by reference in this Prospectus and
the Registration Statement of which this Prospectus is a part, have been
audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon included therein and incorporated herein by reference. Such
financial statements are, and audited financial statements to be included in
subsequently filed documents will be (to the extent covered by consents filed
with the Securities and Exchange Commission), incorporated herein by
reference in reliance upon the reports of Ernst & Young LLP pertaining to
such financial statements given upon the authority of such firm as experts in
accounting and auditing. The historical summary of combined gross revenue
and direct operating expenses of the 25 Facilities acquired on May 24, 1996
from Balcor/Colonial Storage Income Fund-86 for the year ended December 31,
1995 has been incorporated by reference in the Registration Statement, of
which this Prospectus is a part, in reliance upon the report of KPMG Peat
Marwick LLP, independent certified public accountants, incorporated by
reference herein, and upon the authority of said firm as experts in
accounting and auditing.
LEGAL MATTERS
Certain legal matters relating to the validity of the Offered
Securities will be passed upon for the Company by Mayer, Brown & Platt.
Mayer, Brown & Platt has in the past represented and is currently
representing the Company and certain of its affiliates.
23
<PAGE> 25
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
-------------------------------------------
The following table sets forth the estimated expenses in connection
with the issuance and distribution of the securities registered hereby, all
of which will be paid by the Registrant:
<TABLE>
<S> <C>
SEC registration fee $ 45,713
Printing and duplicating expenses 150,000
Legal fees and expenses 140,000
Blue Sky fees and expenses 60,000
Accounting fees and expenses 100,000
NASD Filing Fee 15,500
Miscellaneous expenses 40,000
-------------
Total $ 551,213
=============
</TABLE>
ITEM 15. INDEMNIFICATION OF TRUSTEES AND OFFICERS.
----------------------------------------
As permitted by Maryland law, the Declaration of Trust provides that a
Trustee or officer of the Company shall not be liable for monetary damages to
the Company or its shareholders for any act or omission in the performance of
his duties, except to the extent that (1) the person actually received an
improper benefit or profit in money, property or services or (2) the person's
action or failure to act was the result of active and deliberate dishonesty
and was material to the cause of action adjudicated.
The Registrant's officers and Trustees will be indemnified under the
Declaration of Trust and Bylaws of the Registrant, certain indemnification
agreements with the Registrant, and the Partnership Agreement of the
Operating Partnership against certain liabilities. The Declaration of Trust
and Bylaws require the Registrant to indemnify its Trustees and officers,
among others, against claims and liabilities and reasonable expenses actually
incurred by them in connection with any claim or liability to which they
become subject by reason of their services in those or other capacities
unless it is established that the act or omission of the Trustee or officer
was material to the matter giving rise to the proceeding and was committed in
bad faith or was the result of active and deliberate dishonesty or the
Trustee or officer actually received an improper personal benefit or, in the
case of any criminal
II-1
<PAGE> 26
proceeding, the Trustee or officer had reasonable cause to believe that the
act or omission was unlawful. The indemnification agreements offer
substantially the same scope of coverage afforded by provisions in the
Declaration of Trust and the Bylaws.
The Partnership Agreement of the Operating Partnership also provides
for indemnification of the Registrant and its officers and Trustees to the
same extent indemnification is provided to officers and Trustees of the
Registrant in its Declaration of Trust, and limits the liability of the
Registrant and its officers and Trustees to the Operating Partnership and its
partners to the same extent the liability of the officers and Trustees of the
Registrant to the Registrant and its shareholders is limited under the
Registrant's Declaration of Trust.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
------------------------------------------
See the Exhibit Index included herewith which is hereby incorporated
herein by reference.
ITEM 17. UNDERTAKINGS.
------------
The undersigned registrant hereby undertakes:
(a) 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;
(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 the 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 a 20
percent change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in the
effective registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
Registration Statement or any material change to such
information in the Registration Statement;
Provided, however, that paragraphs (a)(i) and (a)(ii) do
-------- --------
not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained
in periodic reports filed with or furnished to the
Commission by the Registrant pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934 that
are incorporated by reference in the Registration
Statement.
(b) 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.
(c) 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.
II-2
<PAGE> 27
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 Section 15(d) of
the Securities Exchange Act of 1934 that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
The undersigned Registrant hereby undertakes to supplement the
applicable prospectus supplement, after the expiration of the subscription
period, to set forth the results of the subscription offer, the transactions
by the underwriters during the subscription period, the amount of
unsubscribed securities to be purchased by the underwriters, and the terms of
any subsequent reoffering thereof. If any public offering by the
underwriters is to be made on terms differing from those set forth on the
cover page of the applicable prospectus supplement, a post-effective
amendment will be filed to set forth the terms of such offering.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to Trustees, officers and controlling persons of
the Registrant pursuant to the provisions set forth or described in Item 15
of this Registration Statement, or otherwise, the Registrant has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act
of 1933 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 Trustee, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such Trustee, officer or controlling person in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
II-3
<PAGE> 28
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of Storage Trust Realty, a
Maryland real estate investment trust, and each of the undersigned Trustees
and officers of Storage Trust Realty, hereby constitutes and appoints Gordon
Burnam, Michael G. Burnam, P. Crismon Burnam and Stephen M. Dulle its, his or
her true and lawful attorneys-in-fact and agents, for it, him or her and in
its, his or her name, place and stead, in any and all capacities, with full
power to act alone, to sign any and all amendments to this Registration
Statement, and to file each such amendment to this Registration Statement
with all exhibits thereto, and any and all documents in connection therewith,
with the Securities and Exchange Commission, hereby granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to
do and perform any and all acts and things requisite and necessary to be
done, as fully and to all intents and purposes as it, he or she might or
could do in person, hereby ratifying and confirming all that said attorneys-in-
fact and agents, or any of them, may lawfully do or cause to be done by virtue
hereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company
certifies that it has reasonable grounds to believe that it meets all the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Columbia, State of Missouri on the 15th day of
November, 1996.
STORAGE TRUST REALTY
By
--------------------------------------
Michael G. Burnam
Its: Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on the 15th day of November, 1996.
<TABLE>
<CAPTION>
Name Title
---- -----
<C> <S>
Chief Executive Officer and Trustee
- ----------------------------- (Principal Executive Officer)
Michael G. Burnam
Chief Financial Officer
- ----------------------------- (Principal Financial and Accounting Officer)
Stephen M. Dulle
Chairman of the Board of Trustees
- -----------------------------
Gordon Burnam
Chief Operating Officer and Trustee
- -----------------------------
P. Crismon Burnam
Trustee
- -----------------------------
Blake Eagle
Trustee
- -----------------------------
Randall K. Rowe
Trustee
- -----------------------------
Daniel C. Staton
Trustee
- -----------------------------
Fredrick W. Petri
</TABLE>
II-4
<PAGE> 29
<TABLE>
INDEX TO EXHIBITS
<CAPTION>
EXHIBIT DOCUMENT DESCRIPTION
NUMBER --------------------
- -------
<C> <S>
4.1 Second Amended and Restated Declaration of Trust of the Registrant
(Incorporated by reference to exhibit 3.5 to Registration Statement No. 33-83016).
4.2 Amended and Restated Bylaws of the Registrant (Incorporated by reference to exhibit 3.4 to
Registration Statement No. 33-83016).
4.3 Amended and Restated Agreement of Limited Partnership of Storage Trust Properties, L.P., as
amended by the First Amendment thereto (Incorporated by reference to exhibit 10.1 to the
Registrant's Annual Report on Form 10-K for the year ended December 31, 1994, and exhibit -----
to the Registrant's Quarterly Report on Form 10Q for the quarter ended September 30, 1996.)
4.4 Form of Common Share Certificate (Incorporated by reference to exhibit 4.1 to Registration
Statement No. 33-83016).
4.5<F*> Form of Warrant Agreement including Form of Warrant Certificates.
5.1 Opinion of Mayer, Brown & Platt.
8.1 Tax Opinion of Mayer, Brown & Platt.
23.1 Consent of Ernst & Young, LLP.
23.2 Consent of KPMG Peat Marwick LLP.
23.3 Consent of Mayer, Brown & Platt (Included in the opinions filed as Exhibits 5.1 and 8.1 to this
Registration Statement).
24.1 Power of Attorney (Included on page II-4 of this Registration Statement).
<FN>
<F*>To be filed by amendment or incorporated by reference in connection with the offering of the Offered Securities.
</TABLE>
II-5
<PAGE> 1
BERLIN 312-782-0600
BRUSSELS TELEX 190404
HOUSTON FACSIMILE
LONDON 312-701-7711
LOS ANGELES
NEW YORK
WASHINGTON
MEXICO CITY CORRESPONDENT
JAUREGUI, NAVARRETE, NADER Y ROJAS
November 15, 1996
The Board of Trustees
Storage Trust Realty
2407 Rangeline Street
Columbia, Missouri 65202
Ladies and Gentlemen:
We have acted as special counsel to Storage Trust Realty, a Maryland real
estate investment trust (the "Company"), in connection with the registration
of the following securities (the "Securities") of the Company having an
aggregate initial offering price of up to $150,000,000: (i) common shares of
beneficial interest, $.01 par value per share (the "Common Shares"), and
(ii) warrants exercisable for Common Shares (the "Common Share Warrants").
The Securities may be offered and sold by the Company from time to time as
set forth in the prospectus (the "Prospectus") which forms a part of the
Registration Statement on Form S-3, to which this opinion is filed as an
exhibit (the "Registration Statement"), under the Securities Act of 1933, as
amended (the "Act"), and as may be set forth in one or more supplements to
the Prospectus (each a "Prospectus Supplement"). Capitalized terms used but
not defined herein shall have the respective meanings assigned to them in
the Registration Statement.
The Common Share Warrants will be issued under one or more warrant
agreements (each a "Warrant Agreement"), each to be between the Company and
a financial institution identified therein as a warrant agent (each, a
"Warrant Agent"). The issuance of, and certain terms of, the Securities to
be issued by the Company from time to time will be approved by the Board of
Trustees of the Company or a committee thereof as part of the trust action
taken and to be taken in connection with the authorization of the issuance
of the Securities (the "Trust Proceedings").
<PAGE> 2
The Board of Trustees
Storage Trust Realty
November 15, 1996
Page 2
As special counsel to the Company, we have examined originals or
copies certified or otherwise identified to our satisfaction of the
Company's Second Amended and Restated Declaration of Trust and Amended and
Restated Bylaws, resolutions of the Company's Board of Trustees, and such
other Company records, instruments, certificates and documents and such
questions of law as we considered necessary to enable us to express this
opinion. As to certain facts material to our opinion, we have relied, to
the extent we deem such reliance proper, upon certificates of public
officials and officers of the Company. In rendering this opinion, we have
assumed the genuineness of all signatures, the authenticity of all documents
submitted to us as originals and the conformity to authentic original
documents of all documents submitted to us as copies.
Based upon and subject to the foregoing and to the assumptions,
limitations and conditions set forth herein, we are of the opinion that:
(1) when the Registration Statement has become effective under the
Act, and upon the completion of all Trust Proceedings relating to the Common
Shares and the due execution, countersignature and delivery of certificates
representing the Common Shares, the Common Shares, when paid for and issued
in accordance with the resolutions of the Board of Trustees of the Company
authorizing their issuance (and assuming that any shares of beneficial
interest, $.01 par value per share, of the Company issued between the date
hereof and the date on which the Common Shares are actually issued (not
including any of the Common Shares), when aggregated with all shares of
beneficial interest issued as of the date hereof and the Common Shares, will
not exceed the total number of shares of beneficial interest that the
Company is authorized to issue), will be duly authorized, validly issued,
fully paid and, except as described below, nonassessable; and
(2) when the Registration Statement has become effective under the
Act and when the Common Share Warrants have been duly established by the
relevant Warrant Agreement and upon completion of all Trust Proceedings
relating to the Common Share Warrants and the due execution, authentication,
issuance and delivery of certificates representing the Common Share
Warrants, the Common Share Warrants, when paid for and issued in accordance
with the resolutions of the Board of Trustees of the Company authorizing
their issuance (and assuming that any shares of beneficial interest, $.01
par value per share, of the Company issued between
<PAGE> 3
The Board of Trustees
Storage Trust Realty
November 15, 1996
Page 3
the date hereof and the date on which the Common Share Warrants are actually
issued, when aggregated with all shares of beneficial interest issued as of the
date hereof and the Common Shares issuable upon exercise of the Common Share
Warrants, will not exceed the total number of shares of beneficial interest that
the Company is authorized to issue), will be duly authorized and will be binding
obligations of the Company enforceable against the Company in accordance with
their respective terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting creditor's
rights generally and subject to general principles of equity.
Our opinion in paragraph (1) above with respect to nonassessability of
the Common Shares does not pertain to the potential liability of shareholders of
a real estate investment trust for debts and liabilities of the Company.
Section 5-350 of the Courts and Judicial Proceedings Article of the Annotated
Code of Maryland provides that a shareholder of a real estate investment trust
is not personally liable for the obligations of the real estate investment
trust. The Company's Second Amended and Restated Declaration of Trust provides
that the shareholders shall not be personally or individually liable in any
manner whatsoever for any debt, act, omission or obligation incurred by the
Company or the trustees, that the shareholders shall not be liable to assessment
and that the trustees shall have no power to bind the shareholders personally.
The Second Amended and Restated Declaration of Trust further provides that the
Company shall, with certain limited exceptions, indemnify and hold harmless
shareholders against all claims and liabilities and related reasonable expenses
to which they become subject by virtue of their status as current or former
shareholders. In addition, we have been advised that the Company has a policy
of inserting a clause in its business, management and other contracts that
provides that shareholders shall not be personally liable thereunder.
Accordingly, no personal liability should attach to the Company's shareholders
for contract claims under any contract containing such a clause where adequate
notice is given. However, with respect to tort claims, contract claims where
shareholder liability is not so negated, claims for taxes and certain statutory
liability, the shareholders may, in some jurisdictions, be personally liable for
such claims and liabilities.
To the extent that the obligations of the Company under each Warrant
Agreement may be dependent upon such matters, we assume for
<PAGE> 4
The Board of Trustees
Storage Trust Realty
November 15, 1996
Page 4
purposes of this opinion that the Warrant Agent will be duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization; that the Warrant Agent will be duly qualified to engage in the
activities contemplated by the Warrant Agreement; that the Warrant Agreement
will be duly authorized, executed and delivered by the Warrant Agent and will
constitute the legal, valid and binding obligation of the Warrant Agent
enforceable against the Warrant Agent in accordance with its terms; that the
Warrant Agent will be in compliance, generally with respect to acting as a
Warrant Agent under the Warrant Agreement, with all applicable laws and
regulations; and that the Warrant Agent will have the requisite
organizational and legal power and authority to perform its obligations
under the Warrant Agreement.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us under the caption "LEGAL
MATTERS."
Very truly yours,
MAYER, BROWN & PLATT
<PAGE> 1
November 15, 1996
Storage Trust Realty
2407 Rangeline Street
Columbia, Missouri 65202
Re: Partnership Classification; Status
as a Real Estate Investment Trust ("REIT");
Information in the Registration Statement under
"FEDERAL INCOME TAX CONSIDERATIONS" and
"CERTAIN UNITED STATES TAX CONSIDERATIONS FOR
NON-U.S. SHAREHOLDERS"
-----------------------------------------------
Gentlemen:
We have acted as special counsel to Storage Trust Realty, a Maryland
real estate investment trust ("the Company"), in connection with the
registration of one or more series of common shares of beneficial interest
(the "Common Shares") and warrants exercisable for Common Shares (the "Common
Share Warrants", and together with the Common Shares, the "Securities"), with an
aggregate public offering price of up to $150,000,000, all of which Securities
may be offered and sold by the Company from time to time as set forth in the
prospectus (the "Prospectus") which forms a part of the Registration Statement
on Form S-3 filed with the Securities and Exchange Commission on November 15,
1996, (the "Registration Statement") and as may be set forth in one or more
supplements to the Prospectus. Unless otherwise specifically defined herein,
all capitalized terms have the meanings assigned to them in the Registration
Statement.
In connection with the registration of the Securities, you have requested
our opinions concerning (i) the treatment of the Operating Partnership as a
partnership for Federal income tax purposes, and not as an association taxable
as a corporation; (ii) the qualification and taxation for Federal income tax
purposes of the Company as a REIT; and (iii) the information in the Registration
Statement under the headings "FEDERAL INCOME TAX CONSIDERATIONS" and "CERTAIN
UNITED STATES TAX CONSIDERATIONS FOR NON-U.S. SHAREHOLDERS."
<PAGE> 2
Storage Trust Realty
November 15, 1996
Page 2
In formulating our opinions, we have reviewed and relied upon the
partnership agreement of the Operating Partnership, the Registration
Statement, other documents and information provided by you, and such
applicable provisions of law and other documents as we have considered
necessary or desirable for purposes of the opinions expressed herein.
In addition, we have relied upon the Company's certificate (the
"Officer's Certificate"), executed by a duly appointed officer of the
Company, setting forth certain representations relating to the organization
and actual and proposed operation of the Company, the Operating Partnership,
the Subsidiary Company and each of the partnerships in which the Operating
Partnership does or will directly or indirectly hold an interest and which
actually owns an interest in real property (the "Property Partnerships").
For purposes of our opinions, we have not made an independent investigation
of the facts set forth in such documents, the Officer's Certificate, the
partnership agreements for the Operating Partnership or the Property
Partnerships, or the Registration Statement. We have, consequently, relied
upon your representations that the information presented in such documents
or otherwise furnished to us accurately and completely describes all
material facts. No facts have come to our attention, however, that would
cause us to question the accuracy or completeness of such facts or documents
in a material way.
In rendering these opinions, we have assumed that the transactions
contemplated by the foregoing documents will be consummated in accordance
with the operative documents, and that such documents accurately reflect the
material facts of such transactions. The opinion set forth in the subparagraph
numbered one in the next succeeding paragraph is subject to the condition that
the Operating Partnership is not and does not become a "publicly traded
partnership." In addition, the opinions set forth below are based on the
correctness of the following specific assumptions: (i) the Company, the
Operating Partnership, the Subsidiary Company and the Property Partnerships have
been and will each be operated in the manner described in the applicable
partnership agreement or other organizational documents and in the Registration
Statement, and all terms and provisions of such agreements and documents have
been and will continue to be complied with by all parties thereto; (ii) each
partner in the Operating Partnership has been motivated in acquiring its
partnership interest by its anticipation of economic rewards apart from tax
considerations; and (iii) there has been no change in the applicable laws of the
State of Maryland or Delaware, the Code, the regulations promulgated
<PAGE> 3
Storage Trust Realty
November 15, 1996
Page 3
thereunder by the Treasury Department, and the interpretations of the Code and
such regulations by the courts and the Internal Revenue Service, all as they are
in effect and exist at the date of this letter. With respect to the last
assumption, it should be noted that statutes, regulations, judicial decisions,
and administrative interpretations are subject to change at any time and, in
some circumstances, with retroactive effect. A material change that is made
after the date hereof in any of the foregoing bases for our opinions, could
affect our conclusions.
Based upon and subject to the foregoing, it is our opinion that:
1. The Operating Partnership will be treated, for Federal income tax
purposes, as a partnership, and not as an association taxable as a
corporation.
2. Beginning with the Company's taxable year ending December 31,
1994, the Company has been organized in conformity with the requirements for
qualification as a REIT under the Code, and the Company's actual and proposed
method of operation, as described in the Registration Statement and as
represented in the Officer's Certificate, has enabled it and will continue to
enable it to satisfy the requirements for qualification as a REIT.
3. The information in the Registration Statement under the headings
"FEDERAL INCOME TAX CONSIDERATIONS" and "CERTAIN UNITED STATES TAX
CONSIDERATIONS FOR NON-U.S. SHAREHOLDERS," to the extent that it constitutes
matters of law or legal conclusions, has been reviewed by us and is correct
in all material respects.
Other than as expressly stated above, we express no opinion on any
issue relating to the Company, the Operating Partnership, any Property
Partnership or to any investment therein.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of the name of our firm therein and
under the caption "FEDERAL INCOME TAX CONSIDERATIONS" in the Registration
Statement.
Very truly yours,
MAYER, BROWN & PLATT
<PAGE> 1
Exhibit 23.1
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) of Storage Trust Realty for the
registration of its common shares and common share warrants in an aggregate
amount of $150,000,000 and to the incorporation by reference therein of
(1) our report dated January 24, 1996, except for Note 9, as to which the
date is March 5, 1996, with respect to the consolidated and combined
financial statements of Storage Trust Realty incorporated by reference
in its Annual Report (Form 10-K) for the year ended December 31, 1995
and the related financial statement schedule included therein filed with
the Securities and Exchange Commission, (2) our report dated May 31,
1996, with respect to the Historical Summaries of Combined Gross Revenue
and Direct Operating Expenses included in the Current Report on Form 8-K
of Storage Trust Realty dated May 24, 1996 and (3) our report dated
August 29, 1996, with respect to the Historical Summaries of Combined
Gross Revenue and Direct Operating Expenses included in the Current
Report on Form 8-K of Storage Trust Realty dated September 16, 1996.
/s/ Ernst & Young LLP
Chicago, Illinois
November 15, 1996
<PAGE> 1
Exhibit 23.2
INDEPENDENT AUDITORS' CONSENT
The Board of Trustees
Storage Trust Realty:
We consent to the incorporation by reference in the registration statement
on Form S-3 filed on November 15, 1996, of Storage Trust Realty of our report
dated May 31, 1996, with respect to the Historical Summary of Combined
Gross Revenue and Direct Operating Expenses of the Balcor/Colonial Facilities
for the year ended December 31, 1995, which report appears in the Form 8-K
of Storage Trust Realty dated May 24, 1996 as filed on June 7, 1996, and to
the reference to our firm under the heading "Experts" in the prospectus.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Fort Worth, Texas
November 15, 1996
