<PAGE>
FILED PURSUANT TO
RULE 424(b)(2)
FILE NO: 333-32755
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED MARCH 11, 1998
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED OCTOBER 1, 1997
$100,000,000
WEEKS REALTY, L.P.
% NOTES DUE MARCH 15,
[LOGO OF WEEKS REALTY,
L.P. APPEARS HERE] ----------
Weeks Realty, L.P., a limited partnership that focuses primarily on the
acquisition, development, ownership and operation of industrial and office
properties in select suburban markets in the southeastern United States, will
issue % Notes Due March 15, offered hereby in the aggregate principal
amount of $100,000,000. Interest on the Notes is payable semi-annually on March
15 and September 15 of each year, commencing September 15, 1998. The Notes
mature on March 15, . The Notes may be redeemed at any time at the option of
the Operating Partnership, in whole or in part, at a redemption price equal to
the sum of (i) the principal amount of the Notes being redeemed plus accrued
interest to the redemption date and (ii) the Make-Whole Amount, if any. See
"Description of Notes--Optional Redemption." The Notes are not subject to any
mandatory sinking fund. The Notes are unsecured obligations of the Operating
Partnership and will rank pari passu with each other and with all unsecured and
unsubordinated indebtedness of the Operating Partnership and will be
effectively subordinated to all secured indebtedness of the Operating
Partnership and its Subsidiaries. As of December 31, 1997, the Operating
Partnership and its Subsidiaries had outstanding $101.5 million of unsecured,
unsubordinated indebtedness, $192.6 million of secured indebtedness and $616.0
million of unencumbered assets. As of December 31, 1997, on a pro forma basis,
after giving effect to the acquisition of the Beacon Centre Properties, the
Codina Transaction, the February 1998 Common Unit Issuance and the Offering,
the Operating Partnership and its Subsidiaries would have had outstanding
$142.8 million of unsecured, unsubordinated indebtedness, $270.6 million of
secured indebtedness and $676.7 million of unencumbered assets.
The Notes will be represented by a single Global Note registered in the name
of the nominee of The Depository Trust Company. Beneficial interests in the
Global Note will be shown on, and transfers thereof will be effected only
through, records maintained by DTC and its participants. Except as described in
"Description of Notes--Book-Entry System," Notes in definitive form will not be
issued. The Notes will be issued only in denominations of $1,000 and integral
multiples thereof.
Application has been made to list the Notes on the New York Stock Exchange,
although there can be no assurance that the Notes will be approved for listing.
----------
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 SUPPLEMENT OR THE
PROSPECTUS TO WHICH IT RELATES. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
----------
<TABLE>
<CAPTION>
PROCEEDS TO
INITIAL PUBLIC UNDERWRITING OPERATING
OFFERING PRICE(1) DISCOUNT(2) PARTNERSHIP(1)(3)
----------------- ------------ -----------------
<S> <C> <C> <C>
Per Note....................... % % %
Total.......................... $ $ $
</TABLE>
- -----
(1) Plus accrued interest, if any, from March 15, 1998.
(2) The Operating Partnership has agreed to indemnify the Underwriters against
certain liabilities, including liabilities under the Securities Act of
1933. See "Underwriting."
(3) Before deducting estimated expenses of $ 250,000 payable by the Operating
Partnership.
----------
The Notes are offered severally by the Underwriters, as specified herein,
subject to receipt and acceptance by them and subject to their right to reject
any order in whole or in part. It is expected that the Notes will be ready for
delivery in book-entry form only through the facilities of DTC in New York, New
York on or about March , 1998, against payment therefor in immediately
available funds.
GOLDMAN, SACHS & CO. MORGAN STANLEY DEAN WITTER
----------
The date of this Prospectus Supplement is March , 1998.
<PAGE>
[ART]
<PAGE>
PROSPECTUS SUPPLEMENT SUMMARY
The following is qualified in its entirety by the more detailed information
and financial information and statements, and the notes thereto, appearing
elsewhere in this Prospectus Supplement and the accompanying Prospectus and
incorporated herein or therein by reference. This Prospectus Supplement and the
accompanying Prospectus, including documents incorporated herein and therein by
reference, contain forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933, as amended (the "Securities Act"), and Section
21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act").
Forward-looking statements are inherently subject to risks and uncertainties,
many of which cannot be predicted with accuracy and some of which might not
even be anticipated. Future events and actual results, financial and otherwise,
may differ materially from the events and results discussed in the forward-
looking statements. Factors that might cause such a difference include, but are
not limited to, the general economic climate, competition and the supply of and
demand for industrial and suburban office properties in the Operating
Partnership's markets, interest rate levels, the availability of financing,
potential environmental liability and other risks associated with the
ownership, development and acquisition of properties, including risks that
tenants will not take or remain in occupancy or pay rent, or that construction
or operating costs may be greater than anticipated, and those discussed in
"Business and Properties--Acquisition and Development Risks" appearing
elsewhere in this Prospectus Supplement and "Management's Discussion and
Analysis of Results of Operations and Financial Condition" appearing in the
Operating Partnership's Quarterly Report on Form 10-Q for the fiscal quarter
ended September 30, 1997, which is incorporated by reference in the
accompanying Prospectus. All references to the "Operating Partnership" include
Weeks Realty, L.P., its consolidated Subsidiaries and predecessors of Weeks
Realty, L.P., unless the context indicates otherwise. The offering of the
Operating Partnership's % Notes due March 15, (the "Notes") pursuant to
this Prospectus Supplement is referred to herein as the "Offering."
THE OPERATING PARTNERSHIP
The Operating Partnership is a limited partnership that focuses primarily on
the acquisition, development, ownership and operation of industrial and office
properties in select suburban markets in the southeastern United States. The
Operating Partnership, together with its Subsidiaries (as defined in the
accompanying Prospectus under the Section entitled "Description of Debt
Securities--Certain Covenants"), is the entity through which Weeks Corporation
("Weeks" or the "Company"), a self-administered, self-managed, geographically
focused real estate investment trust ("REIT"), conducts all its business.
At February 28, 1998, the Operating Partnership's portfolio was comprised of
313 Properties totaling approximately 25.4 million square feet, including 44
Properties and one Property expansion (totaling approximately 5.7 million
square feet) under development and/or under agreement to acquire. At February
28, 1998, industrial Properties represented approximately 88.9% of the square
footage of all of the Properties, suburban office Properties represented
approximately 9.3% and retail Properties and retail ground leases represented
approximately 1.8%. The average Occupancy Rate of the Operating Partnership's
In-service Properties was 96.0% at December 31, 1997. As used herein,
"Properties" includes properties under development and/or under agreement to
acquire as of the date information is provided herein with respect to the
Properties, and "In-service Properties" excludes those Properties under
development which are not yet stabilized and Properties under agreement to
acquire. "Occupancy Rate" means the rate of occupancy calculated based on
leases under which tenants are paying rent.
At February 28, 1998, the Operating Partnership and its Subsidiaries also
owned or controlled (through agreements to acquire, options and marketing and
development agreements) approximately 1,895.4 net usable acres of undeveloped
land located primarily in existing business parks with zoning and
infrastructure in place. The Operating Partnership believes the development
potential of this land could ultimately total approximately 19.2 million square
feet.
S-3
<PAGE>
With its acquisitions in Nashville, the Raleigh-Durham-Chapel Hill area of
North Carolina (the "Research Triangle"), its recent acquisition of Beacon
Centre in Miami (see "Recent Developments-- Acquisitions"), and with the
expansion of its activities in Orlando, Tampa and Jacksonville, the Operating
Partnership has reduced its concentration of Properties in metropolitan Atlanta
to 58.4% as of February 28, 1998 (based on square footage and pro forma to
include the Properties under development and/or under agreement to acquire)
from 92.9% at December 31, 1995 (calculated on the same basis on that date). In
addition, over approximately the same period, the Operating Partnership has
significantly increased its tenant base and reduced its exposure to any single
tenant. At December 31, 1997, the Operating Partnership's In-Service Properties
were leased to 727 tenants, and its largest tenant represented 3.1% of the
Operating Partnership's total Annualized Base Rent. This compares to 351
tenants at December 31, 1995, with the Operating Partnership's largest tenant
representing 6.9% of the Operating Partnership's total Annualized Base Rent on
that date. As used herein, "Annualized Base Rent" means annualized current base
rent assuming expiration of rental concessions, if any, for leases under which
tenants are paying rent.
The Operating Partnership owns, develops and operates primarily industrial
and suburban office Properties, most of which are located in landscaped
business park settings. The Operating Partnership's business strategy
emphasizes high quality Properties and tenant service. The Operating
Partnership's and its Subsidiaries' more than 400 employees have experience in
and are engaged in virtually every aspect of the real estate business,
including development, construction, engineering, design, landscape, leasing,
marketing and property management. The Operating Partnership's strategy for
growth includes intensive management of its Properties, developing and
acquiring additional Properties that are consistent with its existing
portfolio, and owning and controlling undeveloped land sufficient to develop
new and existing business parks and to meet the expansion and relocation needs
of tenants. The Operating Partnership concentrates its activities in a limited
number of cities in the Southeast where it believes it can sustain a
significant market presence.
THE PROPERTIES
The following table sets forth, as of February 28, 1998, the location of the
313 Properties, including the 44 Properties and one Property expansion
(totaling approximately 5.7 million square feet) under development and/or under
agreement to acquire, and the Operating Partnership's and its Subsidiaries'
undeveloped land interests. See "Recent Developments--Acquisitions," "Business
and Properties--Acquisitions," "--Recently Completed Acquisitions," "--Pending
Acquisitions" and "--Development."
<TABLE>
<CAPTION>
PERCENT UNDEVELOPED ESTIMATED
TOTAL OF TOTAL LAND DEVELOPMENT POTENTIAL
NUMBER OF SQUARE SQUARE (NET USABLE OF UNDEVELOPED LAND
LOCATION PROPERTIES FEET FEET ACRES) (SQUARE FEET)(1)
-------- ---------- ---------- -------- ----------- ---------------------
<S> <C> <C> <C> <C> <C>
Atlanta, GA............. 199 14,821,165 58.4% 686.1 7,453,000
Miami, FL............... 27 2,845,185 11.2 9.3 85,000
Nashville, TN........... 26 2,689,533 10.6 160.2 1,946,000
Research Triangle, NC... 34 2,621,848 10.3 249.7 2,470,000
Orlando, FL............. 17 1,230,870 4.8 155.4 1,774,000
Spartanburg, SC......... 4 491,200 1.9 363.8 2,493,000
Tampa, FL............... 3 366,994 1.4 96.8 1,140,000
Jacksonville, FL........ 3 318,100 1.4 174.1 1,792,000
--- ---------- ----- ------- ----------
Total................... 313 25,384,895 100.0% 1,895.4 19,153,000
=== ========== ===== ======= ==========
</TABLE>
- --------
(1) Based upon the Operating Partnership's estimate of the appropriate density
and anticipated building types that may be developed, net of land necessary
to provide for adequate infrastructure. There can be no assurance that the
Operating Partnership's estimate of development potential will be realized.
S-4
<PAGE>
RECENT DEVELOPMENTS
FOURTH QUARTER AND YEAR-END 1997 RESULTS
The Operating Partnership's total revenues for the year ended December 31,
1997 increased to $92.0 million from total revenues of $53.9 million for the
same period in 1996. Net income available to Common Unitholders was $26.5
million, or $1.24 per Common Unit, for the year ended December 31, 1997,
compared with $15.8 million or $1.11 per Common Unit, for the year ended
December 31, 1996. As used herein, "Units" refers to limited partnership
interests in the Operating Partnership, "Common Units" refers to common limited
partnership interests in the Operating Partnership, and "Preferred Units"
refers to preferred limited partnership interests in the Operating Partnership.
The Preferred Units relate to Weeks' $150 million issuance in October 1997, of
its 8.00% Series A Cumulative Redeemable Preferred Stock (the "Series A
Preferred") and are economically equivalent to shares of the Series A
Preferred.
The Operating Partnership's total revenues for the three months ended
December 31, 1997, increased to $26.4 million from total revenues of $15.8
million for the same period in 1996. Net income available to Common Unitholders
was $7.3 million, or $0.32 per Common Unit, for the three months ended December
31, 1997, compared with $4.5 million, or $0.28 per Common Unit for the three
months ended December 31, 1996. All of the per Unit amounts included above
refer to basic earnings per Unit.
The following table sets forth summary financial information for the
Operating Partnership on a consolidated basis for the three months and the
years ended December 31, 1997 and 1996.
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS YEAR YEAR
ENDED ENDED ENDED ENDED
DEC. 31, 1997 DEC. 31, 1996 DEC. 31, 1997 DEC. 31, 1996
------------- ------------- ------------- -------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
(IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C> <C> <C>
Operating Data:
Total revenue......... $26,403 $15,820 $92,020 $53,883
Net income............ 9,987 4,459 29,194 15,809
Net income available
to Common
Unitholders.......... 7,267 4,459 26,474 15,809
Net income per Common
Unit--
Basic............... $ 0.32 $ 0.28 $ 1.24 $ 1.11
Diluted(1).......... $ 0.31 $ 0.28 $ 1.23 $ 1.10
Weighted average
Common Units--
Basic............... 23,051 15,918 21,380 14,280
Diluted(2).......... 23,241 16,075 21,580 14,386
Funds from
Operations(3)(4)..... $14,067 $ 8,527 $50,543 $29,323
EBIDA(4)(5)........... 20,600 12,361 71,962 41,926
Ratio of funds from
operations before
preferred
distributions and
fixed charges to
fixed
charges(3)(6)(7)(8).. 3.74x 2.64x 2.95x 2.75x
Ratio of funds from
operations before
preferred
distributions and
fixed charges to
preferred
distributions and
fixed
charges(3)(6)(8)(9).. 2.51x 2.64x 2.66x 2.75x
Ratio of earnings to
fixed
charges(6)(10)....... 2.52x 1.78x 1.98x 1.88x
</TABLE>
S-5
<PAGE>
- --------
(1) Computed by dividing net income available to Common Unitholders by weighted
average Common Units (diluted).
(2) Represents the weighted average Common Units outstanding plus the dilutive
effect of outstanding Weeks common stock options. The net proceeds from the
exercise of Weeks common stock options are contributed to the Operating
Partnership in exchange for additional Common Units and, as such, the Weeks
common stock options have a corresponding dilutive effect on the net income
per Common Unit amounts of the Operating Partnership. Common Unit
equivalents related to outstanding Weeks common stock options totaled
190,000 and 157,000 for the three months and 200,000 and 106,000 for the
years ended December 31, 1997 and 1996, respectively.
(3) The Operating Partnership believes that funds from operations provides an
additional indicator of the financial performance of the Operating
Partnership. "Funds from operations" is defined by the National Association
of Real Estate Investment Trusts ("NAREIT") to mean net income (loss)
determined in accordance with generally accepted accounting principles
("GAAP") excluding gains (or losses) from debt restructuring and sales of
property, plus depreciation and amortization, and after adjustments for
unconsolidated partnerships and joint ventures. Adjustments for
unconsolidated partnerships and joint ventures will be calculated to
reflect funds from operations on the same basis. The Operating Partnership
computes funds from operations under the current NAREIT definition by
subtracting from net income the distributions to Preferred Unitholders
before making an adjustment for the non-cash items described above. Funds
from operations does not represent cash flow from operating, investing and
financing activities as defined by GAAP. Additionally, funds from
operations does not measure whether cash flow is sufficient to fund all
cash flow needs, including principal amortization, capital expenditures and
distributions to Unitholders, and should not be considered as an
alternative to net income for purposes of evaluating the Operating
Partnership's operating performance or as an alternative to cash flow, as
defined by GAAP, as a measure of liquidity. Funds from operations presented
herein under the NAREIT guidelines is not necessarily comparable to funds
from operations presented by other real estate companies due to the fact
that not all real estate companies use the same definition. However, the
Operating Partnership's funds from operations is comparable to the funds
from operations of real estate companies that use the current NAREIT
definition.
(4) The Operating Partnership realized cash flows from operating, investing and
financing activities as follows (in thousands):
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
DEC. 31, 1997 DEC. 31, 1996
------------- -------------
(UNAUDITED)
<S> <C> <C>
Provided by (used in)
Operating activities........................... $ 49,097 $ 28,031
Investing activities........................... (173,574) (120,323)
Financing activities........................... 129,638 91,570
</TABLE>
(5) EBIDA means net income before property gains, interest expense,
depreciation and amortization and the amortization of deferred financing
costs. The Operating Partnership believes that in addition to cash flows
and net income, EBIDA is a useful financial performance measurement for
assessing operating performance because, together with net income and cash
flows, EBIDA provides investors with an additional basis to evaluate the
ability of the Operating Partnership to incur and service debt and to fund
acquisitions and other capital expenditures. Excluded from EBIDA are
financing costs such as interest as well as depreciation and amortization,
each of which can significantly affect the Operating Partnership's results
of operations and liquidity and should be considered in evaluating the
Operating Partnership's operating performance. Further, EBIDA does not
represent net income or cash flows from operating, financing and investing
activities as defined by GAAP and does not necessarily indicate that cash
flows will be sufficient to fund cash needs. It should not be considered
S-6
<PAGE>
as an alternative to net income as an indicator of the Operating
Partnership's operating performance or to cash flows as a measure of
liquidity.
(6) Fixed charges consist of interest costs including amortization of debt
discount and deferred financing fees, whether expensed or capitalized, and
the interest component of rental expense.
(7) The ratio of funds from operations before distributions to Preferred
Unitholders and fixed charges, to fixed charges is calculated as funds
from operations plus distributions to Preferred Unitholders and fixed
charges (excluding capitalized interest), divided by fixed charges.
(8) The Operating Partnership believes that in addition to the ratio of
earnings to fixed charges, this ratio provides a useful measure of the
Operating Partnership's ability to service its debt because of the
exclusion of non-cash items such as depreciation and amortization from the
definition of funds from operations. This ratio differs from a GAAP-based
ratio of earnings to fixed charges and should not be considered as an
alternative to that ratio.
(9) The ratio of funds from operations before distributions to Preferred
Unitholders and fixed charges, to distributions to Preferred Unitholders
and fixed charges is calculated as funds from operations plus
distributions to Preferred Unitholders and fixed charges (excluding
capitalized interest), divided by distributions to Preferred Unitholders
and fixed charges.
(10) The ratio of earnings to fixed charges is computed as income from
operations, before extraordinary items, plus fixed charges (excluding
capitalized interest), divided by fixed charges.
ACQUISITIONS
On January 9, 1998, the Operating Partnership acquired an approximately 2.5
million square foot portfolio of Properties in the Beacon Centre project in
Miami, Florida (the "Beacon Centre Properties"). The Beacon Centre Properties
are comprised of 24 business distribution, business service, office and retail
buildings on approximately 205 acres, and the landlord's interest in four
ground leases. Codina Group, Inc. ("Codina") will continue to manage the
Beacon Centre Properties for the Operating Partnership pursuant to a
management agreement. At December 31, 1997, the average Occupancy Rate of the
Beacon Centre Properties was approximately 99%. The purchase price of the
Beacon Centre Properties was approximately $175.0 million, including closing
costs and acquisition expenses, and consisted of the issuance of $28.3 million
of Common Units, the assumption of approximately $78.0 million of mortgage
indebtedness, the assumption of certain other liabilities in excess of certain
other assets of approximately $4.3 million, and cash of approximately $64.4
million. In connection with the acquisition, the Operating Partnership has
also agreed, subject to customary closing conditions, to acquire a 90,000
square foot Property under development and approximately 9.3 acres of adjacent
undeveloped land. See "Business and Properties--Acquisitions," "--Recently
Completed Acquisitions," "--Pending Acquisitions" and "--Acquisition and
Development Risks."
On February 24, 1998, an unconsolidated Subsidiary of the Operating
Partnership, Weeks Realty Services, Inc., acquired for approximately $9.0
million in cash a one-third interest in Codina, a South Florida commercial and
industrial real estate services company that developed the Beacon Centre
Properties (the "Codina Transaction"). St. Joe Corporation (NYSE: SJP), which,
through its affiliates, is Florida's largest single private landowner, also
acquired a one-third interest in Codina. Together, the three companies intend
to pursue development and acquisition activity throughout South Florida.
Armando Codina, Chief Executive Officer of Codina, will also join the Board of
Directors of the Company. As part of the Codina Transaction, the parties
entered into certain exclusive dealing and non-competition agreements covering
a four-county area of South Florida. See "Business and Properties--Acquisition
and Development Risks."
COMMON UNIT ISSUANCE
On February 23, 1998, the Company sold 1,072,797 shares of common stock and
received net proceeds of approximately $33.1 million. The proceeds were
contributed to the Operating Partnership
S-7
<PAGE>
in exchange for the same number of Common Units (the "February 1998 Common Unit
Issuance"). The Operating Partnership used the proceeds to repay borrowings
under the Credit Facility (as defined herein).
SUBSIDIARY REFINANCING
At December 31, 1997, certain of the Operating Partnership's unconsolidated
Subsidiaries had outstanding $16.6 million of unsecured indebtedness under the
Credit Facility. In connection with the Offering, these Subsidiaries refinanced
this indebtedness with intercompany loans from the Operating Partnership (the
"Subsidiary Refinancing"). Accordingly, as of the date of this Prospectus
Supplement, the Operating Partnership's Subsidiaries do not have any
outstanding unsecured indebtedness, except for a $2.0 million unsecured
obligation of a Subsidiary of the Operating Partnership, which incurred such
indebtedness in connection with the Operating Partnership's acquisition of
certain development land in Jacksonville, Florida. In connection with the
Subsidiary Refinancing, the Operating Partnership's Subsidiaries, including the
Subsidiaries noted above, have agreed not to incur any additional unsecured
indebtedness other than through intercompany loans from the Operating
Partnership and trade payables incurred in the ordinary course of business.
S-8
<PAGE>
THE OFFERING
For a more complete description of the terms of the Notes specified in the
following summary, including definitions of capitalized terms not otherwise
provided, see "Description of Notes" in this Prospectus Supplement and
"Description of Debt Securities" in the accompanying Prospectus.
Securities Offered.......... $100,000,000 aggregate principal amount of %
Notes due March 15, .
Maturity.................... The Notes mature on March 15, .
Interest Payment Dates...... Interest on the Notes is payable semi-annually on
March 15 and September 15 of each year,
commencing September 15, 1998.
Optional Redemption......... The Notes may be redeemed at any time at the
option of the Operating Partnership, in whole or
in part, at a redemption price equal to the sum
of (i) the principal amount of the Notes being
redeemed plus accrued interest to the redemption
date and (ii) the Make-Whole Amount, if any. See
"Description of Notes--Optional Redemption."
Ranking..................... The Notes are unsecured obligations of the
Operating Partnership and will rank pari passu
with each other and with all other unsecured and
unsubordinated indebtedness of the Operating
Partnership, except that the Notes will be
effectively subordinated to all secured debt of
the Operating Partnership and its Subsidiaries.
As of December 31, 1997, the Operating
Partnership and its Subsidiaries had outstanding
$101.5 million of unsecured, unsubordinated
indebtedness, $192.6 million of secured
indebtedness, and $616.0 million of unencumbered
assets. As of December 31, 1997, on a pro forma
basis, after giving effect to the acquisition of
the Beacon Centre Properties, the Codina
Transaction, the February 1998 Common Unit
Issuance, the application of the net proceeds
from the Offering as described in "Use of
Proceeds," the Operating Partnership and its
Subsidiaries would have had outstanding $142.8
million of unsecured, unsubordinated
indebtedness, $270.6 million of secured
indebtedness and $676.7 million of unencumbered
assets.
Use of Proceeds............. The net proceeds to the Operating Partnership
from the Offering will be used to repay
outstanding borrowings under the Operating
Partnership's unsecured revolving line of credit
(the "Credit Facility") and for general
partnership purposes. See "Use of Proceeds."
Limitations on Incurrence The Indenture with respect to the Notes contains
of Debt..................... various covenants, including the following:
(1) The Operating Partnership will not, and will
not permit any Subsidiary to, incur any Debt
if, after giving effect thereto, the
aggregate principal amount of all outstanding
Debt of the Operating Partnership and its
Subsidiaries on
S-9
<PAGE>
a consolidated basis is greater than 60% of
the sum of (i) Total Assets as of the end of
the Operating Partnership's calendar quarter
covered in the Operating Partnership's Annual
Report on Form 10-K or Quarterly Report on
Form 10-Q, as the case may be, most recently
filed with the Trustee prior to the incurrence
of such Debt and (ii) the increase in Total
Assets from the end of such quarter,
including, without limitation, increases
resulting from the incurrence of such
additional Debt (such increase, together with
the Total Assets, is referred to as "Adjusted
Total Assets").
(2) The Operating Partnership will not, and will
not permit any Subsidiary to, incur any
Secured Debt, if, after giving effect
thereto, the aggregate amount of all
outstanding Secured Debt is greater than 40%
of Adjusted Total Assets.
(3) The Operating Partnership will not, and will
not permit any Subsidiary to, incur any Debt
if, on a pro forma basis, the Consolidated
Income Available for Debt Service for the
four consecutive fiscal quarters most
recently ended prior to the date of the
incurrence of such Debt would be less than
1.5 times the Annual Service Charge on all
Debt outstanding immediately after the
incurrence of such additional Debt.
(4) The Operating Partnership will maintain Total
Unencumbered Assets of not less than 150% of
the outstanding aggregate principal amount of
Unsecured Debt.
In addition, the ability of the Operating
Partnership's Subsidiaries to incur additional
unsecured indebtedness is subject to certain
limitations. For a more complete description of
the terms and definitions used in the foregoing
covenants, see "Description of Notes--General" in
this Prospectus Supplement and "Description of
Debt Securities--Certain Covenants" in the
accompanying Prospectus.
Listing.................... Application has been made to list the Notes on
the New York Stock Exchange (the "NYSE"),
although there can be no assurance that the Notes
will be approved for listing.
S-10
<PAGE>
THE OPERATING PARTNERSHIP
The Operating Partnership is a limited partnership that focuses primarily on
the acquisition, development, ownership and operation of industrial and office
properties in select suburban markets in the southeastern United States. The
Operating Partnership, together with its Subsidiaries, is the entity through
which Weeks, a self-administered, self-managed, geographically focused REIT,
conducts all of its business.
At February 28, 1998, the Operating Partnership's portfolio was comprised of
313 Properties totaling approximately 25.4 million square feet, including 44
Properties and one Property expansion (totaling approximately 5.7 million
square feet) under development and/or under agreement to acquire. At February
28, 1998, industrial Properties represented approximately 88.9% of the square
footage of all of the Properties, suburban office Properties represented
approximately 9.3% and retail properties and retail ground leases represented
approximately 1.8%. The average Occupancy Rate of the Operating Partnership's
In-service Properties was 96.0% at December 31, 1997.
At February 28, 1998, the Operating Partnership and its Subsidiaries also
owned or controlled (through agreements to acquire, options and marketing and
development agreements) approximately 1,895.4 net usable acres of undeveloped
land located primarily in existing business parks with zoning and
infrastructure in place. The Operating Partnership believes the development
potential of this land could ultimately total approximately 19.2 million
square feet.
With its acquisitions in Nashville, the Research Triangle, its recent
acquisition of Beacon Centre in Miami (see "Prospectus Supplement Summary--
Recent Developments--Acquisitions"), and with the expansion of its activities
in Orlando, Tampa and Jacksonville, Florida, the Operating Partnership has
reduced its concentration of Properties in metropolitan Atlanta to 58.4% as of
February 28, 1998 (based on square footage and pro forma to include the
Properties under development and/or under agreement to acquire) from 92.9% at
December 31, 1995 (calculated on the same basis on that date). In addition,
the Operating Partnership has significantly increased its tenant base and
reduced its exposure to any single tenant. At December 31, 1997, the Operating
Partnership's In-Service Properties were leased to 727 tenants, and the
Operating Partnership's largest tenant represented 3.1% of the Operating
Partnership's total Annualized Base Rent. This compares to 351 tenants at
December 31, 1995, with the Operating Partnership's largest tenant
representing 6.9% of the Operating Partnership's total Annualized Base Rent on
that date.
The Operating Partnership owns, develops and operates primarily industrial
and suburban office Properties, most of which are located in landscaped
business park settings. The Operating Partnership's business strategy
emphasizes high quality Properties and tenant service. The Operating
Partnership's and its Subsidiaries' more than 400 employees have experience in
and are engaged in virtually every aspect of the real estate business,
including development, construction, engineering, design, landscape, leasing,
marketing and property management. The Operating Partnership's strategy for
growth includes intensive management of its Properties, developing and
acquiring additional Properties that are consistent with its existing
portfolio, and owning and controlling undeveloped land sufficient to develop
new and existing business parks and to meet the expansion and relocation needs
of tenants. The Operating Partnership concentrates its activities in a limited
number of cities in the Southeast where it believes it can sustain a
significant market presence.
The Operating Partnership's general partner, Weeks GP Holdings, Inc. ("Weeks
GP" or the "General Partner"), is a wholly owned subsidiary of Weeks. The
Operating Partnership conducts its third-party service businesses through two
unconsolidated Subsidiaries: Weeks Realty Services, Inc. conducts third-party
landscape, property management and leasing services, and Weeks Construction
Services, Inc. conducts third-party construction services. The Operating
Partnership holds 100% of the nonvoting and 1% of the voting common stock of
these Subsidiaries. The remaining voting common
S-11
<PAGE>
stock is held by three executive officers of Weeks. The ownership of the
common stock of each of Weeks Realty Services, Inc. and Weeks Construction
Services, Inc. entitles the Operating Partnership to substantially all (99%)
of the economic benefits from the results of their respective operations.
USE OF PROCEEDS
The net proceeds to the Operating Partnership from the sale of the Notes
offered hereby, after deducting underwriting discounts and commissions and
expenses of the Offering, are expected to be approximately $99.1 million.
The Operating Partnership intends to use the net proceeds of the Offering to
repay borrowings under its $225 million Credit Facility, which amounts have
been incurred to fund development and acquisition activities. The borrowings
under the Credit Facility bear interest at floating rates based on LIBOR or
the prime rate, and the weighted average rate on such borrowings as of
December 31, 1997, was 7.0% per annum, excluding $50 million which had been
swapped to effective fixed rates averaging approximately 7.7%. As of December
31, 1997, outstanding borrowings under the Credit Facility, including
borrowings by unconsolidated Subsidiaries of the Operating Partnership,
totaled approximately $99.5 million. Such outstanding borrowings under the
Credit Facility totaled $159.8 million as of February 28, 1998. The Credit
Facility matures on December 31, 2000, and provides for annual extensions
through December 31, 2002.
CAPITALIZATION
The following table sets forth the capitalization of the Operating
Partnership as of December 31, 1997, on a pro forma basis to reflect the
acquisition of the Beacon Centre Properties, the Codina Transaction, the
February 1998 Common Unit Issuance and the Subsidiary Refinancing, all as
defined herein, and as adjusted to give effect to the Offering and the
application of the net proceeds therefrom as described in "Use of Proceeds."
<TABLE>
<CAPTION>
AS OF DEC. 31, 1997
-------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
Debt
Mortgage notes payable................... $192,595 $ 270,628 $ 270,628
Credit Facility.......................... 82,920(1) 139,872 40,772
% Notes due............................ -- -- 100,000
-------- ---------- ----------
Total debt............................. 275,515 410,500 411,400
-------- ---------- ----------
Partners' capital.......................... 557,392 618,803 618,803
-------- ---------- ----------
Total capitalization....................... $832,907 $1,029,303 $1,030,203
======== ========== ==========
</TABLE>
- --------
(1) Excludes borrowings totaling $16.6 million by unconsolidated Subsidiaries
of the Operating Partnership. These borrowings were repaid with the
proceeds of intercompany loans from the Operating Partnership as part of
the Subsidiary Refinancing. See "Prospectus Supplement Summary--Recent
Developments--Subsidiary Refinancing."
S-12
<PAGE>
SELECTED FINANCIAL AND OTHER INFORMATION
The following table sets forth the Operating Partnership's consolidated
selected financial and operating information for the three months and years
ended December 31, 1997 and 1996. The Operating Partnership's selected balance
sheet data is presented at December 31, 1997 and 1996. This information should
be read in conjunction with all of the financial statements and notes thereto
incorporated by reference in this Prospectus Supplement and the accompanying
Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS YEAR
ENDED ENDED ENDED YEAR
DEC. 31, 1997 DEC. 31, 1996 DEC. 31, 1997 ENDED
(UNAUDITED) (UNAUDITED) (UNAUDITED) DEC. 31, 1996
------------- ------------- ------------- -------------
(IN THOUSANDS, EXCEPT PER UNIT INFORMATION)
<S> <C> <C> <C> <C>
OPERATING DATA:
Rental and reimbursement
revenues............... $ 26,161 $ 15,479 $ 90,806 $ 52,679
Total revenues.......... 26,403 15,820 92,020 53,883
Property operating,
maintenance and real
estate tax expenses.... 5,374 3,186 18,488 10,750
Depreciation and amorti-
zation................. 6,800 4,058 24,144 13,474
Interest expense........ 3,559 3,622 17,900 11,779
Amortization of deferred
financing costs........ 254 222 933 864
General and administra-
tive expenses.......... 1,393 865 5,068 3,039
Interest income......... 513 171 1,509 492
Equity in earnings of
unconsolidated
entities............... 451 421 1,989 1,340
Net income.............. 9,987 4,459 29,194 15,809
Net income available to
Common Unitholders..... 7,267 4,459 26,474 15,809
Net income per Common
Unit--basic............ $ 0.32 $ 0.28 $ 1.24 $ 1.11
Net income per Common
Unit--diluted(1)....... 0.31 0.28 1.23 1.10
Weighted average Common
Units--basic........... 23,051 15,918 21,380 14,280
Weighted average Common
Units--diluted(2)...... 23,241 16,075 21,580 14,386
</TABLE>
<TABLE>
<CAPTION>
DEC. 31, 1997
(UNAUDITED) DEC. 31, 1996
------------- -------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Real estate assets before depreciation............. $ 856,500 $ 592,841
Real estate assets, net............................ 794,952 551,372
Total assets....................................... 852,361 591,849
Total indebtedness................................. 275,515 296,975
Partners' capital.................................. 557,392 281,941
<CAPTION>
YEAR
ENDED
DEC. 31, 1997 YEAR ENDED
(UNAUDITED) DEC. 31, 1996
------------- -------------
(IN THOUSANDS,
EXCEPT RATIOS AND
NUMBER OF PROPERTIES)
<S> <C> <C>
OTHER DATA:
Cash provided by (used in):
Operating activities............................... $ 49,097 $ 28,031
Investing activities............................... (173,574) (120,323)
Financing activities............................... 129,638 91,570
Funds from operations(3)........................... 50,343 29,323
EBIDA(4)........................................... $ 71,962 $ 41,926
Ratio of funds from operations before preferred
distributions and fixed charges to fixed
charges(3)(5)(6)(7)............................... 2.95x 2.75x
Ratio of funds from operations before preferred
distributions and fixed charges to preferred
distributions and fixed charges(3)(5)(7)(8)....... 2.66x 2.75x
Ratio of earnings to fixed charges(5)(9)........... 1.98x 1.88x
Total square feet of In-service Properties(10)..... 17,101 12,976
Number of In-service Properties(10)................ 243 188
</TABLE>
S-13
<PAGE>
- --------
(1) Computed by dividing net income available to Common Unitholders by
weighted average Common Units (diluted).
(2) Represents the weighted average Common Units outstanding and the dilutive
effect of outstanding Weeks common stock options. The net proceeds from
the exercise of Weeks common stock options are contributed to the
Operating Partnership in exchange for additional Common Units and, as
such, the Weeks common stock options have a corresponding dilutive effect
on the net income per Common Unit amounts of the Operating Partnership.
Common Unit equivalents related to outstanding Weeks common stock options
totaled 190,000 and 157,000 for the three months and 200,000 and 106,000
for the years ended December 31, 1997 and 1996, respectively.
(3) The Operating Partnership believes that funds from operations provides an
additional indicator of the financial performance of the Operating
Partnership. "Funds from operations" is defined by NAREIT to mean net
income (loss) determined in accordance with GAAP, excluding gains (or
losses) from debt restructuring and sales of property, plus depreciation
and amortization and after adjustments for unconsolidated partnerships and
joint ventures. Adjustments for unconsolidated partnerships and joint
ventures will be calculated to reflect funds from operations on the same
basis. The Operating Partnership computes funds from operations under the
current NAREIT definition by subtracting from net income the distributions
to Preferred Unitholders before making an adjustment for the non-cash
items described above. Funds from operations does not represent cash flow
from operating, investing and financing activities as defined by GAAP.
Additionally, funds from operations does not measure whether cash flow is
sufficient to fund all cash flow needs, including principal amortization,
capital expenditures and distributions to Unitholders, and should not be
considered as an alternative to net income for purposes of evaluating the
Operating Partnership's operating performance or as an alternative to cash
flow, as defined by GAAP, as a measure of liquidity. Funds from operations
presented herein under the NAREIT guidelines is not necessarily comparable
to funds from operations presented by other real estate companies due to
the fact that not all real estate companies use the same definition.
However, the Operating Partnership's funds from operations is comparable
to the funds from operations of real estate companies that use the current
NAREIT definition.
(4) EBIDA means net income before property gains, interest expense,
depreciation and amortization and the amortization of deferred financing
costs. The Operating Partnership believes that in addition to cash flows
and net income, EBIDA is a useful financial performance measurement for
assessing operating performance because, together with net income and cash
flows, EBIDA provides investors with an additional basis to evaluate the
ability of the Operating Partnership to incur and service debt and to fund
acquisitions and other capital expenditures. Excluded from EBIDA are
financing costs such as interest as well as depreciation and amortization,
each of which can significantly affect the Operating Partnership's results
of operations and liquidity and should be considered in evaluating the
Operating Partnership's operating performance. Further, EBIDA does not
represent net income or cash flows from operating, financing and investing
activities as defined by GAAP and does not necessarily indicate that cash
flows will be sufficient to fund cash needs. It should not be considered
as an alternative to net income as an indicator of the Operating
Partnership's operating performance or to cash flows as a measure of
liquidity.
(5) Fixed charges consist of interest costs including amortization of debt
discount and deferred financing fees, whether expensed or capitalized, and
the interest component of rental expense.
(6) The ratio of funds from operations before distributions to Preferred
Unitholders and fixed charges, to fixed charges is calculated as funds
from operations plus combined distributions to Preferred Unitholders and
fixed charges (excluding capitalized interest), divided by fixed charges.
(7) The Operating Partnership believes that in addition to the ratio of
earnings to fixed charges, this ratio provides a useful measure of the
Operating Partnership's ability to service its debt because of the
exclusion of non-cash items such as depreciation and amortization from the
definition of funds from operations. This ratio differs from a GAAP-based
ratio of earnings to fixed charges and should not be considered as an
alternative to that ratio.
S-14
<PAGE>
(8) The ratio of funds from operations before distributions to Preferred
Unitholders and fixed charges, to distributions to Preferred Unitholders
and fixed charges is calculated as funds from operations plus
distributions to Preferred Unitholders and fixed charges (excluding
capitalized interest), divided by distributions to Preferred Unitholders
and fixed charges.
(9) The ratio of earnings to fixed charges is computed as income from
operations, before extraordinary items, plus fixed charges (excluding
capitalized interest), divided by fixed charges.
(10) At period end.
BUSINESS AND PROPERTIES
The following table sets forth, as of February 28, 1998, the location and
type of the 313 Properties by square feet, including the 44 Properties and one
Property expansion (totaling approximately 5.7 million square feet) under
development and/or under agreement to acquire.
LOCATION AND TYPE OF PROPERTIES
(BY SQUARE FEET)
<TABLE>
<CAPTION>
BUSINESS BULK BUSINESS TOTAL SUBURBAN PERCENT
LOCATION DISTRIBUTION WAREHOUSE SERVICE INDUSTRIAL OFFICE RETAIL TOTAL OF TOTAL
- -------- ------------ --------- --------- ---------- --------- ------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Atlanta, GA............. 7,067,395 5,117,845 1,432,488 13,617,728 1,154,460 48,977 14,821,165 58.4%
Miami, FL............... 2,229,733 -- 136,361 2,366,094 63,240 415,851 2,845,185 11.2
Nashville, TN........... 1,699,476 636,282 353,775 2,689,533 -- -- 2,689,533 10.6
Research Triangle, NC... 726,775 -- 982,453 1,709,228 912,620 -- 2,621,848 10.3
Orlando, FL............. 394,657 486,883 241,330 1,122,870 108,000 -- 1,230,870 4.8
Spartanburg, SC......... 198,000 293,200 -- 491,200 -- -- 491,200 1.9
Tampa, FL............... 68,480 173,514 -- 241,994 125,000 -- 366,994 1.4
Jacksonville, FL........ -- 318,100 -- 318,100 -- -- 318,100 1.4
---------- --------- --------- ---------- --------- ------- ---------- -----
Total................... 12,384,516 7,025,824 3,146,407 22,556,747 2,363,320 464,828 25,384,895 100.0%
---------- --------- --------- ---------- --------- ------- ---------- -----
Percent of Total........ 48.8% 27.7% 12.4% 88.9% 9.3% 1.8% 100.0%
========== ========= ========= ========== ========= ======= ==========
</TABLE>
PROPERTY OCCUPANCY
The following tables set forth the average Occupancy Rate (weighted by
square footage) of the Operating Partnership's In-service Properties as of
December 31, 1997. At that date, the Operating Partnership owned 243 In-
service Properties totaling approximately 17.1 million square feet.
OCCUPANCY RATE OF IN-SERVICE PROPERTIES
AS OF DECEMBER 31, 1997
(BY PROPERTY LOCATION)
<TABLE>
<S> <C>
Atlanta, GA........................................................... 96.0%
Nashville, TN......................................................... 91.8
Research Triangle, NC................................................. 98.1
Orlando, FL........................................................... 97.9
Spartanburg, SC....................................................... 100.0
Jacksonville, FL...................................................... 100.0
-----
Total average....................................................... 96.0%
=====
</TABLE>
OCCUPANCY RATE OF IN-SERVICE PROPERTIES
AS OF DECEMBER 31, 1997
(BY PROPERTY TYPE)
<TABLE>
<S> <C>
Business distribution.................................................. 95.7%
Bulk warehouse......................................................... 99.2
Business service....................................................... 91.3
----
Total industrial average............................................. 96.1
----
Suburban office........................................................ 94.3
Retail................................................................. 97.5
----
Total average........................................................ 96.0%
====
</TABLE>
S-15
<PAGE>
PROPERTY ANNUALIZED BASE RENT
The following tables set forth, as of December 31, 1997, the total
Annualized Base Rent from leases in the Operating Partnership's In-service
Properties, on a percentage basis by the location and type of Property.
PERCENTAGE OF ANNUALIZED BASE RENT
AS OF DECEMBER 31, 1997
(BY PROPERTY LOCATION)
<TABLE>
<S> <C>
Atlanta, GA........................................................... 66.7%
Nashville, TN......................................................... 9.9
Research Triangle, NC................................................. 17.8
Orlando, FL........................................................... 3.9
Spartanburg, SC....................................................... 1.4
Jacksonville, FL...................................................... 0.3
-----
Total............................................................... 100.0%
=====
</TABLE>
PERCENTAGE OF ANNUALIZED BASE RENT
AS OF DECEMBER 31, 1997
(BY PROPERTY TYPE)
<TABLE>
<S> <C>
Business distribution................................................. 44.3%
Bulk warehouse........................................................ 16.9
Business service...................................................... 19.5
-----
Total industrial.................................................... 80.7
-----
Suburban office....................................................... 18.9
Retail................................................................ 0.4
-----
Total............................................................... 100.0%
=====
</TABLE>
ACQUISITIONS
From January 1, 1996 through February 28, 1998, the Operating Partnership
has acquired 111 industrial, suburban office and retail Properties, with a
total of approximately 7.9 million square feet, and with a total cost,
including acquisition-related costs and expenses, of approximately $498.0
million. In addition, the Operating Partnership has agreed to acquire 3
industrial Properties, totaling approximately 357,000 square feet and with a
total cost, including acquisition-related costs and expenses, of approximately
$17.3 million, and has committed, subject to completing or updating its due
diligence procedures, to acquire development land with a total cost of
approximately $21.0 million.
RECENTLY COMPLETED ACQUISITIONS
ACQUISITIONS COMPLETED BETWEEN JANUARY 1, 1996 AND FEBRUARY 28, 1998
(BY PROPERTY LOCATION)
<TABLE>
<CAPTION>
NUMBER OF TOTAL SQUARE OCCUPANCY
PROPERTY LOCATION PROPERTIES FEET RATE(1) TOTAL COST(2)
- ----------------- ---------- ------------ --------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Atlanta, GA..................... 32 1,304,038 80.9% $ 69,702
Nashville, TN................... 21 1,957,663 91.3 103,368
Research Triangle, NC........... 28 2,000,127 98.1 143,169
Orlando, FL..................... 1 60,711 75.8 3,352
Jacksonville, FL................ 1 81,000 100.0 2,939
Miami, FL....................... 28 2,476,565 99.3 175,000
--- --------- ----- --------
Total......................... 111 7,880,104 93.8% $497,530
=== ========= ===== ========
</TABLE>
- --------
(1) As of December 31, 1997.
(2) Includes closing costs and acquisition expenses.
S-16
<PAGE>
PENDING ACQUISITIONS
The following table contains information regarding the Operating
Partnership's Properties currently under agreement to acquire.
ACQUISITIONS--UNDER AGREEMENT TO ACQUIRE
<TABLE>
<CAPTION>
TOTAL ESTIMATED
MARKET/PROPERTY OR NUMBER OF SQUARE ACQUISITION OCCUPANCY ESTIMATED
BUSINESS PARK PROPERTIES FEET(1) DATE(2) RATE(3) COSTS(4)
- ------------------ ---------- ------- ----------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Nashville, TN:
Aspen Grove Business Ctr
320 Premier Court........... 1 106,358 3Q98 68% $ 5,366
Building V.................. 1 160,848 3Q98 47 6,829
Miami, FL:
Beacon Centre Building 13... 1 90,000 1Q99 0 5,100
--- ------- --- -------
Totals...................... 3 357,206 41% $17,295
=== ======= === =======
</TABLE>
- --------
(1) Properties are currently under development or in lease-up. Actual leasable
square feet may vary upon completion.
(2) Estimated acquisition date represents the estimated closing date of the
acquisition of such property under the terms of the applicable agreements.
(3) Properties are currently under development or in lease-up. Occupancy Rate
is as of February 28, 1998.
(4) Includes closing costs and acquisition expenses. There can be no assurance
that the total cost of the Property will not exceed the estimate.
DEVELOPMENT
From January 1, 1996 through February 28, 1998, 29 industrial and suburban
office Properties and 3 Property expansions owned by the Operating
Partnership, with a total of approximately 3.1 million square feet and with a
total cost of approximately $135.0 million, were stabilized. As of
February 28, 1998, these completed and stabilized Properties and the three
Property expansions had an average Occupancy Rate of approximately 98.8%. In
addition, at February 28, 1998, the Operating Partnership had 41 industrial
and suburban office Properties and one Property expansion under development
totaling approximately 5.3 million square feet, with a total estimated cost of
approximately $284.7 million. Of these Properties, 23%, measured by estimated
total cost, are pre-leased build-to-suits. Including these build-to-suits, at
February 28, 1998, approximately 45% of the Operating Partnership's Properties
under development were leased or pre-leased (based on square footage). The
Operating Partnership has substantial experience developing projects
throughout its more than 30-year history, and has developed a systematic
approach to development designed to mitigate risk. This includes carefully
analyzing supply and demand by both property type and submarket before
commencing a project, performing substantially all of the development,
construction and landscaping functions using in-house personnel in order to
control cost, quality and building delivery schedules, thoroughly reviewing
development investment decisions by an Investment Committee consisting of the
Operating Partnership's senior management, diversifying development projects
across a number of locations and property types and limiting the Operating
Partnership's investment in any single project. See "--Acquisition and
Development Risks."
S-17
<PAGE>
The following tables detail the Operating Partnership's development activity
by location and type of Property.
PROPERTIES UNDER DEVELOPMENT
AS OF FEBRUARY 28, 1998
(BY PROPERTY LOCATION)
<TABLE>
<CAPTION>
NUMBER OF
PROPERTIES ESTIMATED
OR ESTIMATED ESTIMATED AVERAGE
PROPERTY SQUARE TOTAL COST PER
PROPERTY LOCATION EXPANSIONS FEET(1) COST(2) PROPERTY(2)
- ----------------- ---------- --------- --------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Atlanta, GA.......................... 19 2,743,485 $127,996 $ 6,737
Nashville, TN........................ 3 464,664 18,380 6,127
Research Triangle, NC................ 6 621,721 53,071 8,845
Orlando, FL.......................... 6 491,519 31,358 5,226
Tampa, FL............................ 3 366,994 21,498 7,166
Jacksonville, FL..................... 2 237,100 7,236 3,618
Miami/Fort Lauderdale, FL............ 2 278,620 21,893 10,947
Spartanburg, SC...................... 1 105,600 3,243 3,243
--- --------- -------- -------
Total/average...................... 42 5,309,703 $284,675 $ 6,778
=== ========= ======== =======
</TABLE>
PROPERTIES UNDER DEVELOPMENT
AS OF FEBRUARY 28, 1998
(BY PROPERTY TYPE)
<TABLE>
<CAPTION>
NUMBER OF
PROPERTIES ESTIMATED
OR ESTIMATED ESTIMATED AVERAGE
PROPERTY SQUARE TOTAL COST PER
PROPERTY TYPE EXPANSIONS FEET(1) COST(2) PROPERTY(2)
- ------------- ---------- --------- --------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Business distribution................ 15 1,508,252 $ 71,664 $ 4,778
Bulk warehouse....................... 12 2,362,788 77,627 6,469
Business service..................... 6 461,956 32,891 5,482
Suburban office...................... 9 976,707 102,493 11,388
--- --------- -------- -------
Total.............................. 42 5,309,703 $284,675 $ 6,778
=== ========= ======== =======
</TABLE>
- --------
(1) Actual leasable square feet may vary upon completion.
(2) The estimated total cost information presented includes the Operating
Partnership's estimate of the fair market value of any development land
used in the development and all estimated capitalized costs to be incurred
through the development stabilization date, and reflects the Operating
Partnership's 50% and 85% ownership, respectively, of the two Properties
being developed with third parties in joint ventures. With respect to
Properties under development or in lease-up, there can be no assurance
that the actual cost will not exceed the estimate.
S-18
<PAGE>
The following table details the Operating Partnership's development activity
by estimated stabilization date.
PROPERTIES UNDER DEVELOPMENT
AS OF FEBRUARY 28, 1998
(BY ESTIMATED STABILIZATION DATE(1))
<TABLE>
<CAPTION>
NUMBER OF ESTIMATED
PROPERTIES ESTIMATED ESTIMATED AVERAGE
OR PROPERTY SQUARE TOTAL COST PER
ESTIMATED STABILIZATION DATE EXPANSIONS FEET(2) COST(3) PROPERTY(3)
- ---------------------------- ----------- --------- --------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
March 1, to Dec. 31, 1998............. 20 2,633,250 $125,014 $ 6,251
1999.................................. 22 2,573,953 148,985 6,772
2000.................................. 1 102,500 10,676 10,676
--- --------- -------- -------
Total............................... 42 5,309,703 $284,675 $ 6,778
=== ========= ======== =======
</TABLE>
- --------
(1) There can be no assurance that Properties under development will be
completed or stabilized by their respective estimated completion and
stabilization dates.
(2) Actual leasable square feet may vary upon completion.
(3) The estimated total cost information presented includes the Operating
Partnership's estimate of the fair market value of any development land
used in the development and all estimated capitalized costs to be incurred
through the development stabilization date, and reflects the Operating
Partnership's 50% and 85% ownership, respectively, of the two Properties
being developed with third parties in joint ventures. With respect to
Properties under development or in lease-up, there can be no assurance that
the actual cost will not exceed the estimate.
ACQUISITION AND DEVELOPMENT RISKS
Acquisitions entail risks that (i) existing agreements to acquire Properties
may fail to close, (ii) acquired Properties may not perform in accordance with
management's expectations, including projected occupancy and rental rates,
(iii) the senior executives and employees of an acquired business will not be
successfully integrated into the Operating Partnership, or (iv) the Operating
Partnership may have underestimated the cost of improvements required to bring
an acquired Property up to standards established for the market position
intended for that Property. New project development is subject to a number of
risks, including risks of construction delays or cost overruns that may
increase project costs, risks that the project will not achieve anticipated
occupancy levels or sustain anticipated rent levels, new project commencement
risks such as the failure to obtain zoning, occupancy and other required
governmental permits and authorizations, and the risk that development costs
will be incurred in connection with projects that are not pursued to
completion.
CLIENT RELATIONSHIPS
The Operating Partnership seeks to retain its tenants by providing a high
level of tenant services. Of the leases that expired in the Operating
Partnership's In-service Properties in 1997, tenants occupying approximately
72% of such space renewed their leases with the Operating Partnership. In
addition, over the same period, the Operating Partnership completed 55 tenant
expansions for existing tenants, totaling approximately 650,000 square feet.
The Operating Partnership's 30 largest tenants (measured by Annualized Base
Rent as of December 31, 1997) occupy a total of approximately 4.6 million
square feet and represented 29.2% of Annualized Base Rent from all leases in
place where tenants were paying rent as of December 31, 1997. As shown in the
table below, no single tenant accounted for more than 3.1% of the Operating
Partnership's total Annualized Base Rent as of December 31, 1997. Information
presented in the table below excludes Properties under development and/or under
agreement to acquire at December 31, 1997.
S-19
<PAGE>
30 LARGEST TENANTS MEASURED BY ANNUALIZED BASE RENT
AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
% OF TOTAL
SQUARE NUMBER ANNUALIZED ANNUALIZED
RANK TENANT FEET OF LEASES BASE RENT BASE RENT STATE
---- ------------------------ --------- --------- ----------- ---------- --------
<C> <S> <C> <C> <C> <C> <C>
1 Northern Telecom, Inc.
(1).................... 416,271 9 $ 3,085,968 3.1% NC,TN
2 Scientific Atlanta,
Inc.................... 600,413 11 2,693,337 2.7 GA
3 IKON Office Solutions,
Inc.................... 170,000 3 1,422,900 1.4 GA
4 GTE Mobilnet Service
Corporation............ 126,124 3 1,320,874 1.3 GA,NC
5 360(degrees)
Communications......... 114,476 7 1,283,731 1.3 NC
6 Radian International
LLC.................... 90,159 2 1,170,275 1.2 NC
7 Square D Company........ 100,822 1 966,816 1.0 TN
8 Honeywell, Inc.......... 70,016 3 963,953 1.0 GA
9 DeVry, Inc.............. 64,981 1 928,269 0.9 GA
10 PPD Pharmaco, Inc....... 89,130 5 917,349 0.9 NC
11 The Athlete's Foot
Group, Inc............. 162,651 1 897,155 0.9 GA
12 Fisher Scientific
Company................ 223,219 1 875,019 0.9 GA
13 Tridom Corporation...... 117,403 4 826,437 0.8 GA
14 National Data
Corporation............ 50,283 4 786,777 0.8 GA
15 AT&T Corp............... 67,551 5 752,082 0.8 GA,NC,TN
16 Saab Cars U.S.A., Inc... 63,625 3 749,509 0.8 GA
17 Intelligent Systems
Corporation............ 137,100 1 719,775 0.7 GA
18 Best Buy Stores, L.P. .. 222,643 1 703,552 0.7 GA
19 United Healthcare....... 72,991 2 699,856 0.7 GA,SC
20 Sally Foster, Inc....... 197,200 2 673,237 0.7 SC
21 Data General
Corporation............ 86,000 1 670,800 0.7 GA
22 Vanstar Corporation..... 86,880 4 668,124 0.7 GA
23 Yokohama Tire
Corporation............ 252,092 1 665,383 0.7 GA
24 Auto-Lok, Inc........... 222,900 2 658,879 0.7 GA
25 Ahlstrom Recovery,
Inc.................... 62,893 2 649,493 0.7 GA
26 Astronet Corporation.... 34,138 1 648,622 0.7 GA
27 Siemens Energy &
Automation, Inc........ 240,000 3 637,200 0.6 GA
28 The Bombay Company,
Inc.................... 253,890 2 631,344 0.6 GA
29 Southern Multimedia
Communications, Inc.... 117,647 3 604,692 0.6 GA
30 United Parcel Service,
Inc.................... 128,275 3 594,201 0.6 TN,FL
--------- --- ----------- ----
4,641,773 91 $28,865,609 29.2%
========= === =========== ====
</TABLE>
- --------
(1) Leases with Northern Telecom totaling 370,824 square feet expire on June
30, 2005, but are subject to an early-termination right that permits
Northern Telecom to terminate any of the leases on June 30, 2000, by
delivering an early-termination notice to the Operating Partnership on or
before June 30, 1999. In the event it exercises its early-termination
option, Northern Telecom will be obligated to make certain termination
payments to the Operating Partnership.
S-20
<PAGE>
LEASING TRENDS
The leases for the Operating Partnership's Properties have terms ranging
from one to fifteen years, with terms for multi-tenant Properties typically
between three and five years and for build-to-suit Properties typically
between seven and ten years. Typically, the tenant in a multi-tenant Property
pays for increases in taxes, operating costs and insurance above a base year
level. For build-to-suit Properties, the tenant typically pays for all taxes,
insurance and operating costs. Approximately 65% of the Operating
Partnership's leases (based on leased square footage as of December 31, 1997)
contain contractual rent escalations.
The Operating Partnership generally continues to be able to increase average
rents. During 1997, the Operating Partnership renewed or re-leased
approximately 2.5 million square feet of second-generation space in its
Properties. Cash-basis rental rates on this space increased by an average
(weighted by square footage) of 6.0%, calculated by comparing the initial
cash-basis rent to be paid by the tenant under the new or renewed lease with
the ending cash-basis rent paid by the tenant under the previous lease on the
same space. Rental rate increases by Property type, calculated on the same
basis, were as follows for the year ended December 31, 1997:
CASH-BASIS RENT INCREASES BY PROPERTY TYPE
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<S> <C>
Bulk warehouse......................................................... 7.2%
Business distribution.................................................. 5.5
Business service....................................................... 4.8
Suburban office........................................................ 10.8
Retail................................................................. 4.0
----
Average.............................................................. 6.0%
====
</TABLE>
LEASE EXPIRATIONS
The following tables show scheduled lease expirations for leases under which
tenants were paying rent to the Operating Partnership as of December 31, 1997,
assuming no exercise of renewal options or termination rights, if any.
LEASE EXPIRATIONS
TOTAL PORTFOLIO
<TABLE>
<CAPTION>
AVERAGE CASH
BASE RENTAL
% OF TOTAL RATE PER
% OF TOTAL ANNUALIZED ANNUALIZED SQUARE FOOT
YEAR OF SQUARE SQUARE FEET BASE RENT(/1/) BASE RENT(/1/) AT
EXPIRATION FEET EXPIRING EXPIRING EXPIRING EXPIRING EXPIRATION
- ---------- -------------- ----------- -------------- -------------- ------------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
1998 3,329 19.5% $ 17,397 16.7% $ 5.23
1999 1,921 11.3 11,565 11.1 6.02
2000 3,105 18.2 18,322 17.5 5.90
2001 1,379 8.1 8,078 7.7 5.86
2002 2,291 13.5 17,629 16.9 7.69
2003 679 4.0 6,235 6.0 9.19
2004 1,050 6.2 5,763 5.5 5.49
2005 875 5.1 5,389 5.2 6.16
2006 612 3.6 3,046 2.9 4.98
2007 1,104 6.5 6,627 6.3 6.00
2008 223 1.3 783 0.7 3.51
2009 20 0.1 157 0.2 7.89
2011 294 1.7 1,704 1.6 5.80
2012 152 0.9 1,744 1.7 11.46
------ ----- -------- ----- ------
17,034 100.0% $104,439 100.0% $ 6.13
====== ===== ======== ===== ======
</TABLE>
S-21
<PAGE>
INDUSTRIAL PROPERTIES
<TABLE>
<CAPTION>
AVERAGE CASH
BASE RENTAL
% OF TOTAL RATE PER
% OF TOTAL ANNUALIZED ANNUALIZED SQUARE FOOT
YEAR OF SQUARE SQUARE FEET BASE RENT(/1/) BASE RENT(/1/) AT
EXPIRATION FEET EXPIRING EXPIRING EXPIRING EXPIRING EXPIRATION
- ---------- -------------- ----------- -------------- -------------- ------------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
1998 3,150 20.1% $14,947 17.8% $4.75
1999 1,833 11.7 10,485 12.5 5.72
2000 2,890 18.5 15,298 18.2 5.29
2001 1,303 8.3 6,976 8.3 5.36
2002 1,954 12.5 12,191 14.5 6.24
2003 475 3.0 3,162 3.8 6.66
2004 946 6.0 4,063 4.8 4.30
2005 846 5.4 4,950 5.9 5.85
2006 590 3.8 2,677 3.2 4.53
2007 1,054 6.7 6,168 7.3 5.85
2008 223 1.4 783 0.9 3.51
2009 20 0.1 157 0.2 7.89
2011 294 1.9 1,704 2.0 5.80
2012 87 0.6 580 0.7 6.65
------ ----- ------- ----- -----
15,665 100.0% $84,141 100.0% $5.37
====== ===== ======= ===== =====
</TABLE>
SUBURBAN OFFICE PROPERTIES
<TABLE>
<CAPTION>
AVERAGE CASH
BASE RENTAL
% OF TOTAL RATE PER
% OF TOTAL ANNUALIZED ANNUALIZED SQUARE FOOT
YEAR OF SQUARE SQUARE FEET BASE RENT(/1/) BASE RENT(/1/) AT
EXPIRATION FEET EXPIRING EXPIRING EXPIRING EXPIRING EXPIRATION
- ---------- -------------- ----------- -------------- -------------- ------------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
1998 178 13.5% $ 2,437 12.3% $13.68
1999 86 6.5 1,058 5.3 12.30
2000 178 13.5 2,715 13.7 15.24
2001 76 5.8 1,102 5.6 14.45
2002 338 25.5 5,438 27.4 16.10
2003 204 15.4 3,073 15.5 15.08
2004 104 7.9 1,700 8.6 16.30
2005 26 1.9 382 1.9 14.69
2006 17 1.3 309 1.6 18.18
2007 50 3.8 460 2.3 9.19
2008 0 0.0 0 0.0 0.00
2009 0 0.0 0 0.0 0.00
2011 0 0.0 0 0.0 0.00
2012 65 4.9 1,164 5.9 17.92
----- ----- ------- ----- ------
1,322 100.0% $19,839 100.0% $14.99
===== ===== ======= ===== ======
</TABLE>
- --------
(1) Represents annualized monthly base rent at the time of lease expirations.
S-22
<PAGE>
RE-LEASING COSTS
The following tables summarize by period the Operating Partnership's
capitalized tenant improvement and leasing commission expenditures incurred in
the renewal or re-leasing of previously occupied space in its industrial and
suburban office Properties.
CAPITALIZED TENANT IMPROVEMENTS AND LEASING COMMISSIONS
INDUSTRIAL PROPERTIES
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DEC. 31, 1997 DEC. 31, 1996
------------- -------------
(IN THOUSANDS, EXCEPT PER
SQUARE FOOT INFORMATION)
<S> <C> <C>
RE-LEASING
Square feet leased............................... 1,073 678
Capitalized tenant improvements and leasing
commissions..................................... $2,276 $1,395
Capitalized tenant improvements and leasing
commissions per square foot..................... $ 2.12 $ 2.06
RENEWAL
Square feet leased............................... 2,358 1,027
Capitalized tenant improvements and leasing
commissions..................................... $1,392 $1,055
Capitalized tenant improvements and leasing
commissions per square foot..................... $ 0.59 $ 1.03
TOTAL
Square feet...................................... 3,431 1,705
Total capitalized tenant improvements and leasing
commissions..................................... $3,668 $2,450
Total capitalized tenant improvements and leasing
commissions per square foot..................... $ 1.07 $ 1.44
</TABLE>
SUBURBAN OFFICE PROPERTIES
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DEC. 31, 1997 DEC. 31, 1996
------------- -------------
(IN THOUSANDS, EXCEPT PER
SQUARE FOOT INFORMATION)
<S> <C> <C>
RE-LEASING
Square feet leased............................... 69 16
Capitalized tenant improvements and leasing
commissions..................................... $ 493 $ 45
Capitalized tenant improvements and leasing
commissions per square foot..................... $7.11 $2.80
RENEWAL
Square feet leased............................... 134 106
Capitalized tenant improvements and leasing
commissions..................................... $ 267 $ 290
Capitalized tenant improvements and leasing
commissions per square foot..................... $1.99 $2.74
TOTAL
Square feet...................................... 203 122
Total capitalized tenant improvements and leasing
commissions..................................... $ 760 $ 335
Total capitalized tenant improvements and leasing
commissions per square foot..................... $3.74 $2.75
</TABLE>
S-23
<PAGE>
UNDEVELOPED LAND
An important part of the Operating Partnership's strategy is to own or
control land sufficient to allow it to develop exclusive business park
environments and to accommodate the expansion and relocation needs of its
tenants. The Operating Partnership and its Subsidiaries employ a number of
ownership and control arrangements in its land strategy, including outright
purchases, joint ventures, staged acquisitions, options and exclusive
marketing and development agreements.
The following schedule details the Operating Partnership's and its
Subsidiaries' undeveloped land interests as of February 28, 1998. The land
detailed below is located primarily in existing business parks with zoning and
infrastructure in place. The Operating Partnership estimates that the
development potential of the undeveloped land ultimately could total
approximately 19.2 million square feet.
UNDEVELOPED LAND
(IN NET USABLE ACRES)
<TABLE>
<CAPTION>
ESTIMATED
DEVELOPMENT
POTENTIAL
TOTAL (SQUARE FEET)(1)
------- ----------------
<S> <C> <C>
Operating Partnership-owned............................ 410.5 5,246,000
Owned in joint ventures(2)............................. 539.6 4,492,000
Under agreement to acquire(3).......................... 421.5 5,187,000
Optioned............................................... 282.2 2,655,000
Marketing/development agreements(4).................... 241.6 1,573,000
------- ----------
Total.............................................. 1,895.4 19,153,000
======= ==========
</TABLE>
- --------
(1) Based upon the Operating Partnership's estimate of the appropriate density
and anticipated building types that may be developed, net of land
necessary to provide for adequate infrastructure. There can be no
assurance that the Operating Partnership's estimate of development
potential will be realized.
(2) The Operating Partnership's and its Subsidiaries' interests in undeveloped
land held in joint ventures ranges from 0% to 30%.
(3) The Operating Partnership has agreed to acquire this land over various
periods ranging up to approximately five years.
(4) Under the terms of the development agreements, the Operating Partnership
or its Subsidiaries will generally either develop properties for a fee, or
have certain rights to acquire land for development or to acquire
developed properties upon their completion. The marketing agreements
generally provide for the Operating Partnership or its Subsidiaries to be
paid marketing or management fees in conjunction with services provided.
Both the development and marketing agreements generally contain certain
non-competition provisions covering a limited geographic area.
S-24
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The Board of Directors of each of Weeks and the General Partner currently
consists of ten persons, with one presently unfilled vacancy. Certain
information regarding the directors and officers of each of Weeks and the
General Partner is set forth below, including their ages as of February 28,
1998:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<C> <C> <S>
A. Ray Weeks Jr. 45 Chairman of the Board and Chief Executive Officer
Thomas D. Senkbeil 48 Vice Chairman of the Board and Chief Investment
Officer
Forrest W. Robinson 46 Director; President and Chief Operating Officer
John W. Nelley Jr. 49 Director; Managing Director in charge of the
Operating Partnership's activities in Nashville,
Tennessee
Barrington H. Branch 57 Director; President, The Branch-Shelton Company LLC
George D. Busbee 70 Director; Of counsel of King & Spalding; former
Governor of Georgia
William Cavanaugh III 59 Director; President and Chief Executive Officer,
Carolina Power & Light
Charles R. Eitel 48 Director; President and Chief Operating Officer,
Interface, Inc.
Harold S. Lichtin 49 Director; President, Lichtin Corporation
William O. McCoy 63 Director; Vice-President, Finance, The University
of North Carolina; former Vice Chairman of the
Board of BellSouth Corporation
Albert W. Buckley Jr. 53 Managing Director, Nashville, Tennessee
Robert G. Cutlip 48 Senior Vice President, North Carolina Operations
Clyde H. Duckett 55 Senior Vice President, Construction
Mark W. Flowers 40 Senior Vice President, Landscape
Charles D. Graham 54 Senior Vice President, North Florida Operations
Eben Hardie III 39 Senior Vice President, Development
Klay W. Simpson 42 Senior Vice President, Marketing
David P. Stockert 35 Senior Vice President and Chief Financial Officer
David L. Barker 42 Vice President, Property Management
Bobby L. Beavers 51 Vice President, Development, Jacksonville
Elizabeth C. Belden 43 Vice President, Corporate Counsel
Julia S. Bennett 30 Vice President, Marketing, Tampa
Patricia P. Clayton 45 Vice President, Property Management
Philip W. Cobb 48 Vice President, Building Construction
John F. Coleman 38 Vice President, Development, Orlando
Arthur J. Quirk 40 Vice President and Controller
Moses L. Salcido 38 Vice President, Marketing, Orlando
Robert K. Sanders, Jr. 38 Vice President, Estimating
Mark L. Scott 38 Vice President, Interior Construction
Thomas W. Trocheck 43 Vice President, Development-Engineering
Susan C. Walker 44 Vice President, Investor Relations
Robert T. Weeks 37 Vice President, Information Technology
</TABLE>
S-25
<PAGE>
DESCRIPTION OF NOTES
The following description of certain terms of the Notes sets forth certain
terms and provisions of the Notes and the Indenture (as defined below) and is
qualified in its entirety by reference to the terms and provisions of the
Notes and the Indenture, which are incorporated herein by reference.
Capitalized terms not otherwise defined herein shall have the meanings given
to them in the Notes and in the Indenture. The following description of the
particular terms of the Notes does not purport to be complete and is subject
to, and, to the extent inconsistent therewith, replaces the description of the
general terms and provisions of the Debt Securities set forth in the
accompanying Prospectus.
GENERAL
The Notes will be limited to the aggregate principal amount of $100,000,000
and will mature on March 15, . The Notes are redeemable at any time at the
option of the Operating Partnership, in whole or in part, at a redemption
price equal to the sum of (i) the principal of the Notes being redeemed plus
accrued interest to the redemption date and (ii) the Make-Whole Amount, if
any. The Notes will not be entitled to the benefits of any sinking fund. The
Notes are to be issued pursuant to an Indenture, dated as of March , 1998
(the "Indenture"), between the Operating Partnership and State Street Bank and
Trust Company, as Trustee (the "Trustee"). The terms of the Notes include
those provisions contained in the Notes and the Indenture and those made part
of the Indenture by reference to the Trust Indenture Act of 1939, as amended
(the "TIA"). The Notes are subject to all such terms, and holders of Notes are
referred to the Notes, the Indenture and the TIA for a statement thereof.
Copies of the Indenture and the form of the Notes are available for inspection
at the office of the Trustee located at Two International Place, Fourth Floor,
Boston, Massachusetts 02110 (the "Corporate Trust Office").
The Notes will be direct, unsecured and unsubordinated obligations of the
Operating Partnership and will rank pari passu with each other and with all
other unsecured and unsubordinated indebtedness of the Operating Partnership
from time to time outstanding. However, the Notes will be effectively
subordinated to mortgages and other secured indebtedness of the Operating
Partnership and its Subsidiaries. The Notes also will be effectively
subordinated to any unsecured indebtedness of the Operating Partnership's
Subsidiaries. As of the date of this Prospectus Supplement, the Operating
Partnership's Subsidiaries do not have any outstanding unsecured indebtedness,
except for a $2.0 million unsecured obligation of one of the Operating
Partnership's Subsidiaries incurred in connection with the Operating
Partnership's acquisition of certain development land in Jacksonville,
Florida. Pursuant to the Indenture and in addition to the financial covenants
described under "Description of Debt Securities--Certain Covenants" in the
accompanying Prospectus, the Operating Partnership (i) will not permit the
Subsidiaries that it controls to incur additional unsecured indebtedness and
(ii) will enforce agreements by the Subsidiaries that it does not control
pursuant to which such Subsidiaries have agreed not to incur additional
unsecured indebtedness, other than, in each case, unsecured indebtedness owed
to the Operating Partnership and trade payables incurred in the ordinary
course of such Subsidiaries' business.
As of December 31, 1997, the Operating Partnership and its Subsidiaries had
outstanding $101.5 million of unsecured, unsubordinated indebtedness, $192.6
million of secured indebtedness and $616.0 million of unencumbered assets. As
of December 31, 1997, on a pro forma basis, after giving effect to the
acquisition of the Beacon Centre Properties, the Codina Transaction, the
February 1998 Common Unit Issuance and the application of the net proceeds
from the Offering as described in "Use of Proceeds," the Operating Partnership
and its Subsidiaries would have had outstanding $142.8 million of unsecured,
unsubordinated indebtedness, $270.6 million of secured indebtedness and $676.7
million of unencumbered assets. Other than the limitations set forth in the
Notes and in the Indenture that are described above and in the Prospectus
under the caption "Description of Debt Securities--Certain Covenants," the
Indenture will not prohibit the Operating Partnership and its Subsidiaries
from incurring additional secured and unsecured indebtedness.
S-26
<PAGE>
The Notes will be issued only in fully registered, book-entry form, in
denominations of $1,000 and integral multiples thereof, except under the
limited circumstances described below under --"Book-Entry System."
Except as provided under "Description of Debt Securities--Certain
Covenants--Existence," "Description of Debt Securities--Merger, Consolidation
or Sale," "Description of Debt Securities-- Events of Default" and
"Description of Debt Securities--Modification and Waiver" in the accompanying
Prospectus, the Notes and the Indenture do not contain any other provisions
that would afford Holders (as defined below) of the Notes protection in the
event of (i) a highly leveraged or similar transaction involving the Operating
Partnership, the management of the Operating Partnership or the Company, or
any affiliate of either such party, (ii) a change in control or (iii) a
reorganization, restructuring, merger or similar transaction involving the
Operating Partnership that may adversely affect the Holders of the Notes. The
financial covenants of the Operating Partnership described under "Description
of Debt Securities--Certain Covenants" in the accompanying Prospectus would
continue to apply, unless waived by Holders of the Notes, in the event of a
highly leveraged or similar transaction involving the Operating Partnership,
management of the Operating Partnership or the Company, or any affiliate of
either such party. In addition, subject to the limitations set forth under
"Description of Debt Securities--Merger, Consolidation or Sale" in the
accompanying Prospectus, the Operating Partnership may, in the future, enter
into certain transactions such as the sale of all or substantially all of its
assets or the merger or consolidation of the Operating Partnership that would
increase the amount of the Operating Partnership's indebtedness or
substantially reduce or eliminate the Operating Partnership's assets, which
may have an adverse effect on the Operating Partnership's ability to service
its indebtedness, including the Notes.
The Operating Partnership has no present intention of engaging in a highly
leveraged or similar transaction. In addition, certain provisions of Georgia
law and the Company's Restated Articles of Incorporation, as amended,
including restrictions on ownership and transfers of the Company's capital
stock designed to preserve its status as a REIT, may act to prevent or hinder
any such transactions or a change of control with respect to the Operating
Partnership.
The Notes are not guaranteed by the Company.
PAYMENT OF PRINCIPAL AND INTEREST ON THE NOTES
Interest on the Notes will accrue at the rate set forth on the cover page of
this Prospectus Supplement from March 15 ,1998, or the most recent Interest
Payment Date (as defined below) to which interest has been paid or provided
for, and will be payable in U.S. Dollars semi-annually in arrears on March 15
and September 15 of each year (each, an "Interest Payment Date"), commencing
September 15, 1998. The interest so payable will be paid to the person (the
"Holder") in whose name the applicable Note is registered at the close of
business on the March 1 or September 1, as the case may be (whether or not a
Business Day, as defined below), next preceding the applicable Interest
Payment Date (each, a "Regular Record Date"). The principal of each Note
payable on the Maturity Date will be paid in U.S. Dollars against presentation
and surrender thereof at the Corporate Trust Office of the Trustee located at
Two International Place, Fourth Floor, Boston, Massachusetts 02110. Interest
on the Notes will be computed on the basis of a 360-day year consisting of
twelve 30-day months.
MATURITY
The Notes will mature on March 15, (the "Maturity Date"). The Notes may
be redeemed at the option of the Operating Partnership at any time. See "--
Optional Redemption." The Notes will not be entitled to the benefit of any
sinking fund.
S-27
<PAGE>
OPTIONAL REDEMPTION
The Notes may be redeemed at any time at the option of the Operating
Partnership, in whole or in part from time to time, at a redemption price
equal to the sum of (i) the principal amount of the Notes (or portion thereof)
being redeemed plus accrued interest thereon to the redemption date and (ii)
the Make-Whole Amount (as defined below), if any, with respect to such Notes
(or portion thereof) (the "Redemption Price").
If notice has been given as provided in the Indenture and funds for the
redemption of any Notes (or any portion thereof) called for redemption shall
have been made available on the redemption date referred to in such notice,
such Notes (or any portion thereof) will cease to bear interest on the date
fixed for such redemption specified in such notice and the only right of the
Holders of such Notes will be to receive payment of the Redemption Price.
Notice of any optional redemption of any Notes (or any portion thereof) will
be given to Holders at their addresses, as shown in the security register for
such Notes, not more than 60 nor less than 30 days prior to the date fixed for
redemption. The notice of redemption will specify, among other items, the
Redemption Price and the principal amount of the Notes held by such Holder to
be redeemed.
The Operating Partnership will notify the Trustee at least 60 days prior to
giving notice of redemption (or such shorter period as is satisfactory to the
Trustee) of the aggregate principal amount of such Notes to be redeemed and
their redemption date. If less than all of the Notes are to be redeemed at the
option of the Operating Partnership, the Trustee shall select, in such manner
as it shall deem fair and appropriate, such Notes to be redeemed in whole or
in part.
As used herein:
"Make-Whole Amount" means, in connection with any optional redemption or
accelerated payment of any Notes, the excess, if any, of (i) the aggregate
present value as of the date of such redemption or accelerated payment of each
dollar of principal being redeemed or paid and the amount of interest
(exclusive of interest accrued to the date of redemption or accelerated
payment) that would have been payable in respect of each such dollar if such
redemption or accelerated payment had not been made, determined by
discounting, on a semi-annual basis, such principal and interest at the
Reinvestment Rate (determined on the third Business Day preceding the date
such notice of redemption is given or declaration of acceleration is made)
from the respective dates on which such principal and interest would have been
payable if such redemption or accelerated payment had not been made, over (ii)
the aggregate principal amount of the Notes being redeemed or paid.
"Reinvestment Rate" means 0. % plus the arithmetic mean of the yields under
the heading "Week Ending" published in the most recent Statistical Release
under the caption "Treasury Constant Maturities" for the maturity (rounded to
the nearest month) corresponding to the remaining life to maturity, as of the
payment date of the principal being redeemed or paid. If no maturity exactly
corresponds to such maturity, yields for the two published maturities most
closely corresponding to such maturity shall be calculated pursuant to the
immediately preceding sentence and the Reinvestment Rate shall be interpolated
or extrapolated from such yields on a straight-line basis, rounding each of
such relevant periods to the nearest month. For the purpose of calculating the
Reinvestment Rate, the most recent Statistical Release published prior to the
date of determination of the Make-Whole Amount shall be used.
"Statistical Release" means the statistical release designed "H.15 (519)" or
any successor publication which is published weekly by the Federal Reserve
System and which establishes yields on actively traded United States
government securities adjusted to constant maturities, or, if such statistical
release is not published at the time of any determination under the Indenture,
then such other reasonably comparable index which shall be designated by the
Operating Partnership.
S-28
<PAGE>
SATISFACTION AND DISCHARGE OF THE INDENTURE
The Indenture will, under certain circumstances upon the Operating
Partnership's request, cease to be of further effect with respect to the
Notes, and the Trustee will execute proper instruments acknowledging
satisfaction and discharge of its Indenture as to the Notes.
BOOK-ENTRY SYSTEM
The Notes will be issued in the form of one or more fully-registered Notes
in book-entry form (each, a "Global Note") which will be deposited with, or on
behalf of, The Depository Trust Company ("DTC") and registered in the name of
DTC's nominee. Except as set forth below, the Global Notes may not be
transferred except as a whole by DTC to a nominee of DTC or by a nominee of
DTC to DTC or another nominee of DTC or by DTC or any such nominee to a
successor of DTC or a nominee of such successor.
So long as DTC or its nominee is the registered owner of a Global Note, DTC
or its nominee, as the case may be, will be considered the sole Holder of the
Notes represented by such Global Note for all purposes under the Indenture and
the beneficial owners of such Notes will be entitled only to those rights and
benefits afforded to them in accordance with DTC's regular operating
procedures. Upon specified written instructions of a Participant (as defined
below), DTC will have its nominee assist Participants in the exercise of
certain Holders' rights, such as demand for acceleration or an instruction to
the Trustee. Except as provided below, owners of beneficial interests in a
Global Note will not be entitled to have Notes registered in their names, will
not receive or be entitled to receive physical delivery of Notes in
certificated form and will not be considered the registered owners or Holders
thereof under the Indenture.
If with respect to the Notes (i) DTC is at any time unwilling or unable to
continue as depository or if at any time DTC ceases to be a clearing agency
registered under the Exchange Act, and a successor depository is not appointed
by the Operating Partnership within 90 days, (ii) an Event of Default under
the Indenture has occurred and is continuing and the beneficial owners
representing a majority in principal amount of such Notes advise DTC to cease
acting as depository or (iii) the Operating Partnership, in its sole
discretion, determines at any time that such Notes shall no longer be
represented by a Global Note, the Operating Partnership will issue individual
Notes of the applicable amount and in certificated form in exchange for the
Global Note representing such Notes. In any such instance, an owner of a
beneficial interest in a Global Note representing such Notes will be entitled
to physical delivery of individual Notes in certificated form of like tenor,
equal in principal amount to such beneficial interest and to have such Notes
in certificated form registered in its name. Notes so issued in certificated
form will be issued in denominations of $1,000 or any integral multiple
thereof, and will be issued in registered form only, without coupons.
The following is based on information furnished by DTC:
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law,
a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its participants ("Participants") deposit with DTC. DTC
also facilitates the settlement among Participants of securities transactions,
such as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in Participants' accounts, thereby eliminating
the need for physical movement of securities certificates. Direct Participants
include securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations ("Direct Participants"). DTC is
owned by a number of its Direct Participants and by the New York Stock
Exchange, Inc., the American Stock Exchange, Inc., and the National
Association of Securities Dealers, Inc. Access to the DTC system is also
available to others such as securities
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<PAGE>
brokers and dealers, banks, and trust companies that clear through or maintain
a custodial relationship with a Direct Participant, either directly or
indirectly ("Indirect Participants"). The rules applicable to DTC and its
Participants are on file with the Commission.
Purchases of Notes under the DTC system must be made by or through Direct
Participants, which will receive a credit for the Notes on DTC's records. The
ownership interest of each actual purchaser of each Note ("Beneficial Owner")
is in turn recorded on the Direct and Indirect Participant's records.
Beneficial Owners will not receive written confirmation from DTC of their
purchase, but Beneficial Owners are expected to receive written confirmations
providing details of the transaction, as well as periodic statements of their
holdings, from the Direct or Indirect Participant through which such
Beneficial Owner entered into the transaction. Transfers of ownership
interests in Notes are accomplished by entries made on the books of
Participants acting on behalf of Beneficial Owners. Beneficial Owners will not
receive certificates representing their ownership interests in the Notes,
except in the event that use of the book-entry system for the Notes is
discontinued.
To facilitate subsequent transfers, each Global Note is registered in the
name of DTC's partnership nominee, Cede & Co. The deposit of each Global Note
with DTC and its registration in the name of Cede & Co. effects no change in
beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of
the Notes; DTC's records reflect only the identity of the Direct Participants
to whose accounts the Notes are credited, which may or may not be the
Beneficial Owners. The Participants remain responsible for keeping account of
their holdings on behalf of their customers.
Delivery of notices and other communications by DTC to Direct Participants,
by Direct Participants to Indirect Participants and by Direct Participants and
Indirect Participants to Beneficial Owners are governed by arrangements among
them subject to any statutory or regulatory requirements as may be in effect
from time to time.
Redemption notices shall be sent to DTC. If less than all of the Notes are
being redeemed, DTC's practice is to determine by lot the amount of the
Interest of each Direct Participant in such issue to be redeemed.
Neither DTC nor Cede & Co. will consent or vote with respect to the Notes.
Under its usual procedures, DTC mails a proxy (an "Omnibus Proxy") to the
issuer as soon as possible after the record date. The Omnibus Proxy assigns
Cede & Co.'s consenting or voting rights to those Direct Participants to whose
accounts the Notes are credited on the record date (identified on a list
attached to the Omnibus Proxy).
Principal and interest payments on the Notes will be made by the Operating
Partnership to the Trustee and from the Trustee to DTC. DTC's practice is to
credit Direct Participants' accounts on the payable date in accordance with
their respective holdings as shown on DTC's records unless DTC has reason to
believe that it will not receive payment on the payable date. Payments by
Participants to Beneficial Owners will be governed by standing instructions
and customary practices, as is the case with securities held for the accounts
of customers in bearer form or registered in "street name," and will be the
responsibility of such Participant and not of DTC, the Trustee or the
Operating Partnership, subject to any statutory or regulatory requirements as
may be in effect from time to time. Payment of principal and interest to DTC
is the responsibility of the Operating Partnership or the Trustee,
disbursement of such payments to Direct Participants is the responsibility of
DTC, and disbursement of such payments to the Beneficial Owners is the
responsibility of Direct and Indirect Participants.
DTC may discontinue providing its services as securities depository with
respect to the Notes at any time by giving reasonable notice to the Operating
Partnership or the Trustee. Under such circumstances, in the event that a
successor securities depository is not appointed, Note certificates are
required to be printed and delivered.
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The Operating Partnership may decide to discontinue use of the system of
book-entry transfers through DTC (or a successor securities depository). In
that event, Note certificates will be printed and delivered.
None of the Operating Partnership, any of the Underwriters (as defined
below) or the Trustee will have any responsibility or liability for any aspect
of the records relating to or payments made on account of beneficial interests
in a Global Note, or for maintaining, supervising or reviewing any records
relating to such beneficial interests.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Operating Partnership believes to be
reliable, but the Operating Partnership takes no responsibility for the
accuracy thereof.
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for the Notes will be made in immediately available funds. All
payments of principal and interest in respect of the Notes will be made by the
Operating Partnership in immediately available funds.
Secondary trading in long-term Notes and debentures of corporate issuers is
generally settled in clearing house or next-day funds. In contrast, the Notes
will trade in DTC's Same-Day Funds Settlement System until maturity, or until
such Notes are issued in certificated form, and secondary market trading
activity in the Notes will therefore be required by DTC to settle in
immediately available funds. No assurance can be given as to the effect, if
any, of settlement in immediately available funds on trading activity in the
Notes.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain United States federal income tax
considerations relating to the purchase, ownership and disposition of the
Notes, but does not purport to be a complete analysis of all the potential tax
considerations relating thereto. This summary is based on laws, regulations,
rulings and decisions now in effect (or, in the case of certain United States
Treasury Regulations ("Treasury Regulations"), now in proposed form), all of
which are subject to change, possibly on a retroactive basis. This summary
deals only with Notes held as "capital assets" (within the meaning of Section
1221 of the Internal Revenue Code of 1986, as amended (the "Code")) and does
not address tax considerations applicable to investors that may be subject to
special tax rules, such as banks, tax-exempt organizations, insurance
companies, dealers in securities or currencies, persons that will hold Notes
as a position in a hedging transaction, "straddle" or "conversion transaction"
for tax purposes, or persons that have a "functional currency" other than the
United States dollar.
Except for the discussion below under "--Clinton Administration's Proposed
Changes to REIT Asset Tests," this Prospectus Supplement does not address the
taxation of the Company or the Operating Partnership, nor does it address the
impact on the Company or the Operating Partnership of the Company's election
to be taxed as a REIT. Such matters are addressed in the accompanying
Prospectus under "Federal Income Tax Considerations--Taxation of the Company."
The Operating Partnership has not sought any ruling from the Internal
Revenue Service ("IRS") with respect to the statements made and the
conclusions reached in the following summary, and there can be no assurance
that the IRS will agree with such statements and conclusions. INVESTORS
CONSIDERING THE PURCHASE OF NOTES SHOULD CONSULT THEIR OWN TAX ADVISORS WITH
RESPECT TO THE APPLICATION OF THE UNITED STATES FEDERAL INCOME TAX LAWS TO
THEIR PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES ARISING UNDER THE
LAWS OF ANY STATE, LOCAL OR FOREIGN TAXING JURISDICTION OR UNDER ANY
APPLICABLE TAX TREATY.
S-31
<PAGE>
CLINTON ADMINISTRATION'S PROPOSED CHANGES TO REIT ASSET TESTS
The Clinton Administration's budget proposal announced on February 2, 1998
includes a proposal to amend the REIT asset tests with respect to non-
qualified REIT subsidiaries, such as the Operating Partnership's corporate
Subsidiaries. The proposal would prohibit a REIT from owning more than 10% of
the vote or value of the outstanding stock of any non-qualified REIT
subsidiary. Existing non-qualified REIT subsidiaries would be grandfathered,
and therefore subject only to the 5% asset test and 10% voting securities test
of current law, except that such grandfathering would terminate if the
subsidiary engaged in a new trade or business or acquired substantial new
assets. (For a description of the 5% asset test and 10% voting securities
test, see the accompanying Prospectus under the heading "Federal Income Tax
Considerations--Taxation of the Company--Asset Tests.") As a result, if the
proposal were to be enacted, certain of the Subsidiaries would become subject
to the new 10%-vote-and-value limitation if they commenced new trade or
business activities or acquired substantial new assets after the specified
effective date. The Company could not satisfy the new test because it would be
considered to own more than 10% of the value of the stock of such
Subsidiaries. Accordingly, the proposal, if enacted, would materially impede
the ability of the Company to engage in other activities without jeopardizing
its REIT status.
U.S. HOLDERS OF THE NOTES
As used herein, the term "U.S. Holder" means any beneficial owner of a Note
that is, for United States federal income tax purposes, (i) a citizen or
resident of the United States, (ii) a corporation, partnership or other entity
created or organized in or under the laws of the United States or of any
political subdivision thereof, (iii) an estate the income of which is subject
to United States federal income taxation regardless of its source, (iv) a
trust if (A) a court within the United States is able to exercise primary
supervision over the administration of the trust and (B) one or more United
States persons have the authority to control all substantial decisions of the
trust, or (v) any other person whose income or gain in respect of a Note is
effectively connected with the conduct of a United States trade or business.
As used herein, the term "Non-U.S. Holder" means a beneficial owner of a Note
that is not a U.S. Holder.
Payment of Interest. The Notes currently are not expected to be issued with
original issue discount ("OID") for federal income tax purposes. Interest on a
Note without OID generally will be included in the income of a U.S. Holder as
ordinary income at the time such interest is received or accrued, in
accordance with the U.S. Holder's regular method of tax accounting.
Market Discount. If a U.S. Holder purchases a Note at original issue for an
amount that is less than its issue price (or, in the case of a subsequent
purchaser, its stated redemption price at maturity), such U.S. Holder will be
treated as having purchased such Note at a "market discount," unless such
market discount is less than a de minimis amount (generally 1/4 of 1 percent
of the stated redemption price of the Note at maturity times the number of
complete years to maturity after the U.S. Holder acquired the Note).
Under the market discount rules, a U.S. Holder will be required to treat any
partial principal payment on a Note, or any gain realized on the sale,
exchange, retirement or other disposition of a Note, as ordinary income to the
extent of the lesser of (i) the amount of such payment or realized gain or
(ii) the market discount which has not previously been included in income and
is treated as having accrued on such Note at the time of such payment or
disposition. Market discount will be considered to accrue ratably during the
period from the date of acquisition to the maturity date of the Note, unless
the U.S. Holder elects to accrue market discount on a constant yield basis.
Once made, such an election is irrevocable.
A U.S. Holder may be required to defer the deduction of all or a portion of
the interest paid or accrued on any indebtedness incurred or maintained to
purchase or carry a Note with market discount
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until the maturity of the Note or certain earlier dispositions, because a
current deduction is only allowed to the extent that the interest expense
exceeds the portion of market discount allocable to the days during the
taxable year in which the Note was held by the taxpayer. A U.S. Holder may
elect to include market discount in income currently as it accrues (on either
a ratable or constant yield basis), in which case the rules described above
regarding the treatment as ordinary income of gain upon the disposition of the
Note and upon the receipt of certain cash payments and regarding the deferral
of interest deductions will not apply. Generally, such currently included
market discount is treated as ordinary interest for federal income tax
purposes. Such an election will apply to all debt instruments with market
discount acquired by the U.S. Holder on or after the first day of the taxable
year to which such election applies and may be revoked only with the consent
of the IRS.
Amortizable Bond Premium. If a U.S. Holder purchases a debt instrument for
an amount that is greater than the sum of all amounts payable on the debt
instrument after the purchase date, other than payments of qualified stated
interest, such U.S. Holder will be considered to have purchased the debt
instrument with "amortizable bond premium," generally equal in amount to such
excess. In the case of a debt instrument that may be optionally redeemed prior
to maturity, however, the amount of amortizable bond premium is determined by
substituting the first date on which the debt instrument may be redeemed (the
"redemption date") for the maturity date and the applicable redemption price
on the redemption date for the amount payable at maturity--but only if the
result is a smaller amount of amortizable bond premium in the period before
the redemption date. Because the Operating Partnership has the option to
redeem the Notes at the Redemption Price prior to maturity, the amount of
amortizable bond premium on the Notes likely will be determined by subtracting
from the U.S. Holder's tax basis in the Notes the applicable Redemption Price
payable on the first date on which the Notes could be redeemed (rather than
the stated redemption price at maturity). If the Operating Partnership does
not in fact exercise its right to redeem the Notes on this date, the Notes
will be treated (for purposes of the amortizable bond premium rules) as having
matured and then as having been reissued for the Redemption Price at which the
Notes could have been redeemed on such date. The Notes deemed to have been
reissued will again be subject to the amortizable bond premium rules with
respect to the remaining dates on which the Notes are redeemable.
A U.S. Holder may elect to amortize bond premium on a Note using a constant
yield method over the remaining term of the Note and may offset interest
otherwise required to be included in respect of the Note during any taxable
year by the amortized amount of such excess for the taxable year. Any election
to amortize bond premium applies to all taxable debt obligations then owned
and thereafter acquired by the U.S. Holder on or after the first day of the
taxable year to which such election applies, and may be revoked only with the
consent of the IRS.
Recently issued Treasury Regulations clarify the treatment of bond premium.
These regulations describe the constant yield method under which such premium
is amortized and provide that the resulting offset to interest income
generally can be taken into account only as a U.S. Holder takes the
corresponding interest income into account. If the bond premium allocable to
an accrual period exceeds the qualified stated interest allocable to such
period, the excess is treated by the U.S. Holder as a bond premium deduction.
The bond premium deduction for each accrual period is limited to the amount by
which the U.S. Holder's total interest inclusions on the Note in prior accrual
periods exceed the total amount treated by such U.S. Holder as a bond premium
deduction on the Note in prior accrual periods. Any amounts not deductible in
an accrual period may be carried forward to the next accrual period and
treated as bond premium allocable to that period. In the case of instruments
that may be redeemed prior to maturity, the regulations provide that the
premium is calculated by assuming that the issuer will exercise or not
exercise its redemption rights in a manner that maximizes the holder's yield.
The regulations are effective for debt instruments acquired on or after March
2, 1998. If a U.S. Holder elects to amortize bond premium for the taxable year
containing this effective date, the regulations will apply to all of the U.S.
Holder's debt instruments held on or after the first day of that taxable year.
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<PAGE>
Disposition of the Notes. Upon the sale, exchange, redemption, retirement or
other disposition of a Note, a U.S. Holder generally will recognize capital
gain or loss equal to the difference between (i) the amount of cash proceeds
and the fair market value of any property received on the disposition (except
to the extent such amount is attributable to accrued but unpaid stated
interest, which is taxable as ordinary income) and (ii) such U.S. Holder's
adjusted tax basis in the Note. For purposes of determining gain or loss, a
U.S. Holder's adjusted tax basis in a Note generally will equal the cost of
the Note to such Holder (increased by accrued market discount, if any, if the
U.S. Holder has included such market discount in income) and decreased by the
amount of any payments, other than qualified stated interest payments,
received, and amortizable bond premium taken, with respect to such Note.
Capital gain or loss recognized upon the disposition of a Note will be a long-
term capital gain or loss if the Note was held for more than one year. In the
case of a non-corporate taxpayer, the maximum tax rate applicable to such a
capital gain generally will be 20% for Notes held for more than 18 months and
28% for Notes held for more than one year but for 18 months or less. A capital
gain recognized on a Note held for one year or less generally will be subject
to tax at the same rate as ordinary income.
NON-U.S. HOLDERS OF THE NOTES
The rules governing the United States federal income taxation of a Non-U.S.
Holder are complex and no attempt will be made herein to provide more than a
summary of such rules. NON-U.S. HOLDERS SHOULD CONSULT WITH THEIR OWN TAX
ADVISORS TO DETERMINE THE EFFECT OF FEDERAL, STATE, LOCAL AND FOREIGN TAX
LAWS, AS WELL AS TAX TREATIES, WITH REGARD TO AN INVESTMENT IN THE NOTES.
Payment of Interest. Generally, payment of principal and interest on a Note
to a Non-U.S. Holder will qualify for the "portfolio interest exemption" and
therefore will not be subject to United States federal income tax or
withholding, unless the Non-U.S. Holder is (i) a direct or indirect 10% or
greater partner (as defined in Section 871(h)(3) of the Code) in the Operating
Partnership, (ii) a controlled foreign corporation related to the Operating
Partnership, or (iii) a bank receiving interest described in section
881(c)(3)(A) of the Code. To qualify for the portfolio interest exemption, the
last United States payor in the chain of payment prior to payment to a Non-
U.S. Holder (the "Withholding Agent") must have received in the year in which
a payment of interest or principal occurs, or in either of the two preceding
calendar years, a statement that (i) is signed by the beneficial owner of the
Note under penalties of perjury, (ii) certifies that such owner is not a U.S.
Holder, and (iii) provides the name and address of the beneficial owner. The
statement may be made on an IRS Form W-8 or a substantially similar form, and
the beneficial owner must inform the Withholding Agent of any change in the
information on the statement within 30 days of such change. If a Note is held
through a securities clearing organization or certain other financial
institutions, the organization or institution may provide a signed statement
to the Withholding Agent. In such case, the signed statement must be
accompanied by a copy of the IRS Form W-8 or the substitute form provided by
the beneficial owner to the organization or institution.
Recently issued Treasury Regulations provide alternative methods for
satisfying the identification and certification requirements described in the
preceding paragraph. These Treasury Regulations generally are effective for
payments made after December 31, 1998; however, any certification provided on
a Form W-8 that is validly in effect prior to January 1, 1999 will be treated
as a valid certification until it expires under the Treasury Regulations or,
if earlier, until December 31, 1999. A Non-U.S. Holder should consult its tax
advisor regarding the effect of the new Treasury Regulations. See "--
Information Reporting and Backup Withholding" for a further description of
these new Treasury Regulations.
Except to the extent that an applicable treaty otherwise provides, a Non-
U.S. Holder generally will be taxed in the same manner as a U.S. Holder with
respect to interest if the interest income is effectively connected with a
United States trade or business of the Non-U.S. Holder. Under certain
circumstances, effectively connected interest received by a corporate Non-U.S.
Holder may be subject
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to an additional "branch profits tax" at a 30% rate (or, if applicable, a
lower tax rate specified by a treaty). Even though such effectively connected
interest is subject to income tax, and may be subject to the branch profits
tax, it is not subject to withholding if the Holder delivers a properly
executed IRS Form 4224 to the Withholding Agent.
Interest income of a Non-U.S. Holder that is not effectively connected with
a United States trade or business and that does not qualify for the portfolio
interest exemption described above generally will be subject to a withholding
tax at a 30% rate (or, if applicable, a lower tax rate specified by a treaty).
Disposition of the Notes. A Non-U.S. Holder of a Note generally will not be
subject to United States federal income tax or withholding on any gain
realized on the sale, exchange, redemption, retirement or other disposition of
a Note unless (i) the gain is effectively connected with a United States trade
or business of the Non-U.S. Holder, (ii) in the case of a Non-U.S. Holder who
is an individual, such Non-U.S. Holder is present in the United States for a
period or periods aggregating 183 days or more during the taxable year of the
disposition, and either such Holder has a "tax home" in the United States or
the disposition is attributable to an office or other fixed place of business
maintained by such Holder in the United States, or (3) the Holder is subject
to tax pursuant to the provisions of the Code applicable to certain United
States expatriates.
Certain United States Federal Estate Tax Considerations Applicable to a Non-
U.S. Holder. A Note beneficially owned by an individual who is not a citizen
or resident of the United States at the time of death will not be included in
the decedent's gross estate for United States federal estate tax purposes,
unless the individual is a direct or indirect 10% or greater partner of the
Operating Partnership, or, at the time of death, payments with respect to such
Note would have been effectively connected with the conduct by such Non-U.S.
Holder of a trade or business within the United States.
INFORMATION REPORTING AND BACKUP WITHHOLDING
On October 6, 1997, the Treasury Department issued final regulations
relating to withholding, information reporting and backup withholding that
unify current certification procedures and forms and clarify reliance
standards applicable to Withholding Agents (the "Final Regulations"). The
Final Regulations generally will be effective with respect to payments made
after December 31, 1998, subject to certain transition rules. Except as
provided below, this section describes rules applicable to payments made on or
before December 31, 1998.
In general, information reporting requirements will apply to payments on a
Note (including stated interest payments and payments of the proceeds from the
sale, exchange, redemption, retirement or other disposition of a Note), unless
the holder of the Note is a corporation or comes within certain exempt
categories and, when required, demonstrates that fact. In addition, backup
withholding at a rate of 31% may apply to such payments, unless the holder of
the Note (i) is a corporation or comes within certain other exempt categories
and, when required, demonstrates that fact or (ii) provides a correct taxpayer
identification number, certifies as to its exemption from backup withholding
and otherwise complies with applicable requirements of the backup withholding
rules. Certain penalties may be imposed by the IRS on a holder that is
required to supply information but does not do so in the proper manner.
Information reporting requirements and backup withholding will not apply to
payments on a Note to a Non-U.S. Holder if the statement described in "Non-
U.S. Holders--Payment of Interest" is duly provided by such Holder, provided
that the Withholding Agent does not have actual knowledge that the Holder is a
United States person. Information reporting requirements and backup
withholding will not apply to any payment of the proceeds of the sale of a
Note effected outside the United States by a foreign office of a "broker" (as
defined in applicable Treasury Regulations), unless such broker (i) is a
United States person, (ii) derives 50% or more of its gross income for certain
periods from the conduct
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of a trade or business in the United States or (iii) is a controlled foreign
corporation as to the United States. Payment of the proceeds of any such sale
effected outside the United States by a foreign office of any broker that is
described in (i), (ii) or (iii) of the preceding sentence will not be subject
to backup withholding, but will be subject to information reporting
requirements unless such broker has documentary evidence in its records that
the beneficial owner is a Non-U.S. Holder and certain other conditions are
met, or the beneficial owner otherwise establishes an exemption. Payment of
the proceeds of any such sale to or through the United States office of a
broker is subject to information reporting and backup withholding
requirements, unless the beneficial owner of the Note provides the statement
described in "Non-U.S. Holders--Payment of Interest" or otherwise establishes
an exemption.
Any amount withheld from a payment to a holder of a Note under the backup
withholding rules is allowable as a credit against such holder's United States
federal income tax liability (which might entitle such holder to a refund),
provided that such holder furnishes the required information to the IRS.
The Final Regulations impose certain certification and documentation
requirements on Non-U.S. Holders claiming an exemption from withholding,
information reporting and backup withholding on interest paid on the Notes and
proceeds from the sale, exchange, redemption, retirement or other disposition
of the Notes. PROSPECTIVE PURCHASERS OF THE NOTES ARE URGED TO CONSULT THEIR
OWN TAX ADVISORS AS TO THE EFFECT, IF ANY, OF THE FINAL REGULATIONS ON THEIR
PURCHASE, OWNERSHIP AND DISPOSITION OF THE NOTES.
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UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement and the
Pricing Agreement, the Operating Partnership has agreed to sell to each of the
underwriters named below (the "Underwriters"), and each of the Underwriters
has severally agreed to purchase, the principal amount of the Notes set forth
opposite its name below:
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OF
UNDERWRITERS NOTES
------------ ------------
<S> <C>
Goldman, Sachs & Co............................................
Morgan Stanley & Co. Incorporated..............................
------------
Total........................................................ $100,000,000
============
</TABLE>
Under the terms and conditions of the Underwriting Agreement and the Pricing
Agreement, the Underwriters are committed to take and pay for all of the
Notes, if any are taken.
The Underwriters propose to offer the Notes in part directly to the public
at the initial public offering price set forth on the cover page of this
Prospectus Supplement and in part to certain securities dealers at such price
less a concession of % of the principal amount of the Notes. The
Underwriters may allow, and such dealers may reallow, a concession not in
excess of % of the principal amount of the Notes to certain brokers and
dealers. After the Notes are released for sale to the public, the offering
price and other selling terms may from time to time be varied by the
Underwriters.
In connection with the Offering, the Underwriters may purchase and sell the
Notes in the open market. These transactions may include over-allotment and
stabilizing transactions and purchases to cover short positions created by the
Underwriters in connection with the Offering. Stabilizing transactions consist
of certain bids or purchases for the purpose of preventing or retarding a
decline in the market price of the Notes, and short positions created by the
Underwriters involve the sale by the Underwriters of a greater number of Notes
than they are required to purchase from the Operating Partnership in the
Offering. The Underwriters also may impose a penalty bid, whereby selling
concessions allowed to broker-dealers in respect to the securities sold in the
Offering may be reclaimed by the Underwriters if such Notes are repurchased by
the Underwriters in stabilizing or covering transactions. These activities may
stabilize, maintain or otherwise affect the market price of the Notes, which
may be higher than the price that might otherwise prevail in the open market;
and these activities, if commenced, may be discontinued at any time. These
transactions may be effected in the over-the-counter market or otherwise.
The Notes are a new issue of securities with no established trading market.
The Underwriters have advised the Operating Partnership that they intend to
make a market in the Notes but are not obligated to do so and may discontinue
market making at any time without notice. No assurance can be given as to the
liquidity of the trading market for the Notes.
In the ordinary course of their business, the Underwriters provide
investment banking, advisory and other financial services to the Operating
Partnership, the Company and their affiliates for which they receive customary
fees.
The Operating Partnership has agreed to indemnify the Underwriters against
certain liabilities, including liabilities under the Securities Act.
VALIDITY OF NOTES
The validity of the Notes offered hereby will be passed upon for the
Operating Partnership by King & Spalding, Atlanta, Georgia, and for the
Underwriters by Sullivan & Cromwell, New York, New York. Sullivan & Cromwell
will rely upon the opinion of King & Spalding as to matters of Georgia law.
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EXPERTS
The consolidated and combined financial statements and related financial
statement schedule of the Operating Partnership included in the Operating
Partnership's Registration Statement on Form 10 dated August 1, 1997 filed
with the Commission on August 4, 1997, as amended by the Operating
Partnership's Pre-Effective Amendment No. 3 to Registration Statement on Form
10 dated and filed with the Commission on October 1, 1997, incorporated by
reference in this Prospectus Supplement and the accompanying Prospectus, have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto, and have been incorporated
herein in reliance upon the authority of such firm as experts in giving such
reports.
The combined financial statements of Lichtin Properties included in the
Company's Current Report on Form 8-K dated November 5, 1996 and filed November
6, 1996, incorporated by reference in the Company's Current Report on Form 8-K
dated December 31, 1996 and filed on January 15, 1997, as amended by Form 8-
K/A dated December 31, 1996 and filed on March 14, 1997, all incorporated by
reference and included in the Operating Partnership's Registration Statement
on Form 10 and incorporated by reference in this Prospectus Supplement and the
accompanying Prospectus, have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their report with respect thereto, and
have been incorporated herein in reliance upon the authority of such firm as
experts in giving such report.
The combined statements of revenue and certain expenses of the Lichtin 1997
Acquisition Properties and the NWI 1997 Acquisition Properties included in the
Operating Partnership's Current Report on Form 8-K dated October 3, 1997 and
filed on October 8, 1997, incorporated by reference in this Prospectus
Supplement and the accompanying Prospectus, have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their reports
with respect thereto, and have been incorporated herein in reliance upon the
authority of such firm as experts in giving such reports.
The combined statements of revenue and certain expenses of the Lichtin 1997
Acquisition Properties and the NWI 1997 Acquisition Properties included in the
Operating Partnership's Current Report on Form 8-K dated February 17, 1998 and
filed on February 18, 1998, incorporated by reference in this Prospectus
Supplement and the accompanying Prospectus, have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their reports
with respect thereto, and have been incorporated herein in reliance upon the
authority of such firm as experts in giving such reports.
The statement of revenues and certain expenses of Beacon Centre Acquisition
Property for the year ended December 31, 1996 incorporated by reference in
this Prospectus Supplement and the accompanying Prospectus has been audited by
Deloitte & Touche LLP, independent auditors, as stated in their report
appearing herein and elsewhere in the Registration Statement, and have been so
including in reliance upon the report of such firm given upon their authority
as experts in accounting and auditing.
The combined financial statements of NWI Warehouse Group, L.P. included in
the Company's Current Report on Form 8-K dated November 1, 1996 and filed on
November 6, 1996, as amended by Form 8-K/A dated November 1, 1996 and filed on
November 8, 1996, incorporated by reference in the Company's Current Report on
Form 8-K dated March 25, 1997 and filed on March 26, 1997, all incorporated by
reference in the Operating Partnership's Registration Statement on Form 10 and
in this Prospectus Supplement and the accompanying Prospectus, have been
audited by Ernst & Young LLP, independent auditors, as indicated in their
report with respect thereto, and have been incorporated herein in reliance
upon the authority of such firm as experts in giving such report.
S-38
<PAGE>
PROSPECTUS
$300,000,000
WEEKS CORPORATION
[LOGO
OF WEEKS CORPORATION
APPEARS HERE]
PREFERRED STOCK, COMMON STOCK AND
COMMON STOCK WARRANTS
$300,000,000
WEEKS REALTY, L.P.
DEBT SECURITIES
----------------
Weeks Corporation (the "Company") may offer from time to time, together or
separately, in one or more series (i) shares of the Company's preferred stock,
par value $.01 per share ("Preferred Stock"), (ii) shares of the Company's
common stock, par value $.01 per share ("Common Stock"), and (iii) warrants to
purchase shares of Common Stock ("Common Stock Warrants") at an aggregate
initial offering price not to exceed U.S. $300,000,000, in amounts, at prices
and on terms to be determined at the time of sale. Weeks Realty, L.P. (the
"Operating Partnership") may offer from time to time, together or separately,
in one or more series, unsecured non-convertible investment grade debt
securities (the "Debt Securities", and, together with the Preferred Stock, the
Common Stock and the Common Stock Warrants, collectively referred to herein as
the "Securities"), at an aggregate initial public offering price not to exceed
$300,000,000, in amounts, at prices and on terms to be determined at the time
of sale.
The specific terms of any Securities offered pursuant to this Prospectus
will be set forth in an accompanying supplement to this Prospectus (a
"Prospectus Supplement"), together with the terms of the offering of such
Securities and the initial price and the net proceeds to the Company from the
sale thereof. The Prospectus Supplement will include, with regard to the
particular Securities, where applicable, the following information: (i) in the
case of Preferred Stock, the designation, number of shares, liquidation
preference per share, initial offering price, dividend rate (or method of
calculation thereof), dates on which dividends shall be payable and dates from
which dividends shall accrue, any redemption or sinking fund provision, any
conversion rights, any voting or other rights, and the terms of the offering
and sale thereof; (ii) in the case of Common Stock, the number of shares and
the terms of the offering and sale thereof; (iii) in the case of Common Stock
Warrants, the designation and aggregate number thereof, the number of shares
of Common Stock purchasable upon exercise, the exercise price, the terms of
the offering and sale thereof, and where applicable, the duration and
detachability thereof; (iv) in the case of Debt Securities, the specific
title, aggregate principal amount, form (which may be registered or bearer, or
certificated or global), authorized denominations, maturity, rate and time of
payment of interest, terms for redemption at the option of the Operating
Partnership or repayment at the option of the holder, terms for sinking fund
payments, covenants and any initial public offering price; and (v) in the case
of all Securities, whether such Securities will be offered separately or as a
unit with other Securities. The Company's Common Stock is subject to certain
restrictions on ownership designed to preserve the Company's status as a real
estate investment trust for federal income tax purposes. See "Description of
Capital Stock."
The Company's Common Stock is listed on the New York Stock Exchange (the
"NYSE") under the symbol "WKS." Any Common Stock offered pursuant to a
Prospectus Supplement will be listed on such exchange, subject to official
notice of issuance.
The Company and the Operating Partnership may sell the Securities in or
outside the United States through underwriters or dealers, directly to one or
more purchasers, or through agents. If any agents, underwriters or dealers are
involved in the sale of the Securities, the names of such agents, underwriters
or dealers and any applicable commissions or discounts will be set forth in
the applicable Prospectus Supplement. See "Plan of Distribution."
THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF SECURITIES UNLESS
ACCOMPANIED BY A PROSPECTUS SUPPLEMENT.
----------------
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 October 1, 1997
<PAGE>
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, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"), pursuant to the
Exchange Act. Such reports, proxy statements and other information filed by
the Company may be examined without charge at, or copies obtained upon payment
of prescribed fees from, the Public Reference Section of the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and are also
available for inspection and copying at the regional offices of the Commission
located at Seven World Trade Center, New York, New York 10048 and at 500 West
Madison Street, Chicago, Illinois 60661. The Commission maintains a Web site
that contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission. The
address of the Commission's Web site is: http://www.sec.gov. The Common Stock
of the Company is listed on the NYSE, and such material can also be inspected
and copied at the offices of the NYSE, 20 Broad Street, New York, New York
10005.
The Company and the Operating Partnership have filed with the Commission a
Registration Statement on Form S-3 under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the Securities offered hereby
(together with all amendments and exhibits and schedules thereto, the
"Registration Statement"). As permitted by the rules and regulations of the
Commission, this Prospectus does not contain all of the information set forth
in the Registration Statement. For further information concerning the Company
and the Operating Partnership and the Securities offered hereby, reference is
made to the Registration Statement, which may be examined without charge at,
or copies obtained upon payment of prescribed fees from, the Commission and
its regional offices at the locations listed above. Any statements contained
herein concerning the provisions of any document are not necessarily complete,
and, in each instance, reference is made to the copy of such document filed as
an exhibit to the Registration Statement or otherwise filed with the
Commission. Each such statement is qualified in its entirety by such
reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company (File No. 001-13254) or the
Operating Partnership (File No. 000-22933) with the Commission are
incorporated herein by reference:
(i) The Company's Annual Report on Form 10-K for the year ended December
31, 1996 (as amended by the Company's Annual Report on Form 10-K/A-2 for
the year ended December 31, 1996 filed with the Commission on September 26,
1997);
(ii) The Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1997;
(iii) The Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1997;
(iv) The Company's Current Report on Form 8-K dated May 7, 1997 filed
with the Commission on May 12, 1997;
(v) The Company's Current Report on Form 8-K dated May 2, 1997 filed with
the Commission on May 2, 1997;
(vi) The Company's Current Report on Form 8-K dated March 25, 1997 filed
with the Commission on March 26, 1997;
(vii) The Company's Current Report on Form 8-K dated December 31, 1996
filed with the Commission on January 15, 1997 (as amended by the Company's
Current Report on Form 8-K/A dated December 31, 1996 filed with the
Commission on March 14, 1997);
(viii) The Company's Current Report on Form 8-K dated November 5, 1996
filed with the Commission on November 6, 1996;
(ix) The Company's Current Report on Form 8-K dated November 1, 1996
filed with the Commission on November 6, 1996 (as amended by the Company's
Current Report on Form 8-K/A dated November 1, 1996 filed with the
Commission on November 8, 1996);
2
<PAGE>
(x) The Company's Registration Statement on Form 8-A dated August 12,
1994, registering the Company's Common Stock under Section 12(b) of the
Exchange Act; and
(xi) The Operating Partnership's Registration Statement on Form 10 dated
August 1, 1997 filed with the Commission on August 4, 1997 (as amended by
the Operating Partnership's Pre-Effective Amendment No. 3 to Registration
Statement on Form 10 dated and filed with the Commission on October 1,
1997), registering the Operating Partnership's partnership interests under
Section 12(g) of the Exchange Act.
All documents and reports filed by the Company or the Operating Partnership
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act from the
date of this Prospectus and prior to the termination of the offering of the
Securities shall be deemed to be incorporated by reference herein and shall be
deemed to be a part hereof from the date of the filing of such reports and
documents (provided, however, that the information referred to in Item
402(a)(8) of Regulation S-K of the Commission shall not be deemed specifically
incorporated by reference herein). 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
also is or is deemed to be incorporated by reference herein modifies or
supersedes 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 a copy of this Prospectus or any Prospectus
Supplement is delivered, on written or oral request of such person, a copy of
any or all documents which are incorporated herein by reference (not including
the exhibits to such documents, unless such exhibits are specifically
incorporated by reference in the document which this Prospectus incorporates).
Requests should be directed to: Vice President-Investor Relations, Weeks
Corporation, 4497 Park Drive, Norcross, Georgia 30093, telephone number (770)
923-4076.
3
<PAGE>
THE COMPANY AND THE OPERATING PARTNERSHIP
The Company is a self-administered, self-managed, geographically focused
real estate investment trust ("REIT") that was organized in 1994 to continue
and expand the fully integrated real estate business previously conducted by
Weeks Corporation and its affiliates. The Company, together with its
affiliates and predecessors, has developed, owned, managed, constructed and
acquired primarily institutional-quality industrial properties in metropolitan
Atlanta, Georgia and certain other southeastern United States markets since
1965.
The Company's portfolio is comprised of 264 properties totaling
approximately 19.8 million square feet (the "Properties"), including 40
Properties and one Property expansion (totaling approximately 4.3 million
square feet) under development and/or under agreement to acquire. The Company
also owns or controls approximately 1,768 net usable acres of undeveloped land
that the Company believes may ultimately support the development of up to 19.0
million square feet of industrial and suburban office properties. The Company
currently manages, or expects to manage upon completion or acquisition, all of
the Properties. Industrial Properties represent approximately 90% of the
square footage of all of the Properties, and suburban office Properties
represent approximately 10%. As used herein, the term "Properties" includes
the completed properties currently in the Company's portfolio, as well as
properties under development and/or under agreement to acquire.
The Company conducts all of its business through the Operating Partnership
and its subsidiaries. As of June 30, 1997, the Company owned approximately 78%
of the outstanding interests in the Operating Partnership, and the remaining
approximately 22% of the partnership interests in the Operating Partnership
were owned by various individuals and entities (including certain officers and
directors of the Company) (i) that previously owned the properties, land and
other assets contributed to the Operating Partnership and its subsidiaries in
connection with the Company's initial public offering in August 1994 (the
"IPO") and (ii) that have contributed, directly or indirectly, certain assets,
properties and businesses to the capital of the Operating Partnership
(collectively, the "Limited Partners"). Of the approximately 78% interest in
the Operating Partnership held by the Company, the Company currently owns the
sole approximately 1% general partnership interest in the Operating
Partnership through Weeks GP Holdings, Inc., a wholly owned Georgia
corporation ("Weeks GP"), and an approximately 77% limited partnership
interest in the Operating Partnership through Weeks LP Holdings, Inc., a
wholly owned Georgia corporation ("Weeks LP"). Both Weeks GP and Weeks LP are
qualified REIT subsidiaries within the meaning of Section 856(i)(2) of the
Internal Revenue Code of 1986, as amended (the "Code"), and their existence
will be disregarded for federal income tax purposes.
Weeks Realty Services, Inc. ("Weeks Realty Services") and Weeks Construction
Services, Inc. ("Weeks Construction Services") were organized as subsidiaries
of the Operating Partnership to provide real estate related services to third
parties. Weeks Realty Services generally provides property management, leasing
and landscaping services, and Weeks Construction Services generally provides
general contracting services, to third parties.
The Operating Partnership owns 1% of the voting common stock and 100% of the
nonvoting common stock of each of Weeks Realty Services and Weeks Construction
Services. The voting and nonvoting common stock of Weeks Realty Services and
Weeks Construction Services held by the Operating Partnership represents
approximately 99% of the economic interests in these corporations. Ninety-nine
percent of the voting common stock of Weeks Realty Services and Weeks
Construction Services is held by executive officers of the Company.
Weeks Development Partnership ("Weeks Development") is a Georgia general
partnership owned 25% by Weeks Realty Services and 75% by Weeks Construction
Services. Weeks Development holds certain development land that is or may be
used for build-to-suit for sale projects, and interests in certain joint
ventures that own interests in certain development land. The Operating
Partnership may purchase sites for development from Weeks Development.
4
<PAGE>
The Operating Partnership owns five of its industrial Properties in Atlanta,
Georgia through its 99% ownership of Weeks Financing Limited Partnership (the
"Financing Partnership"). The Financing Partnership Properties are encumbered
by mortgage indebtedness assumed in connection with the IPO. The remaining 1%
ownership interest in the Financing Partnership is held by Weeks Realty
Services.
In order to maintain its qualification as a REIT for Federal income tax
purposes, the Company is required to distribute at least 95% of its taxable
income each year. Dividends on any Preferred Stock offered pursuant to a
Prospectus Supplement would be included as distributions for this purpose.
The Common Stock is listed on the NYSE under the symbol "WKS." The Company
was incorporated in Georgia in 1983, and the Operating Partnership is a
Georgia limited partnership that was formed in June, 1994. The Company's
principal executive offices are located at 4497 Park Drive, Norcross, Georgia
30093, and its telephone number is (770) 923-4076.
USE OF PROCEEDS
Unless otherwise indicated in the applicable Prospectus Supplement, the
Company intends to contribute the proceeds from the sale of the Securities to
the Operating Partnership, of which the Company's wholly owned subsidiary,
Weeks GP, is the sole general partner, in exchange for additional units
representing general and/or limited partnership interests in the Operating
Partnership. The Operating Partnership will use the proceeds for general
corporate purposes including, without limitation, the acquisition and
development of industrial and office properties and the repayment of
outstanding indebtedness.
CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
The following table sets forth the Company's and the Operating Partnership's
consolidated ratios of earnings to fixed charges for the six months ended June
30, 1997, and for each of the last five fiscal years. With respect to periods
prior to August 24, 1994, the Company's consolidated ratios of earnings to
fixed charges reflect the operating results from the businesses previously
conducted by Weeks Corporation and its affiliates and predecessors. There was
no preferred stock outstanding for any of the periods shown below.
Accordingly, the ratio of earnings to fixed charges and preferred stock
dividends is identical to the ratio of earnings to fixed charges.
<TABLE>
<CAPTION>
YEAR ENDED
DEC. 31, JAN. 1, 1994 AUG. 24, 1994 SIX MONTHS
------------- TO TO YEAR ENDED YEAR ENDED ENDED
1992 1993 AUG. 24, 1994 DEC. 31, 1994 DEC. 31, 1995 DEC. 31, 1996 JUNE 30, 1997
------- ----- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to
fixed charges:(1)...... .86x(2) 1.09x 1.06x 2.69x 1.99x 1.90x 1.78x
</TABLE>
- --------
(1) For purposes of computing these ratios, earnings have been calculated by
adding fixed charges (excluding capitalized interest) to income (loss)
before minority interest and extraordinary items. Fixed charges consist of
interest costs, whether expensed or capitalized, and amortization of debt
discounts and issue costs, whether expensed or capitalized.
(2) Earnings were inadequate to cover fixed charges by $1,551,000 in 1992.
This deficiency occurred in a year prior to the Company's IPO in August,
1994.
5
<PAGE>
DESCRIPTION OF CAPITAL STOCK
GENERAL
Under the Company's Restated Articles of Incorporation (the "Articles"), the
authorized capital stock of the Company consists of 100,000,000 shares of
Common Stock, par value $.01 per share, and 20,000,000 shares of Preferred
Stock, par value $.01 per share.
COMMON STOCK
The following description of the Common Stock sets forth certain general
terms and provisions of the Common Stock to which any Prospectus Supplement
may relate, including a Prospectus Supplement providing that Common Stock will
be issuable upon conversion of Preferred Stock or upon the exercise of Common
Stock Warrants issued by the Company. This description is in all respects
subject to and qualified in its entirety by reference to the applicable
provisions of the Articles and the Company's Bylaws.
The holders of Common Stock are entitled to one vote per share on all
matters voted on by shareholders, including elections of directors. The
Articles do not provide for cumulative voting in the election of directors.
The shares of Common Stock offered hereby will, when issued, be fully paid
and nonassessable and will not be subject to preemptive or similar rights.
Subject to such preferential rights as may be granted by the Board of
Directors in connection with the future issuance of Preferred Stock, the
holders of Common Stock are entitled to such distributions as may be declared
from time to time by the Board of Directors from assets available for
distribution to such holders.
In the event of a liquidation, dissolution or winding up of the Company, the
holders of Common Stock are entitled to receive ratably the assets remaining
after satisfaction of all liabilities and payment of liquidation preferences
and accrued dividends, if any, on Preferred Stock. The rights of holders of
Common Stock are subject to the rights and preferences established by the
Board of Directors for any class or series of Preferred Stock that may
subsequently be issued by the Company.
The Common Stock is listed on the NYSE under the symbol "WKS." Wachovia
Bank, N.A. is the Company's transfer agent and registrar.
PREFERRED STOCK
Subject to limitations prescribed by Georgia law and the Articles, the Board
of Directors is authorized to designate and issue, from the authorized but
unissued capital stock of the Company, one or more classes or series of
Preferred Stock without shareholder approval. The Board of Directors may affix
and determine the preferences, limitations and relative rights of each class
or series of Preferred Stock so issued. Because the Board of Directors has the
power to establish the preferences, limitations and relative rights of each
class or series of Preferred Stock, it may afford the holders in any class or
series of Preferred Stock preferences and relative rights, voting or
otherwise, senior to the rights of holders of Common Stock. The issuance of
Preferred Stock could have the effect of delaying, deferring or preventing a
change in control of the Company.
Preferred Stock offered hereby will, when issued, be fully paid and
nonassessable and will not be subject to preemptive or similar rights. The
specific terms of a particular class or series of Preferred Stock will be
described in the Prospectus Supplement relating to that class or series. In
connection with any offering of any class or series of Preferred Stock, the
Company, through its wholly owned subsidiaries, will receive preferred
partnership interests of the Operating Partnership which will have
preferences, limitations and relative rights that are substantially identical
to those of such class or series of Preferred Stock. The description of
Preferred Stock set forth below and the description of the terms of a
particular class or series of Preferred Stock set forth in a Prospectus
Supplement do not purport to be complete and are qualified in their entirety
by reference to the articles of amendment relating to such class or series.
6
<PAGE>
The preferences, limitations and relative rights of each class or series of
Preferred Stock will be fixed by the articles of amendment relating to such
class or series. The applicable Prospectus Supplement will describe the terms
of the Preferred Stock in respect of which this Prospectus is being delivered,
including, where applicable, the following:
(1) The designation of such Preferred Stock;
(2) The number of shares of such Preferred Stock offered, the liquidation
preferences per share and the initial offering price of such Preferred
Stock;
(3) The dividend rate(s), period(s), and/or payment date(s) or method(s)
of calculation thereof applicable to such Preferred Stock;
(4) Whether dividends on such Preferred Stock are cumulative or not and,
if cumulative, the date from which dividends on such Preferred Stock shall
accumulate;
(5) The procedures for any auction and remarketing, if any, for such
Preferred Stock;
(6) The provision for a sinking fund, if any, for such Preferred Stock;
(7) The provision for redemption, if applicable, of such Preferred Stock;
(8) Any listing of such Preferred Stock on any securities exchange;
(9) The terms and conditions, if applicable, upon which such Preferred
Stock will be convertible into Common Stock or other securities of the
Company, including the conversion price (or manner of calculation thereof);
(10) A discussion of the material Federal income tax considerations
applicable to such Preferred Stock;
(11) Any limitations on direct or beneficial ownership and restrictions
on transfer, in each case as may be appropriate to preserve the status of
the Company as a REIT;
(12) The relative ranking and preferences of such Preferred Stock as to
dividend rights and rights upon liquidation, dissolution or winding up of
the Company;
(13) Any limitations on issuance of any class or series of preferred
stock ranking senior to or on a parity with such class or series of
Preferred Stock as to dividend rights and rights upon liquidation,
dissolution or winding up of the affairs of the Company;
(14) Any voting rights of such Preferred Stock; and
(15) Any other specific terms, preferences, limitations or relative
rights of such Preferred Stock.
Unless otherwise specified in the Prospectus Supplement, the Preferred Stock
will, with respect to dividend rights and rights upon liquidation, dissolution
or winding up of the Company, rank (i) senior to Common Stock and to all other
equity securities ranking junior to such Preferred Stock with respect to
dividend rights or rights upon liquidation, dissolution or winding up of the
Company; (ii) on a parity with all equity securities issued by the Company the
terms of which specifically provide that such equity securities rank on a
parity with the Preferred Stock with respect to dividend rights or rights upon
liquidation, dissolution or winding up of the Company; and (iii) junior to all
equity securities issued by the Company the terms of which specifically
provide that such equity securities rank senior to the Preferred Stock with
respect to dividend rights or rights upon liquidation, dissolution or winding
up of the Company.
The terms and conditions, if any, upon which shares of any class or series
of Preferred Stock are convertible into Common Stock or other securities of
the Company will be set forth in the applicable Prospectus Supplement relating
thereto. Such terms will include the number of shares of Common Stock or other
securities of the Company into which the Preferred Stock is convertible, the
conversion price (or manner of calculation thereof), the conversion period,
provisions as to whether conversion will be at the option of the holders of
the Preferred Stock or the Company, the events requiring an adjustment of the
conversion price and provisions affecting conversion in the event of the
redemption of such Preferred Stock.
7
<PAGE>
RESTRICTIONS ON TRANSFER
The Articles contain certain restrictions on the number of shares of capital
stock that individual shareholders may own. For the Company to qualify as a
REIT under the Code, no more than 50% in value of its outstanding shares of
capital stock may be owned, directly or indirectly, by five or fewer
individuals (as defined in the Code to include certain entities) during the
last half of a taxable year (other than the first taxable year) or during a
proportionate part of a shorter taxable year. The capital stock must also be
beneficially owned by 100 or more persons during at least 335 days of a
taxable year (other than the first taxable year) or during a proportionate
part of a shorter taxable year. To enable the Company to continue to qualify
as a REIT, the Articles contain restrictions on the acquisition of capital
stock intended to ensure compliance with these requirements (collectively, the
"Ownership Limit").
The Ownership Limit provides that, subject to certain exceptions specified
in the Articles, no person (excluding the Weeks Family and the Weeks Siblings,
as defined below) may own, actually and constructively under the applicable
attribution provisions of the Code, more than 7.5% of the outstanding shares
of any class of capital stock of the Company. The Ownership Limit also
provides that the sisters and brother of A. Ray Weeks, Jr., Chairman and Chief
Executive Officer of the Company (the "Weeks Family"), as well as all
individuals (other than A. Ray Weeks, Jr.) from whom shares of capital stock
would be attributed to such persons under the applicable attribution
provisions of the Code, may not actually and constructively own, in the
aggregate, more than 10% of the outstanding shares of any class of capital
stock of the Company. The Ownership Limit further provides that A. Ray Weeks,
Jr. and the Weeks Family (collectively, the "Weeks Siblings"), as well as all
individuals from whom shares of capital stock would be attributed to such
persons under the applicable attribution provisions of the Code, may not
actually and constructively own, in the aggregate, more than 19% of the
outstanding shares of any class of capital stock of the Company.
The Board of Directors may (but in no event will be required to) waive the
Ownership Limit with respect to a holder if it determines that such holder's
ownership will not then or in the future jeopardize the Company's status as a
REIT. The Board of Directors has granted waivers with respect to the Ownership
Limit after making such a determination. As a condition to the grant of any
such waiver, the Board of Directors may require opinions of counsel
satisfactory to it and/or an undertaking or other information from the
applicant with respect to preserving the REIT status of the Company.
If any purported transfer of capital stock of the Company or any other event
would otherwise result in any person or entity holding shares of capital stock
of the Company in excess of the applicable Ownership Limit, then any such
purported transfer will be null and void as to that number of shares in excess
of such Ownership Limit and the purported transferee (the "Prohibited
Transferee") shall acquire no right or interest (or, in the case of any event
other than a purported transfer, the person or entity holding record title to
any such shares in excess of the Ownership Limit (the "Prohibited Owner")
shall cease to own any right or interest) in such excess shares. In addition,
if any purported transfer of capital stock or any other event would result in
the Company's failing to qualify as a REIT under the Code (other than as a
result of a violation of the requirement that a REIT have at least 100
shareholders), then any such purported transfer will be null and void as to
that number of shares in excess of the number that could have been transferred
without such result, and the Prohibited Transferee shall acquire no right or
interest (or, in the case of any event other than a transfer, the Prohibited
Owner shall cease to own any right or interest) in such excess shares.
Any such excess shares described above will be transferred automatically, by
operation of law, to a trust, the beneficiary of which will be a qualified
charitable organization selected by the Company (the "Beneficiary"). The
trustee of the trust will be empowered to sell such excess shares to a
qualified person or entity and distribute to a Prohibited Transferee an amount
equal to the lesser of the price paid by the Prohibited Transferee for such
excess shares or the sales proceeds received by the trust for such excess
shares. In the case of any excess shares resulting from any event other than a
transfer, or from a transfer for no consideration, the trustee will be
empowered to sell such excess
8
<PAGE>
shares to a qualified person or entity and distribute to the Prohibited Owner
an amount equal to the lesser of the fair market value of such excess shares
on the date of such event or the sales proceeds received by the trust for such
excess shares. Prior to a sale of any such excess shares by the trust, the
trustee will be entitled to receive, in trust for the benefit of the
Beneficiary, all dividends and other distributions paid by the Company with
respect to such excess shares, and also will be entitled to exercise all
voting rights with respect to such excess shares. Any sales proceeds received
by the trust in excess of the amount that must be distributed to a Prohibited
Transferee or Prohibited Owner, as the case may be, will be distributed to the
Beneficiary.
Any purported transfer of capital stock of the Company that would otherwise
cause the Company to be beneficially owned by fewer than 100 persons will be
null and void in its entirety, and the intended transferee will acquire no
rights in such stock.
All certificates representing shares of capital stock will bear a legend
referring to the restrictions described above.
Every owner of more than 1% (or such lower percentage as may be required by
the Code or regulations promulgated thereunder) of the outstanding shares of
capital stock of the Company must file a written notice with the Company
containing the information specified in the Articles within 30 days after
December 31 and June 30 of each year. In addition, each shareholder shall upon
demand be required to disclose to the Company in writing such information as
the Company may request in order to determine the effect, if any, of such
shareholder's actual and constructive ownership on the Company's status as a
REIT and to ensure compliance with the Ownership Limit.
The Ownership Limit may have the effect of precluding an acquisition of
control of the Company without the approval of the Board of Directors.
LIMITATION OF DIRECTORS' LIABILITY
The Articles eliminate, subject to certain exceptions, the personal
liability of a director to the Company or its shareholders for monetary
damages for breaches of such director's duty of care or other duties as a
director. The Articles do not provide for the elimination of, or any
limitation on, the personal liability of a director for (i) any appropriation,
in violation of the director's duties, of any business opportunity of the
Company, (ii) acts or omissions which involve intentional misconduct or a
knowing violation of law, (iii) approving or assenting to unlawful corporate
distributions or (iv) any transaction from which the director received an
improper personal benefit. The Articles further provide that if the Georgia
Business Corporation Code (the "GBCC") is amended to authorize corporate
action further eliminating or limiting the personal liability of directors,
then the liability of a director of the Company shall be eliminated or limited
to the fullest extent permitted by the GBCC, as amended. These provisions of
the Articles will limit the remedies available to a shareholder in the event
of breaches of any director's duties to such shareholder or the Company.
Under the Company's Bylaws, the Company is required to indemnify to the
fullest extent permitted by the GBCC any individual made a party to a
proceeding (as defined in the GBCC) because he is or was a director or officer
of the Company, against liability (as defined in the GBCC) incurred in such
proceeding, if he acted in a manner he believed in good faith to be in or not
opposed to the best interests of the Company and, in the case of any criminal
proceeding, he had no reasonable cause to believe his conduct was unlawful.
The Company is required to pay for or reimburse the reasonable expenses
incurred by a director or officer who is party to a proceeding in advance of
final disposition thereof if (i) such director or officer furnishes the
Company a written affirmation of his good faith belief that he has met the
standard of conduct set forth above, and (ii) such director or officer
furnishes the Company a written undertaking, executed personally or in his
behalf, to repay any advances if it is ultimately determined that he is not
entitled to indemnification. The Company may not indemnify a director (i) in
connection with a proceeding by or in the right of the Company, except for
reasonable
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expenses incurred in connection with the proceeding if it is determined that
the director has met the standard of conduct set forth above, or (ii) in
connection with any other proceeding in which he was adjudged liable on the
basis that personal benefit was improperly received by him, whether or not
involving action in his official capacity.
INDEMNIFICATION AGREEMENTS
The Company has entered into indemnification agreements with each of the
Company's directors. The indemnification agreements require, among other
things, that the Company indemnify its directors to the fullest extent
permitted by applicable law as enacted or amended, and advance to directors
all reasonable expenses incurred in a proceeding in which the director was
made a party because he is or was a director of the Company, subject to
reimbursement if it is subsequently determined that indemnification is not
permitted. The Company also must indemnify and advance all reasonable expenses
incurred by directors seeking to enforce their rights under the
indemnification agreements, and cover directors under the Company's directors'
and officers' liability insurance. Although the indemnification agreements
offer substantially the same scope of coverage afforded by provisions in the
Company's Bylaws, they provide greater assurance to directors that
indemnification will be available, because, as contracts, they cannot be
modified unilaterally in the future by the Board of Directors or by the
shareholders to eliminate the rights provided thereunder.
GEORGIA ANTI-TAKEOVER STATUTES
The GBCC restricts certain business combinations with "interested
shareholders" (as defined below) (the "Business Combination Statute"), and
contains fair price requirements applicable to certain mergers with certain
interested shareholders (the "Fair Price Statute"). In accordance with the
provisions of these statutes, the Company must elect in its Articles or Bylaws
to be covered by the restrictions imposed by these statutes. The Company has
not elected to be covered by such restrictions; however, the Company, by
action of its Board of Directors without shareholder approval, may in the
future amend its Bylaws to make such an election. If such an election is made,
the applicable Bylaw provision may only be repealed by the affirmative vote of
at least two-thirds of the continuing directors and a majority of the votes
entitled to be cast by the holders of voting shares of the Company.
Furthermore, shareholders may amend or repeal the Company's Bylaws or adopt
new Bylaws (even though the Bylaws may also be amended or repealed by the
Board of Directors) and may also expressly provide that any Bylaw so amended
or repealed by them may not be amended or repealed by the Board of Directors.
The Business Combination Statute regulates business combinations such as
mergers, consolidations, share exchanges and asset purchases where the
acquired business has at least 100 shareholders residing in Georgia and has
its principal office in Georgia, as the Company does, and where the acquiror
became an interested shareholder of the corporation, unless either (i) the
transaction resulting in such acquiror becoming an interested shareholder or
the business combination received the approval of the corporation's board of
directors prior to the date on which the acquiror became an interested
shareholder, or (ii) the acquiror became the owner of at least 90% of the
outstanding voting shares of the corporation (excluding shares held by
directors, officers and affiliates of the corporation and shares held by
certain other persons) in the same transaction in which the acquiror became an
interested shareholder. For purposes of the Business Combination Statute and
the Fair Price Statute, an "interested shareholder" generally is any person
who directly or indirectly, alone or in concert with others, beneficially owns
or controls 10% or more of the voting power of the outstanding voting shares
of the corporation. The Business Combination Statute prohibits business
combinations with an unapproved interested shareholder for a period of five
years after the date on which such person became an interested shareholder.
The Business Combination Statute is broad in its scope and is designed to
inhibit unfriendly acquisitions.
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The Fair Price Statute prohibits certain business combinations between a
Georgia business corporation and an interested shareholder. The Fair Price
Statute would permit the business combination to be effected if (i) certain
"fair price" criteria are satisfied, (ii) the business combination is
unanimously approved by the continuing directors, (iii) the business
combination is recommended by at least two-thirds of the continuing directors
and approved by a majority of the votes entitled to be cast by holders of
voting shares, other than voting shares beneficially owned by the interested
shareholder, or (iv) the interested shareholder has been an interested
shareholder for at least three years and has not increased his ownership
position in such three-year period by more than one percent in any twelve
month period. The Fair Price Statute is designed to inhibit unfriendly
acquisitions that do not satisfy the specified "fair price" requirements.
Pursuant to the GBCC, the Company cannot, subject to certain exceptions,
merge with or sell all or substantially all of the assets of the Company,
except pursuant to a resolution approved by shareholders holding a majority of
the shares entitled to vote on the resolution. In addition, the agreement of
limited partnership of the Operating Partnership (the "Partnership Agreement")
requires that any merger of the Operating Partnership into another entity if
the Operating Partnership is not the surviving entity or any sale of all or
substantially all of the assets of the Operating Partnership to the Company or
an affiliate of the Company be approved by a majority in interest of the
limited partners (excluding any limited partner interests in the Operating
Partnership owned by the Company and its subsidiaries).
CERTAIN OTHER PROVISIONS OF THE COMPANY'S ARTICLES AND BYLAWS
Certain provisions of the Company's Articles and Bylaws might discourage
certain types of transactions that involve an actual or threatened change in
control of the Company. The Ownership Limit may delay or impede a transaction
or a change in control of the Company that might involve a premium price for
the Company's capital stock or otherwise be in the best interest of the
shareholders. See "--Restrictions on Transfer." Pursuant to the Articles, the
Company's Board of Directors is divided into three classes of directors, each
class serving staggered three-year terms. The staggered terms of directors may
reduce the possibility of a tender offer or an attempt to change control of
the Company. Under the GBCC, unless otherwise set forth in the articles of
incorporation or in a bylaw adopted by the shareholders, directors serving on
a classified board may only be removed by the shareholders for cause. In
addition, the Bylaws of the Company provide that, subject to the right of the
holders of any Preferred Stock then outstanding to elect additional directors
under specified circumstances, directors may be removed only for cause upon
the affirmative vote of holders of a majority of the shares present and
voting. These provisions may render more difficult a change in control of the
Company or removal of incumbent management. The issuance of Preferred Stock by
the Board of Directors also may have the effect of delaying, deferring or
preventing a change in control of the Company. See "--Preferred Stock."
DESCRIPTION OF COMMON STOCK WARRANTS
The Company may issue Common Stock Warrants, which may be issued
independently or together with any other Securities and may be attached to or
separate from any such Securities. Each series of Common Stock Warrants will
be issued under a separate warrant agreement (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 Stock
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 Stock
Warrants. The following summary of certain provisions of the Common Stock
Warrants does not purport to be complete and is subject to, and qualified in
its entirety by reference to, the applicable
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Prospectus Supplement and the provisions of the Warrant Agreement that will be
filed with the Commission in connection with the offering of such Common Stock
Warrants.
The applicable Prospectus Supplement will describe the terms of the Common
Stock Warrants in respect of which this Prospectus is being delivered,
including, where applicable, the following:
(1) The designation of such Common Stock Warrants;
(2) The aggregate number of such Common Stock Warrants;
(3) The price or prices at which such Common Stock Warrants will be
issued;
(4) The number of shares of Common Stock purchasable upon exercise of a
Common Stock Warrant and the price at which such shares may be purchased
upon exercise (which price may be payable in cash, securities or other
property);
(5) If applicable, the designation and terms of the Securities with which
such Common Stock Warrants are issued and the number of such Common Stock
Warrants issued with each such Security;
(6) The date, if any, from and after which such Common Stock Warrants and
any Securities issued therewith will be separately transferable;
(7) The date on which the right to exercise such Common Stock Warrants
shall commence and the date on which such right shall expire;
(8) The minimum or maximum amount of such Common Stock Warrants which may
be exercised at any one time;
(9) The antidilution provisions of such Common Stock Warrants, if any;
(10) A discussion of the material Federal income tax considerations
applicable to such Common Stock Warrants; and
(11) Any other specific terms of such Common Stock Warrants, including
terms, procedures and limitations relating to the exercise of such Common
Stock Warrants.
Reference is made to the section captioned "Description of Capital Stock"
for a general description of the Common Stock to be acquired upon the exercise
of the Common Stock Warrants, including a description of certain restrictions
on the ownership of Common Stock.
DESCRIPTION OF DEBT SECURITIES
The following description sets forth certain general terms and provisions of
the Debt Securities to which any Prospectus Supplement may relate. The
particular terms of the Debt Securities being offered and the extent to which
such general provisions may apply will be described in a Prospectus Supplement
relating to such Debt Securities.
The Debt Securities will be issued under an indenture, dated as of a date
prior to the issuance of the Debt Securities, as amended or supplemented from
time to time (the "Indenture"), between the Operating Partnership and a
trustee (the "Trustee") chosen by the Operating Partnership and qualified to
act as Trustee under the Trust Indenture Act of 1939, as amended (the "TIA").
The form of Indenture has been filed as an exhibit to the Registration
Statement of which this Prospectus is a part and is available for inspection
as described above under "Available Information." The Indenture is subject to,
and governed by, the TIA. The statements made hereunder relating to the
Indenture and the Debt Securities to be issued thereunder are summaries of
certain provisions thereof and do not purport to be complete and are subject
to, and are qualified in their entirety by reference to, all provisions of the
Indenture and such Debt Securities. Capitalized terms used but not defined
herein
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shall have the respective meanings set forth in the Indenture. All Section
references appearing herein are to sections of the Indenture.
Wherever particular Sections or defined terms of the Indenture are referred
to herein or in a Prospectus Supplement, such Sections or defined terms are
incorporated by reference herein or therein, as the case may be.
GENERAL
The Debt Securities will be direct, unsecured obligations of the Operating
Partnership and will rank pari passu with all other unsecured and
unsubordinated indebtedness of the Operating Partnership. The Debt Securities
are non-convertible and will be effectively subordinated to any secured
indebtedness of the Operating Partnership and its Subsidiaries. The Company
intends that all future borrowings will be made through the Operating
Partnership and its Subsidiaries. At least one nationally-recognized
statistical rating organization will have assigned an investment grade rating
to the Debt Securities at the time of sale. At June 30, 1997, the Operating
Partnership and its Subsidiaries had $169.1 million of secured indebtedness
and $105.7 million of unsecured indebtedness outstanding. The Debt Securities
may be issued without limit as to aggregate principal amount, in one or more
series, in each case as established from time to time in or pursuant to
authority granted by a resolution of the Board of Directors of Weeks GP as
sole general partner of the Operating Partnership or as established in the
Indenture or in one or more indentures supplemental to the Indenture. All Debt
Securities of one series need not be issued at the same time and, unless
otherwise provided, a series may be reopened, without the consent of the
holders of the Debt Securities of such series, for issuances of additional
Debt Securities of such series (Section 301).
The Indenture provides that there may be more than one Trustee thereunder,
each with respect to one or more series of Debt Securities. Any Trustee under
the Indenture may resign or be removed with respect to one or more series of
Debt Securities, and a successor Trustee may be appointed to act with respect
to such series (Section 610). In the event that two or more persons are acting
as Trustee with respect to different series of Debt Securities, each such
trustee shall be a Trustee of a trust under the applicable Indenture separate
and apart from the trust administered by any other Trustee (Section 609) and,
except as otherwise indicated herein, any action described herein to be taken
by a Trustee may be taken by each such Trustee with respect to, and only with
respect to, the one or more series of Debt Securities for which it is Trustee
under the applicable Indenture.
The applicable Prospectus Supplement will set forth the price or prices at
which the Debt Securities to be offered will be issued and will describe the
following terms of such Debt Securities:
(1) the title of such Debt Securities;
(2) any limit on the aggregate principal amount of such Debt Securities
or the series of which they are a part;
(3) the Person to whom any interest on a Debt Security shall be payable,
if other than the Person in whose name the Debt Security is registered;
(4) the date or dates on which the principal of any of such Debt
Securities will be payable;
(5) the rate or rates at which any of such Debt Securities will bear
interest, if any, the date or dates from which any such interest will
accrue, the Interest Payment Dates on which any such interest will be
payable and the Regular Record Date for any such interest payable on any
Interest Payment Date;
(6) the place or places where the principal of and any premium and
interest on any of such Debt Securities will be payable;
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(7) the period or periods within which, the price or prices at which and
the terms and conditions on which any of such Debt Securities may be
redeemed, in whole or in part, at the option of the Operating Partnership;
(8) the obligation, if any, of the Operating Partnership to redeem or
purchase any of such Debt Securities pursuant to any sinking fund or
analogous provision or at the option of the Holder thereof, and the period
or periods within which, the price or prices at which, and the terms and
conditions on which, any of such Debt Securities will be redeemed or
purchased, in whole or in part, pursuant to any such obligation;
(9) the denominations in which any of such Debt Securities will be
issuable, if other than denominations of $1,000 and any integral multiple
thereof;
(10) if the amount of principal of or any premium or interest on any of
such Debt Securities may be determined with reference to an index or
pursuant to a formula, the manner in which such amounts will be determined;
(11) if other than the entire principal amount thereof, the portion of
the principal amount of any of such Debt Securities which will be payable
upon declaration of acceleration of the Maturity thereof;
(12) if the principal amount payable at the Stated Maturity of any of
such Debt Securities will not be determinable as of any one or more dates
prior to the Stated Maturity, the amount which will be deemed to be such
principal amount as of any such date for any purpose, including the
principal amount thereof which will be due and payable upon any Maturity
other than the Stated Maturity or which will be deemed to be Outstanding as
of any such date (or, in any such case, the manner in which such deemed
principal amount is to be determined);
(13) if applicable, that such Debt Securities, in whole or any specified
part, are defeasible pursuant to the provisions of the Indenture described
under "--Defeasance and Covenant Defeasance--Defeasance and Discharge" or
"--Defeasance and Covenant Defeasance--Defeasance of Certain Covenants," or
under both such captions;
(14) whether any of such Debt Securities will be issuable in whole or in
part in the form of one or more Global Debt Securities and, if so, the
respective Depositaries for such Global Debt Securities, the form of any
legend or legends to be borne by any such Global Debt Security in addition
to or in lieu of the legend referred to under "--Global Debt Securities"
and, if different from those described under such caption, any
circumstances under which any such Global Debt Security may be exchanged in
whole or in part for Debt Securities registered, and any transfer of such
Global Debt Security in whole or in part may be registered, in the names of
Persons other than the Depositary for such Global Debt Security or its
nominee;
(15) any addition to or change in the Events of Default applicable to any
of such Debt Securities and any change in the right of the Trustee or the
Holders thereof to declare the principal amount of any of such Debt
Securities due and payable;
(16) any addition to or change in the covenants in the Indenture
described under "--Certain Covenants" applicable to any of such Debt
Securities; and
(17) any other terms of such Debt Securities not inconsistent with the
provisions of the Indenture (Section 301 ).
Debt Securities, including Original Issue Discount Securities, may be sold
at a substantial discount below their principal amount. Certain special United
States federal income tax considerations (if any) applicable to Debt
Securities sold at an original issue discount may be described in the
applicable Prospectus Supplement.
Except as described under "--Merger, Consolidation or Sale" or "--Certain
Covenants" or as may be set forth in any Prospectus Supplement, the Indenture
does not contain any provisions that would
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limit the ability of the Operating Partnership to incur indebtedness or that
would afford Holders of the Debt Securities protection in the event of (i) a
highly leveraged or similar transaction involving the Operating Partnership,
the management of the Operating Partnership or any affiliate of any such
party, (ii) a change of control or (iii) a reorganization, restructuring,
merger or similar transaction involving the Operating Partnership that may
adversely affect the Holders of the Debt Securities. In addition, subject to
the limitations set forth under "--Merger, Consolidation or Sale," the
Operating Partnership may, in the future, enter into certain transactions,
such as the sale of all or substantially all of its assets or the merger or
consolidation of the Operating Partnership, that would increase the amount of
the Operating Partnership's indebtedness or substantially reduce or eliminate
the Operating Partnership's assets, which may have an adverse effect on the
Operating Partnership's ability to service its indebtedness, including the
Debt Securities. However, restrictions on ownership and transfers of the
Company's Common Stock designed to preserve its status as a REIT may act to
prevent or hinder a change of control. Reference is made to the applicable
Prospectus Supplement for information with respect to any deletions from,
modifications of or additions to the events of default or covenants that are
described below, including any addition of a covenant or other provision
providing event risk or similar protection.
DENOMINATIONS, REGISTRATION AND TRANSFER
The Debt Securities of each series will be issuable only in fully registered
form, without coupons, and, unless otherwise specified in the applicable
Prospectus Supplement, only in denominations of $1,000 and integral multiples
thereof (Section 302).
At the option of the Holder, subject to the terms of the Indenture and the
limitations applicable to Global Debt Securities, Debt Securities of each
series will be exchangeable for other Debt Securities of the same series of
any authorized denomination and of a like tenor and aggregate principal amount
(Section 305).
Subject to the terms of the Indenture and the limitations applicable to
Global Debt Securities, Debt Securities may be presented for exchange as
provided above or for registration of transfer (duly endorsed or with the form
of transfer endorsed thereon duly executed) at the office of the Security
Registrar or at the office of any transfer agent designated by the Operating
Partnership for such purpose. No service charge will be made for any
registration of transfer or exchange of Debt Securities, but the Operating
Partnership may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith. Such transfer or exchange
will be effected upon the Security Registrar or such transfer agent, as the
case may be, being satisfied with the documents of title and identity of the
person making the request. The Operating Partnership has appointed the Trustee
as Security Registrar. Any transfer agent (in addition to the Security
Registrar) initially designated by the Operating Partnership for any Debt
Securities will be named in the applicable Prospectus Supplement (Section
305).
The Operating Partnership may at any time designate additional transfer
agents or rescind the designation of any transfer agent or approve a change in
the office through which any transfer agent acts, except that the Operating
Partnership will be required to maintain a transfer agent in each Place of
Payment for the Debt Securities of each series (Section 1002).
If the Debt Securities of any series (or of any series and specified terms)
are to be redeemed in part, the Operating Partnership will not be required to
(i) issue, register the transfer of or exchange any Debt Security of that
series (or of that series and specified terms, as the case may be) during a
period beginning at the opening of business 15 days before the day of mailing
of a notice of redemption of any such Debt Security that may be selected for
redemption and ending at the close of business on the day of such mailing,
(ii) register the transfer of or exchange any Debt Security so selected for
redemption, in whole or in part, except the unredeemed portion of any such
Debt Security
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being redeemed in part or (iii) issue, register the transfer of or exchange
any Debt Security that has been surrendered for payment at the option of the
Holder, except the portion, if any, of such Debt Security not to be so repaid
(Section 305).
GLOBAL DEBT SECURITIES
Some or all of the Debt Securities of any series may be represented, in
whole or in part, by one or more Global Debt Securities which will have an
aggregate principal amount equal to that of the Debt Securities represented
thereby. Each Global Debt Security will be registered in the name of a
Depositary or a nominee thereof identified in the applicable Prospectus
Supplement, will be deposited with such Depositary or nominee or a custodian
therefor and will bear a legend regarding the restrictions on exchanges and
registration of transfer thereof referred to below and any such other matters
as may be provided for pursuant to the Indenture (Section 305).
Notwithstanding any provision of the Indenture or any Debt Security
described herein, no Global Debt Security may be exchanged in whole or in part
for Debt Securities registered, and no transfer of a Global Debt Security in
whole or in part may be registered, in the name of any Person other than the
Depositary for such Global Debt Security or any nominee of such Depositary
unless (i) the Depositary has notified the Operating Partnership that it is
unwilling or unable to continue as Depositary for such Global Debt Security or
has ceased to be qualified to act as such as required by the Indenture, (ii)
there shall have occurred and be continuing an Event of Default with respect
to the Debt Securities represented by such Global Debt Security or (iii) there
shall exist such circumstances, if any, in addition to or in lieu of those
described above as may be described in the applicable Prospectus Supplement
(Section 305). All securities issued in exchange for a Global Debt Security or
any portion thereof will be registered in such names as the Depositary may
direct (Sections 204 and 305).
As long as the Depositary, or its nominee, is the registered Holder of a
Global Debt Security, the Depositary or such nominee, as the case may be, will
be considered the sole owner and Holder of such Global Debt Security and the
Debt Securities represented thereby for all purposes under the Debt Securities
and the Indenture (Section 308). Except in the limited circumstances referred
to above, owners of beneficial interests in a Global Debt Security will not be
entitled to have such Global Debt Security or any Debt Securities represented
thereby registered in their names, will not receive or be entitled to receive
physical delivery of certificated Debt Securities in exchange therefor and
will not be considered to be the owners or Holders of such Global Debt
Security or any Debt Securities represented thereby for any purpose under the
Debt Securities or the Indenture. All payments of principal of and any premium
and Interest on a Global Debt Security will be made to the Depositary or its
nominee, as the case may be, as the Holder thereof. The laws of some
jurisdictions require that certain purchasers of securities take physical
delivery of such securities in definitive form. These laws may impair the
ability to transfer beneficial interests in a Global Debt Security.
Ownership of beneficial interests in a Global Debt Security will be limited
to institutions that have accounts with the Depositary or its nominee
("participants") and to persons that may hold beneficial interests through
participants. In connection with the issuance of any Global Debt Security, the
Depositary will credit, on its book-entry registration and transfer system,
the respective principal amounts of Debt Securities represented by the Global
Debt Security to the accounts of its participants. Ownership of beneficial
interests in a Global Debt Security will be shown only on, and the transfer of
those ownership interests will be effected only through, records maintained by
the Depositary (with respect to participants' interests) or any such
participant (with respect to interests of persons held by such participants on
their behalf). Payments, transfers, exchanges and other matters relating to
beneficial interests in a Global Debt Security may be subject to various
policies and procedures adopted by the Depositary from time to time. None of
the Operating Partnership, the Trustee or any agent of the Operating
Partnership or the Trustee will have any responsibility or liability for any
aspect
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of the Depositary's or any participant's records relating to, or for payments
made on account of, beneficial interests in a Global Debt Security, or for
maintaining, supervising or reviewing any records relating to such beneficial
interests.
Secondary trading in notes and debentures of corporate issuers is generally
settled in clearing-house or next-day funds. In contrast, beneficial interests
in a Global Debt Security, in all cases, will trade in the Depositary's
settlement system, in which secondary market trading activity in those
beneficial interests will be required by the Depositary to settle in
immediately available funds. The Operating Partnership cannot predict the
effect, if any, that settlement in immediately available funds would have on
trading activity in such beneficial interests. Also, settlement for purchases
of beneficial interests in a Global Debt Security upon the original issuance
thereof will be required to be made in immediately available funds.
PAYMENT AND PAYING AGENTS
Unless otherwise indicated in the applicable Prospectus Supplement, payment
of interest on a Debt Security on any Interest Payment Date will be made to
the Person in whose name such Debt Security (or one or more Predecessor Debt
Securities) is registered at the close of business on the Regular Record Date
for such interest (Section 307).
Unless otherwise indicated in the applicable Prospectus Supplement,
principal of and any premium and interest on the Debt Securities of a
particular series will be payable at the office of such Paying Agent or Paying
Agents as the Operating Partnership may designate for such purpose from time
to time, except that at the option of the Operating Partnership payment of any
interest may be made by check mailed to the address of the Person entitled
thereto as such address appears in the Security Register. Unless otherwise
indicated in the applicable Prospectus Supplement, the corporate trust office
of the Trustee will be designated as the Operating Partnership's sole Paying
Agent for payments with respect to Debt Securities of each series. Any other
Paying Agents initially designated by the Operating Partnership for the Debt
Securities of a particular series will be named in the applicable Prospectus
Supplement. The Operating Partnership may at any time designate additional
Paying Agents or rescind the designation of any Paying Agent or approve a
change in the office through which any Paying Agent acts, except that the
Operating Partnership will be required to maintain a Paying Agent in each
Place of Payment for the Debt Securities of a particular series (Section
1002).
All moneys paid by the Operating Partnership to a Paying Agent for the
payment of the principal of, or any premium or interest on, any Debt Security
that remain unclaimed at the end of two years after such principal, premium or
interest has become due and payable will be repaid to the Operating
Partnership, and the Holder of such Debt Security thereafter may look only to
the Operating Partnership for payment thereof (Section 103).
Any interest not punctually paid or duly provided for on any Interest
Payment Date with respect to a Debt Security ("Defaulted Interest") will
forthwith cease to be payable to the Holder on the applicable regular record
date and may either be paid to the person in whose name such Debt Security is
registered at the close of business on a special record date (the "Special
Record Date") for the payment of such Defaulted Interest to be fixed by the
Trustee, notice whereof shall be given to the Holder of such Debt Security not
less than 10 days prior to such Special Record Date, or may be paid at any
time in any other lawful manner, all as more completely described in the
applicable Prospectus Supplement (Section 307).
MERGER, CONSOLIDATION OR SALE
The Operating Partnership may not consolidate with or merge into, or convey,
transfer or lease its properties and assets substantially as an entirety to,
any Person (a "successor Person"), and may not
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permit any Person to merge into, or convey, transfer or lease its properties
and assets substantially as an entirety to, the Operating Partnership, unless
(i) the successor Person (if any) is a corporation, partnership or trust
organized and validly existing under the laws of any domestic jurisdiction and
assumes, by a supplemental indenture, the Operating Partnership's obligations
on the Debt Securities and under the Indenture, (ii) immediately after giving
effect to the transaction, and treating any indebtedness which becomes an
obligation of the Operating Partnership or any Subsidiary as a result of the
transaction as having been incurred by it at the time of the transaction, no
Event of Default, and no event which, after notice or lapse of time or both,
would become an Event of Default, shall have occurred and be continuing and
(iii) certain other conditions are met (Section 801).
CERTAIN COVENANTS
Existence. Except as permitted under "--Merger, Consolidation or Sale," the
Operating Partnership will be required to do or cause to be done all things
necessary to preserve and keep in full force and effect its existence, rights
and franchises; provided, however, that the Operating Partnership shall not be
required to preserve any right or franchise if it determines that the
preservation thereof is no longer desirable in the conduct of its business and
that the loss thereof is not disadvantageous in any material respect to the
Holders of the Debt Securities (Section 1005).
Maintenance of Properties. The Operating Partnership will be required to
cause all properties used or useful in the conduct of its business or the
business of any Subsidiary to be maintained and kept in good condition, repair
and working order and supplied with all necessary equipment and to cause to be
made all necessary repairs, renewals, replacements, betterments and
improvements thereof, all as in the judgment of the Operating Partnership may
be necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; provided, however, that
the Operating Partnership shall not be prevented from discontinuing the
operation or maintenance of any of its properties if such discontinuance is,
in the judgment of the Operating Partnership, desirable in the conduct of its
business or the business of any Subsidiary and not disadvantageous in any
material respect to the Holders (Section 1006).
Insurance. The Operating Partnership will be required to, and to cause each
of its Subsidiaries to, keep all of its insurable properties insured against
loss or damage with insurers of recognized responsibility in commercially
reasonable amounts and types (Section 1008).
Payment of Taxes and Other Claims. The Operating Partnership will be
required to pay or discharge or cause to be paid or discharged, before the
same shall become delinquent, (i) all taxes, assessments and governmental
charges levied or imposed upon the Operating Partnership or any Subsidiary or
upon the income, profits or property of the Operating Partnership or any
Subsidiary, and (ii) all lawful claims for labor, materials and supplies
which, if unpaid, might by law become a lien upon the property of the
Operating Partnership or any Subsidiary; provided, however, that the Operating
Partnership shall not be required to pay or discharge or cause to be paid or
discharged any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings (Section 1007).
Provision of Financial Information. Whether or not the Operating Partnership
is subject to Section 13 or Section 15(d) of the Exchange Act and for so long
as any Debt Securities are outstanding, the Operating Partnership will, to the
extent permitted under the Exchange Act, file with the Commission the annual
reports, quarterly reports and other documents which the Operating Partnership
would have been required to file with the Commission pursuant to such Section
13 or Section 15(d) (the "Financial Statements") if the Operating Partnership
were so subject, such documents to be filed with the Commission on or prior to
the respective dates (the "Required Filing Dates") by which the Operating
Partnership would have been required so to file such documents if the
Operating Partnership were so subject. The Operating Partnership will also in
any event (x) within 15 days of each Required Filing
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Date (i) transmit by mail to all Holders of Debt Securities whose names appear
in the Security Register for such Debt Securities, as their names and
addresses appear in the Security Register for such Debt Securities, without
cost to such Holders, copies of the annual reports and quarterly reports which
the Operating Partnership would have been required to file with the Commission
pursuant to Section 13 or Section 15(d) of the Exchange Act if the Operating
Partnership were subject to such Sections and (ii) file with any Trustee
copies of the annual reports, quarterly reports and other documents which the
Operating Partnership would have been required to file with the Commission
pursuant to Section 13 or Section 15(d) of the Exchange Act if the Operating
Partnership were subject to such Sections and (y) if filing such documents by
the Operating Partnership with the Commission is not permitted under the
Exchange Act, promptly upon written request and payment of the reasonable cost
of duplication and delivery, supply copies of such documents to any
prospective Holder (Section 1010).
Limitations on Incurrence of Indebtedness. The Operating Partnership will
not, and will not permit any Subsidiary to, incur any Indebtedness (as defined
below), other than intercompany debt representing Indebtedness to which the
only parties are the Company, the Operating Partnership and any of their
Subsidiaries (but only so long as such Indebtedness is held solely by any of
the Company, the Operating Partnership and any Subsidiary) that is subordinate
in right of payment to Outstanding Debt Securities, if, immediately after
giving effect to the incurrence of such additional Indebtedness, the aggregate
principal amount of all outstanding Indebtedness of the Operating Partnership
and its Subsidiaries on a consolidated basis is greater than 60% of the sum of
(i) Total Assets (as defined below) as of the end of the calendar quarter
covered in the Operating Partnership's Annual Report on Form 10-K or Quarterly
Report on Form 10-Q, as the case may be, most recently filed with the Trustee
(or such reports of the Company if filed by the Operating Partnership with the
Trustee in lieu of filing its own reports) prior to the incurrence of such
additional Indebtedness and (ii) the increase in Total Assets from the end of
such quarter including, without limitation, any increase in Total Assets
resulting from the incurrence of such additional Indebtedness (such increase,
together with the Total Assets, is referred to as "Adjusted Total Assets")
(Section 1009).
In addition to the foregoing limitation on the incurrence of Indebtedness,
the Operating Partnership will not, and will not permit any Subsidiary to,
incur any Indebtedness if the ratio of Consolidated Income Available for Debt
Service to the Annual Service Charge (in each case as defined below) for the
four consecutive fiscal quarters most recently ended prior to the date on
which such additional Indebtedness is to be incurred shall have been less than
1.5 to 1, on a pro forma basis, after giving effect to the incurrence of such
Indebtedness and to the application of the proceeds therefrom and calculated
on the assumption that (i) such Indebtedness and any other Indebtedness
incurred by the Operating Partnership or its Subsidiaries since the first day
of such four-quarter period and the application of the proceeds therefrom,
including to refinance other Indebtedness, had occurred at the beginning of
such period, (ii) the repayment or retirement of any other Indebtedness by the
Operating Partnership or its Subsidiaries since the first day of such four-
quarter period had occurred at the beginning of such period (except that, in
making such computation, the amount of Indebtedness under any revolving credit
facility shall be computed based upon the average daily balance of such
Indebtedness during such period), (iii) the income earned on any increase in
Adjusted Total Assets since the end of such four-quarter period had been
earned on an annualized basis, during such period, and (iv) in the case of any
acquisition or disposition by the Operating Partnership or any Subsidiary of
any asset or group of assets since the first day of such four-quarter period,
including, without limitation, by merger, stock purchase or sale, or asset
purchase or sale, such acquisition or disposition or any related repayment of
Indebtedness had occurred as of the first day of such period with appropriate
adjustments with respect to such acquisition or disposition being included in
such pro forma calculation (Section 1009). Further, the Operating Partnership
will not, and will not permit any Subsidiary to, incur any Secured
Indebtedness of the Operating Partnership or any Subsidiary if, immediately
after giving effect to the incurrence of such additional Secured Indebtedness,
the aggregate principal amount of all outstanding Secured Indebtedness of the
Operating Partnership and its Subsidiaries on a
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consolidated basis would be greater than 40% of Adjusted Total Assets. As used
herein, "Secured Indebtedness" means Indebtedness secured by any mortgage,
lien, charge, encumbrance, trust, deed, deed of trust, deed to secure debt,
security agreement, pledge, conditional sale or other title retention
agreement, capitalized lease, or other like agreement granting or conveying
security title to or a security interest in real property or other tangible
assets.
For purposes of the foregoing provisions regarding the limitation on the
incurrence of Indebtedness, Indebtedness shall be deemed to be "incurred" by
the Operating Partnership or a Subsidiary whenever the Operating Partnership
and its Subsidiary shall create, assume, guarantee or otherwise become liable
in respect thereof (Section 1009).
Maintenance of Total Unencumbered Assets. For so long as there are
Outstanding any Debt Securities (other than Debt Securities that are not, by
their terms, entitled to the benefit of this covenant), the Operating
Partnership is required to maintain Total Unencumbered Assets (as defined
below) of not less than 150% of the aggregate outstanding principal amount of
all outstanding Unsecured Indebtedness (as defined below) (Section 1009).
As used herein:
"Annual Service Charge" as of any date means the amount which is expensed in
any 12-month period for interest on Indebtedness of the Operating Partnership
and its Subsidiaries.
"Consolidated Income Available for Debt Service" for any period means
Consolidated Net Income (i) plus amounts which have been deducted for (a)
interest on Indebtedness of the Operating Partnership and its Subsidiaries,
(b) provision for taxes of the Operating Partnership and its Subsidiaries
based on income, (c) amortization of Indebtedness discount, (d) losses and
provisions for losses on properties, (e) depreciation and amortization, (f)
the effect of any noncash charge resulting from a change in accounting
principles in determining Consolidated Net Income for such period, (g)
amortization of deferred charges and (h) the effect of net losses of joint
ventures in which the Operating Partnership or any Subsidiary owns an interest
to the extent not requiring a use of cash, and (ii) less amounts which have
been included for (a) gains from sales or dispositions of properties and (b)
the effect of net income of joint ventures in which the Operating Partnership
or any Subsidiary owns an interest to the extent not providing a source of
cash.
"Consolidated Net Income" for any period means the amount of consolidated
net income (or loss) of the Partnership and its Subsidiaries for such period
determined on a consolidated basis in accordance with generally accepted
accounting principles.
"Indebtedness" of the Operating Partnership or any Subsidiary means any
indebtedness of the Operating Partnership or such Subsidiary, as applicable,
whether or not contingent, in respect of (i) borrowed money evidenced by
bonds, notes, debentures or similar instruments, (ii) indebtedness secured by
a mortgage, pledge, lien, charge, encumbrance of any security interest
existing on property owned by the Operating Partnership or such Subsidiary,
(iii) the reimbursement obligations, contingent or otherwise, in connection
with any letters of credit actually issued or amounts representing the balance
that constitutes an accrued expense or trade payable or (iv) any lease of
property by the Operating Partnership or such Subsidiary as lessee which is
reflected in the Operating Partnership's consolidated balance sheet as a
capitalized lease in accordance with generally accepted accounting principles,
in the case of items of indebtedness under (i) through (iii) above to the
extent that any such items (other than letters of credit) would appear as a
liability on the Operating Partnership's consolidated balance sheet in
accordance with generally accepted accounting principles, and also includes,
to the extent not otherwise included, any obligation by the Operating
Partnership or such Subsidiary to be liable for, or to pay, as obligor,
guarantor or otherwise (other than for purposes of collection in the ordinary
course of business), indebtedness of another person (other than the Operating
Partnership or any Subsidiary).
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"Subsidiary" means Weeks Realty Services, Weeks Construction Services and
any other corporation, partnership or limited liability company more than 50%
of the outstanding voting stock, partnership interests or membership
interests, as the case may be, of which is owned or controlled, directly or
indirectly, by the Operating Partnership or by one or more other Subsidiaries,
or by the Operating Partnership and one or more other Subsidiaries. For the
purposes of this definition, "voting stock" means stock which ordinarily has
voting power for the election of directors, whether at all times or only so
long as no senior class of stock has such voting power by reason of any
contingency.
"Total Assets" as of any date means the sum of (i) Undepreciated Real Estate
Assets and (ii) all other assets of the Operating Partnership and its
Subsidiaries on a consolidated basis determined in accordance with generally
accepted accounting principles (but excluding intangibles and straight-line
rents receivable).
"Total Unencumbered Assets" means the sum of (i) those Undepreciated Real
Estate Assets which have not been pledged, mortgaged or otherwise encumbered
by the owner thereof to secure Indebtedness, excluding infrastructure
assessment bonds and (ii) all other assets of the Operating Partnership and
its Subsidiaries determined in accordance with generally accepted accounting
principles (but excluding intangibles and straight-line rents receivable)
which have not been pledged, mortgaged or otherwise encumbered by the owner
thereof to secure Indebtedness.
"Undepreciated Real Estate Assets" as of any date means the cost (original
cost plus capital improvements) of real estate assets of the Operating
Partnership and its Subsidiaries on such date, before depreciation and
amortization, determined on a consolidated basis in accordance with generally
accepted accounting principles.
"Unsecured Indebtedness" means Indebtedness which is (i) not subordinated to
any other Indebtedness and (ii) not secured by any mortgage, lien, charge,
pledge, encumbrance or security interest of any kind upon any of the
properties of the Operating Partnership or any Subsidiary.
Additional Covenants. Any additional or different covenants of the Operating
Partnership with respect to any series of Debt Securities will be set forth in
the applicable Prospectus Supplement.
EVENTS OF DEFAULT
Each of the following will constitute an Event of Default under the
Indenture with respect to Debt Securities of any series: (i) failure to pay
any interest on any Debt Securities of that series when due, and continuance
of such failure for a period of 30 days; (ii) failure to pay principal of or
any premium on any Debt Security of that series when due; (iii) failure to
deposit any sinking fund payment, when due, in respect of any Debt Security of
that series; (iv) failure to perform any other covenant of the Operating
Partnership in the Indenture (other than a covenant included in the Indenture
solely for the benefit of a series other than that series), that has continued
for 60 days after written notice has been given by the Trustee, or the Holders
of at least 25% in aggregate principal amount of the Outstanding Debt
Securities of that series, as provided in the Indenture; (v) failure to pay
when due (subject to any applicable grace period) the principal of, or
acceleration of, any Indebtedness for money borrowed by the Operating
Partnership, if, in the case of any such failure, such Indebtedness has not
been discharged or, in the case of any such acceleration, such Indebtedness
has not been discharged or such acceleration has not been rescinded or
annulled, in each case within 10 days after written notice has been given by
the Trustee, or the Holders of at least 25% in aggregate principal amount of
the Outstanding Debt Securities of that series, as provided in the Indenture,
if the aggregate outstanding principal amount of indebtedness under the
instrument with respect to which such default or acceleration has occurred
exceeds $10 million; (vi) certain events of bankruptcy, insolvency or
reorganization of the Operating Partnership or any Significant Subsidiary or
any of their respective
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property; and (vii) any other event of default provided with respect to a
particular series of Debt Securities (Section 501).
If an Event of Default (other than an Event of Default described in clause
(vi) above) with respect to the Debt Securities of any series at the time
Outstanding shall occur and be continuing, either the Trustee or the Holders
of at least 25% in aggregate principal amount of the Outstanding Debt
Securities of that series by notice as provided in the Indenture may declare
the principal amount of the Debt Securities of that series (or, in the case of
any Debt Security that is an Original Issue Discount Security or the principal
amount of which is not then determinable, such portion of the principal amount
of such Debt Security, or such other amount in lieu of such principal amount,
as may be specified in the terms of such Debt Security) to be due and payable
immediately. If an Event of Default described in clause (vi) above with
respect to the Debt Securities of any series at the time Outstanding shall
occur, the principal amount of all the Debt Securities of that series (or, in
the case of any such Original Issue Discount Security or other Debt Security,
such specified amount) will automatically, and without any action by the
Trustee or any Holder, become immediately due and payable. After any such
acceleration, but before a judgment or decree based on acceleration, the
Holders of a majority in aggregate principal amount of the Outstanding Debt
Securities of that series may, under certain circumstances, rescind and annul
such acceleration if all Events of Default, other than the non-payment of
accelerated principal (or other specified amount), have been cured or waived
as provided in the Indenture (Section 502). For information as to waiver of
defaults, see "--Modification and Waiver."
Subject to the provisions of the Indenture relating to the duties of the
Trustee in case an Event of Default shall occur and be continuing, the Trustee
will be under no obligation to exercise any of its rights or powers under the
Indenture at the request or direction of any of the Holders, unless such
Holders shall have offered to the Trustee reasonable indemnity (Section 603).
Subject to such provisions for the indemnification of the Trustee, the Holders
of a majority in aggregate principal amount of the Outstanding Debt Securities
of any series will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee with respect to the
Debt Securities of that series (Section 512).
No Holder of a Debt Security of any series will have any right to institute
any proceeding with respect to the Indenture, or for the appointment of a
receiver or a trustee, or for any other remedy thereunder, unless (i) such
Holder has previously given to the Trustee written notice of a continuing
Event of Default with respect to the Debt Securities of that series, (ii) the
Holders of at least 25% in aggregate principal amount of the Outstanding Debt
Securities of that series have made written request, and such Holder or
Holders have offered reasonable indemnity, to the Trustee to institute such
proceeding as trustee and (iii) the Trustee has failed to institute such
proceeding, and has not received from the Holders of a majority in aggregate
principal amount of the Outstanding Debt Securities of that series a direction
inconsistent with such request, within 60 days after such notice, request and
offer (Section 507). However, such limitations do not apply to a suit
instituted by a Holder of a Debt Security for the enforcement of payment of
the principal of or any premium or interest on such Debt Security on or after
the applicable due date specified in such Debt Security (Section 508).
Within 120 days after the close of each fiscal year, the Operating
Partnership will be required to furnish to the Trustee a statement by certain
of the Company's officers as to whether the Operating Partnership, to their
knowledge, is in default in the performance or observance of any of the terms,
provisions and conditions of the Indenture and, if so, specifying all such
known defaults (Section 1004).
MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made by the Operating
Partnership and the Trustee with the consent of the Holders of a majority in
principal amount of the Outstanding Debt
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Securities of each series affected by such modification or amendment;
provided, however, that no such modification or amendment may, without the
consent of the Holder of each Outstanding Debt Security affected thereby, (i)
change the Stated Maturity of the principal of, or any installment of
principal of or interest on, any Debt Security, (ii) reduce the principal
amount of, or any premium or interest on, any Debt Security, (iii) reduce the
amount of principal of an Original Issue Discount Security or any other Debt
Security payable upon acceleration of the Maturity thereof, (iv) change the
place or currency of payment of principal of, or any premium or interest on,
any Debt Security, (v) impair the right to institute suit for the enforcement
of any payment on or with respect to any Debt Security, (vi) reduce the
percentage in principal amount of Outstanding Debt Securities of any series,
the consent of whose Holders is required for modification or amendment of the
Indenture, (vii) reduce the percentage in principal amount of Outstanding Debt
Securities of any series necessary for waiver of compliance with certain
provisions of the Indenture or for waiver of certain defaults or (viii) modify
such provisions with respect to modification and waiver (Section 902).
The Holders of a majority in principal amount of the Outstanding Debt
Securities of any series may waive compliance by the Operating Partnership
with certain restrictive provisions of the Indenture (Section 1011). The
Holders of a majority in principal amount of the Outstanding Debt Securities
of any series may waive any past default under the Indenture, except a default
in the payment of principal, premium or interest and certain covenants and
provisions of the Indenture that cannot be amended without the consent of the
Holder of each Outstanding Debt Security of such series affected (Section
513).
The Indenture provides that in determining whether the Holders of the
requisite principal amount of the Outstanding Debt Securities have given or
taken any direction, notice, consent, waiver or other action under the
Indenture as of any date (i) the principal amount of an Original Issue
Discount Security that will be deemed to be Outstanding will be the amount of
the principal thereof that would be due and payable as of such date upon
acceleration of the Maturity thereof to such date and (ii) if, as of such
date, the principal amount payable at the Stated Maturity of a Debt Security
is not determinable (for example, because it is based on an index), the
principal amount of such Debt Security deemed to be Outstanding as of such
date will be an amount determined in the manner prescribed for such Debt
Security. Certain Debt Securities, including those for whose payment or
redemption money has been deposited or set aside in trust for the Holders and
those that have been fully defeased pursuant to Section 1302, will not be
deemed to be Outstanding (Section 101).
Except in certain limited circumstances, the Operating Partnership will be
entitled to set any day as a record date for the purpose of determining the
Holders of Outstanding Debt Securities of any series entitled to give or take
any direction, notice, consent, waiver or other action under the Indenture, in
the manner and subject to the limitations provided in the Indenture. In
certain limited circumstances, the Trustee will be entitled to set a record
date for action by Holders. If a record date is set for any action to be taken
by Holders of a particular series, such action may be taken only by persons
who are Holders of Outstanding Debt Securities of that series on the record
date. To be effective, such action must be taken by Holders of the requisite
principal amount of such Debt Securities within a specified period following
the record date. For any particular record date, this period will be 180 days
or such shorter period as may be specified by the Operating Partnership (or
the Trustee, if it set the record date), and may be shortened or lengthened
(but not beyond 180 days) from time to time (Section 104).
Modifications and amendments of the Indenture may be made by the Operating
Partnership and the Trustee without the consent of any Holders of Debt
Securities for any of the following purposes: (i) to evidence the succession
of another person to the Operating Partnership and the assumption by such
successor of the covenants of the Operating Partnership in the Indenture and
the Debt Securities; (ii) to add to the covenants of the Operating Partnership
for the benefit of the Holders of all or any series of Debt Securities or to
surrender any right or power conferred upon the Operating Partnership
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in the Indenture; (iii) to add events of default for the benefit of the
Holders of all or any series of Debt Securities; (iv) to add to or change any
provisions of the Indenture as necessary to permit or facilitate the issuance
of Debt Securities in uncertificated form; (v) to add to, change or eliminate
any of the provisions of the Indenture with respect to one or more series of
Debt Securities, so long as the changes (A) do not (1) apply to any Debt
Securities of any series created prior to such modification or amendment and
entitled to the benefit of such provision or (2) modify the rights of the
holder of any such Debt Security with respect to such provision, or (B) will
only become effective when there is no such Debt Security Outstanding; (vi) to
secure the Debt Securities; (vii) to establish the form or terms of Debt
Securities of any series as permitted in the Indenture; or (viii) to provide
for the acceptance of appointment by a successor Trustee (Section 901).
DEFEASANCE AND COVENANT DEFEASANCE
If and to the extent indicated in the applicable Prospectus Supplement, the
Operating Partnership may elect, at its option at any time, to have the
provisions of Section 1302 of the Indenture, relating to defeasance and
discharge of indebtedness, or Section 1303, relating to defeasance of certain
restrictive covenants in the Indenture, applied to the Debt Securities of any
series, or to any specified part of a series (Section 1301).
DEFEASANCE AND DISCHARGE
The Indenture provides that, upon the Operating Partnership's exercise of
its option (if any) to have Section 1302 applied to any Debt Securities, the
Operating Partnership will be discharged from all its obligations with respect
to such Debt Securities (except for certain obligations to exchange or
register the transfer of Debt Securities, to replace stolen, lost or mutilated
Debt Securities, to maintain paying agencies and to hold moneys for payment in
trust) upon the deposit in trust for the benefit of the Holders of such Debt
Securities of money or U.S. Government Obligations, or both, which, through
the payment of principal and interest in respect thereof in accordance with
their terms, will provide money in an amount sufficient to pay the principal
of and any premium and interest on such Debt Securities on the respective
Stated Maturities in accordance with the terms of the Indenture and such Debt
Securities. Such defeasance or discharge may occur only if, among other
things, the Operating Partnership has delivered to the Trustee an Opinion of
Counsel to the effect that the Operating Partnership has received from, or
there has been published by, the United States Internal Revenue Service a
ruling, or there has been a change in tax law, in either case to the effect
that Holders of such Debt Securities will not recognize gain or loss for
federal income tax purposes as a result of such deposit, defeasance and
discharge and will be subject to federal income tax on the same amount, in the
same manner and at the same times as would have been the case if such deposit,
defeasance and discharge were not to occur (Sections 1302 and 1304).
DEFEASANCE OF CERTAIN COVENANTS
The Indenture provides that, upon the Operating Partnership's exercise of
its option (if any) to have Section 1303 applied to any Debt Securities, the
Operating Partnership may omit to comply with certain restrictive covenants,
including those described under "Certain Covenants," in the last sentence
under "--Merger, Consolidation or Sale" and any that may be described in the
applicable Prospectus Supplement, and the occurrence of certain Events of
Default, which are described above in clause (iv) (with respect to such
restrictive covenants) and clauses (v) and (vii) under "--Events of Default"
and any that may be described in the applicable Prospectus Supplement, will be
deemed not to be or result in an Event of Default, in each case with respect
to such Debt Securities. The Operating Partnership, in order to exercise such
option, will be required to deposit, in trust for the benefit of the Holders
of such Debt Securities, money or U.S. Government Obligations, or both, which,
through the payment of principal and interest in respect thereof in accordance
with their terms, will provide money in an amount sufficient to pay the
principal of and any premium and interest on such Debt Securities
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on the respective Stated Maturities in accordance with the terms of the
Indenture and such Debt Securities. The Operating Partnership will also be
required, among other things, to deliver to the Trustee an Opinion of Counsel
to the effect that Holders of such Debt Securities will not recognize gain or
loss for federal income tax purposes as a result of such deposit and
defeasance of certain obligations and will be subject to federal income tax on
the same amount, in the same manner and at the same times as would have been
the case if such deposit and defeasance were not to occur. In the event the
Operating Partnership exercised this option with respect to any Debt
Securities and such Debt Securities were declared due and payable because of
the occurrence of any Event of Default, the amount of money and U.S.
Government Obligations so deposited in trust would be sufficient to pay
amounts due on such Debt Securities at the time of their respective Stated
Maturities but may not be sufficient to pay amounts due on such Debt
Securities upon any acceleration resulting from such Event of Default. In such
case, the Operating Partnership would remain liable for such payments
(Sections 1303 and 1304).
"U.S. Government Obligations" means securities which are (i) direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged or (ii) obligations of a person controlled or
supervised by and acting as a agency or instrumentality of the United States
of America, the payment of which is unconditionally guaranteed as a full faith
and credit obligation by the United States of America, which, in either case,
are not callable or redeemable at the option of the issuer thereof, and shall
also include a depository receipt issued by a bank or trust company as
custodian with respect to any such U.S. Government Obligation or a specific
payment of interest on or principal of any such U.S. Government Obligation
held by such custodian of the account of the holder of a depository receipt,
provided that (except as required by law) such custodian is not authorized to
make any deduction from the amount payable to the holder of such depository
receipt from any amount received by the custodian in respect of the U.S.
Government Obligation or the specific payment of interest on or principal of
the U.S. Government Obligation evidenced by such depository receipt (Section
1304).
NOTICES
Notices to Holders of Debt Securities will be given by mail to the addresses
of such Holders as they may appear in the Security Register (Sections 101 and
106).
TITLE
The Operating Partnership, the Trustee and any agent of the Operating
Partnership or the Trustee may treat the Person in whose name a Debt Security
is registered as the absolute owner thereof (whether or not such Debt Security
may be overdue) for the purpose of making payment and for all other purposes
(Section 308).
NO CONVERSION RIGHTS
The Debt Securities will not be convertible into or exchangeable for any
capital stock of the Company or equity interest in the Operating Partnership.
FEDERAL INCOME TAX CONSIDERATIONS
INTRODUCTORY NOTES
The following discussion summarizes the United States federal income tax
considerations material to a prospective holder of Common Stock. The Company
has received a legal opinion from King & Spalding, which has acted as tax
counsel to the Company, to the effect that the following discussion fairly
summarizes the United States federal income tax considerations that are
material to a holder of
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Common Stock and, to the extent such discussion contains statements of law or
legal conclusions, such statements and conclusions are the opinion of King &
Spalding. If the Company offers Securities other than Common Stock pursuant to
this Prospectus, a discussion of the United States federal income tax
considerations relevant to such Securities will be included in the Prospectus
Supplement relating thereto.
This discussion is based on current law. It is not exhaustive of all
possible tax considerations and does not give a detailed discussion of any
state, local or foreign tax considerations. Nor does it discuss all of the
aspects of federal income taxation that may be relevant to a prospective
shareholder in light of his or her particular circumstances or to certain
types of shareholders (including insurance companies, tax-exempt entities,
financial institutions or broker-dealers, foreign corporations, and persons
who are not citizens or residents of the United States) who are subject to
special treatment under the federal income tax laws. As used in this section,
the term "Subsidiaries" refers to Weeks Realty Services and Weeks Construction
Services.
EACH PROSPECTIVE PURCHASER IS ADVISED TO CONSULT WITH HIS OWN TAX ADVISOR
REGARDING THE SPECIFIC TAX CONSEQUENCES TO HIM OR HER OF THE PURCHASE,
OWNERSHIP, AND SALE OF SECURITIES, INCLUDING THE FEDERAL, STATE, LOCAL,
FOREIGN, AND OTHER TAX CONSEQUENCES OF SUCH PURCHASE, OWNERSHIP, SALE, AND
ELECTION AND OF POTENTIAL CHANGES IN APPLICABLE TAX LAWS.
TAXATION OF THE COMPANY
General. The Company has made an election to be taxed as a REIT under
Sections 856 and 860 of the Code commencing with its taxable year that ended
on December 31, 1994. The Company has received a legal opinion from King &
Spalding to the effect that the Company was organized and has operated in
conformity with the requirements for qualification and taxation as a REIT for
its taxable years ended December 31, 1994, 1995, and 1996, and that its
current organization and method of operation should enable it to continue to
qualify as a REIT. Investors should be aware, however, that opinions of
counsel are not binding upon the Internal Revenue Service ("IRS") or any
court. Further, King & Spalding's opinion is based on various assumptions and
is conditioned upon certain representations made by the Company as to certain
relevant factual matters relating to the organization and the past, current
and expected future manner of operation of the Company, the Operating
Partnership and the Financing Partnership. Moreover, the Company's continued
qualification and taxation as a REIT depends upon the Company's ability to
meet on a continuing basis, through actual annual operating results,
distribution levels and diversity of stock ownership, the various
qualification tests imposed by the Code and discussed below. King & Spalding
will not review compliance with these tests on a continuing basis. No
assurance can be given that the Company will satisfy such tests on a
continuing basis. See "--Failure to Qualify" below.
The following is a general summary of the Code provisions that govern the
U.S. federal income tax treatment of a REIT and its shareholders. These
provisions of the Code are highly technical and complex. This summary is
qualified in its entirety by the applicable Code provisions, the regulations
promulgated thereunder ("Treasury Regulations"), and administrative and
judicial interpretations thereof.
As a REIT, the Company generally is not subject to U.S. federal corporate
income tax on net income that it currently distributes to shareholders. This
treatment substantially eliminates the "double taxation" (at the corporate and
shareholder levels) that generally results from investment in a corporation.
Notwithstanding its REIT election, however, the Company is still subject to
U.S. federal income tax in the following circumstances. First, the Company is
taxed at regular corporate rates on any undistributed taxable income,
including undistributed net capital gains. Second, under certain
circumstances, the Company may be subject to the "alternative minimum tax" on
its items of tax
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preference. Third, if the Company has (i) net income from the sale or other
disposition of "foreclosure property" (which is, in general, property acquired
by foreclosure or otherwise on default of a loan or lease secured by the
property) which is held primarily for sale to clients in the ordinary course
of business or (ii) other non-qualifying income from foreclosure property, it
will be subject to tax at the highest corporate rate on such income. Fourth,
if the Company has net income from prohibited transactions (which are, in
general, certain sales or other dispositions of property (other than
foreclosure property) held primarily for sale to clients in the ordinary
course of business), such income will be subject to a 100% tax. Fifth, if the
Company should fail to satisfy the 75% gross income test or the 95% gross
income test (as discussed below), and has nonetheless maintained its
qualification as a REIT because certain other requirements have been met, it
will be subject to a 100% tax on the net income attributable to the greater of
the amount by which the Company fails the 75% or 95% test. Sixth, if the
Company should fail to distribute during each calendar year at least the sum
of (i) 85% of its REIT ordinary income for such year, (ii) 95% of its REIT
capital gain net income for such year, and (iii) any undistributed taxable
income from prior years, the Company would be subject to a 4% excise tax on
the excess of such required distribution over the amounts actually
distributed. Seventh, if the Company acquires any asset from a C corporation
(i.e., a corporation generally subject to full corporate level tax) in a
transaction in which the basis of the asset in the Company's hands is
determined by reference to the basis of the asset (or any other property) in
the hands of the C corporation, and the Company recognizes gain on the
disposition of such asset during the 10-year period beginning on the date on
which such asset was acquired by the Company, then, to the extent of such
property's "built-in" gain (the excess of the fair market value of such
property at the time of acquisition by the Company over the adjusted basis of
such property at such time), and assuming the Company will make an election
pursuant to Notice 88-19, such gain will be subject to tax at the highest
regular corporate rate applicable (as provided in IRS regulations that have
not yet been promulgated).
Requirements for Qualification. The Code defines a REIT as a corporation,
trust or association (1) which is managed by one or more trustees or
directors; (2) the beneficial ownership of which is evidenced by transferable
shares or by transferable certificates of beneficial interest; (3) which would
be taxable as a domestic corporation but for Sections 856 through 859 of the
Code; (4) which is neither a financial institution nor an insurance company
subject to certain provisions of the Code; (5) the beneficial ownership of
which is held by 100 or more persons; (6) during the last half of each taxable
year not more than 50% in value of the outstanding stock of which is owned,
directly or indirectly, by five or fewer individuals (as defined in the Code
to include certain entities); and (7) which meets certain other tests,
described below, regarding the nature of its income and assets. The Code
provides that conditions (1) through (4), inclusive, must be met during the
entire taxable year and that condition (5) must be met during at least 335
days of a taxable year of twelve months, or during a proportionate part of a
taxable year of less than twelve months. The Company has issued sufficient
shares of Common Stock with sufficient diversity of ownership to allow the
Company to satisfy requirements (5) and (6). In addition, the Company's
Articles provide restrictions regarding the transfer of its shares that are
intended to assist the Company in continuing to satisfy the share ownership
requirements described in (5) and (6) above. See "Capital Stock of the
Company--Restrictions on Transfer". In addition, a corporation may not elect
to become a REIT unless its taxable year is the calendar year. The Company's
taxable year is a calendar year.
In the case of a REIT that owns the stock of a corporation that is a
"qualified REIT subsidiary" within the meaning of Section 856(i)(2) of the
Code, the subsidiary will not be treated as a separate corporation, and the
assets, liabilities, and items of income, deduction, and credit of the
subsidiary will be treated as assets, liabilities, and such items of the REIT.
Weeks GP and Weeks LP are "qualified REIT subsidiaries" of the Company, so the
separate existence of these corporations will be ignored for U.S. federal tax
purposes, and the Company will be treated as directly holding the assets and
liabilities and receiving the tax items of these subsidiaries. Further, in the
case of a REIT that is a partner in a partnership, Treasury Regulations
provide that the REIT will be deemed to own its
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proportionate share of the assets of the partnership and will be deemed to be
entitled to the income of the partnership attributable to such share. In
addition, the character of the assets and gross income of the partnership will
retain the same character in the hands of the REIT for purposes of Section 856
of the Code, including satisfying the gross income tests and asset tests (as
discussed below). Thus, the Company's proportionate share of the assets,
liabilities, and items of income of the Operating Partnership and the
Financing Partnership will be treated as assets, liabilities, and items of
income of the Company for purposes of applying the requirements described
herein.
Income Tests. For its taxable years ending on or before December 31, 1997,
in order to maintain qualification as a REIT, three gross income requirements
must be satisfied annually. First, at least 75% of the REIT's gross income
(excluding gross income from prohibited transactions) for each taxable year
must be derived directly or indirectly from investments relating to real
property or mortgages on real property (including "rents from real property"
and, in certain circumstances, interest) or from certain types of temporary
investments. Second, at least 95% of the REIT's gross income (excluding gross
income from prohibited transactions) for each taxable year must be derived
from such real property investments described above, and from dividends,
interest, and gain from the sale or disposition of stock or securities, or
from any combination of the foregoing. Third, for each taxable year ending on
or before December 31, 1997, short-term gain from the sale or other
disposition of stock or securities, gain from prohibited transactions, and
gain on the sale or other disposition of real property held for less than four
years (apart from involuntary conversions and sales of foreclosure property)
must represent less than 30% of the REIT's gross income (including gross
income from prohibited transactions) for each taxable year. Under the 30%
gross income test, where a REIT holds an interest in a partnership that sells
real property or where the REIT sells its interest in a partnership that holds
real property, the gross income derived from such sale, to the extent
attributable to real property, is deemed to be derived from the sale of real
property held for the shorter of the period the partnership held the property
or the REIT held its partnership interest. Therefore, for purposes of applying
the 30% gross income test, the holding period of Properties held by the
Operating Partnership on the closing date of the IPO will be deemed to have
commenced on such date so that if the Operating Partnership sells one or more
of the Properties prior to the expiration of four years after such closing
date, income from the sale of those Properties will not qualify under the 30%
gross income test even though the Operating Partnership has held such
Properties for more than four years. The Taxpayer Relief Act of 1997 signed by
the President on August 5, 1997 (the "1997 Act') repeals the 30% gross income
test effective for the Company's taxable year beginning January 1, 1998.
Rents received by the Company will qualify as "rents from real property" in
satisfying the above gross income tests only if several conditions are met.
First, the amount of rent must not be based in whole or in part on the income
or profits of any person. However, an amount received or accrued generally
will not be excluded from "rents from real property" solely by reason of being
based on a fixed percentage or percentages of receipts or sales. Second, rents
received from a tenant will not qualify as "rents from real property" if the
Company, or an owner of 10% or more of the Company, directly or constructively
owns 10% or more of such tenant (a "Related Party Tenant"). Third, if rent
attributable to personal property that is leased in connection with a lease of
real property is greater than 15% of the total rent received under the lease,
then the portion of rent attributable to such personal property will not
qualify as "rents from real property". Finally, for rents received to qualify
as "rents from real property," the Company generally must not operate or
manage the property or furnish or render services to tenants, other than
through an "independent contractor" from whom the Company derives no revenue.
The "independent contractor" requirement, however, does not apply to the
extent the services provided by the Company are "usually or customarily
rendered" in the relevant geographic region in connection with the rental of
space for occupancy only and are not otherwise considered "rendered to the
occupant". The Company believes that, except in certain circumstances that are
not believed to be material, it provides only usual and customary services to
the tenants of the Properties and that any noncustomary services are provided
by independent contractors. For the
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Company's taxable years beginning after December 31, 1997, the "independent
contractor" requirement will not apply to noncustomary services provided by
the Company, the annual value of which does not exceed 1% of the gross income
derived from the property with respect to which the services are provided. For
this purpose, such services may not be valued at less than 150% of the
Company's direct cost of providing the services.
The Operating Partnership receives rents from a company controlled by Ray
Weeks' spouse that may under certain circumstances qualify as a Related Party
Tenant. The Company also receives certain other types of non-rent income,
including its allocable share of any dividends and interest paid by the
Subsidiaries to the Operating Partnership (which will qualify under the 95%
gross income test but not under the 75% gross income test). The Company
believes, however, that the aggregate amount of such income and other non-
qualifying income in any taxable year will not cause the Company to exceed the
limits on non-qualifying income under the 75% and 95% gross income tests.
Any gross income derived from a prohibited transaction is taken into account
in applying the 30% income test necessary to qualify as a REIT (and the net
income from the transaction is subject to 100% tax). The term "prohibited
transaction" generally includes a sale or other disposition of property (other
than foreclosure property) that is held primarily for sale to customers in the
ordinary course of a trade or business. The Company believes that no asset
owned by the Operating Partnership or the Financing Partnership is held for
sale to customers and that the sale of any Property or Development Land by
such partnerships is not in its ordinary course of business. Whether property
is held "primarily for sale to customers in the ordinary course of a trade or
business" depends, however, on the facts and circumstances in effect from time
to time, including those related to a particular property. Nevertheless, the
Company and such partnerships will attempt to comply with the terms of safe-
harbor provisions in the Code prescribing when assets sales will not be
characterized as prohibited transactions. Complete assurance cannot be given,
however, that the Company or such partnerships will comply with the safe-
harbor provisions of the Code or avoid owning property that may be
characterized as property held "primarily for sale to customers in the
ordinary course of business".
If the Company fails to satisfy one or both of the 75% or 95% gross income
tests for any taxable year, it may nevertheless qualify as a REIT for such
year if it is entitled to relief under certain provisions of the Code. These
relief provisions generally are available if the Company's failure to meet
such tests was due to reasonable cause and not due to willful neglect, the
Company attaches a schedule of the sources of its income to its return, and
any incorrect information on the schedules was not due to fraud with intent to
evade tax. It is not possible, however, to state whether in all circumstances
the Company would be entitled to the benefit of these relief provisions. As
discussed above in "General," even if these relief provisions were to apply, a
tax would be imposed with respect to the Company's excess net income. The
foregoing relief provisions do not apply in the case of a failure to satisfy
the 30% gross income test (which, as noted above, has been repealed commencing
with the Company's 1998 taxable year).
Asset Tests. At the close of each quarter of its taxable year, the Company
must also satisfy three tests relating to the nature of its assets. First, at
least 75% of the value of the Company's total assets must be represented by
real estate assets (including (i) its allocable share of real estate assets
held by the Operating Partnership and the Financing Partnership and (ii) stock
or debt instruments held for not more than one year purchased with the
proceeds of a stock offering or long-term (at least five years) debt offering
of the Company), cash, cash items, and government securities. Second, not more
than 25% of the Company's total assets may be represented by securities other
than those in the 75% asset class. Third, of the investments included in the
25% asset class, the value of any one issuer's debt and equity securities
owned by the Company may not exceed 5% of the value of the Company's total
assets, and the Company may not own more than 10% of any one issuer's
outstanding voting securities. Debt of an issuer that is secured by real
estate assets does not constitute a "security" for purposes of the 5% asset
test. The 5% asset test must generally be met for any quarter in which a
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REIT acquires securities of an issuer or other property. Thus, this
requirement must be satisfied not only on the date that the Company initially
acquires securities in a Subsidiary, but also each time the Company increases
its ownership of securities of a Subsidiary (including as a result of
increasing its interest in the Operating Partnership as limited partners
exercise their Exchange Rights).
As described above, the Operating Partnership owns 100% of the nonvoting
stock and 1% of the voting stock of Weeks Realty Services, Inc. and Weeks
Construction Services, Inc. (the "Subsidiaries"). The Operating Partnership
does not own more than 10% of the voting securities of the Subsidiaries. In
addition, based upon its analysis of the estimated value of the debt and
equity securities of the Subsidiaries owned by the Operating Partnership
relative to the estimated value of the other assets owned by the Operating
Partnership, the Company believes that its pro rata share of the debt and
equity securities of each Subsidiary held by the Operating Partnership does
not exceed 5% of the total value of the Company's assets, although no
independent appraisals have been obtained to support this conclusion. Although
the Company plans to take steps to ensure that it satisfies the 5% value test
for any quarter in which it acquires securities of the Subsidiaries or other
property, 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 Subsidiaries.
Annual Distribution Requirements. As a REIT, the Company is required to
distribute dividends (other than capital gain dividends) to its shareholders
in an amount at least equal to (A) the sum of (i) 95% of the Company's "REIT
taxable income" (computed without regard to the dividends paid deduction and
the REIT's net capital gain) and (ii) 95% of the net income (after tax), if
any, from "foreclosure property" (as defined above under "--Taxation of the
Company (General)"), minus (B) the sum of certain items of noncash income.
Such distributions must be paid in the taxable year to which they relate, or
in the following taxable year if declared before the Company timely files its
tax return for such year and if paid on or before the first regular dividend
payment after such declaration. To the extent that the Company does not
distribute 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 and ordinary
corporate tax rates. Furthermore, if the Company should fail to distribute
during each calendar year at least the sum of (i) 85% of its REIT ordinary
income for such year, (ii) 95% of its REIT capital gain income for such year,
and (iii) any undistributed taxable income from prior periods, the Company
will be subject to a 4% excise tax on the excess of such required distribution
over the amounts actually distributed.
The Company intends to make timely distributions sufficient to satisfy the
annual distribution requirements. 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, however, that the Company, from time to time,
may not have sufficient cash or other liquid assets to meet the distribution
requirements due to timing differences between the actual receipt of income
and actual payment of deductible expenses and the inclusion of such income and
deduction of such expenses in arriving at taxable income of the Company, or if
the amount of nondeductible expenses (such as principal amortization or
capital expenditures) exceed the amount of noncash deductions. In the event
that such timing differences occur, in order to meet the distribution
requirements, the Company may cause the Operating Partnership to arrange for
short-term, or possibly long-term, borrowing to permit the payment of required
dividends. If the amount of nondeductible expenses exceeds noncash deductions,
the Operating Partnership may refinance its indebtedness to reduce principal
payments and borrow funds for capital expenditures.
Under certain circumstances, the Company may be able to rectify a failure to
meet the distribution requirement for a year by paying "deficiency dividends"
to shareholders in a later year that may be included in the Company's
deduction for dividends paid for the earlier year. Thus, the Company may be
able to avoid paying income tax (but not excise tax) on amounts distributed as
deficiency dividends;
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however, the Company will be required to pay interest to the IRS based upon
the amount of any deduction taken for deficiency dividends.
Information Regarding Stock Ownership. Pursuant to applicable Treasury
Regulations, the Company must maintain certain records and request certain
information from its shareholders designed to disclose the actual ownership of
its stock. The Company intends to comply with such requirements.
FAILURE TO QUALIFY
If the Company fails to qualify for taxation as a REIT in any taxable year
and no relief provisions apply, the Company will be subject to tax (including
any applicable alternative minimum tax) on its taxable income at regular
corporate rates. Any distributions made by the Company to shareholders in any
year in which the Company fails to qualify will not be deductible by the
Company. In such event, to the extent of the Company's 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 would
be disqualified from taxation as a REIT for the four taxable years following
the year during which qualification was lost. It is not possible to state
whether in all circumstances the Company would be entitled to such statutory
relief.
TAXATION OF SHAREHOLDERS
Taxation of Taxable Domestic Shareholders. As long as the Company continues
to qualify 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) are taken into account by them as
ordinary income, and corporate shareholders are not eligible for the dividends
received deduction as to such amounts. Distributions that are designated as
capital gain dividends will be taxed as gain from the sale or exchange of a
capital asset held for more than one year (to the extent they do not exceed
the payor's actual net capital gain for the taxable year) without regard to
the period for which the shareholder held his shares. However, corporate
shareholders are required to treat up to 20% of certain capital gain dividends
as ordinary income.
Distributions in excess of current and accumulated earnings and profits are
not taxable to a shareholder to the extent that they do not exceed the
adjusted basis of the shareholder's Common Stock, but rather reduce the
adjusted basis of such shares. To the extent that such distributions exceed
the adjusted basis of a shareholder's Common Stock, they are included in
income as capital gain (or short-term capital gain if the shares have been
held for one year or less), assuming the shares are a capital asset in the
hands of the shareholder. The tax rate to which such capital gain will be
subject will depend on the shareholder's holding period for his shares. See
"Taxation of Shareholders--Capital Gains Rates Under the 1997 Act" below.
For its taxable years beginning after December 31, 1997, the Company may
make an election with respect to all or part of its undistributed net capital
gain. If the Company should make such an election, its shareholders would be
required to include in their income as long-term capital gain their
proportionate share of the Company's undistributed net capital gain as
designated by the Company. The tax rate applicable to such gain is not clear
under the 1997 Act. See "Taxation of Shareholders--Capital Gains Rates Under
the 1997 Act" below. Each such shareholder would be deemed to have paid his
proportionate share of the income tax imposed on the Company with respect to
such undistributed net capital gain, and this amount would be credited or
refunded to the shareholder. In addition, the tax basis of the shareholder's
stock would be increased by his proportionate share of undistributed net
capital gains included in his income less his proportionate share of the
income tax imposed on the Company with respect to such gains.
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Any dividend declared by the Company in October, November, or December of
any year payable to a shareholder of record on a specific date in any such
month are 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 do not
include in their individual income tax returns any net operating losses or
capital losses of the Company.
In general, any gain or loss realized upon a taxable disposition of shares
of Common Stock by a shareholder who is not a dealer in securities will be
treated as a capital gain or loss. Lower marginal tax rates for individuals
may apply in the case of capital gains depending on the holding period of the
shares of Common Stock that are sold. See "Taxation of Shareholders--Capital
Gains Rates Under the 1997 Act" below. However, any loss upon a sale or
exchange of Common Stock by a shareholder who has held such shares for six
months or less (after applying certain holding period rules) are 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 gain.
Capital Gains Rates Under the 1997 Act. In general, under the 1997 Act, the
maximum tax rate on an individual's net capital gain is reduced from 28-
percent to 20-percent. In addition, any net capital gain which otherwise would
be taxed at a 15-percent rate is taxed at a 10-percent rate. However, the
rates applicable to ordinary income continue to apply to the sale or exchange
of capital assets held for one year or less, and the applicable tax rate under
prior law, rather than the new 20-percent and 10-percent rates, will continue
to apply to the sale or exchange of capital assets held for more than one year
but not more than 18 months. It is unclear how the applicable rate is
determined in the case of capital gain dividends paid by a REIT, which, under
Section 857 of the Code, are required to be treated as "gain from the sale or
exchange of a capital asset held for more than one year." The Treasury
Department is authorized to issue regulations that address the application of
the new capital gains rates to sales and exchanges by REITs and to sales and
exchanges of interests in REITs, but no such regulations have been issued.
Backup Withholding. The Company reports to its domestic shareholders and the
IRS the amount of dividends paid during each calendar year, and the amount of
tax withheld, if any, with respect thereto. Under the backup withholding
rules, a shareholder may be subject to backup withholding at the rate of 31%
with respect to dividends paid unless such holder (a) is a corporation or
comes within certain other exempt categories and, when required, demonstrates
this fact, or (b) provides a taxpayer identification number, certifies as to
no loss of exemption from backup withholding, and otherwise complies with
applicable requirements of the backup withholding rules. A shareholder who
does not provide the Company with its correct taxpayer identification number
may also be subject to penalties imposed by the IRS. Any amount paid as backup
withholding will be creditable against the 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 "Taxation of Foreign Shareholders" below.
Taxation of Tax-Exempt Shareholders. The IRS has ruled that amounts
distributed by a REIT to a tax-exempt employees' pension trust do not
constitute "unrelated business taxable income" ("UBTI"). The Revenue
Reconciliation Act of 1993 (the "1993 Act") has partially preempted this
revenue ruling (as discussed below). In those circumstances in which the
ruling still applies, 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 and the Common Stock is not
otherwise used in an unrelated trade or business of the tax-exempt entity.
Revenue rulings are interpretative in nature and subject to revocation or
modification by the IRS.
In applying the stock ownership test of Section 856(h) of the Code, the 1993
Act treats beneficiaries of certain pension trusts as holding the shares of a
REIT in proportion to their actuarial
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interests in such trust, thus permitting affected pension trusts to acquire
more concentrated ownership of a REIT. However, a pension trust that owns more
than 10% of a REIT must now treat a percentage of the dividends as UBTI (the
"UBTI Percentage") under certain circumstances. The UBTI Percentage is
determined by dividing (i) the gross income of a REIT, less related direct
expenses, that would be considered to be derived from an unrelated trade or
business if the REIT were a pension trust by (ii) the gross income of the
REIT, less related direct expenses, for the year in which the dividends are
paid. The UBTI rule would apply to a pension trust that owns more than 10% of
the value of the REIT's stock only if (a) the UBTI Percentage is at least 5%,
(b) the REIT qualifies as a REIT by reason of the above modification of the
stock ownership test, and (c) either one pension trust owns more than 25% of
the value of the REIT's stock or a group of pension trusts individually owning
more than 10% of the value of the REIT's stock collectively own more than 50%
of the value of the REIT's stock.
Taxation of Foreign Shareholders. The rules governing U.S. federal income
taxation of nonresident alien individuals, foreign corporations, foreign
partnerships, and other foreign shareholders (collectively, "Non-U.S.
Shareholders") are complex, and no attempt is made herein to provide more than
a limited summary of such rules. Prospective Non-U.S. Shareholders should
consult with their own tax advisors to determine the impact of U.S. federal,
state, and local income tax laws with regard to an investment in Common Stock,
including any reporting requirements.
Distributions that are not attributable to gain from sales or exchanges by
the Company of U.S. real property interests and not designated by the Company
as capital gain dividends are treated as dividends of ordinary income to the
extent that they are made out of current or accumulated earnings and profits
of the Company. Such distributions, ordinarily, are subject to a withholding
tax equal to 30% of the gross amount of the distribution unless an applicable
tax treaty reduces that tax. However, if income from the investment in the
shares of capital stock 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 is subject to a 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 if the shareholder is a foreign corporation).
The Company withholds U.S. income tax at the rate of 30% on the gross amount
of any dividends paid to a Non-U.S. Shareholder that are not designated as
capital gain dividends unless (i) a lower treaty rate applies and the required
form evidencing eligibility for that reduced rate is filed with the Company or
(ii) the Non-U.S. Shareholder files an IRS Form 4224 with the Company claiming
that the distribution is "effectively connected" income. The IRS issued
proposed regulations in April 1996 that would modify the manner in which the
Company complies with the withholding requirements.
Distributions in excess of current and accumulated earnings and profits of
the Company are not taxable to a shareholder to the extent that they do not
exceed the adjusted basis of the shareholder's shares of capital stock, but
rather will reduce the adjusted basis of such shares. To the extent that such
distributions exceed the adjusted basis of a Non-U.S. Shareholder's shares,
they give rise to tax liability if the Non-U.S. Shareholder is otherwise
subject to tax on any gain from the sale or disposition of his shares of
capital stock as described below. If it cannot be determined at the time a
distribution is made whether or not such distribution is in excess of current
and accumulated earnings and profits, the distribution is subject to
withholding at the rate applicable to dividends. The Small Business Job
Protection Act of 1996 requires the Company to withhold 10% of any
distribution to a Non-U.S. Shareholder in excess of the Company's current and
accumulated earnings and profits. Accordingly, although the Company intends to
withhold at a rate of 30% on the entire amount of the distribution, to the
extent that the Company does not do so, any portion of the distribution not
subject to withholding at a rate of 30% will be subject to withholding at a
rate of 10%. The Non-U.S. Shareholder may seek a refund of such amounts from
the IRS to the extent that the amount withheld from such distribution was, in
fact, in excess of the U.S. income tax due with respect to such distribution.
For any year in which the Company qualifies as a REIT, distributions that
are attributable to gain from sales or exchanges by the Company of U.S. real
property interests will be taxed to a Non-U.S.
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<PAGE>
Shareholder under the FIRPTA provisions as if such gain were effectively
connected with a U.S. business. Thus, Non-U.S. Shareholders will be taxed on
such distributions at the normal capital gain rates applicable to U.S.
shareholders (subject to applicable alternative minimum tax and a special
alternative minimum tax in the case of nonresident alien individuals). Also,
distributions that are attributable to gain from sales or exchanges by the
Company of U.S. real property interests may be subject to a 30% branch profits
tax in the hands of a corporate Non-U.S. Shareholder not entitled to treaty
relief or exemption. The Company is required by applicable Treasury
Regulations to withhold 35% of any distribution that could be designated by
the Company as a capital gain dividend. The amount withheld is creditable
against the Non-U.S. Shareholder's U.S. federal income tax liability.
Gain recognized by a Non-U.S. Shareholder upon the sale or exchange of
Common Stock generally will not be subject to U.S. tax unless the capital
stock constitutes a "United States real property interest" within the meaning
of the Foreign Investment in Real Property Tax Act of 1980 ("FIRPTA"). The
capital stock will not constitute a "United States real property interest" so
long as the Company qualifies as 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 stock is held, directly
or indirectly, by Non-U.S. Shareholders. Because the Company is publicly
traded, there can be no assurance that the Company will qualify as a
domestically controlled REIT. If the Company does not qualify (or ceases to
qualify) as a "domestically controlled REIT," whether gain arising from the
sale or exchange of capital stock by a Non-U.S. Shareholder would be subject
to U.S. tax under FIRPTA will depend on whether the capital stock is
"regularly traded" (as defined by applicable Treasury Regulations) on an
established securities market (e.g., the New York Stock Exchange) and on the
size of the selling Non-U.S. Shareholders interest in the Company.
If gain on the sale or exchange of capital stock were subject to tax under
FIRPTA, then (i) the Non-U.S. Shareholder would be subject to regular U.S.
income tax with respect to such gain in the same manner as a U.S. shareholder
(subject to any applicable alternative minimum tax and a special alternative
minimum tax in the case of nonresident alien individuals), and (ii) the
purchaser of the capital stock would be required to withhold and remit to the
IRS 10% of the purchase price unless the purchased capital stock was
"regularly traded" on an established securities market.
Notwithstanding the foregoing, gain from the sale or exchange of capital
stock not otherwise taxable under FIRPTA will be subject to U.S. tax if (i)
the investment in capital stock is treated as effectively connected with a
U.S. trade or business of a Non-U.S. Shareholder, in which case the Non-U.S.
Shareholder will be subject to the same treatment as U.S. shareholders with
respect to such gain, or (ii) the Non-U.S. Shareholder is a nonresident alien
individual who is present in the United States for 183 days or more during the
taxable year and has a "tax home" in the United States, in which case the
individual will be subject to a 30% tax on the individual's capital gains.
OTHER TAX CONSIDERATIONS
Tax Status of Operating Partnership; Effect on REIT Qualification. All of
the Company's investments are made through the Operating Partnership, which in
turn owns substantially all of the interests in the Financing Partnership. The
Company has received a legal opinion from King & Spalding to the effect that
the Operating Partnership and the Financing Partnership will be treated for
U.S. federal income tax purposes as partnerships (and not as associations
taxable as a corporation). If the Operating Partnership were treated as an
association taxable as a corporation, the Company would fail the 75% asset
test (in addition to the 5% asset test and, likely, the 10% voting securities
test). Further, if the Financing Partnership were treated as a taxable
corporation, then the Company would likely fail to qualify as a REIT under the
10% voting securities test, and would also fail to qualify under the 5% test
if the value of the Company's interest in the Financing Partnership (through
the Operating Partnership) exceeded 5% of the value of the Company's assets.
Furthermore, in such a situation, distributions from such partnerships would
be treated as dividends, which are not taken into
34
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account in satisfying the 75% gross income test described above and which
could therefore make it more difficult for the Company to meet such test, and
the Company would not be able to deduct its share of any losses generated by
such partnerships in computing its taxable income. See "--Failure to Qualify"
above for a discussion of the effect of the Company's failure to meet such
tests for a taxable year.
Depreciation. The Partnership's initial income tax basis in the Properties
acquired in exchange for Units generally is the same as the transferor's basis
in such Property on the date of acquisition by the Partnership, except to the
extent that gain is recognized by the transferor in connection with the
transfer. The Partnership generally depreciates such Properties under the
alternative depreciation system of depreciation ("ADS"), using a 40-year
recovery period and the straight-line method with respect to the building and
structural components of such Properties. The Partnership's tax depreciation
deductions will be allocated among the Partners in accordance with their
respective percentage interests in the Partnership, except as otherwise
required pursuant to Section 704(c) of the Code.
State and Local Taxes. The Company and its shareholders may be subject to
state or local taxation in various state or local 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. Consequently, prospective
shareholders should consult their own tax advisors regarding the effect of
state and local tax laws on an investment in the Common Stock.
PLAN OF DISTRIBUTION
The Company and the Operating Partnership may sell the Securities in or
outside the United States through underwriters or dealers, directly to one or
more purchasers, through agents or through a combination of any such methods
of sale. The Prospectus Supplement with respect to the Securities will set
forth the terms of the offering of the Securities, including the name or names
of any underwriters, dealers or agents, the initial public offering price, any
delayed delivery arrangements, any underwriting discounts and other items
constituting underwriters compensation, any discounts or concessions allowed
or reallowed or paid to dealers, and any securities exchanges on which the
Securities may be listed.
If underwriters are used in the sale of the Securities, the Securities may
be acquired by the underwriters for their own accounts and may be resold from
time to time in one or more transactions, including negotiated transactions,
at a fixed public offering price or at varying prices determined at the time
of sale. The Securities may be offered to the public either through
underwriting syndicates represented by one or more managing underwriters or
directly by one or more firms acting as underwriters. The underwriter or
underwriters with respect to a particular underwritten offering of Securities
will be named in the Prospectus Supplement relating to such offering, and if
an underwriting syndicate is used, the managing underwriter or underwriters
will be set forth on the cover of such Prospectus Supplement. Unless otherwise
set forth in the Prospectus Supplement relating thereto, the obligations of
the underwriters or agents to purchase the Securities will be subject to
conditions precedent and the underwriters will be obligated to purchase all
the Securities if any are purchased. The initial public offering price and any
discounts or concessions allowed or reallowed or paid to dealers may be
changed from time to time.
If dealers are used in the sale of the Securities, the Company or the
Operating Partnership will sell such Securities to the dealers as principals.
The dealers may then resell such Securities to the public at varying prices to
be determined by such dealers at the time of resale. The names of the dealers
and the terms of the transaction will be set forth in the Prospectus
Supplement relating thereto.
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<PAGE>
Securities may be sold directly by the Company or the Operating Partnership
through agents designated by the Company or the Operating Partnership from
time to time at fixed prices, which may be changed, or at varying prices
determined at the time of sale. Any agent involved in the offer or sale of the
Securities will be named, and any commissions payable by the Company or the
Operating Partnership to such agent will be set forth, in the Prospectus
Supplement relating thereto. Unless otherwise indicated in the Prospectus
Supplement, any such agent will be acting on a best efforts basis for the
period of its appointment.
In connection with the sale of the Securities, underwriters, dealers or
agents may receive compensation from the Company, from the Operating
Partnership or from purchasers of Securities for whom they may act as agents
in the form of discounts, concessions or commissions. Underwriters, dealers
and agents participating in the distribution of the Securities may be deemed
to be underwriters and any discounts or commissions received by them from the
Company or the Operating Partnership and any profit on the resale of the
Securities by them may be deemed to be underwriting discounts or commissions
under the Securities Act.
If so indicated in the Prospectus Supplement, the Company or the Operating
Partnership, as the case may be, will authorize dealers or agents to solicit
offers from certain types of institutions to purchase Securities from the
Company or the Operating Partnership, as the case may be, at the public
offering price set forth in the Prospectus Supplement pursuant to delayed
delivery contracts providing for payment and delivery on a specified date in
the future. Such contracts will be subject only to those conditions set forth
in the Prospectus Supplement, and the Prospectus Supplement will set forth the
commission payable for solicitation of such contracts.
Underwriters, dealers and agents may be entitled under agreements entered
into with the Company and the Operating Partnership to indemnification by the
Company or the Operating Partnership against certain civil liabilities,
including liabilities under the Securities Act, or to contribution with
respect to payments that such agents, dealers or underwriters may be required
to make with respect thereto. Underwriters, agents and dealers may engage in
transactions with, or perform services for, the Company or the Operating
Partnership in the ordinary course of business.
The Preferred Stock, the Common Stock Warrants and the Debt Securities may
or may not be listed on a national securities exchange. The Common Stock
currently trades on the NYSE, and any Common Stock offered hereby will be
listed on the NYSE, subject to an official notice of issuance. No assurances
can be given that there will be a market for the Securities.
LEGAL MATTERS
The validity of the Securities will be passed upon for the Company by King &
Spalding, Atlanta, Georgia. George D. Busbee, a director of the Company, is of
counsel to King & Spalding.
EXPERTS
The consolidated and combined financial statements and related financial
statement schedule of the Company included in the Company's Annual Report on
Form 10-K for the year ended December 31, 1996, as amended by Form 10-K/A-2
filed with the Commission on September 26, 1997 incorporated by reference in
this Prospectus and the Registration Statement, have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their reports
with respect thereto, and have been incorporated herein in reliance upon the
authority of such firm as experts in giving such reports.
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<PAGE>
The consolidated and combined financial statements and related financial
statement schedule of the Operating Partnership included in the Operating
Partnership's Registration Statement on Form 10 dated August 1, 1997 and filed
with the Commission on August 4, 1997, as amended by Pre-Effective Amendment
No. 3 to Form 10 filed with the Commission on October 1, 1997, incorporated by
reference in this Prospectus and the Registration Statement, have been audited
by Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and have been incorporated herein in reliance
upon the authority of such firm as experts in giving such reports.
The combined financial statements of Lichtin Properties included in the
Company's Current Report on Form 8-K dated November 5, 1996 and filed November
6, 1996, incorporated by reference in the Company's Current Report on Form 8-K
dated December 31, 1996 and filed on January 15, 1997, as amended by
Form 8-K/A dated December 31, 1996 and filed on March 14, 1997, all
incorporated by reference in this Prospectus and the Registration Statement,
have been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their report with respect thereto, and have been incorporated
herein in reliance upon the authority of such firm as experts in giving such
report.
The combined financial statements of NWI Warehouse Group included in the
Company's Current Report on Form 8-K dated November 1, 1996 and filed on
November 6, 1996, as amended by Form 8-K/A dated November 1, 1996 and filed on
November 8, 1996, incorporated by reference in the Company's Current Report on
Form 8-K dated March 25, 1997 and filed on March 26, 1997, all incorporated by
reference in this Prospectus and the Registration Statement, have been audited
by Ernst & Young LLP, independent auditors, as indicated in their report with
respect thereto, and have been incorporated herein in reliance upon the
authority of such firm as experts in giving such report.
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<PAGE>
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTA-
TIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPEC-
TUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RE-
LIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS SUPPLEMENT AND THE PRO-
SPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY SECURITIES OTHER THAN THE SECURITIES DESCRIBED IN THIS PROSPECTUS SUP-
PLEMENT OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH SECU-
RITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE OPERATING PARTNERSHIP
SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN OR THEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
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TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Supplement Summary............................................ S-3
The Operating Partnership................................................ S-11
Use of Proceeds.......................................................... S-12
Capitalization........................................................... S-12
Selected Financial and Other Information................................. S-13
Business and Properties.................................................. S-15
Management............................................................... S-25
Description of Notes..................................................... S-26
Certain Federal Income Tax Considerations................................ S-31
Underwriting............................................................. S-37
Validity of Securities................................................... S-37
Experts.................................................................. S-38
PROSPECTUS
Available Information.................................................... 2
Incorporation of Certain Documents by Reference.......................... 2
The Company and the Operating Partnership................................ 4
Use of Proceeds.......................................................... 5
Consolidated Ratio of Earnings to Fixed Charges and Preferred Stock
Dividends............................................................... 5
Description of Capital Stock............................................. 6
Description of Common Stock Warrants..................................... 11
Description of Debt Securities........................................... 12
Federal Income Tax Considerations........................................ 25
Plan of Distribution..................................................... 35
Legal Matters............................................................ 36
Experts.................................................................. 36
</TABLE>
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$100,000,000
WEEKS REALTY, L.P.
% NOTES DUE MARCH 15,
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LOGO
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GOLDMAN, SACHS & CO.
MORGAN STANLEY DEAN WITTER
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