AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 29, 1997
REGISTRATION STATEMENT NO.
333-_____ SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
__________________
RECKSON ASSOCIATES REALTY CORP.
(Exact name of registrant as specified in its charter)
MARYLAND 11-3233650
(State or other jurisdiction (I.R.S. employer
of incorporation or organization) identification number)
225 BROADHOLLOW ROAD
MELVILLE, NEW YORK 11747
(516) 694-6900
(Address, including zip code, and telephone number, including area code, of
registrant's principal
executive offices)
DONALD J. RECHLER
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
RECKSON ASSOCIATES REALTY CORP.
225 BROADHOLLOW ROAD
MELVILLE, NEW YORK 11747
(516) 694-6900
(Name, address, including zip code, and telephone number, including area
code, of agent for service)
___________________
Copy to:
DOUGLAS A. SGARRO, ESQ.
BROWN & WOOD LLP
ONE WORLD TRADE CENTER, 58TH FLOOR
NEW YORK, N.Y. 10048
___________________
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF PUBLIC:
From time to time after this Registration Statement becomes effective.
___________________
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box./ /
If any of the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities
Act of 1933, other than securities offered only in connection with dividend
or interest reinvestment plans, please check the following box./x/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering./ /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering./ /
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box./x/
___________________
<TABLE>
CALCULATION OF REGISTRATION FEE
<CAPTION>
Proposed Maximum
Title of Class of Aggregate Offering Amount of
Securities to be Registered Price(1) Registration Fee
- ------------------------------------------------------ ---------------------- -----------------
<S> <C> <C>
Common Stock, $.01 par value per share(2) . . . . . . .
Preferred Stock, $.01 per value per share(3) . . . . .
Common Stock Warrants . . . . . . . . . . . . . . . . . $500,000,000 $151,515.15(4)
Preferred Stock Warrants . . . . . . . . . . . . . . .
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee.
(2) Such indeterminate number of shares of Common Stock as may from time to
time be issued at indeterminate prices or upon conversion of Preferred
Stock registered hereunder or upon exercise of Common Stock Warrants
registered hereunder, as the case may be.
(3) Such indeterminate number of shares of Preferred Stock as may from time
to time be issued at indeterminate prices or upon exercise of Preferred
Stock Warrants registered hereunder, as the case may be.
(4) Calculated pursuant to Rule 457(o) under the Securities Act of 1933, as
amended.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(A), MAY DETERMINE.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any such State.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED MAY 29, 1997
PROSPECTUS
- ----------
$500,000,000
RECKSON ASSOCIATES REALTY CORP.
COMMON STOCK, PREFERRED STOCK AND WARRANTS
_________________
Reckson Associates Realty Corp. (the "Company") may offer and issue from
time to time (i) shares of its common stock, $.01 par value per share (the
"Common Stock"), (ii) shares of its preferred stock, $.01 par value per share
(the "Preferred Stock") and (iii) warrants to purchase Common Stock or
Preferred Stock (the "Warrants"), with an aggregate initial public offering
price of up to $500,000,000 on terms to be determined at the time of
offering. The Common Stock, Preferred Stock and Warrants (collectively, the
"Securities") may be offered at prices and on terms to be set forth in one or
more supplements to this Prospectus (each a "Prospectus Supplement").
The specific terms of the Securities in respect of which this Prospectus
is being delivered will be set forth in the applicable Prospectus Supplement
and will include, where applicable: (i) in the case of Common Stock, any
initial public offering price, (ii) in the case of Preferred Stock, the
specific title and stated value, any dividend, liquidation, redemption,
conversion, voting and other rights, and any initial public offering price
and (iii) in the case of Warrants, the Securities as to which such Warrants
may be exercised, the duration, offering price, exercise price and
detachability features. In addition, such specific terms may include
limitations on direct or beneficial ownership and restrictions on transfer of
the Securities, in each case as may be appropriate to preserve the status of
the Company as a real estate investment trust ("REIT") for United States
federal income tax purposes. See "Restrictions on Ownership of Capital
Stock".
The applicable Prospectus Supplement will also contain information,
where applicable, about certain United States federal income tax
considerations relating to, and any listing on a securities exchange of, the
Securities covered by such Prospectus Supplement.
SEE "RISK FACTORS" BEGINNING ON PAGE 3 OF THIS PROSPECTUS FOR A
DESCRIPTION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PURCHASERS OF THE
SECURITIES.
The Securities may be offered directly or through agents designated from
time to time by the Company or to or through underwriters or dealers. If any
agents or underwriters are involved in the sale of any of the Securities,
their names, and any applicable purchase price, fee, commission or discount
arrangement between or among them, will be set forth, or will be calculable
from the information set forth, in an accompanying Prospectus Supplement. No
Securities may be sold by the Company through agents, underwriters or dealers
without delivery of a Prospectus Supplement describing the method and terms
of the offering of such Securities. See "Plan of Distribution."
_________________________
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 __________________, 1997.
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"). Reports,
proxy statements and other information filed by the Company may be inspected
and copied at the public reference facilities maintained by the Commission at
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, as well as the
regional offices of the Commission at 7 World Trade Center (13th Floor), New
York, New York 10048, and Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661-2511. Copies of such information can be
obtained by mail from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. Such
materials can also be inspected at the office of the New York Stock Exchange,
Inc. ("NYSE"), 20 Broad Street, New York, New York 10005. The Commission
maintains a Web site at http://www.sec.gov containing reports, proxy and
information statements and other information regarding registrants, including
the Company, that file electronically with the Commission.
The Company has 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. This Prospectus does not contain all of the
information set forth in the Registration Statement, certain parts of which
have been omitted in accordance with the rules and regulations of the
Commission. For further information with respect to the Company and the
Securities, reference is made to the Registration Statement, including the
exhibits filed as a part thereof and otherwise incorporated therein.
Statements made in this Prospectus as to the contents of any contract,
agreement or other document referred to are not necessarily complete; with
respect to each such contract, agreement or other document filed as an
exhibit to the Registration Statement, reference is made to such exhibit for
a more complete description of the matter involved, and each such statement
shall be deemed qualified in its entirety by such reference. Copies of the
Registration Statement and the exhibits may be inspected, without charge, at
the offices of the Commission, or obtained at prescribed rates from the
Public Reference Section of the Commission at the address set forth above.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed by the Company with the
Commission pursuant to the Exchange Act are incorporated by reference in this
Prospectus:
1. Annual Report on Form 10-K for the year ended December 31, 1996.
2. Quarterly Reports on Form 10-Q for the quarter ended March 31,
1997.
3. Current Reports on Form 8-K and dated March 8, 1996, October 1,
1996, October 22, 1996, November 25, 1996, February 18, 1997 and
May 15, 1997, respectively.
4. The description of the Company's Common Stock which is contained in
Item 1 of the Company's registration statement on Form 8-A, as
amended, filed May 9, 1995 pursuant to Section 12 of the Exchange
Act.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the termination of the offering of the Securities hereunder shall be
deemed to be incorporated by reference herein and to be a part hereof from
the date of the filing of such reports and documents. Any statement
contained in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for the
purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is incorporated or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
The Company will provide a copy of any or all of such documents
(exclusive of exhibits unless such exhibits are specifically incorporated by
reference therein), without charge, to each person to whom this Prospectus is
delivered, upon written or oral request to Reckson Associates Realty Corp.,
225 Broadhollow Road, Melville, New York 11747, Attn: Jason M. Barnett,
Senior Vice President and General Counsel (516) 694-6900.
THE COMPANY
Reckson Associates Realty Corp. (the "Company") was incorporated in
September 1994 and commenced operations effective with the completion of its
initial public offering (the "IPO") on June 2, 1995. The Company, together
with Reckson Operating Partnership, L.P. (the "Operating Partnership"), were
formed for the purpose of continuing the commercial real estate business of
Reckson Associates, its affiliated partnerships and other entities
("Reckson"). For more than 35 years, Reckson has been engaged in the
business of owning, developing, acquiring, constructing, managing and leasing
suburban office and industrial properties in the New York metropolitan area.
Based on industry surveys, management believes that the Company is one of the
largest owners and managers of Class A suburban office and industrial
properties in the New York City metropolitan Tri-State area of New York, New
Jersey and Connecticut (the "Tri-State area"). The Company's growth strategy
is currently focused on suburban markets within a 50 mile radius surrounding
New York City. The Company operates as a fully-integrated, self administered
and self-managed REIT. As of March 31, 1997, the Company owned 123
properties (the "Properties") (including three joint venture properties)
encompassing approximately 9.6 million rentable square feet, all of which are
managed by the Company. The Properties consist of 32 Class A suburban office
properties (the "Office Properties") encompassing approximately 4.4 million
rentable square feet, 89 industrial properties (the "Industrial Properties")
encompassing approximately 5.2 million rentable square feet and two 10,000
square foot retail properties. In addition, as of March 31, 1997, the
Company owned or had contracted to acquire approximately 140 acres of land in
nine separate parcels that may present future development opportunities and
had invested approximately $50.9 million in certain mortgage indebtedness
encumbering four Class A office properties on Long Island and one Class A
office property in New Jersey encompassing an aggregate of approximately
881,000 square feet.
The Office Properties are Class A suburban office buildings and are
well-located, well-maintained and professionally managed. In addition, these
properties are modern with high finishes or have been modernized to
successfully compete with newer buildings and achieve among the highest rent,
occupancy and tenant retention rates within their markets. The majority of
the Office Properties are located in six planned office parks and are
tenanted primarily by national service firms such as "big six" accounting
firms, securities brokerage houses, insurance companies and health care
providers. The Industrial Properties are utilized for distribution,
warehousing, research and development and light manufacturing/assembly
activities and are located primarily in three planned industrial parks.
The Company's executive offices are located at 225 Broadhollow Road,
Melville, New York 11747 and its telephone number at that location is (516)
694-6900. At December 31, 1996, the Company had approximately 185 employees.
RISK FACTORS
This Prospectus contains forward-looking statements which involve risks
and uncertainties. The Company's actual results may differ significantly
from the results discussed in the forward-looking statements. Factors that
might cause such a difference include, but are not limited to, those
discussed below. An investment in the Securities involves various risks.
Prospective investors should carefully consider the following information in
conjunction with the other information contained in this Prospectus before
purchasing the Securities offered hereby (the "Offering").
DEPENDENCE ON TRI-STATE AREA MARKET CONDITIONS DUE TO LIMITED GEOGRAPHIC
DIVERSIFICATION
Currently, all of the Properties are located in the Tri-State area.
Consequently, the Company is dependent upon the continued demand for office,
industrial and other commercial space in the Tri-State area. Like other real
estate markets, the commercial real estate markets have experienced periodic
economic fluctuations and a future decline in the Tri-State area economy or
in the market for commercial real estate could affect the Company's cash
available for distribution and its ability to make distributions to
shareholders.
CONFLICTS OF INTEREST IN THE BUSINESS OF THE COMPANY
Tax Consequences Upon Sale or Refinancing. Holders of units of limited
partnership of the Operating Partnership ("Units") or co-owners of properties
not owned entirely by the Company may suffer different and more adverse tax
consequences than the Company upon the sale or refinancing of the Properties
owned by the Operating Partnership and therefore such holders or co-owners
and the Company may have different objectives regarding the appropriate
pricing and timing of any sale or refinancing of such Properties. While the
Company, as the sole general partner of the Operating Partnership, has the
exclusive authority as to whether and on what terms to sell or refinance each
Property owned solely by the Operating Partnership, those Directors and
officers of the Company who hold Units may seek to influence the Company not
to sell or refinance the Properties, even though such a sale might otherwise
be financially advantageous to the Company, or may seek to influence the
Company to refinance a Property with a higher level of debt.
Policies With Respect to Conflicts of Interest. The Company has adopted
certain policies designed to eliminate or minimize conflicts of interest.
These policies include a requirement that all transactions in which officers
or Directors have a conflicting interest must be approved by a majority of
the Directors of the Company who are neither officers of the Company nor
affiliated with Reckson (the "Independent Directors"). However, there can be
no assurance that these policies will be successful in minimizing or
eliminating such conflicts and, if they are not successful, decisions could
be made that might fail to reflect fully the interests of all stockholders.
RISKS OF ADVERSE EFFECT ON COMPANY FROM DEBT SERVICING AND REFINANCING,
INCREASES IN INTEREST RATES, FINANCIAL COVENANTS AND ABSENCE OF LIMITATION OF
DEBT
Debt Financing. The Company is subject to the risks normally associated
with debt financing, including the risk that the Company's cash flow will be
insufficient to meet required payments of principal and interest, the risk
that existing indebtedness on the Properties (which in most cases will not
have been fully amortized at maturity) will not be able to be refinanced or
that the terms of such refinancing will not be as favorable as the terms of
the existing indebtedness. There can be no assurance that the Company will
be able to refinance any indebtedness the Company may incur or to otherwise
obtain funds by selling assets or raising equity to make required payments on
maturing indebtedness.
Existing Debt Maturities; Foreclosures. The Company anticipates that
only a portion of the principal of the Company's mortgage indebtedness
currently outstanding will be repaid prior to maturity. However, the Company
may not have on hand funds sufficient to repay such indebtedness at maturity;
it may therefore be necessary for the company to refinance debt through
additional debt financing or equity offerings. If the Company is unable to
refinance this indebtedness on acceptable terms, the Company may be forced to
dispose of properties upon disadvantageous terms, which could result in
losses to the Company and adversely affect the amount of cash available for
distribution to stockholders. Further, if a property or properties are
mortgaged to secure payment of indebtedness and the Company is unable to meet
mortgage payments, the property or properties could be foreclosed upon by or
otherwise transferred to the mortgagee with a consequent loss of income and
asset value to the Company. In addition, even with respect to non-recourse
indebtedness, the lender may have the rights to recover deficiencies from the
Company in certain circumstances, including fraud and environmental
liabilities.
Risk of Rising Interest Rates. Outstanding advances under the Credit
Facility (defined below) and the Credit Facility (defined below) bear
interest at a variable rate. In addition, the Company may incur indebtedness
in the future that also bears interest at a variable rate or may be required
to refinance its debt at higher rates. Accordingly, increases in interest
rates could increase the Company's interest expense, which could adversely
affect the Company's ability to pay expected distributions to stockholders.
Credit Facility Requirements. The Company has obtained a three-year
unsecured credit facility from The Chase Manhattan Bank and Union Bank of
Switzerland, as co-arrangers. The Credit Facility provides for a maximum
borrowing amount of up to $175 million which, upon syndication, may be
increased. The Company's ability to borrow under the Credit Facility is
subject to the satisfaction of certain financial covenants, including
covenants relating to limitations on unsecured and secured borrowings,
minimum interest and fixed charge coverage ratios, a minimum equity value and
a maximum dividend payout ratio. In addition, borrowings under the Credit
Facility bear interest at a floating rate equal to one, two, three or six
month LIBOR (at the Company's election) plus a spread ranging from 1.125% to
1.5%, based on the Company's leverage ratio.
No Limitation on Debt. The Company currently has a policy of incurring
debt only if upon such incurrence the Company's Debt Ratio would be 50% or
less. For these purposes, Debt Ratio is defined as the total debt of the
Company as a percentage of the market value of outstanding shares of Common
Stock on a full diluted basis plus total debt. However, the organizational
documents of the Company do not contain any limitation on the amount of
indebtedness the Company may incur. Accordingly, the Board of Directors
could alter or eliminate this policy and would do so, for example, if it were
necessary in order for the Company to continue to qualify as a REIT. If this
policy were changed, the Company could become more highly leveraged,
resulting in an increase in debt service that could adversely affect the
Company's cash available for distribution to stockholders and could increase
the risk of default on the Company's indebtedness.
LIMITS ON OWNERSHIP AND CHANGES IN CONTROL MAY DETER CHANGES IN MANAGEMENT
AND THIRD PARTY ACQUISITION PROPOSALS
Ownership Limit. In order to maintain its qualification as a REIT, not
more than 50% in value of the outstanding capital stock of the Company may be
owned, directly or indirectly, by five or fewer individuals (as defined in
the Internal Revenue Code of 1986, as amended (the "Code") to include certain
entities) during the last half of a taxable year (other than the first year).
In order to protect the Company against the risk of losing REIT status due to
a concentration of ownership among its stockholders, the Articles of
Incorporation of the Company limit ownership of the issued and outstanding
Common Stock by any single stockholder to 9.0% of the number or value of the
outstanding shares of Common Stock from time to time. See "Restrictions on
Ownership of Capital Stock." Such provision may have the effect of
precluding a change of control of the Company by a third party without the
consent of the Board of Directors even if a change of control were in the
best interests of stockholders.
Staggered Board. The Board of Directors of the Company is divided into
three classes of directors. The terms of the first, second and third classes
will expire in 1999, 1997 and 1998, respectively. Directors for each class
are chosen for a three-year term upon the expiration of the applicable prior
term.
Required Consent of Holders of Units for Certain Transactions. For the
five-year period following completion of the IPO, the Operating Partnership
may not sell, transfer or otherwise dispose of all or substantially all of
its assets or engage in any other similar transaction (regardless of the form
of such transaction) without the consent of the holders of 85% of all
outstanding Units. This voting requirement could delay, defer or prevent a
change in control of the Company.
Future Issuances of Common Stock. The Articles of Incorporation
authorize the Board of Directors to issue additional shares of Common Stock
without shareholder approval. Any such issuance could have the effect of
diluting existing shareholders' interests in the Company.
Preferred Stock. The Articles of Incorporation authorize the Board of
Directors to issue up to 25 million shares of preferred stock, $.01 par value
per share (the "Preferred Stock" and, together with the Common Stock, the
"Stock"), to reclassify unissued shares of Stock, and to establish the
preferences, conversion and other rights, voting powers, restrictions,
limitations and restrictions on ownership, limitations as to dividends or
other distributions, qualifications, and terms and conditions of redemption
for each such class or series of any Preferred Stock issued.
Limitations on Acquisition of and Changes in Control Pursuant to
Maryland Law. Certain provisions of the Maryland General Corporation Law
(the "MGCL") may have the effect of inhibiting a third party from making an
acquisition proposal for the Company or of impending a change in control of
the Company under circumstances that otherwise could provide the holders of
shares of Common Stock with the opportunity to realize a premium over the
then-prevailing market price of such shares.
RISKS OF ACQUISITION, DEVELOPMENT AND CONSTRUCTION ACTIVITIES
The Company intends to acquire existing office and industrial properties
to the extent that they can be acquired on advantageous terms and meet the
Company's investment criteria. Acquisitions of commercial properties entail
general investment risks associated with any real estate investment,
including the risk that investments will fail to perform as expected or that
estimates of the cost of improvements to bring an acquired property up to
standards established for the intended market position may prove inaccurate.
The Company also intends to continue the selective development and
construction of office and industrial properties in accordance with the
Company's development and underwriting policies as opportunities arise in the
future. Risks associated with the Company's development and construction
activities include the risks that: the Company may abandon development
opportunities after expending resources to determine feasibility;
construction costs of a project may exceed original estimates; occupancy
rates and rents at a newly completed property may not be sufficient to make
the property profitable; financing may not be available on favorable terms
for development of a property; and construction and lease-up may not be
completed on schedule, resulting in increased debt service expense and
construction costs. Development activities are also subject to risks
relating to the inability to obtain, or delays in obtaining, all necessary
zoning, land-use, building, occupancy and other required governmental permits
and authorizations. If any of the above occur, the Company's ability to make
expected distributions to stockholders could be adversely affected. In
addition, new development activities, regardless of whether or not they are
ultimately successful, typically require a substantial portion of
management's time and attention.
REAL ESTATE INVESTMENT RISKS
General Risks. Investments of the Company are subject to the risks
incident to the ownership and operation of commercial real estate generally.
The yields available from equity investments in real estate depend on the
amount of income generated and expenses incurred. If the Company's
properties do not generate revenues sufficient to meet operating expenses,
including debt service and capital expenditures, the Company's cash available
for distributions and ability to make distributions to its stockholders will
be adversely affected.
A commercial property's revenues and value may be adversely affected by
a number of factors, including the national, state and local economic climate
and real estate conditions (such as oversupply of or reduced demand for space
and changes in market rental rates); the perceptions of prospective tenants
of the safety, convenience and attractiveness of the properties; the ability
of the owner to provide adequate management, maintenance and insurance; the
ability to collect on a timely basis all rent from tenants; the expense of
periodically renovating, repairing and reletting spaces; and increasing
operating costs (including real estate taxes and utilities) which may not be
passed through to tenants. Certain significant expenditures associated with
investments in real estate (such as mortgage payments, real estate taxes,
insurance and maintenance costs) are generally not reduced when circumstances
cause a reduction in rental revenues from the property. If a property is
mortgaged to secure the payment of indebtedness and if the Company is unable
to meet its mortgage payments, a loss could be sustained as a result of
foreclosure on the property or the exercise of other remedies by the
mortgagee. In addition, real estate values and income from properties are
also affected by such factors as compliance with laws, including tax laws,
interest rate levels and the availability of financing. Also, the rentable
square feet of commercial property is often affected by market conditions and
may therefore fluctuate over time.
Tenant Defaults. Substantially all of the Company's income is derived
from rental income from real property and, consequently, the Company's
distributable cash flow and ability to make expected distributions to
stockholders would be adversely affected if a significant number of tenants
of its properties failed to meet their lease obligations. In the event of a
default by a lessee, the Company may experience delays in enforcing its
rights as lessor and may incur substantial costs in protecting its
investment.
Market Illiquidity. Equity real estate investments are relatively
illiquid. Such illiquidity will tend to limit the ability of the Company to
vary its portfolio promptly in response to changes in economic or other
conditions. In addition, provisions of the Code limit a REIT's ability to
sell properties held for fewer than four years, which may affect the
Company's ability to sell properties at a time when it is otherwise
economically advantageous to do so, thereby adversely affecting returns to
stockholders.
Operating Risks. The Properties are subject to operating risks common
to commercial real estate in general, any and all of which may adversely
affect occupancy or rental rates. The Properties are subject to increases in
operating expenses such as cleaning; electricity; heating, ventilation and
air conditioning ("HVAC"); elevator repair and maintenance; insurance and
administrative costs; and other general costs associated with security,
landscaping, repairs and maintenance. While the Company's tenants generally
are currently obligated to pay a portion of these escalating costs, there can
be no assurance that tenants will agree to pay such costs upon renewal or
that new tenants will agree to pay such costs. If operating expenses
increase, the local rental market may limit the extent to which rents may be
increased to meet increased expenses without decreasing occupancy rates.
While the Company implements costs saving incentive measures at each of its
Properties, if any of the above occurs, the Company's ability to make
distributions to stockholders could be adversely affected.
Competition. There are numerous commercial properties that compete with
the Company in attracting tenants and numerous companies that compete in
selecting land for development and properties for acquisition.
Third-Party Property Management and Construction. The Company pursues
actively (through its affiliated management company) the management of
properties which are owned by third parties. Risks associated with the
management of properties owned by third parties include the risk that
management contracts (which are typically cancelable without notice) will be
terminated by the entity controlling the property or in connection with the
sale of such property, that contracts may not be renewed upon expiration or
may not be renewed on terms consistent with current terms and that the rental
revenues upon which management fees are based will decline as a result of
general real estate market conditions or specific market factors affecting
properties managed by the Company, resulting in decreased management fee
income. The Company's third-party interior construction business (which is
conducted through its affiliated construction company) is subject to similar
risks.
Uninsured Loss. The Company carries comprehensive liability, fire,
extended coverage and rental loss insurance with respect to all of the
Properties, with policy specifications, insured limits and deductibles
customarily carried for similar properties. There are, however, certain
types of losses (such as losses arising from acts of war or relating to
pollution) that are not generally insured because they are either uninsurable
or not economically insurable. Should an uninsured loss or a loss in excess
of insured limits occur, the Company could lose its capital invested in a
property, as well as the anticipated future revenue from such property and
would continue to be obligated on any mortgage indebtedness or other
obligations related to the property. Any such loss would adversely affect
the business of the Company and its financial condition and results of
operations.
Investments in Mortgage Debt. From time to time, the Company may invest
in mortgages which are secured by office or industrial properties and, in
certain circumstances, may result in the acquisition of the related
properties through foreclosure proceedings or negotiated settlements. In
addition to the risks associated with investments in commercial properties,
investments in mortgage indebtedness present additional risks, including the
risk that the fee owners of such properties may default in payments of
interest on a current basis and that the Company may not realize its
anticipated return or sustain losses relating to such investments. In that
regard, as of March 31, 1997, the Company had invested approximately $50.9
million in mortgage indebtedness encumbering four Class A office properties
on Long Island and one Class A office property in New Jersey.
RISKS INVOLVED IN PROPERTY OWNERSHIP THROUGH PARTNERSHIPS AND JOINT VENTURES
The Company owns through the Operating Partnership a 60% general partner
interest in Omni Partners, L.P. (the "Omni Partnership"), the partnership
that owns the Omni, a 575,000 square foot office building located in the
Company's Nassau West Corporate Center Office Park. Odyssey Partners, L.P.
and an affiliate of Odyssey (collectively, "Odyssey") own the remaining 40%
interest. Through its partnership interest, the Company acts as managing
partner and has the sole authority to conduct the business and affairs of the
Omni Partnership subject to the limitations set forth in the Omni Partnership
Agreement. These limitations include Odyssey's right to negotiate under
certain circumstances a refinancing of the mortgage debt encumbering the Omni.
The Operating Partnership will continue to act as the sole managing partner
of the Omni Partnership unless the Operating Partnership fails to satisfy
certain conditions specified in the Omni Partnership Agreement. Under such
circumstances, the Operating Partnership may convert to a co-managing partner
with an Odyssey affiliate or a limited partner (in which case an Odyssey
affiliate would become the sole managing partner).
In addition, the Company may in the future acquire either a limited
partnership interest in a property partnership without partnership management
responsibility or a co-venturer interest or co-general partnership interest
in a property partnership with shared responsibility for managing the affairs
of a property partnership or joint venture and, therefore, will not be in a
position to exercise sole decision-making authority regarding the property
partnership or joint venture. In that regard, the Company (through the
Operating Partnership) owns a 60% managing member interest in a limited
liability company that owns 520 White Plains Road, a 171,761 square foot
office building located in Tarrytown, New York. The remaining 40% member
interest is held by Tarrytown Corporate Center III, L.P., a partnership
affiliated with the Halpern organization ("TCC"). Pursuant to the member
agreement governing the joint venture arrangement, the Company will be
required to obtain the consent of TCC prior to engaging in certain
activities, including entering into or modifying a major lease (i.e., a lease
for more than 25,000 rentable square feet), financing or refinancing
indebtedness encumbering the property and selling or otherwise transferring
the property. The Company also owns (through the Operating Partnership) a
50% co-managing member interest in a limited liability company that owns 360
Hamilton Avenue, a 365,000 square foot office building located in White
Plains, New York. The remaining 50% co-managing member interest is held by
an unaffiliated corporation. Pursuant to the member agreement governing this
joint venture, decisions that affect the business and affairs of the joint
venture generally require the approval of both co-managing members and such
members are jointly responsible for the day-to-day operation of the property.
Partnership or joint venture investments may, under certain
circumstances, involve risks not otherwise present, including the possibility
that the Company's partners or co-venturer might become bankrupt, that such
partners or co-venturer might at any time have economic or other business
interests or goals which are inconsistent with the business interests or
goals of the Company, and that such partners or co-venturer may be in a
position to take action contrary to the instructions or the requests of the
Company and contrary to the Company's policies or objectives, including the
Company's policy with respect to maintaining its qualification as a REIT.
Such investments may also have the potential risk of impasse on decisions,
such as a sale, because neither the Company nor the partner or co-venturer
would have full control over the partnership or joint venture. Consequently,
actions by such partner or co-venturer might result in subjecting properties
owned by the partnership or joint venture to additional risk. The Company
will, however, seek to maintain sufficient control of such partnerships or
joint ventures to permit the Company's business objectives to be achieved.
There is no limitation under the Company's organizational documents as to the
amount of available funds that may be invested in partnerships or joint
ventures.
POTENTIAL ENVIRONMENTAL LIABILITY RELATED TO THE PROPERTIES
Under various Federal, state and local laws, ordinances and regulations,
an owner of real estate is liable for the costs of removal or remediation of
certain hazardous or toxic substances on or in such property. These laws
often impose such liability without regard to whether the owner knew of, or
was responsible for, the presence of such hazardous or toxic substances. The
cost of any required remediation and the owner's liability therefore as to
any property is generally not limited under such enactments and could exceed
the value of the property and/or the aggregate assets of the owner. The
presence of such substances, or the failure to properly remediate such
substances, may adversely affect the owner's ability to sell or rent such
property or to borrow using such property as collateral. Persons who arrange
for the disposal or treatment of hazardous or toxic substances may also be
liable for the costs of removal or remediation of such substances at a
disposal or treatment facility, whether or not such facility is owned or
operated by such person. Certain environmental laws govern the removal,
encapsulation or disturbance of asbestos-containing materials ("ACMs") when
such materials are in poor condition, or in the event of renovation or
demolition. Such laws impose liability for release of ACMs into the air and
third parties may seek recovery from owners or operators of real properties
for personal injury associated with ACMs. In connection with the ownership
(direct or indirect), operation, management and development of real
properties, the Company may be considered an owner or operator of such
properties or as having arranged for the disposal or treatment of hazardous
or toxic substances and, therefore, potentially liable for removal or
remediation costs, as well as certain other related costs, including
governmental fines and injuries to persons and property.
All of the Office Properties and all of the Industrial Properties have
been subjected to a Phase I or similar environmental site assessment after
April 1, 1994 (which involved general inspections without soil sampling,
ground water analysis or radon testing and, for the Properties constructed in
1978 or earlier, survey inspections to ascertain the existence of ACMs were
conducted) completed by independent environmental consultant companies (except
for 35 Pinelawn Road which was originally developed by Reckson and subjected
to a Phase I in April 1992). These environmental site assessments have
not revealed any environmental liability that would have a material adverse
effect on the Company's business.
RISKS OF FAILURE TO QUALIFY AS A REIT
The Company intends to operate so as to qualify as a REIT under the Code
commencing with its taxable year ended December 31, 1995. Although
management of the Company believes that the Company has been organized and
operates in such a manner, no assurance can be given that the Company will
qualify or remain qualified as a REIT. See "Federal Income Tax
Considerations."
EFFECT OF MARKET INTEREST RATES ON PRICE OF COMMON STOCK AND PREFERRED STOCK
One of the factors that influences the market price of the shares of
Common Stock in public markets is the annual yield on the price paid for
shares of Common Stock from distributions by the Company. An increase in
market interest rates may lead prospective purchasers of the Common Stock to
demand a higher annual yield from future distributions. Such an increase in
the required distribution yield may adversely affect the market price of the
Common Stock. Similar risks may apply to shares of Preferred Stock.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Securities offered
hereby will be used for general corporate purposes, which may include the
repayment of existing indebtedness, the development or acquisition of
additional properties as suitable opportunities arise and the renovation,
expansion and improvement of the Company's existing properties. Further
details relating to the use of the net proceeds will be set forth in the
applicable Prospectus Supplement.
RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth the Company's consolidated ratios of
earnings to fixed charges for the periods shown:
<TABLE>
<CAPTION>
June 3, 1995 January 1, 1995
Three Months Ended Year Ended to to Year Ended December 31,
March 31, 1997 December 31, 1996 December 31, 1995 June 2, 1995 1994 1993 1992
- ----------------- ------------------- ------------------ ----------------- ---- ------ -----
<S> <C> <C> <C> <C> <C> <C>
2.55x 2.72x 2.71x 0.96x(1) 0.97x(1) 0.65x(1) 0.70x(1)
</TABLE>
(1) Prior to completion of the IPO on June 2, 1995, the Company's
predecessors operated in a manner as to minimize net taxable income to
the owners. The IPO and the related formation transactions permitted
the Company to deleverage its properties significantly, resulting in a
significantly improved ratio of earnings to fixed charges.
The ratios of earnings to combined fixed charges were computed by
dividing earnings by fixed charges. For this purpose, earnings consist of
income from continuing operations before minority interest and fixed charges.
Fixed charges consist of interest expense (including interest costs
capitalized) and the amortization of debt issuance costs. To date, the
Company has not issued any Preferred Stock; therefore, the ratio of earnings
to combined fixed charges and Preferred Stock dividends are unchanged from
the ratios in this section.
DESCRIPTION OF PREFERRED STOCK
GENERAL
The Articles of Incorporation of the Company provide that the Company
may issue up to 25 million shares of preferred stock, $.01 par value per
share, of which no Preferred Stock was outstanding at the date hereof.
The following description of the Preferred Stock sets forth certain
general terms and provisions of the Preferred Stock to which any Prospectus
Supplement may relate. The statements below describing the Preferred Stock
are in all respects subject to and qualified in their entirety by reference
to the applicable provisions of the Articles of Incorporation and Bylaws of
the Company and any applicable articles supplementary to the Articles of
Incorporation designating terms of a series of Preferred Stock (a
"Designating Amendment").
The issuance of Preferred Stock could adversely affect the voting power,
dividend rights and other rights of holders of Common Stock. Issuance of
Preferred Stock also could, depending on the terms of such issue, either
impede, delay, prevent or facilitate a merger, tender offer or change in
control of the Company. Although the Board of Directors is required to make
a determination as to the best interests of the stockholders of the Company
when issuing Preferred Stock, the Board could act in a manner that would
discourage an acquisition attempt or other transaction that some, or a
majority, of the stockholders might believe to be in the best interests of
the Company or in which stockholders might receive a premium for their shares
over the then prevailing market price. Management believes that the
availability of Preferred Stock will provide the Company with increased
flexibility in structuring possible future financing and acquisitions and in
meeting other needs that might arise.
TERMS
Subject to the limitations prescribed by the Articles of Incorporation,
the Board of Directors is authorized to fix the number of shares constituting
each series of Preferred Stock and the designations and powers, preferences
and relative, participating, optional or other special rights and
qualifications, limitations or restrictions thereof, including such
provisions as may be desired concerning voting, redemption, dividends,
dissolution or the distribution of assets, conversion or exchange, and such
other subjects or matters as may be fixed by resolution of the Board of
Directors. The Preferred Stock will, when issued, be fully paid and
nonassessable by the Company and will have no preemptive rights.
Reference is made to the Prospectus Supplement relating to the Preferred
Stock offered thereby for specific terms, including:
(1) The title and stated value of such Preferred Stock;
(2) The number of shares of such Preferred Stock offered, the
liquidation preference per share and the 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) The date from which dividends on such Preferred Stock shall
accumulate, if applicable;
(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 of the Company,
including the conversion price (or manner of calculation thereof);
(10) Any other specific terms, preferences, rights, limitations or
restrictions of such Preferred Stock;
(11) A discussion of federal income tax considerations applicable to
such Preferred Stock;
(12) The relative ranking and preferences of such Preferred Stock as to
dividend rights and rights upon liquidation, dissolution or winding
up of the affairs of the Company;
(13) Any limitations on issuance of any series of Preferred Stock
ranking senior to or on a parity with such series of Preferred
Stock as to dividend rights and rights upon liquidation,
dissolution or winding up of the affairs of the Company; and
(14) 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.
RANK
Unless otherwise specified in the Prospectus Supplement, the Preferred
Stock will, with respect to dividend rights and rights upon liquidation,
dissolution or winding up of the Company, rank (i) senior to all classes or
series of Common Stock of the Company, and to all equity securities ranking
junior to such Preferred Stock; (ii) on a parity with all equity securities
issued by the Company the terms of which specifically provide that such
equity securities rank on a parity with the Preferred Stock; and (iii) junior
to all equity securities issued by the Company the terms of which
specifically provide that such equity securities rank senior to the Preferred
Stock. The term "equity securities" does not include convertible debt
securities.
DIVIDENDS
Unless otherwise specified in the Prospectus Supplement, the Preferred
Stock will have the rights with respect to payment of dividends set forth
below.
Holders of the Preferred Stock of each series will be entitled to
receive, when, as and if declared by the Board of Directors of the Company,
out of assets of the Company legally available for payment, cash dividends at
such rates and on such dates as will be set forth in the applicable
Prospectus Supplement. Each such dividend shall be payable to holders of
record as they appear on the share transfer books of the Company on such
record dates as shall be fixed by the Board of Directors of the Company.
Dividends on any series of the Preferred Stock may be cumulative or non-
cumulative, as provided in the applicable Prospectus Supplement. Dividends,
if cumulative, will be cumulative from and after the date set forth in the
applicable Prospectus Supplement. If the Board of Directors of the Company
fails to declare a dividend payable on a dividend payment date on any series
of the Preferred Stock for which dividends are non-cumulative, then the
holders of such series of the Preferred Stock will have no right to receive a
dividend in respect of the dividend period ending on such dividend payment
date, and the Company will have no obligation to pay the dividend accrued for
such period, whether or not dividends on such series are declared payable on
any future dividend payment date.
If Preferred Stock of any series is outstanding, no dividends will be
declared or paid or set apart for payment on any capital stock of the Company
of any other series ranking, as to dividends, on a parity with or junior to
the Preferred Stock of such series for any period unless (i) if such series
of Preferred Stock has a cumulative dividend, full cumulative dividends have
been or contemporaneously are declared and paid or declared and a sum
sufficient for the payment thereof set apart for such payment on the
Preferred Stock of such series for all past dividend periods and the then
current dividend period or (ii) if such series of Preferred Stock does not
have a cumulative dividend, full dividends for the then current dividend
period have been or contemporaneously are declared and paid or declared and a
sum sufficient for the payment thereof set apart for such payment on the
Preferred Stock of such series. When dividends are not paid in full (or a
sum sufficient for such full payment is not so set apart) upon Preferred
Stock of any series and the shares of any other series of Preferred Stock
ranking on a parity as to dividends with the Preferred Stock of such series,
all dividends declared upon Preferred Stock of such series and any other
series of Preferred Stock ranking on a parity as to dividends with such
Preferred Stock shall be declared pro rata so that the amount of dividends
declared per share of Preferred Stock of such series and such other series of
Preferred Stock shall in all cases bear to each other the same ratio that
accrued dividends per share on the Preferred Stock of such series (which
shall not include any accumulation in respect of unpaid dividends for prior
dividend periods if such Preferred Stock does not have a cumulative dividend)
and such other series of Preferred Stock bear to each other. No interest, or
sum of money in lieu of interest, shall be payable in respect of any dividend
payment or payments on Preferred Stock of such series which may be in
arrears.
Except as provided in the immediately preceding paragraph, unless (i) if
such series of Preferred Stock has a cumulative dividend, full cumulative
dividends on the Preferred Stock of such series have been or
contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof set apart for payment for all past dividend periods and
the then current dividend period, and (ii) if such series of Preferred Stock
does not have a cumulative dividend, full dividends on the Preferred Stock of
such series have been or contemporaneously are declared and paid or declared
and a sum sufficient for the payment thereof set apart for payment for the
then current dividend period, no dividends (other than in shares of Common
Stock or other capital shares ranking junior to the Preferred Stock of such
series as to dividends and upon liquidation) shall be declared or paid or set
aside for payment or other distribution shall be declared or made upon the
Common Stock, or any other capital shares of the Company ranking junior to or
on a parity with the Preferred Stock of such series as to dividends or upon
liquidation, nor shall any shares of Common Stock, or any other capital
shares of the Company ranking junior to or on a parity with the Preferred
Stock of such series as to dividends or upon liquidation be redeemed,
purchased or otherwise acquired for any consideration (or any moneys be paid
to or made available for a sinking fund for the redemption of any such
shares) by the Company (except by conversion into or exchange for other
capital shares of the Company ranking junior to the Preferred Stock of such
series as to dividends and upon liquidation).
REDEMPTION
If so provided in the applicable Prospectus Supplement, the Preferred
Stock will be subject to mandatory redemption or redemption at the option of
the Company, as a whole or in part, in each case upon the terms, at the times
and at the redemption prices set forth in such Prospectus Supplement.
The Prospectus Supplement relating to a series of Preferred Stock that
is subject to mandatory redemption will specify the number of shares of such
Preferred Stock that shall be redeemed by the Company in each year commencing
after a date to be specified, at a redemption price per share to be
specified, together with an amount equal to all accrued and unpaid dividends
thereon (which shall not, if such Preferred Stock does not have a cumulative
dividend, include any accumulation in respect of unpaid dividends for prior
dividend periods) to the date of redemption. The redemption price may be
payable in cash or other property, as specified in the applicable Prospectus
Supplement. If the redemption price for Preferred Stock of any series is
payable only from the net proceeds of the issuance of capital shares of the
Company, the terms of such Preferred Stock may provide that, if no such
capital shares shall have been issued or to the extent the net proceeds from
any issuance are insufficient to pay in full the aggregate redemption price
then due, such Preferred Stock shall automatically and mandatorily be
converted into the applicable capital shares of the Company pursuant to
conversion provisions specified in the applicable Prospectus Supplement.
Notwithstanding the foregoing, unless (i) if such series of Preferred
Stock has a cumulative dividend, full cumulative dividends on all shares of
any series of Preferred Stock shall have been or contemporaneously are
declared and paid or declared and a sum sufficient for the payment thereof
set apart for payment for all past dividend periods and the then current
dividend period, and (ii) if such series of Preferred Stock does not have a
cumulative dividend, full dividends on the Preferred Stock of any series have
been or contemporaneously are declared and paid or declared and a sum
sufficient for the payment thereof set apart for payment for the then current
dividend period, no shares of any series of Preferred Stock shall be redeemed
unless all outstanding Preferred Stock of such series is simultaneously
redeemed; provided, however, that the foregoing shall not prevent the
purchase or acquisition of Preferred Stock of such series to preserve the
REIT status of the Company or pursuant to a purchase or exchange offer made
on the same terms to holders of all outstanding Preferred Stock of such
series. In addition, unless (i) if such series of Preferred Stock has a
cumulative dividend, full cumulative dividends on all outstanding shares of
any series of Preferred Stock have been or contemporaneously are declared and
paid or declared and a sum sufficient for the payment thereof set apart for
payment for all past dividend period and the then current dividend period,
and (ii) if such series of Preferred Stock does not have a cumulative
dividend, full dividends on the Preferred Stock of any series have been or
contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof set apart for payment for the then current dividend
period, the Company shall not purchase or otherwise acquire directly or
indirectly any shares of Preferred Stock of such series (except by conversion
into or exchange for capital shares of the Company ranking junior to the
Preferred Stock of such series as to dividends and upon liquidation);
provided, however, that the foregoing shall not prevent the purchase or
acquisition of Preferred Stock of such series to preserve the REIT status of
the Company or pursuant to a purchase or exchange offer made on the same
terms to holders of all outstanding Preferred Stock of such series.
If fewer than all of the outstanding shares of Preferred Stock of any
series are to be redeemed, the number of shares to be redeemed will be
determined by the Company and such shares may be redeemed pro rata from the
holders of record of such shares in proportion to the number of such shares
held or for which redemption is requested by such holder (with adjustments to
avoid redemption of fractional shares) or by lot in a manner determined by
the Company.
Notice of redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each holder of record of Preferred
Stock of any series to be redeemed at the address shown on the share transfer
books of the Company. Each notice shall state: (i) the redemption date; (ii)
the number of shares and series of the Preferred Stock to be redeemed; (iii)
the redemption price; (iv) the place or places where certificates for such
Preferred Stock are to be surrendered for payment of the redemption price;
(v) that dividends on the shares to be redeemed will cease to accrue on such
redemption date; and (vi) the date upon which the holder's conversion rights,
if any, as to such shares shall terminate. If fewer than all the shares of
Preferred Stock of any series are to be redeemed, the notice mailed to each
such holder thereof shall also specify the number of shares of Preferred
Stock to be redeemed from each such holder. If notice of redemption of any
Preferred Stock has been given and if the funds necessary for such redemption
have been set aside by the Company in trust for the benefit of the holders of
any Preferred Stock so called for redemption, then from and after the
redemption date dividends will cease to accrue on such Preferred Stock, and
all rights of the holders of such shares will terminate, except the right to
receive the redemption price.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding up
of the affairs of the Company, then, before any distribution or payment shall
be made to the holders of any Common Stock or any other class or series of
capital shares of the Company ranking junior to the Preferred Stock in the
distribution of assets upon any liquidation, dissolution or winding up of the
Company, the holders of each series of Preferred Stock shall be entitled to
receive out of assets of the Company legally available for distribution to
shareholders liquidating distributions in the amount of the liquidation
preference per share (set forth in the applicable Prospectus Supplement),
plus an amount equal to all dividends accrued and unpaid thereon (which shall
not include any accumulation in respect of unpaid dividends for prior
dividend periods if such Preferred Stock does not have a cumulative
dividend). After payment of the full amount of the liquidating distributions
to which they are entitled, the holders of Preferred Stock will have no
rights or claim to any of the remaining assets of the Company. In the event
that, upon any such voluntary or involuntary liquidation, dissolution or
winding up, the available assets of the Company are insufficient to pay the
amount of the liquidating distributions on all outstanding Preferred Stock
and the corresponding amounts payable on all shares of other classes or
series of capital shares of the Company ranking on a parity with the
Preferred Stock in the distribution of assets, then the holders of the
Preferred Stock and all other such classes or series of capital shares shall
share ratably in any such distribution of assets in proportion to the full
liquidating distributions to which they would otherwise be respectively
entitled.
If liquidating distributions shall have been made in full to all holders
of Preferred Stock, the remaining assets of the Company shall be distributed
among the holders of any other classes or series of capital shares ranking
junior to the Preferred Stock upon liquidation, dissolution or winding up,
according to their respective rights and preferences and in each case
according to their respective number of shares. For such purposes, the
consolidation or merger of the Company with or into any other corporation,
trust or entity, or the sale, lease or conveyance of all or substantially all
of the property or business of the Company, shall not be deemed to constitute
a liquidation, dissolution or winding up of the Company.
VOTING RIGHTS
Holders of the Preferred Stock will not have any voting rights, except
as set forth below or as otherwise from time to time required by law or as
indicated in the applicable Prospectus Supplement.
Whenever dividends on any shares of Preferred Stock shall be in arrears
for six or more consecutive quarterly periods, the holders of such shares of
Preferred Stock (voting separately as a class with all other series of
Preferred Stock upon which like voting rights have been conferred and are
exercisable) will be entitled to vote for the election of two additional
directors of the Company at a special meeting called by the holders of record
of at least ten percent (10%) of any series of Preferred Stock so in arrears
(unless such request is received less than 90 days before the date fixed for
the next annual or special meeting of the stockholders) or at the next annual
meeting of stockholders, and at each subsequent annual meeting until (i) if
such series of Preferred Stock has a cumulative dividend, all dividends
accumulated on such shares of Preferred Stock for the past dividend periods
and the then current dividend period shall have been fully paid or declared
and a sum sufficient for the payment thereof set aside for payment or (ii) if
such series of Preferred Stock does not have a cumulative dividend, four
consecutive quarterly dividends shall have been fully paid or declared and a
sum sufficient for the payment thereof set aside for payment. In such case,
the entire Board of Directors of the Company will be increased by two
directors.
Unless provided otherwise for any series of Preferred Stock, so long as
any shares of Preferred Stock remain outstanding, the Company will not,
without the affirmative vote or consent of the holders of at least two-thirds
of the shares of each series of Preferred Stock outstanding at the time,
given in person or by proxy, either in writing or at a meeting (such series
voting separately as a class), (i) authorize or create, or increase the
authorized or issued amount of, any class or series of capital stock ranking
prior to such Preferred Stock with respect to payment of dividends or the
distribution of assets upon liquidation, dissolution or winding up or
reclassify any authorized capital stock of the Company into such shares, or
create, authorize or issue any obligation or security convertible into or
evidencing the right to purchase any such shares; or (ii) amend, alter or
repeal the provisions of the Company's Articles of Incorporation or the
Designating Amendment for such series of Preferred Stock, whether by merger,
consolidation or otherwise (an "Event"), so as to materially and adversely
affect any right, preference, privilege or voting power of such series of
Preferred Stock or the holders thereof; provided, however, with respect to
the occurrence of any of the Events set forth in (ii) above so long as the
Preferred Stock remains outstanding with the terms thereof materially
unchanged, taking into account that upon the occurrence of an Event, the
Company may not be the surviving entity, the occurrence of any such Event
shall not be deemed to materially and adversely affect such rights,
preferences, privileges or voting power of holders of Preferred Stock and
provided further that (x) any increase in the amount of the authorized
Preferred Stock or the creation or issuance of any other series of Preferred
Stock, or (y) any increase in the amount of authorized shares of such series
or any other series of Preferred Stock, in each case ranking on a parity with
or junior to the Preferred Stock of such series with respect to payment of
dividends or the distribution of assets upon liquidation, dissolution or
winding up, shall not be deemed to materially and adversely affect such
rights, preferences, privileges or voting powers.
The foregoing voting provisions will not apply if, at or prior to the
time when the act with respect to which such vote would otherwise be required
shall be effected, all outstanding shares of such series of Preferred Stock
shall have been redeemed or called for redemption and sufficient funds shall
have been deposited in trust to effect such redemption.
CONVERSION RIGHTS
The terms and conditions, if any, upon which any series of Preferred
Stock is convertible into shares of Common Stock will be set forth in the
applicable Prospectus Supplement relating thereto. Such terms will include
the number of shares of Common Stock into which the shares of Preferred Stock
are convertible, the conversion price (or manner of calculation thereof), the
conversion period, provisions as to whether conversion will be at the option
of the holders of the Preferred 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 series of Preferred Stock.
SHAREHOLDER LIABILITY
As discussed below under "Description of Common Stock -- General,"
applicable Maryland law provides that no shareholder, including holders of
Preferred Stock, shall be personally liable for the acts and obligations of
the Company and that the funds and property of the Company shall be the only
recourse for such acts or obligations.
RESTRICTIONS ON OWNERSHIP
As discussed below under "Restrictions on Ownership of Capital Stock,"
for the Company to qualify as a REIT under the Code, not more than 50% in
value of its outstanding 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. Therefore, the Designating
Amendment for each series of Preferred Stock may contain provisions
restricting the ownership and transfer of the Preferred Stock. The
applicable Prospectus Supplement will specify any additional ownership
limitation relating to a series of Preferred Stock.
REGISTRAR AND TRANSFER AGENT
The Registrar and Transfer Agent for the Preferred Stock will be set
forth in the applicable Prospectus Supplement.
DESCRIPTION OF COMMON STOCK
GENERAL
The Company's Articles of Amendment and Restatement (the "Articles of
Incorporation") provide that the Company may issue up to 100 million shares
of Common Stock, $.01 par value per share. Each outstanding share of Common
Stock will entitle the holder to one vote on all matters presented to
stockholders for a vote and cumulative voting is not permitted. Holders of
the Common Stock do not have preemptive rights. On May 27, 1997, there were
34,293,602 shares of Common Stock outstanding.
All shares of Common Stock offered hereby have been duly authorized, and
will be fully paid and nonassessable. Subject to the preferential rights of
any other shares or series of stock and to the provisions of the Articles of
Incorporation regarding Excess Stock (as defined under "Restrictions on
Ownership of Capital Stock"), holders of shares of Common Stock are entitled
to receive dividends on such stock if, as and when authorized and declared by
the Board of Directors of the Company out of assets legally available
therefor and to share ratably in the assets of the Company legally available
for distribution to its stockholders in the event of its liquidation,
dissolution or winding up after payment of or adequate provision for all
known debts and liabilities of the Company.
Subject to the provisions of the Articles of Incorporation regarding
Excess Stock, each outstanding share of Common Stock entitles the holder to
one vote on all matters submitted to a vote of stockholders, including the
election of directors, and, except as provided with respect to any other
class or series of stock, the holders of such shares will possess the
exclusive voting power. There is no cumulative voting in the election of
directors, which means that the holders of a majority of the outstanding
shares of Common Stock can elect all of the directors then standing for
election and the holders of the remaining shares will not be able to elect
any directors.
Holders of shares of Common Stock have no preference, conversion,
exchange, sinking fund, redemption or appraisal rights and have no preemptive
rights to subscribe for any securities of the Company. Subject to the
provisions of the Articles of Incorporation regarding Excess Stock, shares of
Common Stock will have equal dividend, liquidation and other rights.
CERTAIN PROVISIONS OF THE COMPANY'S ARTICLES OF INCORPORATION
Under the Maryland General Corporation Law, as amended (the "MGCL"), a
Maryland corporation generally cannot dissolve, amend its charter, merge,
sell all or substantially all of its assets, engage in a share exchange or
engage in similar transactions outside the ordinary course of business unless
approved by the affirmative vote of stockholders holding at least two-thirds
of the shares entitled to vote on the matter unless a lesser percentage (but
not less than a majority of all of the votes entitled to be cast on the
matter) is set forth in the corporation's charter. The Articles of
Incorporation do not provide for a lesser percentage in such situations. In
addition, the Operating Partnership Agreement provides that for the five-year
period following the completion of the IPO, the Operating Partnership may not
sell, transfer or otherwise dispose of all or substantially all of its assets
or engage in any other similar transaction (regardless of the form of such
transaction) without the consent of the holders of 85% of all outstanding
Units.
The Articles of Incorporation authorize the Board of Directors to
reclassify any unissued shares of Common Stock into other classes or series
of classes of stock and to establish the number of shares in each class or
series and to set the preferences, conversion and other rights, voting
powers, restrictions, limitations and restrictions on ownership, limitations
as to dividends or other distributions, qualifications and terms or
conditions of redemption for each such class or series.
The Company's Board of Directors is divided into three classes of
directors, each class constituting approximately one-third of the total
number of directors, with the classes serving staggered terms. At each
annual meeting of stockholders, the class of directors to be elected at such
meeting will be elected for a three-year term and the directors in the other
two classes will continue in office. The Company believes that classified
directors will help to assure the continuity and stability of the Board of
Directors and the Company's business strategies and policies as determined by
the Board. The use of a staggered board may render more difficult a change
in control of the Company or removal of incumbent management.
RESTRICTIONS ON OWNERSHIP
For the Company to qualify as a REIT under the Code, not more than 50%
in value of its outstanding Common Stock may be owned, directly or
indirectly, by five or fewer individuals (as defined in the Code) during the
last half of a taxable year and the Common Stock must be beneficially owned
by 100 or more persons during at least 335 days of a taxable year of 12
months (or during a proportionate part of a shorter taxable year). To
satisfy the above ownership requirements and certain other requirements for
qualification as a REIT, the Board of Directors has adopted, and the
stockholders prior to the IPO approved, a provision in the Articles of
Incorporation restricting the ownership or acquisition of shares of Common
Stock. See "Restrictions on Ownership of Capital Stock."
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is American Stock
Transfer & Trust Company.
DESCRIPTION OF WARRANTS
The Company may issue Warrants for the purchase of Preferred Stock or
Common Stock. Warrants may be issued independently or together with any
Securities and may be attached to or separate from such Securities. Each
series of Warrants will be issued under a separate warrant agreement (each, a
"Warrant Agreement") to be entered into between the Company and a warrant
agent specified therein ("Warrant Agent"). The Warrant Agent will act solely
as an agent of the Company in connection with the 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 Warrants.
The applicable Prospectus Supplement will describe the following terms,
where applicable, of the Warrants in respect of which this Prospectus is
being delivered: (1) the title of such Warrants; (2) the aggregate number of
such Warrants; (3) the price or prices at which such Warrants will be issued;
(4) the currencies in which the price or prices of such Warrants may be
payable; (5) the designation, amount and terms of the Securities purchasable
upon exercise of such Warrants; (6) the designation and terms of the other
Securities, if any, with which such Warrants are issued and the number of
such Warrants issued with each such security; (7) if applicable, the date on
and after which such Warrants and the Securities purchasable upon exercise of
such Warrants will be separately transferable; (8) the price or prices at
which and currency or currencies in which the Securities purchasable upon
exercise of such Warrants may be purchased; (9) the date on which the right
to exercise such Warrants shall commence and the date on which such right
shall expire; (10) the minimum or maximum amount of such Warrants which may
be exercised at any one time; (11) information with respect to book-entry
procedures, if any; (12) a discussion of certain federal income tax
considerations; and (13) any other material terms of such Warrants, including
terms, procedures and limitations relating to the exchange and exercise of
such Warrants.
RESTRICTIONS ON OWNERSHIP OF CAPITAL STOCK
EXCESS STOCK
The Articles of Incorporation provide that the Company may issue up to
75 million shares of excess stock, par value $.01 per share ("Excess Stock").
For a description of Excess Stock, see "--Restrictions on Ownership" below.
RESTRICTIONS ON OWNERSHIP
For the Company to qualify as a REIT under the Code, among other things,
not more than 50% in value of its outstanding capital stock may be owned,
directly or indirectly, by five or fewer individuals (defined in the Code to
include certain entities) during the last half of a taxable year (other than
the first year) (the "Five or Fewer Requirement"), and such shares of capital
stock must be beneficially owned by 100 or more persons during at least 335
days of a taxable year of 12 months (other than the first year) or during a
proportionate part of a shorter taxable year. Pursuant to the Code, Common
Stock held by certain types of entities, such as pension trusts qualifying
under Section 401(a) of the Code, United States investment companies
registered under the Investment Company Act of 1940, partnerships, trusts and
corporations, will be attributed to the beneficial owners of such entities
for purposes of the Five or Fewer Requirement (i.e., the beneficial owners of
such entities will be counted as shareholders of the Company). In order to
protect the Company against the risk of losing its status as a REIT due to a
concentration of ownership among its stockholders, the Articles of
Incorporation, subject to certain exceptions, provide that no stockholder may
own, or be deemed to own by virtue of the attribution provisions of the Code,
more than 9.0% (the "Ownership Limit") of the aggregate number or value of
the Company's outstanding shares of Common Stock. In the event the Company
issues Preferred Stock, it may, in the Designating Amendment, determine a
limit on the ownership of such stock. Any direct or indirect ownership of
shares of stock in excess of the Ownership Limit or that would result in the
disqualification of the Company as a REIT, including any transfer that
results in shares of capital stock being owned by fewer than 100 persons or
results in the Company being "closely held" within the meaning of Section
856(h) of the Code, shall be null and void, and the intended transferee will
acquire no rights to the shares of capital stock. The foregoing restrictions
on transferability and ownership will not apply if the Board of Directors
determines that it is no longer in the best interests of the Company to
attempt to qualify, or to continue to qualify, as a REIT. The Board of
Directors may, in its sole discretion, waive the Ownership Limit if evidence
satisfactory to the Board of Directors and the Company's tax counsel is
presented that the changes in ownership will not then or in the future
jeopardize the Company's REIT status and the Board of Directors otherwise
decides that such action is in the best interest of the Company.
Shares of capital stock owned, or deemed to be owned, or transferred to
a stockholder in excess of the Ownership Limit will automatically be
converted into shares of Excess Stock that will be transferred, by operation
of law, to the trustee of a trust for the exclusive benefit of one or more
charitable organizations described in Section 170(b)(1)(A) and 170(c) of the
Code (the "Charitable Beneficiary"). The trustee of the trust will be deemed
to own the Excess Stock for the benefit of the Charitable Beneficiary on the
date of the violative transfer to the original transferee-stockholder. Any
dividend or distribution paid to the original transferee-stockholder of
Excess Stock prior to the discovery by the Company that capital stock has
been transferred in violation of the provisions of the Company's Articles of
Incorporation shall be repaid to the trustee upon demand. Any dividend or
distribution authorized and declared but unpaid shall be rescinded as void ab
initio with respect to the original transferee-stockholder and shall instead
be paid to the trustee of the trust for the benefit of the Charitable
Beneficiary. Any vote cast by an original transferee-stockholder of shares
of capital stock constituting Excess Stock prior to the discovery by the
Company that shares of capital stock have been transferred in violation of
the provisions of the Company's Articles of Incorporation shall be rescinded
as void ab initio. While the Excess Stock is held in trust, the original
transferee-stockholder will be deemed to have given an irrevocable proxy to
the trustee to vote the capital stock for the benefit of the Charitable
Beneficiary. The trustee of the trust may transfer the interest in the trust
representing the Excess Stock to any person whose ownership of the shares of
capital stock converted into such Excess Stock would be permitted under the
Ownership Limit. If such transfer is made, the interest of the Charitable
Beneficiary shall terminate and the proceeds of the sale shall be payable to
the original transferee-stockholder and to the Charitable Beneficiary as
described herein. The original transferee-stockholder shall receive the
lesser of (i) the price paid by the original transferee-stockholder for the
shares of capital stock that were converted into Excess Stock or, if the
original transferee-stockholder did not give value for such shares (e.g., the
stock was received through a gift, devise or other transaction), the average
closing price for the class of shares from which such shares of capital stock
were converted for the ten trading days immediately preceding such sale or
gift, and (ii) the price received by the trustee from the sale or other
disposition of the Excess Stock held in trust. The trustee may reduce the
amount payable to the original transferee-stockholder by the amount of
dividends and distributions relating to the shares of Excess Stock which have
been paid to the original transferee-stockholder and are owed by the original
transferee-stockholder to the trustee. Any proceeds in excess of the amount
payable to the original transferee-stockholder shall be paid by the trustee
to the Charitable Beneficiary. Any liquidation distributions relating to
Excess Stock shall be distributed in the same manner as proceeds of a sale of
Excess Stock. If the foregoing transfer restrictions are determined to be
void or invalid by virtue of any legal decision, statute, rule or
regulations, then the original transferee-stockholder of any shares of Excess
Stock may be deemed, at the option of the Company, to have acted as an agent
on behalf of the Company in acquiring the shares of Excess Stock and to hold
the shares of Excess Stock on behalf of the Company.
In addition, the Company will have the right, for a period of 90 days
during the time any shares of Excess Stock are held in trust, to purchase all
or any portion of the shares of Excess Stock at the lesser of (i) the price
initially paid for such shares by the original transferee-stockholder, or if
the original transferee-stockholder did not give value for such shares (e.g.,
the shares were received through a gift, devise or other transaction), the
average closing price for the class of stock from which such shares of Excess
Stock were converted for the ten trading days immediately preceding such sale
or gift, and (ii) the average closing price for the class of stock from which
such shares of Excess Stock were converted for the ten trading days
immediately preceding the date the Company elects to purchase such shares.
The Company may reduce the amount payable to the original transferee-
stockholder by the amount of dividends and distributions relating to the
shares of Excess Stock which have been paid to the original transferee-
stockholder and are owned by the original transferee-stockholder to the
trustee. The Company may pay the amount of such reductions to the trustee
for the benefit of the Charitable Beneficiary. The 90-day period begins on
the later date of which notice is received of the violative transfer if the
original transferee-stockholder gives notice to the Company of the transfer
or, if no such notice is given, the date the Board of Directors determines
that a violative transfer has been made.
These restrictions will not preclude settlement of transactions through
the New York Stock Exchange.
All certificates representing shares of capital stock will bear a legend
referring to the restrictions described above.
Each stockholder shall upon demand be required to disclose to the
Company in writing any information with respect to the direct, indirect and
constructive ownership of capital stock of the Company as the Board of
Directors deems necessary to comply with the provisions of the Code
applicable to REITs, to comply with the requirements of any taxing authority
or governmental agency or to determine any such compliance.
The Ownership Limit may have the effect of delaying, deferring or
preventing a change in control of the Company unless the Board of Directors
determines that maintenance of REIT status is no longer in the best interest
of the Company.
FEDERAL INCOME TAX CONSIDERATIONS
The Company believes it has operated, and the Company intends to
continue to operate, in such a manner as to qualify as a REIT under the Code,
but no assurance can be given that it will at all times so qualify.
The provisions of the Code pertaining to REITs are highly technical and
complex. The following is a brief and general summary of certain provisions
that currently govern the federal income tax treatment of the Company and its
stockholders. For the particular provisions that govern the federal income
tax treatment of the Company and its stockholders, reference is made to
Sections 856 through 860 of the Code and the regulations thereunder. The
following summary is qualified in its entirety by such reference.
Under the Code, if certain requirements are met in a taxable year, a
REIT generally will not be subject to federal income tax with respect to
income that it distributes to its stockholders. If the Company fails to
qualify during any taxable year as a REIT, unless certain relief provisions
are available, it will be subject to tax (including any applicable
alternative minimum tax) on its taxable income at regular corporate rates,
which could have a material adverse effect upon its stockholders.
In any year in which the Company qualifies to be taxed as a REIT,
distributions made to its stockholders out of current or accumulated earnings
and profits will be taxed to stockholders as ordinary income except that
distributions of net capital gains designated by the Company as capital gain
dividends will be taxed as long-term capital gain income to the stockholders.
To the extent that distributions exceed current or accumulated earnings and
profits, they will constitute a return of capital, rather than dividend or
capital gain income, and will reduce the basis for the stockholder's Common
Stock or Preferred Stock, with respect to which the distribution is paid or,
to the extent that they exceed such basis, will be taxed in the same manner
as gain from the sale of that Common Stock or Preferred Stock.
Investors are urged to consult their own tax advisors with respect to
the appropriateness of an investment in the Securities offered hereby and
with respect to the tax consequences arising under federal law and the laws
of any state, municipality or other taxing jurisdiction, including tax
consequences resulting from such investor's own tax characteristics. In
particular, foreign investors should consult their own tax advisors
concerning the tax consequences of an investment in the Company, including
the possibility of United States income tax withholding on Company
distributions.
PLAN OF DISTRIBUTION
The Company may sell the Securities to one or more underwriters for
public offering and sale by them or may sell the Securities to investors
directly or through agents. Any such underwriter or agent involved in the
offer and sale of the Securities will be named in the applicable Prospectus
Supplement.
Underwriters may offer and sell the Securities at a fixed price or
prices, which may be changed, at prices related to the prevailing market
prices at the time of sale or at negotiated prices. The Company also may,
from time to time, authorize underwriters acting as the Company's agents to
offer and sell the Securities upon the terms and conditions as are set forth
in the applicable Prospectus Supplement. In connection with the sale of
Securities, underwriters may be deemed to have received compensation from the
Company in the form of underwriting discounts or commissions and may also
receive commissions from purchasers of Securities for whom they may act as
agent. Underwriters may sell Securities to or through dealers, and such
dealers may receive compensation in the form of discounts, concessions or
commissions from the underwriters and/or commissions from the purchasers for
whom they may act as agent.
Any underwriting compensation paid by the Company to underwriters or
agents in connection with the offering of Securities, and any discounts,
concessions for commissions allowed by underwriters to participating dealers,
are set forth in the applicable Prospectus Supplement. Underwriters, dealers
and agents participating in the distribution of the Securities may be deemed
to be underwriters, and any discounts and commissions received by them and
any profit realized by them on resale of the Securities may be deemed to be
underwriting discounts and commissions, under the Securities Act of 1933
(the "Securities Act"). Underwriters, dealers and agents may be entitled,
under agreements entered into with the Company, to indemnification against
and contribution toward certain civil liabilities, including liabilities
under the Securities Act.
If so indicated in the applicable Prospectus Supplement, the Company
will authorize dealers acting as the Company's agents to solicit offers by
certain institutions to purchase Securities from the Company at the public
offering price set forth in such Prospectus Supplement pursuant to Delayed
Delivery Contracts ("Contracts") providing for payment and delivery on the
date or dates stated in such Prospectus supplement. Institutions with whom
Contracts, when authorized, may be made include commercial and savings banks,
insurance companies, pension funds, investment companies, educational and
charitable institutions, and other institutions but will in all cases be
subject to the approval of the Company. Contracts will not be subject to any
conditions except that the purchase by an institution of the Securities
covered by its Contracts shall not at the time of delivery be prohibited
under the laws of any jurisdiction in the United States to which such
institution is subject.
Certain of the underwriters and their affiliates may be customers of,
engage in transactions with and perform services for the Company and its
subsidiaries in the ordinary course of business.
LEGAL MATTERS
The legality of the Common Stock offered hereby and certain legal
matters described under "Federal Income Tax Considerations" will be passed
upon for the Company by Brown & Wood LLP, New York, New York. Brown & Wood
LLP may rely on Ballard Spahr Andrews & Ingersoll, Baltimore, Maryland, as
to certain matters of Maryland law.
EXPERTS
The consolidated balance sheet of Reckson Associates Realty Corp. as of
December 31, 1996 and December 31, 1995, and the related consolidated
statements of operations, stockholders' equity and cash flows for the year
ended December 31, 1996 and the period from June 3, 1995 to December 31, 1995
and the related combined statements of operations, owners' deficit and cash
flows of the Reckson Group for the period from January 1, 1995 to June 2,
1995 and for the year ended December 31, 1994 appearing in the Company's
Annual Report on Form 10-K for the year ended December 31, 1996; the combined
statement of revenues and certain expenses of the Westchester Properties (as
defined therein) for the year ended December 31, 1995, appearing in the
Company's Form 8-K/A, dated March 27, 1996; the combined statement of
revenues and certain expenses of Landmark Square Properties (as defined
therein) for the year ended December 31, 1995 and combined statements of
revenues and certain expenses of Certain Option Properties (as defined
therein) for the years ended December 31, 1995, 1994 and 1993 appearing in
the Company's Form 8-K, dated October 1, 1996; and the combined statement of
revenues and certain expenses of the New Jersey Portfolio (as defined
therein) for the year ended December 31, 1996, the combined statement of
revenues and certain expenses for the Hauppauge Portfolio (as defined
therein) for the year ended December 31, 1996 and the statement of revenues
and certain expenses of the Uniondale Office Property (as defined therein),
for the year ended December 31, 1996, appearing in the Company's Form 8-K,
dated February 18, 1997, have in each case been audited by Ernst & Young LLP,
independent auditors, as set forth in their reports thereon, included therein
and incorporated herein by reference. Such consolidated and combined
financial statements are incorporated herein by reference in reliance upon
such reports given upon the authority of such firm as experts in accounting
and auditing.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following sets forth the estimated expenses in connection with the
issuance and distribution of the Registrant's securities being registered
hereby, other than underwriting discounts and commissions, all of which will
be borne by the Registrant:
Securities and Exchange Commission registration fee . . . . $ 151,516
Printing and engraving expenses . . . . . . . . . . . . . . . 200,000
NASD fees . . . . . . . . . . . . . . . . . . . . . . . . . . 30,500
NYSE listing fees . . . . . . . . . . . . . . . . . . . . . . 100,000
Legal fees and expenses . . . . . . . . . . . . . . . . . . 150,000
Accounting fees and expenses . . . . . . . . . . . . . . . . . 40,000
Blue Sky fees and expenses . . . . . . . . . . . . . . . . . . 20,000
Miscellaneous expenses . . . . . . . . . . . . . . . . . . . . 17,984
---------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . $750,000
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Maryland General Corporation Law, as amended from time to time (the
"MGCL"), permits a Maryland corporation to include in its charter a provision
limiting the liability of its directors and officers to the corporation and
its stockholders for money damages except for liability resulting from (a)
actual receipt of an improper benefit or profit in money, property or
services or (b) active and deliberate dishonesty established by a final
judgment as being material to the cause of action. The Amended and Restated
Articles of Incorporation contain such a provision which eliminates such
liability to the maximum extent permitted by Maryland law.
The Amended and Restated Articles of Incorporation authorize the
Company, to the maximum extent permitted by Maryland law, to obligate itself
to indemnify and to pay or reimburse reasonable expenses in advance of final
disposition of a proceeding to (a) any present or former director or officer
or (b) any individual who, while a director of the Company and at the request
of the Company, serves or has served another corporation, partnership, joint
venture, trust, employee benefit plan or any other enterprise as a director,
officer, partner or trustee of such corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise. The Bylaws of the Company
obligate it, to the maximum extent permitted by Maryland law, to indemnify
and to pay or reimburse reasonable expenses in advance of final disposition
of a proceeding to (a) any present or former director or officer who is made
a party to the proceeding by reason of his service in that capacity or
(b) any individual who, while a director of the Company and at the request of
the Company, serves or has served another corporation, partnership, joint
venture, trust, employee benefit plan or any other enterprise as a director,
officer, partner or trustee of such corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise and who is made a party to
the proceeding by reason of his service in that capacity. The Amended and
Restated Articles of Incorporation and Bylaws also permit the Company to
indemnify and advance expenses to any person who served a predecessor of the
Company in any of the capacities described above and to any employee or agent
of the Company or a predecessor of the Company.
MGCL requires a corporation (unless its charter provides otherwise,
which the Amended and Restated Articles of Incorporation do not) to indemnify
a director or officer who has been successful, on the merits or otherwise, in
the defense of any proceeding to which he is made a party by reason of his
service in that capacity. MGCL permits a corporation to indemnify its
present and former directors and officers, among others, against judgments,
penalties, fines, settlements and reasonable expenses actually incurred by
them in connection with any proceeding to which they may be made a party by
reason of their service in those or other capacities unless it is established
that (a) the act or omission of the director or officer was material to the
matter giving rise to the proceeding and (i) was committed in bad faith or
(ii) was the result of active and deliberate dishonesty, (b) the director or
officer actually received an improper personal benefit in money, property or
services or (c) in the case of any criminal proceeding, the director or
officer had reasonable cause to believe that the act or omission was
unlawful. However, a Maryland corporation may not indemnify for an adverse
judgment in a suit by or in the right of the corporation. In addition, the
MGCL requires the Company, as a condition to advancing expenses, to obtain
(a) a written affirmation by the director or officer of his good faith belief
that he has met the standard of conduct necessary for indemnification by the
Company as authorized by the Bylaws and (b) a written statement by or on his
behalf to repay the amount paid or reimbursed by the Company if it shall
ultimately be determined that the standard of conduct was not met.
The Company has entered into indemnification agreements with each of its
executive officers and directors. The indemnification agreements require,
among other matters, that the Company indemnify its executive officers and
directors to the fullest extent permitted by law and advance to the executive
officers and directors all related expenses, subject to reimbursement if it
is subsequently determined that indemnification is not permitted. Under
these agreements, the Company must also indemnify and advance all expenses
incurred by executive officers and directors seeking to enforce their rights
under the indemnification agreements and may cover executive officers and
directors under the Company's directors' and officers' liability insurance.
Although indemnification agreements offer substantially the same scope of
coverage afforded the Bylaws, they provide greater assurance to directors and
executive officers that indemnification will be available, because, as
contracts, they cannot be modified unilaterally in the future by the Board of
Directors or the stockholders to eliminate the rights they provide.
ITEM 16. EXHIBITS.
1 -- Form of Underwriting Agreement.(1)
4.1 -- Form of Common Stock Certificate.(2)
4.2 -- Form of Designating Amendment for Preferred Stock.(1)
4.3 -- Form of Preferred Stock Certificate.(1)
4.4 -- Form of Warrant Agreement.(1)
4.5 -- Form of Warrant.(1)
5 -- Opinion of Brown & Wood LLP as to the legality of the
Securities.
8.1 -- Opinion of Brown & Wood LLP as to tax matters.
12 -- Calculation of Ratios of Earnings to Fixed Charges.
23.1 -- Consent of Brown & Wood LLP (included in Exhibit 5).
23.2 -- Consent of Ernst & Young LLP.
24 -- Power of attorney (included on signature page of this
Registration Statement).
_______________
(1) To be filed by amendment or incorporated by reference in connection with
the offering of Securities.
(2) Previously filed as an exhibit to Registration Statement on Form S-11
(No. 33-84324) and incorporated herein by reference.
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to the Registration Statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the Registration
Statement.
Provided, however, that paragraphs (1)(i) and (1)(ii) do not apply
if the information required to be included in a post-effective amendment
by those paragraphs is contained in periodic reports filed by the
Registrant pursuant to Section 13 or 15(d) of the Exchange Act that are
incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination
of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Exchange Act) that is incorporated by
reference in the Registration Statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of
any action, suit or proceeding ) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
(d) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained
in a form of prospectus filed by the Registrant pursuant to Rule
424(b)(1) or (4) under the Securities Act shall be deemed to be part of
this Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Reckson
Associates Realty Corp. certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form S-3 and has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the Township of Huntington, State
of New York, on May 29, 1997.
RECKSON ASSOCIATES REALTY CORP.
By: /s/ Donald J. Rechler
------------------------------------
Donald J. Rechler
Chairman
KNOWN ALL MEN BY THESE PRESENTS, that we, the undersigned officers and
directors of Reckson Associates Realty Corp. hereby severally constitute
Scott H. Rechler, Mitchell D. Rechler and J. Michael Maturo, and each of them
singly, our true and lawful attorneys with full power to them, and each of
them singly, to sign for us and in our names in the capacities indicated
below, the Registration Statement filed herewith and any and all amendments
to said Registration Statement, and generally to do all such things in our
names and in our capacities as officers and directors to enable Reckson
Associates Realty Corp. to comply with the provisions of the Securities Act
of 1933, and all requirements of the Securities and Exchange Commission,
hereby ratifying and confirming our signatures as they may be signed by our
said attorneys, or any of them, to said Registration Statement and any all
amendments thereto.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
----------- ------- ----------
<S> <C> <C>
Chairman of the Board, Chief Executive
/s/ Donald J. Rechler Officer and Director (Principal Executive May 29, 1997
- --------------------------------- Officer)
Donald J. Rechler
/s/ Scott H. Rechler President, Chief Operating Officer and May 29, 1997
- --------------------------------- Director
Scott H. Rechler
Executive Vice President, Treasurer and
/s/ J. Michael Maturo Chief Financial Officer (Principal May 29, 1997
- --------------------------------- Financial Officer and Principal
J. Michael Maturo Accounting Officer)
/s/ Roger M. Rechler Vice-Chairman of the Board and Director May 29, 1997
- ---------------------------------
Roger M. Rechler
/s/ Mitchell D. Rechler Executive Vice President and Director May 29, 1997
- ---------------------------------
Mitchell D. Rechler
/s/ Harvey R. Blau Director May 29, 1997
- ---------------------------------
Harvey R. Blau
/s/ Leonard Feinstein Director May 29, 1997
- ---------------------------------
Leonard Feinstein
/s/ Herve A. Kevenides Director May 29, 1997
- ---------------------------------
Herve A. Kevenides
/s/ John V.N. Klein Director May 29, 1997
- ---------------------------------
John V.N. Klein
/s/ Conrad D. Stephenson Director May 29, 1997
- ---------------------------------
Conrad D. Stephenson
</TABLE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION PAGE
--------- -------------- ----
<S> <C> <C>
1 -- Form of Underwriting Agreement.(1)
4.1 -- Form of Common Stock Certificate.(2)
4.2 -- Form of Designating Amendment for Preferred Stock. (1)
4.3 -- Form of Preferred Stock Certificates.(1)
4.4 -- Form of Warrant Agreement.(1)
4.5 -- Form of Warrant.(1)
5 -- Opinion of Brown & Wood LLP as to the legality of the
Securities.
8.1 -- Opinion of Brown & Wood LLP as to tax matters.
12 -- Calculation of Ratios of Earnings to Fixed Charges.
23.1 -- Consent of Brown & Wood LLP (included in Exhibit 5).
23.2 -- Consent of Ernst & Young LLP.
24 -- Power of attorney (included on signature page of this
Registration Statement).
</TABLE>
_________________
(1) To be filed by amendment or incorporated by reference in connection with
the offering of Securities.
(2) Previously filed as an exhibit to Registration Statement on Form S-11
(No. 33-84324) and incorporated herein by reference.
Exhibit 5
Brown & Wood LLP
One World Trade Center
NY, NY 10048
Telephone: (212) 839-5300
Facsimile: (212) 839-5599
May 29, 1997
Reckson Associates Realty Corp.
225 Broadhollow Road
Melville, New York 11747
Ladies and Gentlemen:
This opinion is furnished in connection with the registration statement
on Form S-3 (the "Registration Statement"), pursuant to the Securities Act of
1933, as amended (the "Securities Act"), relating to an indeterminate amount
of shares of Common Stock, Preferred Stock, Common Stock Warrants and
Preferred Stock Warrants (as such terms are defined in the Registration
Statement), of Reckson Associates Realty Corp., a Maryland corporation (the
"Company") authorized for issuance under the Company's Amended and Restated
Articles of Incorporation (the "Articles of Incorporation"), with an
aggregate public offering price of up to $500,000,000 (collectively, the
"Securities"). The Registration Statement provides that the Securities may
be offered separately or together, in separate series, in amounts, at prices
and on terms to be set forth in one or more prospectus supplements to the
prospectus contained in the Registration Statement (collectively, the
"Prospectus").
In connection with rendering this opinion, we have examined the Articles
of Incorporation, and the Bylaws, as amended, of the Company; such records of
the corporate proceedings of the Company as we deemed appropriate; the
Registration Statement, and such other certificates, receipts, records and
documents as we considered necessary for the purposes of this opinion.
We are attorneys admitted to practice in the State of New York. We
express no opinion concerning the laws of any jurisdictions other than the
laws of the United States of America, the State of Maryland and the State of
New York.
Based upon the foregoing, we are of the opinion that:
(a) The shares of Common Stock have been duly authorized and, when
delivered and paid for in the manner contemplated by the Prospectus, will be
validly issued, fully paid and nonassessable.
(b) The shares of Preferred Stock have been duly authorized and,
when the number and specific terms thereof have been duly established in
accordance with the Designating Amendment (as defined in the Prospectus) and
such shares are delivered and paid for in the manner contemplated by the
Prospectus, will be validly issued, fully paid and nonassessable.
(c) The Common Stock Warrants and Preferred Stock Warrants have
been duly authorized and, when the number and specific terms thereof have
been duly established and such warrants are duly executed and delivered by
the Company and countersigned by the applicable Warrant Agent in accordance
with an applicable Warrant Agreement (as such terms are defined in the
Prospectus), and when delivered and paid for in the manner contemplated in
the Prospectus, will constitute legally issued, valid and binding obligations
of the Company and will entitle the holders thereof to the rights specified
in the Warrant Agreement.
The foregoing assumes that all requisite steps will be taken to comply
with the requirements of the Securities Act and applicable requirements of
state laws regulating the offer and sale of securities.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and the reference to our firm under the caption "Legal
Matters" in the Prospectus.
Very truly yours,
/s/ Brown & Wood LLP
Exhibit 8.1
Brown & Wood LLP
One World Trade Center
NY, NY 10048
Telephone: (212) 839-5300
Facsimile: (212) 839-5599
May 29, 1997
Reckson Associates Realty Corp.
225 Broadhollow Road
Melville, New York 11747
Re: $500,000,000 Aggregate Offering
Price of Securities of
Reckson Associates Realty Corp.
-------------------------------
Ladies and Gentlemen:
You have requested our opinion concerning certain federal income tax
matters with respect to Reckson Associates Realty Corp. (the "Company") in
connection with the Form S-3 Registration Statement of the Company filed by
the Company with the Securities and Exchange Commission on or about May 29,
1997 (the "Registration Statement").
This opinion is based, in part, upon various assumptions and
representations, including representations made by the Company as to factual
matters set forth in the Registration Statement, in registration statements
on Form S-11 previously filed by the Company with the Securities and Exchange
Commission and in a letter delivered to us by the Company today. This
opinion is also based upon the Internal Revenue Code of 1986, as amended (the
"Code"), the Treasury Regulations promulgated thereunder and existing
administrative and judicial interpretations thereof, all as they exist at the
date of this letter. All of the foregoing statutes, regulations and
interpretations are subject to change, in some circumstances with retroactive
effect. Any changes to the foregoing authorities might result in
modifications of our opinions contained herein.
Based on the foregoing, we are of the opinion that, commencing with the
Company's taxable year ended December 31, 1995, the Company has been
organized in conformity with the requirements for qualification as a real
estate investment trust (a "REIT") under the Code, and the proposed method of
operation of the Company will enable the Company to meet the requirements for
qualification and taxation as a REIT.
We express no opinion with respect to the transactions described herein
and in the Registration Statement other than those expressly set forth
herein. Furthermore, the Company's qualification as a REIT will depend upon
the Company's meeting, in its actual operations, the applicable asset
composition, source of income, shareholder diversification, distribution,
recordkeeping and other requirements of the Code and Treasury Regulations
necessary for a corporation to qualify as a REIT. We will not review these
operations, and no assurance can be given that the actual operations of the
Company and its affiliates will meet these requirements or the
representations made to us with respect thereto.
This opinion is furnished to you solely for your use in connection with
the Registration Statement. We hereby consent to the filing of this opinion
as Exhibit 8.1 to the Registration Statement and to the use of our name in
connection with the material discussed therein under the caption "Federal
Income Tax Considerations."
Very truly yours,
/s/ Brown & Wood LLP
EXHIBIT 12
Reckson Associates Realty Corp.
Ratios of Earnings to Fixed Charges
The following table sets forth the calculation of the Company's consolidated
ratios of earnings to fixed charges for the periods shown (in Thousands):
<TABLE>
<CAPTION>
For the Period For the Period For the Period
from from from
January 1, 1997 June 3, 1995 January 1, 1995
to to to
Description March 31, 1997 1996 December 31, 1995 June 2, 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C> <C>
Interest $5,075 $13,331 $5,331 $7,622 $17,426 $27,454 $27,597
Rent Expense 227 830 434 176 375 771 778
Amortization of Debt 165 525 400 195 564 489 505
Issuance Costs
$5,467 $14,686 $6,165 $7,993 $18,365 $28,714 $28,880
Income from Continuing
Operations before
Minority Interest
and Fixed Charges $13,933 $39,876 $16,719 $7,639 $17,872 $18,609 $20,151
Ratio of Earnings
to Fixed Charges 2.55 2.72 2.71 0.96 0.97 0.65 0.70
</TABLE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement and related Prospectus of
Reckson Associates Realty Corp. (the "Company") for the registration of
$500,000,000 of common stock, preferred stock, common stock warrants, and
preferred stock warrants and to the incorporation by reference therein of our
report dated February 25, 1997, except for Note 14, as to which the date is
March 12, 1997, with respect to the consolidated financial statements and
schedule of the Company included in its Annual Report (Form 10-K) for year
ended December 31, 1996 and the period June 3, 1995 to December 31, 1995 and
the combined financial statements of the Reckson Group for the period January
1, 1995 to June 2, 1995 and for the year ended December 31, 1994, filed with
the Securities and Exchange Commission. We also consent to the
incorporation by reference therein of: (i) our report dated February 23,
1996, with respect to the combined statement of revenues and certain expenses
of the Westchester Properties for the year ended December 31, 1995, included
in the Company's Form 8-K/A filed with the Securities and Exchange Commission
on March 27, 1996, (ii) our report dated September 20, 1996, with respect to
the combined statement of revenues and certain expenses of the Landmark
Square Properties for the year ended December 31, 1995, included in the
Company's Form 8-K filed with the Securities and Exchange Commission on
October 1, 1996, (iii) our report dated September 16, 1996, with respect to
the combined statements of revenues and certain expenses of the Certain
Option Properties for the years ended December 31, 1995, 1994 and 1993,
included in the Company's Form 8-K filed with the Securities and Exchange
Commission on October 1, 1996, (iv) our report dated February 4, 1997, with
respect to the combined statement of revenues and certain expenses of the New
Jersey Portfolio for the year ended December 31, 1996, included in the
Company's Form 8-K filed with the Securities and Exchange Commission on
February 19, 1997, (v) our report dated January 16, 1997, with respect to the
statement of revenues and certain expenses of the Uniondale Office Property
for the year ended December 31, 1996, included in the Company's Form 8-K
filed with the Securities and Exchange Commission on February 19, 1997, and
(vi) our report dated January 17, 1997, with respect to the combined
statement of revenues and certain expenses of the Hauppauge Portfolio for the
year ended December 31, 1996, included in the Company's Form 8-K filed with
the Securities and Exchange Commission on February 19, 1997.
/s/ Ernst & Young LLP
New York, New York
May 29, 1997
