<PAGE>
FILED PURSUANT TO RULE 424(B)(5)
REGISTRATION NO. 333-28015
PROSPECTUS SUPPLEMENT
December 2, 1997
(To Prospectus dated September 29, 1997)
3,081,177 SHARES
RECKSON ASSOCIATES REALTY CORP.
COMMON STOCK
All of the 3,081,177 shares of common stock, par value $.01 per share (the
"Common Stock"), offered hereby (the "Offering") are being sold by Reckson
Associates Realty Corp. (the "Company"). The Common Stock is listed on the New
York Stock Exchange ("NYSE") under the symbol "RA." On December 2, 1997, the
last reported sale price of the Common Stock on the NYSE was $26 11/16 per
share.
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION
WITH AN INVESTMENT IN THE COMMON STOCK, SEE "RISK FACTORS" ON PAGES 4 TO 12 IN
THE ACCOMPANYING PROSPECTUS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE
ACCOMPANYING PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PRICE UNDERWRITING PROCEEDS
TO THE DISCOUNTS AND TO THE
PUBLIC COMMISSIONS (1) COMPANY (2)
<S> <C> <C> <C>
Per Share......................... $26.00 $0.13 $25.87
Total............................. $80,110,602 $400,553 $79,710,049
</TABLE>
(1) SEE "UNDERWRITING" FOR INDEMNIFICATION ARRANGEMENTS WITH THE UNDERWRITER.
(2) BEFORE DEDUCTING EXPENSES PAYABLE BY THE COMPANY ESTIMATED AT APPROXIMATELY
$150,000.
The shares of Common Stock offered hereby are offered by the Underwriter,
subject to prior sale, when, as and if delivered to and accepted by it and
subject to approval of certain legal matters by Rogers & Wells, counsel for the
Underwriter. The Underwriter reserves the right to reject orders in whole or in
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
<PAGE>
part. It is expected that delivery of the shares of Common Stock offered hereby
will be made against payment therefor in New York, New York on or about December
5, 1997.
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK.
SPECIFICALLY, THE UNDERWRITER MAY OVERALLOT IN CONNECTION WITH THE OFFERING, AND
MAY BID FOR, AND PURCHASE, COMMON STOCK IN THE OPEN MARKET. FOR A DESCRIPTION OF
THESE ACTIVITIES, SEE "UNDERWRITING."
------------------------
FORWARD-LOOKING INFORMATION
This Prospectus Supplement and the accompanying Prospectus, as well as the
information incorporated by reference herein and therein, contain certain
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. The Company intends such forward-looking statements to be covered by
the safe harbor provisions for forward-looking statements contained in the
Private Securities Reform Act of 1995 and is including this statement for
purposes of complying with these safe harbor provisions. Forward-looking
statements, which are based on certain assumptions and describe future plans,
strategies and expectations of the Company, are generally identifiable by use of
the words "believe," "expect," "intend," "anticipate," "estimate," "project" or
similar expressions. The Company's ability to predict results or the actual
effect of future plans or strategies is inherently uncertain. Factors which
could have a material adverse affect on the operations and future prospects of
the Company include, but are not limited to, changes in: economic conditions
generally and the real estate market specifically, legislative/regulatory
changes (including changes to laws governing the taxation of real estate
investment trusts ("REITs"), availability of capital, interest rates,
competition, supply and demand for office and industrial properties in the
Company's current and proposed market areas and general accounting principles,
policies and guidelines applicable to REITs. These risks and uncertainties,
together with those stated under the caption "Risk Factors" in the accompanying
Prospectus, should be considered in evaluating forward-looking statements and
undue reliance should not be placed on such statements.
RECENT DEVELOPMENTS
The Company has announced publicly that it is considering a spin-off to its
stockholders of its common stock in Reckson Strategic Inc., a subsidiary of
Reckson Operating Partnership, L.P. There can be no assurance as to if, when, or
the terms upon which, such spin-off will occur.
S-2
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company.......... 3,081,177 shares
Common Stock to be outstanding after the
Offering................................... 44,800,116 shares(1)
Use of Proceeds.............................. To finance pending acquisitions and repay
indebtedness under the Company's credit
facility.
NYSE Symbol.................................. RA
</TABLE>
- ------------------------
(1) As of December 2, 1997. Includes 7,220,184 shares of Common Stock issuable
upon the exchange of limited partnership interests in the Company's
subsidiary, Reckson Operating Partnership, L.P. ("Units"), and excludes
2,406,733 shares of Common Stock issuable upon the exercise of outstanding
options under the Company's stock option plans.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the shares of Common Stock
offered hereby are expected to be approximately $79.6 million. The Company
intends to use such net proceeds to finance pending acquisitions and for the
repayment of borrowings under its credit facility with The Chase Manhattan Bank
and Union Bank of Switzerland (the "Credit Facility") which were incurred to
finance acquisitions. As of December 2, 1997, borrowings under the Credit
Facility aggregated approximately $136.5 million, had a weighted average
interest rate of 7.12% and were scheduled to mature on April 30, 2000.
Pending such uses, the net proceeds may be invested in short-term
income-producing investments such as investment grade commercial paper,
government and government agency securities, money market funds that invest in
government securities, certificates of deposit, interest-bearing bank accounts
and mortgage loan participations.
UNDERWRITING
Subject to the terms and conditions contained in the terms agreement and
related underwriting agreement, dated December 2, 1997 (the "Underwriting
Agreement"), the company has agreed to sell to Donaldson, Lufkin & Jenrette
Securities Corporation (the "Underwriter"), and the Underwriter has agreed to
purchase from the Company, 3,081,177 shares of Common Stock.
The Underwriting Agreement provides that the obligation of the Underwriter
to pay for and accept delivery of the shares of Common Stock is subject to the
approval of certain legal matters by its counsel and to certain other
conditions. The Underwriter is obligated to take and pay for all of the shares
of Common Stock offered hereby if any such shares of Common Stock are taken. The
Company has agreed to reimburse the Underwriter for the fees of its counsel in
this Offering.
The Underwriter has advised the Company that the Underwriter proposes to
offer the shares of Common Stock to the public at the offering price set forth
on the cover page of this Prospectus Supplement and to certain dealers at such
price less a concession not in excess of $0.07 per share of
S-3
<PAGE>
Common Stock. The Underwriter may allow, and such dealers may re-allow, a
concession of not in excess of $0.01 per share of Common Stock on sales to
certain other dealers.
In connection with the Offering, the Underwriter may engage in transactions
that stabilize, maintain or otherwise affect the price of the shares of Common
Stock. Specifically, the Underwriter may overallot the Offering, creating a
short position. In addition, the Underwriter may bid for, and purchase, shares
of Common Stock in the open market to cover short positions or to stabilize the
price of the shares of Common Stock. Finally, the Underwriter may reclaim
selling concessions allowed for distributing the shares of Common Stock in the
Offering if it repurchases previously distributed shares of Common Stock in
covering transactions or otherwise. Any of these activities may stabilize or
maintain the market price of the shares of Common Stock above independent market
levels. The Underwriter is not required to engage in these activities, and may
end any of these activities at any time.
The Underwriting Agreement contains covenants of indemnity between the
Underwriter and the Company against certain civil liabilities, including
liabilities under the Securities Act of 1933, as amended.
The Company and the Operating Partnership have agreed, subject to certain
exceptions, not to, directly or indirectly, offer, sell, transfer, hypothecate,
grant any option for the sale of, or otherwise dispose of, any shares of Common
Stock or any security convertible into or exchangeable into or exercisable for
Common Stock for a period of 30 days after the date of this Prospectus
Supplement, without the prior written consent of the Underwriter.
The Underwriter and its affiliates, from time to time, engage in
transactions with, and have performed and will perform investment banking,
financial advisory and other services for, the Company in the ordinary course of
business for which ordinary fees and expenses have been and will be paid.
LEGAL MATTERS
The legality of the Common Stock offered hereby and certain legal matters
described under "Federal Income Tax Considerations" in the accompanying
Prospectus will be passed upon for the Company by Brown & Wood LLP, New York,
New York. In addition, certain legal matters will be passed upon for the
Underwriter by Rogers & Wells, New York, New York. Brown & Wood LLP and Rogers &
Wells will rely on Ballard Spahr Andrews & Ingersoll, Baltimore, Maryland, as to
certain matters of Maryland law.
S-4
<PAGE>
PROSPECTUS
$500,000,000
RECKSON ASSOCIATES REALTY CORP.
COMMON 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") and (ii) warrants to purchase Common 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 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 and (ii) 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 4 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 date of this Prospectus is September 29, 1997.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). 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 quarters ended March 31, 1997
and June 30, 1997.
3. Current Reports on Form 8-K (including Form 8-K/A) and dated March
8, 1996, October 1, 1996, October 22, 1996, November 25, 1996, February 18,
1997, May 15, 1997, June 12, 1997, August 7, 1997 and September 9, 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
2
<PAGE>
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.
3
<PAGE>
THE COMPANY
Reckson Associates Realty Corp. (including, as the context requires, its
subsidiaries, 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"), was 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 September 29,
1997, the Company owned 136 properties (including three joint ventures) (the
"Properties") encompassing approximately 11.6 million rentable square feet, all
of which are managed by the Company. The Properties consist of 44 Class A
suburban office properties (the "Office Properties") encompassing approximately
6.1 million rentable square feet, 90 industrial properties (the "Industrial
Properties") encompassing approximately 5.5 million rentable square feet and two
10,000 square foot retail properties. In addition, as of September 29, 1997, the
Company owned or had contracted to acquire approximately 698 acres of land
(including 400 acres under option) that may present future development
opportunities and had invested approximately $52.6 million in certain mortgage
indebtedness encumbering five Class A office properties on Long Island
encompassing an aggregate of approximately 928,000 square feet and a 400-acre
parcel of land. In addition, the Company has invested $17 million in a note
receivable secured by the interest of Odyssey Partners, L.P. in Omni Partners,
L.P.
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 September 29, 1997, the Company had approximately 200 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").
4
<PAGE>
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
5
<PAGE>
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 $250 million. 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 fully
diluted basis plus total debt. Certain of the Company's indebtedness contains
limitations on the ability of the Operating Partnership to incur additional
indebtedness. 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 Charter of the Company
limits ownership of the issued and outstanding Common Stock by any single
stockholder to 9.0% of the lesser 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 delaying,
6
<PAGE>
deferring or preventing a change of control of the Company or other transaction
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 Class I, Class II and Class III
directors will expire in 1999, 2000 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 (i.e. through June 2, 2000),
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 Charter authorizes the Board of
Directors to issue additional shares of Common Stock without shareholder
approval. The Company may issue shares of common stock from time to time in
exchange for limited partnership units pursuant to the Operating Partnership
agreement. Any such issuance could have the effect of diluting existing
shareholders' interests in the Company.
PREFERRED STOCK. The Charter authorizes 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. Although the Board of Directors has no
such intention at the present time, it could establish a series of Preferred
Stock that could, depending on the terms of such series, delay, defer or
prevent a transaction or a change in control of the Company that might involve a
premium price for the Common Stock or otherwise be in the best interest of the
stockholders.
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 delaying, deferring or preventing 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. However, as permitted by the
MGCL, the Bylaws of the Company contain a provision exempting from the control
share acquisition statute any and all acquisitions by any person of the
Company's shares of stock. In addition, the board of directors has adopted a
resolution exempting the Company from the provisions of the business combination
statute. There can be no assurance that such provisions will not be amended or
eliminated at any time in the future.
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.
7
<PAGE>
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
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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
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relating to such investments. In that regard, as of June 30, 1997, the Company
had invested approximately $52.1 million in mortgage indebtedness encumbering
five Class A office properties on Long Island.
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 amended and restated agreement of
limited partnership of Omni Partners, L.P. (the "Omni Partnership Agreement").
These limitations include Odyssey's right to negotiate under certain
circumstances a refinancing of the mortgage debt encumbering the Omni and the
right to approve any sale of the Omni made on or before March 13, 2007 (the
"Acquisition Date"). The Operating Partnership will continue to act as the sole
managing partner of the Omni Partnership unless certain conditions specified in
the Omni Partnership Agreement shall occur. Upon the occurrence of any of such
conditions the Operating Partnership's general partnership interest shall be
converted to a limited partnership interest (in which case an affiliate of
Odyssey shall be the sole managing partner), or at the option of Odyssey, the
Operating Partnership shall be a co-managing partner with an Odyssey affiliate
of Odyssey. In addition, on the Acquisition Date, the Operating Partnership will
have the right to purchase Odyssey's interest in the Omni Partnership at a price
(the "Option Price") based on 90% of its fair market value. If the Operating
Partnership fails to exercise such option, Odyssey has the right to require the
Operating Partnership to purchase Odyssey's interest in the Omni Partnership on
the Acquisition Date at the Option Price. The Operating Partnership has the
right to extend the Acquisition Date until March 13, 2012. The Option Price
shall be applied to the payment of all sums due under a loan (the "Odyssey
Loan") made by the Operating Partnership in March 1997 to Odyssey in the amount
of approximately $17 million. The Odyssey Loan matures on the Acquisition Date
(subject to the Operating Partnership's right to extend the Acquisition Date as
set forth above) and is secured by a pledge of all of Odyssey's right, title and
interest in the Omni Partnership. All distributions of net cash flow which
Odyssey would otherwise be entitled to shall be applied to all interest which is
due under the Odyssey Loan. All distributions from a sale or refinancing of the
Omni which Odyssey would otherwise be entitled to shall be applied to the
interest and principal outstanding under the Odyssey Loan.
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-
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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
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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 has operated (and 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
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.
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.
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DESCRIPTION OF COMMON STOCK
GENERAL
The Company's Charter (the "Charter") provides 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.
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 Charter 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 Charter 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
Charter regarding Excess Stock, shares of Common Stock will have equal dividend,
liquidation and other rights.
CERTAIN PROVISIONS OF THE COMPANY'S CHARTER
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 Company's Charter does 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 (I.E.
through June 2, 2000), 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 Company's Charter authorizes 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,
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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 delay or defer 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 Charter 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 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
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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 Charter provides 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 Charter,
subject to certain exceptions, provides 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. 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
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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 Charter 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 Charter 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 owed 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.
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These restrictions will not preclude settlement of transactions through the
New York Stock Exchange.
All certificates representing shares of 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, 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. Beginning in 1998, the Company may elect to retain
long-term capital gains and pay corporate-level income tax on them and treat the
retained gains as if they had been distributed to stockholders. In such case,
each stockholder would include in income, as long-term capital gain, its
proportionate share of the undistributed gains and would be deemed to have paid
its proportionate share of the tax paid by the Company with respect thereto. In
addition, the basis for a stockholder's Common Stock would be increased by the
amount of the undistributed long-term capital gain included in its income, less
the amount of the tax it is deemed to have paid with respect thereto.
17
<PAGE>
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.
18
<PAGE>
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; and the statement of revenues and certain expenses
of 710 Bridgeport Avenue (as defined therein), for the year ended December 31,
1996 and the statement of revenues and certain expenses of the Shorthills Office
Center (as defined therein), for the year ended December 31, 1996 appearing in
the Company's Form 8-K dated June 12, 1997; and the statement of revenues and
certain expenses of Garden City Plaza for the year ended December 31, 1996,
appearing in the Company's Form 8-K dated September 9, 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.
19
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NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THE PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATION MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITER.
THIS PROSPECTUS SUPPLEMENT AND ACCOMPANYING PROSPECTUS DO NOT CONSTITUTE AN
OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, TO ANY PERSON IN ANY
JURISDICTION WHERE SUCH AN OFFER OR SOLICITATION WOULD BE UNLAWFUL.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PROSPECTUS SUPPLEMENT
<S> <C>
PAGE
---------
Forward-Looking Information........... S-2
Recent Developments................... S-2
The Offering.......................... S-3
Use of Proceeds....................... S-3
Underwriting.......................... S-3
Legal Matters......................... S-4
PROSPECTUS
Available Information................. 2
Incorporation of Certain Documents by
Reference........................... 2
The Company........................... 4
Risk Factors.......................... 4
Use of Proceeds....................... 12
Description of Common Stock........... 13
Description of Warrants............... 14
Restrictions on Ownership of Capital
Stock............................... 15
Federal Income Tax Considerations..... 17
Plan of Distribution.................. 18
Legal Matters......................... 19
Experts............................... 19
</TABLE>
3,081,177 SHARES
RECKSON ASSOCIATES
REALTY CORP.
COMMON STOCK
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PROSPECTUS SUPPLEMENT
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DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
DECEMBER 2, 1997
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