AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 1, 1999
REGISTRATION STATEMENT NO. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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RECKSON ASSOCIATES REALTY CORP.
(Exact name of each registrant as specified in its charter)
MARYLAND
(State or other jurisdiction 11-3233650
of incorporation or organization) (I.R.S. employer 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 office)
SCOTT H. RECHLER
PRESIDENT AND CO-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)
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Copy to:
EDWARD F. PETROSKY, ESQ.
J. GERARD CUMMINS, ESQ.
BROWN & WOOD LLP
ONE WORLD TRADE CENTER, 58TH FLOOR
NEW YORK, N.Y. 10048
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC:
From time to time after this Registration Statement becomes effective.
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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, as amended (the "Securities Act"), 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. |_|
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<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
Title of Class of Securities Amount to Proposed Maximum Proposed Maximum Amount of
to be Registered be Registered Aggregate Price per Aggregate Offering Price Registration Fee(3)
Share (1)
<S> <C> <C> <C> <C>
Series B Convertible Cumulative 6,000,000 $25.00 $150,000,000 $41,700
Preferred Stock, $.01 par value per (2)
share, and the underlying Common Stock,
par value $.01 per share
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee. No
separate consideration will be received for common stock issued upon
conversion of the Series B Convertible Cumulative Preferred Stock.
(2) Such indeterminate number of shares of common stock into which the Series B
Convertible Cumulative Preferred Stock are convertible.
(3) Pursuant to Rule 457(i) the amount of the registration fee is calculated
on the basis of the proposed offering price of 6,000,000 shares of
Series B Convertible Cumulative Preferred Stock.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON THE 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 THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON THE DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
<PAGE>
The information contained in this prospectus is not complete and may be
changed. We may not sell these securities until the registration statement
filed with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities and it is not soliciting an
offer to buy these securities in any state where the offer or sale is not
permitted.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED DECEMBER 1, 1999
PROSPECTUS
6,000,000 SHARES
RECKSON ASSOCIATES REALTY CORP.
SERIES B CONVERTIBLE CUMULATIVE PREFERRED STOCK
(LIQUIDATION PREFERENCE EQUIVALENT TO $25.00 PER SHARE)
AND SUCH INDETERMINATE NUMBER OF SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION
OF THE PREFERRED STOCK
(PAR VALUE $0.01 PER SHARE)
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This prospectus relates to the offer and sale from time to time by
selling security holders referred to in this prospectus of up to 6,000,000
shares of our Series B Convertible Cumulative Preferred Stock, liquidation
preference $25.00 per share, and such indeterminate number of shares of our
common stock issuable on conversion of the Series B Preferred Stock. In this
prospectus, we refer to the Series B Preferred Stock and the common stock
issuable upon the conversion of the Series B Preferred Stock as the Offered
Shares. The selling security holders acquired their Series B Preferred Stock
in a private placement in June 1999. We are registering the Offered Shares as
required under the terms of a registration rights agreement entered into at
the time of the original private placement to the selling security holders.
The registration of the Offered Shares does not necessarily mean that any of
the Offered Shares will be offered or sold by the selling security holders.
The selling security holders will receive all of the net proceeds
from the sale of the Offered Shares and will pay all underwriting discounts
and selling commissions, if any, applicable to any such sale. We will not
receive any of the proceeds of sales by the selling security holders. We are
paying the costs of preparing and filing the registration statement of which
this prospectus is a part.
Our common stock is listed on the New York Stock Exchange under the
symbol "RA." The Series B Preferred Stock is not listed on any national
securities exchange or quoted on any automated quotation system.
The Offered Shares may be sold by the selling security holders from
time to time directly to purchasers or through agents, underwriters or
dealers. See "Plan of Distribution" and "Selling Security Holders." The
selling security holders and any dealers, agents or underwriters which
participate in the distribution of the Offered Shares may be deemed to be
"underwriters" within the meaning of the Securities Act of 1933 and any
commission received by them and any profit on the resale of the Offered Shares
purchased by them may be deemed to be underwriting commissions or discounts
under the Securities Act. See "Plan of Distribution" for a description of
indemnification arrangements.
SEE "RISK FACTORS" BEGINNING ON PAGE 3 OF THIS PROSPECTUS FOR A
DESCRIPTION OF RISKS THAT SHOULD BE CONSIDERED BY PURCHASERS OF THE
SECURITIES.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is , 1999.
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<PAGE>
AVAILABLE INFORMATION
We are subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith, we file reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). These reports, proxy
statements and other information may be inspected and copied at the Public
Reference Room 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. The public may obtain information on the
operation of the Public Reference Room by calling the Commission at
1-800-SEC-0330. The Commission maintains a web site that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the Commission. You may access the Commission's
web site at http://www.sec.gov. These materials can also be inspected at the
office of the New York Stock Exchange, 20 Broad Street, New York, New York,
the exchange on which our common stock is listed.
We have filed with the Commission a registration statement on Form
S-3 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act, with respect to the
securities, of which this prospectus constitutes a part. 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 regarding us and the
securities, reference is made to the Registration Statement, including the
exhibits filed as a part thereof, and the documents incorporated by reference
in this prospectus.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents that we previously filed with the Commission
pursuant to the Exchange Act are incorporated by reference in this prospectus:
SEC FILINGS (FILE NO. 1-13762) PERIOD
Annual Report on Form 10-K Year ended December 31, 1998
Quarterly Reports on Form 10-Q Quarters ended March 31, 1999,
June 30, 1999 and September 30, 1999
Current Reports on Form 8-K Filed February 5, 1999,
(including Form 8-K/A) February 5, 1999, March 1, 1999,
March 26, 1999, May 11, 1999,
June 7, 1999, June 25, 1999,
August 25, 1999 and October 25, 1999
Registration Statement on Form 8-A Filed May 9, 1995 (as amended)
We also incorporate by reference each of the following documents that
we will file with the Commission after the date of this prospectus until the
particular offering is completed or after the date of the initial registration
statement and prior to effectiveness of the registration statement:
o Reports filed under Section 13(a) and (c) of the Exchange Act;
o Definitive proxy or information statements filed under Section
14 of the Exchange Act in connection with any subsequent
stockholders' meeting; and
o Any reports filed under Section 15(d) of the Exchange Act.
Any statement contained herein or in a document all or any portion of
which is incorporated or deemed to be incorporated by reference herein will be
deemed to be modified or superceded for purposes of this prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supercedes such earlier statement. Any statement so modified or
superseded will not be deemed, except as so modified or superceded, to
constitute a part of this prospectus.
We will provide a copy of any or all of these documents (exclusive of
exhibits unless the 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: Susan McGuire, Investor
Relations, telephone number (516) 694-6900.
CAUTIONARY STATEMENTS CONCERNING
FORWARD-LOOKING INFORMATION
Certain information both included and incorporated by reference in
this prospectus may contain forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act, and as
such may involve known and unknown risks, uncertainties and other factors
which may cause the actual results, performance or achievements of our company
to be materially different from future results, performance or achievements
expressed or implied by such forward-looking statements. Forward-looking
statements, which are based on certain assumptions and describe our future
plans, strategies and expectations are generally identifiable by use of the
words "may," "will," "should," "expect," "anticipate," "estimate," "believe,"
"intend" or "project" or the negative thereof or other variations thereon or
comparable terminology. Factors which could have a material adverse effect on
the operations and future prospects of our company are described below under
"Risk Factors." These risks and uncertainties should be considered in
evaluating any forward-looking statements contained or incorporated by
reference herein. Our actual results may differ significantly from the results
discussed in the forward-looking statements.
RISK FACTORS
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. This prospectus contains forward-looking statements which
involve risks and uncertainties. Factors that might cause a difference
include, but are not limited to, those discussed below. You should refer to
the explanation of the qualifications and limitations of such forward-looking
statements discussed above.
o WE ARE DEPENDENT ON THE NEW YORK TRI-STATE AREA MARKET DUE TO LIMITED
GEOGRAPHIC DIVERSIFICATION AND OUR FINANCIAL RESULTS MAY SUFFER AS A RESULT
OF A DECLINE IN ECONOMIC CONDITIONS IN SUCH AREA
A decline in the economic conditions in the New York Tri-State area
and for commercial real estate could adversely affect our business, financial
condition and results of operations. All of our properties, except one office
property located in Orlando, Florida, are located in the New York Tri-State
area, although our organizational documents do not restrict us from owning
properties outside of this area. Each of our five markets are located in New
York City and the suburbs of New York City and may be similarly affected by
economic changes in this area. A significant downturn in the financial
services industry and related industries would likely have a negative effect
on these markets and on the performance of our properties.
The following is a breakdown of our office and industrial properties
for each of our five markets at September 30, 1999:
NUMBER OF SQUARE FOOTAGE ANNUAL BASE
PROPERTIES(1) RENT(2)
Long Island
o Office 24 3,748,025 $77,339,309
o Industrial 94 5,638,435 31,577,425
Westchester
o Office 24 3,274,373 56,571,431
o Industrial 3 163,000 1,264,300
New Jersey
o Office 17 1,993,999 32,442,856
o Industrial 11 1,787,381 7,889,671
Connecticut
o Office 8 1,123,188 22,323,614
o Industrial 1 452,414 2,911,020
New York City
o Office 4 2,968,761 78,476,358
(1) We also own one 357,000 square foot office building located in Orlando, FL.
(2) Represents base rents from leases in place as of October 1, 1999, for
the period October 1, 1999 through September 30, 2000,
excluding the reimbursement by tenants of electrical costs.
o DEBT SERVICING AND REFINANCING, INCREASES IN INTEREST RATES AND
FINANCIAL COVENANTS COULD ADVERSELY AFFECT OUR ECONOMIC PERFORMANCE
DEPENDENCE UPON DEBT FINANCING; RISK OF INABILITY TO SERVICE OR
REFINANCE DEBT. In order to qualify as a real estate investment trust, or
REIT, for federal income tax purposes, we are required to distribute at least
95% of our taxable income. As a result, we are more reliant on debt or equity
financings than many other non-REIT companies that are able to retain more of
their income.
We are subject to the risks associated with debt financing. Our cash
flow could be insufficient to meet required payments of principal and
interest. We may not be able to refinance existing indebtedness, which in
virtually all cases requires substantial principal payments at maturity, or
the terms of such refinancing might not be as favorable as the terms of the
existing indebtedness. As of September 30, 1999, the weighted average maturity
of our existing indebtedness was approximately 7.9 years and our total
existing indebtedness was approximately $1.2 billion. We also may not be able
to refinance any indebtedness we incur in the future. Finally, we may not be
able to obtain funds by selling assets or raising equity to make required
payments on maturing indebtedness.
RISING INTEREST RATES COULD ADVERSELY AFFECT CASH FLOW. We conduct
all of our operations through, and serve as the sole general partner of,
Reckson Operating Partnership, L.P. (the "Operating Partnership"). Increases
in interest rates could increase the Operating Partnership's interest expense,
which could adversely affect the ability to service its indebtedness or to pay
dividends to our stockholders. As noted above, as of September 30, 1999,
approximately 27% of our debt was variable rate debt and our total debt was
approximately $1.2 billion. Outstanding advances under the credit facilities
of the Operating Partnership bear interest at variable rates. In addition, we
may incur indebtedness in the future that also bears interest at a variable
rate.
REQUIREMENTS OF CREDIT FACILITIES COULD ADVERSELY AFFECT OUR
FINANCIAL CONDITION AND OUR ABILITY TO MAKE DISTRIBUTIONS. The ability of the
Operating Partnership to borrow under our credit facilities is subject to
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. The
Operating Partnership relies on borrowings under its credit facilities to
finance acquisition and development activities and for working capital
purposes and, if the Operating Partnership is unable to borrow under its
credit facilities, it could adversely affect our financial condition. The
Operating Partnership has obtained a three-year unsecured credit facility from
The Chase Manhattan Bank, Union Bank of Switzerland and PNC Bank, National
Association, which provides for a maximum borrowing amount of up to $500
million. The Operating Partnership has also obtained a separate $75 million
one-year unsecured credit facility from Chase and is currently negotiating to
replace such facility, the term of which expires in December 1999, with a
larger facility. The credit facilities also contain a financial covenant
limiting the amount of distributions that we may pay to holders of our common
stock during any fiscal quarter if they exceed, when added to all
distributions paid during the three immediately preceding quarters, the
greater of:
o 90% of our funds from operations or 100% of our funds
available for dividend; and
o the amounts required in order for us to continue to qualify
as a REIT.
Although the Operating Partnership presently is in compliance with
the covenants under the credit facilities, there is no assurance that the
Operating Partnership will continue to be in compliance or that we will be
able to service our indebtedness or pay dividends to our stockholders.
NO LIMITATION ON DEBT. Currently, we have a policy of incurring debt
only if our Debt Ratio is then 50% or less. As of September 30, 1999, our Debt
Ratio was 42.4%. For these purposes, Debt Ratio is defined as the total debt
of the Operating Partnership as a percentage of the market value of
outstanding shares of common stock, including the conversion of outstanding
partnership units in the Operating Partnership, the liquidation preference of
the preferred stock of the Company and the liquidation preference of the
preferred units of the Operating Partnership, excluding all units of general
partnership owned by the Company, plus total debt (including the Company's
share of joint venture debt and net of minority partners' interests). Under
this policy, we could incur additional debt if our stock price increases, even
if we may not have a corresponding increase in our ability to repay the debt.
In addition, as of September 30, 1999, our debt-to-equity ratio was 1:1.36. We
calculated our debt-to-equity ratio by comparing the total debt of the
Operating Partnership to the value of the outstanding common stock of the
Company and the common units of limited partnership interest of the Operating
Partnership (including its share of joint venture debt and net of minority
partners' interests), each based upon the market value of the common stock,
and the liquidation preference of the preferred stock of the Company and the
preferred units of limited partnership interest in the Operating Partnership,
excluding all units of general partnership interest owned by the Company. As
described above, our credit facilities contain financial covenants which limit
the ability of the Operating Partnership to incur additional indebtedness.
However, our organizational documents do not contain any limitation on the
amount of indebtedness we 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, we could become more highly leveraged, resulting in
higher interest payments that could adversely affect the ability to pay
dividends to our stockholders and could increase the risk of default on the
Operating Partnership's existing indebtedness.
o OUR ACQUISITION, DEVELOPMENT AND CONSTRUCTION ACTIVITIES COULD RESULT IN
LOSSES
We intend to acquire existing office and industrial properties to the
extent that suitable acquisitions can be made on advantageous terms.
Acquisitions of commercial properties entail risks, such as the risks that we
may not be in a position or have the opportunity in the future to make
suitable property acquisitions on advantageous terms and that our investments
will fail to perform as expected. Some of the properties that we acquire
require significant additional investment and upgrades and are subject to the
risk that estimates of the cost of improvements to bring such properties up to
standards established for the intended market position may prove inaccurate.
Since the IPO of the Company in June 1995, we have acquired or have contracted
to acquire 68 office properties (excluding the office property located in
Orlando, Florida and other properties located outside of New York that were
acquired and subsequently disposed of in our acquisition of Tower Realty
Trust, Inc.) with aggregate square footage of approximately 12.1 million and
50 industrial properties with aggregate square footage of approximately 5.1
million.
We also intend to continue the selective development and construction
of office and industrial properties in accordance with our development and
underwriting policies as opportunities arise. We are currently developing or
re-developing seven properties comprising approximately 1.1 million square
feet. Our development and construction activities include the risks that:
o we may abandon development opportunities after expending
resources to determine feasibility
o construction costs of a project may exceed our original
estimates
o occupancy rates and rents at a newly completed
property may not be sufficient to make the property
profitable
o financing may not be available to us on favorable terms for
development of a property
o we may not complete construction and lease-up on schedule,
resulting in increased carrying costs to complete
construction, construction costs and, in some instances,
penalties owed to tenants with executed leases
Our 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 events occur, the ability to pay dividends
to our stockholders and service the Operating Partnership's indebtedness 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.
o ADVERSE REAL ESTATE MARKET CONDITIONS, INCREASES IN OPERATING EXPENSES
OR CAPITAL EXPENDITURES, TENANT DEFAULTS AND UNINSURED LOSSES COULD ADVERSELY
AFFECT OUR FINANCIAL RESULTS
Our properties' revenues and value may be adversely affected by a
number of factors, including:
o 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
o the need to periodically renovate, repair and relet our
space
o increasing operating costs, including real estate taxes and
utilities, which may not be passed through to tenants
o defaults by our tenants or their failure to pay rent on a
timely basis uninsured losses
A significant portion of our expenses of real estate investments,
such as mortgage payments, real estate taxes, insurance and maintenance costs,
are generally not reduced when circumstances cause a decrease in income from
our properties. In addition, our real estate values and income from properties
are also affected by our compliance with laws, including tax laws, interest
rate levels and the availability of financing.
BECAUSE REAL ESTATE INVESTMENTS ARE ILLIQUID, WE MAY NOT BE ABLE TO
SELL PROPERTIES WHEN APPROPRIATE. Real estate investments generally cannot be
sold quickly. We may not be able to vary our portfolio promptly in response to
economic or other conditions. In addition, provisions of the Internal Revenue
Code limit a REIT's ability to sell properties in some situations when it may
be economically advantageous to do so, thereby adversely affecting returns to
the Company's stockholders.
COMPETITION IN OUR MARKETS IS SIGNIFICANT. The competition for
tenants in the office and industrial markets in the New York Tri-State area is
significant and includes properties owned by other REITs, local privately-held
companies, institutional investors and other owners. There is also significant
competition for acquisitions in our markets from the same types of
competitors. In addition, many users of industrial space in our markets own
the buildings that they occupy.
INCREASING OPERATING COSTS COULD ADVERSELY AFFECT CASH FLOW. Our
properties are subject to operating risks common to commercial real estate,
any and all of which may adversely affect occupancy or rental rates. Our
properties are subject to increases in our operating expenses such as
cleaning, electricity, heating, ventilation and air conditioning; elevator
repair and maintenance; insurance and administrative costs; and other costs
associated with security, landscaping, repairs and maintenance of our
properties. While our tenants generally are currently obligated to pay a
portion of these costs, there is no assurance that tenants will agree to pay
these costs upon renewal or that new tenants will agree to pay these costs
initially. If operating expenses increase, the local rental market may limit
the extent to which rents may be increased to meet increased expenses without
at the same time decreasing occupancy rates. While we have cost saving
measures at each of our properties, if any of the above occurs, our ability to
pay dividends to our stockholders and service our indebtedness could be
adversely affected.
SOME POTENTIAL LOSSES ARE NOT COVERED BY INSURANCE. We carry
comprehensive liability, fire, extended coverage and rental loss insurance on
all of our properties. However, losses arising from acts of war or relating to
pollution are not generally insured because they are either uninsurable or not
economically insurable. If an uninsured loss or a loss in excess of insured
limits should occur, we could lose our capital invested in a property, as well
as any future revenue from the property. We would remain obligated on any
mortgage indebtedness or other obligations related to the property.
INVESTMENTS IN MORTGAGE DEBT COULD LEAD TO LOSSES. We may invest in
mortgages secured by office or industrial properties. We may acquire the
mortgaged 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 not make
payments of interest on a current basis and we may not realize our anticipated
return or sustain losses relating to the investments. Although we currently
have no intention to originate mortgage loans as a significant part of our
business, we may make loans to a seller in connection with our purchase of
real estate. The underwriting criteria we would use for these loans would be
based upon the credit and value of the underlying real estate.
o PROPERTY OWNERSHIP THROUGH PARTNERSHIPS AND JOINT VENTURES COULD LIMIT OUR
CONTROL OF THOSE INVESTMENTS
Partnership or joint venture investments may involve risks not
otherwise present for investments made solely by us, including the possibility
that our partners or co-venturer might become bankrupt, that our partners or
co-venturer might at any time have different interests or goals than we do,
and that our partners or co-venturer may take action contrary to our
instructions, requests, policies or objectives, including our policy with
respect to maintaining the qualification of the Company as a REIT. Other risks
of joint venture investments include impasse on decisions, such as a sale,
because neither our partner or co-venturer nor us would have full control over
the partnership or joint venture. There is no limitation under our
organizational documents as to the amount of funds that may be invested in
partnerships or joint ventures.
The following is a description of the significant joint ventures in
which we are involved:
OUR INVESTMENT IN THE OMNI INCLUDES THE RISKS THAT WE CANNOT
REFINANCE OR DISPOSE OF THE PROPERTY IN OUR SOLE DISCRETION AND WE COULD HAVE
OUR GENERAL PARTNERSHIP INTEREST CONVERTED INTO A LIMITED PARTNERSHIP
INTEREST. The Operating Partnership owns 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 our Nassau West
Corporate Center office park. Odyssey Partners, L.P. and an affiliate of
Odyssey own the remaining 40% interest. Through our partnership interest, we
act as managing partner and have 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 these conditions, the
Operating Partnership's general partnership interest shall convert to a
limited partnership interest and 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 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 this 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
apply to the payment of all sums due under a 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 Odyssey's interest in the Omni
Partnership.
OUR JOINT VENTURE IN AN OFFICE BUILDING IN TARRYTOWN, NEW YORK
INCLUDES THE RISKS THAT WE CANNOT ENTER INTO LARGE LEASES OR REFINANCE OR
DISPOSE OF THE BUILDING IN OUR DISCRETION. 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. ("TCC"), a partnership affiliated with the Halpern
organization, the organization from which we acquired eight Class A office
properties for approximately $86 million in February 1996. The member
agreement governing the joint venture arrangement requires us to obtain the
consent of TCC prior to engaging in activities such as entering into or
modifying a lease for more than 25,000 rentable square feet, financing or
refinancing indebtedness encumbering the property and selling or otherwise
transferring the property.
OUR JOINT VENTURES IN PRIVATIZATION OF GOVERNMENT OFFICE BUILDINGS
AND CORRECTIONAL FACILITIES ARE DEPENDENT UPON CONTINUED OUTSOURCING BY
GOVERNMENTS AND COMPETITIVE BIDDING. From time to time, the Operating
Partnership may make joint venture investments in real estate assets with
Reckson Strategic Venture Partners, LLC ("Reckson Strategic Venture
Partners"). Reckson Service Industries, Inc. ("Reckson Service Industries"),
an entity that the Company spun-off to its shareholders in 1998, owns 100% of
the common ownership interests of Reckson Strategic Venture Partners and,
accordingly, controls Reckson Strategic Venture Partners. The strategy of
Reckson Strategic Venture Partners is to acquire interests in established
entrepreneurial enterprises with experienced management teams in market
sectors which are in the early stages of their growth cycle or offer
circumstances for attractive investments as well as opportunities for future
growth. Joint venture investments with Reckson Strategic Venture Partners may
involve various types of real estate assets and involve different risks than
those in our office and industrial sectors, as to which we have no prior
experience or expertise. No assurance can be given as to the success of these
investments. As of September 30, 1999, the Operating Partnership had made a
joint venture investment with Reckson Strategic Venture Partners of $17.6
million in the area of privatization of government occupied office buildings
and correctional facilities. In addition to the joint venture risks discussed
above, this investment includes the following specific risks:
o dependence upon the continued outsourcing of real estate
functions by governmental entities
o the ability to compete effectively in bidding on specific
projects
o significant government regulation and/or oversight
o ENVIRONMENTAL PROBLEMS ARE POSSIBLE AND MAY BE COSTLY
Federal, state and local laws and regulations relating to the
protection of the environment may require a current or previous owner or
operator of real estate to investigate and clean up hazardous or toxic
substances or petroleum product releases at a property. An owner of real
estate is liable for the costs of removal or remediation of certain hazardous
or toxic substances on or in the property. These laws often impose such
liability without regard to whether the owner knew of, or caused, the presence
of the contaminants. Clean-up costs and the owner's liability generally are
not limited under the enactments and could exceed the value of the property
and/or the aggregate assets of the owner. The presence of, or the failure to
properly remediate, the substances may adversely affect the owner's ability to
sell or rent the property or to borrow using the property as collateral.
Persons who arrange for the disposal or treatment of hazardous or toxic
substances may also be liable for the clean-up costs of the substances at a
disposal or treatment facility, whether or not such facility is owned or
operated by the person. Even if more than one person was responsible for the
contamination, each person covered by the environmental laws may be held
responsible for the clean-up costs incurred. In addition, third parties may
sue the owner or operator of a site for damages and costs resulting from
environmental contamination emanating from that site.
Environmental laws also govern the presence, maintenance and removal
of asbestos-containing materials ("ACMs"). These 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, we may be considered an owner or operator of
properties containing ACMs. Having arranged for the disposal or treatment of
contaminants we may be potentially liable for removal, remediation and other
costs, including governmental fines and injuries to persons and property.
All of our office properties and all of our industrial properties
have been subjected to a Phase I or similar environmental site assessment
after April 1, 1994 that were completed by independent environmental
consultant companies, except for the property located at 35 Pinelawn Road
which was originally developed by us and subjected to a Phase I in April 1992.
These Phase I or similar environmental site assessments involved general
inspections without soil sampling, ground water analysis or radon testing and,
for our properties constructed in 1978 or earlier, survey inspections to
ascertain the existence of ACMs. These environmental site assessments have not
revealed any environmental liability that we believe would have a material
adverse effect on our business.
o FAILURE TO QUALIFY AS A REIT WOULD BE COSTLY
We have operated (and intend to operate) so as to qualify as a REIT
under the Internal Revenue Code beginning with our taxable year ended December
31, 1995. Although our management believes that we are organized and operated
in a manner to so qualify, no assurance can be given that we will qualify or
remain qualified as a REIT.
If we fail to qualify as a REIT in any taxable year, we will be
subject to federal income tax (including any applicable alternative minimum
tax) on our taxable income at regular corporate rates. Moreover, unless
entitled to relief under certain statutory provisions, we also will be
disqualified from treatment as a REIT for the four taxable years following the
year during which qualification was lost. This treatment would significantly
reduce net earnings available to service indebtedness, make investments or pay
dividends to shareholders because of the additional tax liability to us for
the years involved. Also, we would not then be required to pay dividends to
our shareholders.
o TAX CONSEQUENCES UPON A SALE OR REFINANCING OF PROPERTIES MAY RESULT IN
CONFLICTS OF INTEREST FOR DIRECTORS AND OFFICERS OF THE COMPANY
Holders of units of limited partnership of the Operating Partnership
or co-owners of properties not owned entirely by us may suffer different and
more adverse tax consequences than we will upon the sale or refinancing of our
properties. We may have different objectives from these co-owners and holders
of limited partnership units regarding the appropriate pricing and timing of
any sale or refinancing of these 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, the directors and officers of the Company who
hold limited partnership units may seek to influence us not to sell or
refinance the properties, even though such a sale might otherwise be
financially advantageous to us, or may seek to influence us to refinance a
property with a higher level of debt.
o WE MAY HAVE CONFLICTS OF INTEREST WITH RECKSON SERVICE INDUSTRIES
CONFLICTS AS A RESULT OF OVERLAPPING MANAGEMENT. Donald J. Rechler
serves as our Chairman of the Board and as Co-Chief Executive Officer and is
Chairman of the Board of Reckson Service Industries. Scott H. Rechler serves
as our Co-Chief Executive Officer and President and is President and Chief
Executive Officer of Reckson Service Industries. Scott Rechler is also a
director of both companies. Michael Maturo serves as Executive Vice President,
Treasurer and Chief Financial Officer of the Company and Reckson Service
Industries and is a director of Reckson Service Industries. Gregg Rechler and
Mitchell Rechler, Co-Chief Operating Officers of the Company, also serve as
directors of Reckson Service Industries and are members of its management
advisory committee. Mitchell Rechler is also a director of the Company. Jason
Barnett serves as Executive Vice President and General Counsel of both
companies. Furthermore, Roger Rechler, an executive vice president of the
Company and Vice-Chairman of the Board serves as a member of Reckson Service
Industries Management Advisory Committee. Although each of the individuals
referred to above is committed to the success of the Company they are also
committed to the success of Reckson Service Industries. Our senior management
and directors beneficially owned approximately 10% of the outstanding common
stock of the Company, with a total market value, based on the New York Stock
Exchange closing price of $20.8125 per share on September 30, 1999, of
approximately $118.1 million, and approximately 35% of the outstanding common
stock of Reckson Service Industries, with a total market value, at a stock
price of $15.8125 per share on September 30, 1999, of approximately $141.0
million. In calculating the ownership of our common stock, we have assumed the
conversion of all limited partnership units in the Operating Partnership into
shares of common stock and the exercise of all vested stock options. There is
a risk that the common membership of management, members of the Boards of
Directors and ownership of the Company and Reckson Service Industries will
lead to conflicts of interest in the fiduciary duties owed to stockholders by
common directors and officers in connection with transactions between the two
companies, as well as a conflict in allocating management time.
CONFLICTS IN TRANSACTIONS WITH RECKSON SERVICE INDUSTRIES UNDER THE
INTERCOMPANY AGREEMENT. The Operating Partnership and Reckson Service
Industries have entered into an intercompany agreement to formalize their
relationship at the outset and to limit conflicts of interest. The
intercompany agreement was not negotiated at arms' length as it was negotiated
while 95% of the common stock of Reckson Service Industries was owned by the
Operating Partnership. Under the intercompany agreement, Reckson Service
Industries granted the Operating Partnership a right of first opportunity to
make any REIT-qualified investment that becomes available to Reckson Service
Industries. In addition, if a REIT-qualified investment opportunity becomes
available to an affiliate of Reckson Service Industries, including Reckson
Strategic Venture Partners, 100% of the common ownership interest of which is
indirectly owned by Reckson Service Industries, the intercompany agreement
requires the Reckson Service Industries' affiliate to allow the Operating
Partnership to participate in the opportunity to the extent of Reckson Service
Industries' interest in the affiliate.
Under the intercompany agreement, the Operating Partnership granted
Reckson Service Industries a right of first opportunity to provide to the
Operating Partnership and our tenants any type of non-customary commercial
services for occupants of office, industrial and other property types, which
we may not be permitted to provide because they may generate REIT
non-qualifying income under Federal tax laws. Reckson Service Industries will
provide services to the Operating Partnership at rates and on terms as
attractive as either the best available for comparable services in the market
or those offered by Reckson Service Industries to third parties. In addition,
the Operating Partnership will give Reckson Service Industries access to its
tenants with respect to commercial services that may be provided to tenants.
Under the intercompany agreement, subject to certain conditions, the
Operating Partnership granted Reckson Service Industries a right of first
refusal to become the lessee of any real property acquired by the Operating
Partnership if the Operating Partnership determines that, because the
operation of the property may involve the performance of non-customary
services that under the Internal Revenue Code a REIT may not generally
provide, it is required to enter into a "master" lease arrangement. Pursuant
to a "master" lease arrangement, the Operating Partnership would own the
property, but lease it entirely to a single lessee that would operate the
property.
With respect to services that Reckson Service Industries will provide
to the Operating Partnership, management will have a conflict of interest in
determining the market rates to charge the Operating Partnership for these
services. In addition, management will have a conflict of interest in
determining whether the Operating Partnership or Reckson Service Industries
would pursue a REIT-qualified investment opportunity outside of our core
business strategy of investing in office and industrial properties in the New
York Tri-State area. Furthermore, the Operating Partnership and Reckson
Service Industries may structure investments so that Reckson Strategic Venture
Partners - Reckson Operating Partnership joint ventures may pursue the portion
of investments generating REIT-qualified income and Reckson Strategic Venture
Partners will pursue directly the other portion of these investments.
Accordingly, Reckson Strategic Venture Partners and Reckson Strategic Venture
Partners-Reckson Operating Partnership joint ventures may have conflicts of
interest in the structuring, valuation, management and disposition of these
investments.
CONFLICTS IN OUR LOANS TO RECKSON SERVICE INDUSTRIES. In June 1998,
the Operating Partnership established a credit facility with Reckson Service
Industries (the "Reckson Service Industries Facility") in the amount of $100
million for Reckson Service Industries' service sector operations and other
general corporate purposes. In addition, in June 1998, the Operating
Partnership also established a credit facility with Reckson Service Industries
(the "Reckson Strategic Venture Partners Facility", and together with the
Reckson Service Industries Facility, the "Reckson Service Industries Credit
Facilities") for the funding of investments of up to $100 million by Reckson
Service Industries in Reckson Strategic Venture Partners. Amounts available
under the Reckson Strategic Venture Partners Facility are reduced by the
amount of any joint investment by the Operating Partnership into a joint
venture with Reckson Strategic Venture Partners. Advances under the Reckson
Strategic Venture Partners Facility in excess of $25 million in respect of any
single platform will be subject to approval by the Board of Directors of the
Company, while advances under the Reckson Service Industries Facility in
excess of $10 million in respect of any single investment in non-customary
commercial services, as well as advances for investments in opportunities in
other services, will be subject to approval by the Board of Directors of the
Company, or a committee thereof. Each Reckson Service Industries Credit
Facility has a term of five years and advances thereunder are recourse
obligations of Reckson Service Industries. Interest accrues on advances made
under the Reckson Service Industries Credit Facilities at a rate equal to the
greater of (1) the prime rate plus 2% and (2) 12% per annum, with the rate on
amounts that are outstanding for more than one year increasing annually at a
rate of 4% of the prior year's rate. Prior to maturity, interest will be
payable quarterly but only to the extent of net cash flow and on an
interest-only basis and will be prepayable without penalty at the option of
Reckson Service Industries. As long as there are outstanding advances under
either Reckson Service Industries Credit Facilities, Reckson Service
Industries is generally prohibited from paying dividends on any shares of its
capital stock, from incurring debt or from granting security interests in its
assets. In November 1999, the Reckson Service Industries Facilities were
amended to allow Reckson Service Industries to incur up to $135 million in
debt secured by Reckson Service Industries' assets and to pay interest
thereon, and to allow the payment of dividends on up to $200 million of
preferred stock which may be issued by Reckson Service Industries. In
consideration of the amendments, which were approved by our independent
directors, Reckson Service Industries paid Reckson Operating Partnership
approximately 176,000 shares of Reckson Service Industries common stock. The
Reckson Service Industries Credit Facilities are subject to certain other
covenants and prohibit advances thereunder to the extent the advances could,
in our determination endanger the Company's status as a REIT. The terms of the
Reckson Service Industries Credit Facilities were not negotiated at arms'
length and thus may not reflect terms that could have been obtained from
independent third parties. Additional indebtedness may be incurred by
subsidiaries of Reckson Service Industries. As of September 30, 1999,
borrowings under the Reckson Service Industries Credit Facilities aggregated
approximately $116.6 million.
POLICIES WITH RESPECT TO CONFLICTS OF INTEREST MAY NOT BE SUCCESSFUL.
We have adopted policies designed to eliminate or minimize conflicts of
interest. These policies include the approval of all transactions in which
directors or officers of the Company have a conflicting interest by a majority
of the directors who are neither officers nor affiliated with us. These
policies do not prohibit sales of assets to or from affiliates, but would
require the sales to be approved by the independent directors of the Company.
However, there is no assurance that these policies will be successful and, if
they are not successful, decisions could be made that might fail to reflect
fully the interests of all of our stockholders.
o THE TOWER TRANSACTION INVOLVES OUR ENTRY INTO A NEW MARKET; THE TOWER
PROPERTIES MAY NOT PERFORM AS WE ANTICIPATE
On May 24, 1999, through Metropolitan Partners LLC, we closed on the
purchase of 100% of the outstanding common stock of Tower Realty Trust, Inc.
for a combination of cash and securities, including the Company's Class B
exchangeable common stock. We control Metropolitan and own 100% of the common
member interests therein. The acquisition of Tower subjects us to the
following risks:
o the Tower portfolio may not perform as we anticipate
o we may not be able to effectively integrate Tower's
operations, which involve the operation and leasing of
buildings in New York City, a market in which we have not
previously owned and operated properties
o LIMITS ON OWNERSHIP AND CHANGES IN CONTROL MAY DETER CHANGES IN MANAGEMENT
AND THIRD PARTY ACQUISITION PROPOSALS
OWNERSHIP LIMIT. To maintain the qualification of the Company as a
REIT, five or fewer individuals (as defined in the Internal Revenue Code of
1986, as amended, to include certain entities) may not own, directly or
indirectly, more than 50% in value of the outstanding capital stock of the
Company during the last half of a taxable year (other than the first year). In
order to protect against the risk of losing REIT status, our charter limits
ownership of our issued and outstanding common stock by any single stockholder
to 9% of the lesser of the number or value of the outstanding shares of common
stock. It also limits ownership of our Class B exchangeable common stock by
any single stockholder to 9% in value of the outstanding shares of all of our
common stock and limits ownership of our issued and outstanding 7-5/8% Series
A convertible cumulative preferred stock and Series B Convertible Cumulative
Preferred Stock to 9% in value of the outstanding shares of all of our capital
stock. In addition, a stockholder may not acquire shares of our Series A
preferred stock that would result in the stockholder's owning in excess of 20%
of the lesser of the number or value of outstanding shares of the Series A
preferred stock. See "Description of Preferred Stock -- Restrictions on
Ownership." These provisions may delay, defer or prevent a change of control
in the Company or other transaction by a third party without the consent of
the Board of Directors even if a change in control were in the best interests
of our stockholders.
STAGGERED BOARD. The Board of Directors of the Company is divided
into three classes. The terms of the Class I, Class II and Class III directors
expire in 2002, 2000, and 2001, respectively. Directors are chosen for a
three-year term. These provisions may deter changes in control because of the
increased time period necessary for a third party to acquire control of
management through positions on the Board of Directors.
SUPERMAJORITY VOTE FOR REMOVAL OF DIRECTORS. Our board of directors
has approved an amendment to the Company's charter to opt into a provision of
the Maryland General Corporation law (the "MGCL") requiring a vote of
two-thirds of the common stock to remove one or more directors.
MAJORITY OF VOTES REQUIRED TO CALL SPECIAL MEETINGS OF STOCKHOLDERS.
Our board of directors has approved an amendment to the Company's bylaws
providing that a special meeting of stockholders need only be called if
requested by holders of the majority of votes eligible to be cast at such
meeting.
REQUIRED CONSENT OF HOLDERS OF UNITS FOR CERTAIN TRANSACTIONS. Under
the terms of the Operating Partnership's partnership agreement, through June
2, 2000, the Operating Partnership may not sell, transfer or otherwise dispose
of all or substantially all of its assets (whether by way of sale or by
merger, sale or consolidation into another person) without the consent of the
holders of 85% of the outstanding common limited partnership units. This
voting requirement could delay, defer or prevent a change in control of the
Company.
FUTURE ISSUANCES OF COMMON STOCK. The Company's charter authorizes
the Board of Directors to issue additional shares of common stock without
stockholder approval. The Company may also issue shares of common stock in
exchange for limited partnership units pursuant to the Operating Partnership's
partnership agreement. The Board of Directors has also authorized the issuance
of up to 11.7 million shares of Class B exchangeable common stock in
connection with the Tower transaction. These shares are exchangeable on a
one-for-one basis for shares of Reckson common stock and are entitled to an
initial annual dividend of $2.24 per share, subject to adjustment annually.
Issuance of common stock or Class B exchangeable common stock could have the
effect of diluting existing common stockholders' interests.
THE CHARTER OF THE COMPANY PERMITS THE ISSUANCE OF PREFERRED STOCK
WHICH COULD DELAY, DEFER OR PREVENT A CHANGE IN CONTROL. Our charter
authorizes the Board of Directors to issue up to 25 million shares of
preferred stock, of which 9,200,000 shares of Series A Preferred Stock (8,000
shares of which have been converted to shares of common stock) and 6,000,000
shares of Series B preferred stock have been issued, to reclassify unissued
shares of capital 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 class or series of any capital
stock issued. Although the Board of Directors does not intend to do so at the
present time, it could establish a series of preferred stock that could,
depending on the terms of the preferred stock, delay, defer or prevent 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. The MGCL contains provisions, referred to as the "control share
acquisition statute," which eliminate the voting rights of shares acquired in
a Maryland corporation in quantities so as to constitute "control shares," as
defined under the MGCL. The MGCL also contains provisions, referred to as the
"business combination statute," which generally limit business combinations
between a Maryland corporation and any 10% owners of the company's stock or
any affiliate thereof. These provisions 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. As permitted by the MGCL, our bylaws contain a provision
exempting any and all acquisitions by any person of shares of our capital
stock from the control share acquisition statute. Our board of directors,
however, has approved the Company's opting into the "business combination
statute."
o RISK OF IMPACT OF YEAR 2000 ISSUE ON OUR OPERATIONS AND FINANCIAL RESULTS
Some of our older computer programs were written using two digits
rather than four to define the applicable year. As a result, those computer
programs have time-sensitive software that recognizes a date using "00" as the
year 1900 rather than the year 2000. This could cause a system failure or
miscalculation causing disruptions of operations, including, among other
things, a temporary inability to process transactions, or engage in similar
normal business activities.
We have completed our internal year 2000 project. Additionally, we
have received assurances from our contractors that all of our building
management and mechanical systems are currently year 2000 compliant or will be
made compliant prior to any impact on those systems. However, we cannot
guarantee that all contractors will comply with their assurances and therefore
we may not be able to determine year 2000 compliance of those contractors. At
that time, we will determine the extent to which we will be able to replace
non-compliant contractors. We believe that with modifications to existing
software and conversion to new software, the year 2000 issue will not pose
significant operational problems for our computer systems. However, if
modifications and conversions are not made, or are not completed timely, the
year 2000 issue could have a material impact on our operations.
Through September 30, 1999, we have expended approximately $1.0
million in connection with year 2000 issues. However, due to unforeseeable
factors in connection with the year 2000 issues, there can be no guarantee
that additional expenses may not be necessary to assure year 2000 compliance.
Specific factors that might cause material additional expenses include, but
are not limited to, the future detection of vulnerable computer systems and
programs, the availability and costs of personnel trained in this area to
achieve year 2000 compliance, and similar uncertainties.
o THE MARKET VALUE OF SECURITIES COULD DECREASE BASED ON OUR PERFORMANCE AND
MARKET PERCEPTION AND CONDITIONS
EFFECT OF EARNINGS AND CASH DIVIDENDS. The market value of the equity
securities of a REIT may be based primarily upon the market's perception of
the REIT's growth potential and its current and future cash dividends, and may
be secondarily based upon the real estate market value of the underlying
assets. For the year ended December 31, 1998, the Company distributed
approximately 75.7% of its cash available for distribution to its common
stockholders. Although we have retained operating cash flow for investment and
working capital purposes, which has increased the value of our underlying
assets, this has not proportionately increased the market price of our equity
securities. Our failure to meet the market's expectation with regard to future
earnings and cash distributions likely would adversely affect the market price
of the our equity securities.
ADVERSE IMPACT OF RISING INTEREST RATES. One factor which influences
the price of securities is the dividend or interest rate on the securities
relative to market interest rates. Rising interest rates may lead potential
buyers of equity securities of the Company to expect a higher dividend rate,
which would adversely affect the market price of the securities. In addition,
rising interest rates would result in increased expense, thereby adversely
affecting cash flow and the ability of the Operating Partnership to service
its indebtedness.
o TRANSACTIONS BY THE OPERATING PARTNERSHIP OR THE COMPANY COULD ADVERSELY
AFFECT DEBT HOLDERS
Except with respect to a covenant limiting the incurrence of
indebtedness, a covenant requiring the Operating Partnership to maintain a
certain percentage of unencumbered assets and a covenant requiring any
successor in a business combination with the Operating Partnership to assume
all of the obligations of the Operating Partnership under the indenture
pursuant to which the debt securities will be issued, the indenture does not
contain any provisions that would protect holders of debt securities in the
event of (i) a highly leveraged or similar transaction involving the Operating
Partnership, the management of the Operating Partnership or the Company, or
any affiliate of any of these parties, (ii) a change of control, or (iii)
certain reorganizations, restructurings, mergers or similar transactions
involving the Operating Partnership or the Company.
o WE MAY NOT BE ABLE TO PAY ON GUARANTEES
A guarantee of the Operating Partnership's debt securities by the
Company effectively provides no benefit to investors and should not be viewed
by investors as enhancing the credit of the debt securities or as providing
any additional value to the debt securities. The Operating Partnership
conducts all of the Company's operations, and the only asset of the Company is
its interest in the Operating Partnership. As a result, if the Operating
Partnership is unable to meet its obligations on the debt securities, the
Company will not have any assets from which to pay on its guarantee of these
debt securities.
THE COMPANY
We were incorporated in September 1994 and commenced operations
effective with the completion of our initial public offering (the "IPO") on
June 2, 1995.
We were formed for the purpose of continuing the commercial real
estate business of our predecessors, affiliated partnerships and other
entities. For more than 40 years, we have 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, we believe that we are 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
"New York Tri-State area"). When we refer to Class A office buildings in this
prospectus, we mean well maintained, high quality buildings that achieve
rental rates that are at the higher end of the range of rental rates for
office properties in the particular market. We operate as a self-managed REIT
with in-house capabilities in property management, development, construction
and acquisitions. As of September 30, 1999, we owned and controlled, directly
or indirectly, 188 properties located in the New York Tri-State area (the
"Properties") encompassing approximately 21.2 million rentable square feet,
all of which we manage. We also own one 357,000 square foot Class A office
facility located in Orlando, Florida. The Properties consist of 77 Class A
office properties encompassing approximately 13.1 million rentable square
feet, 109 industrial properties encompassing approximately 8.0 million
rentable square feet and two 10,000 square foot retail properties. In
addition, as of September 30, 1999, we owned or had contracted to acquire
approximately 377 acres of land that may present future development
opportunities. We also have invested approximately $312.9 million in certain
mortgage notes encumbering three Class A office properties encompassing
approximately 1.6 million square feet, approximately 472 acres of land located
in New Jersey and in a note receivable secured by a partnership interest in
Omni Partner's, L.P., owner of the Omni, a 575,000 square foot Class A office
property located in Uniondale, New York.
The office properties are Class A office buildings that are
well-located, well-maintained and professionally managed. In addition, these
properties are modern or have been modernized to compete with newer buildings
in their markets. We believe that these properties achieve among the highest
rent and occupancy rates within their markets. A significant portion of the
office properties are located in twelve planned office parks and are tenanted
by, among others, national service firms, such as telecommunications firms,
"big five" 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.
Our executive offices are located at 225 Broadhollow Road, Melville,
New York 11747 and our telephone number at that location is (516) 694-6900. At
September 30, 1999, we had approximately 250 employees.
USE OF PROCEEDS
We will not receive any of the proceeds of sales of the Offered
Shares by the selling security holders.
<PAGE>
RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
The following table sets forth the consolidated ratios of earnings to
fixed charges and preferred stock dividends of the Company for the periods
shown:
<TABLE>
<CAPTION>
Nine Months Ended June 3, 1995 to January 1, 1995 Year Ended
September 30, Year Ended December 31, December 31, to June 2 December 31,
1999 1998 1997 1996 1995 1995 1994
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of 2.06x 2.11x 2.77x 2.72x 2.71x 1.02x(1) ($493,000)
Earnings to (1)(3)
Fixed Charges
Ratio of 1.55x 1.89x -- -- -- -- --
Earnings to
Combined Fixed
Charges and
Preferred
Stock
Dividends(2)
(1) Prior to completion of the IPO on June 2, 1995, our predecessors operated
in a manner as to minimize net taxable income to the owners. The IPO and
the related formation transactions permitted us to deleverage our
properties significantly, resulting in a significantly improved ratio of
earnings to fixed charges.
(2) Prior to April 1998, the Company had no preferred stock outstanding.
(3) Represents the excess of fixed charges over earnings for the year ended
December 31, 1994.
</TABLE>
The ratios of earnings to fixed charges were computed by dividing
earnings by fixed charges. The ratio of earnings to combined fixed charges and
preferred stock dividends were computed by dividing earnings by the aggregate
of fixed charges and preferred dividends. For this purpose, earnings consist
of income from continuing operations before minority interest, fixed charges
and preferred dividends. Fixed charges consist of interest expense (including
interest costs capitalized) and the amortization of debt issuance costs.
DESCRIPTION OF SERIES B PREFERRED STOCK
GENERAL
Our Charter provides that we may issue up to 25 million shares of
preferred stock, $.01 par value per share. As of September 30, 1999, there
were 9,192,000 shares of 7 5/8% Series A Convertible Cumulative Preferred
Stock and 6,000,000 shares of Series B Convertible Cumulative Preferred Stock
outstanding. The Series B Preferred Stock accumulates dividends at an initial
rate of 7.85% per annum with such rate increasing annually to a rate of 8.85%
per annum from and after April 30, 2001. Shares of the Series B Preferred
Stock are redeemable by the Company on or after March 2, 2002. The Series B
Preferred Stock is convertible at any time at the option of the holder at a
conversion price of $26.05 per share of common stock, subject to adjustment in
certain circumstances.
The statements made hereunder relating to the Series B Preferred
Stock are summaries of the material terms thereof and do not purport to be
complete and are subject to, and are qualified in their entirety by, reference
to the applicable provisions of the Company's articles of incorporation
("Charter") and bylaws and the articles supplementary establishing and fixing
the rights and preferences of the Series B Preferred Stock (the "Designating
Amendment"). All capitalized terms not otherwise defined herein have the
respective meanings as set forth in the Designating Amendment.
RANK
The Series B Preferred Stock, with respect to distribution rights and
rights upon liquidation, dissolution or winding up of the Company, ranks:
(i) senior to the common stock and to all classes or series of
equity securities issued by the Company, the terms of which
provide that the equity securities shall rank junior to the
Series B Preferred Stock;
(ii) on a parity with all classes or series of equity securities
issued by us, including the Series A Preferred Stock, other
than those referred to in clauses (i) and (iii); and
(iii) junior to all classes or series of equity securities issued
by the Company which the terms of the preferred stock provide
will rank senior to it.
The term "equity securities" does not include convertible debt
securities.
DISTRIBUTIONS
Holders of shares of Series B Preferred Stock are entitled to
receive, when and as authorized by the Board of Directors, out of funds
legally available for the payment of distributions, cumulative cash
distributions at a rate equal to:
(i) 7.85% per annum of the liquidation preference per share
(equivalent to $1.9625 per annum per share) from and including
the date of original issue to but excluding April 30, 2000;
(ii) 8.35% per annum of the liquidation preference per share
(equivalent to $2.0875 per annum per share) from and including
April 30, 2000 to but excluding April 30, 2001; and
(iii) 8.85% per annum of the liquidation preference per share
(equivalent to $2.2125 per annum per share) from and including
April 30, 2001 and thereafter until any applicable redemption
or conversion.
Distributions on the Series B Preferred Stock are cumulative from the
date of original issue and are payable quarterly in arrears on January 31,
April 30, July 31 and October 31 of each year or, if not a Business Day, the
next succeeding Business Day, commencing July 31, 1999 (each a "Distribution
Payment Date"). Any distribution payable on the Series B Preferred Stock for a
partial distribution period will be computed on the basis of a 360-day year
consisting of twelve 30-day months. Distributions are payable to holders of
record as they appear in the stock transfer records of the Company at the
close of business on the applicable record date. The record date is the date
designated by the Board of Directors of the Company for the payment of
distributions that is not more than 30 nor less than 10 days prior to the
Distribution Payment Date.
No distributions on the Series B Preferred Stock shall be authorized
by the Board of Directors of the Company or be paid or set apart in trust for
payment by the Company at such time as the terms and provisions of any
agreement of the Company, including any agreement relating to its
indebtedness, prohibits such authorization, payment or setting apart for
payment or provides that such authorization, payment or setting apart for
payment would constitute a breach thereof or a default thereunder, or if such
authorization or payment shall be restricted or prohibited by law.
Distributions on the Series B Preferred Stock accumulate whether or
not the Company has earnings, whether or not there are funds legally available
for the payment of such distributions and whether or not such distributions
are authorized. Accumulated but unpaid distributions on the Series B Preferred
Stock will not bear interest and holders of the Series B Preferred Stock will
not be entitled to any distributions in excess of full cumulative
distributions as described above.
No full distributions will be authorized or paid or set apart in
trust for payment on any equity securities of the Company ranking, as to
distributions, on a parity with or junior to the Series B Preferred Stock for
any period unless full distributions in respect of the Series B Preferred
Stock have been or contemporaneously are authorized and paid or authorized and
a sum sufficient for the payment thereof is set apart in trust for such
payment on the Series B Preferred Stock for all past distribution periods and
the then current distribution period.
When distributions are not paid in full or a sum sufficient for full
payment is not so set apart in trust upon the Series B Preferred Stock and the
other equity securities of the Company ranking on a parity as to distributions
with the Series B Preferred Stock, all distributions authorized upon the
Series B Preferred Stock and any other equity securities of the Company
ranking on a parity as to distributions with the Series B Preferred Stock
shall be authorized pro rata so that the amount of distributions authorized
per share of Series B Preferred Stock and such other equity securities shall
in all cases bear to each other the same ratio that accumulated distributions
per share on the Series B Preferred Stock and such other equity securities
(which shall not include any accumulation in respect of unpaid distributions
for prior distribution periods if such equity securities do not have
cumulative distributions) bear to each other. No interest, or sum of money in
lieu of interest, shall be payable in respect of any distribution payment or
payments on Series B Preferred Stock which may be in arrears.
Except as provided in the immediately preceding paragraph, unless
full distributions on the Series B Preferred Stock have been or
contemporaneously are authorized and paid or authorized and a sum sufficient
for the payment thereof set apart in trust for payment for all past
distribution periods and the then current distribution period, no
distributions (other than in shares of common stock or other capital stock
ranking junior to the Series B Preferred Stock of the series as to
distributions and upon liquidation) shall be authorized or made upon the
common stock, or any other of our capital stock ranking junior to or on a
parity with the Series B Preferred Stock of the series as to distributions or
upon liquidation, nor shall any shares of common stock, or any other capital
stock of the Company ranking junior to or on a parity with the Series B
Preferred Stock as to distributions or upon liquidation be redeemed, purchased
or otherwise acquired for any consideration (or any monies be paid to or made
available for a sinking fund for the redemption of any shares) by the Company
except:
(i) by conversion into or exchange for other capital stock of the
Company ranking junior to the Series B Preferred Stock as to distributions and
upon liquidation or
(ii) redemptions for the purpose of preserving our status as a REIT.
REDEMPTION
Shares of Series B Preferred Stock are not redeemable prior to March
2, 2002, subject to certain provisions of the Designating Amendment. On or
after March 2, 2002, the Company may redeem shares of the Series B Preferred
Stock, in whole or in part, from time to time, at a redemption price per share
in cash equal to:
(i) in the case of a redemption from and including March 2, 2002
to and including June 2, 2003, an amount that provides an
annual rate of return in respect of such share of 15%
calculated based on the timing and amount of all payments
(including all distributions other than liquidated damages)
made to and including the date of redemption, relative to
the liquidation preference thereof;
(ii) in the case of a redemption from and including June 2, 2003
to and including June 2, 2004, $25.50; and
(iii) in the case of a redemption from and including June 2, 2004
and thereafter, $25.00, plus, in each case, all accumulated
and unpaid distributions thereon to the date of redemption
(the "Cash Redemption Right").
In addition to the Cash Redemption Right, on or after March 2, 2002,
the Series B Preferred Stock is redeemable by the Company, in whole or in
part, at the option of the Company, for such number of shares of common stock
as equals the redemption price per share of Series B Preferred Stock referred
to in clause (i), (ii) or (iii) above, as applicable, exclusive of accumulated
and unpaid distributions to the date of redemption, divided by the Conversion
Price as of the opening of business on the date set forth for such redemption
(the "Stock Redemption Right").
Unless full distributions on all shares of Series B Preferred Stock
have been or contemporaneously are authorized and paid or authorized and a sum
sufficient for the payment thereof is set apart in trust for payment for all
past distribution periods and the then current distribution period, no shares
of Series B Preferred Stock shall be redeemed unless all outstanding shares of
Series B Preferred Stock are simultaneously redeemed; provided, however, that
the foregoing shall not prevent the purchase or acquisition of shares of
Series B Preferred Stock to preserve our REIT status or pursuant to a purchase
or exchange offer made on the same terms to holders of all outstanding shares
of Series B Preferred Stock.
Unless full distributions on all shares of Series B Preferred Stock
have been or contemporaneously are authorized and paid or authorized and a sum
sufficient for the payment thereof is set apart in trust for payment for all
past distribution periods and the then current distribution period, the
Company shall not purchase or otherwise acquire or cause any of our affiliates
to purchase or otherwise acquire, directly or indirectly, any shares of Series
B Preferred Stock (except by conversion into or exchange for equity securities
of the Company ranking junior to the Series B Preferred Stock as to
distributions and upon liquidation); provided, however, that the foregoing
shall not prevent the purchase or acquisition of Series B Preferred Stock to
preserve our REIT status or pursuant to a purchase or exchange offer made on
the same terms to holders of all outstanding shares of Series B Preferred
Stock.
Each holder of Series B Preferred Stock at the close of business on a
distribution payment record date is entitled to the distribution payable on
the shares on the corresponding distribution payment date notwithstanding the
redemption of the shares on or prior to the distribution payment date. Except
as provided above, the Company will make no payment or allowance for unpaid
distributions, whether or not in arrears, on Series B Preferred Stock for
which a notice of redemption has been given.
Notice of redemption will be mailed by the Company, postage prepaid,
not less than 30 nor more than 60 days prior to the date fixed for redemption
(the "Series B Preferred Stock Redemption Date"), addressed to the respective
holders of record of the Series B Preferred Stock to be redeemed at their
respective addresses as they appear on the stock transfer records of the
Company.
Each notice of redemption shall state:
(i) the Series B Preferred Stock Redemption Date;
(ii) the number of shares of Series B Preferred Stock to be
redeemed;
(iii) with respect to the Cash Redemption Right, the redemption
price;
(iv) with respect to the Stock Redemption Right, the number of
shares of common stock to be issued with respect to each
share of Series B Preferred Stock;
(v) the place or places where certificates representing such
shares of Series B Preferred Stock are to be surrendered
for payment of the redemption price in cash, with respect
to the Cash Redemption Right, and in certificates
representing shares of common stock, with respect to the
Stock Redemption Right;
(vi) that distributions on the shares to be redeemed will cease
to accumulate on such Series B Preferred Stock Redemption
Date; and
(vii) the date upon which the holder's conversion rights as to
such shares shall terminate.
If fewer than all the shares of Series B Preferred Stock are to be
redeemed, the notice mailed to each such holder thereof shall also specify the
number of shares of Series B Preferred Stock to be redeemed from each such
holder.
The Series B Preferred Stock does not have a stated maturity date and
is not be subject to any sinking fund or mandatory redemption provisions.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding
up of the affairs of the Company (referred to herein as a "liquidation"), the
holders of the Series B Preferred Stock will be entitled to be paid out of the
assets of the Company legally available for distribution to its stockholders
liquidating distributions, in cash or property at its fair market value, as
determined by our Board of Directors, in the amount of a liquidation
preference of $25.00 per share, plus an amount equal to any accumulated and
unpaid distributions to the date of such liquidation, before any distribution
or payment is made to holders of Common Stock or any other equity securities
of the Company ranking junior to the Series B Preferred Stock as to the
distribution of assets upon a liquidation. After payment of the full amount of
the liquidating distributions to which they are entitled, the holders of
Series B Preferred Stock will have no right or claim to any of the remaining
assets of the Company.
In the event that, upon any liquidation of the Company, the available
assets of the Company are insufficient to pay the amount of the liquidating
distributions on all outstanding shares of Series B Preferred Stock and the
corresponding amounts payable on all other equity securities of the Company
ranking on a parity with Series B Preferred Stock in the distribution of
assets upon a liquidation, then the holders of Series B Preferred Stock and
all other such equity securities shall share ratably in any such distribution
of assets in proportion to the full liquidating distributions per share to
which they would otherwise be respectively entitled.
The consolidation or merger of the Company with or into any other
entity, or the merger of another entity with or into the Company, or a
statutory share exchange by the Company, 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 of the Company.
VOTING RIGHTS
Holders of the Series B Preferred Stock do not have any voting
rights, except as set forth below or as otherwise from time to time required
by law.
Whenever distributions on the Series B Preferred Stock are in arrears
for six or more quarterly periods, the holders of the Series B 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 the preferred stock so in arrears (unless the 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 all distributions accumulated on such
shares of Series B Preferred Stock for the past distribution periods and the
then current distribution period shall have been fully paid or declared and a
sum sufficient for the payment thereof set aside for payment. In these cases,
the entire Board of Directors will be increased by two directors.
Unless provided otherwise, so long as any shares of the Series B
Preferred Stock remain outstanding, we will not, without the affirmative vote
or consent of the holders of at least two-thirds of the outstanding shares of
Series B Preferred Stock, given in person or by proxy, either in writing or at
a meeting (the Series B Preferred Stock 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
senior to the Series B Preferred Stock with respect to
payment of distributions or the distribution of assets upon
a liquidation of the Company, or reclassify any authorized
capital stock of the Company into such equity securities, or
create, authorize or issue any obligation or security
convertible into or evidencing the right to purchase any
such stock; or
(ii) amend, alter or repeal the provisions of the Designating
Amendment, whether by merger, consolidation or otherwise (an
"Event"), so as to materially and adversely affect any
right, preference, privilege or voting power of the Series B
Preferred Stock or the holders thereof;
provided, however, with respect to the occurrence of any of the
Events set forth in (2) above, so long as the Series B Preferred Stock remains
outstanding with the terms thereof materially unchanged, taking into account
that upon the occurrence of an Event we may not be the surviving entity, the
occurrence of any Event shall not be deemed to materially and adversely affect
the rights, preferences, privileges or voting powers of holders of the Series
B Preferred Stock; and provided, further, that (x) any increase in the amount
of the authorized Series B 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, in each case ranking on a parity with or
junior to the Series B Preferred Stock with respect to payment of
distributions or the distribution of assets upon liquidation of the Company,
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 Series B Preferred Stock shall
have been converted, redeemed or called for redemption upon proper notice and
sufficient funds or shares of Common Stock, as applicable, shall have been
deposited in trust to effect the redemption.
CONVERSION RIGHTS
Subject to the restrictions on transfer and ownership described
below, shares of the Series B Preferred Stock are convertible at any time, at
the option of the holders thereof, into Common Stock at a conversion price of
$26.05 per share of common stock (equivalent to a conversion rate of .9597
shares of common stock for each share of Series B Preferred Stock), subject to
adjustment as described below (the "Conversion Price"). The right to convert
Series B Preferred Stock called for redemption will terminate at the close of
business on the fifth Business Day prior to any Series B Preferred Stock
Redemption date for such shares.
Conversion of shares of Series B Preferred Stock may be effected by
delivering certificates representing the shares to be converted, together with
a written notice of conversion and a proper assignment of such shares, to the
office of the Transfer Agent. Currently, such office is the principal
corporate trust office of the Transfer Agent at 40 Wall Street, New York, New
York 10005.
Each conversion will be deemed to have been effected immediately
prior to the close of business on the date on which the certificates were
surrendered and notice was received by the Company (and if applicable, payment
of any amount equal to the distribution payable on the related shares of
Series B Preferred Stock surrendered for conversion shall have been received
by the Company as described below) and the conversion shall be at the
Conversion Price in effect at such time and on such date.
Holders of shares of Series B Preferred Stock at the close of
business on a Distribution Payment Record Date will be entitled to receive the
distribution payable on such shares on the corresponding Distribution Payment
Date, notwithstanding the conversion of such shares following the Distribution
Payment Record Date and prior to the Distribution Payment Date. A holder of
Series B Preferred Stock on a Distribution Payment Record Date who (or whose
transferee) tenders shares for conversion into Common Stock on the
Distribution Payment Date will receive the distribution payable by the Company
on such Series B Preferred Stock on such date, and the converting holder need
not include payment of the amount of the distribution upon surrender of
certificates for conversion. Except as provided above, the Company will make
no payment or allowance for unpaid distributions, whether or not in arrears,
on converted shares or for distributions on the common stock that is issued
upon the conversion.
Fractional shares of Common Stock will not be issued upon conversion
but, instead, the Company will pay a cash adjustment based on the Current
Market Price of the Common Stock on the Trading Day immediately prior to the
Conversion Date.
For a discussion of the Common Stock to be received upon conversion
of Series B Preferred Stock, see "Description of Common Stock" below.
CONVERSION PRICE ADJUSTMENTS
The Conversion Price is subject to adjustment upon certain events,
including:
(i) the payment of distributions payable in Common Stock on any
class of shares of the Company;
(ii) the issuance to all holders of Common Stock of certain
rights, options or warrants entitling them to subscribe
for or purchase Common Stock at a price per share less
than the fair market value per share of Common Stock;
(iii) subdivisions, combinations and reclassifications of Common
Stock; and
(iv) distributions to all holders of Common Stock of the
Company of evidences of indebtedness of the Company or
assets (excluding those rights, options, warrants and
distributions referred to above and excluding Permitted
Common Stock Cash Distributions (as defined below)).
Permitted Common Stock Cash Distributions are those cumulative cash
distributions paid with respect to the common stock after June 2, 1999, which
are not in excess of the following: the sum of (i) the Company's cumulative
undistributed FFO at June 2, 1999, plus (ii) the cumulative amount of FFO, as
determined by the Board of Directors, after June 2, 1999, minus (iii) the
cumulative amount of distributions accumulated or paid on any other class of
preferred shares after the date of original issue of the Series B Preferred
Stock. Any adjustment required to be made shall be made in the time as may be
required in order to preserve the tax-free nature of a distribution to the
holders of common stock. No adjustment in the Conversion Price shall be
required unless such adjustment would require a cumulative increase or
decrease of at least 1% in the Conversion Price. However, any adjustments that
are not required to be made because of the 1% threshold in the prior sentence,
shall be carried forward and taken into account in any subsequent adjustment
until made.
Except as otherwise described in the preceding paragraph, in case the
Company shall be a party to any transaction (including, without limitation, a
merger, consolidation, statutory share exchange, tender offer for all or
substantially all of the common stock or sale of all or substantially all of
the Company's assets), in each case as a result of which common stock will be
converted into the right to receive securities or other property (including
cash or any combination thereof), each share of Series B Preferred Stock, if
convertible after the consummation of the transaction, will thereafter be
convertible into the kind and amount of shares of stock and other securities
and property (including cash or any combination thereof) receivable upon the
consummation of such transactions by a holder of that number of shares of
common stock or fraction thereof into which one share of Series B Preferred
Stock was convertible immediately prior to such transaction, assuming such
holder of common stock
(i) is not a person with which the Company consolidated or
into which the Company merged or which merged into the
Company or to which such sale or transfer was made, or an
affiliate of this person, and
(ii) failed to exercise any rights of election (provided that
if the kind and amount of stock or beneficial interest,
securities and other property so receivable is not the
same for each non-electing share, the kind and amount so
receivable by each non-electing share shall be deemed to
be the kind and amount received per share by a plurality
of non-electing shares).
The Company may not become a party to any such transaction unless the
terms thereof are consistent with the foregoing.
SHAREHOLDER LIABILITY
Applicable Maryland law provides that no shareholder, including
holders of preferred stock, shall be personally liable for our acts and
obligations, and that our funds and property shall be the only recourse for
these acts or obligations.
RESTRICTIONS ON OWNERSHIP
To qualify as a REIT under the Code, not more than 50% in value of
our 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. Except as provided in the Designating
Amendment, no person shall beneficially own or constructively own any shares
of Series B Preferred Stock such that this person would beneficially or
constructively own in excess of 9% of the capital stock of the Company. In
addition, the Designating Amendment for the Series B Preferred Stock contains
further provisions restricting the ownership and transfer of the Series B
Preferred Stock.
REGISTRAR AND TRANSFER AGENT
The Registrar and Transfer Agent for the Series B Preferred Stock is
American Stock Transfer & Trust Company.
DESCRIPTION OF COMMON STOCK
GENERAL
The Series B Preferred Stock is convertible into our common stock as
described above under "Description of Series B Preferred Stock - Conversion
Rights."
The charter of the Company (the "Charter") provides that the Company
may issue up to 100 million shares of common stock, $.01 par value per share.
In addition, units of limited partnership interest in the Operating
Partnership may be redeemed for cash or, at the option of the Company, common
stock of the Company on a one-for-one basis. On September 30, 1999, there were
40,369,506 shares of common stock outstanding and 10,913,763 shares of Class B
exchangeable common stock outstanding.
The Company issued Class B exchangeable common stock in connection
with the acquisition of Tower Realty Trust, Inc. The shares of Class B common
stock are entitled to receive an annual dividend of $2.24 per share, payable
quarterly, for the first four full quarters immediately following their
issuance. The cash dividend on the Class B common stock is subject to
adjustment annually, beginning on the first anniversary of the end of the
quarter following the issuance of the Class B common stock, by a percentage
equal to 70% of the cumulative percentage change in the Company's FFO per
share above the FFO per share during the year prior to issuance. The shares of
Class B common stock are convertible at any time, at the option of the holder,
into an equal number of shares of common stock of the Company, subject to
customary antidilution adjustments. The Company, at its option, may redeem any
or all of the Class B common stock in exchange for an equal number of shares
of its common stock at any time following the four year, six-month anniversary
of the issuance of the Class B common stock. The Class B common stock ranks
pari passu with the Company's existing common stock. The Series B Preferred
Stock is not convertible into our Class B exchangeable common stock.
All shares of common stock 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 offered hereby will be entitled to receive
distributions on the 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 common 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 the Company's common stock and Class B 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 these
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 the Company's common stock and Class B 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 other securities. 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 CHARTER
Under 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 Charter does not provide for a lesser percentage in these situations. In
addition, the Operating Partnership's 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 the transaction) without the consent of
the holders of 85% of all outstanding limited partnership units.
The Charter authorizes the Board of Directors of the Company to
reclassify any unissued shares of common stock into other classes or series of
classes of capital 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 class or series.
Prospective investors should review the section captioned "Risk
Factors - Limits on Ownership and Changes in Control May Delay Changes in
Management and Third Party Acquisition Proposals."
RESTRICTIONS ON OWNERSHIP
In order to qualify as a REIT under the Code, not more than 50% in
value of the outstanding common stock of the Company 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.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock is American
Stock Transfer & Trust Company.
SELLING SECURITY HOLDERS
The Series B Preferred Stock was originally issued by the Company in
an offering exempt from the registration requirements of the Securities Act.
The purchasers of the Series B Preferred Stock in that offering or their
transferees, pledgees, donees or successors, who we collectively refer to in
this prospectus as selling security holders, may from time to time offer and
sell pursuant to this prospectus any or all of the Series B Preferred Stock
and/or the shares of our common stock issuable upon conversion of the Series B
Preferred Stock. In this prospectus, we refer to the Series B Preferred Stock
and the common stock issuable upon conversion of such preferred stock as
Offered Shares. Although none of the selling security holders has advised us
that it currently intends to sell all or any of the Offered Shares pursuant to
this prospectus, the selling security holders may choose to sell Offered
Shares from time to time upon notice to us. See "Plan of Distribution."
Except as otherwise indicated, the table below sets forth certain
information with respect to the Series B Preferred Stock as of the date
hereof. To our knowledge and based on certain representations made by the
selling security holders, except as indicated below and other than as a result
of the ownership of the Series B Preferred Stock indicated below, none of the
selling security holders has had any material relationship with us or any of
our affiliates within the past three years; except that Salomon Smith Barney,
Inc., a subsidiary of The Travelers Group, has provided us with investment
banking and similar services from time to time.
Number of Shares of Series B Preferred
Name of Selling Security Holder Stock Owned and That May be Sold
Stichting Pensioenfonds ABP...................... 4,000,000
The Travelers Insurance Company.................. 900,000
The Travelers Life and Annuity Company........... 100,000
The Standard Fire Insurance Company.............. 120,000
Travelers Casualty and Surety Company............ 880,000
---------
TOTAL............................................ 6,000,000
=========
The preceding table has been prepared based on information furnished
to us by or on behalf of the selling security holders. With respect to each
selling security holder, the number of shares of Series B Preferred Stock set
forth may be increased or decreased since the information was furnished, and
there may be additional selling security holders of which we are unaware. The
Series B Preferred Stock is convertible into our common stock based upon a
conversion ratio, which at November 15, 1999 equalled .9597 of our common
shares for each converted share of Series B Preferred Stock. The conversion
ratio is subject to adjustment under certain circumstances.
Information concerning the selling security holders may change from
time to time and any such changed information that we become aware of will be
set forth in supplements to this prospectus if and when necessary.
Accordingly, the number of Offered Shares offered hereby may increase or
decrease.
PLAN OF DISTRIBUTION
The Offered Shares may be sold from time to time to purchasers
directly by the selling security holders. Alternatively, the selling security
holders may from time to time offer the Offered Shares to or through
underwriters, dealers or agents, who may receive compensation in the form of
underwriting discounts, concessions or commissions from the selling security
holders or the purchasers of such securities for whom they may act as agents.
The selling security holders and any underwriters, dealers or agents that
participate in the distribution of Offered Shares may be deemed to be
"underwriters" within the meaning of the Securities Act and any profit on the
sale of such securities and any discounts, commissions, concessions or other
compensation received by any such underwriter, dealer or agent may be deemed
to be underwriting discounts and commissions under the Securities Act.
Offered Shares may be sold from time to time in one or more
transactions (which may involve block crosses or transactions) (i) on any
national securities exchange or quotation service on which the Offered Shares
may be listed or quoted at the time of sale, (ii) in the over-the-counter
market, (iii) in transactions otherwise than on such exchanges or in the
over-the-counter market, (iv) through the distribution of the Offered Shares
by any selling security holder to its partners, members or shareholders, (v)
directly to one or more purchasers, (vi) through agents, (vii) in a
combination of such methods of sale or (viii) through short sales through
underwriters, brokers or dealers (who may act as agent or principal). The
selling security holders may sell the Offered Shares at prices which are
current when the sales take place or at other prices to which they agree.
In addition, the Offered Shares covered by this prospectus may be
sold in private transactions or under Rule 144 rather than pursuant to this
prospectus. To comply with the securities laws of certain jurisdictions, if
applicable, the Offered Shares will be offered or sold in such jurisdictions
only through registered or licensed brokers or dealers. In addition, in
certain jurisdictions the Offered Shares may not be offered or sold unless it
has been registered or qualified for sale in such jurisdictions or any
exemption from registration or qualification is available and is complied
with.
The selling security holders will be subject to applicable provisions
of the Exchange Act and rules and regulations thereunder, which provisions may
limit the timing of purchases and sales of any of the Offered Shares by the
selling security holders. The foregoing may affect the marketability of such
securities.
Pursuant to the Registration Rights Agreement, we shall pay all
expenses of the registration of the Offered Shares, including, without
limitation, Commission filing fees and expenses of compliance with state
securities or "blue sky" laws, and will reimburse any single counsel
designated in writing by the selling security holders of a majority of the
aggregate liquidation preference of outstanding preferred stock provided,
however, that each selling security holder will pay all expenses of its
counsel, underwriting discounts and selling commissions and transfer taxes, if
any, relating to the sale or disposition of such selling security holder's
Offered Shares. The selling security holders will be indemnified by us against
certain civil liabilities, including certain liabilities under the Securities
Act, or will be entitled to contribution in connection therewith. The selling
security holders or other persons effecting sales hereunder may agree to
indemnify any such underwriters, dealers and agents against certain
liabilities, including liabilities under the Securities Act.
Upon notification by a selling security holder that any material
arrangement has been entered into with a broker-dealer for the sale of Offered
Shares through a block trade, special offering, exchange distribution or
secondary distribution or a purchase by a broker or dealer, we will file a
supplement to this prospectus, if required, pursuant to Rule 424(b) under the
Securities Act, disclosing (i) the name of each such selling security holder
and of the participating broker-dealer(s), (ii) the number of shares of
preferred stock involved, (iii) the price at which such preferred stock was
sold, (iv) the commissions paid or discounts or concessions allowed to such
broker-dealer(s), where applicable, (v) that such broker-dealer(s) did not
conduct any investigation to verify the information set out or incorporated by
reference in this prospectus and (vi) other facts material to the transaction.
RESTRICTIONS ON OWNERSHIP OF CAPITAL STOCK
EXCESS STOCK
The Charter provides that we may issue up to 75 million shares of
Excess Stock, par value $.01 per share. For a description of our Excess Stock,
see "--Restrictions on Ownership" below.
RESTRICTIONS ON OWNERSHIP
In order for us to qualify as a REIT under the Code, among other
things, not more than 50% in value of our 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 the 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, the 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 the
entities for purposes of the Five or Fewer Requirement (i.e., the beneficial
owners of the entities will be counted as our shareholders).
In order to protect us against the risk of losing our status as a
REIT due to a concentration of ownership among stockholders, our 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
outstanding shares of common stock. The Charter also imposes limitations on
the ownership of preferred stock. See "Description of Series B Preferred Stock
- - Restrictions on Ownership." Any transfer of shares of stock that would
result in a violation of the Ownership Limit or that would result in
disqualification 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 our best interests 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 tax
counsel is presented that the changes in ownership will not then or in the
future jeopardize REIT status and the Board of Directors otherwise decides
that waiving the Ownership Limit is in our best interests.
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 our discovery that capital stock has been transferred in
violation of the provisions of the 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 us that shares of capital stock have been
transferred in violation of the provisions of the 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 Excess Stock would be permitted under the
Ownership Limit. If the 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 (1) 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 the 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 the shares of capital stock were
converted for the ten trading days immediately preceding the sale or gift, and
(2) 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 our option, to have acted as our agent in acquiring the shares of
Excess Stock and to hold the shares of Excess Stock for us.
In addition, we 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 the shares by the original transferee-stockholder, or if the original
transferee-stockholder did not give value for the 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 the shares of Excess Stock
were converted for the ten trading days immediately preceding the sale or
gift, and (ii) the average closing price for the class of stock from which the
shares of Excess Stock were converted for the ten trading days immediately
preceding the date we elect to purchase the shares. We 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. We may pay the amount of the 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 us of the
transfer or, if no 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 stock will bear a legend
referring to the restrictions described above.
Each stockholder shall upon demand be required to disclose to us in
writing any information with respect to the direct, indirect and constructive
ownership of our capital stock 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 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 our best interests.
FEDERAL INCOME TAX CONSIDERATIONS
Based on various assumptions and factual representations made by the
Company regarding its operations, in the opinion of Brown & Wood LLP, counsel
to the Company, 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 REIT under the Code, and the proposed method of operating
the Company will enable it to meet the requirements for qualification and
taxation as a REIT. The qualification of the Company depends upon its ability
to meet the various requirements imposed under the Code through actual
operations, as discussed below. Brown & Wood LLP will not review the Company's
operations, and no assurance can be given that actual operations will meet
these requirements. The opinion of Brown & Wood LLP is not binding on the IRS
or any court. The opinion of Brown & Wood LLP is based upon existing law, IRS
regulations and currently published administrative positions of the IRS and
judicial decisions, which are subject to change either prospectively or
retroactively.
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 Company and its stockholders' federal
income tax treatment. For the particular provisions that govern the Company
and its stockholders' federal income tax treatment, reference is made to
Sections 856 through 860 of the Code and the regulations thereunder. The
following summary is qualified in its entirety by 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. See "Risk Factors-Risks
of Failure to Qualify as a REIT."
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. To
the extent that distributions exceed the stockholder's basis, the excess will
be taxed in the same manner as gain from the sale of that common stock or
preferred stock. For purposes of determining whether a distribution on the
common stock or the preferred stock is out of current or accumulated earnings
and profits, the earnings and profits of the Company will be allocated first
to the preferred stock and then to the 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 this 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 or preferred 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.
The Work Incentives Improvement Act of 1999 was recently passed by
Congress and is currently before the President for signature. This act
contains several tax provisions regarding REITs, including a reduction of the
annual distribution requirement for REIT taxable income from 95% to 90%. The
act also would change the 10% voting securities test under current law to a
10% vote or value test. Thus, subject to certain exceptions, a REIT would not
be allowed to own more than 10% of the vote or value of the outstanding
securities of any issuer (other than a qualified REIT subsidiary or another
REIT). One exception to this new test, which would also be an exception to the
5% asset test under current law, would allow a REIT to own any or all of the
securities of a "taxable REIT subsidiary." A taxable REIT subsidiary could
perform non-customary services for tenants of a REIT without disqualifying
rents received from such tenants for purposes of the REIT's gross income tests
and could also undertake third-party management and development activities as
well as non-real-estate-related activities. A taxable REIT subsidiary would be
taxed as a regular C corporation but would be subject to "earnings stripping"
limitations on the deductibility of interest paid to its REIT. In addition, a
REIT would be subject to a 100% excise tax on certain excess amounts to ensure
an arm's-length relationship between the REIT and its taxable REIT
subsidiaries. No more than 20% of a REIT's total assets could consist of
securities of taxable REIT subsidiaries.
The foregoing provisions would become applicable to the Company on
January 1, 2001, subject to grandfather rules with respect to the 10% value
test as well as a transition period for the tax-free conversion of existing
corporate subsidiaries into taxable REIT subsidiaries. We have made no
decision at this time with regard to any actions we might take if and when the
Work Incentives Improvement Act becomes law and there can be no assurance as
to how the enactment of these changes would affect our business in the future.
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 the 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 our distributions.
CONVERSION OF SERIES B PREFERRED STOCK TO COMMON STOCK. Assuming that
Series B Preferred Stock will not be converted at a time when there are
distributions in arrears, in general, no gain or loss will be recognized for
federal income tax purposes upon the conversion of the Series B Preferred
Stock at the option of the holder solely into Common Stock, whether as a
result of the exercise by the holder of its conversion right or the exercise
by the Company of its Stock Redemption Right. The basis that a holder will
have for tax purposes in the Common Stock received will be equal to the
adjusted basis the holder had in the Series B Preferred Stock so converted
and, provided that the Series B Preferred Stock was held as a capital asset,
the holding period for the Common Stock received will include the holding
period for the Series B Preferred Stock converted. A holder, however, will
generally recognize gain or loss on the receipt of cash in lieu of a
fractional share of Common Stock in an amount equal to the difference between
the amount of cash received and the holder's adjusted basis in such fractional
share. If a conversion occurs when there is a dividend arrearage on the Series
B Preferred Stock and the fair market value of the Common Stock exceeds the
issue price of the Series B Preferred Stock, a portion of the Common Stock
received may be treated as a dividend distribution taxable as ordinary income.
ADJUSTMENTS TO CONVERSION PRICE. Section 305(c) of the Code treats
certain actual or constructive distributions of stock with respect to stock or
convertible stock, such as the Series B Preferred Stock, as a distribution
taxable as a dividend to the extent of the issuing corporation's current and
accumulated earnings and profits. Treasury regulations treat holders of
convertible preferred stock as having received such a constructive
distribution when the conversion price of such preferred stock is adjusted to
reflect certain taxable distributions with respect to the stock into which
such preferred stock is convertible. Thus, under certain circumstances, an
adjustment to the conversion price of the Series B Preferred Stock may give
rise to a deemed taxable stock dividend to the stockholders thereof, whether
or not such stockholders exercise their conversion privilege.
CASH REDEMPTION OF SERIES B PREFERRED STOCK. The Company may redeem
the Series B Preferred Stock for cash at its option, in whole or in part, and
from time to time, beginning on March 2, 2002, at prices reflecting a premium
over the Liquidation Preference for redemptions occurring before June 2, 2004,
all as more fully set forth under "Description of Series B Preferred Stock -
Redemption". A redemption of Series B Preferred Stock will be treated under
Section 302 of the Code as a distribution taxable as a dividend (to the extent
of the Company's current and accumulated earnings and profits) at ordinary
income rates unless the redemption satisfies one of the tests set forth in
Section 302(b) of the Code and is therefore treated as a sale or exchange of
the redeemed shares. The redemption will be treated as a sale or exchange if
it (i) is "substantially disproportionate" with respect to the holder, (ii)
results in a "complete termination" of the holder's share interest in the
Company, or (iii) is "not essentially equivalent to a dividend" with respect
to the holder, all within the meaning of Section 302(b) of the Code. In
determining whether any of these tests have been met, stock considered to be
owned by the holder by reason of certain constructive ownership rules set
forth in the Code, as well as stock actually owned by the holder, must
generally be taken into account. If a particular holder of Series B Preferred
Stock owns (actually or constructively) no Common Stock, or an insubstantial
percentage of the outstanding Common Stock (including Common Stock owned
constructively as a result of the conversion feature of the Series B Preferred
Stock), a redemption of Series B Preferred Stock of that holder is likely to
qualify for sale or exchange treatment because the redemption would not be
"essentially equivalent to a dividend." However, because the determination as
to whether any of the alternative tests of Section 302(b) of the Code will be
satisfied with respect to any particular holder of Series B Preferred Stock
depends upon the facts and circumstances at the time that the determination
must be made, prospective holders of Series B Preferred Stock are advised to
consult their own tax advisors to determine such tax treatment.
If a redemption of Series B Preferred Stock is not treated as a
distribution taxable as a dividend to a particular holder, it will be treated
as to that holder as a taxable sale or exchange. As a result, such holder will
recognize gain or loss for federal income tax purposes in an amount equal to
the difference between (i) the amount of cash and the fair market value of any
property received (less any portion thereof attributable to accumulated and
declared but unpaid dividends, which will be taxable as a dividend to the
extent of the Company's current and accumulated earnings and profits), and
(ii) the holder's adjusted tax basis in the Series B Preferred Stock. Such
gain or loss will be capital gain or loss if the Series B Preferred Stock has
been held as a capital asset, and will be long-term gain or loss if such
shares have been held for more than one year.
If a redemption of Series B Preferred Stock is treated as a
distribution taxable as a dividend, the amount of the distribution will be
measured by the amount of cash and the fair market value of any property
received by the holder. The holder's adjusted tax basis in the redeemed Series
B Preferred Stock will be transferred to the holder's remaining shares of
stock of the Company. If the holder owns no other shares of stock of the
Company, such basis may, under certain circumstances, be transferred to a
related person or it may be lost entirely.
REDEMPTION PREMIUM. Section 305(c) of the Code and the regulations
thereunder provide in certain cases for the accrual of a redemption premium on
preferred stock on a constant yield-to-maturity basis and for the treatment of
such accrual as a distribution with respect to such preferred stock. For such
accrual to apply to a redemption premium on the Series B Preferred Stock,
there would be required a determination of the existence of a "maturity date,"
i.e., a date (occurring before June 2, 2004) at which it would be considered,
as of the issuance of the Series B Preferred Stock, to be more likely than not
that the Company would exercise its redemption option. The regulations,
however, provide a safe harbor under which an issuer will not be considered to
be more likely than not to exercise its redemption option. In addition to
certain other requirements, the safe harbor requires that the exercise of the
redemption option will not reduce the yield of the stock. Based upon certain
representations of the Company and the terms of the Series B Preferred Stock,
the safe harbor will be satisfied. Accordingly, the redemption premium on the
Series B Preferred Stock should not be subject to accrual under Section
305(c).
LEGAL MATTERS
The validity of the issuance of the Offered Shares (and certain
legal matters described under "Federal Income Tax Considerations") will be
passed upon for us by Brown & Wood LLP, New York, New York.
EXPERTS
The consolidated financial statements of the Company appearing in the
Company's Annual Report (Form 10-K) for the year ended December 31, 1998; and
the combined statement of revenues and certain expenses of 919 Third Avenue
(as defined therein) for the year ended December 31, 1998 appearing in the
Company's Form 8-K dated May 11, 1999, have in each case been audited by Ernst
& Young LLP, independent auditors, as set forth in their reports thereon,
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.
<PAGE>
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR THE SELLING SECURITY HOLDERS. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF ANY OFFER TO BUY,
THE OFFERED SHARES, IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS
UNLAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY OFFER OR SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE
FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE
DATE HEREOF.
--------------------
TABLE OF CONTENTS
Available Information..................... 2
Incorporation of Certain Documents By
Reference............................ 2
Cautionary Statements Concerning
Forward-Looking Information............... 3 RECKSON ASSOCIATES
Risk Factors.............................. 3 REALTY CORP.
The Company............................... 15
Use of Proceeds........................... 16
Ratio of Earnings to Combined Fixed
Charges and Preferred Stock
Dividends............................ 17
Description of Series B Preferred Stock... 17
Description of Common Stock............... 25
Selling Security Holders.................. 27
Plan of Distribution...................... 28
Restrictions on Ownership of Capital
Stock................................ 29
Federal Income Tax Considerations......... 31
Legal Matters............................. 34
Experts................................... 34
--------------------
<PAGE>
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 Company:
Securities and Exchange Commission registration fee......... $41,700.00
Printing and engraving expenses............................. 5,000.00
Legal fees and expenses..................................... 25,000.00
Accounting fees and expenses................................ 12,000.00
Trustee's fees.............................................. 10,000.00
Miscellaneous............................................... 5,000.00
---------
Total....................................................... $98,700.00
=========
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 company
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. Our Charter contains such a provision
which eliminates such liability to the maximum extent permitted by Maryland
law.
Our Charter authorizes us, to the maximum extent permitted by
Maryland law, to obligate ourselves 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 and at our request, serves or has served another company, real estate
investment trust, partnership, joint venture, trust, employee benefit plan or
any other enterprise as a director, officer, partner or trustee of such
company, real estate investment trust, partnership, joint venture, trust,
employee benefit plan or other enterprise and who is made a party to the
proceeding by reason of his or her service in that capacity. Our Bylaws
obligate us, 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 and at our request, serves or has served
another company, real estate investment trust, partnership, joint venture,
trust, employee benefit plan or any other enterprise as a director, officer,
partner or trustee of such company, real estate investment trust, 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. Our
Charter and Bylaws also permit us to indemnify and advance expenses to any
person who served our predecessor in any of the capacities described above and
to any employee or agent of us or our predecessor.
The MGCL requires a company (unless its charter provides otherwise,
which our Charter does not) to indemnify a director or officer who has been
successful, on the merits or otherwise, in the defense of any proceeding to
which he is made a party by reason of his service in that capacity. The MGCL
permits a company 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, under the MGCL, a
Maryland corporation may not indemnify for an adverse judgment in a suit by or
in the right of the company or for a judgment of liability on the basis that
personal benefit was improperly received, unless in either case a court orders
indemnification and then only for expenses. In addition, the MGCL permits a
company to advance reasonable expenses, upon the company's receipt of (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 us and (b)
a written statement by or on his behalf to repay the amount paid or reimbursed
by us if it shall ultimately be determined that the standard of conduct was
not met.
We have entered into indemnification agreements with each of our
executive officers and directors. The indemnification agreements require,
among other matters, that we indemnify our 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, we
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 our 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.
The Partnership Agreement of the Operating Partnership contains
provisions indemnifying its partners and their officers and directors to the
fullest extent permitted by the Delaware Limited Partnership Act.
ITEM 16. EXHIBITS.
4.1 -- Articles of Incorporation(1)
4.2 -- Articles Supplementary establishing and fixing
the rights and preferences of the Series B
Convertible Cumulative Preferred Stock(2)
4.3 -- Form of Series B Preferred Stock Certificate
4.4 -- Form of Common Stock Certificate(1)
4.5 -- By-laws(1)
5 -- Opinion of Brown & Wood LLP as to the legality of
the Offered Shares
8 -- Opinion of Brown & Wood LLP as to tax matters
12.1 -- Calculation of Reckson Associates Realty Corp.
Ratios of Earnings to Fixed Charges.
12.2 -- Calculation of Reckson Associates Realty Corp.
Ratios of Earnings to Combined
Fixed Charges and Preferred Stock Dividends.
23.1 -- Consent of Brown & Wood LLP (included in Exhibits
5 and 8)
23.2 -- Consent of Ernst & Young LLP
24 -- Power of attorney (included on the signature page of
this Registration Statement)
- ---------------
(1) Previously filed as an exhibit to Registration Statement on Form S-11 (No.
33-84324) and incorporated herein by reference.
(2) Previously filed as Exhibit 3.1 to Current Report on Form 8-K filed on
June 7, 1999 and incorporated herein by reference.
ITEM 17. UNDERTAKINGS.
(a) The 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
aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement.
Provided, however, that paragraphs (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; and
(3) (a) 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 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, partners 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, partner or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer, partner 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.
<PAGE>
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 December 1, 1999.
RECKSON ASSOCIATES REALTY CORP.
By: /s/ Scott H. Rechler
----------------------------
Scott H. Rechler
President
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints Scott H. Rechler, Mitchell D.
Rechler and Michael Maturo or any one of them, his or her attorneys-in-fact
and agents, each with full power of substitution and resubstitution for him or
her in any and all capacities, to sign any or all amendments or post-effective
amendments to this registration statement or a registration statement prepared
in accordance with Rule 462 of the Securities Act of 1933, as amended, and to
file the same, with exhibits thereto and other documents in connection
herewith or in connection with the registration of the offered securities
under the Securities Exchange Act of 1934, as amended, with the Securities and
Exchange Commission, granting unto each of such attorneys-in-fact and agents
full power to do and perform each and every act and thing requisite and
necessary in connection with such matters and hereby ratifying and confirming
all that each of such attorneys-in-fact and agents or his or her substitutes
may do or cause to be done by virtue hereof.
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>
/s/ Donald J. Rechler Chairman of the Board, Co-Chief Executive December 1, 1999
--------------------- Officer and Director (Principal Executive
Donald J. Rechler Officer)
/s/ Scott H. Rechler President, Co-Chief Executive Officer and December 1, 1999
-------------------- Director
Scott H. Rechler
Executive Vice President, Treasurer and
/s/ Michael Maturo Chief Financial Officer (Principal December 1, 1999
------------------ Financial Officer and Principal Accounting
Michael Maturo Officer)
/s/ Roger M. Rechler Vice-Chairman of the Board and Director December 1, 1999
--------------------
Roger M. Rechler
/s/ Mitchell D. Rechler Co-Chief Operating Officer and Director December 1, 1999
-----------------------
Mitchell D. Rechler
/s/ Harvey R. Blau Director December 1, 1999
------------------
Harvey R. Blau
/s/ Leonard Feinstein Director December 1, 1999
---------------------
Leonard Feinstein
/s/ Herve A. Kevenides Director December 1, 1999
----------------------
Herve A. Kevenides
/s/ John V.N. Klein Director December 1, 1999
-------------------
John V.N. Klein
Director
----------------
Lewis S. Ranieri
/s/ Conrad D. Stephenson Director December 1, 1999
------------------------
Conrad D. Stephenson
</TABLE>
<PAGE>
EXHIBIT INDEX
EXHIBITS DESCRIPTION PAGE
4.3 -- Form of Series B Preferred Stock Certificate
5 -- Opinion of Brown & Wood LLP as to the legality of the
Offered Shares
8 -- Opinion of Brown & Wood LLP as to tax matters
12.1 -- Calculation of Reckson Associates Realty Corp. Ratios
of Earnings to Fixed Charges
12.2 -- Calculation of Reckson Associates Realty Corp. Ratios
of Earnings to Combined Fixed Charges and Preferred
Stock Dividends
23.1 -- Consent of Brown & Wood LLP (included in Exhibits 5
and 8)
23.2 -- Consent of Ernst & Young LLP
24 -- Power of attorney (included on the signature page of
this Registration Statement)
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 4.3
<S> <C>
**SPECIMEN** **SPECIMEN**
NUMBER *** *** SHARES
SEE REVERSE FOR IMPORTANT NOTICE
ON TRANSFER RESTRICTIONS, CERTAIN
DEFINITIONS AND OTHER INFORMATION
a Corporation Formed Under the Laws
of the State of Maryland
RECKSON ASSOCIATES REALTY CORP.
THIS CERTIFIES THAT
****SPECIMEN****
IS THE OWNER OF *** ***
---------
FULLY PAID AND NON-ASSESSABLE SHARES OF SERIES B CONVERTIBLE CUMULATIVE PREFERRED STOCK, LIQUIDATION PREFERENCE $25.00 PER
SHARE, $.01 PAR VALUE PER SHARE, OF
Reckson Associates Realty Corp. (the "Corporation") transferable on the books of the Corporation by the holder hereof in
person or by its duly authorized attorney, upon surrender of this Certificate properly endorsed. This Certificate and the
shares represented hereby are issued and shall be held subject to all of the provisions of the charter of the Corporation
(the "Charter") and the Bylaws of the Corporation and any amendments thereto. This Certificate is not valid unless
countersigned and registered by the Corporation.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be executed on its behalf by its duly authorized
officers.
Dated:
Countersigned and Registered:
_____________________________________ _________________________________
Gregg Rechler, Secretary Scott Rechler, President
</TABLE>
<PAGE>
IMPORTANT NOTICE
The Corporation will furnish to any stockholder, on request and without
charge, a full statement of the information required by Section 2-211(b) of the
Corporations and Associations Article of the Annotated Code of Maryland with
respect to the designations and any preferences, conversion and other rights,
voting powers, restrictions, limitations as to dividends and other
distributions, qualifications, and terms and conditions of redemption of the
stock of each class which the Corporation has authority to issue and, if the
Corporation is authorized to issue any preferred or special class in series,
(i) the differences in the relative rights and preferences between the shares
of each series to the extent set, and (ii) the authority of the Board of
Directors to set such rights and preferences of subsequent series. The
foregoing summary does not purport to be complete and is subject to and
qualified in its entirety by reference to the charter of the Corporation
including all amendments and supplements thereto (the "Charter"), a copy of
which will be sent without charge to each stockholder who so requests. Such
request must be made to the Secretary of the Corporation at its principal
office.
This certificate for shares of Series B Convertible Cumulative Preferred
Stock is subject to restrictions on ownership and transfer for the purpose of
the Corporation's maintenance of its status as a real estate investment trust
under the Internal Revenue Code of 1986, as amended. Except as otherwise
provided pursuant to the Charter of the Corporation, no person may Beneficially
Own or Constructively Own shares of Series B Preferred Stock such that such
Person would Beneficially Own or Constructively Own Capital Stock in excess of
9% in value of the aggregate of the outstanding shares of Capital Stock of the
Corporation. Any Person who Acquires or attempts to Acquire or Beneficially
Owns or Constructively Owns shares of Series B Preferred Stock in excess of the
aforementioned limitation, or any Person who is or attempts to become a
transferee such that Series B Excess Preferred Stock would result under the
provisions of the Charter, shall immediately give written notice or, in the
event of a proposed or attempted Transfer, give at least 15 days prior written
notice to the Corporation of such event and shall provide to the Corporation
such other information as it may request in order to determine the effect of
any such Transfer on the corporation's status as a REIT. All capitalized terms
in this legend have the meanings defined in the Charter of the Corporation, a
copy of which, including the restrictions on transfer, will be sent to any
stockholder on request and without charge. Transfers in violation of the
restrictions described above shall be void ab initio. If the restrictions on
ownership and transfer are violated, the securities represented hereby will be
designated and treated as shares of Series B Excess Preferred Stock which will
be held in trust by the Corporation. The foregoing summary does not purport to
be complete and is subject to and qualified in its entirety by reference to the
Charter, a copy of which, including the restrictions on transfer, will be sent
without charge to each stockholder who so requests. Such request must be made
to the Secretary of the Corporation at its principal office.
KEEP THIS CERTIFICATE IN A SAFE PLACE. IF IT IS LOST, STOLEN OR
DESTROYED, THE CORPORATION WILL REQUIRE A BOND OF INDEMNITY AS A CONDITION TO
THE ISSUANCE OF A REPLACEMENT CERTIFICATE.
The following abbreviations, when used in the inscription on the face of
this Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT -- _________ Custodian _______
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with under Uniform Gifts to Minors Act _______
right of survivorship and (State)
not as tenants in common
</TABLE>
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, _____________________ HEREBY SELL, ASSIGN AND TRANSFER UNTO
Please insert social security or other identifying number of assignee
_______________________________________________________________________________
_______________________________________________________________________________
(Please Print or Typewrite Name and Address, Including Zip Code, of Assignee)
_______________________________________________________________________________
_________________________________________SHARES OF SERIES B CONVERTIBLE
CUMULATIVE PREFERRED STOCK OF THE CORPORATION REPRESENTED BY THIS CERTIFICATE
AND DO HEREBY IRREVOCABLY CONSTITUTE AND APPOINT
__________________________________________ATTORNEY TO TRANSFER THE SAID
SHARES ON THE BOOKS OF THE CORPORATION WITH THE POWER OF SUBSTITUTION IN THE
PREMISES.
Dated __________________________________ ________________________________
NOTICE: The Signature To This
Assignment Must Correspond With
The Name As Written Upon
The Face Of The Certificate In
Every Particular, Without
Alteration Or Enlargement Or Any
Change Whatsoever.
<PAGE>
Exhibit 5
Brown & Wood LLP
One World Trade Center
New York, New York 10048
December 1, 1999
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") filed with the Securities
and Exchange Commission (the "Commission") under the Securities Act of 1933,
as amended (the "Securities Act"), relating to the offering from time to time
by selling security holders of up to 6,000,000 shares of Series B Convertible
Cumulative Preferred Stock, liquidation preference $25.00 per share (the
"Series B Preferred Shares"), of Reckson Associates Realty Corp. (the
"Company") and such indeterminate number of shares of common stock, par value
$.01 per share, issuable upon conversion of the preferred stock (the "Common
Shares").
In connection with rendering this opinion, we have examined the
Company's Amended and Restated Articles of Incorporation and Bylaws, as
amended, records of the Company's corporate proceedings, the Registration
Statement and such other certificates, records and documents as 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 of the 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:
(i) the Series B Preferred Shares are validly issued, fully paid
and nonassessable; and
(ii) the Common Shares issuable upon conversion of the Series B
Preferred Shares have been duly and validly authorized and
reserved for issuance upon such conversion by the Company
and such Common Shares, when issued upon conversion of the
Series B Preferred Shares as contemplated thereby, will be
validly issued, fully paid and nonassessable.
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
<PAGE>
Exhibit 8
Brown & Wood LLP
One World Trade Center
New York, New York 10048
December 1, 1999
Reckson Associates Realty Corp.
225 Broadhollow Road
Melville, New York 11747
Re: REIT Federal Income Tax Opinion
Ladies and Gentlemen:
You have requested our opinion concerning certain federal income tax
matters with respect to Reckson Associates Realty Corp., a Maryland
corporation (the "Company"), in connection with the Company's Registration
Statement on Form S-3 (the "Registration Statement") filed on or about
December 1, 1999, relating to the registration of 6,000,000 shares of Series B
Convertible Cumulative Preferred Stock of the Company (the "Preferred Stock")
and such indeterminate number of shares of common stock of the Company
issuable upon conversion of the Preferred Stock.
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 (attached as an exhibit
hereto). 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
operating 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 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
<PAGE>
EXHIBIT 12.1
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 For the
For the Period from Period from
Nine Months For the June 3, 1995 January 1,
Ended Year For the For the to 1995 For the
September Ended Year Ended Year Ended December to Year Ended
Description 30, 1999 1998 1997 1996 31, 1995 June 2, 1995 1994
<S> <C> <C> <C> <C> <C> <C> <C>
Interest $60,901 $55,139 $23,936 $13,331 $5,331 $7,622 $17,426
Rent Expense 1,204 1,321 952 830 434 176 375
Amortization of Debt
Issuance Costs 2,391 1,600 797 525 400 195 564
Fixed Charges 64,496 58,060 25,685 14,686 6,165 7,993 18,365
Income from
Continuing Operations
before Minority
Interest and Fixed
Charges $132,836 $122,541 $71,175 $39,876 $16,719 $8,187 $17,872
Ratio of Earnings to 2.06 2.11 2.77 2.72 2.71 1.02 0.97
Fixed Charges
</TABLE>
<PAGE>
EXHIBIT 12.2
Reckson Associates Realty Corp.
Ratios of Earnings to Combined Fixed Charges and Preferred Stock Dividends
The following table sets forth the calculation of the Company's
consolidated Ratios of Earnings to combined fixed charges and preferred stock
dividends for the periods shown (in thousands)
<TABLE>
<CAPTION>
For the
Nine Months Ended
Description September 30, 1999 For the Year Ended 1998
<S> <C> <C>
Interest $60,901 $55,139
Rent Expense 1,204 1,321
Amortization of debt issuance costs 2,391 1,600
Preferred Stock Dividends 21,283 14,244
Fixed Charges and Preferred Stock Dividends 85,779 72,304
Income from continuing operations before $132,836 $136,785
Minority Interests, Fixed Charges and
Preferred Stock Dividends
Ratio of Earnings to Combined Fixed Charges 1.55 1.89
and Preferred Stock Dividends
</TABLE>
<PAGE>
Exhibit 23.2
Consent of Independent Accountants
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) of Reckson Associates Realty Corp. (the
"Company") for the registration of 6,000,000 shares of Series B Convertible
cumulative Preferred Stock and to the incorporation by reference therein of
our reports dated (i) February 11, 1999, with respect to the consolidated
financial statements and schedule of the Company included in its Annual Report
on Form 10-K for the year ended December 31, 1998 and on Form 8-K filed with
the Securities and Exchange Commission on March 16, 1999 and March 1, 1999,
respectively, and (ii) March 4, 1999, with respect to the combined statement
of revenues and certain expenses of 919 Third Avenue (as defined therein) for
the year ended December 31, 1998 included in the Company's Form 8-K filed with
the Securities and Exchange Commission on May 11, 1999.
/s/ Ernst & Young LLP
New York, New York
November 29, 1999
