<PAGE>
Filed Pursuant to Rule 424(b)(2)
Registration No. 33-84892
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS SUPPLEMENT DATED AUGUST 5, 1996
PROSPECTUS SUPPLEMENT
- ---------------------
(To Prospectus Dated December 13, 1994)
$150,000,000
ERP OPERATING LIMITED PARTNERSHIP
___ % NOTES DUE AUGUST __, 2026
Interest on the ___% Notes due August __, 2026 (the "Notes") issued by ERP
Operating Limited Partnership, an Illinois limited partnership (the "Operating
Partnership"), is payable semi-annually on February __ and August __ of each
year, beginning on February __, 1997. The Notes have no sinking fund
provisions. The Notes mature on August __, 2026.
The registered holder of each Note may elect to have such Note, or any
portion of the principal amount thereof that is a multiple of $1,000, repaid on
August __, 2006 at 100% of the principal amount thereof, together with accrued
interest to August __, 2006. Such election, which is irrevocable when made, must
be made within the period commencing on June __, 2006, and ending at the close
of business on July __, 2006. The Notes are redeemable at any time after August
___, 2006 by the Operating Partnership, in whole or in part, at a redemption
price equal to the sum of (i) the principal amount of the Notes being redeemed
plus accrued interest to the redemption date and (ii) the Make-Whole Amount (as
defined herein), if any.
The Notes will be represented by a single fully registered Note in book-
entry form (the "Global Security") registered in the name of the nominee of The
Depository Trust Company ("DTC"). Beneficial interests in the Global Security
will be shown on, and transfers thereof will be effected only through, records
maintained by DTC and, with respect to the beneficial owners' interests, by
DTC's Participants. Except as described in this Prospectus Supplement, Notes in
definitive form will not be issued. See "Description of Notes -- Book Entry
System." Settlement for the Notes will be in same-day funds. See "Description of
Notes -- Same-Day Settlement and Payment."
---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO
WHICH IT RELATES. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
--------------
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR
ENDORSED THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE
CONTRARY IS UNLAWFUL.
<TABLE>
<CAPTION>
================================================================================
Price to Underwriting Proceeds to the
Public(1) Discount (2) Operating Partnership (1)(3)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Note........... % % %
- --------------------------------------------------------------------------------
Total.............. $ $ $
================================================================================
</TABLE>
(1) Plus accrued interest, if any, from August __, 1996.
(2) The Operating Partnership has agreed to indemnify the several Underwriters
against certain liabilities under the Securities Act of 1933. See
"Underwriting."
(3) Before deducting expenses payable by the Operating Partnership estimated at
$225,000.
The Notes are being offered by the several Underwriters, subject to prior
sale, when, as and if issued to and accepted by the Underwriters, subject to
approval of certain legal matters by counsel for the Underwriters and certain
other conditions. The Underwriters reserve the right to withdraw, cancel or
modify such offer and reject orders in whole or in part. It is expected that
delivery of the Global Security will be made in New York, New York on or about
August ___, 1996
--------------------
MERRILL LYNCH & CO.
ALEX. BROWN & SONS
INCORPORATED
-------------------- J. P. MORGAN & CO.
The date of this Prospectus Supplement is August __, 1996.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted without the delivery of a final prospectus supplement
and prospectus. This Prospectus Supplement shall not constitute an offer to
sell or the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of any
such State.
<PAGE>
[MAP]
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES
OFFERED HEREBY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
S-2
<PAGE>
The following information contained in this Prospectus Supplement is
qualified in its entirety by the detailed information appearing in the
accompanying Prospectus or incorporated therein by reference. As used herein,
the "Operating Partnership" shall be deemed to mean the Operating Partnership
and those entities owned or controlled by it on a consolidated basis (the
"Subsidiaries"), unless the context indicates otherwise.
THE OPERATING PARTNERSHIP
The Notes offered hereby (the "Offering") are being issued by the Operating
Partnership which is managed by its general partner, Equity Residential
Properties Trust (the "Company"). The Company, one of the largest publicly
traded real estate investment trusts (each, a "REIT") (based on the aggregate
market value of its outstanding common shares of beneficial interest (the
"Common Shares")), is a self-administered and self-managed equity REIT. The
Company was organized in March 1993 and commenced operations as a publicly
traded company on August 18, 1993 upon the completion of its initial public
offering (the "IPO"). The Company was formed to continue the multifamily
property business objectives and acquisition strategies of certain affiliated
entities controlled by Mr. Samuel Zell, Chairman of the Board of Trustees of the
Company. These entities had been engaged in the acquisition, ownership and
operation of multifamily properties since 1969. The Company's senior executives
average over 23 years of experience in the multifamily property business.
All of the Company's interests in multifamily properties are held directly
or indirectly by, and substantially all of its operations relating to
multifamily properties are conducted through, the Operating Partnership. The
Company controls the Operating Partnership as the sole general partner and, as
of August 1, 1996, owned approximately 83% of the Operating Partnership's
outstanding partnership interests.
The Company is the largest publicly traded REIT owner of multifamily
properties (based on the number of apartment units owned and total revenues
earned). As of August 1, 1996, the Operating Partnership owned or had interests
in a portfolio of 219 multifamily properties (individually a "Property" and
collectively the "Properties") containing 65,640 apartment units and managed
13,829 additional units owned by affiliated entities. Since the Company's IPO,
at which time the Operating Partnership owned 69 Properties, the Operating
Partnership has acquired, directly or indirectly, interests in an additional 158
Properties containing 46,840 units for a total purchase price of approximately
$2.1 billion, including the assumption of approximately $481 million of mortgage
indebtedness. Since the IPO, the Operating Partnership has disposed of eight of
its properties containing 2,925 units for a total sales price of approximately
$62.2 million and the release of mortgage indebtedness in the amount of $20.5
million. The Operating Partnership's interest in six of the Properties consists
solely of ownership of the debt collateralized by such Properties and in 21 of
the Properties consists solely of investments in partnership interests and
subordinated mortgages collateralized by such Properties. At August 1, 1996,
the Properties had an average occupancy rate of approximately 94%. The
Properties are located throughout the United States in the following 30 states:
Arizona, Arkansas, California, Colorado, Florida, Georgia, Idaho, Illinois,
Indiana, Iowa, Kansas, Kentucky, Louisiana, Maryland, Michigan, Missouri, New
Hampshire, New Jersey, New Mexico, Nevada, North Carolina, Ohio, Oklahoma,
Oregon, Pennsylvania, South Carolina, Tennessee, Texas, Virginia and Washington.
The Operating Partnership's executive offices are located at Two North
Riverside Plaza, Suite 450, Chicago, Illinois 60606, and its telephone number is
(312) 474-1300. In addition, the Operating Partnership has Regional Operations
Centers in Chicago, Illinois; Dallas, Texas; Denver, Colorado; Seattle,
Washington; Tampa, Florida and Bethesda, Maryland, and area offices in Atlanta,
Georgia; Las Vegas, Nevada; Phoenix, Arizona; Portland, Oregon; San Antonio,
Texas; Irvine, California; Raleigh, North Carolina; and Ft. Lauderdale, Florida.
S-3
<PAGE>
RECENT DEVELOPMENTS
ACQUISITIONS
Since January 1, 1996, the Operating Partnership has acquired 26 Properties
containing an aggregate of 8,930 units at a total purchase price of
approximately $392.3 million (including the assumption of mortgage indebtedness
of approximately $69 million). The Operating Partnership funded the cash portion
of these acquisitions primarily from its $250 million unsecured line of credit
(the "Line of Credit") which it pays down from time to time with the proceeds of
equity or debt offerings by the Company or the Operating Partnership. See
"Financing Activities" below.
PROBABLE ACQUISITIONS
The Operating Partnership has entered into contracts with various sellers
to purchase an additional four multifamily properties (the "Properties Under
Contract") consisting of 1,494 units. The total combined purchase price for the
Properties Under Contract is approximately $77.2 million, which includes the
assumption of approximately $51.8 million of mortgage indebtedness. There can
be no assurance that these four Properties Under Contract will be acquired or,
if acquired, that the terms of such acquisitions will not change from the terms
presently contemplated. The Operating Partnership anticipates that the
acquisition of the Properties Under Contract will be funded with the proceeds of
the Offering, its working capital and/or its Line of Credit. The Operating
Partnership believes that the Properties Under Contract can be integrated into
its system of Regional Operations Centers and area offices without any
significant corresponding increase in costs of the operations of such offices.
PENDING ACQUISITIONS
Additional Properties Under Contract
The Operating Partnership has entered into contracts with various
unaffiliated sellers to acquire 11 additional properties under contract (the
"Additional Properties Under Contract") for a total combined purchase price of
approximately $139 million, which includes the assumption of $18.5 million of
mortgage indebtedness. These Additional Properties Under Contract contain 2,798
units and are located in California, Colorado, Florida, Kentucky, North
Carolina, Missouri, Tennessee and Texas. The contracts for the Additional
Properties Under Contract contain due diligence contingency provisions that
allow the Operating Partnership to conduct extensive investigation procedures of
such properties and give the Operating Partnership the option to terminate such
contracts with a full refund of earnest money if the Operating Partnership
becomes dissatisfied with the Additional Properties Under Contract in any way,
in its sole discretion, during such review period. The purchase price for the
Additional Properties Under Contract is expected to be funded primarily with the
net proceeds of the Offering or from the Operating Partnership's Line of Credit.
There can be no assurance that the Additional Properties Under Contract will be
acquired or, if acquired, that the terms of such acquisitions will not change
from the terms presently contemplated.
Properties Under Negotiation
The Operating Partnership is also negotiating with various sellers for the
acquisition of six additional multifamily properties (the "Properties Under
Negotiation") consisting of 1,172 units for a purchase price of approximately
$58.4 million, which includes the assumption of approximately $8.9 million of
mortgage indebtedness. With respect to the Properties Under Negotiation, the
Operating Partnership is negotiating the significant terms of the purchase
contracts for such properties. The Operating Partnership anticipates that, if
and when entered into, the purchase contracts for the Properties Under
Negotiation will contain due diligence contingency provisions that will allow
the Operating Partnership to conduct extensive investigations of such properties
and will give the Operating Partnership flexibility to terminate such contracts
with a full refund of earnest money if the Operating Partnership becomes
dissatisfied with the Properties Under Negotiation in any way, in its sole
discretion, during such review period. If the Operating Partnership acquires the
Properties Under Negotiation, it is expected that the terms and conditions of
such acquisitions will be similar to other acquisitions of Properties made by
the Operating Partnership. The purchase price for the Properties Under
Negotiation is expected to be funded primarily with the net proceeds of the
Offering or from the Operating Partnership's Line of Credit. In addition, the
Company or the Operating Partnership may consider issuing additional equity or
debt securities to finance some or all of such potential acquisitions. There
can be no assurance, however, that the Properties Under Negotiation will be
acquired or, if acquired, that the terms of such acquisitions will not change
from the terms presently contemplated.
S-4
<PAGE>
DISPOSITIONS
Since January 1, 1996, the Operating Partnership has disposed of its
interests in two properties containing 480 units for an aggregate sales price of
approximately $10.15 million. The proceeds of these transactions were used for
the acquisition of two of the Properties.
COMMON SHARE ISSUANCES
Since January 1, 1996, the Company has raised an aggregate of approximately
$229.8 million pursuant to five separate public offerings of its Common Shares.
In January 1996, the Company sold 1,725,000 Common Shares to Lehman Brothers
Inc. for $29.375 per Common Share and, in February 1996, the Company sold
2,300,000 Common Shares to Merrill Lynch, Pierce, Fenner & Smith Incorporated
("Merrill Lynch") for $29.50 per Common Share. On May 21, 1996, the Company
completed the sale of 2,300,000 Common Shares to Merrill Lynch for $30.50 per
Common Share, which Merrill Lynch agreed to reoffer at no less than $31.00 per
Common Share. On May 28, 1996, the Company completed the sale of 73,287 Common
Shares to employees of the Company, the Operating Partnership and Equity Group
Investments, Inc. ("EGI") and certain of their respective affiliates and
consultants at a price equal to $30.50 per Common Share. Mr. Zell is Chairman
of the Board of Directors of EGI. On May 30, 1996, the Company completed the
sale of 1,264,400 Common Shares to Merrill Lynch for $30.75 per Common Share.
FINANCING ACTIVITIES
The Company restructured certain of its tax-exempt bond investments in June
1996 and received approximately $77.1 million of proceeds in connection
therewith.
USE OF PROCEEDS
The net proceeds to be received by the Operating Partnership from the sale
of the Notes are estimated at $148,725,000 after the deduction of the
underwriting discount and the estimated expenses payable by the Operating
Partnership. The Operating Partnership intends to use the net proceeds of this
offering for the acquisition of additional multifamily properties, to reduce
amounts outstanding under its $250 million Line of Credit, and for working
capital purposes. The Line of Credit bears interest at a per annum rate equal to
one-, two-, three- or six- month London Interbank Offered Rate ("LIBOR") (as
selected by the Operating Partnership) plus 1.375% and matures in November 1996
unless extended by the parties. The Line of Credit currently bears interest at a
weighted average rate equal to approximately 6.86% per annum. As of August 1,
1996, $113 million was outstanding under the Line of Credit.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the Operating Partnership's ratio of
earnings to fixed charges for the periods shown.
<TABLE>
<CAPTION>
For the Years Ended December 31,
For the Quarter Ended For the Quarter Ended --------------------------------------------
March 31, 1996 March 31, 1995 1995 1994 1993 1992 1991
--------------------- --------------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
1.53 1.65 1.54 2.18 1.25 .91 .82
</TABLE>
Ratio of earnings to fixed charges represents income (loss) before
extraordinary items plus fixed charges (principally interest expense incurred)
to fixed charges.
S-5
<PAGE>
BUSINESS AND PROPERTIES
The Operating Partnership is managed by the Company which was formed in
1993. The Company is a self-administered and self-managed equity REIT
established to continue the multifamily property business objectives and
acquisition strategies of certain affiliated entities controlled by Mr. Zell,
Chairman of the Board of Trustees of the Company. These entities had been
engaged in the multifamily property business since 1969. The Operating
Partnership is a fully integrated real estate concern that acquires, improves,
operates and manages its Properties. The Operating Partnership has benefited,
and expects to benefit, from the following elements:
DIVERSIFIED PORTFOLIO
As of August 1, 1996, the Operating Partnership's portfolio of 219
Properties containing 65,640 apartment units located in 30 states is the largest
multifamily property portfolio controlled by a publicly traded REIT (based on
the number of apartment units owned and total revenues earned). No single
Property represents more than 2.16% of the Operating Partnership's total
apartment units. The distribution of the Properties throughout the United States
reflects the Operating Partnership's belief that geographic diversification
helps insulate the portfolio from regional and economic influences. At the same
time, the Operating Partnership has sought to create clusters of Properties
within each of its primary markets to achieve economies of scale in management
and operation; the Operating Partnership has established Regional Operations
Centers in Chicago, Illinois; Tampa, Florida; Dallas, Texas; Denver, Colorado;
Seattle, Washington; and Washington, D.C. and area offices in Atlanta, Georgia;
Las Vegas, Nevada; Phoenix, Arizona; Portland, Oregon; San Antonio, Texas;
Irvine, California; Raleigh, North Carolina; and Ft. Lauderdale, Florida.
EXPERIENCED MANAGEMENT
The Company's senior executives average over 23 years of experience in the
multifamily property business. The Operating Partnership has a fully integrated
management team: an Acquisitions Department that is dedicated exclusively to
the property acquisition function and is in constant contact with principals and
brokers nationwide; an Asset Management Department that establishes strategic
plans with respect to the portfolio including the development and implementation
of long-term business plans, asset financings, property repositionings,
expansions, and property disposition decisions; a Property Management Department
that aggressively manages the portfolio through significant interaction with on-
site property managers at each Property; an Accounting and Finance Department
that maintains the books and records of the Properties and generates timely
financial reports; a Capital Markets Department which manages investor relations
and capital raising; and a Legal Department which oversees all of the legal
affairs of the Operating Partnership.
SOPHISTICATED MANAGEMENT INFORMATION SYSTEMS
The Operating Partnership makes extensive use of management information
systems. On-site computers at every Property are capable of compiling and
forwarding to the Operating Partnership's Regional Operations Centers on a daily
basis numerous standardized reports including daily occupancy, lease expiration
and renewals, prospective tenants and rental rate information. Quality controls
are assured with the Operating Partnership's practice of (i) conducting resident
satisfaction surveys, (ii) surveying residents that move out of the Properties,
and (iii) surveying prospective tenants who select alternative housing.
THE PROPERTIES
As of August 1, 1996, the Operating Partnership controlled 219 Properties
located in 30 states containing 65,640 apartment units with the largest having
1,420 units and the smallest having 40 units. The average number of units per
Property is approximately 300. The units are typically contained in a series of
two-story buildings. The Properties average unit size is 882 square feet. As
of August 1, 1996, the Properties had an average occupancy rate of approximately
94%. Tenant leases are generally year-to-year and require security deposits.
The Properties typically provide residents with attractive amenities, including
a clubhouse, swimming pool, laundry facilities and cable television access.
Certain Properties offer additional amenities such as saunas, whirlpools, spas,
sports courts and exercise rooms.
S-6
<PAGE>
The following chart sets forth certain information regarding the Properties
on a state by state basis.
PROPERTIES BY STATE
(AS OF AUGUST 1, 1996)
<TABLE>
<CAPTION>
STATE NUMBER OF PROPERTIES NUMBER OF UNITS % OF UNITS IN PORTFOLIO
- ---------------- -------------------- --------------- ------------------------
<S> <C> <C> <C>
Arizona 16 4,955 7.55%
Arkansas 4 1,039 1.58%
California 30 7,389 11.26%
Colorado 8 1,749 2.66%
Florida 23 5,793 8.83%
Georgia 13 3,454 5.26%
Idaho 1 120 0.18%
Illinois 3 2,032 3.10%
Indiana 1 272 0.41%
Iowa 1 186 0.28%
Kansas 4 1,678 2.56%
Kentucky 5 1,327 2.02%
Louisiana 1 200 0.30%
Maryland 12 3,753 5.72%
Michigan 5 2,406 3.67%
Missouri 1 388 0.59%
Nevada 8 2,313 3.52%
New Hampshire 1 390 0.59%
New Jersey 1 704 1.07%
New Mexico 3 601 0.92%
North Carolina 10 2,746 4.18%
Ohio 4 2,083 3.17%
Oklahoma 5 1,140 1.74%
Oregon 6 1,868 2.85%
Pennsylvania 2 558 0.85%
South Carolina 1 211 0.32%
Tennessee 2 682 1.04%
Texas 27 9,830 14.98%
Virginia 6 2,103 3.20%
Washington 15 3,670 5.59%
--- ------ ------
TOTAL 219 65,640 100.00%
=== ====== ======
</TABLE>
For additional information with respect to the Properties, see the Form
10-K for the year ended December 31, 1995 incorporated by reference into the
accompanying Prospectus.
S-7
<PAGE>
SELECTED FINANCIAL AND OPERATING INFORMATION
The following table sets forth selected financial and operating information
on a historical basis for the Operating Partnership. The following information
should be read in conjunction with all of the financial statements and notes
thereto included in the Quarterly Report on Form 10-Q for the quarter ended
March 31, 1996 and the Annual Report on Form 10-K for the year ended December
31, 1995, which documents are incorporated by reference into the accompanying
Prospectus. In the opinion of management, the operating data for the periods
presented include all adjustments (consisting only of normal recurring
adjustments) necessary to present fairly the information set forth therein.
ERP OPERATING LIMITED PARTNERSHIP
CONSOLIDATED HISTORICAL FINANCIAL INFORMATION
(AMOUNTS IN THOUSANDS EXCEPT PER PARTNERSHIP INTEREST DATA)
<TABLE>
<CAPTION>
Three Months Ended
March 31, Year Ended December 31,
-------------------- ----------------------------------
1996 (1) 1995 1995(1) 1994 1993
---------- -------- ------------ --------- ---------
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
REVENUES
Rental income $101,443 $ 89,426 $372,447 $220,727 $104,388
Fee and asset management 1,545 1,862 7,030 4,739 4,651
Interest income-investment
in mortgage notes 2,710 -- 4,862 -- --
623 594 4,573 5,568 3,031
Interest and other income -------- -------- -------- -------- --------
106,321 91,882 388,912 231,034 112,070
Total revenues -------- -------- -------- -------- --------
EXPENSES
Property and maintenance 28,666 25,248 110,714 66,534 35,324
Real estate taxes and insurance 10,279 9,290 37,002 23,028 11,403
Property management 4,435 4,020 15,213 10,249 4,938
Property management-non-recurring -- -- -- 879 --
Fee and asset management 1,106 986 3,887 2,056 2,242
Depreciation 20,616 16,609 72,410 37,273 15,384
Interest:
Expense incurred 18,241 19,565 78,375 37,044 26,042
Amortization of deferred
financing costs 944 786 3,444 1,930 3,322
Refinancing costs -- -- -- -- 3,284
General and administrative(2) 2,079 2,158 8,129 6,053 1,994
-------- -------- -------- -------- --------
Total expenses 86,366 78,662 329,174 185,046 103,933
-------- -------- -------- -------- --------
Income before gain on dispo-
sition of properties and
extraordinary items 19,955 13,220 59,738 45,988 8,137
Gain on disposition of properties 1,340 -- 21,617 -- --
-------- -------- -------- -------- --------
Income before extraordinary
items 21,295 13,220 81,355 45,988 8,137
Extraordinary items:
Gain on early extinguishment
of debt -- -- 2,000 -- --
Gain on discharge of indebtedness -- -- -- -- 1,792
-------- -------- -------- -------- --------
Net income $ 21,295 $ 13,220 $ 83,355 $ 45,988 $ 9,929
Net income per weighted average ======== ======== ======== ======== ========
partnership interest outstanding
$ .32 $ .30 $ 1.68 $ 1.34 $ .43
Weighted average partnership
interests outstanding 46,210 42,414 42,749 34,150 22,939
</TABLE>
S-8
<PAGE>
<TABLE>
<CAPTION>
At March 31, at December 31,
---------------------------- ---------------------------------------
1996(1) 1995 1995(1) 1994 1993
----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Real estate, before accumulated
depreciation $ 2,305,972 $ 1,987,060 $ 2,186,636 $ 1,963,476 $ 634,577
Real estate, after accumulated
depreciation $ 2,070,761 $ 1,811,685 $ 1,969,453 $ 1,770,735 $ 478,210
Total assets $ 2,217,506 $ 1,875,773 $ 2,141,260 $ 1,847,685 $ 535,914
Total debt $ 964,037 $ 1,029,418 $ 1,002,219 $ 994,746 $ 278,642
Redeemable Preference Interests $ -- $ 25,750 $ 24,578 $ 26,001 $ --
9 3/8% Series A Cumulative
Redeemable Preference Units $ 153,000 $ -- $ 153,000 $ -- $ --
9 1/8% Series B Cumulative
Redeemable Preference Units $ 125,000 $ -- $ 125,000 $ -- $ --
Partners' capital $ 880,489 $ 752,163 $ 750,902 $ 761,373 $ 229,644
</TABLE>
_________________________
(1) Pro forma financial information relating to the acquisition or probable
acquisition of certain multifamily properties for this period is presented
in the Current Report on Form 8-K, dated May 23, 1996, of the Operating
Partnership, which document is incorporated by reference into the
accompanying Prospectus.
(2) General and administrative includes corporate expenses.
S-9
<PAGE>
DESCRIPTION OF THE NOTES
The Notes constitute a separate series of securities (which are more fully
described in the accompanying Prospectus) to be issued pursuant to an indenture,
dated as of October 1, 1994 (the "Indenture") between the Operating Partnership
and The First National Bank of Chicago, as trustee (the "Trustee"). The terms of
the Notes include those provisions contained in the Indenture and those made
part of the Indenture by reference to the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act"). The following description of the particular
terms of the Notes offered hereby (referred to herein as the "Notes" and in the
Prospectus as the "Debt Securities") supplements, and to the extent inconsistent
therewith, replaces, the description of the general terms and provisions of the
Debt Securities set forth in the Prospectus, to which description reference is
hereby made. The following summary of the Notes is qualified in its entirety by
reference to the Indenture referred to in the Prospectus. Capitalized terms used
but not defined herein shall have the meanings ascribed to them in the
Prospectus or the Indenture, as the case may be.
GENERAL
The Notes will be limited to $150,000,000 in aggregate principal amount. The
Notes will be issued in denominations of $1,000 and integral multiples of
$1,000, will bear interest from August ___, 1996 at the annual rate set forth on
the cover page of this Prospectus Supplement, and will mature on August __, 2026
(the "Maturity Date"). Interest will be payable semi-annually in arrears on
February __ and August __, commencing February __, 1997 (each, an "Interest
Payment Date"), to the persons in whose names the Notes are registered at the
close of business on the preceding January __ or July __, respectively.
The Notes will be direct, unsecured obligations of the Operating Partnership
and will rank equally with all other unsecured and unsubordinated indebtedness
of the Operating Partnership from time to time outstanding. The Notes will be
effectively subordinated to the prior claims of each secured mortgage lender to
any specific Property which secures such lender's mortgage. As of March 31,
1996, such mortgages aggregated approximately $588 million. As of March 31,
1996, the outstanding indebtedness of the Operating Partnership with which the
Notes will rank pari passu was approximately $376 million. As of March 31, 1996,
the Operating Partnership's total debt was approximately $964 million, and on a
pro forma basis giving effect to this Offering, the total outstanding
indebtedness of the Operating Partnership and its Subsidiaries was approximately
$1.1 billion. Subject to certain limitations set forth in the Indenture, and as
described under "Certain Covenants--Limitations on Incurrence of Indebtedness"
in the accompanying Prospectus, the Indenture will permit the Operating
Partnership to incur additional secured and unsecured indebtedness.
If any Interest Payment Date or the Maturity Date falls on a day that is not a
Business Day, the required payment shall be made on the next Business Day as if
it were made on the date such payment was due and no interest shall accrue on
the amount so payable for the period from and after such Interest Payment Date
or the Maturity Date, as the case may be. "Business Day" means any day, other
than a Saturday or Sunday, on which banking institutions in The City of New York
are open for business.
The Notes will be issued only in fully registered, book-entry form. See "--
Book Entry System" below.
The Notes will not be subject to a sinking fund.
Reference is made to the section entitled "Certain Covenants" in the
accompanying Prospectus for a description of the covenants applicable to the
Notes. In addition, the Operating Partnership is required to maintain Total
Unencumbered Assets of not less than 150% of the aggregate outstanding principal
amount of the Unsecured Debt of the Operating Partnership.
Compliance with such covenants with respect to the Notes generally may not be
waived by the Board of Trustees of the Company, as general partner of the
Operating Partnership, or the Trustee unless the Holders of at least a majority
in principal amount of all outstanding Notes of such series consent to such
waiver; provided, however, that the defeasance and covenant defeasance
provisions of the Indenture described under "Description of Debt Securities--
Discharge, Defeasance and Covenant Defeasance" in the accompanying Prospectus
will apply to the Notes.
Except as described herein or under "Certain Covenants--Limitations on
Incurrence of Indebtedness" and under "Merger, Consolidation or Sale" in the
accompanying Prospectus, the Indenture does not contain any other provisions
that would limit the ability of the Operating Partnership to incur indebtedness
or that would afford Holders of the Notes protection in the event of (i) a
highly leveraged or similar transaction involving the Operating Partnership, the
general partner of the Operating Partnership, or any Affiliate of either such
party, (ii) a change of control, or (iii) a reorganization, restructuring,
merger or similar transaction involving the Operating Partnership that may
adversely affect the Holders of the Notes. In addition, subject to the
limitations set
S-10
<PAGE>
forth under "Merger, Consolidation or Sale" in the accompanying Prospectus, the
Operating Partnership may, in the future, enter into certain transactions such
as the sale of all or substantially all of its assets or the merger or
consolidation of the Operating Partnership that would increase the amount of the
Operating Partnership's indebtedness or substantially reduce or eliminate the
Operating Partnership's assets, which may have an adverse effect on the
Operating Partnership's ability to service its indebtedness, including the
Notes.
The Operating Partnership and its management have no present intention of
engaging in a highly leveraged or similar transaction involving the Operating
Partnership.
As used herein,
"Make-Whole Amount" means, in connection with any optional redemption or
accelerated payment of any Note, the excess, if any, of (i) the aggregate
present value as of the date of such redemption or accelerated payment of each
dollar of principal being redeemed or paid and the amount of interest (exclusive
of interest accrued to the date of redemption or accelerated payment) that would
have been payable in respect of such dollar if such redemption or accelerated
payment had not been made, determined by discounting, on a semiannual basis,
such principal and interest at the Reinvestment Rate (determined on the third
Business Day preceding the date such notice of redemption is given or
declaration of acceleration is made) from the respective dates on which such
principal and interest would have been payable if such redemption or accelerated
payment had not been made, over (ii) the aggregate principal amount of the Notes
being redeemed or paid.
"Reinvestment Rate" means .25% (one-fourth of one percent) plus the arithmetic
means of the yields under the respective heading "Week Ending" published in the
most recent Statistical Release under the caption "Treasury Constant Maturities"
for the maturity (rounded to the nearest month) corresponding to the remaining
life to maturity, as of the payment date of the principal being redeemed or
paid. If no maturity exactly corresponds to such maturity, yields for the two
published maturities most closely corresponding to such maturity shall be
calculated pursuant to the immediately preceding sentence and the Reinvestment
Rate shall be interpolated or extrapolated from such yields on a straight-line
basis, rounding in each of such relevant periods to the nearest month. For the
purposes of calculating the Reinvestment Rate, the most recent Statistical
Release published prior to the date of determination of the Make-Whole Amount
shall be used.
"Statistical Release" means the statistical release designated "H.15(519)" or
any successor publication which is published weekly by the Federal Reserve
System and which establishes yields on actively traded United States government
securities adjusted to constant maturities, or, if such statistical release is
not published at the time of any determination under the Indenture, then such
other reasonably comparable index which shall be designated by the Operating
Partnership.
"Total Unencumbered Assets" means the sum of (i) those Undepreciated Real
Estate Assets not subject to an encumbrance and (ii) all other assets of the
Operating Partnership and its Subsidiaries not subject to an encumbrance
determined in accordance with GAAP (but excluding accounts receivable and
intangibles).
"Undepreciated Real Estate Assets" as of any date means the cost (original
cost plus capital improvements) of real estate assets of the Operating
Partnership and its Subsidiaries on such date, before depreciation and
amortization determined on a consolidated basis in accordance with GAAP.
"Unsecured Debt" means Debt of the Operating Partnership or any Subsidiary
which is not secured by any mortgage, lien, charge, pledge or security interest
of any kind upon any of the Properties.
REPAYMENT AT THE OPTION OF HOLDERS
The Notes may be repaid on August __, 2006 (the "Option Payment Date"), at the
option of the registered Holders at 100% of their principal amount together with
accrued interest to August __, 2006. In order for a Holder to exercise this
option, the Operating Partnership must receive at its office or agency in New
York, New York, during the period beginning on June __, 2006, and ending at 5:00
p.m. (New York City time) on July __, 2006 (or, if July __, 2006, is not a
Business Day, the next succeeding Business Day), the Note with the form entitled
"Option to Elect Repayment on August __, 2006" on the Note duly completed. Any
such notice received by the Operating Partnership during the period beginning on
June __, 2006, and ending at 5:00 p.m. (New York City time) on July __, 2006,
shall be irrevocable. The repayment option may be exercised for less than the
entire principal amount of the Notes held by each such Holder, so long as the
principal amount that is to be repaid is equal to $1,000 or an integral multiple
of $1,000. All questions as to the validity, form, eligibility (including time
of receipt) and
S-11
<PAGE>
acceptance of any Note for repayment will be determined by the Operating
Partnership, whose determination will be final and binding.
Failure by the Operating Partnership to repay the Notes when required as
described in the preceding paragraph will result in an Event of Default under
the Indenture.
As described below under "-- Book Entry System," the Notes will be registered
in the name of DTC or its nominee, which will be the Holder thereof entitled to
exercise the repayment option. In order to ensure that DTC or its nominee will
exercise such option in a timely manner with respect to a particular Note, the
beneficial owner of an interest in such Note must instruct the broker or other
Participant (as defined below) through which it holds an interest in such Note
to notify DTC or its nominee of its desire to exercise such option. Different
Participants have different cut-off times for accepting instructions from their
customers and, accordingly, each such beneficial owner should consult the
Participant through which it holds an interest in the Notes to ascertain the
cut-off time by which such an instruction must be given for timely notice to be
delivered to DTC or its nominee.
OPTIONAL REDEMPTION BY THE OPERATING PARTNERSHIP
The Operating Partnership may redeem the Notes, at any time after the Option
Payment Date, in whole or from time to time in part, at the election of the
Operating Partnership, at a redemption price equal to the sum of (i) the
principal amount of the Notes being redeemed plus accrued interest thereon to
the redemption date and (ii) the Make-Whole Amount, if any, with respect to such
Notes (the "Redemption Price"). Notice of any optional redemption of any Notes
will be given to Holders at their addresses, as shown in the Security Register,
not more than 60 nor less than 30 days prior to the date fixed for redemption.
The notice of redemption will specify, among other items, the Redemption Price
and the principal amount of the Notes held by such Holder to be redeemed.
DEFEASANCE
The Notes will be subject to defeasance and discharge and to defeasance of
certain obligations as described under "Description of Debt Securities"
Discharge, Defeasance, and Covenant Defeasance" in the Prospectus.
BOOK ENTRY SYSTEM
The following are summaries of certain rules and operating procedures of DTC
that affect the payment of principal and interest and transfers of interests in
the Global Security. Upon issuance, the Notes will only be issued in the form of
a Global Security which will be deposited with, or on behalf of, DTC and
registered in the name of Cede & Co., as nominee of DTC. Unless and until it is
exchanged in whole or in part for Notes in definitive form under the limited
circumstances described below, the Global Security may not be transferred except
as a whole (i) by DTC to a nominee of DTC, (ii) by a nominee of DTC to DTC or
another nominee of DTC, or (iii) by DTC or any such nominee to a successor of
DTC or a nominee of such successor.
Ownership of beneficial interests in the Global Security will be limited to
persons that have accounts with DTC for the Global Security ("Participants") or
persons that may hold interests through Participants. Upon the issuance of the
Global Security, DTC will credit, on its book-entry registration and transfer
system, the Participants' accounts with the respective principal amounts of the
Notes represented by the Global Security beneficially owned by such
Participants. Ownership of beneficial interests in the Global Security will be
shown on, and the transfer of such ownership interests will be effected only
through, records maintained by DTC (with respect to interests of Participants)
and on the records of Participants (with respect to interests of persons holding
through Participants). The laws of some states may require that certain
purchasers of securities take physical delivery of such securities in definitive
form. Such limits and such laws may impair the ability to own, transfer, or
pledge beneficial interests in the Global Security.
So long as DTC or its nominee is the registered owner of the Global Security,
DTC or such nominee, as the case may be, will be considered the sole owner or
holder of the Notes represented by the Global Security for all purposes under
the Indenture. Except as set forth below, owners of beneficial interests in the
Global Security will not be entitled to have the interests represented by the
Global Security registered in their names, will not receive or be entitled to
receive physical delivery of the Notes in definitive form, and will not be
considered the owners or holders thereof under the Indenture. Accordingly, each
person owning a beneficial interest in the Global Security must rely on the
procedures of DTC and, if such person is not a Participant, on the procedures of
the Participant through which such person owns its interest, to exercise any
rights of a holder under the Indenture. The Operating Partnership understands
that under existing industry practices, if the Operating Partnership requests
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<PAGE>
any action of holders or if an owner of a beneficial interest in the Global
Security desires to give or take any action that a holder is entitled to give or
take under the Indenture, DTC would authorize the Participants holding the
relevant beneficial interests to give or take such action, and such Participants
would authorize beneficial owners owning through such Participants to give or
take such action or would otherwise act upon the instructions of beneficial
owners holding through them.
Principal and interest payments on interests represented by the Global
Security will be made to DTC or its nominee, as the case may be, as the
registered owner of the Global Security. None of the Operating Partnership, the
Trustee, or any other agent of the Operating Partnership or agent of the Trustee
will have any responsibility or liability for any aspect of the records relating
to or payments made on account of beneficial ownership interests in the Global
Security or for maintaining, supervising, or reviewing any records relating to
such beneficial ownership interests.
The Operating Partnership expects that DTC, upon receipt of any payment of
principal or interest in respect of the Global Security, will immediately credit
Participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the Global Security as shown on the records
of DTC. The Operating Partnership also expects that payments by Participants to
owners of beneficial interests in the Global Security held through such
Participants will be governed by standing customer instructions and customary
practices, as is now the case with the securities held for the accounts of
customers in bearer form or registered in "street name," and will be the
responsibility of such Participants.
If DTC is at any time unwilling or unable to continue as depository for the
Notes and the Operating Partnership fails to appoint a successor depository
registered as a clearing agency under the Exchange Act within 90 days, the
Operating Partnership will issue the Notes in definitive form in exchange for
the Global Security. Any Notes issued in definitive form in exchange for the
Global Security will be registered in such name or names, and will be issued in
denominations of $1,000 and such integral multiples thereof, as DTC shall
instruct the Trustee. It is expected that such instructions will be based upon
directions received by DTC from Participants with respect to ownership of
beneficial interests in the Global Security.
DTC has advised the Operating Partnership of the following information
regarding DTC. DTC is a limited-purpose trust company organized under the
Banking Law of the State of New York, a member of the Federal Reserve System, a
"clearing corporation" within the meaning of the New York Uniform Commercial
Code, and a "clearing agency" registered pursuant to the provisions of Section
17A of the Exchange Act. DTC was created to hold securities of its Participants
and to facilitate the clearance and settlement of transactions among its
Participants in such securities through electronic book-entry changes in
accounts of the Participants, thereby eliminating the need for physical movement
of securities certificates. DTC's Participants include securities brokers and
dealers, banks, trust companies, clearing corporations, and certain other
organizations, some of which (and/or their representatives) own DTC. Access to
DTC book-entry system is also available to others, such as banks, brokers,
dealers, and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly.
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for the Notes will be made by the Underwriters (as defined herein)
in immediately available funds. All payments of principal and interest in
respect of the Notes will be made by the Operating Partnership in immediately
available funds. Secondary trading in long-term notes and debentures of
corporate issuers is generally settled in clearing house or next-day funds. In
contrast, the Notes will trade in DTC's Same-Day Funds Settlement System until
maturity or until the Notes are issued in certificated form, and secondary
market trading activity in the Notes will therefore be required by DTC to settle
in immediately available funds. No assurance can be given as to the effect, if
any, of settlement in immediately available funds on trading activity in the
Notes.
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<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the Terms Agreement
incorporating by reference the related Purchase Agreement (collectively, the
"Purchase Agreement"), the Operating Partnership has agreed to sell to the
several Underwriters named below (the "Underwriters"), and the Underwriters have
severally agreed to purchase, the respective principal amounts of Notes set
forth opposite their names below. The Purchase Agreement provides that the
obligations of the Underwriters are subject to certain conditions precedent and
that the Underwriters will be obligated to purchase all of the Notes if any are
purchased.
<TABLE>
<CAPTION>
Principal
Underwriter Amount
- --------------------------------------- -------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.............. $
Alex. Brown & Sons
Incorporated....................
J. P. Morgan & Co.....................
------------
Total.................. $150,000,000
============
</TABLE>
The Purchase Agreement provides that the Underwriters are obligated to
purchase all of the Notes if any are purchased.
The Operating Partnership has been advised by the Underwriters that the
Underwriters propose to offer the Notes to the public at the offering price set
forth on the cover page of this Prospectus Supplement, and to certain dealers at
such price less a concession not in excess of . % of the principal amount
thereof, and that the Underwriters may allow, and such dealers may reallow, a
discount not in excess of . % of the principal amount to other dealers. The
public offering price and the concession and discount to dealers may be changed
after the initial public offering.
The Notes are a new issue of securities with no established trading market.
The Operating Partnership does not intend to apply for listing of the Notes on a
national securities exchange. The Operating Partnership has been advised by the
Underwriters that they intend to make a market in the Notes, but are not
obligated to do so and may discontinue any market making at any time without
notice. No assurance can be given as to the liquidity of the trading market for
the Notes.
The Operating Partnership has agreed to indemnify the Underwriters against
certain liabilities, including civil liabilities under the Securities Act of
1933, as amended, or to contribute to payments the Underwriters may be required
to make in respect thereof.
Merrill Lynch from time to time provides investment banking and financial
advisory services to the Operating Partnership and other entities owned or
controlled by Mr. Zell, and affiliates of Merrill Lynch from time to time
provide financing to such entities.
Merrill Lynch owns indirectly an approximate 2.28% economic interest in
Zell/Merrill Lynch Real Estate Opportunity Partners Limited Partnership
("Zell/Merrill I") and an approximate 1.45% economic interest in Zell/Merrill
Lynch Real Estate Opportunity Partners Limited Partnership II ("Zell/Merrill
II") which are limited partnerships that invest in, among other things,
multifamily properties. Mr. Zell and trusts for the benefit of the family of
Robert Lurie, a deceased partner of Mr. Zell (the "Lurie Family Trusts"), own
indirectly an approximate 5.33% economic interest in Zell/Merrill I and an
approximate 2.28% economic interest in Zell/Merrill II. Subject to Mr. Zell's
obligations under the noncompetition agreement entered into with the Company,
Mr. Zell and Merrill Lynch engaged in the promotion of Zell/Merrill Lynch Real
Estate Opportunity Partners Limited Partnership III ("Zell/Merrill III"), in
which Merrill Lynch owns indirectly an approximate .37% economic interest and
Mr. Zell and the Lurie Family Trusts own indirectly an approximate 2.09%
economic interest, and in the promotion of Zell/Merrill Lynch Real Estate
Opportunity Partners Limited Partnership IV ("Zell/Merrill IV"), in which
Merrill Lynch owns indirectly an approximate .42% economic interest and Mr. Zell
and the Lurie Family Trusts own indirectly an approximate 4.21% economic
interest. Zell/Merrill III and Zell/Merrill IV primarily invest in office
properties, but may invest in multifamily properties.
The Operating Partnership has purchased and may purchase multifamily
properties from affiliates of Merrill Lynch in the future.
S-14
<PAGE>
EXPERTS
The Consolidated and Combined Financial Statements incorporated in the
Prospectus attached hereto by reference to the Operating Partnership's Annual
Report on Form 10-K for the year ended December 31, 1995 have been so
incorporated in reliance on the reports of Grant Thornton LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting. The Combined Statement of Revenue and Certain Expenses of the 1996
Acquired Properties and Probable Properties for the year ended December 31,
1995, as set forth in the Operating Partnership's Current Report on Form 8-K,
dated May 23, 1996, has been audited by Ernst & Young LLP, independent auditors,
as set forth in their report thereon included therein and incorporated in the
Prospectus attached hereto by reference. Such combined financial statement is
incorporated therein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
LEGAL MATTERS
The legality of the Notes offered hereby will be passed upon for the Operating
Partnership by Rosenberg & Liebentritt, P.C., Chicago, Illinois and certain
legal matters will be passed upon for the Underwriters by Hogan & Hartson
L.L.P., Washington, D.C. Hogan & Hartson L.L.P. from time to time provides
services to the Operating Partnership and other entities controlled by Mr. Zell.
S-15
<PAGE>
PROSPECTUS
- ----------
$500,000,000
ERP OPERATING LIMITED PARTNERSHIP
DEBT SECURITIES
---------------
ERP Operating Limited Partnership (the "Operating Partnership") may from
time to time offer in one or more series its unsecured senior debt securities
(the "Debt Securities"), in an aggregate principal amount of up to $500,000,000,
on terms to be determined at the time of offering. The Debt Securities may be
offered by the Operating Partnership in separate series, in amounts, at prices
and on terms to be set forth in a supplement to this Prospectus (a "Prospectus
Supplement").
The specific terms of the Debt Securities in respect of which this
Prospectus is being delivered will be set forth in the applicable Prospectus
Supplement and will include the specific title, aggregate principal amount,
currency, form (which may be registered or bearer, or certificated or global),
authorized denominations, maturity, rate (or manner of calculation thereof) and
time of payment of interest, terms for redemption at the option of the Operating
Partnership or repayment at the option of the Holder, terms for sinking fund
payments, covenants and any initial public offering price.
The applicable Prospectus Supplement will also contain information, where
applicable, about certain United States federal income tax considerations
relating to, and any listing on a securities exchange of, the Debt Securities
covered by such Prospectus Supplement.
The Debt Securities may be offered directly, through agents designated from
time to time by the Operating Partnership, or to or through underwriters or
dealers. If any agents or underwriters are involved in the sale of any of the
Debt Securities, their names, and any applicable purchase price, fee, commission
or discount arrangement between or among them, will be set forth or will be
calculable from the information set forth in the applicable Prospectus
Supplement. See "Plan of Distribution." No Debt Securities may be sold without
delivery of the applicable Prospectus Supplement describing the method and terms
of the offering of such Debt Securities.
--------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
-------------
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED
ON OR ENDORSED THE MERITS OF THIS OFFERING. ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
-------------
The date of this Prospectus is December 13, 1994.
<PAGE>
AVAILABLE INFORMATION
Upon effectiveness of its Registration Statement on the General Form for
Registration of Securities on Form 10, as amended ("Form 10"), the Operating
Partnership will be subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith will file reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). The Registration
Statement, the exhibits and schedules forming a part thereof and the reports,
proxy statements and other information filed by the Operating Partnership with
the Commission in accordance with the Exchange Act can be inspected and copied
at the Commission's Public Reference Section, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the following regional offices of the Commission:
Seven World Trade Center, 13th Floor, New York, New York 10048 and 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such
material can be obtained from the Public Reference Section of the Commission,
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.
The Operating Partnership has filed with the Commission a registration
statement (the "Registration Statement") (of which this Prospectus is a part)
under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to the Debt Securities offered hereby. For further information with
respect to the Operating Partnership and the Debt Securities offered hereby,
reference is made to the Registration Statement and exhibits thereto. This
Prospectus does not contain all of the information set forth in the Registration
Statement, certain portions of which have been omitted as permitted by the rules
and regulations of the Commission. Statements contained in this Prospectus as
to the contents of any contract or other document are not necessarily complete,
and in each instance reference is made to the copy of such contract or other
document filed as an exhibit to the Registration Statement, each such statement
being qualified in all respects by such reference and the exhibits and schedules
thereto. For further information regarding the Operating Partnership and the
Debt Securities, reference is hereby made to the Registration Statement and such
exhibits and schedules which may be obtained from the Commission at its
principal office in Washington, D.C. upon payment of the fees prescribed by the
Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Form 10 has been heretofore filed by the Operating Partnership with the
Commission and is incorporated herein by reference.
All documents filed by the Operating Partnership pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of the offering of the Debt Securities
shall be deemed to be incorporated by reference in this Prospectus and to be
part hereof from the date of filing such documents.
Any statement contained herein or in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
(or in the applicable Prospectus Supplement) or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
Copies of the Form 10 and all other documents which are incorporated herein
by reference (not including the exhibits to such information, unless such
exhibits are specifically incorporated by reference in such information) will be
provided without charge to each person, including any beneficial owner, to whom
this Prospectus is delivered upon written or oral request. Requests should be
directed to ERP Operating Limited Partnership, c/o Equity Residential Properties
Trust, Two North Riverside Plaza, Chicago, Illinois 60606, Attention: Cynthia
McHugh (telephone number: (312) 474-1300).
2
<PAGE>
THE OPERATING PARTNERSHIP
GENERAL
The Debt Securities offered hereby are being issued by the Operating
Partnership which is managed by its general partner, Equity Residential
Properties Trust (the "Company"). The Company is a self-administered and self-
managed equity real estate investment trust ("REIT"), which was formed to
continue the multifamily residential business objectives and acquisition
strategies of certain affiliated entities controlled by Mr. Samuel Zell,
Chairman of the Board of Trustees of the Company. These entities had been
engaged in the acquisition, ownership and operation of multifamily residential
properties since 1969. The Company controls a portfolio of 158 multifamily
residential properties (individually a "Property" and collectively the
"Properties") located throughout the United States containing 48,380 apartment
units. The Properties are located in the following 29 states: Arizona,
Arkansas, California, Colorado, Florida, Georgia, Idaho, Illinois, Indiana,
Iowa, Kansas, Kentucky, Louisiana, Maryland, Michigan, Missouri, Nevada, New
Hampshire, New Jersey, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania,
South Carolina, Tennessee, Texas, Virginia and Washington.
All of the Company's interests in the Properties are held directly or
indirectly by, and substantially all of its operations relating to the
Properties are conducted through the Operating Partnership. The Company
controls the Operating Partnership as the sole general partner and owner, as of
December 13, 1994, of approximately 80.1% of the Operating Partnership's
outstanding partnership interests ("OP Units"), which OP Units may be exchanged
by the holder thereof for common shares of beneficial interest, $.01 par value
per share ("Common Shares") on a one for one basis. With each such exchange,
the number of OP Units owned by the Company and, therefore, the Company's
percentage interest in the Operating Partnership, will increase.
A former partner of Mr. Zell has initiated legal proceedings against Mr.
Zell and various partnerships and corporations controlled by Mr. Zell, claiming
a partial interest in 20 of the Properties. The Operating Partnership has been
indemnified by affiliates of Mr. Zell against any actual losses and all legal
fees and expenses related to such proceedings. The Operating Partnership does
not believe that this litigation poses a material risk to the Operating
Partnership.
Based on industry sources, the Operating Partnership believes that it is
one of the largest public owners and operators of multifamily residential
properties in the United States (based on the number of apartment units owned
and total revenues earned). The Company's senior executives average over 22
years of experience in the multifamily residential property business.
The primary factors affecting investments in multifamily residential
properties include (i) the existing supply of properties, (ii) competition for
property acquisitions, (iii) the scarcity of capital for the construction of
additional properties, and (iv) the demand for multifamily residential housing.
According to data published by the National Association of Homebuilders in 1993,
since 1985, annual new construction starts of multifamily residential properties
have declined nationally by approximately 76%, while the number of household
formations has increased by an average of 1.3 million per annum. As a result of
these trends, rents and occupancy levels have been increasing since 1988 in a
number of the Operating Partnership's markets.
Since the Company's initial public offering of Common Shares in August,
1993 (the "IPO"), the Operating Partnership has acquired direct or indirect
interests in 85 Properties and the debt collateralized by four additional
Properties, containing 26,655 units in the aggregate for total purchase price of
approximately $1.3 billion, including the assumption of $334.1 million of
mortgage indebtedness.
3
<PAGE>
The Operating Partnership's executive offices are located at Two North
Riverside Plaza, Chicago, Illinois 60606, and its telephone number is
(312) 474-1300.
THE OPERATING SUBSIDIARIES
Essentially all operations of the Company are conducted directly or
indirectly by the Operating Partnership and those entities owned or controlled
by the Operating Partnership (collectively, the "Subsidiaries"), so that, among
other things, the Company is able to comply with certain technical and complex
requirements under the Federal tax law relating to the assets and income that a
REIT may hold or earn. In this regard, the Company has established: (i) the
Operating Partnership which benefited those entities that contributed certain of
the 69 Properties acquired by the Operating Partnership in connection with the
IPO in exchange for OP Units by allowing them to partially defer certain tax
consequences and which will allow the Operating Partnership to acquire
additional multifamily residential properties in transactions that may defer
some or all of the sellers' tax consequences, (ii) Equity Residential Properties
Management Limited Partnership and Equity Residential Properties Management
Limited Partnership II (collectively, the "Management Partnerships") to provide
management services because the income from such operations might jeopardize the
Company's REIT status if such services were provided directly by the Company or
the Operating Partnership, and (iii) a series of limited partnerships which own
the beneficial interest of certain of the Properties which are encumbered by
mortgage financing. The Operating Partnership and its Subsidiaries perform
substantially all ownership and management functions with respect to the
Properties, or the Operating Partnership has given notice to third party
managers of its intention to cancel such management contracts effective either
January 1, 1995 or February 1, 1995.
USE OF PROCEEDS
Unless otherwise indicated in the accompanying Prospectus Supplement, the
Operating Partnership intends to use the proceeds from the sale of the Debt
Securities for general purposes including, without limitation, the acquisition
of multifamily residential properties and the repayment of debt.
RATIOS OF EARNINGS TO FIXED CHARGES
The Operating Partnership's ratio of earnings to fixed charges for the nine
months ended September 30, 1994 was 2.34 and for the year ended December 31,
1993 was 1.25.
For purposes of computing these ratios, earnings have been calculated by
adding fixed charges to income (loss) before extraordinary items. Fixed charges
(as applicable) consist of interest costs, whether expensed or capitalized, the
interest component of rental expense, and amortization of debt discounts and
issue costs, whether expensed or capitalized.
Prior to completion of the IPO, certain of the predecessor entities to the
Operating Partnership operated in a highly leveraged manner. As a result,
although the Properties have historically generated positive net cash flow, the
combined financial statements of the predecessor entities show net losses for
the fiscal years ended December 31 1992, 1991, 1990 and 1989. Consequently, the
computation of the ratio of earnings to fixed charges for such periods indicates
that earnings were inadequate to cover fixed charges by approximately $3.3
million, S6.2 million, $12.2 million, and $16.8 million for the fiscal years
ended December 31, 1992, 1991, 1990 and 1989, respectively.
The reorganization and recapitalization of the Company effected in
connection with the IPO permitted the Operating Partnership to significantly
deleverage the Properties resulting in an improved ratio of earnings to fixed
charges for periods subsequent to the IPO.
4
<PAGE>
DESCRIPTION OF DEBT SECURITIES
The following description sets forth certain general terms and provisions
of the Debt Securities to which any Prospectus Supplement may relate. The
particular terms of the Debt Securities being offered and the extent to which
such general provisions may apply will be described in a Prospectus Supplement
relating to such Debt Securities.
The Debt Securities will be issued under an Indenture dated as of October
1, 1994, as amended or supplemented from time to time (the "Indenture"), between
the Operating Partnership and The First National Bank of Chicago, as trustee
(the "Trustee"). The Indenture has been filed as an exhibit to the Registration
Statement of which this Prospectus is a part and is available for inspection at
the corporate trust office of the Trustee at 14 Wall Street, Eighth Floor, New
York, New York or as described above under "Available Information." The
Indenture is subject to, and governed by, the Trust Indenture Act of 1939, as
amended (the "TIA"). The statements made hereunder relating to the Indenture
and the Debt Securities to be issued thereunder are summaries of certain
provisions thereof and do not purport to be complete and are subject to, and are
qualified in their entirety by reference to, all provisions of the Indenture and
such Debt Securities. All section references appearing herein are to sections
of the Indenture, and capitalized terms used but not defined herein shall have
the respective meanings set forth in the Indenture.
GENERAL
The Debt Securities will be direct, unsecured obligations of the Operating
Partnership and will rank equally with all other unsecured and unsubordinated
indebtedness of the Operating Partnership. Unless otherwise specified in the
applicable Prospectus Supplement, the Company has no obligation for payment of
principal of or interest on the Debt Securities. The Debt Securities may be
issued in one or more series, in each case as established from time to time in
or pursuant to authority granted by a resolution of the Board of Trustees of the
Company, as general partner of the Operating Partnership, or as established in
the Indenture or in one or more indentures supplemental to the Indenture. All
Debt Securities of one series need not be issued at the same time and, unless
otherwise provided, a series may be reopened, without the consent of the Holders
of the Debt Securities of such series, for issuances of additional Debt
Securities of such series (Section 301).
The Indenture provides that there may be more than one Trustee thereunder,
each with respect to one or more series of Debt Securities. Any Trustee under
the Indenture may resign or be removed with respect to one or more series of
Debt Securities, and a successor Trustee may be appointed to act with respect to
such series (Section 608). In the event that two or more persons are acting as
Trustee with respect to different series of Debt Securities, each such Trustee
shall be a Trustee of a trust under the applicable Indenture separate and apart
from the trust administered by any other Trustee (Section 609), and, except as
otherwise indicated herein, any action described herein to be taken by the
Trustee may be taken by each such Trustee with respect to, and only with respect
to, the one or more series of Debt Securities for which it is Trustee under the
Indenture.
Reference is made to the Prospectus Supplement relating to the series of
Debt Securities being offered for the specific terms thereof, including without
limitation:
(1) the title of such Debt Securities;
(2) the aggregate principal amount of such Debt Securities and any limit
on such aggregate principal amount;
(3) the percentage of the principal amount at which such Debt Securities
will be issued
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and, if other than the principal amount thereof, the portion of the
principal amount thereof payable upon declaration of acceleration of
the maturity thereof;
(4) the date or dates, or the method for determining such date or dates,
on which the principal of such Debt Securities will be payable;
(5) the rate or rates (which may be fixed or variable), or the method by
which such rate or rates shall be determined, at which such Debt
Securities will bear interest, if any;
(6) the date or dates, or the method for determining such date or dates,
from which any such interest will accrue, the Interest Payment Dates
on which any such interest will be payable, the Regular Record Dates
for such Interest Payment Dates, or the method by which such dates
shall be determined, the Person to whom such interest shall be
payable, and the basis upon which interest shall be calculated if
other than that of a 360-day year of twelve 30-day months;
(7) the place or places where the principal of (and premium, if any) and
interest, if any, on such Debt Securities will be payable, such Debt
Securities may be surrendered for conversion or registration of
transfer or exchange and notices or demands to or upon the Operating
Partnership in respect of such Debt Securities and the Indenture may
be served;
(8) the period or periods within which, the price or prices at which and
the terms and conditions upon which such Debt Securities may be
redeemed, in whole or in part, at the option of the Operating
Partnership, if the Operating Partnership is to have such an option;
(9) the obligation, if any, of the Operating Partnership to redeem, repay
or purchase such Debt Securities at the option of a Holder thereof,
and the period or periods within which, the price or prices as to
which and the terms and conditions upon which such Debt Securities
will be redeemed, repaid or purchased, in whole or in part, pursuant
to such obligation;
(10) if other than U.S. dollars, the currency or currencies in which such
Debt Securities are denominated and payable, which may be a foreign
currency or units of two or more foreign currencies or a composite
currency or currencies, and the terms and conditions relating thereto;
(11) whether the amount of payments of principal (and premium, if any) or
interest, if any, on such Debt Securities may be determined with
reference to an index, formula or other method (which index, formula
or other method may, but need not be, based on a currency, currencies,
currency unit or units or composite currency or currencies) and the
manner in which such amounts shall be determined;
(12) any additions to, modifications of or deletions from the terms of such
Debt Securities with respect to the Events of Default or covenants,
set forth in the Indenture;
(13) whether such Debt Securities will be issued in certificated or book-
entry form;
(14) whether such Debt Securities will be in registered or bearer form and,
if in registered form, the denominations thereof if other than $1,000
and any integral
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multiple thereof and, if in bearer form, the denominations thereof and
the terms and conditions relating thereto;
(15) the applicability, if any, of the defeasance and covenant defeasance
provisions of Article Fourteen of the Indenture;
(16) whether and under what circumstances the Operating Partnership will
pay Additional Amounts as contemplated in the Indenture in respect of
any tax, assessment or governmental charge and, if so, whether the
Operating Partnership will have the option to redeem such Debt
Securities in lieu of making such payment;
(17) any other terms of such Debt Securities not inconsistent with the
provisions of the Indenture (Section 301).
The Debt Securities may provide for less than the entire principal amount
thereof to be payable upon declaration of acceleration of the maturity thereof
("Original Issue Discount Securities"). Special U.S. federal income tax,
accounting and other considerations applicable to Original Issue Discount
Securities will be described in the applicable Prospectus Supplement.
Except as set forth below under "Certain Covenants--Limitations on
Incurrence of Debt," the Indenture does not contain any other provisions that
would limit the ability of the Operating Partnership to incur indebtedness or
that would afford Holders of Debt Securities protection in the event of a highly
leveraged or similar transaction involving the Operating Partnership or in the
event of a change of control. However, restrictions on ownership and transfers
of the Company's Common Shares and preferred shares of beneficial interest are
designed to preserve its status as a REIT and, therefore, may act to prevent or
hinder a change of control. Reference is made to the applicable Prospectus
Supplement for information with respect to any deletions from, modifications of
or additions to the Events of Default or covenants of the Operating Partnership
that are described below, including any addition of a covenant or other
provision providing event risk or similar protection.
DENOMINATIONS, INTEREST, REGISTRATION AND TRANSFER
Unless otherwise described in the applicable Prospectus Supplement, the
Registered Securities of any series will be issuable in denominations of $1,000
and integral multiples thereof (Section 302).
Unless otherwise specified in the applicable Prospectus Supplement, the
principal of (and premium, if any) and interest on any series of Debt Securities
will be payable at the corporate trust office of the Trustee, initially located
at 14 Wall Street, Eighth Floor, New York, New York; provided that, at the
option of the Operating Partnership, payment of interest may be made by check
mailed to the address of the Person entitled thereto as it appears in the
Security Register or by wire transfer of funds to such Person at an account
maintained within the United States (Sections 301, 305, 306, 307 and 1002).
Any interest not punctually paid or duly provided for on any Interest
Payment Date with respect to a Debt Security ("Defaulted Interest") will
forthwith cease to be payable to the Holder on the applicable Regular Record
Date and may either be paid to the person in whose name such Debt Security is
registered at the close of business on a special record date (the "Special
Record Date") for the payment of such Defaulted Interest to be fixed by the
Trustee, notice whereof shall be given to the Holder of such Debt Security not
less than 10 days prior to such Special Record Date, or may be paid at any time
in any other lawful manner, all as more completely described in the Indenture.
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Subject to certain limitations imposed upon Debt Securities issued in book-
entry form, the Debt Securities of any series will be exchangeable for other
Debt Securities of the same series and of a like aggregate principal amount and
tenor of different authorized denominations upon surrender of such Debt
Securities at the corporate trust office of the Trustee referred to above. In
addition, subject to certain limitations imposed upon Debt Securities issued in
book-entry form, the Debt Securities of any series may be surrendered for
conversion or registration of transfer or exchange thereof at the corporate
trust office of the Trustee. Every Debt Security surrendered for conversion,
registration of transfer or exchange shall be duly endorsed or accompanied by a
written instrument of transfer. No service charge will be made for any
registration of transfer or exchange of any Debt Securities, but the Operating
Partnership may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith (Section 305). If the
applicable Prospectus Supplement refers to any transfer agent (in addition to
the Trustee) initially designated by the Operating Partnership with respect to
any series of Debt Securities, the Operating Partnership may at any time rescind
the designation of any such transfer agent or approve a change in the location
through which any such transfer agent acts, except that the Operating
Partnership will be required to maintain a transfer agent in each Place of
Payment for such series. The Operating Partnership may at any time designate
additional transfer agents with respect to any series of Debt Securities
(Section 1002).
Neither the Operating Partnership nor the Trustee shall be required to (i)
issue, register the transfer of or exchange Debt Securities of any series during
a period beginning at the opening of business 15 days before any selection of
Debt Securities of that series to be redeemed and ending at the close of
business on the day of mailing of the relevant notice of redemption; (ii)
register the transfer of or exchange any Debt Security, or portion thereof,
called for redemption, except the unredeemed portion of any Debt Security being
redeemed in part; or (iii) issue, register the transfer of or exchange any Debt
Security which has been surrendered for repayment at the option of the Holder,
except the portion, if any, of such Debt Security not to be so repaid (Section
305).
MERGER, CONSOLIDATION OR SALE
The Operating Partnership may consolidate with, or sell, lease or convey
all or substantially all of its assets to, or merge with or into any other
entity, provided that (i) the Operating Partnership shall be the continuing
entity, or the successor entity shall be an entity organized and existing under
the laws of the United States or a state thereof and such successor entity shall
expressly assume payment of the principal of and premium (if any) and any
interest (including all Additional Amounts, if any, payable pursuant to Section
1012) on all of the Debt Securities and the due and punctual performance and
observance of all of the covenants and conditions contained in the Indenture;
(ii) immediately after giving effect to such transaction and treating any
indebtedness which becomes an obligation of the Operating Partnership or any
Subsidiary as a result thereof as having been incurred by the Operating
Partnership, or such Subsidiary at the time of such transaction, no Event of
Default under the Indenture, and no event which after notice or the lapse of
time, or both, would become such an Event of Default, shall have occurred and be
continuing; and (iii) an officer's certificate of the Company as general partner
of the Operating Partnership and legal opinion covering such conditions shall be
delivered to the Trustee (Sections 801 and 803).
CERTAIN COVENANTS
Limitations on Incurrence of Debt. The Operating Partnership will not, and
will not permit any Subsidiary to incur any Debt (as defined below), other than
intercompany Debt (representing Debt to which the only parties are the Company,
the Operating Partnership and any of its Subsidiaries, (but only so long as such
Debt is held solely by any of the Company, the Operating Partnership and any
Subsidiary) that is subordinate in right of payment of the Debt Securities, if,
immediately after giving effect to the incurrence of such additional Debt, the
aggregate principal amount of all outstanding Debt of the Operating Partnership
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and its Subsidiaries on a consolidated basis determined in accordance with
generally accepted accounting principles is greater than 60% of the sum of (i)
the Operating Partnership's Total Assets (as defined below) as of the end of the
calendar quarter covered in the Operating Partnership's Annual Report on Form
10-K or Quarterly Report on Form 10-Q, as the case may be, most recently filed
with the Commission (or, if such filing is not permitted under the Exchange Act,
with the Trustee) prior to the incurrence of such additional Debt and (ii) the
increase in Total Assets from the end of such quarter including, without
limitation, any increase in Total Assets caused by the incurrence of such
additional Debt (such increase together with the Company's Total Assets shall be
referred to as the "Adjusted Total Assets") (Section 1004).
In addition to the foregoing limitation on the incurrence of Debt, the
Operating Partnership will not and will not permit any Subsidiary to incur any
Debt if the ratio of Consolidated Income Available for Debt Service to the
Maximum Annual Service Charge for the four consecutive fiscal quarters most
recently ended prior to the date on which such additional Debt is to be incurred
shall have been less than 1.5 to 1, on a pro forma basis after giving effect to
the incurrence of such Debt and to the application of the proceeds therefrom,
and calculated on the assumption that (i) such Debt and any other Debt incurred
by the Operating Partnership or its Subsidiaries since the first day of such
four-quarter period and the application of the proceeds therefrom, including to
refinance other Debt, had occurred at the beginning of such period, (ii) the
repayment or retirement of any other Debt by the Operating Partnership or its
Subsidiaries since the first day of such four-quarter period had been incurred,
repaid or retired at the beginning of such period (except that, in making such
computation, the amount of Debt under any revolving credit facility shall be
computed based upon the average daily balance of such Debt during such period),
(iii) the income earned on any increase in Adjusted Total Assets since the end
of such four-quarter period had been earned, on an annualized basis, during such
period; and (iv) in the case of any acquisition or disposition by the Operating
Partnership or any Subsidiary of any asset or group of assets since the first
day of such four-quarter period, including, without limitation, by merger, stock
purchase or sale, or asset purchase or sale, such acquisition or disposition or
any related repayment of Debt had occurred as of the first day of such period
with the appropriate adjustments with respect to such acquisition or disposition
being included in such pro forma calculation (Section 1004).
In addition to the foregoing limitations on the incurrence of Debt, the
Operating Partnership will not, and will not permit any Subsidiary to incur any
Debt secured by any mortgage, lien, charge, pledge, encumbrance or security
interest of any kind upon any of the property of the Operating Partnership or
any Subsidiary ("Secured Debt"), whether owned at the date of the Indenture or
thereafter acquired, if, immediately after giving effect to the incurrence of
such additional Secured Debt, the aggregate principal amount of all outstanding
Secured Debt of the Operating Partnership and its Subsidiaries on a consolidated
basis is greater than 40% of the Adjusted Total Assets (Section 1004).
Notwithstanding the limitation set forth in the preceding paragraph, the
Indenture provides that the Operating Partnership and its Subsidiaries may incur
Secured Debt, provided that such Secured Debt is incurred under the Acquisition
Lines of Credit, and provided further that after the increase of such Secured
Debt under the Acquisition Lines of Credit, the aggregate principal amount of
all outstanding Secured Debt, including debt under the Acquisition Lines of
Credit of the Operating Partnership or any Subsidiary does not exceed 45% of the
Adjusted Total Assets; provided, however, that the aggregate principal amount of
all outstanding Secured Debt of the Operating Partnership and its Subsidiaries
on a consolidated basis may exceed 40% of the Adjusted Total Assets for not more
than 270 days of any consecutive 360 day period.
For purposes of the foregoing provisions regarding the limitation on the
incurrence of Debt, Debt shall be deemed to be "incurred" by the Operating
Partnership and its Subsidiaries on a consolidated basis whenever the Operating
Partnership and its Subsidiaries on a consolidated basis shall create, assume,
guarantee or otherwise become liable in respect thereof.
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Restrictions on Distributions. The Operating Partnership will not make any
distribution, by reduction of capital or otherwise (other than distributions
payable in securities evidencing interests in the Operating Partnership's
capital for the purpose of acquiring interests in real property or otherwise)
if, immediately after such distribution the aggregate of all such distributions
made since March 31, 1993 shall exceed Funds from Operations of the Operating
Partnership and its Subsidiaries from March 31, 1993 until the end of the
calendar quarter covered in the Operating Partnership's Annual Report on Form
10-K or Quarterly Report on Form 10-Q, as the case may be, most recently filed
with the Commission (or, if such filing is not permitted under the Exchange Act,
with the Trustee) prior to such distribution; provided, however, that the
foregoing limitation shall not apply to any distribution which is necessary to
maintain the Company's status as a REIT under the Internal Revenue Code of 1986,
as amended (the "Code"), if the aggregate principal amount of all outstanding
Debt of the Operating Partnership and its Subsidiaries on a consolidated basis
at such time is less than 60% of Adjusted Total Assets (Section 1005).
Notwithstanding the foregoing, the Operating Partnership will not be
prohibited from making the payment of any distribution within 30 days of the
declaration thereof if at such date of declaration such payment would have
complied with the provisions of the immediately preceding paragraph (Section
1005).
Existence. Except as permitted under "Merger, Consolidation or Sale," the
Operating Partnership will do or cause to be done all things necessary to
preserve and keep in full force and effect its existence, rights and franchises;
provided, however, that the Operating Partnership shall not be required to
preserve any right or franchise if it determines that the preservation thereof
is no longer desirable in the conduct of the business of the Operating
Partnership, and that the loss thereof is not disadvantageous in any material
respect to the Holders of the Debt Securities.
Maintenance of Properties. The Operating Partnership will cause all of its
properties used or useful in the conduct of its business or the business of any
Subsidiary to be maintained and kept in good condition, repair and working order
and supplied with all necessary equipment and will cause to be made all
necessary repairs, renewals, replacements, betterments and improvements thereof,
all as in the judgment of the Operating Partnership may be necessary so that the
business carried on in connection therewith may be properly and advantageously
conducted at all times; provided, however, that the Operating Partnership shall
not be prevented from selling or otherwise disposing for value its properties in
the ordinary course of business (Section 1007).
Insurance. The Operating Partnership will and will cause each of its
Subsidiaries to, keep all of its insurable properties insured against loss or
damage at least equal to their then fully insurable value with financially sound
and reputable insurance companies (Section 1008).
Payment of Taxes and Other Claims. The Operating Partnership will pay or
discharge or cause to be paid or discharged, before the same shall become
delinquent, (i) all taxes, assessments and governmental charges levied or
imposed upon it or any Subsidiary or upon the income, profits or property of the
Operating Partnership or any Subsidiary, and (ii) all lawful claims for labor,
materials and supplies which, if unpaid, might by law become a lien upon the
property of the Operating Partnership or any Subsidiary; provided, however, that
the Operating Partnership shall not be required to pay or discharge or cause to
be paid or discharged any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings (Section 1009).
Provision of Financial Information. The Holders of the Debt Securities
will be provided with copies of the annual reports and quarterly reports of the
Operating Partnership. Whether or not the Operating Partnership is subject to
Section 13 or 15(d) of the Exchange Act, the Operating Partnership will, to the
extent permitted under the Exchange Act, file with the Commission the annual
reports, quarterly reports and other documents which the Operating Partnership
would have been required to file with the Commission
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pursuant to such Sections 13 or 15(d) (the "Financial Statements") if the
Operating Partnership were so subject, such documents to be filed with the
Commission on or prior to the respective dates (the "Required Filing Dates") by
which the Operating Partnership would have been required so to file such
documents if the Operating Partnership were so subject. The Operating
Partnership will also in any event (x) within 15 days of each Required Filing
Date (i) transmit by mail to all Holders of Debt Securities, as their names and
addresses appear in the Security Register, without cost to such Holders, copies
of the annual reports and quarterly reports which the Operating Partnership
would have been required to file with the Commission pursuant to Section 13 or
15(d) of the Exchange Act if the Operating Partnership were subject to such
Sections and (ii) file with the Trustee copies of the annual reports, quarterly
reports and other documents which the Operating Partnership would have been
required to file with the Commission pursuant to Section 13 or 15(d) of the
Exchange Act if the Operating Partnership were subject to such Sections and (y)
if filing such documents by the Operating Partnership with the Commission is not
permitted under the Exchange Act, promptly upon written request and payment of
the reasonable cost of duplication and delivery, supply copies of such documents
to any prospective Holder (Section 1010).
ADDITIONAL COVENANTS AND/OR MODIFICATIONS TO THE COVENANTS DESCRIBED ABOVE
Any additional covenants and/or modifications to the covenants described
above with respect to any series of Debt Securities will be set forth in the
Prospectus Supplement relating thereto.
As used herein,
"Acquisition Lines of Credit" means, collectively, any secured lines of
credit of the Operating Partnership and its Subsidiaries, the proceeds of which
shall be used to, among other things, acquire interests, directly or indirectly,
in real estate.
"Consolidated Income Available for Debt Service" for any period means
Consolidated Net Income (as defined below) of the Operating Partnership and its
Subsidiaries plus amounts which have been deducted for (a) interest on Debt of
the Operating Partnership and its Subsidiaries, (b) provision for taxes of the
Operating Partnership and its Subsidiaries based on income, (c) amortization of
debt discount, (d) provisions for gains and losses on properties, (e)
depreciation and amortization, (f) the effect of any non-cash charge resulting
from a change in accounting principles in determining Consolidated Net Income
for such period and (g) amortization of deferred charges.
"Consolidated Net Income" for any period means the amount of consolidated
net income (or loss) of the Operating Partnership and its Subsidiaries for such
period determined on a consolidated basis in accordance with generally accepted
accounting principles.
"Debt" of the Operating Partnership or any Subsidiary means any
indebtedness of the Operating Partnership and its Subsidiaries, whether or not
contingent, in respect of (i) borrowed money evidenced by bonds, notes,
debentures or similar instruments, (ii) indebtedness secured by any mortgage,
pledge, lien, charge, encumbrance or any security interest existing on property
owned by the Operating Partnership and its Subsidiaries, (iii) the reimbursement
obligations, contingent or otherwise, in connection with any letters of credit
actually issued or amounts representing the balance deferred and unpaid of the
purchase price of any property except any such balance that constitutes an
accrued expense or trade payable or (iv) any lease of property by the Operating
Partnership and its Subsidiaries as lessee which is reflected on the Operating
Partnership's consolidated balance sheet as a capitalized lease in accordance
with generally accepted accounting principles, in the case of items of
indebtedness incurred under (i) through (iii) above to the extent that any such
items (other than letters of credit) would appear as a liability on the
Operating Partnership's consolidated balance sheet in accordance with generally
accepted accounting principles, and also includes, to the extent not otherwise
included, any obligation of the Operating Partnership or any Subsidiary to be
liable
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for, or to pay, as obligor, guarantor or otherwise (other than for
purposes of collection in the ordinary course of business), indebtedness of
another person (other than the Operating Partnership or any Subsidiary) (it
being understood that Debt shall be deemed to be incurred by the Operating
Partnership and its Subsidiaries on a consolidated basis whenever the Operating
Partnership and its Subsidiaries on a consolidated basis shall create, assume,
guarantee or otherwise become liable in respect thereof).
"Funds from Operations" for any period means the Consolidated Net Income of
the Operating Partnership and its Subsidiaries for such period without giving
effect to depreciation and amortization, gains or losses from extraordinary
items, gains or losses on sales of real estate, gains or losses on investments
in marketable securities and any provision/benefit for income taxes for such
period, plus funds from operations of unconsolidated joint ventures, all
determined on a consistent basis in accordance with generally accepted
accounting principles.
"Maximum Annual Service Charge" as of any date means the maximum amount
which is payable in any 12 month period for interest on Debt.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Significant Subsidiary" means any Subsidiary which is a "Significant
Subsidiary" (within the meaning of Regulation S-X, promulgated under the
Securities Act) of the Operating Partnership.
"Subsidiary" means a corporation or a partnership a majority of the
outstanding voting stock or partnership interests, as the case may be, of which
is owned or controlled, directly or indirectly, by the Operating Partnership or
by one or more other Subsidiaries of the Operating Partnership. For the
purposes of this definition, "voting stock" means stock having voting power for
the election of directors, or trustees, as the case may be, whether at all times
or only so long as no senior class of stock has such voting power by reason of
any contingency
"Total Assets" as of any date means the sum of (i) the Operating
Partnership's and its Subsidiaries' Undepreciated Real Estate Assets and (ii)
all other assets of the Operating Partnership and its Subsidiaries on a
consolidated basis determined in accordance with generally accepted accounting
principles (but excluding intangibles and accounts receivable).
"Undepreciated Real Estate Assets" as of any date means the cost (original
cost plus capital improvements) of real estate assets of the Operating
Partnership and its Subsidiaries on such date, before depreciation and
amortization, determined on a consolidated basis in accordance with generally
accepted accounting principles.
EVENTS OF DEFAULT, NOTICE AND WAIVER
The Indenture provides that the following events are "Events of Default"
with respect to the Debt Securities issued thereunder: (i) default for 30 days
in the payment of any interest on any Debt Security of such series; (ii) default
in the payment of the principal of (or premium, if any,) on any Debt Security of
such series at its maturity; (iii) default in the performance, or breach, of any
other covenant or warranty of the Operating Partnership contained in the
Indenture (other than a covenant added to the Indenture solely for the benefit
of a series of Debt Securities issued thereunder other than such series),
continued for 60 days after written notice as provided in the applicable
Indenture; (iv) an event of default under any Debt, as defined in any indenture
or instrument evidencing such Debt, whether such indebtedness now exists or
shall hereinafter be created, the repayment of which the Operating Partnership
is directly responsible or liable as obligor or guarantor on a full recourse
basis, for outstanding indebtedness for borrowed money in, or a
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guarantee for, a principal amount in excess of $10,000,000, shall happen and be
continuing and such indebtedness shall have been accelerated so that the same
shall be or become due and payable prior to the date on which the same would
otherwise have become due and payable or the Operating Partnership shall default
in the payment at final maturity of outstanding indebtedness for borrowed money
in a principal amount in excess of $10,000,000, without such indebtedness having
been discharged, or such acceleration having been rescinded or annulled; and (v)
certain events of bankruptcy, insolvency or reorganization, or court appointment
of a receiver, liquidator or trustee of the Operating Partnership, any
Significant Subsidiary or any of their property and any other Event of Default.
If an Event of Default under the Indenture with respect to Debt Securities
of any series at the time Outstanding occurs and is continuing, then in every
such case the Trustee or the Holders of not less than 25% of the principal
amount of the Outstanding Debt Securities of that series will have the right to
declare the principal of (or, if the Debt Securities of that series are Original
Issue Discount Securities or Indexed Securities, such portion of the principal
amount as may be specified in the terms thereof) and premium (if any) on all of
the Debt Securities of that series to be due and payable immediately by written
notice thereof to the Operating Partnership (and to the Trustee if given by the
Holders). However, at any time after such a declaration of acceleration with
respect to Debt Securities of such series (or of all Debt Securities then
Outstanding under the Indenture, as the case may be) has been made, but before a
judgment or decree for payment of the money due has been obtained by the
Trustee, the Holders of not less than a majority in principal amount of
Outstanding Debt Securities of such series (or of all Debt Securities then
Outstanding under the Indenture, as the case may be) may rescind and annul such
declaration and its consequences if (i) the Operating Partnership shall have
paid or deposited with the Trustee all required payments of the principal of and
premium (if any) and interest on the Outstanding Debt Securities of such series
(or of all Debt Securities then Outstanding under the Indenture, as the case may
be), plus certain fees, expenses, disbursements and advances of the Trustee and
(ii) all Events of Default, other than the non-payment of accelerated principal
or interest, with respect to the Debt Securities of such series (or of all Debt
Securities then Outstanding under the Indenture, as the case may be) have been
cured or waived as provided in the Indenture (Section 502). The Indenture also
provides that the Holders of not less than a majority in principal amount of the
Outstanding Debt Securities of any series (or of all Debt Securities then
Outstanding under the Indenture, as the case may be) may waive any past default
with respect to such series and its consequences, except a default (x) in the
payment of the principal of and premium (if any) or interest on any Debt
Security of such series or (y) in respect of a covenant or provision contained
in the Indenture that cannot be modified or amended without the consent of the
Holder of each Outstanding Debt Security affected thereby (Section 513).
The Trustee will be required to give notice to the Holders of Debt
Securities within 90 days of a default under the Indenture, unless such default
shall have been cured or waived; provided, however, that the Trustee may
withhold notice to the Holders of any series of Debt Securities of any default
with respect to such series (except a default in the payment of the principal of
and premium (if any) or interest on any Debt Security) if and so long as the
Responsible Officers of the Trustee consider such withholding to be in the
interest of such Holders (Section 601).
The Indenture provides that no Holders of Debt Securities of any series may
institute any proceedings, judicial or otherwise, with respect to the Indenture
or for any remedy thereunder, except in the case of failure of the Trustee, for
60 days, to act after it has received a written request to institute proceedings
in respect of an Event of Default from the Holders of not less than 25% in
principal amount of the Outstanding Debt Securities of such series, as well as
an offer of indemnity reasonably satisfactory to it (Section 507). This
provision will not prevent, however, any Holder of Debt Securities from
instituting suit for the enforcement of payment of the principal of and premium
(if any) and interest on such Debt Securities at the respective due dates
thereof (Section 508).
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<PAGE>
Subject to provisions in the Indenture relating to its duties in case of
default, the Trustee is under no obligation to exercise any of its rights or
powers under the Indenture at the request or direction of any Holders of any
series of Debt Securities then Outstanding under the Indenture, unless such
Holders shall have offered to the Trustee reasonable security or indemnity
(Section 602). The Holders of not less than a majority in principal amount of
the Outstanding Debt Securities of any series (or of all Debt Securities then
Outstanding under the Indenture, as the case may be) shall have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee, or of exercising any trust or power conferred upon the
Trustee. However, the Trustee may refuse to follow any direction which is in
conflict with any law or the Indenture, which may involve the Trustee in
personal liability or which may be unduly prejudicial to the Holders of Debt
Securities of such series not joining therein (Section 512).
Within 120 days after the close of each fiscal year, the Operating
Partnership must deliver to the Trustee a certificate, signed by one of several
specified officers of the Company as to such officer's knowledge of the
Operating Partnership's compliance with all conditions and covenants under the
Indenture, and, in the event of any noncompliance, specifying each such
noncompliance and the nature and status thereof.
MODIFICATION OF THE INDENTURE
Modifications and amendments of the Indenture may be made only with the
consent of the Holders of not less than a majority in principal amount of all
Outstanding Debt Securities of each series issued under the Indenture which are
affected by such modification or amendment; provided, however, that no such
modification or amendment may, without the consent of the Holder of each such
Debt Security affected thereby, (i) change the Stated Maturity of the principal
of, or any installment of principal of and premium (if any) or interest on, any
such Debt Security; (ii) reduce the principal amount of, or the rate or amount
of interest on, or premium payable upon the redemption of any such Debt
Security; (iii) change the Place of Payment, or the currency, for payment of
principal of any Debt Security or any premium or interest on any such Debt
Security; (iv) impair the right to institute suit for the enforcement of any
payment on or with respect to any such Debt Security; (v) reduce the above-
stated percentage of Outstanding Debt Securities of any series necessary to
modify or amend the Indenture, to waive compliance with certain provisions
thereof or certain defaults and consequences thereunder or to reduce the quorum
or voting requirements set forth in the Indenture; or (vi) modify any of the
foregoing provisions or any of the provisions relating to the waiver of certain
past defaults or certain covenants, except to increase the required percentage
to effect such action or to provide that certain other provisions may not be
modified or waived without the consent of the Holder of such Debt Security or
(vii) adversely modify or affect (in any manner adverse to the Holders) the
terms and conditions of the obligations of the Operating Partnership in respect
of the due and punctual payment of the principal of and premium (if any), or
interest on the Debt Securities (Section 902).
The Holders of not less than a majority in principal amount of Outstanding
Debt Securities of each series effected thereby have the right to waive
compliance by the Operating Partnership with certain covenants in the Indenture
(Section 1013).
Modifications and amendments of the Indenture may be permitted to be made
by the Operating Partnership and the Trustee without the consent of any Holders
of Debt Securities for any of the following purposes: (i) to evidence the
succession of another Person to the Operating Partnership as obligor under the
Indenture; (ii) to add to the covenants of the Operating Partnership for the
benefit of the Holders of all or any series of Debt Securities or to surrender
any right or power conferred upon the Operating Partnership in Indenture; (iii)
to add Events of Default for the benefit of the Holders of all or any series of
Debt Securities; (iv) to change or eliminate any of the provisions of the
Indenture, provided that any such change or elimination shall become effective
only when there is no Debt Security Outstanding of any series created prior to
the modification or amendment which is entitled to the benefit of such
provision; (v) to secure the Debt Securities; (vi) to provide for the acceptance
of appointment by a successor Trustee or facilitate the
14
<PAGE>
administration of the trusts under the Indenture by more than one Trustee; (vii)
to cure any ambiguity, defect or inconsistency in the Indenture, provided that
such action shall not adversely affect the interests of Holders of Debt
Securities of any series issued under the Indenture in any material respect; or
(viii) to supplement any of the provisions of the Indenture to the extent
necessary to permit or facilitate defeasance and discharge of any series of such
Debt Securities, provided that such action shall not adversely affect the
interests of the Holders of the Debt Securities of any series in any material
respect (Section 901).
The Indenture provides that in determining whether the Holders of the
requisite principal amount of Outstanding Debt Securities of a series have given
any request, demand, authorization, direction, notice, consent or waiver
thereunder or whether a quorum is present at a meeting of Holders of Debt
Securities, Debt Securities owned by the Operating Partnership, or any other
obligor upon the Debt Securities or any affiliate of the Operating Partnership,
Company or of such other obligor shall be disregarded.
The Indenture contains provisions for convening meetings of the Holders of
Debt Securities of a series (Section 1501). A meeting may be called at any time
by the Trustee, and also, upon request, by the Operating Partnership or by the
Holders of at least 10% in principal amount of the Outstanding Debt Securities
of such series, or in any such case, upon notice given as provided in the
Indenture (Section 1502). Except for any consent that must be given by the
Holder of each Debt Security affected by certain modifications and amendments of
the Indenture, any resolution presented at a meeting or adjourned meeting duly
reconvened at which a quorum is present may be adopted by the affirmative vote
of the Holders of a majority in principal amount of the Outstanding Debt
Securities of that series; provided, however, that, except as referred to above,
any resolution with respect to any request, demand, authorization, direction,
notice, consent, waiver or other action that may be made, given or taken by the
Holders of a specified percentage, which is less than a majority, in principal
amount of the Outstanding Debt Securities of a series may be adopted at a
meeting or adjourned meeting duly reconvened at which a quorum is present by the
affirmative vote of the Holders of such specified percentage in principal amount
of the Outstanding Debt Securities of that series. Any resolution passed or
decision taken at any meeting of Holders of Debt Securities of any series duly
held in accordance with the Indenture will be binding on all Holders of Debt
Securities of that series. The quorum at any meeting called to adopt a
resolution, and at any reconvened meeting, will be Persons holding or presenting
a majority in principal amount of the Outstanding Debt Securities of a series;
provided, however, that if any action is to be taken at such meeting with
respect to a consent or waiver which may be given by the Holders of not less
than a specified percentage in principal amount of the Outstanding Debt
Securities of a series, the Persons holding or representing such specified
percentage in principal amount of the Outstanding Debt Securities will
constitute a quorum (Section 1504).
Notwithstanding the foregoing provisions, if any action is to be taken at a
meeting of Holders of Debt Securities of any series with respect to any request,
demand, authorization, direction, notice, consent, waiver or other action that
the Indenture expressly provides may be made, given or taken by the Holders of a
specified percentage in principal amount of all Outstanding Debt Securities
affected thereby, or of the Holders of such series and one or more additional
series: (i) there shall be no minimum quorum requirement for such meeting; and
(ii) the principal amount of the Outstanding Debt Securities of such series that
vote in favor of such request, demand, authorization, direction, notice,
consent, waiver or other action shall be taken into account in determining
whether such request, demand, authorization, direction, notice, consent, waiver
or other action has been made, given or taken under the Indenture (Section
1504).
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
The Operating Partnership may discharge certain obligations to Holders of
any series of Debt Securities that either have become due and payable or will
become due and payable within one year (or scheduled for redemption within one
year) by irrevocably depositing with the Trustee, in trust, funds in an amount
sufficient to pay and discharge the entire indebtedness on such Debt Securities
in respect of principal
15
<PAGE>
and premium (if any) and interest to the date of such deposit (if such Debt
Securities have become due and payable) or to the Stated Maturity or Redemption
Date, as the case may be (Section 1401).
The Indenture provides that, if the provisions of Article Fourteen are made
applicable to the Debt Securities of or within any series pursuant to Section
301 of the Indenture, the Operating Partnership may elect either (i) to decease
and be discharged from any and all obligations with respect to such Debt
Securities (except for the obligations to register the transfer or exchange of
such Debt Securities, to replace temporary or mutilated, destroyed, lost or
stolen Debt Securities, to maintain an office or agency in respect of such Debt
Securities and to hold moneys for payment in trust) ("defeasance") (Section
1402) or (ii) to be released from its obligations with respect to such Debt
Securities under Sections 1004 to 1010, inclusive, of the Indenture (being the
restrictions described under "Certain Covenants") and any omission to comply
with such obligations shall not constitute a default or an Event of Default with
respect to such Debt Securities ("covenant defeasance") (Section 1403), in
either case upon the irrevocable deposit by the Operating Partnership with the
Trustee, in trust, of an amount, in cash or Government Obligations (as defined
below), or both, which through the scheduled payment of principal and interest
in accordance with their terms will provide money in an amount sufficient
without reinvestment to pay the principal of and premium (if any) and interest
on such Debt Securities on the scheduled due dates therefor.
Such a trust may only be established if, among other things, the Operating
Partnership has delivered to the applicable Trustee an Opinion of Counsel (as
specified in the Indenture) to the effect that the Holders of such Debt
Securities will not recognize income, gain or loss for U.S. federal income tax
purposes as a result of such defeasance or covenant defeasance and will be
subject to U.S. federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such defeasance or covenant
defeasance had not occurred, and such Opinion of Counsel, in the case of
defeasance, must refer to and be based upon a ruling of the Internal Revenue
Service or a change in applicable United States federal income tax law occurring
after the date of the Indenture (Section 1404).
"Government Obligations" means securities which are (i) direct obligations
of the United States of America, for the payment of which its full faith and
credit is pledged or (ii) obligations of a Person controlled or supervised by
and acting as an agency or instrumentality of the United States of America, the
timely payment of which is unconditionally guaranteed as a full faith and credit
obligation by the United States of America, which are not callable or redeemable
at the option or the issuer thereof, and shall also include a depository receipt
issued by a bank or trust company as custodian with respect to any such
Government Obligation or specific payment of interest on or principal of any
such Government Obligation held by such custodian for the account of the Holder
of a depository receipt, provided that (except as required by law) such
custodian is not authorized to make any deduction from the amount payable to the
Holder of such depository receipt from any amount received by the custodian in
respect of the Government Obligation or the specific payment of interest on or
principal of the Government Obligation evidenced by such depository receipt.
In the event the Operating Partnership effects covenant defeasance with
respect to any Debt Securities, and such Debt Securities are declared due and
payable because of the occurrence of any Event of Default other than the Event
of Default described in clause (iii) under "Events of Default, Notice and
Waiver" with respect to Sections 1004 to 1010, inclusive, of the Indenture
(which Sections would no longer be applicable to such Debt Securities), the
amount of Government Obligations on deposit with the Trustee will be sufficient
to pay amounts due on such Debt Securities at the time of their Stated Maturity
but may not be sufficient to pay amounts due on such Debt Securities at the time
of the acceleration resulting from such Event of Default. However, the
Operating Partnership would remain liable to make payment of such amounts due at
the time of acceleration.
The applicable Prospectus Supplement may further describe the provisions,
if any, permitting such
16
<PAGE>
defeasance or covenant defeasance including any modifications to the provisions
described above, with respect to the Debt Securities of or within a particular
series.
REDEMPTION OF SECURITIES
The Indenture provides that the Debt Securities may be redeemed at any time
at the option of the Operating Partnership, in whole or in part, at the
Redemption Price, except as may otherwise be provided in connection with any
Debt Securities or series thereof.
From and after notice has been given as provided in the Indenture, if funds
for the redemption of any Debt Securities called for redemption shall have been
made available on such redemption date, such Debt Securities will cease to bear
interest on the date fixed for such redemption specified in such notice and the
only right of the Holders of the Debt Securities will be to receive payment of
the Redemption Price.
Notice of any optional redemption of any Debt Securities will be given to
Holders at their addresses, as shown in the Security Register, not more than 60
nor less than 30 days prior to the date fixed for redemption. The notice of
redemption will specify, among other items, the Redemption Price and the
principal amount of the Debt Securities held by such Holder to be redeemed.
If the Operating Partnership elects to redeem Debt Securities, it will
notify the Trustee at lease 45 days prior to the redemption date (or such
shorter period as satisfactory to the Trustee) of the aggregate principal amount
of Debt Securities to be redeemed and the redemption date. If less than all the
Debt Securities are to be redeemed, the Trustee shall select the Debt Securities
to be redeemed pro rata, by lot or in such manner as it shall deem fair and
appropriate.
17
<PAGE>
PLAN OF DISTRIBUTION
The Operating Partnership may sell the Debt Securities to one or more
underwriters for public offering and sale by them or may sell the Debt
Securities to investors directly or through agents. Any such underwriter or
agent involved in the offer and sale of the Debt Securities will be named in the
applicable Prospectus Supplement.
Underwriters may offer and sell the Debt Securities at a fixed price or
prices, which may be changed, at prices related to the prevailing market prices
at the time of sale or at negotiated prices. The Operating Partnership may,
from time to time, authorize underwriters acting as the Operating Partnership's
agents to offer and sell the Debt Securities upon the terms and conditions as
are set forth in the applicable Prospectus Supplement. In connection with the
sale of the Debt Securities, underwriters may be deemed to have received
compensation from the Operating Partnership in the form of underwriting
discounts or commissions and may also receive commissions from purchasers of
the Debt Securities for whom they may act as agent. Underwriters may sell Debt
Securities to or through dealers, and such dealers may receive compensation in
the form of discounts, concessions or commissions from the underwriters and/or
commissions from the purchasers for whom they may act as agent.
Any underwriting compensation paid by the Operating Partnership to
underwriters or agents in connection with the offering of the Debt Securities,
and any discounts, concessions or commissions allowed by underwriters to
participating dealers, will be set forth in the applicable Prospectus
Supplement. Underwriters, dealers and agents participating in the distribution
of the Debt Securities may be deemed to be underwriters, and any discounts and
commissions received by them and any profit realized by them on resale of the
Debt Securities may be deemed to be underwriting discounts and commissions,
under the Securities Act. Underwriters, dealers and agents may be entitled,
under agreements entered into with the Operating Partnership, to indemnification
against and contribution toward certain civil liabilities, including liabilities
under the Securities Act.
If so indicated in the applicable Prospectus Supplement, the Operating
Partnership will authorize underwriters or other persons acting as the Operating
Partnership's agents to solicit offers by certain institutions to purchase Debt
Securities from the Operating Partnership at the public offering price set forth
in such Prospectus Supplement pursuant to Delayed Delivery Contracts
("Contracts") providing for payment and delivery on the date or dates stated in
such Prospectus Supplement. Each Contract will be for an amount not less than,
and the aggregate principal amount of Debt Securities sold pursuant to Contracts
shall be not less nor more than, the respective amounts stated in the applicable
Prospectus Supplement. Institutions with whom Contracts, when authorized, may be
made include commercial and savings banks, insurance companies, pension funds,
investment companies, educational and charitable institutions, and other
institutions but will in all cases be subject to the approval of the Operating
Partnership. Contracts will not be subject to any conditions except (i) the
purchase by an institution of the Debt Securities covered by its Contracts shall
not at the time of delivery be prohibited under the laws of any jurisdiction in
the United States to which such institution is subject, and (ii) if the Debt
Securities are being sold to underwriters, the Operating Partnership shall have
sold to such underwriters, the total principal amount of the Debt Securities
less the principal amount thereof covered by Contracts.
Certain of the underwriters and their affiliates may be customers of,
engage in transactions with and perform services for the Operating Partnership
and its Subsidiaries in the ordinary course of business.
18
<PAGE>
EXPERTS
The Financial Statements in the Form 10 (incorporated herein by reference),
with respect to the Operating Partnership, to the extent and for the periods
indicated in their reports, have been audited by Grant Thornton, independent
accountants, and are included herein in reliance upon the authority of said firm
as experts in accounting and auditing.
LEGAL MATTERS
The legality of the Debt Securities offered hereby will be passed upon for
the Operating Partnership by Rosenberg & Liebentritt, P.C., Chicago, Illinois,
and Barack, Ferrazzano, Kirschbaum & Perlman, Chicago, Illinois, and, with
respect to any underwritten offering of Debt Securities, certain legal matters
will be passed upon for the underwriters by Hogan & Hartson L.L.P., Washington,
D.C. Hogan & Hartson L.L.P. from time to time provides services to the Company
and other entities controlled by Mr. Zell.
Sheli Z. Rosenberg, a partner in Rosenberg & Liebentritt, P.C., is a
trustee of the Company, owns 5,032 Common Shares and is also a limited partner
in certain of the Original Owners with a 5% interest or less in each such
Original Owner. Therefore, if such Original Owners exchange the OP Units for
Common Shares and then such Original Owners distribute such Common Shares to
their partners, Ms. Rosenberg would own a total of 5,349 Common Shares,
including the 5,032 Common Shares she currently owns. Bruce Strohm, a partner
in Rosenberg & Liebentritt, P.C., is a vice president of the Company. Ruth
Pinkharn Haring, a partner in Rosenberg & Liebentritt, P.C., is a vice president
and general counsel to the Company. The Company paid legal fees to Rosenberg &
Liebentritt, P.C. of approximately $1.1 million in 1993 and, to date,
approximately $2.0 million in 1994. Partners and associates of Rosenberg &
Liebentritt, P.C. beneficially own approximately 98,354 Common Shares, either
directly or upon the exercise of share options. Partners and associates of
Barack, Ferrazzano, Kirschbaum & Perlman beneficially own approximately 24,400
Common Shares.
19
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================================================================================
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS IN CONNECTION WITH
THE OFFERING COVERED BY THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS. IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE OPERATING PARTNERSHIP. THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO
BUY, THE NOTES, 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 SUPPLEMENT OR THE 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 SUPPLEMENT OR THE
PROSPECTUS OR IN THE AFFAIRS OF THE OPERATING PARTNERSHIP SINCE THE DATE HEREOF.
<TABLE>
<CAPTION>
-------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<S> <C>
The Operating Partnership................................................. S-3
Recent Developments....................................................... S-4
Use of Proceeds........................................................... S-5
Ratio of Earnings to Fixed Charges........................................ S-5
Business and Properties................................................... S-6
Selected Financial and Operating Information.............................. S-8
Description of the Notes.................................................. S-10
Underwriting.............................................................. S-14
Experts................................................................... S-15
Legal Matters............................................................. S-15
PROSPECTUS
Available Information..................................................... 2
Incorporation of Certain Documents by Reference........................... 2
The Operating Partnership................................................. 3
Use of Proceeds........................................................... 4
Ratios of Earnings to Fixed Charges....................................... 4
Description of Debt Securities............................................ 5
Plan of Distribution...................................................... 18
Experts................................................................... 19
Legal Matters............................................................. 19
</TABLE>
================================================================================
$150,000,000
ERP OPERATING
LIMITED PARTNERSHIP
% NOTES
DUE AUGUST , 2026
---------------
PROSPECTUS SUPPLEMENT
---------------
MERRILL LYNCH & CO.
ALEX. BROWN & SONS
INCORPORATED
J.P. MORGAN & CO.
AUGUST ___, 1996
================================================================================
