<PAGE> 1
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED APRIL 6, 1998)
$300,000,000
ERP OPERATING LIMITED PARTNERSHIP ERP LOGO
6.63% NOTES DUE APRIL 13, 2015, PUTABLE/CALLABLE APRIL 13, 2005
------------------------
ERP Operating Limited Partnership, an Illinois limited partnership (the
"Operating Partnership"), is offering $300,000,000 in aggregate principal amount
of its 6.63% Notes due April 13, 2015, Putable/Callable April 13, 2005 (the
"Notes"). The annual interest rate on the Notes to April 13, 2005 (the
"Remarketing Date") is 6.63%. THE NOTES ARE SUBJECT TO MANDATORY TENDER ON THE
REMARKETING DATE. If Salomon Brothers Inc, as Remarketing Dealer (the
"Remarketing Dealer"), has elected to remarket the Notes as described herein,
the Notes will be subject to mandatory tender to the Remarketing Dealer at 100%
of the principal amount thereof for remarketing on the Remarketing Date, except
in the limited circumstances described herein. See "Description of the
Notes -- Tender of Notes; Remarketing." If the Remarketing Dealer for any reason
does not purchase all tendered Notes on the Remarketing Date or elects not to
remarket the Notes, or in certain other limited circumstances described herein,
the Operating Partnership will be required to repurchase the Notes as a whole
from the beneficial owners ("Beneficial Owners") thereof at 100% of the
principal amount thereof plus accrued interest, if any. See "Description of the
Notes--Repurchase."
Interest on the Notes is payable semiannually on April 13 and October 13 of
each year, commencing October 13, 1998. Except in the limited circumstances
described herein, the Notes are not subject to redemption by the Operating
Partnership prior to their Stated Maturity Date (as defined below). See
"Description of the Notes--Redemption."
Ownership of the Notes will be maintained in book-entry form by or through
The Depository Trust Company ("DTC"). Interests in the Notes will be shown on,
and transfers thereof will be effected only through, records maintained by DTC
and its participants. Beneficial Owners of the Notes will not have the right to
receive physical certificates evidencing their ownership except under the
limited circumstances described herein. Settlement for the Notes will be made in
immediately available funds. The secondary market trading activity in the Notes
will therefore settle in immediately available funds. All payments of principal
and interest on the Notes will be made by the Operating Partnership in
immediately available funds so long as the Notes are maintained in book-entry
form. Beneficial interests in the Notes may be acquired, or subsequently
transferred, only in denominations of $1,000 and integral multiples thereof.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO
WHICH IT RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
The Notes will be sold to the public at varying prices relating to
prevailing market prices at the time of resale to be determined by the
applicable Underwriter at the time of each sale. The net proceeds to the
Operating Partnership will be 102.085% of the principal amount of the Notes sold
and the aggregate proceeds will be $306,255,000, plus accrued interest, if any,
from April 13, 1998. Expenses payable by the Operating Partnership for the Notes
offering are estimated at $450,000. For further information with respect to the
plan of distribution, see "Underwriting."
The Notes are offered by the several Underwriters, subject to prior sale,
when, as and if issued to and accepted by them, and subject to 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 Notes will be made through the book-entry facilities of DTC on or about
April 13, 1998.
------------------------
MERRILL LYNCH & CO.
NATIONSBANC MONTGOMERY SECURITIES LLC
SALOMON SMITH BARNEY
------------------------
The date of this Prospectus Supplement is April 6, 1998.
<PAGE> 2
LOGO
ERP OPERATING LIMITED PARTNERSHIP
NATIONAL PORTFOLIO
MAP
Certain persons participating in this Offering may engage in transactions
that maintain or otherwise affect the price of the Notes. Such transactions may
include over-allotment transactions and the purchase of Notes to cover the
Underwriters' short positions. For a description of these activities, see
"Underwriting."
S-2
<PAGE> 3
THE OFFERING
For a more complete description of the Notes specified in the following
summary, including definitions of capitalized terms not otherwise found
therein, see "Description of the Notes" in this Prospectus Supplement and
"Description of Debt Securities" in the accompanying Prospectus.
Securities Offered............. $300,000,000 aggregate principal amount of 6.63%
Notes due April 13, 2015, Putable/Callable April
13, 2005 (the "Offering").
Maturity....................... The Stated Maturity Date of the Notes is April
13, 2015.
Remarketing Date............... The Remarketing Date of the Notes is April 13,
2005.
Mandatory Tender of Notes;
Remarketing and Repurchase.... Provided that the Remarketing Dealer gives
notice to the Operating Partnership and the
Trustee on a Business Day not later than five
Business Days prior to the Remarketing Date of
its intention to purchase the Notes for
remarketing, each Note will be automatically
tendered, or deemed tendered, to the Remarketing
Dealer for purchase on the Remarketing Date,
except in the circumstances described under
"Description of the Notes--Repurchase" or
"--Redemption."
The purchase price to be paid by the Remarketing
Dealer for the tendered Notes will equal 100% of
the principal amount thereof. When the Notes are
tendered for remarketing, the Remarketing Dealer
may remarket the Notes for its own account at
varying prices to be determined by the
Remarketing Dealer at the time of each sale. If
the Remarketing Dealer for any reason does not
purchase all tendered Notes on the Remarketing
Date or elects not to remarket the Notes, or
in certain other limited circumstances described
herein, the Operating Partnership will be
required to repurchase the Notes as a whole
from the Beneficial Owners thereof on the
Remarketing Date, at 100% of the principal
amount thereof plus accrued and unpaid interest,
if any. See "Description of the Notes--
Repurchase."
Optional Redemption............ The Notes are subject to redemption from the
Remarketing Dealer, in whole but not in part, at
the option of the Operating Partnership on
the Remarketing Date at the Optional Redemption
Price. The Notes are not otherwise subject to
redemption by the Operating Partnership.
Interest Payment Dates......... Interest on the Notes will be payable
semiannually in arrears on each April 13 and
October 13, commencing October 13, 1998.
Ranking........................ The Notes will rank equally with each other and
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 December 31, 1997, such mortgages
aggregated approximately $1.6 billion. As of
December 31, 1997, the outstanding indebtedness
of the Operating Partnership with which the
Notes will rank equally was approximately $1.4
billion (net of a $2.5 million discount and
including an $8.2 million premium). As of
December 31, 1997, the Operating Partnership's
total debt was approximately $2.9 billion, and
on a pro forma basis giving effect to this
Offering, the total outstanding indebtedness of
the Operating Partnership and its subsidiaries
was approximately $3.2 billion.
S-3
<PAGE> 4
Form........................... The Notes will be issued and maintained in
book-entry form registered in the name of a
nominee of DTC, except under the limited
circumstances described herein. See
"Description of the Notes--Tender of Notes;
Remarketing" below and "Description of Debt
Securities" in the accompanying Prospectus.
Use of Proceeds................ The net proceeds to the Operating Partnership
from the Offering (approximately $306.1 million)
are expected to be used to acquire additional
multifamily properties and for working
capital purposes.
Limitations on Incurrence
of Debt...................... For a description of certain covenants
applicable to the Notes, see "Description
of Debt Securities--Certain Covenants" and
"--Additional Covenants and/or Modifications to
the Covenants Described Above" in the
accompanying Prospectus.
S-4
<PAGE> 5
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, unless
the context indicates otherwise. As used herein, the term "Company" includes
Equity Residential Properties Trust ("EQR") and those entities owned or
controlled by it on a consolidated basis (the "Subsidiaries"), as the survivor
of the mergers between EQR and each of Wellsford Residential Property Trust
("Wellsford") and Evans Withycombe Residential Inc. ("EWR") and each of EQR,
Wellsford and EWR as predecessors to the Company, unless the context indicates
otherwise.
THE OPERATING PARTNERSHIP
The Notes offered hereby 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 REITs (based
on the aggregate market value of its outstanding equity capitalization), is a
self-administered and self-managed equity REIT. EQR was organized in March 1993
and commenced operations as a publicly traded company on August 18, 1993 upon
completion of its initial public offering (the "EQR IPO"). EQR 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. In May 1997, EQR completed the acquisition of the multifamily
property business of Wellsford through the tax-free merger of EQR and
Wellsford. In December 1997, EQR completed the acquisition of the multifamily
property business of EWR through the tax-free merger of EQR and EWR. The
Company's senior executives average over 24 years of experience in the
multifamily property business.
All of the Company's interests in multifamily properties are held or
controlled 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 March 31, 1998, owned approximately 91% of the Operating
Partnership's outstanding partnership interests.
The Operating Partnership is the largest owner of multifamily properties
in the United States (based on the number of apartment units owned and total
revenues earned). As of March 31, 1998, the Operating Partnership owned or had
interests in a portfolio of 502 multifamily properties (individually a
"Property" and collectively the "Properties") containing 143,348 apartment
units and managed 9,295 additional units owned by affiliated entities. Since
the EQR IPO, at which time the Operating Partnership owned 69 Properties, and
through March 31, 1998, the Operating Partnership has acquired, directly or
indirectly, interests in an additional 453 Properties containing 127,164 units
for a total purchase price of approximately $7.0 billion, including the
assumption of approximately $2.1 billion of mortgage indebtedness and unsecured
notes. Since the EQR IPO and through March 31, 1998, the Operating Partnership
has disposed of 20 of its properties and a portion of one of its Properties
containing an aggregate of 5,541 units and a vacant land parcel for a total
sales price of approximately $146.5 million and the release of mortgage
indebtedness in the amount of approximately $20.5 million. The Operating
Partnership's interest in 11 of the Properties at the time of acquisition
thereof consisted solely of ownership of the debt collateralized by such
Properties and in 21 of the Properties consisted solely of investments in
partnership interests and subordinated mortgages collateralized by such
Properties. As of March 31, 1998, the Properties had an average occupancy rate
of approximately 96%. The Properties are located throughout the United States
in the following 35 states: Alabama, Arizona, Arkansas, California, Colorado,
Connecticut, Florida, Georgia, Idaho, Illinois, Indiana, Iowa, Kansas,
Kentucky, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri, New
Hampshire, New Jersey, New Mexico, Nevada, North Carolina, Ohio, Oklahoma,
Oregon, South Carolina, Tennessee, Texas, Utah, Virginia, Washington and
Wisconsin.
The Operating Partnership's executive offices are located at Two North
Riverside Plaza, Suite 400, Chicago, Illinois 60606, and its telephone number
is (312) 474-1300. In addition, the Operating Partnership has 30 management
offices in the following cities: Chicago, Illinois; Denver, Colorado; Seattle,
Federal Way and Redmond, Washington; Bethesda, Maryland; Atlanta, Georgia; Las
Vegas, Nevada; Scottsdale and Tucson, Arizona; Portland, Oregon; Dallas,
Houston and San Antonio, Texas; Irvine, Pleasant Hill and Stockton, California;
Ypsilanti, Michigan; Charlotte and Raleigh, North Carolina; Tampa, Jacksonville
and Ft. Lauderdale, Florida; Kansas City, Kansas; Minneapolis, Minnesota;
Louisville, Kentucky; Tulsa, Oklahoma; Boston, Massachusetts; and Nashville and
Memphis, Tennessee.
S-5
<PAGE> 6
RECENT DEVELOPMENTS
ACQUISITIONS
From January 1, 1998 through March 31, 1998, the Operating Partnership
acquired 15 Properties containing an aggregate of 3,387 units at a total
purchase price of approximately $225.2 million (including the assumption of
mortgage indebtedness of approximately $93.6 million). The Operating
Partnership funded the cash portion of these acquisitions primarily with
proceeds from previous securities issuances by the Company. See "Securities
Issuances" below.
PROBABLE ACQUISITIONS
As of March 31, 1998, the Operating Partnership had entered into contracts
with unaffiliated sellers to acquire four additional properties containing
1,622 units which are located in four states (collectively, the "Properties
Under Contract"). The total combined purchase price for the Properties Under
Contract is approximately $184.1 million, including the assumption of
approximately $48.5 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 net proceeds of the Offering,
its working capital, its $500 million unsecured line of credit (the "Line of
Credit") and/or proceeds from previous securities issuances by the Company. The
Operating Partnership believes that the Properties Under Contract can be
integrated into its system of management offices without any significant
corresponding increase in the costs of operations of such offices.
PENDING ACQUISITIONS
Additional Properties Under Contract
As of March 31, 1998, the Operating Partnership had entered into contracts
with various unaffiliated sellers to acquire five additional properties under
contract (the "Additional Properties Under Contract") for a total combined
purchase price of approximately $93.7 million, including the assumption of
approximately $26.3 million of mortgage indebtedness. These Additional
Properties Under Contract contain 1,205 units and are located in five states.
The contracts for the Additional Properties Under Contract contain due
diligence contingency provisions that allow the Operating Partnership to
conduct extensive investigative 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 and/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
As of March 31, 1998, the Operating Partnership was also negotiating with
various sellers for the acquisition of 63 additional properties (the
"Properties Under Negotiation") containing 14,238 units for a purchase price of
approximately $970.2 million, including the assumption of approximately $381.6
million of mortgage indebtedness. With respect to the Properties Under
Negotiation, the Operating Partnership was 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
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-6
<PAGE> 7
DISPOSITIONS
Since January 1, 1998, the Operating Partnership disposed of its interests
in two properties containing 506 units for an aggregate sales price of
approximately $16.7 million. The net proceeds of these dispositions were or
will be used for the acquisition of additional properties.
SECURITIES ISSUANCES
Since January 1, 1998, the Company has raised an aggregate of
approximately $314 million pursuant to five separate public offerings of EQR's
common shares of beneficial interest. In addition, from January 1, 1998,
through March 31, 1998, the Company has raised approximately $31.7 million
pursuant to its Distribution Reinvestment and Share Purchase Plan.
S-7
<PAGE> 8
USE OF PROCEEDS
The net proceeds to the Operating Partnership from the Offering are
estimated at $305,805,000 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 and for working capital purposes.
BUSINESS AND PROPERTIES
The Operating Partnership is managed by the Company. The Company is a
self-administered and self-managed equity REIT. EQR was established in 1993 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 Company 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 March 31, 1998, the Operating Partnership owned or had interests in
a portfolio of 502 Properties containing 143,348 apartment units located in 35
states. As of such date, the Operating Partnership was the largest owner of
multifamily properties in the United States (based on the number of
apartment units owned and total revenues earned). The Operating Partnership's
interest in 11 of the Properties at the time of acquisition thereof consisted
solely of ownership of the debt collateralized by such Properties and in 21
Properties consists solely of investments in partnership interests and
subordinated mortgages collateralized by such Properties. No single Property
represents more than 1.0% of 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 local 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 30 management offices in the following cities:
Chicago, Illinois; Denver, Colorado; Seattle, Federal Way and Redmond,
Washington; Bethesda, Maryland; Atlanta, Georgia; Las Vegas, Nevada; Scottsdale
and Tucson, Arizona; Portland, Oregon; Dallas, Houston and San Antonio, Texas;
Irvine, Pleasant Hill and Stockton, California; Ypsilanti, Michigan; Charlotte
and Raleigh, North Carolina; Tampa, Jacksonville and Ft. Lauderdale, Florida;
Kansas City, Kansas; Minneapolis, Minnesota; Louisville, Kentucky; Tulsa,
Oklahoma; Boston, Massachusetts; and Nashville and Memphis, Tennessee.
EXPERIENCED MANAGEMENT
The Company's senior executives average over 24 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
that manages investor relations and capital raising; and a Legal Department
that oversees all of the Operating Partnership's legal affairs.
SOPHISTICATED MANAGEMENT INFORMATION SYSTEMS
The Operating Partnership makes extensive use of management information
systems. The Operating Partnership has installed on-site computers at every
Property, except for the newly-acquired Properties at which such computers will
be installed, that 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
maintained through 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.
S-8
<PAGE> 9
THE PROPERTIES
As of March 31, 1998, the Operating Partnership owned or had interests in
a portfolio of 502 Properties located in 35 states containing 143,348 apartment
units with the largest having 1,420 units and the smallest having 40 units. The
average number of units per Property was approximately 286. The units are
typically contained in a series of two-story buildings. As of March 31, 1998,
the Properties had an average occupancy rate of approximately 96%. 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-9
<PAGE> 10
The following chart sets forth certain information regarding the
Properties on a state-by-state basis. PROPERTIES BY STATE (AS OF MARCH 31,
1998)
<TABLE>
<CAPTION>
STATE NUMBER OF PROPERTIES NUMBER OF UNITS % OF UNITS IN PORTFOLIO
----- -------------------- --------------- -----------------------
<S> <C> <C> <C>
Alabama 2 400 0.3%
Arizona 74 21,802 15.2%
Arkansas 4 1,039 0.7%
California 53 14,599 10.2%
Colorado 23 6,392 4.4%
Connecticut 2 407 0.3%
Florida 42 11,242 7.8%
Georgia 20 5,811 4.1%
Idaho 1 120 0.1%
Illinois 7 3,322 2.3%
Indiana 1 320 0.2%
Iowa 2 386 0.3%
Kansas 6 2,392 1.7%
Kentucky 7 1,977 1.4%
Maine 5 672 0.5%
Maryland 13 3,795 2.6%
Massachusetts 3 737 0.5%
Michigan 9 3,644 2.5%
Minnesota 14 3,305 2.3%
Missouri 7 1,576 1.1%
Nevada 11 3,279 2.3%
New Hampshire 1 390 0.3%
New Jersey 2 861 0.6%
New Mexico 4 1,073 0.7%
North Carolina 20 5,216 3.6%
Ohio 6 2,683 1.9%
Oklahoma 14 3,981 2.8%
Oregon 11 3,448 2.4%
South Carolina 6 1,045 0.7%
Tennessee 14 3,812 2.7%
Texas 57 18,543 12.9%
Utah 4 1,426 1.0%
Virginia 10 3,133 2.2%
Washington 44 9,834 6.9%
Wisconsin 3 686 0.5%
------- ------ -------
TOTAL 502 (1) 143,348 100.0%
======= ======= =======
</TABLE>
_______________________________
(1) The Operating Partnership's interest in 11 of the Properties at the
time of acquisition thereof consisted solely of ownership of the debt
collateralized by such Properties and in 21 Properties consists solely of
investments in partnership interests and subordinated mortgages collateralized
by such Properties.
For additional information with respect to the Properties, see the
Operating Partnership's Annual Report on Form 10-K for the year ended December
31, 1997, which is incorporated by reference into the accompanying Prospectus.
S-10
<PAGE> 11
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 Operating Partnership s Annual Report on Form
10-K for the year ended December 31 1997 which document is 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>
YEAR ENDED DECEMBER 31,
------------------------------------------------------
1997 1996 1995 1994
------------ ------------- ------------ -----------
OPERATING DATA:
<S> <C> <C> <C> <C>
REVENUES
Rental income $707,733 $454,412 $373,919 $220,727
Fee and asset management 5,697 6,749 7,030 4,739
Interest income-investment
in mortgage notes 20,366 12,819 4,862
Interest and other income 13,525 4,405 4,573 5,568
-------- --------- -------- ----------
Total revenues 747,321 478,385 390,384 231,034
-------- --------- -------- ----------
EXPENSES
Property and maintenance 176,075 127,172 112,186 66,534
Real estate taxes and insurance 69,520 44,128 37,002 23,028
Property management 26,793 17,512 15,213 10,249
Property management-non-recurring - - - 879
Fee and asset management 3,364 3,837 3,887 2,056
Depreciation 156,644 93,253 72,410 37,273
Interest:
Expense incurred 121,324 81,351 78,375 37,044
Amortization of deferred
financing costs 2,523 4,242 3,444 1,930
General and administrative 15,064 9,857 8,129 6,053
-------- --------- -------- ----------
Total expenses 571,307 381,352 330,646 185,046
-------- --------- -------- ----------
Income before gain on disposition of properties and
extraordinary items 176,014 97,033 59,738 45,988
Gain on disposition of properties 13,838 22,402 21,617 -
-------- --------- -------- ----------
Income before extraordinary items 189,852 119,435 81,355 45,988
Extraordinary items:
Write-off of unamortized costs
on refinanced debt - (3,512) - -
Gain on early extinguishment
of debt - - 2,000 -
-------- --------- -------- ----------
Net income $189,852 $115,923 $ 83,355 $ 45,988
Net income per weighted average ======== ========= ======== =========
partnership interest outstanding $ 1.79 $ 1.70 $ 1.68 $ 1.34
======== ========= ======== =========
Weighted average partnership
interests outstanding 73,182 51,108 42,749 34,150
======== ========= ======== =========
Net income per weighted average partnership interest
outstanding-assuming dilution $ 1.76 $ 1.69 $ 1.67 $ 1.34
======== ========= ======== =========
</TABLE>
S-11
<PAGE> 12
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------
1997 1996 1995 1994
---------- ---------- ---------- -----------
BALANCE SHEET DATA:
<S> <C> <C> <C> <C>
Real estate, before accumulated
depreciation $7,121,435 $2,983,510 $2,188,939 $1,963,476
Real estate, after accumulated
depreciation $6,676,673 $2,681,998 $1,970,600 $1,770,735
Total assets $7,094,631 $2,986,127 $2,141,260 $1,847,685
Total debt $2,948,323 $1,254,274 $1,002,219 $994,746
9 3/8% Series A Cumulative
Redeemable Preference Units $ 153,000 $ 153,000 $ 153,000 $ -
9 1/8% Series B Cumulative
Redeemable Preference Units $ 125,000 $ 125,000 $ 125,000 $ -
9 1/8% Series C Cumulative
Redeemable Preference Units $ 115,000 $ 115,000 $ - $ -
8.60% Series D Cumulative
Redeemable Preference Units $ 175,000 $ - $ - $ -
Series E Cumulative
Convertible Preference Units $ 99,963 $ - $ - $ -
9.65% Series F Cumulative
Redeemable Preference Units $ 57,500 $ - $ - $ -
7 1/4% Series G Convertible
Cumulative Preference Units $ 316,250 $ - $ - $ -
Partners' capital $2,921,682 $1,216,467 $ 750,902 $ 761,373
</TABLE>
S-12
<PAGE> 13
DESCRIPTION OF THE NOTES
GENERAL
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.
The Notes will be direct, unsecured obligations of the Operating
Partnership and will rank equally with each other and 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 December 31, 1997, such mortgages aggregated
approximately $1.6 billion. As of December 31, 1997, the outstanding
indebtedness of the Operating Partnership with which the Notes will rank
equally was approximately $1.4 billion (net of a $2.5 million discount and
including an $8.2 million premium). As of December 31, 1997, the Operating
Partnership's total debt was approximately $2.9 billion, and on a pro forma
basis giving effect to this Offering, the total outstanding indebtedness of the
Operating Partnership and its Subsidiaries was approximately $3.2 billion.
Subject to certain limitations set forth in the Indenture, and as described
under "Certain Covenants--Limitations on Incurrence of Indebtedness" and
"--Additional Covenants and/or Modifications to the Covenants Described Above"
in the accompanying Prospectus, the Indenture permits the Operating Partnership
to incur additional secured and unsecured indebtedness.
The Notes will be senior unsecured obligations of the Operating
Partnership and will be limited to $300,000,000 in aggregate principal amount.
The Notes will mature on April 13, 2015 (the "Stated Maturity Date"). Except in
the limited circumstances described herein, the Notes are not subject to
redemption by the Operating Partnership prior to their Stated Maturity Date.
See "--Redemption" below.
The Notes will bear interest at the annual interest rate of 6.63% to April
13, 2005 (the "Remarketing Date"). If the Remarketing Dealer elects to remarket
the Notes, except in the limited circumstances described herein, (i) the Notes
will be subject to mandatory tender to the Remarketing Dealer at 100% of the
principal amount thereof for remarketing on the Remarketing Date, on the terms
and subject to the conditions described herein, and (ii) on and after the
Remarketing Date, the Notes will bear interest at the rate determined by the
Remarketing Dealer in accordance with the procedures set forth below (the
"Interest Rate to Maturity"). See "--Tender of Notes; Remarketing" below.
Under the circumstances described below, the Notes are subject to
redemption by the Operating Partnership from the Remarketing Dealer on the
Remarketing Date. See "--Redemption" below. If the Remarketing Dealer for any
reason does not purchase all tendered Notes on the Remarketing Date or elects
not to remarket the Notes, or in certain other limited circumstances described
herein, the Operating Partnership will be required to repurchase the Notes as a
whole from the Beneficial Owners thereof on the Remarketing Date, at 100% of
the principal amount thereof plus accrued interest, if any. See "--Repurchase"
below.
The Notes will bear interest from April 13, 1998, payable semiannually on
April 13 and October 13 of each year (each, an "Interest Payment Date"),
commencing October 13, 1998, to the persons in whose names the Notes are
registered on the fifteenth calendar day (whether or not a Business Day)
immediately preceding the related Interest Payment Date (each, a "Record
Date"). Interest on the Notes will be computed on the basis of a 360-day year
of twelve 30-day months. "Business Day" means any day, other than a Saturday or
Sunday, that is neither a legal holiday nor a day on which banking institutions
in The City of New York are authorized or required by law, regulation or
executive order to close.
Interest payable on any Interest Payment Date and at the Remarketing Date
and the Stated Maturity Date or date of earlier redemption or repurchase shall
be the amount of interest accrued from and including the next preceding
Interest Payment
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Date in respect of which interest has been paid or duly provided for (or from
and including April 13, 1998, if no interest has been paid or duly provided
for) with respect to the Notes to but excluding such Interest Payment Date or
the Stated Maturity Date or date of redemption or repurchase, as the case may
be. If any Interest Payment Date or the Stated Maturity Date or date of
redemption or repurchase of Notes falls on a day that is not a Business Day,
the payment shall be made on the next Business Day with the same force and
effect 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 Stated Maturity Date or date of earlier redemption
or repurchase, as the case may be.
The Notes will be issued in denominations of $1,000 and integral
multiples thereof.
TENDER OF NOTES; REMARKETING
The following description sets forth the terms and conditions of the
remarketing of the Notes, if the Remarketing Dealer elects to purchase the
Notes and remarkets the Notes on the Remarketing Date.
Mandatory Tender. Provided that the Remarketing Dealer gives notice to the
Operating Partnership and the Trustee on a Business Day not later than five
Business Days prior to the Remarketing Date of its intention to purchase the
Notes for remarketing (the "Notification Date"), each Note will be
automatically tendered, or deemed tendered, to the Remarketing Dealer for
purchase on the Remarketing Date, except in the circumstances described under
"--Repurchase" or "-- Redemption" below. The purchase price for the tendered
Notes to be paid by the Remarketing Dealer will equal 100% of the principal
amount thereof. See "--Notification of Results; Settlement" below. When the
Notes are tendered for remarketing, the Remarketing Dealer may remarket the
Notes for its own account at varying prices to be determined by the Remarketing
Dealer at the time of each sale. From and after the Remarketing Date, the Notes
will bear interest at the Interest Rate to Maturity. If the Remarketing Dealer
elects to remarket the Notes, the obligation of the Remarketing Dealer to
purchase the Notes on the Remarketing Date is subject to, among other things,
the conditions that, since the Notification Date, no material adverse change in
the condition of the Operating Partnership and its subsidiaries, considered as
one enterprise, shall have occurred and that no Event of Default (as defined in
the Indenture), or any event which, with the giving of notice or passage of
time, or both, would constitute an Event of Default, with respect to the Notes
shall have occurred and be continuing. If for any reason the Remarketing Dealer
does not purchase all tendered Notes on the Remarketing Date, the Operating
Partnership will be required to repurchase the Notes as a whole from the
Beneficial Owners thereof at a price equal to the principal amount thereof plus
all accrued and unpaid interest, if any, on the Notes to the Remarketing Date.
See "--Repurchase" below.
The Interest Rate to Maturity shall be determined by the Remarketing
Dealer by 3:30 p.m., New York City time, on the third Business Day immediately
preceding the Remarketing Date (the "Determination Date") to the nearest one
hundred-thousandth (0.00001) of one percent per annum and will be equal to
5.507% (the "Base Rate") plus the Applicable Spread (as defined below) which
will be based on the Dollar Price (as defined below) of the Notes. The Interest
Rate to Maturity announced by the Remarketing Dealer, absent manifest error,
shall be binding and conclusive upon the Beneficial Owners and Holders of the
Notes, the Operating Partnership and the Trustee.
The "Applicable Spread" will be the lowest bid indication, expressed as a
spread (in the form of a percentage or in basis points) above the Base Rate,
obtained by the Remarketing Dealer on the Determination Date from the bids
quoted by five Reference Corporate Dealers (as defined below) for the full
aggregate principal amount of the Notes at the Dollar Price, but assuming (i)
an issue date equal to the Remarketing Date, with settlement on such date
without accrued interest, (ii) a maturity date equal to the Stated Maturity
Date of the Notes, and (iii) a stated annual interest rate, payable
semiannually on each Interest Payment Date, equal to the Base Rate plus the
spread bid by the applicable Reference Corporate Dealer. If fewer than five
Reference Corporate Dealers bid as described above, then the Applicable Spread
shall be the lowest of such bid indications obtained as described above.
"Dollar Price" means, with respect to the Notes, the present value as
determined by the Remarketing Dealer, as of the Remarketing Date, of the
Remaining Scheduled Payments (as defined below) discounted to the Remarketing
Date, on a semiannual basis (assuming a 360-day year consisting of twelve
30-day months), at the Treasury Rate (as defined below).
"Reference Corporate Dealers" means leading dealers of publicly traded
debt securities of the Operating Partnership in The City of New York (which may
include the Remarketing Dealer or one of its affiliates) selected by the
Remarketing Dealer.
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"Treasury Rate" means, with respect to the Remarketing Date, the rate per
annum equal to the semiannual equivalent yield to maturity or interpolated (on
a day count basis) yield to maturity of the Comparable Treasury Issues (as
defined below), assuming a price for the Comparable Treasury Issues (expressed
as a percentage of its principal amount), equal to the Comparable Treasury
Price (as defined below) for such Remarketing Date.
"Comparable Treasury Issues" means the United States Treasury security or
securities selected by the Remarketing Dealer as having an actual or
interpolated maturity or maturities comparable to the remaining term of the
Notes being purchased.
"Comparable Treasury Price" means, with respect to the Remarketing Date,
(a) the offer prices for the Comparable Treasury Issues (expressed in each case
as a percentage of its principal amount) on the Determination Date, as set
forth on "Telerate Page 500" (or such other page as may replace Telerate Page
500) or (b) if such page (or any successor page) is not displayed or does not
contain such offer prices on such Determination Date, (i) the average of the
Reference Treasury Dealer Quotations for such Remarketing Date, after excluding
the highest and lowest of such Reference Treasury Dealer Quotations, or (ii) if
the Remarketing Dealer obtains fewer than four such Reference Treasury Dealer
Quotations, the average of all such Reference Treasury Dealer Quotations.
"Telerate Page 500" means the display designated as "Telerate Page 500" on Dow
Jones Markets Limited (or such other page as may replace Telerate Page 500 on
such service) or such other service displaying the offer prices specified in
(a) above as may replace Dow Jones Markets Limited.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and the Remarketing Date, the offer prices for the
Comparable Treasury Issues (expressed in each case as a percentage of its
principal amount) quoted to the Remarketing Dealer by such Reference Treasury
Dealer by 3:30 p.m., New York City time, on the Determination Date.
"Reference Treasury Dealer" means each of Credit Suisse First Boston
Corporation, Lehman Brothers Inc., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Morgan Stanley & Co. Incorporated and Salomon Brothers Inc (or
their respective affiliates which are primary U.S. Government securities
dealers) and their respective successors; provided, however, that if any of the
foregoing or their affiliates shall cease to be a primary U.S. Government
securities dealer in The City of New York (a "Primary Treasury Dealer"), the
Remarketing Dealer shall substitute therefor another Primary Treasury Dealer.
"Remaining Scheduled Payments" means, with respect to the Notes, the
remaining scheduled payments of the principal thereof and interest thereon,
calculated at the Base Rate only, that would be due after the Remarketing Date
to and including the Stated Maturity Date, as determined by the Remarketing
Dealer; provided, however, that if the Remarketing Date is not an Interest
Payment Date with respect to the Notes, the amount of the next succeeding
scheduled interest payment thereon, calculated at the Base Rate only, will be
reduced by the amount of interest accrued thereon, calculated at the Base Rate
only, to the Remarketing Date.
Notification of Results-Settlement. Provided the Remarketing Dealer has
previously notified the Operating Partnership and the Trustee on the
Notification Date of its intention to purchase all tendered Notes on the
Remarketing Date, the Remarketing Dealer will notify the Operating Partnership,
the Trustee and DTC by telephone, confirmed in writing (which may include
facsimile or other electronic transmission), by 4:00 p.m., New York City time,
on the Determination Date, of the Interest Rate to Maturity. All of the
tendered Notes will be automatically delivered to the account of the Trustee,
by book-entry through DTC pending payment of the purchase price therefor, on
the Remarketing Date.
If the Remarketing Dealer purchases the tendered Notes on the Remarketing
Date, the Remarketing Dealer will make or cause the Trustee to make payment to
the DTC Participant of each tendering Beneficial Owner of Notes, by book-entry
through DTC no later than the close of business on the Remarketing Date against
delivery through DTC of such Beneficial Owner's tendered Notes, of 100% of the
principal amount of the tendered Notes that have been purchased for remarketing
by the Remarketing Dealer. If the Remarketing Dealer does not purchase all of
the Notes on the Remarketing Date, it will be the obligation of the Operating
Partnership to make or cause to be made such payment for the Notes, as
described below under "--Repurchase." In any case, the Operating Partnership
will make or cause the Trustee to make payment of interest to each Beneficial
Owner of Notes due on the Remarketing Date by book-entry through DTC no later
than the close of business on the Remarketing Date.
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The transactions described above will be executed on the Remarketing Date
through DTC in accordance with the procedures of DTC, and the accounts of the
respective DTC Participants will be debited and credited and the Notes
delivered by book-entry as necessary to effect the purchases and sales thereof.
Transactions involving the sale and purchase of Notes remarketed by the
Remarketing Dealer on and after the Remarketing Date will settle in immediately
available funds through DTC's Same-Day Funds Settlement System.
The tender and settlement procedures described above, including provisions
for payment by purchasers of Notes in the remarketing or for payment to selling
Beneficial Owners of tendered Notes, may be modified to the extent required by
DTC or to the extent required to facilitate the tender and remarketing of Notes
in certificated form, if the book-entry system is no longer available for the
Notes at the time of the remarketing. In addition, the Remarketing Dealer may,
in accordance with the terms of the Indenture, modify the tender and settlement
procedures set forth above in order to facilitate the tender and settlement
process.
As long as DTC's nominee holds the certificate representing any Notes in
the book-entry system of DTC, no certificates for such Notes will be delivered
by any selling Beneficial Owner to reflect any transfer of such Notes effected
in the remarketing. In addition, under the terms of the Notes and the
Remarketing Agreement (described below), the Operating Partnership has agreed
that, notwithstanding any provision to the contrary set forth in the Indenture,
(i) it will use its best efforts to maintain the Notes in book-entry form with
DTC or any successor thereto and to appoint a successor depositary to the
extent necessary to maintain the Notes in book-entry form, and (ii) it will
waive any discretionary right it otherwise has under the Indenture to cause the
Notes to be issued in certificated form.
For further information with respect to transfers and settlement through
DTC, see "Description of Debt Securities" in the accompanying Prospectus.
The Remarketing Dealer. The Operating Partnership and the Remarketing
Dealer are entering into a Remarketing Agreement, the general terms and
provisions of which are summarized below.
The Remarketing Dealer will not receive any fees or reimbursement of
expenses from the Operating Partnership in connection with the remarketing.
The Operating Partnership will agree to indemnify the Remarketing Dealer
against certain liabilities, including liabilities under the Securities Act of
1933 (the "Securities Act"), arising out of or in connection with its duties
under the Remarketing Agreement.
If the Remarketing Dealer elects to remarket the Notes as described
herein, the obligation of the Remarketing Dealer to purchase Notes from
tendering Beneficial Owners of Notes will be subject to several conditions
precedent set forth in the Remarketing Agreement, including the conditions
that, since the Notification Date, no material adverse change in the condition
of the Operating Partnership and its subsidiaries, considered as one
enterprise, shall have occurred and that no Event of Default (as defined in the
Indenture), or any event which, with the giving of notice or passage of time,
or both, would constitute an Event of Default, with respect to the Notes shall
have occurred and be continuing. In addition, the Remarketing Agreement will
provide for the termination thereof, or redetermination of the Interest Rate to
Maturity, by the Remarketing Dealer on or before the Remarketing Date, upon the
occurrence of certain events as set forth in the Remarketing Agreement.
No Holder or Beneficial Owner of any Notes shall have any rights or claims
under the Remarketing Agreement or against the Remarketing Dealer as a result
of the Remarketing Dealer not purchasing such Notes.
The Remarketing Agreement will also provide that the Remarketing Dealer
may resign at any time as Remarketing Dealer, such resignation to be effective
ten days after the delivery to the Operating Partnership and the Trustee of
notice of such resignation. In such case, it shall be the sole obligation of
the Operating Partnership to appoint a successor Remarketing Dealer.
The Remarketing Dealer, in its individual or any other capacity, may buy,
sell, hold and deal in any of the Notes. The Remarketing Dealer may exercise
any vote or join in any action which any Beneficial Owner of Notes may be
entitled to exercise or take with like effect as if it did not act in any
capacity under the Remarketing Agreement. The Remarketing
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Dealer, in its individual capacity, either as principal or agent, may also
engage in or have an interest in any financial or other transaction with the
Operating Partnership as freely as if it did not act in any capacity under the
Remarketing Agreement.
REPURCHASE
If (i) the Remarketing Dealer for any reason does not notify the Operating
Partnership of the Interest Rate to Maturity by 4:00 p.m., New York City time,
on the Determination Date, or (ii) prior to the Remarketing Date, the
Remarketing Dealer has resigned and no successor has been appointed on or
before the Determination Date, or (iii) since the Notification Date, a material
adverse change in the condition of the Operating Partnership and its
subsidiaries, considered as one enterprise, shall have occurred or an Event of
Default (as defined in the Indenture), or any event which, with the giving of
notice or passage of time, or both, would constitute an Event of Default, with
respect to the Notes shall have occurred and be continuing, or any other event
constituting a termination event under the Remarketing Agreement shall have
occurred, or (iv) the Remarketing Dealer elects not to remarket the Notes, or
(v) the Remarketing Dealer for any reason does not purchase all tendered Notes
on the Remarketing Date, the Operating Partnership will repurchase the Notes as
a whole on the Remarketing Date at a price equal to 100% of the principal
amount of the Notes plus all accrued and unpaid interest, if any, on the Notes
to the Remarketing Date. In any such case, payment will be made by the
Operating Partnership to the DTC Participant of each tendering Beneficial Owner
of Notes, by book-entry through DTC no later than the close of business on the
Remarketing Date against delivery through DTC of such Beneficial Owner's
tendered Notes.
REDEMPTION
If the Remarketing Dealer elects to remarket the Notes on the Remarketing
Date, the Notes will be subject to mandatory tender to the Remarketing Dealer
for remarketing on such date, in each case subject to the conditions described
above under "--Tender of Notes; Remarketing" and "--Repurchase" and to the
Operating Partnership's right to redeem the Notes from the Remarketing Dealer
as described in the next sentence. The Operating Partnership will notify the
Remarketing Dealer and the Trustee, not later than the close of business on the
Business Day immediately preceding the Determination Date, if the Operating
Partnership irrevocably elects to exercise its right to redeem the Notes, in
whole but not in part, from the Remarketing Dealer on the Remarketing Date at
the Optional Redemption Price.
The "Optional Redemption Price" shall be the greater of (i) 100% of the
principal amount of the Notes and (ii) the sum of the present values of the
Remaining Scheduled Payments thereon, as determined by the Remarketing Dealer,
discounted to the Remarketing Date on a semiannual basis (assuming a 360-day
year consisting of twelve 30-day months) at the Treasury Rate, plus in either
case accrued and unpaid interest from the Remarketing Date on the principal
amount being redeemed to the date of redemption. If the Operating Partnership
elects to redeem the Notes, it shall pay the redemption price therefor in
same-day funds by wire transfer to an account designated by the Remarketing
Dealer on the Remarketing Date.
CERTAIN COVENANTS
Reference is made to the sections entitled "Description of Debt
Securities--Certain Covenants" and "--Additional Covenants and/or Modifications
to the Covenants Described Above" in the accompanying Prospectus for a
description of the covenants applicable to the Notes. 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.
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following discussion summarizes certain federal income tax
considerations relating to the acquisition, ownership and disposition of the
Notes. The following description is for general information only, is not
exhaustive of all possible tax considerations, and is not intended to be and
should not be construed as tax advice. For example, this summary addresses only
Notes held as capital assets by initial holders purchasing Notes at the "issue
price" (generally, the first price to the public (excluding bond houses,
brokers or similar persons or organizations acting as underwriters, placement
agents or wholesalers) at which a substantial amount of Notes is sold for
money). This summary does not purport to deal with persons in special tax
situations, such as financial institutions, insurance companies, regulated
investment companies, dealers in securities or currencies, persons holding the
Notes as a hedge against currency risk or as a position in a "straddle" for
U.S. tax purpose, persons whose functional currency is not the U.S. dollar,
tax-exempt organizations or foreign corporations and persons who are not
citizens or residents of the United States (except as described under the
heading "--Taxation of Non-U.S. Holders of Notes"). In addition, this summary
only addresses the federal income tax consequences of the Notes until the
Remarketing Date. It does not give a detailed discussion of any state, local or
foreign tax consequences and does not discuss all aspects of federal income
taxation that might be relevant to a specific holder in light of its particular
investment or tax circumstances.
As used herein, the term "U.S. Holder" means a holder of Notes who (for
United States federal income tax purposes) (i) is a citizen or resident of the
United States, (ii) is a corporation, partnership, or other entity created or
organized in or under the laws of the United States or of any political
subdivision thereof, (iii) is an estate the income of which is subject to
United States federal income taxation regardless of its source or (iv) is a
trust whose administration is subject to the primary supervision of a United
States court and which has one or more United States persons who have the
authority to control all substantial decisions of the trust. The term "Non-U.S.
Holder" means a holder of Notes who is not a U.S. Holder.
The information in this section is based on the Internal Revenue Code of
1986, as amended (the "Code"), current, temporary and proposed Treasury
Regulations thereunder, the legislative history of the Code, current
administrative interpretations and practices of the IRS and court decisions,
all as of the date hereof. No assurance can be given that future legislation,
Treasury Regulations, administrative interpretations and court decisions will
not significantly change current law or adversely affect existing
interpretations of current law. Any such change could apply retroactively to
transactions preceding the date of the change. Thus, no assurance can be
provided that the statements set forth herein (which do not bind the IRS or the
courts) will not be challenged by the IRS or will be sustained by a court if so
challenged.
EACH PROSPECTIVE PURCHASER IS URGED TO CONSULT WITH ITS OWN TAX ADVISOR
REGARDING THE SPECIFIC TAX CONSEQUENCES TO IT OF THE ACQUISITION, OWNERSHIP AND
DISPOSITION OF NOTES IN LIGHT OF ITS SPECIFIC TAX AND INVESTMENT SITUATIONS AND
THE SPECIFIC FEDERAL, STATE, LOCAL AND FOREIGN TAX LAWS APPLICABLE TO IT.
TAXATION OF U.S. HOLDERS OF NOTES
Interest on Notes. The federal income tax treatment of debt obligations
such as the Notes is not certain. Because the Notes are subject to mandatory
tender on the Remarketing Date, the Operating Partnership intends to treat the
Notes as maturing on the Remarketing Date for federal income tax purposes. By
purchasing the Notes, the U.S. Holder agrees to follow such treatment for
federal income tax purposes. There can be no assurance that the Internal
Revenue Service ("IRS") will agree with the Operating Partnership's treatment
of the Notes and it is possible that the IRS could assert another treatment.
For instance, it is possible that the IRS could seek to treat the Notes as
maturing on the Stated Maturity Date. See "--Possible Characterization as
Contingent Interest" below.
In accordance with such treatment, interest on the Notes will constitute
"qualified stated interest" and generally will be taxable to a U.S. Holder as
ordinary interest income at the time such payments are accrued or received (in
accordance with the U.S. Holder's regular method of tax accounting). Under the
foregoing, since the Notes are being issued to the Holder at par value, the
Notes will not be treated as having original issue discount.
Sale, Exchange or Retirement of Notes. Under the foregoing treatment, upon
the sale, exchange or retirement of a Note, a U.S. Holder generally will
recognize taxable gain or loss equal to the difference between the amount
realized on the sale, exchange or retirement (other than amounts representing
accrued and unpaid interest) and such U.S. Holder's adjusted tax basis in the
Note. A U.S. Holder's adjusted tax basis in a Note generally will equal such
U.S. Holder's initial investment in the Note (increased by accrued market
discount, if any, if the U.S. Holder has included such market discount in
income) and decreased by
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the amount of any payments, other than qualified stated interest payments,
received and amortizable bond premium taken with respect to such Note. Such
gain or loss will be capital if the Note is held as a capital asset. In the
case of a U.S. Holder who is an individual or an estate or trust, such gain or
loss will be long-term capital gain or loss, subject to a 28% tax rate, if the
Notes have been held for more than one year but not more than 18 months, and
long-term capital gain or loss, subject to a 20% tax rate, if the Notes have
been held for more than 18 months. In the case of a U.S. Holder that is a
corporation, such gain or loss will be long-term capital gain or loss if the
Notes have been held for more than one year.
Possible Characterization as Contingent Interest. It is possible that the
IRS might seek to treat the Notes as maturing on the Stated Maturity Date
(instead of on the Remarketing Date, as discussed under "--Interest on Notes"
above) for federal income tax purposes. Pursuant to such treatment, since the
Interest Rate to Maturity will not be determined until the Determination Date,
the Notes would be treated as having contingent interest under the Code. In
such event, under Treasury Regulations governing debt instruments that provide
for contingent payments (the "Contingent Payment Regulations"), the Operating
Partnership would be required to construct a projected payment schedule for the
Notes, based upon the Operating Partnership's current borrowing costs for
comparable debt instruments of the Operating Partnership, from which an
estimated yield on the Notes would be calculated. A U.S. Holder would be
required to include in income original issue discount in an amount equal to the
sum of the daily portions of original issue discount on the Notes that would be
deemed to accrue at this estimated yield for each day during the U.S. Holder's
taxable year on which the U.S. Holder holds the Notes. The amount of original
issue discount that would be deemed to accrue in any accrual period would equal
the product of this estimated yield (properly adjusted for the length of the
accrual period) and the Notes' adjusted issue price (as defined below) at the
beginning of the accrual period. The daily portions of original issue discount
would be determined by allocating to each day in the accrual period the ratable
portion of the original issue discount that would be deemed to accrue during
the accrual period. In general, for these purposes, a Note's adjusted issue
price would equal the Note's issue price increased by the original issue
discount previously accrued on the Note, and reduced by all payments made on
the Note. As a result of the application of the Contingent Payment Regulations,
it is possible that a U.S. Holder would be required to include original issue
discount in income in excess of actual cash payments received for certain
taxable years.
Under the Contingent Payment Regulations, upon the sale or exchange of a
Note (including a sale pursuant to the mandatory tender on the Remarketing
Date), a U.S. Holder would be required to recognize taxable income or loss in
an amount equal to the difference, if any, between the amount realized by the
U.S. Holder upon such sale or exchange and the U.S. Holder's adjusted tax basis
in the Note as of the date of disposition. A U.S. Holder's adjusted tax basis
in a Note generally would equal such U.S. Holder's initial investment in the
Note increased by any original issue discount previously included in income
with respect to the Note by the U.S. Holder, and decreased by any payments
received by the U.S. Holder. Any such taxable income generally would be treated
as ordinary income. Any such taxable loss generally would be treated (i) first
as an offset to any interest otherwise includible in income by the U.S. Holder
with respect to the Notes for the taxable year in which the sale or exchange
occurs to the extent of the amount of such includible interest and (ii) then as
an ordinary loss to the extent of the U.S. Holder's total interest inclusions
on the Notes in previous taxable years. Any remaining loss in excess of the
amounts described in (i) and (ii) above generally would be treated as
short-term, mid-term, or long term-capital loss (depending upon the U.S.
Holder's holding period for the Notes). All amounts includible in income by a
U.S. Holder as ordinary interest pursuant to the Contingent Payment Treasury
Regulations would be treated as original issue discount.
TAXATION OF NON-U.S. HOLDERS OF NOTES
A Non-U.S. Holder will not be subject to federal income taxes on payments
of principal, premium (if any) or interest on a Note unless such Non-U.S.
Holder is a direct or indirect 10% or greater partner of the Operating
Partnership, a controlled foreign corporation related to the Operating
Partnership or a bank receiving interest described in section 881(c)(3)(A) of
the Code, and provided that the interest is not effectively connected with the
conduct of a trade or business in the United States by the Non-U.S. Holder. To
qualify for the exemption from taxation, the last United States payor in the
chain of payment prior to payment to a Non-U.S. Holder (the "Withholding
Agent") must have received in the year in which a payment of interest or
principal occurs, or in either of the two preceding calendar years, a statement
that (i) is signed by the beneficial owner of the Notes under penalties of
perjury, (ii) certifies that such owner is not a U.S. Holder and (iii) provides
the name and address of the beneficial owner. The statement may be made on an
IRS Form W-8 or a substantially similar form, and the beneficial owner must
inform the Withholding Agent of any change in the information on the statement
within 30 days of such change. If a Note is held through a securities clearing
organization or certain other financial institutions, the organization or
institution may provide a signed statement to the Withholding Agent. However,
in such case, the signed statement must be accompanied by a copy of the IRS
Form W-8 or the substitute form provided by the beneficial owner to the
organization or institution. The Treasury Department is
S-19
<PAGE> 20
considering implementation of further certification requirements aimed at
determining whether the issuer of a debt obligation is related to holders
thereof.
Generally, a Non-U.S. Holder will not be subject to federal income taxes
on any amount which constitutes gain upon retirement or disposition of a Note,
provided the gain is not effectively connected with the conduct of a trade or
business in the United States by the Non-U.S. Holder. Certain other exceptions
may be applicable, and a Non-U.S. Holder should consult its tax advisor in this
regard.
If a Non-U.S. Holder of a Note is engaged in a trade or business in the
United States and interest or gain on the Note is effectively connected with
the conduct of such trade or business, such holder, although exempt from U.S.
federal withholding tax as discussed in the preceding paragraph (or by reason
of the delivery of properly completed Form 4224), is subject to U.S. federal
income tax on such interest and on any gain realized on the sale, exchange or
other dispositions of a Note in the same manner as if it were a U.S. Holder. In
addition, if such Non-U.S. Holder is a foreign corporation, it may be subject
to a branch profits tax equal to 30% of its effectively connected earnings and
profits for that taxable year, unless it qualifies for a lower rate under an
applicable income tax treaty.
The Notes will not be includible in the estate of a Non-U.S. Holder unless
the individual is a direct or indirect 10% or greater partner of the Operating
Partnership or, at the time of such individual's death, payments in respect of
the Notes would have been effectively connected with the conduct by such
individual of a trade or business in the United States.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Backup withholding of federal income tax at a rate of 31% may apply to
payments made in respect of the Notes to registered owners who are not "exempt
recipients" and who fail to provide certain identifying information (such as
the registered owner's taxpayer identification number) in the required manner.
Generally, individuals are not exempt recipients, whereas corporations and
certain other entities generally are exempt recipients. Payments made in
respect of the Notes to a U.S. Holder must be reported to the IRS, unless the
U.S. Holder is an exempt recipient or establishes an exemption. Compliance with
the identification procedures described in the preceding section would
establish an exemption from backup withholding for those Non-U.S. Holders who
are not exempt recipients.
In addition, upon the sale of a Note to (or through) a broker, the broker
must withhold 31% of the entire purchase price, unless either (i) the broker
determines that the seller is a corporation or other exempt recipient or (ii)
the seller provides, in the required manner, certain identifying information
and, in the case of a Non-U.S. Holder, certifies that such seller is a Non-U.S.
Holder (and certain other conditions are met). Such a sale must also be
reported by the broker to the IRS, unless either (i) the broker determines that
the seller is an exempt recipient or (ii) the seller certifies its non-U.S.
status (and certain other conditions are met). Certification of the registered
owner's non-U.S. status would be made normally on an IRS Form W-8 under
penalties of perjury, although in certain cases it may be possible to submit
other documentary evidence.
Any amounts withheld under the backup withholding rules from a payment to
a beneficial owner would be allowed as a refund or a credit against such
beneficial owner's United States Federal income tax provided the required
information is furnished to the IRS.
The United States Treasury has recently finalized regulations regarding
the withholding and information reporting rules discussed above. In general,
these regulations do not alter the substantive withholding and information
reporting requirements but unify certification procedures and forms and clarify
and modify reliance standards. These regulations generally are effective for
payments made after December 31, 1999, subject to certain transition rules.
Valid withholding certificates that are held on December 31, 1999, will remain
valid until the earlier of December 31, 2000 or the date of expiration of the
certificate under rules currently in effect (unless otherwise invalidated due
to changes in the circumstances of the person whose name is on such
certificate). A Non-U.S. Holder should consult its own advisor regarding the
effect of the new Treasury Regulations.
S-20
<PAGE> 21
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
and the Code impose certain restrictions on (a) employee benefit plans (as
defined in Section 3(3) of ERISA), (b) plans described in Section 4975 (e) (1)
of the Code, including individual retirement accounts or Keogh plans, (c) any
entities whose underlying assets include plan assets by reason of a plan's
investment in such entities (each a "Plan") and (d) persons who have certain
specified relationships to such Plans ("Parties-in-Interest" under ERISA and
"Disqualified Persons" under the Code). ERISA also imposes certain duties on
persons who are fiduciaries of Plans subject to ERISA and prohibits certain
transactions between a Plan and Parties-in-Interest or Disqualified Persons
with respect to such Plans.
The Operating Partnership and the Remarketing Dealer, because of their
activities or the activities of their respective affiliates, may be considered
to be Parties-in-Interest or Disqualified Persons with respect to certain
Plans. If the Notes are acquired by a Plan with respect to which the Operating
Partnership or the Remarketing Dealer is, or subsequently becomes, a
Party-in-Interest or Disqualified Person, the purchase, holding or sale of
Notes to the Remarketing Dealer could be deemed to be a direct or indirect
violation of the Prohibited Transaction rules of ERISA and the Code unless such
transaction were subject to one or more statutory or administrative exemptions
such as Prohibited Transaction Class Exemption ("PTCE") 75-1, which exempts
certain transactions involving employee benefit plans and certain
broker-dealers, reporting dealers and banks; PTCE 90-1, which exempts certain
transactions between insurance company pooled separate accounts and
Parties-in-Interest or Disqualified Persons; PTCE 91-38, which exempts certain
transactions between bank collective investment funds and Parties-in-Interest
or Disqualified Persons; PTCE 84-14, which exempts certain transactions
effected on behalf of a Plan by a "qualified professional asset manager;" PTCE
95-60, which exempts certain transactions between insurance company general
accounts and Parties-in-Interest or Disqualified Persons; or PTCE 96-23, which
exempts certain transactions effected on behalf of a Plan by an "in-house asset
manager." Even if the conditions specified in one or more of these exemptions
are met, the scope of relief provided by these exemptions will not necessarily
cover all acts in relation to an acquisition or sale of Notes that might be
construed as prohibited transactions.
Accordingly, prior to making an investment in the Notes, a Plan should
determine whether the Operating Partnership or the Remarketing Dealer is a
Party-in-Interest or Disqualified Person with respect to such Plan and, if so,
whether such transaction is subject to one or more statutory or administrative
exemptions, including those described above.
Prior to making an investment in the Notes, Plans should consult with
their legal advisers concerning the impact of ERISA and the Code and the
potential consequences of such investment with respect to their specific
circumstances. Moreover, each Plan fiduciary should take into account, among
other considerations, whether the fiduciary has the authority to make the
investment on behalf of the Plan; whether the investment constitutes a direct
or indirect transaction with a Party-in-Interest or a Disqualified Person; and
whether under the general fiduciary standards of investment procedure and
diversification an investment in the Notes is appropriate for the Plan, taking
into account, among other things, the overall investment policy of the Plan and
the composition of the Plan's investment portfolio.
S-21
<PAGE> 22
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 each of
the Underwriters named below, and each of the Underwriters named below has
severally agreed to purchase from the Operating Partnership, the respective
principal amount of Notes set forth opposite its name below.
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
UNDERWRITERS OF NOTES
----------- ----------------
<S> <C>
Merrill Lynch, Pierce, Fenner
Incorporated............................. $210,000,000
NationsBanc Montgomery Securities LLC ................ 45,000,000
Salomon Brothers Inc ................................. 45,000,000
------------
TOTAL.................................... $300,000,000
============
</TABLE>
In the Purchase Agreement, the several Underwriters have agreed, subject
to the terms and conditions set forth therein, to purchase all of the Notes
offered hereby if any Notes are purchased. The Underwriters have advised the
Operating Partnership that the Underwriters propose to offer the Notes from
time to time for sale in negotiated transactions or otherwise, at prices
relating to prevailing market prices determined at the time of sale. The
Underwriters may effect such transactions by selling Notes to or through
dealers and such dealers may receive compensation in the form of underwriting
discounts, concessions or commissions from the Underwriters and any purchasers
of Notes for whom they may act as agent. The Underwriters and any dealers that
participate with the Underwriters in the distribution of the Notes may be
deemed to be underwriters, and any discounts or commissions received by them
and any profit on the resale of Notes by them may be deemed to be underwriting
compensation.
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.
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 the Underwriters intend to make a market in the
Notes as permitted by applicable laws and regulations, but the Underwriters are
not obligated to do so and may discontinue market-making at any time without
notice. No assurance can be given as to the liquidity of the trading market for
the Notes.
The Underwriters are permitted to engage in certain transactions that
maintain or otherwise affect the price of the Notes. Such transactions may
include over-allotment transactions and purchases to cover short positions
created by the Underwriters in connection with the Offering. If the
Underwriters create a short position in the Notes in connection with the
Offering, i.e., if they sell Notes in an aggregate principal amount exceeding
that set forth on the cover page of this Prospectus Supplement, the
Underwriters may reduce that short position by purchasing Notes in the open
market. In general, purchases of a security to reduce a short position could
cause the price of the security to be higher than it might be in the absence of
such purchases.
Neither the Operating Partnership nor the Underwriters makes any
representation or prediction as to the direction or magnitude of any effect
that the transactions described above may have on the price of the Notes. In
addition, neither the Operating Partnership nor the Underwriters makes any
representation that the Underwriters will engage in such transactions or that
such transactions, once commenced, will not be discontinued without notice.
The Underwriters from time to time provide investment banking and
financial advisory services to the Company and other entities owned or
controlled by Mr. Zell, and affiliates of the Underwriters from time to time
provide financing to such entities.
The Operating Partnership has purchased, and may purchase in the future,
multifamily properties from affiliates of Merrill Lynch, Pierce, Fenner &
Smith Incorporated.
S-22
<PAGE> 23
PROSPECTUS
- ----------
$1,275,000,000
ERP OPERATING LIMITED PARTNERSHIP
DEBT SECURITIES
----------------
ERP Operating Limited Partnership, an Illinois 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 $1,275,000,000, 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 teens to be set forth in a
supplement to this Prospectus (each 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 holders of such Debt
Securities, 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 NOR HAS THE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
______________________________________________
THE DATE OF THIS PROSPECTUS IS APRIL 6, 1998.
<PAGE> 24
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this Prospectus and the documents incorporated by
reference herein and any accompanying Prospectus Supplement, including those
set forth in "Use of Proceeds" herein and "Risk Factors" incorporated by
reference from the Operating Partnership's Annual Report on Form 10-K for the
year ended December 31, 1997, constitute "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995 (the
"Reform Act"). Such forwarding-looking statements involve known and unknown
risks, uncertainties and other factors which may cause the actual results,
performance or achievements of the Company or industry results to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements. Such factors include, among others,
the following: general economic and business conditions which will, among other
things, affect demand for multifamily properties, availability and credit
worthiness of prospective tenants, lease rents and the availability of
financing, adverse changes in the real estate markets including, among other
things, competition with other companies, risks of real estate acquisition,
governmental actions and initiatives, and environmental/safety requirements.
AVAILABLE INFORMATION
The Operating Partnership is subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). The Registration
Statement (defined 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 Commission maintains a Web site (http://www.sec.gov) that contains
reports, proxy and information statements, and other information regarding
registrants, including the Operating Partnership, that file electronically with
the Commission.
The Operating Partnership has filed with the Commission a registration
statement on Form S-3 (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 or from the Commission's
Web site.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The documents listed below have been filed by the Operating Partnership
under the Exchange Act with the Commission and are incorporated herein by
reference:
a. The Operating Partnership's Annual Report on Form 10-K for the year ended
December 31, 1997.
b. The Operating Partnership's Current Reports on Form 8-K dated May 20,
1997, May 30, 1997, August 15, 1997, September 10, 1997, September 17,
1997 and October 9, 1997, and the Operating Partnership's Current Report
on Form 8-K/A dated October 9, 1997.
c. The Operating Partnership's Fourth Amended and Restated ERP Operating
Limited Partnership Agreement of Limited Partnership, filed as Exhibit 10.1
to the Operating Partnership's Quarterly Report on Form 10-Q for period
ended September 30, 1995, and the Operating Partnership's Amendment to
Fourth Amended and Restated Agreement of Limited Partnership, filed as
Exhibit 4.2 to the Operating Partnership's Current Report on Form 8-K dated
December 23, 1997.
d. The Operating Partnership's Consent Solicitation/Prospectus/Information
Statement dated November 24, 1997.
2
<PAGE> 25
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 or any accompanying Prospectus
Supplement. Subject to the foregoing, all information appearing in this
Prospectus and each accompanying Prospectus Supplement is qualified in its
entirety by the information appearing in the documents incorporated by
reference.
Copies of all 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, Suite 400, Chicago, Illinois 60606, Attention:
Cynthia McHugh (telephone number: (312) 474-1300).
3
<PAGE> 26
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, unless the context indicates otherwise. As used herein, the
term "Company" includes Equity Residential Properties Trust ("EQR") and those
entities owned or controlled by it as the survivor of the mergers between EQR
and each of Wellsford Residential Property Trust ("Wellsford") and Evans
Withycombe Residential, Inc. ("EWR") and each of EQR, Wellsford and EWR as
predecessors to the Company, unless the context indicates otherwise.
THE OPERATING PARTNERSHIP
GENERAL
The Debt Securities offered hereby are being issued by the Operating
Partnership which is managed by EQR, its general partner. The Company, one of
the largest publicly traded real estate investment trusts ("REITs")(based on the
aggregate market value of its outstanding equity capitalization), is a
self-administered and self-managed equity REIT. EQR was organized as a Maryland
real estate investment trust in March 1993 and commenced operations as a
publicly traded company on August 18, 1993 upon completion of its initial public
offering (the "IPO"). EQR 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 EQR. These
entities had been engaged in the acquisition, ownership and operation of
multifamily properties since 1969. In May 1997, EQR completed the acquisition of
the multifamily property business of Wellsford through the tax-free merger of
the Company and Wellsford. In December 1997, EQR completed the acquisition of
the multifamily property business of EWR through the tax-free merger of EWR and
the Company. The Company's senior executives average over 24 years of experience
in the multifamily property business.
All of the Company's interests in its multifamily properties (the
"Properties") are held or controlled directly or indirectly by, and
substantially all of its operations relating to the Properties are conducted
through, the Operating Partnership.
The Operating Partnership currently has eight classes of limited
partnership interests outstanding: (i) partnership interests ("OP Units"), which
may be exchanged by the holders thereof for either common shares of beneficial
interest of the Company, $.01 par value per share ("Common Shares"), on a
one-for-one basis or, at the Company's option, cash; (ii) 9 3/8% Series A
Cumulative Redeemable Preference Units ("9 3/8% Series A Preference Units");
(iii) 9 1/8% Series B Cumulative Redeemable Preference Units ("9 1/8% Series B
Preference Units"); (iv) 9 1/8% Series C Cumulative Redeemable Preference Units
("9 1/8% Series C Preference Units"); (v) 8.60% Series D Cumulative Redeemable
Preference Units ("8.60% Series D Preference Units"); (vi) Series E Cumulative
Convertible Preference Units ("Series E Preference Units"), (vii) 9.65% Series F
Cumulative Redeemable Preference Units ("9.65% Series F Preference Units") and
(viii) 7 1/4% Series G Convertible Cumulative Preference Units ("7 1/4% Series G
Preference Units"). The 9 3/8% Series A Preference Units, the 9 1/8% Series B
Preference Units, the 9 1/8% Series C Preference Units, the 8.60% Series D
Preference Units, the Series E Preference Units, the 9.65% Series F Preference
Units and the 7 1/4% Series G Preference Units (collectively, the "Outstanding
Preference Units") are owned by the Company and mirror the payments of
distributions, including accrued and unpaid distributions upon redemption, and
of the liquidating preference amount of the Company's 9 3/8% Series A Cumulative
Redeemable Preferred Shares of Beneficial Interest, $.01 par value per share
(the "Series A Preferred Shares"), the Company's 9 1/8% Series B Cumulative
Redeemable Preferred Shares of Beneficial Interest, $.01 par value per share
(the "Series B Preferred Shares"), the Company's 9 1/8% Series C Cumulative
Redeemable Preferred Shares of Beneficial Interest, $.01 par value per share
(the "Series C Preferred Shares"), the Company's 8.60% Series D Cumulative
Redeemable Preferred Shares of Beneficial Interest, $.01 par value per share
(the "Series D Preferred Shares"), the Company's Series E Cumulative Convertible
Preferred Shares of Beneficial Interest, $.01 par value per share (the "Series E
Preferred Shares"), the Company's 9.65% Series F Preferred Shares of Beneficial
Interest, $.01 par value per share (the "Series F Preferred Shares"), and the
Company's 7 1/4% Series G Convertible Cumulative Preferred Shares of Beneficial
Interest, $.01 par value per share (the "Series G Preferred Shares" and,
collectively with the Series A Preferred Shares, the Series B Preferred Shares,
the Series C Preferred Shares, the Series D Preferred Shares, the Series E
Preferred Shares and the Series F Preferred Shares, the "Outstanding Preferred
Shares"), respectively. The Company controls the Operating Partnership as the
sole general partner and, as of March 31, 1998, owned approximately 91% of all
of the Operating Partnership's outstanding partnership interests, excluding the
Outstanding Preference Units. It is the Company's policy that Equity Residential
Properties Trust shall not incur indebtedness other than short-term trade,
employee compensation, dividends payable or similar indebtedness that will be
paid in the ordinary course of business, and that indebtedness shall instead be
incurred by the Operating Partnership to the extent necessary to fund the
business activities conducted by the Operating Partnership and its subsidiaries.
The Operating Partnership's and the Company's corporate headquarters and
executive offices are located at Two North Riverside Plaza, Suite 400, Chicago,
Illinois 60606, and its telephone number is (312) 474-1300. In addition, the
Operating Partnership has 30
4
<PAGE> 27
management offices in the following cities: Chicago, Illinois; Denver, Colorado;
Seattle, Federal Way and Redmond, Washington; Bethesda, Maryland; Atlanta,
Georgia; Las Vegas, Nevada; Scottsdale and Tucson, Arizona; Portland, Oregon;
Dallas, Houston and San Antonio, Texas; Irvine, Pleasant Hill and Stockton,
California; Ypsilanti, Michigan; Charlotte and Raleigh, North Carolina; Tampa,
Jacksonville and Ft. Lauderdale, Florida; Kansas City; Kansas; Minneapolis,
Minnesota; Louisville, Kentucky; Tulsa, Oklahoma; Boston, Massachusetts; and
Nashville and Memphis, Tennessee.
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 OF Units by allowing them to partially defer certain tax
consequences and which will allow the Operating Partnership to acquire
additional multifamily properties in transactions that may defer some or all of
the sellers' tax consequences, (ii) Equity Residential Properties Management
Corp., Equity Residential Properties Management Corp. II, Equity Residential
Properties Management Corp. III, Wellsford Holly Management, Inc. and Evans
Withycombe Management, Inc. (collectively, the "Management Corps") and Equity
Residential Properties Management Limited Partnership and Equity Residential
Properties Management Limited Partnership II (collectively, the "Management
Partnerships") 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 to third parties,
and (iii) a series of limited partnerships and limited liability companies 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.
5
<PAGE> 28
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 properties and the repayment of debt.
RATIOS OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERENCE UNIT DISTRIBUTIONS
The following table sets forth the Operating Partnership's ratios of
earnings to combined fixed charges and preference unit distributions for the
periods shown.
<TABLE>
<CAPTION>
For the Years Ended December 31,
_____________________________________
<S> <C> <C> <C> <C> <C>
1997 1996 1995 1994 1993 1992
----- ---- ---- ---- ---- ----
1.64 1.59 1.54 2.18 1.25 .91
</TABLE>
Ratio of earnings to combined fixed charges and preference unit
distributions represents the ratio of income before gain on disposition of
properties, extraordinary items and allocation to minority interests plus fixed
charges (principally interest expense incurred) to fixed charges and preference
unit distributions.
The reorganization and recapitalization of the Company and the Operating
Partnership effected in connection with the IPO in 1993 permitted the Company
and the Operating Partnership to significantly deleverage the Properties
resulting in an improved ratio of earnings to combined fixed charges and
preference unit distributions for periods subsequent to the IPO.
6
<PAGE> 29
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 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
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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 (i) the principal of (and premium and
Make-Whole Amounts (as defined below), if any) and interest, if
any, on such Debt Securities will be payable, (ii) such Debt
Securities may be surrendered for conversion or registration of
transfer or exchange and (iii) 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 United States 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 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; and
(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 United States 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
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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 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
(section 307).
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).
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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 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.
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
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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 1 5(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 pursuant to
such Section 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 1 5(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 1 5(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).
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ADDITIONAL COVENANTS AND/OR MODIFICATIONS TO THE COVENANTS DESCRIBED ABOVE
In addition to the covenants described in the section entitled "Certain
Covenants - Limitations on Incurrence of Debt" above, 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. As of December 31, 1997, the Operating Partnership's Total
Unencumbered Assets were equal to approximately 347% of the aggregate
outstanding amount of the Unsecured Debt of the Operating Partnership.
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 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.
"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.
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"Maximum Annual Service Charge" as of any date means the maximum amount
which is payable in any 12 month period for interest on Debt.
"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.
"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.
"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.
"Subsidiary" means a corporation, a limited liability company or a
partnership a majority of the outstanding voting stock, limited liability
company or partnership interests, as the case may be, of which is owned,
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,
managing members or trustees, 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).
"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 generally accepted accounting principles (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 not subject to an encumbrance determined in
accordance with generally accepted accounting principles.
"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.
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
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<PAGE> 36
as obligor guarantor on a full recourse basis, for outstanding indebtedness for
borrowed money in, or a 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 (Section 501).
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).
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.
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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 affected 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 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
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
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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 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 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 of the
Indenture 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 defease 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
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longer be applicable to such Debt Securities), the amount of Government
Obligations on deposit with the Trustee will be sufficient 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 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.
BOOK ENTRY REGISTRATION
If the applicable Prospectus Supplement so indicates, the Debt Securities
will be represented by one or more certificates (the "Global Notes"). The
Global Notes representing Debt Securities will be deposited with, or on behalf
of, The Depository Trust Company ("DTC") or other successor depository
appointed by the Operating Partnership (DTC or such other depository is herein
referred to as the "Depository") and registered in the name of the Depository
or its nominee. Unless and until it is exchanged in whole or in part for Debt
Securities in definitive form under the limited circumstances described below,
the Global Note may not be transferred except as a whole (i) by DTC for the
Global Note 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.
DTC currently limits the maximum denomination of any single Global Note to
$150,000,000. Therefore, for purposes hereof, "Global Note" refers to the
Global Note or Global Notes representing the entire issue of Debt Securities of
a particular series.
Ownership of beneficial interests in the Global Note will be limited to
persons that have accounts with DTC for the Global Note ("participants") or
persons that may hold interests through participants. Upon the issuance of the
Global Note, DTC will credit, on its book-entry registration and transfer
system, the participants' accounts with the respective principal amounts of the
Debt Securities represented by the Global Note beneficially owned by such
participants. Ownership of beneficial interests in the Global Note 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 Note.
So long as DTC or its nominee is the registered owner of the Global Note,
DTC or such nominee, as the case may be, will be considered the sole owner or
holder of the Debt Securities represented by the Global Note for all purposes
under the Indenture. Except as set forth below, owners of beneficial interests
in the Global Note will not be entitled to have the Debt Securities represented
by the Global Note registered in their names, will not receive or be entitled
to receive physical delivery of the Debt Securities in definitive form, and
will
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not be considered the owners or holders thereof under the Indenture.
Accordingly, each person owning a beneficial interest in the Global Note 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 any action of holders or if an owner of a beneficial
interest in the Global Note 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 Debt Securities represented by the
Global Note will be made to DTC or its nominee, as the case may be, as the
registered owner of the Global Note. 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 Note 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 Note, will immediately credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the Global Note as shown on the records of
DTC. The Operating Partnership also expects that payments by participants to
owners of beneficial interests in the Global Note held through such
participants will be governed by standing customer instructions and customary
practices, as is not 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 Debt Securities 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 Debt Securities in definitive
form in exchange for the Global Note. Any Debt Securities issued in definitive
form in exchange for the Global Note 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 Note.
DTC has advised the Operating Partnership of the following information
regarding DTC. DTC is a limited-purpose trust company organized under the
Banking Laws 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
Unless the applicable Prospectus Supplement so indicates, settlement for
the Debt Securities will be made by the underwriters, dealers or agents in
immediately available funds and all payments of principal and interest on the
Debt Securities 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 clearinghouse or next-day funds. In contrast, the Debt
Securities subject to settlement in immediately available funds will trade in
DTC's Same-Day Funds Settlement System until maturity or until the Debt
Securities are issued in certificated form, and secondary market trading
activity in such Debt Securities 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
Debt Securities.
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<PAGE> 41
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.
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EXPERTS
The consolidated financial statements of the Operating Partnership
appearing in the Operating Partnership's 1997 Annual Report (Form 10-K) for the
years ended December 31, 1997 and 1996; the consolidated financial statements
of Evans Withycombe Residential, L.P. appearing in the Operating Partnership's
Current Report on Form 8-K, dated September 10,1997; the consolidated financial
statements of Wellsford and its subsidiaries included in the Operating
Partnership's Current Report on Form 8-K, dated May 30, 1997; and the
Statements of Revenue and Certain Expenses of certain properties either
acquired or expected to be acquired, appearing in the Operating Partnership's
Current Reports on Forms 8-K or 8-K/A dated May 20, 1997, August 15, 1997,
September 17, 1997 and October 9, 1997; have all been audited by Ernst & Young
LLP, independent auditors, as set forth in their reports thereon included or
incorporated by reference therein and are incorporated herein by reference in
reliance upon such reports given upon the authority of such firm as experts in
accounting and auditing.
The consolidated financial statements of the Operating Partnership and its
subsidiaries appearing in the Operating Partnership's 1997 Annual Report (Form
10-K) at December 31, 1995 and for the year then ended incorporated herein by
reference have been audited by Grant Thornton LLP, independent public
accountants, as indicated in their report with respect thereto, and are
incorporated in this Registration Statement 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, 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 trustee of the Company, was a principal in the law
firm of Rosenberg & Liebentritt, P.C. until September, 1997. The Company
incurred legal fees to Rosenberg & Liebentritt, P.C. of approximately $1.4
million in 1997. Attorneys of Rosenberg & Liebentritt, P.C. beneficially own
less than 1% of the outstanding Common Shares of the Company, either directly
or upon the exercise of options.
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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 OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
PROSPECTUS SUPPLEMENT
The Offering........................... S-3
The Operating Partnership.............. S-5
Recent Developments.................... S-6
Use of Proceeds........................ S-8
Business and Properties................ S-8
Selected Financial and Operating
Information.......................... S-11
Description of the Notes............... S-13
Certain United States Federal Income
Tax Considerations................... S-18
ERISA Considerations................... S-21
Underwriting........................... S-22
PROSPECTUS
Special Note Regarding Forward-Looking
Statements........................... 2
Available Information.................. 2
Incorporation of Certain Documents by
Reference............................ 2
The Operating Partnership.............. 4
Use of Proceeds........................ 6
Ratios of Earnings to Combined Fixed
Charges and Preference Unit
Distributions........................ 6
Description of Debt Securities......... 7
Plan of Distribution................... 19
Experts................................ 20
Legal Matters.......................... 20
</TABLE>
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======================================================
$300,000,000
ERP LOGO
ERP OPERATING
LIMITED PARTNERSHIP
6.63% NOTES DUE APRIL 13, 2015, PUTABLE/CALLABLE APRIL 13, 2005
------------------------------------
PROSPECTUS SUPPLEMENT
------------------------------------
MERRILL LYNCH & CO.
NATIONSBANC MONTGOMERY
SECURITIES LLC
SALOMON SMITH BARNEY
APRIL 6, 1998
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