<PAGE>
The information in this prospectus supplement is not complete and may be
changed. We may not sell these securities until the registration statement filed
with the Securities and Exchange Commission is effective and we have delivered a
final prospectus supplement. This prospectus supplement is not an offer to sell
these securities and it is not soliciting an offer to buy these securities in
any state where the offer or sale is not permitted.
<PAGE>
SUBJECT TO COMPLETION
DATED AUGUST 12, 1998
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED APRIL 6, 1998)
$150,000,000
[GRAPHIC]
ERP OPERATING LIMITED PARTNERSHIP
REMARKETED RESET NOTES DUE AUGUST , 2003
------------------
ERP Operating Limited Partnership, an Illinois limited partnership (the
"Operating Partnership"), is offering (the "Offering") $150,000,000 aggregate
principal amount of Remarketed Reset Notes due August , 2003 (the "Notes").
During the period from and including August , 1998 to but excluding August
, 1999 (the "Initial Spread Period"), the interest rate on the Notes will be
reset quarterly, and will equal LIBOR plus the applicable Spread. The Spread
during the Initial Spread Period is %. After the Initial Spread Period, the
character and duration of the interest rate on the Notes will be agreed to by
the Operating Partnership and the Remarketing Underwriter on each applicable
Duration/Mode Determination Date and the Spread will be agreed to by the
Operating Partnership and the Remarketing Underwriter on the corresponding
Spread Determination Date. Interest on the Notes during each Subsequent Spread
Period shall be payable, as applicable, either (i) at a floating interest rate
(such Notes being in the "Floating Rate Mode," and such interest being a
"Floating Rate"), or (ii) at a fixed interest rate (such Notes being in the
"Fixed Rate Mode," and such interest rate being a "Fixed Rate"), in each case as
determined by the Operating Partnership and the Remarketing Underwriter in
accordance with a Remarketing Agreement between the Operating Partnership and
the Remarketing Underwriter (the "Remarketing Agreement"). Capitalized terms
used but not defined on this cover page shall have the meanings ascribed to them
under "Description of the Notes" contained herein.
After the Initial Spread Period, the Spread applicable to each Subsequent
Spread Period will be determined on each subsequent Spread Determination Date
that immediately precedes the beginning of the corresponding Subsequent Spread
Period, pursuant to agreement between the Operating Partnership and the
Remarketing Underwriter (except as otherwise provided below), and the interest
rate mode used for each Subsequent Spread Period may be a Floating Rate Mode or
a Fixed Rate Mode, at the discretion of the Operating Partnership and the
Remarketing Underwriter. If the Operating Partnership and the Remarketing
Underwriter are unable to agree on the Spread, (1) the Subsequent Spread Period
will be one year, (2) the Notes will be reset to the Floating Rate Mode, (3) the
Spread for such Subsequent Spread Period will be the Alternate Spread and (4)
the Notes will be redeemable at the option of the Operating Partnership, in
whole or in part, upon at least five
(CONTINUED ON NEXT PAGE)
------------------------
NEITHER THE SECURITIES EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR
PASSED UPON THE ADEQUACY OR ACCURACY OF THE PROSECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
The Notes will be sold to the public at varying prices to be determined by
the Underwriters at the time of each sale. The net proceeds to the Operating
Partnership, before deducting expenses payable by the Operating Partnership
(estimated to be approximately $ ), will be % of the principal amount
of the Notes sold and the aggregate net proceeds will be $ . For further
information with respect to the plan of distribution and any discounts,
commissions or profits on resales of Notes that may be deemed underwriting
discounts or commissions, see "Underwriting."
The Notes are offered by the Underwriters, subject to prior sale, when, as
and if issued to and accepted by it, 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 in New York, New York on
or about August , 1998.
------------------------
MERRILL LYNCH & CO. GOLDMAN, SACHS & CO.
----------------
The date of this Prospectus Supplement is August , 1998.
<PAGE>
Business Days' notice given by no later than the fifth Business Day after the
relevant Spread Determination Date, at a redemption price equal to 100% of the
principal amount thereof, together with accrued interest to the redemption date,
except that the Notes may not be redeemed prior to the Tender Date, or later
than the last day of such one-year Subsequent Spread Period. During the Initial
Spread Period, interest on the Notes will be payable quarterly in arrears on
November , 1998, February , 1999, May , 1999 and August , 1999 (or,
if not a Business Day, on the next succeeding Business Day, except as described
herein). After the Initial Spread Period, (i) if the Notes are in the Floating
Rate Mode, interest on the Notes will be payable, unless otherwise specified on
the applicable Duration/Mode Determination Date, quarterly in arrears on each
February , May , August and November during the applicable
Subsequent Spread Period, or (ii) if the Notes are in the Fixed Rate Mode,
interest on the Notes will be payable, unless otherwise specified on the
applicable Duration/Mode Determination Date, semiannually in arrears on each
February and August during the applicable Subsequent Spread Period.
"Interest Payment Dates" as used herein shall mean any date interest is paid on
the Notes. See "Description of the Notes."
The Notes are not redeemable prior to August , 1999. Thereafter, the Notes
may be redeemable, at the option of the Operating Partnership, on such date, on
each Commencement Date and on those Interest Payment Dates that are specified as
redemption dates by the Operating Partnership on the applicable Duration/Mode
Determination Date, in whole or in part, upon notice thereof given at any time
during the 30 calendar day period ending on the tenth Business Day prior to the
redemption date, in accordance with the redemption type selected on the
Duration/Mode Determination Date. Unless previously redeemed, the Notes will
mature on August , 2003. See "Description of the Notes--Redemption of the
Notes."
The Notes will be represented by a single Global Note registered in the name
of The Depository Trust Company ("DTC") or its nominee. Beneficial interest in
the Global Note will be shown on, and transfers thereof will be effected only
through, records maintained by DTC and its participants. Except as described
herein, Notes in definitive form will not be issued.
If the Operating Partnership and the Remarketing Underwriter agree on the
Spread with respect to any Subsequent Spread Period, each Note may be tendered
to the Remarketing Underwriter for purchase from the tendering holder of Notes
at 100% of its principal amount and for remarketing by the Remarketing
Underwriter on the date immediately following the end of each Subsequent Spread
Period (the "Tender Date"). In the case of the Initial Spread Period, the Notes
may be tendered on August , 1999. Notice of a beneficial owner's election to
tender to the Remarketing Underwriter must be received by the Remarketing
Underwriter during the period beginning at 3:00 p.m., New York City time, on the
relevant Spread Determination Date and ending at 12:00 noon, New York City time,
on the second Business Day following the relevant Spread Determination Date. The
obligation of the Remarketing Underwriter to purchase tendered Notes from the
tendering holders of Notes will be subject to certain conditions and termination
events customary in the Operating Partnership's public offerings. If the
Remarketing Underwriter does not purchase all tendered Notes on the relevant
Tender Date, (1) all Tender Notices relating thereto will be null and void, (2)
none of the Notes for which such Tender Notices shall have been given will be
purchased by the Remarketing Underwriter on such Tender Date, (3) the Subsequent
Spread Period will be one year, which Subsequent Spread Period shall be deemed
to have commenced upon the applicable Commencement Date, (4) the Notes will be
reset to the Floating Rate Mode, (5) the Spread for such Subsequent Spread
Period will be the Alternate Spread and (6) the Notes will be redeemable at the
option of the Operating Partnership, in whole or in part, upon at least ten
Business Days' notice given by no later than the fifth Business Day following
the relevant Tender Date, on the date set forth in such notice, which shall be
not later than the last day of such Subsequent Spread Period, at a redemption
price equal to 100% of the principal amount thereof, together with accrued
interest to the redemption date. No beneficial owner of any Note shall have any
rights or claims against the Operating Partnership or the Remarketing
Underwriter as a result of the Remarketing Underwriter not purchasing such
Notes, except that such beneficial owner shall have the right to receive the
Alternate Spread on such Notes from the Operating Partnership. See "Description
of Notes--Tender at Option of Beneficial Owners."
THE UNDERWRITER MAY ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN OR
OTHERWISE AFFECT THE PRICE OF THE NOTES OFFERED HEREBY. SUCH TRANSACTIONS MAY
INCLUDE STABILIZING TRANSACTIONS AND THE PURCHASE OF NOTES TO COVER SYNDICATE
SHORT POSITIONS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
S-2
<PAGE>
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.
<TABLE>
<CAPTION>
<S> <C>
Securities Offered.......... $150,000,000 aggregate principal amount of
Remarketed Reset Notes due August , 2003.
Maturity ................... The Notes will mature on August , 2003, unless
previously redeemed.
Interest Payment Due ....... During the Initial Spread Period, interest on the
Notes will be payable quarterly in arrears on
November , 1998, February , 1999, May ,
1999 and August , 1999. During the Initial
Spread Period, the interest rate on the Notes will
be reset quarterly. After the Initial Spread
Period, interest on the Notes will be payable in
arrears (i) on each February , May , August
, and November , during the Subsequent
Spread Period in the case of Notes in the Floating
Rate Mode or (ii) on each February and August
during the Subsequent Spread Period in the case of
Notes in the Fixed Rate Mode, in either case
unless otherwise specified by the Operating
Partnership and the Remarketing Underwriter on the
applicable Duration/Mode Determination Date in
connection with the establishment of each
Subsequent Spread Period. See "Description of the
Notes."
Ranking .................... The Notes will rank equally with each other and
with all other unsecured and unsubordinated
obligations of the Operating Partnership and the
Notes will be effectively subordinated to the
prior claims of any secured indebtedness of the
Operating Partnership to the extent of the value
of the Property securing such indebtedness.
Redemption ............... The Notes may not be redeemed by the Operating
Partnership prior to August , 1999. On that
date, on each Commencement Date and on those
Interest Payment Dates specified as redemption
dates by the Operating Partnership on each
Duration/Mode Determination Date, the Notes may be
redeemed at the option of the Operating
Partnership, as described herein. The Notes may
also be redeemed at the option of the Operating
Partnership under certain circumstances, as
described herein. See "Description of the Notes -
Tender at Option of Beneficial Owners" and
"--Redemption of the Notes."
Form ...................... The Notes will be issued and maintained in
book-entry form registered in the name of the
nominee of DTC, except under the limited
circumstances described herein. See "Description
of the Notes - Tender at Option of Beneficial
Owners" and "--Book-Entry System."
Use of Proceeds ........... The net proceeds to the Operating Partnership from
the Offering (approximately $ million) will be
used to pay down existing indebtedness under its
$500 million unsecured line of credit (the "Line
of Credit").
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.
</TABLE>
S-3
<PAGE>
THE FOLLOWING INFORMATION CONTAINED IN THIS PROSPECTUS SUPPLEMENT IS
QUALIFIED IN ITS ENTIRETY BY THE DETAILED INFORMATION APPEARING IN THE
ACCOMPANYING PROSPECTUS OR INCORPORATED THEREIN BY REFERENCE. AS USED
HEREIN, THE "OPERATING PARTNERSHIP" SHALL BE DEEMED TO MEAN THE OPERATING
PARTNERSHIP AND THOSE ENTITIES OWNED OR CONTROLLED BY IT ON A CONSOLIDATED
BASIS, 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 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 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 August 4, 1998, owned approximately 88% 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 August 4, 1998, the Operating Partnership owned or
had interests in a portfolio of 568 multifamily properties (individually a
"Property" and collectively the "Properties") containing 158,711 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 August 4, 1998, the Operating Partnership has acquired, directly or
indirectly, interests in an additional 523 Properties containing 143,469
units for a total purchase price of approximately $8.2 billion, including the
assumption of approximately $2.4 billion of mortgage indebtedness and
unsecured notes. Since the EQR IPO and through August 4, 1998, the Operating
Partnership has disposed of 24 of its properties and a portion of one of its
Properties containing an aggregate of 6,483 units and a vacant land parcel
for a total sales price of approximately $191.7 million and the release of
mortgage indebtedness in the amount of approximately $27.5 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 August 4, 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, Tukwila 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-4
<PAGE>
RECENT DEVELOPMENTS
MERGER ACTIVITY
On July 8, 1998, EQR entered into an Agreement and Plan of Merger
regarding the planned acquisition of the multifamily property business of
Merry Land & Investment Company, Inc. ("Merry Land"), a Georgia corporation,
through the tax free merger of EQR and Merry Land (the "Merger"). The
transaction is valued at approximately $2.2 billion and includes 118
multifamily properties containing 34,990 units. In the Merger, each
outstanding share of common stock of Merry Land will be converted to .53 of a
common share of EQR. The Merger is subject to approval of the shareholders
of EQR and Merry Land and, therefore, completion of the Merger is conditioned
upon such approval and certain other closing conditions. Upon completion of
the Merger, it is expected that EQR will contribute the assets of Merry Land
to the Operating Partnership in exchange for additional partnership interests
in the Operating Partnership.
Merry Land is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended ("Exchange Act"), and, in
accordance therewith, files reports, proxy statements and other information
with the Securities and Exchange Commission (the "Commission"), including
Merry Land's Annual Report on Form 10-K for the year ended December 31, 1997.
Reports, proxy statements and other information filed by Merry Land can be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549; and at its
Regional Offices located at 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661; and Seven World Trade Center, Suite 1300, New York, New York
10048. 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 that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the Commission. The address of the Commission's
web site is: http://www.sec.gov. The shares of common stock of Merry Land
are currently listed on the New York Stock Exchange ("NYSE") and such
reports, proxy statements and other information concerning Merry Land can be
inspected at the offices of NYSE, 20 Broad Street, New York, New York 10005.
ACQUISITIONS
From January 1, 1998 through August 4, 1998, the Operating Partnership
acquired 90 Properties containing an aggregate of 21,063 units at a total
purchase price of approximately $1.5 billion (including the assumption of
mortgage indebtedness of approximately $410.6 million). The Operating
Partnership funded the cash portion of these acquisitions primarily with
proceeds from previous securities issuances by the Company, its Line of
Credit and working capital. See "Securities Issuances" below.
PROBABLE ACQUISITIONS
As of August 4, 1998, the Operating Partnership had entered into
contracts with unaffiliated sellers to acquire 15 additional properties
containing 4,070 units which are located in seven states (collectively, the
"Properties Under Contract"). The total combined purchase price for the
Properties Under Contract is approximately $252 million, including the
assumption of approximately $86.2 million of mortgage indebtedness. There
can be no assurance that these 15 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 its working
capital and/or its Line of Credit. The Operating Partnership believes that
the Properties Under Contract can be integrated into its system of management
offices without any significant corresponding increase in the costs of
operations of such offices.
PENDING ACQUISITIONS
ADDITIONAL PROPERTIES UNDER CONTRACT
As of August 4, 1998, the Operating Partnership had entered into
contracts with various unaffiliated sellers to acquire two additional
properties under contract (the "Additional Properties Under Contract") for a
total combined purchase price of approximately $50.5 million, including the
assumption of approximately $33.45 million of mortgage indebtedness. These
Additional Properties Under Contract contain 806 units and are located in two
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 from the
Operating Partnership's Line of Credit and/or working capital. There can be
no
S-5
<PAGE>
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 August 4, 1998, the Operating Partnership was also negotiating
with various sellers for the acquisition of five additional properties (the
"Properties Under Negotiation") containing 928 units for a purchase price of
approximately $53.8 million, including the assumption of approximately $17.9
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.
DISPOSITIONS
From January 1, 1998 through August 4, 1998, the Operating Partnership
disposed of its interests in six properties containing 1,448 units for an
aggregate sales price of approximately $61.9 million, including the release
of approximately $7 million of mortgage indebtedness. The net proceeds of
these dispositions were or will be used for the acquisition of additional
properties.
SECURITIES ISSUANCES
Since January 1, 1998, the Operating Partnership has raised
approximately $306 million pursuant to one public offering of its Debt
Securities. Since January 1, 1998, the Company has raised an aggregate of
approximately $358 million pursuant to six separate public offerings of EQR's
common shares of beneficial interest. In addition, from January 1, 1998,
through August 4, 1998, the Company has raised approximately $50.1 million
pursuant to its Distribution Reinvestment and Share Purchase Plan.
S-6
<PAGE>
USE OF PROCEEDS
The net proceeds to the Operating Partnership from the Offering are
estimated at $ 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 to
pay down existing indebtedness on its Line of Credit, which bears interest at
a weighted average rate of 6.05% and matures in November 1999. As of August
4, 1998, $360 million was outstanding under the Line of Credit.
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 August 4, 1998, the Operating Partnership owned or had interests
in a portfolio of 568 Properties containing 158,711 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 of the Properties consisted 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, Tukwila 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
S-7
<PAGE>
satisfaction surveys, (ii) surveying residents that move out of the
Properties, and (iii) surveying prospective tenants who select alternative
housing.
THE PROPERTIES
As of August 4, 1998, the Operating Partnership owned or had interests
in a portfolio of 568 Properties located in 35 states containing 158,711
apartment units with the largest having 1,420 units and the smallest having
40 units. The average number of units per Property was approximately 279.
The units are typically contained in a series of two-story buildings. As of
August 4, 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-8
<PAGE>
The following chart sets forth certain information regarding the
Properties on a state-by-state basis.
PROPERTIES BY STATE
(AS OF AUGUST 4, 1998)
<TABLE>
<CAPTION>
NUMBER OF % OF UNITS IN
STATE PROPERTIES NUMBER OF UNITS PORTFOLIO
----- ---------- --------------- -------------
<S> <C> <C> <C>
Alabama 3 814 0.513%
Arizona 74 21,802 13.737%
Arkansas 4 1,039 0.655%
California 67 17,431 10.983%
Colorado 30 7,880 4.965%
Connecticut 3 563 0.355%
Florida 41 11,072 6.976%
Georgia 27 8,119 5.116%
Idaho 1 120 0.076%
Illinois 7 3,322 2.093%
Indiana 1 320 0.202%
Iowa 2 386 0.243%
Kansas 6 2,392 1.507%
Kentucky 8 2,169 1.367%
Maine 5 672 0.423%
Maryland 16 3,977 2.506%
Massachusetts 6 1,520 0.958%
Michigan 11 4,084 2.573%
Minnesota 17 3,731 2.351%
Missouri 7 1,576 0.993%
Nevada 13 4,035 2.542%
New Hampshire 1 390 0.246%
New Jersey 3 1,388 0.875%
New Mexico 4 1,073 0.676%
North Carolina 21 5,636 3.551%
Ohio 6 2,683 1.690%
Oklahoma 14 3,981 2.508%
Oregon 11 3,448 2.173%
South Carolina 6 1,045 0.658%
Tennessee 15 4,232 2.666%
Texas 70 21,054 13.266%
Utah 4 1,426 0.898%
Virginia 10 3,133 1.974%
Washington 50 10,917 6.879%
Wisconsin 4 1,281 0.806%
--- ------- -------
TOTAL 568 (1) 158,711 100.000%
--- ------- -------
--- ------- -------
</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, as amended by Form
10-K/A, for the year ended December 31, 1997, and its Quarterly Reports on
Form 10-Q for the three- and six-month periods ended March 31, 1998 and June
30, 1998, respectively, which reports are incorporated by reference into the
accompanying Prospectus.
S-9
<PAGE>
SELECTED FINANCIAL AND OPERATING INFORMATION
The following table sets forth selected financial and operating
information on a historical basis for the Operating Partnership. The
following information should be read in conjunction with all of the financial
statements and notes thereto included in the Operating Partnership's Annual
Report on Form 10-K, as amended by Form 10-K/A, for the year ended December
31, 1997, the Operating Partnership's Quarterly Report on Form 10-Q for the
six-month period ended June 30, 1998, and the Current Reports on Form 8-K
dated June 25, 1998 and July 23, 1998, which documents are incorporated by
reference into the accompanying Prospectus. In the opinion of management,
the operating data for the periods presented include all adjustments
(consisting only of normal recurring adjustments) necessary to present fairly
the information set forth therein.
ERP OPERATING LIMITED PARTNERSHIP
CONSOLIDATED HISTORICAL FINANCIAL INFORMATION
(AMOUNTS IN THOUSANDS EXCEPT PER PARTNERSHIP INTEREST/UNIT DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, YEAR ENDED DECEMBER 31,
------------------------ ----------------------------------------------------
1998 1997 1997 1996 1995 1994
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
REVENUES
Rental income $571,370 $290,799 $707,733 $454,412 $373,919 $220,727
Fee and asset management 2,790 3,110 5,697 6,749 7,030 4,739
Interest income-investment
in mortgage notes 10,221 8,011 20,366 12,819 4,862 -
Interest and other income 9,010 4,404 13,525 4,405 4,573 5,568
-------- -------- -------- -------- -------- --------
Total revenues 593,391 306,324 747,321 478,385 390,384 231,034
-------- -------- -------- -------- -------- --------
EXPENSES
Property and maintenance 137,910 70,760 176,075 127,172 112,186 66,534
Real estate taxes and insurance 56,484 29,667 69,520 44,128 37,002 23,028
Property management 25,110 11,819 26,793 17,512 15,213 10,249
Property management-non-recurring - - - - - 879
Fee and asset management 2,240 1,569 3,364 3,837 3,887 2,056
Depreciation 131,910 62,775 156,644 93,253 72,410 37,273
Interest:
Expense incurred 105,651 50,924 121,324 81,351 78,375 37,044
Amortization of deferred
financing costs 1,275 1,220 2,523 4,242 3,444 1,930
General and administrative 10,271 6,206 15,064 9,857 8,129 6,053
-------- -------- -------- -------- -------- --------
Total expenses 470,851 234,940 571,307 381,352 330,646 185,046
-------- -------- -------- -------- -------- --------
Income before gain on disposition of
properties and extraordinary items 122,540 71,384 176,014 97,033 59,738 45,988
Gain on disposition of properties 11,092 3,632 13,838 22,402 21,617 -
-------- -------- -------- -------- -------- --------
Income before extraordinary items 133,632 75,016 189,852 119,435 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 $133,632 $ 75,016 $189,852 $115,923 $ 83,355 $ 45,988
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
Net income per weighted average
partnership interest outstanding $ 0.86 $ 0.86 $ 1.79 $ 1.70 $ 1.68 $ 1.34
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
Weighted average partnership
interests outstanding 105,077 62,786 73,182 51,108 42,749 34,150
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
Net income per weighted average
partnership interest outstanding- $ 0.85 $ 0.85 $ 1.76 $ 1.69 $ 1.67 $ 1.34
assuming dilution
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
</TABLE>
S-10
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, YEAR ENDED DECEMBER 31,
------------------------ ----------------------------------------------------
1998 1997 1997 1996 1995 1994
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Real estate, before accumulated
Depreciation $7,968,121 $4,482,434 $ 7,121,435 $2,983,510 $ 2,188,939 $1,963,476
Real estate, after accumulated
Depreciation $7,394,762 $4,124,835 $ 6,676,673 $2,681,998 $ 1,970,600 $1,770,735
Total assets $8,000,039 $4,738,734 $ 7,094,631 $2,986,127 $ 2,141,260 $1,847,685
Total debt $3,378,860 $1,758,388 $ 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 $ 153,000 $ 153,000 $ -
9 1/8% Series B Cumulative
Redeemable Preference Units $ 125,000 $ 125,000 $ 125,000 $ 125,000 $ 125,000 $ -
9 1/8% Series C Cumulative
Redeemable Preference Units $ 115,000 $ 115,000 $ 115,000 $ 115,000 $ - $ -
8.60% Series D Cumulative
Redeemable Preference Units $ 175,000 $ 175,000 $ 175,000 $ - $ - $ -
Series E Cumulative
Convertible Preference Units $ 99,950 $ 99,995 $ 99,963 $ - $ - $ -
9.65% Series F Cumulative
Redeemable Preference Units $ 57,500 $ 57,500 $ 57,500 $ - $ - $ -
7 1/4% Series G Convertible
Cumulative Preference Units $ 316,250 $ - $ 316,250 $ - $ - $ -
Partners' capital $3,300,072 $2,116,411 $ 2,921,682 $1,216,467 $ 750,902 $ 761,373
</TABLE>
S-11
<PAGE>
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 and to the Notes to be issued
thereunder and to the Remarketing Agreement and the Remarketing Underwriting
Agreement (the forms of which will be filed, pursuant to a Current Report on
Form 8-K, as exhibits to the Registration Statement of which this Prospectus
forms a part). 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 limited to $150,000,000 in aggregate
principal amount and will mature, unless previously redeemed, on August ,
2003. 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. 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 June 30, 1998, such mortgages aggregated
approximately $1.8 billion. As of June 30, 1998, the outstanding
indebtedness of the Operating Partnership with which the Notes will rank
equally was approximately $1.4 billion (net of a $4.1 million discount and
including a $7.4 million premium). As of June 30, 1998, the Operating
Partnership's total debt was approximately $3.4 billion, and on a pro forma
basis giving effect to this Offering, the total outstanding indebtedness of
the Operating Partnership was approximately $3.5 billion. Subject to certain
limitations set forth in the Indenture, and as described under "Description
of Debt Securities--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 issued only in fully registered, book-entry form. See
"--Book-Entry System" below.
The Notes will not be subject to a sinking fund.
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.
FLOATING RATE MODE
During the period from and including August , 1998 to but excluding
August , 1999 (the "Initial Spread Period"), interest on the Notes will be
payable quarterly in arrears, on November , 1998, February , 1999, May
, 1999 and August , 1999 (or, if not a Business Day (as defined below),
on the next succeeding Business Day (except as described below)), to the
persons in whose names the Notes are registered at the close of business on
the applicable record date (in the case of Notes in either the Floating Rate
Mode or the Fixed Rate Mode, the 15th calendar day, whether or not a Business
Day, next preceding the applicable Interest Payment Date) next preceding such
Interest Payment Date. During the Initial Spread Period and any Subsequent
Spread Period during which the Notes are in the Floating Rate Mode, the
interest rate on the Notes will be reset quarterly and the Notes will bear
interest at a per annum rate (computed on the basis of the actual number of
days elapsed over a 360-day year) equal to LIBOR (as defined below) for the
applicable Quarterly Period (as defined below), plus the applicable Spread
(as defined below). Interest on the Notes will accrue from and including
each Interest Payment Date (or in the case of the Initial Quarterly Period
(as defined below), August , 1998) to but excluding the next succeeding
Interest Payment Date or maturity date, as the case may be. The Initial
Quarterly Period will be the period
S-12
<PAGE>
from and including August , 1998 to but excluding the first Interest
Payment Date (November , 1998) (the "Initial Quarterly Period").
Thereafter, each Quarterly Period during the Initial Spread Period or any
Subsequent Spread Period (as defined below) (each, a "Quarterly Period") will
be from and including the most recent Interest Payment Date to which interest
has been paid to but excluding the next Interest Payment Date; the first day
of a Quarterly Period is referred to herein as an "Interest Reset Date."
The Spread applicable during the Initial Spread Period will be %
(the "Initial Spread"), and the interest rate mode used for the Initial
Spread Period will be the Floating Rate Mode. Thus, the interest rate per
annum during the Initial Quarterly Period will be equal to LIBOR, determined
as of August , 1998, plus %. The interest rate per annum for each
succeeding Quarterly Period during the Initial Spread Period will equal LIBOR
for such Quarterly Period plus the Initial Spread. Thereafter, the Spread
will be determined in the manner described below for each subsequent Spread
period from and including each Commencement Date to but excluding each next
succeeding Commencement Date (a "Subsequent Spread Period"), which will be
one or more periods of at least six months and not more than ten years (or
any integral-multiple of six months therein), designated by the Operating
Partnership, commencing on a February or August (or as otherwise
specified by the Operating Partnership and the Remarketing Underwriter (as
defined below) on the applicable Duration/Mode Determination Date (as defined
below) in connection with the establishment of each Subsequent Spread
Period), as applicable (a "Commencement Date"), through and including August
, 2003 (no Subsequent Spread Period may end after August , 2003). The
first Commencement Date will be August , 1999.
If any Interest Payment Date (other than at maturity), redemption date,
Interest Reset Date, Commencement Date or Tender Date (as defined below)
would otherwise be a day that is not a Business Day, such Interest Payment
Date, redemption date, Interest Reset Date, Commencement Date or Tender Date
will be postponed to the next succeeding day that is a Business Day, except
that if such Business Day is in the next succeeding calendar month, such
Interest Payment Date, redemption date, Interest Reset Date, Commencement
Date or Tender Date shall be the next preceding Business Day.
LIBOR applicable for a Quarterly Period will be determined by the Rate
Agent (as defined under "--Tender at Option of Beneficial Owners" below) as
of the second London Business Day (as defined below) preceding each Interest
Reset Date (the "LIBOR Determination Date") in accordance with the following
provisions:
(i) LIBOR will be determined on the basis of the offered rates for
three-month deposits in U.S. dollars, commencing on the second London
Business Day immediately following such LIBOR Determination Date, which
appears on Telerate Page 3750 (as defined below) as of approximately
11:00 a.m., London time, on such LIBOR Determination Date. "Telerate
Page 3750" means the display designated on page "3750" on Dow Jones Markets
Limited (or such other page as may replace the 3750 page on that service,
any successor service or such other service or services as may be nominated
by the British Bankers' Association for the purpose of displaying London
interbank offered rates for U.S. dollar deposits). If no rate appears on
Telerate Page 3750, LIBOR for such LIBOR Determination Date will be
determined in accordance with the provisions of paragraph (ii) below.
(ii) With respect to a LIBOR Determination Date on which no rate
appears on Telerate Page 3750 as of approximately 11:00 a.m., London time,
on such LIBOR Determination Date, the Rate Agent shall request the
principal London offices of each of four major reference banks in the
London interbank market selected by the Rate Agent to provide the Rate
Agent with a quotation of the rate at which three-month deposits in U.S.
dollars, commencing on the second London Business Day immediately following
such LIBOR Determination Date, are offered by it to prime banks in the
London interbank market as of approximately 11:00 a.m., London time, on
such LIBOR Determination Date in a principal amount equal to an amount of
not less than U.S. $1,000,000 that is representative for a single
transaction in such market at such time. If at least two such quotations
are provided, LIBOR for such LIBOR Determination Date will be the
arithmetic mean of such quotations as calculated by the Rate Agent. If
fewer than two quotations are provided, LIBOR for such LIBOR Determination
Date will be the arithmetic mean of the rates quoted as of approximately
11:00 a.m., New York City time, on such LIBOR Determination Date by three
major banks in The City of New York selected by the Rate Agent (after
consultation with the Operating Partnership) for loans in U.S. dollars to
leading European banks, having a three-month maturity commencing on the
second London Business Day immediately following such LIBOR Determination
Date and in a principal amount equal to an amount of not less than U.S.
$1,000,000 that is representative for a single transaction in such market
at such time; provided, however, that if the banks selected as aforesaid by
the Rate Agent are not quoting as mentioned in this sentence, LIBOR for
such LIBOR Determination Date will be LIBOR determined with respect to the
immediately preceding LIBOR Determination Date, or in the case of the first
LIBOR Determination Date, LIBOR for the Initial Quarterly Period.
S-13
<PAGE>
FIXED RATE MODE
If the Notes are to be reset to the Fixed Rate Mode, as agreed to by the
Operating Partnership and the Remarketing Underwriter on a Duration/Mode
Determination Date, then the applicable Fixed Rate for the corresponding
Subsequent Spread Period will be determined by 1:00 p.m., New York City time,
on the third Business Day prior to the Commencement Date for such Subsequent
Spread Period (the "Fixed Rate Determination Date"), in accordance with the
following provisions: the Fixed Rate will be determined by adding (i) the
applicable Spread (as agreed to by the Operating Partnership and the
Remarketing Underwriter on the preceding Spread Determination Date (as
defined below)) to (ii) the yield to maturity determined by 1:00 p.m., New
York City time, on the Fixed Rate Determination Date (expressed as a bond
equivalent, on the basis of a year of 365 or 366 days, as applicable, and
applied on a daily basis) of the applicable United States Treasury security,
selected by the Rate Agent after consultation with the Remarketing
Underwriter, as having a maturity comparable to the duration selected for the
following Subsequent Spread Period, which would be used in accordance with
customary financial practice in pricing new issues of corporate debt
securities of comparable maturity to the duration selected for the following
Subsequent Spread Period.
Interest in the Fixed Rate Mode will be computed on the basis of a
360-day year of twelve 30-day months. Such interest will be payable
semiannually in arrears on the Interest Payment Dates (February and
August , unless otherwise specified by the Operating Partnership and the
Remarketing Underwriter on the applicable Duration/Mode Determination Date)
at the applicable Fixed Rate, as determined by the Operating Partnership and
the Remarketing Underwriter on the Fixed Rate Determination Date, beginning
on the Commencement Date and for the duration of the relevant Subsequent
Spread Period. Interest on the Notes will accrue from and including each
Interest Payment Date to but excluding the next succeeding Interest Payment
Date or maturity date, as the case may be. See "--Additional Terms of the
Notes" below for other provisions applicable to Notes in the Fixed Rate Mode.
If any Interest Payment Date or any redemption date in the Fixed Rate
Mode falls on a day that is not a Business Day (in either case, other than
any Interest Payment Date or redemption date that falls on a Commencement
Date, in which case such date will be postponed to the next day that is a
Business Day), the related payment of principal and interest will be made on
the next succeeding Business Day as if it were made on the date such payment
was due, and no interest will accrue on the amounts so payable for the period
from and after such dates.
ADDITIONAL TERMS OF THE NOTES
The Spread that will be applicable during each Subsequent Spread Period
will be the percentage (a) recommended by the Remarketing Underwriter (as
defined under "--Tender at Option of Beneficial Owners" below) so as to
result in a rate that, in the opinion of the Remarketing Underwriter, will
enable tendered Notes to be remarketed by the Remarketing Underwriter at 100%
of the principal amount thereof, as described under "--Tender at Option of
Beneficial Owners" below, and (b) agreed to by the Operating Partnership. The
interest rate mode during each Subsequent Spread Period shall be either the
Floating Rate Mode or the Fixed Rate Mode, as determined by the Operating
Partnership and the Remarketing Underwriter.
If the maturity date for the Notes falls on a day that is not a Business
Day, the related payment of principal and interest will be made on the next
succeeding Business Day as if it were made on the date such payment was due,
and no interest will accrue on the amounts so payable for the period from and
after such date.
Unless notice of redemption of the Notes as a whole has been given, the
duration, redemption dates, redemption type (I.E., par, premium or
make-whole), redemption prices (if applicable), Commencement Date, Interest
Payment Dates, interest rate mode (I.E., Fixed Rate Mode or Floating Rate
Mode) and any other relevant terms for each Subsequent Spread Period will be
established by 3:00 p.m., New York City time, on the tenth Business Day prior
to the Commencement Date of each Subsequent Spread Period (the "Duration/Mode
Determination Date"). In addition, the Spread for each Subsequent Spread
Period will be established by 1:00 p.m., New York City time, on the fifth
Business Day prior to the Commencement Date of such Subsequent Spread Period
(the "Spread Determination Date"). The Operating Partnership will request not
less than five nor more than ten Business Days prior to any Spread
Determination Date, that DTC notify its Participants (as defined below) of
such Spread Determination Date and of the procedures that must be followed if
any beneficial owner of a Note wishes to tender such Note as described under
"--Tender at Option of Beneficial Owners" below. In the event that DTC or its
nominee is no longer the holder of record of the Notes, the Operating
Partnership will notify the holders of Notes of such information within such
period of time. This will be the only notice given by the Operating
Partnership or the Remarketing Underwriter with respect to such Spread
Determination Date and procedures for tendering Notes. The term "Business
Day" means any day other than a Saturday or Sunday or a day on which banking
institutions in The City of New York are required or
S-14
<PAGE>
authorized to close and, in the case of Notes in the Floating Rate Mode, that
is also a London Business Day. The term "London Business Day" means any day
on which dealings in deposits in U.S. dollars are transacted in the London
interbank market.
In the event that the Operating Partnership and the Remarketing
Underwriter do not agree on the Spread for any Subsequent Spread Period, then
(1) the Subsequent Spread Period will be one year, (2) the Notes will be
reset to the Floating Rate Mode, (3) the Spread for such Subsequent Spread
Period will be the Alternate Spread (as defined below) and (4) the Notes will
be redeemable at the option of the Operating Partnership, in whole or in
part, upon at least five Business Days' notice given by no later than the
fifth Business Day after the Spread Determination Date in the manner
described under "--Redemption of the Notes" below, at a redemption price
equal to 100% of the principal amount thereof, together with accrued interest
to the redemption date, except that Notes may not be redeemed prior to the
Tender Date or later than the last day of such one-year Subsequent Spread
Period. The Alternate Spread will be the percentage equal to LIBOR
(determined as described above) for the Quarterly Period beginning on the
Commencement Date for such Subsequent Spread Period.
All percentages resulting from any calculation of any interest rate for
the Notes will be rounded, if necessary, to the nearest one hundred
thousandth of a percentage point, with five one millionths of a percentage
point rounded upward and all dollar amounts will be rounded to the nearest
cent, with one-half cent being rounded upward.
TENDER AT OPTION OF BENEFICIAL OWNERS
In the event the Operating Partnership and the Remarketing Underwriter
agree on the Spread on the Spread Determination Date with respect to any
Subsequent Spread Period, the Operating Partnership and the Remarketing
Underwriter will enter into a Remarketing Underwriting Agreement (the
"Remarketing Underwriting Agreement") on such Spread Determination Date,
under which the Remarketing Underwriter will agree, subject to the terms and
conditions set forth therein, to purchase from tendering holders of Notes on
the date immediately following the end of such Subsequent Spread Period (the
"Tender Date") all Notes with respect to which the Remarketing Underwriter
receives a Tender Notice as described below at 100% of the principal amount
thereof (the "Purchase Price"). In such event (except as otherwise provided
in the next succeeding paragraph), each beneficial owner of a Note may, at
such owner's option, upon giving notice as provided below (the "Tender
Notice"), tender such Note for purchase by the Remarketing Underwriter on the
Tender Date at the Purchase Price. The Purchase Price will be paid by the
Remarketing Underwriter in accordance with the standard procedures of DTC,
which currently provide for payments in same-day funds. Interest accrued on
the Notes with respect to the preceding interest period will be paid by the
Operating Partnership in the manner described under "--Book-Entry System"
below and "--Additional Terms of the Notes" above. If such beneficial owner
has an account at the Remarketing Underwriter and tenders such Note through
such account, such beneficial owner will not be required to pay any fee or
commission to the Remarketing Underwriter. If such Note is tendered through
a broker, dealer, commercial bank, trust company or other institution, other
than the Remarketing Underwriter, such holder may be required to pay fees or
commissions to such other institution. It is currently anticipated that
Notes so purchased by the Remarketing Underwriter will be remarketed by it.
The Tender Notice must be received by the Remarketing Underwriter during
the period commencing at 3:00 p.m., New York City time, on the Spread
Determination Date and ending at 12:00 noon, New York City time, on the
second Business Day following such Spread Determination Date for such
Subsequent Spread Period (the "Notice Date"). In order to ensure that a
Tender Notice is received on a particular day, the beneficial owner of Notes
must direct his broker or other designated Participant or Indirect
Participant to give such Tender Notice before the broker's cut-off time for
accepting instructions for that day. Different firms may have different
cut-off times for accepting instructions from their customers. Accordingly,
beneficial owners should consult the brokers or other Participants or
Indirect Participants through which they own their interests in the Notes for
the cut-off times for such brokers, other Participants or Indirect
Participants. See "--Book-Entry System" below. Except as otherwise provided
below, a Tender Notice shall be irrevocable. If a Tender Notice is not
received for any reason by the Remarketing Underwriter with respect to any
Note by 5:00 p.m., New York City time, on the Notice Date, the beneficial
owner of such Note shall be deemed to have elected not to tender such Note
for purchase by the Remarketing Underwriter.
The Remarketing Underwriter will attempt, on a reasonable best efforts
basis, to remarket the tendered Notes at a price equal to 100% of the
aggregate principal amount so tendered. There is no assurance that the
Remarketing Underwriter will be able to remarket the entire principal amount
of Notes tendered in a remarketing. The obligation of the Remarketing
Underwriter to purchase Notes from tendering holders of Notes will be subject
to several conditions precedent set forth in the Remarketing Underwriting
Agreement that are customary in the Operating Partnership's public offerings,
including a condition that no material adverse change in the condition of the
Operating Partnership and its subsidiaries, taken as a whole,
S-15
<PAGE>
shall have occurred since the Spread Determination Date. In addition, the
Remarketing Underwriting Agreement will provide for the termination thereof
by the Remarketing Underwriter upon the occurrence of certain events that are
also customary in the Operating Partnership's public securities offerings.
In the event that, due to such events with respect to any Subsequent Spread
Period, the Remarketing Underwriter does not purchase on the relevant Tender
Date all of the Notes for which a Tender Notice shall have been given, (1)
all such Tender Notices will be null and void, (2) none of the Notes for
which such Tender Notices shall have been given will be purchased by the
Remarketing Underwriter on such Tender Date, (3) the Subsequent Spread Period
will be one year, which Subsequent Spread Period shall be deemed to have
commenced upon the applicable Commencement Date, (4) the Notes will be reset
to the Floating Rate Mode, (5) the Spread for such Subsequent Spread Period
will be the Alternate Spread and (6) the Notes will be redeemable at the
option of the Operating Partnership, in whole or in part, upon at least ten
Business Days' notice given by no later than the fifth Business Day following
the relevant Tender Date in the manner described under "--Redemption of the
Notes" below, on the date set forth in such notice, which shall be no later
than the last day of such one-year Subsequent Spread Period, at a redemption
price equal to 100% of the principal amount thereof, together with accrued
interest to the redemption date.
No beneficial owner of any Note shall have any rights or claims against
the Operating Partnership or the Remarketing Underwriter as a result of the
Remarketing Underwriter not purchasing such Notes, except that such
beneficial owner shall have the right to receive the Alternate Spread on such
Notes from the Operating Partnership. The Operating Partnership will have no
obligation under any circumstance to repurchase any Notes, except in the case
of Notes called for redemption as described below.
If the Remarketing Underwriter does not purchase all Notes tendered for
purchase on any Tender Date, it will promptly notify the Operating
Partnership and the Trustee. As soon as practicable after receipt of such
notice, the Operating Partnership will cause a notice to be given to holders
of Notes specifying (1) the one-year duration of the Subsequent Spread
Period, (2) that the Notes will be reset to the Floating Rate Mode, (3) the
Spread for such Subsequent Spread Period (which shall be the Alternate
Spread) and (4) LIBOR for the initial Quarterly Period of such Subsequent
Spread Period.
The term "Remarketing Underwriter" means the nationally recognized
broker-dealer selected by the Operating Partnership to act as Remarketing
Underwriter. The term "Rate Agent" means the entity selected by the
Operating Partnership as its agent to determine (i) LIBOR and the interest
rate on the Notes for any Quarterly Period and/or (ii) the yield to maturity
on the applicable United States Treasury security that is used in connection
with the determination of the applicable Fixed Rate, and the ensuing
applicable Fixed Rate. Pursuant to the Remarketing Agreement, Merrill Lynch,
Pierce, Fenner & Smith Incorporated has agreed to act as Remarketing
Underwriter and Rate Agent. The Operating Partnership, in its sole
discretion, may change the Remarketing Underwriter and the Rate Agent for any
Subsequent Spread Period at any time on or prior to 3:00 p.m., New York City
time, on the Duration/Mode Determination Date relating thereto.
Each of the Rate Agent and the Remarketing Underwriter, in its
individual or any other capacity, may buy, sell, hold and deal in any of the
Notes. Either of such parties 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. Either of such parties, 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.
REDEMPTION OF THE NOTES
The Notes may not be redeemed prior to August , 1999. On that date,
on each Commencement Date and on those Interest Payment Dates specified as
redemption dates by the Operating Partnership on the Duration/Mode
Determination Date in connection with any Subsequent Spread Period, the Notes
may be redeemed, at the option of the Operating Partnership, in whole or in
part, upon notice thereof given at any time during the 30 calendar day period
ending on the tenth Business Day prior to the redemption date, in accordance
with the redemption type selected on the Duration/Mode Determination Date.
In the event that less than all of the outstanding Notes are to be redeemed,
the Notes to be redeemed shall be selected by such method as the Operating
Partnership shall deem fair and appropriate. So long as the Global Note is
held by DTC, the Operating Partnership will give notice to DTC, whose nominee
is the record holder of all of the Notes, and DTC will determine the
principal amount to be redeemed from the account of each Participant. A
Participant may determine to redeem from some beneficial owners (which may
include a Participant holding Notes for its own account) without redeeming
from the accounts of other beneficial owners. The Notes are also subject to
redemption as provided under " Tender at Option of Beneficial Owners" above.
S-16
<PAGE>
The redemption type to be chosen by the Operating Partnership and the
Remarketing Underwriter on the Duration/Mode Determination Date may be one of
the following as defined herein: (i) Par Redemption; (ii) Premium Redemption
or (iii) Make-Whole Redemption. "Par Redemption" means redemption at a
redemption price equal to 100% of the principal amount thereof, plus accrued
interest thereon, if any, to the redemption date. "Premium Redemption" means
redemption at a redemption price or prices greater than 100% of the principal
amount thereof, plus accrued interest thereon, if any, to the redemption
date, as determined on the Duration/Mode Determination Date. "Make-Whole
Redemption" means redemption at a redemption price equal to the sum of (A)
the principal amount of the Notes being redeemed plus accrued interest
thereof, if any, to the redemption date and (B) the Make-Whole Amount (as
defined below) if any, with respect to such Notes.
"MAKE-WHOLE AMOUNT" means, in connection with any optional redemption or
accelerated payment of any Note, the excess, if any, of (i) the aggregate
present value as of the date of such redemption or accelerated payment of
each dollar of principal being redeemed or paid and the amount of interest
(exclusive of interest accrued to the date of redemption or accelerated
payment) that would have been payable in respect of such dollar if such
redemption or accelerated payment had not been made, determined by
discounting, on a semiannual basis, such principal and interest at the
Reinvestment Rate (determined on the third Business Day preceding the date
such notice of redemption is given or declaration of acceleration is made)
from the respective dates on which such principal and interest would have
been payable if such redemption or accelerated payment had not been made,
over (ii) the aggregate principal amount of the Notes being redeemed or paid.
"REINVESTMENT RATE" means .25% plus the yield on treasury securities at
constant maturity under the heading "Week Ending" published in the
Statistical Release (as defined below) 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 purposes of calculating the Reinvestment Rate, the
most recent Statistical Release published prior to the date of determination
of the Make-Whole Amount shall be used.
"STATISTICAL RELEASE" means the statistical release designated "H.
15(519)" or any successor publication which is published weekly by the
Federal Reserve System and which establishes yields on actively traded United
States government securities adjusted to constant maturities or, if such
statistical release is not published at the time of any determination under
the Indenture, then such other reasonably comparable index which shall be
designated by the Rate Agent, after consultation with the Operating
Partnership.
BOOK-ENTRY SYSTEM
The following are summaries of certain rules and operating procedures of
DTC that affect the payment of principal and interest and transfers of
interests in the Global Notes. Upon issuance, the Notes will be issued only
in the form of Global Notes which will be deposited with, or on behalf of,
DTC and registered in the name of Cede & Co., as nominee of DTC. Unless and
until it is exchanged in whole or in part for Notes in definitive form under
the limited circumstances described below, the Global Notes may not be
transferred except as a whole (i) by DTC to a nominee of DTC, (ii) by a
nominee of DTC to DTC or another nominee of DTC, or (iii) by DTC or any such
nominee to a successor of DTC or a nominee of such successor.
Ownership of beneficial interests in the Global Notes will be limited to
persons that have accounts with DTC for the Global Notes ("Participants") or
persons that may hold interests through Participants. Upon the issuance of
the Global Notes, DTC will credit, on its book-entry registration and
transfer system, the Participants' accounts with the respective principal
amounts of the Notes represented by the Global Notes beneficially owned by
such Participants. Ownership of beneficial interests in the Global Notes 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 Notes.
So long as DTC or its nominee is the registered owner of the Global
Notes, DTC or such nominee, as the case may be, will be considered the sole
owner or holder of the Notes represented by the Global Notes for all purposes
under the Indenture. Except as set forth below, owners of beneficial
interests in the Global Notes will not be entitled to have the interests
represented by the Global Notes registered in their names, will not receive
or be entitled to receive physical delivery
S-17
<PAGE>
of the Notes in definitive form and will not be considered the owners or
holders thereof under the Indenture. Accordingly, each person owning a
beneficial interest in the Global Notes 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 Notes desires to give or take any action that a holder
is entitled to give or take under the Indenture, DTC would authorize the
Participants holding the relevant beneficial interests to give or take such
action, and such Participants would authorize beneficial owners owning
through such Participants to give or take such action or would otherwise act
upon the instructions of beneficial owners holding through them.
Principal and interest payments on interests represented by the Global
Notes will be made to DTC or its nominee, as the case may be, as the
registered owner of the Global Notes. 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 Notes 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 Notes, will immediately
credit Participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the Global Notes as shown on the records
of DTC. The Operating Partnership also expects that payments by Participants
to owners of beneficial interests in the Global Notes held through such
participants will be governed by standing customer instructions and customary
practices, as is now the case with the securities held for the accounts of
customers in bearer form or registered in "street name," and will be the
responsibility of such Participants.
If DTC, is at any time unwilling or unable to continue as depository for
the Notes and the Operating Partnership fails to appoint a successor
depository registered as a clearing agency under the Securities Exchange Act
of 1934, as amended, within 90 days, the Operating Partnership will issue the
Notes in definitive form in exchange for the Global Notes. Any Notes issued
in definitive form in exchange for the Global Notes 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 Notes.
DTC has advised the Operating Partnership of the following information
regarding DTC: DTC is a limited-purpose trust company organized under the
Banking Law of the State of New York, a "banking organization" within the
meaning of the Banking Law of the State of New York, a member of the Federal
Reserve System, a "clearing corporation" within the meaning of the New York
Uniform Commercial Code, and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities of its Participants and to facilitate the clearance and settlement
of transactions among its Participants in such securities through electronic
book-entry changes in accounts of the Participants, thereby eliminating the
need for physical movement of securities certificates. DTC's Participants
include securities brokers and dealers, banks, trust companies, clearing
corporations, and certain other organizations, some of which (and/or their
representatives) own DTC. Access to DTC book-entry system is also available
to others, such as banks, brokers, dealers, and trust companies that clear
through or maintain a custodial relationship with a Participant, either.
directly or indirectly.
S-18
<PAGE>
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following summary of certain United States Federal income tax
consequences of the purchase, ownership and disposition of the Notes is based
upon the Internal Revenue Code of 1986, as amended (the "Code"), regulations
promulgated thereunder ("Treasury Regulations"), and rulings and decisions
now in effect, all of which are subject to change (prospectively or
retroactively). The following discussion deals only with Notes held as
capital assets and does not purport to deal with persons in special tax
situations, such as financial institutions, banks, insurance companies,
regulated investment companies, dealers in securities or currencies, persons
holding Notes as a hedge against currency risks or as a position in a
"straddle" for tax purposes, or persons whose functional currency is not the
United States dollar. It also does not deal with holders other than original
purchasers buying the Notes at the original offering price (except where
otherwise specifically noted). It does not discuss 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.
PERSONS CONSIDERING THE PURCHASE OF THE NOTES SHOULD CONSULT THEIR OWN
TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP
AND DISPOSITION OF THE NOTES, INCLUDING THE TAX CONSEQUENCES UNDER STATE,
LOCAL, FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN
UNITED STATES FEDERAL OR OTHER TAX LAWS.
As used herein, the term "U.S. Holder" means a beneficial owner of a
Note that is for United States Federal income tax purposes (i) a citizen or
resident of the United States, (ii) a corporation, partnership or other
entity created or organized in or under the laws of the United States or of
any state thereof, (iii) an estate the income of which is subject to United
States Federal income taxation regardless of its source, or (iv) a trust if a
court within the United States is able to exercise primary supervision over
the administration of the trust and one or more United States persons have
the authority to control all substantial decisions of the trust. As used
herein, the term "Non-U.S. Holder" means a beneficial owner of a Note that is
not a U.S. Holder.
U.S. HOLDERS
PAYMENTS OF INTEREST. The Notes should constitute "variable rate debt
instruments" ("VRDI") and the interest payments received should be considered
"qualified stated interest" under section 1.1275-5 of the Treasury
Regulations. The interest received will thus 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.
DISPOSITION OF A NOTE. Based on the foregoing treatment, upon the sale,
exchange or retirement of a Note, a U.S. Holder generally will recognize
taxable gain or loss in an amount equal to the difference, if any, between
the amount realized upon the sale, exchange or retirement (other than amounts
representing accrued and unpaid interest which will be taxable as interest
income) and such U.S. Holder's adjusted tax basis in the Note. A U.S.
Holder's adjusted tax basis in a Note is generally equal to such U.S.
Holder's initial investment in such Note. Any such gain or loss generally
will be capital gain or loss, and generally will be a long-term capital gain
or loss if the Notes have been held for more than one year prior to the date
of disposition. Tax rates on capital gains received by individual U.S.
Holders vary depending on each U.S. Holder's income and holding period for
the Notes. U.S. Holders who are individuals should contact their own tax
advisors for more information or for the capital gains rate applicable to a
specific Note. The deduction of capital losses is subject to certain
limitations.
OTHER POSSIBLE TREATMENT OF THE NOTES. While the Operating Partnership
intends to treat the Notes as VRDIs issued without original issue discount
("OID"), it is possible that the Internal Revenue Service ("IRS") will take
the position that the Notes are either (i) VRDIs issued with OID, or (ii)
contingent payment debt instruments. In the event the IRS were successful in
either assertion, holders of Notes could experience U.S. Federal income tax
consequences significantly different from those discussed herein.
Prospective purchasers of Notes are urged to consult their tax advisors as to
the potential application of, and the consequences of applying, the
regulations governing VRDIs issued with OID and contingent payment
obligations.
NON-U.S. HOLDERS
A non-U.S. Holder will not be subject to Federal income taxes on payment
of principal, premium (if any) or interest of 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
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<PAGE>
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 Note
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 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 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 above (or by reason of the delivery of a
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 disposition
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 United States 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 normally be
made 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 Federal income tax provided the required information is
furnished to the IRS.
NEW WITHHOLDING REGULATIONS
On October 6, 1997, the Treasury Department issued new regulations (the
"New Regulations") which make certain modifications to the withholding, backup
withholding and information reporting rules described above. The New
Regulations attempt to unify certification requirements and modify reliance
standards. The IRS has announced that the New Regulations will generally be
effective for payments made after December 31, 1999, subject to certain
transition rules. Valid
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<PAGE>
withholding certificates that are held on December 31, 1999 will remain valid
until the earlier of December 31, 2000 or the expiration of the certificate
under rules currently in effect (unless otherwise invalidated due to changes
in circumstances of the person whose name is on such certificate).
Prospective investors are urged to consult their own tax advisors regarding
the New Regulations.
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<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the Terms Agreement,
dated August , 1998, incorporating by reference the related Purchase
Agreement, dated August , 1998 (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, at a price equal to % of the
principal amount thereof, 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 & Smith
Incorporated........................
Goldman, Sachs & Co.......................
____________
TOTAL $150,000,000
------------
------------
</TABLE>
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 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 Notes are a new issue of securities with no established trading
market. The Operating Partnership does not intend to apply for listing of the
Notes on a national securities exchange. The Operating Partnership has been
advised by the Underwriters that they intend to make a market in the Notes as
permitted by applicable laws and regulations, but 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.
Until the distribution of the Notes is completed, rules of the
Commission may limit the ability of the Underwriters to bid for and purchase
the Notes. As an exception to these rules, the Underwriters are permitted to
engage in certain transactions that stabilize the price of the Notes. Such
transactions consist of bids or purchases for the purpose of pegging, fixing
or maintaining the price of the Notes.
If the Underwriters create a short position in the Notes in connection
with the offering, I.E., if they sell more of the Notes than are 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, purchasers of a security for the purpose of stabilization or
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 make any
representation or prediction as to the direction or magnitude of any effect
that the transactions described above may have on the prices of the Notes.
In addition, neither the Operating Partnership nor the Underwriters make any
representation that the Underwriters will engage in such transactions or that
such transactions, once commenced, will not be discontinued without notice.
The Operating Partnership has agreed to indemnify the Underwriters
against certain civil liabilities, including liabilities under the Securities
Act of 1933, as amended (the "Securities Act"), or to contribute to payments
the Underwriters may be required to make in respect thereof.
The Underwriters from time to time provides 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>
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 terms 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>
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 below), 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 Prospectus/Information Statement dated
November 24, 1997.
2
<PAGE>
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).
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<PAGE>
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 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
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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 OP 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.
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<PAGE>
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,
- -----------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
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.
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<PAGE>
DESCRIPTION OF DEBT SECURITIES
The following description sets forth certain general terms and
provisions of the Debt Securities to which any Prospectus Supplement may
relate. The particular terms of the Debt Securities being offered and the
extent to which such general provisions may apply will be described in a
Prospectus Supplement relating to such Debt Securities.
The Debt Securities will be issued under an Indenture dated as of
October 1, 1994, as amended or supplemented from time to time (the
"Indenture"), between the Operating Partnership and The First National Bank
of Chicago, as trustee (the "Trustee"). The Indenture has been filed as an
exhibit to the Registration Statement of which this Prospectus is a part and
is available for inspection at the corporate trust office of the Trustee at
14 Wall Street, Eighth Floor, New York, New York or as described above under
"Available Information." The Indenture is subject to, and governed by, the
Trust Indenture Act of 1939, as amended (the "TIA"). The statements made
hereunder relating to the Indenture and the Debt Securities to be issued
thereunder are summaries of certain provisions thereof and do not purport to
be complete and are subject to, and are qualified in their entirety by
reference to, all provisions of the Indenture and such Debt Securities. All
section references appearing herein are to sections of the Indenture, and
capitalized terms used but not defined herein shall have the respective
meanings set forth in the Indenture.
GENERAL
The Debt Securities will be direct, unsecured obligations of the
Operating Partnership and will rank equally with all other unsecured and
unsubordinated indebtedness of the Operating Partnership. Unless otherwise
specified in the applicable Prospectus Supplement, the Company has no
obligation for payment of principal of or interest on the Debt Securities.
The Debt Securities may be issued in one or more series, in each case as
established from time to time in or pursuant to authority granted by a
resolution of the Board of Trustees of the Company, as general partner of the
Operating Partnership, or as established in the Indenture or in one or more
indentures supplemental to the Indenture. All Debt Securities of one series
need not be issued at the same time and, unless otherwise provided, a series
may be reopened, without the consent of the Holders of the Debt Securities of
such series, for issuances of additional Debt Securities of such series
(Section 301).
The Indenture provides that there may be more than one Trustee
thereunder, each with respect to one or more series of Debt Securities. Any
Trustee under the Indenture may resign or be removed with respect to one or
more series of Debt Securities, and a successor Trustee may be appointed to
act with respect to such series (Section 608). In the event that two or more
persons are acting as Trustee with respect to different series of Debt
Securities, each such Trustee shall be a Trustee of a trust under the
applicable Indenture separate and apart from the trust administered by any
other Trustee (Section 609), and, except as otherwise indicated herein, any
action described herein to be taken by the Trustee may be taken by each such
Trustee with respect to, and only with respect to, the one or more series of
Debt Securities for which it is Trustee under the Indenture.
Reference is made to the Prospectus Supplement relating to the series of
Debt Securities being offered for the specific terms thereof, including
without limitation:
(1) the title of such Debt Securities;
(2) the aggregate principal amount of such Debt Securities and any
limit on such aggregate principal amount;
(3) the percentage of the principal amount at which such Debt
Securities will be issued and, if other than the principal amount
thereof, the portion of the principal amount thereof payable upon
declaration of acceleration of the maturity thereof;
(4) the date or dates, or the method for determining such date or
dates, on which the principal of such Debt Securities will be
payable;
(5) the rate or rates (which may be fixed or variable), or the method
by which such rate or rates shall be determined, at which such Debt
Securities will bear interest, if any;
(6) the date or dates, or the method for determining such date or
dates, from which any such interest will accrue, the Interest
Payment Dates on which any such interest will be payable, the
Regular Record Dates for such Interest Payment Dates, or the method
by which such dates shall be determined, the Person to whom such
interest shall be payable, and the basis upon which interest shall
be calculated if other than that of a 360-day year of twelve 30-day
months;
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<PAGE>
(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 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.
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<PAGE>
DENOMINATIONS, INTEREST, REGISTRATION AND TRANSFER
Unless otherwise described in the applicable Prospectus Supplement, the
Registered Securities of any series will be issuable in denominations of
$1,000 and integral multiples thereof (Section 302).
Unless otherwise specified in the applicable Prospectus Supplement, the
principal of (and premium, if any) and interest on any series of Debt
Securities will be payable at the corporate trust office of the Trustee,
initially located at 14 Wall Street, Eighth Floor, New York, New York;
provided that, at the option of the Operating Partnership, payment of
interest may be made by check mailed to the address of the Person entitled
thereto as it appears in the Security Register or by wire transfer of funds
to such Person at an account maintained within the United States (Sections
301, 305, 306, 307 and 1002).
Any interest not punctually paid or duly provided for on any Interest
Payment Date with respect to a Debt Security ("Defaulted Interest") will
forthwith cease to be payable to the Holder on the applicable Regular Record
Date and may either be paid to the person in whose name such Debt Security is
registered at the close of business on a special record date (the "Special
Record Date") for the payment of such Defaulted Interest to be fixed by the
Trustee, notice whereof shall be given to the Holder of such Debt Security
not less than 10 days prior to such Special Record Date, or may be paid at
any time in any other lawful manner, all as more completely described in the
Indenture (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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<PAGE>
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 calendar quarter covered in the Operating
Partnership's Annual Report on Form 10-K or Quarterly Report on Form 10-Q,
as the
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<PAGE>
case may be, most recently filed with the Commission (or, if such filing is
not permitted under the Exchange Act, with the Trustee) prior to such
distribution; provided, however, that the foregoing limitation shall not
apply to any distribution which is necessary to maintain the Company's status
as a REIT under the Internal Revenue Code of 1986, as amended (the "Code"),
if the aggregate principal amount of all outstanding Debt of the Operating
Partnership and its Subsidiaries on a consolidated basis at such time is less
than 60% of Adjusted Total Assets (Section 1005).
Notwithstanding the foregoing, the Operating Partnership will not be
prohibited from making the payment of any distribution within 30 days of the
declaration thereof if at such date of declaration such payment would have
complied with the provisions of the immediately preceding paragraph (Section
1005).
EXISTENCE. Except as permitted under "Merger, Consolidation or Sale,"
the Operating Partnership will do or cause to be done all things necessary to
preserve and keep in full force and effect its existence, rights and
franchises; provided, however, that the Operating Partnership shall not be
required to preserve any right or franchise if it determines that the
preservation thereof is no longer desirable in the conduct of the business of
the Operating Partnership, and that the loss thereof is not disadvantageous
in any material respect to the Holders of the Debt Securities.
MAINTENANCE OF PROPERTIES. The Operating Partnership will cause all of
its properties used or useful in the conduct of its business or the business
of any Subsidiary to be maintained and kept in good condition, repair and
working order and supplied with all necessary equipment and will cause to be
made all necessary repairs, renewals, replacements, betterments and
improvements thereof, all as in the judgment of the Operating Partnership may
be necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; provided, however, that
the Operating Partnership shall not be prevented from selling or otherwise
disposing for value its properties in the ordinary course of business
(Section 1007).
INSURANCE. The Operating Partnership will and will cause each of its
Subsidiaries to, keep all of its insurable properties insured against loss or
damage at least equal to their then fully insurable value with financially
sound and reputable insurance companies (Section 1008).
PAYMENT OF TAXES AND OTHER CLAIMS. The Operating Partnership will pay
or discharge or cause to be paid or discharged, before the same shall become
delinquent, (i) all taxes, assessments and governmental charges levied or
imposed upon it or any Subsidiary or upon the income, profits or property of
the Operating Partnership or any Subsidiary, and (ii) all lawful claims for
labor, materials and supplies which, if unpaid, might by law become a lien
upon the property of the Operating Partnership or any Subsidiary; provided,
however, that the Operating Partnership shall not be required to pay or
discharge or cause to be paid or discharged any such tax, assessment, charge
or claim whose amount, applicability or validity is being contested in good
faith by appropriate proceedings (Section 1009).
PROVISION OF FINANCIAL INFORMATION. The Holders of the Debt Securities
will be provided with copies of the annual reports and quarterly reports of
the Operating Partnership. Whether or not the Operating Partnership is
subject to Section 13 or 15(d) of the Exchange Act, the Operating Partnership
will, to the extent permitted under the Exchange Act, file with the
Commission the annual reports, quarterly reports and other documents which
the Operating Partnership would have been required to file with the
Commission 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 15(d) of the Exchange Act if the Operating
Partnership were subject to such Sections and (ii) file with the Trustee
copies of the annual reports, quarterly reports and other documents which the
Operating Partnership would have been required to file with the Commission
pursuant to Section 13 or 15(d) of the Exchange Act if the Operating
Partnership were subject to such Sections and (y) if filing such documents by
the Operating Partnership with the Commission is not permitted under the
Exchange Act, promptly upon written request and payment of the reasonable
cost of duplication and delivery, supply copies of such documents to any
prospective Holder (Section 1010).
ADDITIONAL COVENANTS AND/OR MODIFICATIONS TO THE COVENANTS DESCRIBED ABOVE
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
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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.
"MAXIMUM ANNUAL SERVICE CHARGE" as of any date means the maximum amount
which is payable in any 12 month period for interest on Debt.
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"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 as obligor
or 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
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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 under the Indenture; (ii) to add to the covenants of the Operating
Partnership for the benefit of the Holders of all or any series of Debt
Securities or to surrender any right or power conferred upon the Operating
Partnership in Indenture; (iii) to add Events of Default for the benefit of
the Holders of all or any series of Debt Securities; (iv) to change or
eliminate any of the provisions of the Indenture, provided that any such
change or elimination shall become effective only when there is no Debt
Security Outstanding of any series created prior to the modification or
amendment which is entitled to the benefit of such provision; (v) to secure
the Debt Securities; (vi) to provide for the acceptance of appointment by a
successor Trustee or facilitate the administration of the trusts under the
Indenture by more than one Trustee; (vii) to cure any ambiguity, defect or
inconsistency in the Indenture, provided that such action shall not adversely
affect the interests of Holders of Debt Securities of any series issued under
the Indenture in any material respect; or (viii) to supplement any of the
provisions of the Indenture to the extent necessary to permit or facilitate
defeasance and discharge of any series of such Debt Securities, provided that
such action shall not adversely affect the interests of the Holders of the
Debt Securities of any series in any material respect (Section 901).
The Indenture provides that in determining whether the Holders of the
requisite principal amount of Outstanding Debt Securities of a series have
given any request, demand, authorization, direction, notice, consent or
waiver thereunder or whether a quorum is present at a meeting of Holders of
Debt Securities, Debt Securities owned by the Operating Partnership, or any
other obligor upon the Debt Securities or any affiliate of the Operating
Partnership, Company or of such other obligor shall be disregarded.
The Indenture contains provisions for convening meetings of the Holders
of Debt Securities of a series (Section 1501). A meeting may be called at
any time by the Trustee, and also, upon request, by the Operating Partnership
or by the Holders of at least 10% in principal amount of the Outstanding Debt
Securities of such series, or in any such case, upon notice given as provided
in the Indenture (Section 1502). Except for any consent that must be given
by the Holder of each Debt Security affected by certain modifications and
amendments of the Indenture, any resolution presented at a meeting or
adjourned meeting duly reconvened at which a quorum is present may be adopted
by the affirmative vote of the Holders of a majority in principal amount of
the Outstanding Debt Securities of that series; provided, however, that,
except as referred to above, any resolution with respect to any request,
demand, authorization, direction, notice, consent, waiver or other action
that may be made, given or taken by the Holders of a specified percentage,
which is less than a majority, in principal amount of the Outstanding Debt
Securities of a series may be adopted at a meeting or adjourned meeting duly
reconvened at which a quorum is present by the affirmative vote of the
Holders of such specified percentage in principal amount of the Outstanding
Debt Securities of that series. Any resolution passed or decision taken at
any meeting of Holders of Debt Securities of any series duly held in
accordance with the Indenture will be binding on all Holders of Debt
Securities of that series. The quorum at any meeting called to adopt a
resolution, and at any reconvened meeting, will be Persons holding or
presenting a majority in principal amount of the Outstanding Debt Securities
of a series; provided, however, that if any action is to be taken at such
meeting with respect to a consent or waiver which may be given by the Holders
of not less than a
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specified percentage in principal amount of the Outstanding Debt Securities
of a series, the Persons holding or representing such specified percentage in
principal amount of the Outstanding Debt Securities will constitute a quorum
(Section 1504).
Notwithstanding the foregoing provisions, if any action is to be taken
at a meeting of Holders of Debt Securities of any series with respect to any
request, demand, authorization, direction, notice, consent, waiver or other
action that the Indenture expressly provides may be made, given or taken by
the Holders of a specified percentage in principal amount of all Outstanding
Debt Securities affected thereby, or of the Holders of such series and one or
more additional series: (i) there shall be no minimum quorum requirement for
such meeting; and (ii) the principal amount of the Outstanding Debt
Securities of such series that vote in favor of such request, demand,
authorization, direction, notice, consent, waiver or other action shall be
taken into account in determining whether such request, demand,
authorization, direction, notice, consent, waiver or other action has been
made, given or taken under the Indenture (Section 1504).
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
The Operating Partnership may discharge certain obligations to Holders
of any series of Debt Securities that either have become due and payable or
will become due and payable within one year (or scheduled for redemption
within one year) by irrevocably depositing with the Trustee, in trust, funds
in an amount sufficient to pay and discharge the entire indebtedness on such
Debt Securities in respect of principal 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 longer be applicable to such Debt
Securities), the amount of Government Obligations on deposit with the Trustee
will be sufficient to pay amounts due on such Debt Securities at the time of
their Stated Maturity but may not be sufficient to pay amounts due on such
Debt Securities at the time of the acceleration resulting from such Event of
Default. However, the Operating
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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 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
17
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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>
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.
19
<PAGE>
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
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
The Offering................................... S-3
The Operating Partnership...................... S-4
Recent Developments............................ S-5
Use of Proceeds................................ S-7
Business and Properties........................ S-7
Selected Financial and Operating Information... S-10
Description of the Notes....................... S-12
Certain United States Federal Income Tax
Considerations............................... S-19
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>
$150,000,000
ERP OPERATING
LIMITED PARTNERSHIP
REMARKETED RESET NOTES DUE
AUGUST , 2003
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PROSPECTUS SUPPLEMENT
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MERRILL LYNCH & CO.
GOLDMAN, SACHS & CO.
AUGUST , 1998
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