<PAGE>
PROSPECTUS SUPPLEMENT
- ----------------------------
(TO PROSPECTUS DATED APRIL 6, 1998)
$300,000,000 [LOGO]
ERP OPERATING LIMITED PARTNERSHIP
7.10% NOTES DUE JUNE 23, 2004
------------------------
We will pay interest on the notes on December 23 and June 23 of each year,
beginning December 23, 1999. We may redeem the notes at any time before
maturity.
The notes will be unsecured and will rank equally with all of our other
unsecured senior indebtedness.
------------------------
<TABLE>
<CAPTION>
PER NOTE TOTAL
---------- --------------
<S> <C> <C>
Public offering price (1)......................................................... 99.938% $ 299,814,000
Underwriting discount............................................................. .6% $ 1,800,000
Proceeds, before expenses, to ERP Operating
Limited Partnership............................................................. 99.338% $ 298,014,000
</TABLE>
(1) Plus accrued interest from June 23, 1999, if settlement occurs after that
date
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus supplement or the accompanying prospectus is truthful or complete.
Any representation to the contrary is a criminal offense.
The notes will be ready for delivery in book-entry form only through The
Depository Trust Company on or about June 23, 1999.
------------------------
MERRILL LYNCH & CO.
BANC OF AMERICA SECURITIES LLC
CHASE SECURITIES INC.
J.P. MORGAN & CO.
------------------------
The date of this prospectus supplement is June 17, 1999.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
PROSPECTUS SUPPLEMENT
ERP Operating Limited Partnership...................................S-3
Use of Proceeds.....................................................S-3
Description of Notes................................................S-3
Underwriting........................................................S-5
Legal Matters.......................................................S-6
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>
----------------
You should rely only on the information contained or incorporated by
reference in this prospectus supplement and the accompanying prospectus. We have
not, and the underwriters have not, authorized any other person to provide you
with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not, and the
underwriters are not, making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted. You should assume that
the information appearing in this prospectus supplement and the accompanying
prospectus is accurate only as of their dates. Our business, financial
condition, results of operations and prospects may have changed since then.
S-2
<PAGE>
ERP OPERATING LIMITED PARTNERSHIP
We and our managing general partner, Equity Residential Properties
Trust, were formed to continue and expand the national multifamily property
business organized by Samuel Zell, Chairman of the Board of Equity Residential.
As of March 31, 1999, we had a national portfolio of 681 multifamily properties
containing 192,318 apartment units in 34 states. As of March 31, 1999, our
properties had an occupancy rate of approximately 96%. In addition, as of March
31, 1999, we managed an additional 11,728 units owned by affiliated and
unaffiliated entities.
USE OF PROCEEDS
We will use the net proceeds from the offering of these notes to repay
indebtedness under our $500 million and $120 million revolving credit
facilities. As of June 18, 1999, indebtedness under our revolving credit
facilities bore interest at a weighted average annual rate of 5.4%. As of June
18, 1999, the outstanding amount under our $500 million revolving credit
facility was $255 million. This credit facility matures in November 1999. The
outstanding amount under our $120 million credit facility as of June 18, 1999
was $45 million. This credit facility matures in September 2000. Affiliates of
Banc of America Securities LLC, Chase Securities Inc. and J.P. Morgan Securities
Inc., three of the underwriters, are participating lenders in our credit
facilities, and upon application of the net proceeds from the offering of the
notes, each will receive its proportionate share of the amount of the credit
facilities to be repaid.
DESCRIPTION OF NOTES
THE FOLLOWING DESCRIPTION OF THE PARTICULAR TERMS OF THE NOTES
SUPPLEMENTS THE DESCRIPTION OF THE GENERAL TERMS AND PROVISIONS OF DEBT
SECURITIES IN THE ACCOMPANYING PROSPECTUS UNDER THE CAPTION "DESCRIPTION OF DEBT
SECURITIES."
GENERAL
We are offering $300,000,000 of our 7.10% notes maturing on June 23,
2004. We will issue the notes as a separate series of Debt Securities under the
Indenture, which is more fully described in the accompanying prospectus. Some
terms used in this prospectus supplement are defined in the accompanying
prospectus.
We will pay interest on the notes semi-annually in arrears on December
23 and June 23 of each year, commencing December 23, 1999, to the registered
holders of the notes on the preceding December 1 or June 1, as the case may be.
The notes are our direct, unsecured obligations and will rank equally
with all of our other unsecured and unsubordinated indebtedness. The notes will
be effectively subordinated to the prior claims of each secured mortgage lender
to any specific property of ours that secures the lender's mortgage. As of May
31, 1999, the mortgages on our properties totaled approximately $2.5 billion.
Our outstanding indebtedness with which the notes will have equal rank was
approximately $1.9 billion as of May 31, 1999, net of a $4.9 million discount
and including an $8.2 million premium. As of May 31, 1999, our total debt was
approximately $4.8 billion, and on a pro forma basis giving effect to this
offering the total outstanding indebtedness was approximately $4.8 billion.
Except as limited by the Indenture, and as described under "Description of Debt
Securities--Certain Covenants--Limitations on Incurrence of Indebtedness" in the
accompanying prospectus, the Indenture will permit us to incur additional
secured and unsecured indebtedness.
The notes will be issued only in fully registered, book-entry form. See
"Description of Debt Securities--Book Entry Registration" in the accompanying
prospectus.
The notes are not repayable at the option of any holder before
maturity. The notes will not be subject to a sinking fund.
The defeasance and covenant defeasance provisions of the Indenture,
described under "Description of Debt Securities--Discharge, Defeasance, and
Covenant Defeasance" in the accompanying prospectus, apply to the notes.
S-3
<PAGE>
Please refer to the section 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.
Except as described in this prospectus supplement or under "Certain
Covenants--Limitations on Incurrence of Indebtedness" and under "Merger,
Consolidation or Sale" in the accompanying prospectus, the Indenture does not
contain any other provisions that would limit our ability to incur indebtedness
or that would afford holders of the notes protection in the event of (1) a
highly leveraged or similar transaction involving us or our general partner or
any of our affiliates, (2) a change of control, or (3) a reorganization,
restructuring, merger or similar transaction involving us that may adversely
affect the holders of the notes. In addition, subject to the limitations set
forth under "Merger, Consolidation or Sale" in the accompanying prospectus, we
may, in the future, enter into certain transactions such as the sale of all or
substantially all of our assets or the merger or consolidation of us that would
increase the amount of indebtedness or substantially reduce or eliminate our
assets, which may have an adverse effect on our ability to service our
indebtedness, including the notes.
We have no present intention of engaging in a highly leveraged or
similar transaction.
OPTIONAL REDEMPTION AT OUR ELECTION
We may redeem the notes at any time in whole or, from time to time, in
part, at our election, at a redemption price equal to the sum of (1) the
principal amount of the notes being redeemed plus accrued interest thereon to
the redemption date and (2) the Make-Whole Amount, if any, with respect to such
notes, which we refer to collectively as the "Redemption Price". Notice of any
optional redemption of any notes will be given to holders at their addresses, as
shown in the security register, not more than 60 nor less than 30 days prior to
the date fixed for redemption. The notice of redemption will specify, among
other items, the Redemption Price and the principal amount of the notes held by
the holder to be redeemed.
S-4
<PAGE>
UNDERWRITING
Subject to the terms and conditions in an underwriting agreement among
Merrill Lynch, Pierce, Fenner & Smith Incorporated, Banc of America Securities
LLC, Chase Securities Inc. and J.P. Morgan Securities Inc., as underwriters, and
us, we have agreed to sell to the underwriters, and the underwriters have
severally agreed to purchase, the principal amounts of the notes set forth
opposite their respective names below. The underwriting agreement provides that
the obligations of the underwriters are subject to certain conditions precedent
and that when such conditions are satisfied the underwriters will be obligated
to purchase all of the notes.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OF
UNDERWRITER NOTES
----------- -------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated............................$ 75,000,000
Banc of America Securities LLC....................... 75,000,000
Chase Securities Inc. ............................... 75,000,000
J.P. Morgan Securities Inc. ......................... 75,000,000
-------------
Total................................... $300,000,000
</TABLE>
The underwriters have advised us that they propose initially to offer
the notes to the public at the public offering price set forth on the cover of
this prospectus supplement and to certain dealers at such price, less a
concession not in excess of .35% of the principal amount of the notes. The
underwriters may allow, and such dealers may reallow, a discount not in excess
of .25% of the principal amount of the notes on sales to certain other dealers.
After the initial public offering of the notes, the public offering price,
concession and discount may be changed.
The notes are a new issue of securities with no established trading
market. We have been advised by the underwriters that they intend to make a
market in the notes, but are not obligated to do so and may discontinue market
making at any time without notice. We can give no assurance as to the liquidity
of or any trading market for the notes.
In connection with the offering, 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 a greater
aggregate principal amount of notes than is set forth on the cover of this
prospectus supplement, the underwriters may reduce that short position by
purchasing notes in the open market. In general, purchases 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 we nor any underwriter makes any representation or prediction
as to the direction or magnitude of any effect that the transactions described
above may have on the price of the notes. In addition, neither we nor any
underwriter makes any representation that the underwriters will engage in such
transactions or that such transactions, once commenced, will not be discontinued
without notice.
We have agreed to indemnify the several underwriters against, or
contribute to payments that the underwriters may be required to make in respect
of, certain liabilities, including liabilities under the Securities Act of 1933.
From time to time, the underwriters and certain of their affiliates
have engaged, and may in the future engage, in transactions with, and perform
investment banking and/or commercial banking services for, us and our
affiliates and other entities owned or controlled by Mr. Zell in the ordinary
course of business. Morgan Guaranty Trust Company of New York, an affiliate
of J.P. Morgan Securities Inc., and Bank of America Illinois, an affiliate of
Banc of America Securities LLC, both are lenders on our $500 million credit
facility. In addition, an affiliate of Chase Securities Inc. is a
participating bank on our
S-5
<PAGE>
$120 million credit facility. These affiliates will receive their
proportionate share of the amount of the credit facilities to be repaid with
the proceeds of this offering. Because the amount to be repaid to affiliates
of the underwriters will exceed 10% of the net proceeds from the sale of the
notes, this offering complies with the provisions of Rule 2710(c)(8) of the
Conduct Rules of the National Association of Securities Dealers, Inc.
We estimate that our share of the total expenses of the offering,
excluding underwriting discounts and commissions, will be approximately
$450,000.
LEGAL MATTERS
The legality of the notes will be passed upon for us by Rosenberg &
Liebentritt, P.C., Chicago, Illinois and certain legal matters will be passed
upon for the underwriters by Hogan & Hartson L.L.P. Hogan & Hartson L.L.P. from
time to time provides services to us and other entities controlled by Mr. Zell.
S-6
<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).
3
<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
4
<PAGE>
management offices in the following cities: Chicago, Illinois; Denver,
Colorado; Seattle, Federal Way and Redmond, Washington; Bethesda, Maryland;
Atlanta, Georgia; Las Vegas, Nevada; Scottsdale and Tucson, Arizona;
Portland, Oregon; Dallas, Houston and San Antonio, Texas; Irvine, Pleasant
Hill and Stockton, California; Ypsilanti, Michigan; Charlotte and Raleigh,
North Carolina; Tampa, Jacksonville and Ft. Lauderdale, Florida; Kansas City;
Kansas; Minneapolis, Minnesota; Louisville, Kentucky; Tulsa, Oklahoma;
Boston, Massachusetts; and Nashville and Memphis, Tennessee.
THE OPERATING SUBSIDIARIES
Essentially all operations of the Company are conducted directly or
indirectly by the Operating Partnership and those entities owned or controlled
by the Operating Partnership (collectively, the "Subsidiaries"), so that, among
other things, the Company is able to comply with certain technical and complex
requirements under the federal tax law relating to the assets and income that a
REIT may hold or earn. In this regard, the Company has established: (i) the
Operating Partnership which benefited those entities that contributed certain of
the 69 Properties acquired by the Operating Partnership in connection with the
IPO in exchange for 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.
5
<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.
6
<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
7
<PAGE>
the method by which such dates shall be determined, the Person
to whom such interest shall be payable, and the basis upon
which interest shall be calculated if other than that of a
360-day year of twelve 30-day months;
(7) the place or places where (i) the principal of (and premium
and Make-Whole Amounts (as defined below), if any) and
interest, if any, on such Debt Securities will be payable,
(ii) such Debt Securities may be surrendered for conversion or
registration of transfer or exchange and (iii) notices or
demands to or upon the Operating Partnership in respect of
such Debt Securities and the Indenture may be served;
(8) the period or periods within which, the price or prices at
which and the terms and conditions upon which such Debt
Securities may be redeemed, in whole or in part, at the option
of the Operating Partnership, if the Operating Partnership is
to have such an option;
(9) the obligation, if any, of the Operating Partnership to
redeem, repay or purchase such Debt Securities at the option
of a Holder thereof, and the period or periods within which,
the price or prices as to which and the terms and conditions
upon which such Debt Securities will be redeemed, repaid or
purchased, in whole or in part, pursuant to such obligation;
(10) if other than United States dollars, the currency or
currencies in which such Debt Securities are denominated and
payable, which may be a foreign currency or units of two or
more foreign currencies or a composite currency or currencies,
and the terms and conditions relating thereto;
(11) whether the amount of payments of principal (and premium, if
any) or interest, if any, on such Debt Securities may be
determined with reference to an index, formula or other method
(which index, formula or other method may, but need not be,
based on a currency, currencies, currency unit or units or
composite currency or currencies) and the manner in which such
amounts shall be determined;
(12) any additions to, modifications of or deletions from the terms
of such Debt Securities with respect to the Events of Default
or covenants, set forth in the Indenture;
(13) whether such Debt Securities will be issued in certificated or
book-entry form;
(14) whether such Debt Securities will be in registered or bearer
form and, if in registered form, the denominations thereof if
other than $1,000 and any integral multiple thereof and, if in
bearer form, the denominations thereof and the terms and
conditions relating thereto;
(15) the applicability, if any, of the defeasance and covenant
defeasance provisions of Article Fourteen of the Indenture;
(16) whether and under what circumstances the Operating Partnership
will pay Additional Amounts as contemplated in the Indenture
in respect of any tax, assessment or governmental charge and,
if so, whether the Operating Partnership will have the option
to redeem such Debt Securities in lieu of making such payment;
and
(17) any other terms of such Debt Securities not inconsistent with
the provisions of the Indenture (Section 301).
The Debt Securities may provide for less than the entire principal
amount thereof to be payable upon declaration of acceleration of the maturity
thereof ("Original Issue Discount Securities"). Special United States federal
income tax, accounting and other considerations applicable to Original Issue
Discount Securities will be described in the applicable Prospectus Supplement.
Except as set forth below under "Certain Covenants - Limitations on
Incurrence of Debt," the Indenture does not contain any other provisions that
would limit the ability of the Operating Partnership to incur indebtedness or
that would afford Holders of Debt Securities protection in the event of a highly
leveraged or similar transaction involving the Operating Partnership or in the
event of a change of control. However, restrictions on ownership and transfers
of the Company's Common Shares and preferred shares of beneficial interest are
designed to preserve its status as a REIT and, therefore, may act to prevent or
hinder a change of control. Reference is made to the applicable Prospectus
Supplement for information with respect to any deletions from, modifications of
or additions to the Events of 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.
8
<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).
9
<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 case may
10
<PAGE>
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 principal
11
<PAGE>
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.
12
<PAGE>
"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 money in a principal
amount in excess of
13
<PAGE>
$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.
14
<PAGE>
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 specified percentage in principal amount of the Outstanding Debt
Securities of a series, the Persons
15
<PAGE>
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
16
<PAGE>
Securities at the time of the acceleration resulting from such Event of
Default. However, the Operating Partnership would remain liable to make
payment of such amounts due at the time of acceleration.
The applicable Prospectus Supplement may further describe the
provisions, if any, permitting such defeasance or covenant defeasance including
any modifications to the provisions described above, with respect to the Debt
Securities of or within a particular series.
REDEMPTION OF SECURITIES
The Indenture provides that the Debt Securities may be redeemed at any
time at the option of the Operating Partnership, in whole or in part, at the
Redemption Price, except as may otherwise be provided in connection with any
Debt Securities or series thereof.
From and after notice has been given as provided in the Indenture, if
funds for the redemption of any Debt Securities called for redemption shall have
been made available on such redemption date, such Debt Securities will cease to
bear interest on the date fixed for such redemption specified in such notice and
the only right of the Holders of the Debt Securities will be to receive payment
of the Redemption Price.
Notice of any optional redemption of any Debt Securities will be given
to Holders at their addresses, as shown in the Security Register, not more than
60 nor less than 30 days prior to the date fixed for redemption. The notice of
redemption will specify, among other items, the Redemption Price and the
principal amount of the Debt Securities held by such Holder to be redeemed.
If the Operating Partnership elects to redeem Debt Securities, it will
notify the Trustee at lease 45 days prior to the redemption date (or such
shorter period as satisfactory to the Trustee) of the aggregate principal amount
of Debt Securities to be redeemed and the redemption date. If less than all the
Debt Securities are to be redeemed, the Trustee shall select the Debt Securities
to be redeemed PRO RATA, by lot or in such manner as it shall deem fair and
appropriate.
BOOK ENTRY REGISTRATION
If the applicable Prospectus Supplement so indicates, the Debt
Securities will be represented by one or more certificates (the "Global Notes").
The Global Notes representing Debt Securities will be deposited with, or on
behalf of, The Depository Trust Company ("DTC") or other successor depository
appointed by the Operating Partnership (DTC or such other depository is herein
referred to as the "Depository") and registered in the name of the Depository or
its nominee. Unless and until it is exchanged in whole or in part for Debt
Securities in definitive form under the limited circumstances described below,
the Global Note may not be transferred except as a whole (i) by DTC for the
Global Note to a nominee of DTC, (ii) by a nominee of DTC to DTC or another
nominee of DTC, or (iii) by DTC or any such nominee to a successor of DTC or a
nominee of such successor.
DTC currently limits the maximum denomination of any single Global Note
to $150,000,000. Therefore, for purposes hereof, "Global Note" refers to the
Global Note or Global Notes representing the entire issue of Debt Securities of
a particular series.
Ownership of beneficial interests in the Global Note will be limited to
persons that have accounts with DTC for the Global Note ("participants") or
persons that may hold interests through participants. Upon the issuance of the
Global Note, DTC will credit, on its book-entry registration and transfer
system, the participants' accounts with the respective principal amounts of the
Debt Securities represented by the Global Note beneficially owned by such
participants. Ownership of beneficial interests in the Global Note will be shown
on, and the transfer of such ownership interests will be effected only through,
records maintained by DTC (with respect to interests of participants) and on the
records of participants (with respect to interests of persons holding through
participants). The laws of some states may require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
limits and such laws may impair the ability to own, transfer, or pledge
beneficial interests in the Global Note.
So long as DTC or its nominee is the registered owner of the Global
Note, DTC or such nominee, as the case may be, will be considered the sole owner
or holder of the Debt Securities represented by the Global Note for all purposes
under the Indenture. Except as set forth below, owners of beneficial interests
in the Global Note will not be entitled to have the Debt Securities represented
by the Global Note registered in their names, will not receive or be entitled to
receive physical delivery of the Debt Securities in definitive form, and will
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
17
<PAGE>
person owns its interest, to exercise any rights of a holder under the
Indenture. The Operating Partnership understands that under existing industry
practices, if the Operating Partnership requests any action of holders or if
an owner of a beneficial interest in the Global Note desires to give or take
any action that a holder is entitled to give or take under the Indenture, DTC
would authorize the participants holding the relevant beneficial interests to
give or take such action, and such participants would authorize beneficial
owners owning through such participants to give or take such action or would
otherwise act upon the instructions of beneficial owners holding through them.
Principal and interest payments on Debt Securities represented by the
Global Note will be made to DTC or its nominee, as the case may be, as the
registered owner of the Global Note. None of the Operating Partnership, the
Trustee, or any other agent of the Operating Partnership or agent of the Trustee
will have any responsibility or liability for any aspect of the records relating
to or payments made on account of beneficial ownership interests in the Global
Note or for maintaining, supervising, or reviewing any records relating to such
beneficial ownership interests.
The Operating Partnership expects that DTC, upon receipt of any payment
of principal or interest in respect of the Global Note, will immediately credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the Global Note as shown on the records of
DTC. The Operating Partnership also expects that payments by participants to
owners of beneficial interests in the Global Note held through such participants
will be governed by standing customer instructions and customary practices, as
is not the case with the securities held for the accounts of customers in bearer
form or registered in "street name," and will be the responsibility of such
participants.
If DTC is at any time unwilling or unable to continue as depository for
the Debt Securities and the Operating Partnership fails to appoint a successor
Depository registered as a clearing agency under the Exchange Act within 90
days, the Operating Partnership will issue the Debt Securities in definitive
form in exchange for the Global Note. Any Debt Securities issued in definitive
form in exchange for the Global Note will be registered in such name or names,
and will be issued in denominations of $1,000 and such integral multiples
thereof, as DTC shall instruct the Trustee. It is expected that such
instructions will be based upon directions received by DTC from participants
with respect to ownership of beneficial interests in the Global Note.
DTC has advised the Operating Partnership of the following information
regarding DTC. DTC is a limited-purpose trust company organized under the
Banking Laws of the State of New York, a member of the Federal Reserve System, a
"clearing corporation" within the meaning of the New York Uniform Commercial
Code, and a "clearing agency" registered pursuant to the provisions of Section
17A of the Exchange Act. DTC was created to hold securities of its participants
and to facilitate the clearance and settlement of transactions among its
participants in such securities through electronic book-entry changes in
accounts of the participants, thereby eliminating the need for physical movement
of securities certificates. DTC's participants include securities brokers and
dealers, banks, trust companies, clearing corporations, and certain other
organizations, some of which (and/or their representatives) own DTC. Access to
DTC book-entry system is also available to others, such as banks, brokers,
dealers, and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly.
SAME-DAY SETTLEMENT
Unless the applicable Prospectus Supplement so indicates, settlement
for the Debt Securities will be made by the underwriters, dealers or agents in
immediately available funds and all payments of principal and interest on the
Debt Securities will be made by the Operating Partnership in immediately
available funds.
Secondary trading in long-term notes and debentures of corporate
issuers is generally settled in clearinghouse or next-day funds. In contrast,
the Debt Securities subject to settlement in immediately available funds will
trade in DTC's Same-Day Funds Settlement System until maturity or until the Debt
Securities are issued in certificated form, and secondary market trading
activity in such Debt Securities will therefore be required by DTC to settle in
immediately available funds. No assurance can be given as to the effect, if any,
of settlement in immediately available funds on trading activity in the Debt
Securities.
18
<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.
20
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$300,000,000
[LOGO]
ERP OPERATING LIMITED PARTNERSHIP
7.10% NOTES DUE JUNE 23, 2004
----------------------------
PROSPECTUS SUPPLEMENT
----------------------------
MERRILL LYNCH & CO.
BANC OF AMERICA SECURITIES LLC
CHASE SECURITIES INC.
J.P. MORGAN & CO.
JUNE 17, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
