Rule No. 424(b)(5)
Registration No. 33-51029
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED DECEMBER 13, 1993
$100,000,000
[LOGO OF FEDERAL REALTY INVESTMENT TRUST APPEARS HERE]
8 7/8% NOTES DUE JANUARY 15, 2000
---------------
Interest on the Notes is payable on January 15 and July 15 of each year,
commencing July 15, 1995. The Notes are not redeemable prior to maturity. The
Notes are unsecured obligations of the Trust and will rank equally with all
unsecured and unsubordinated indebtedness of the Trust. The Notes will contain
certain restrictions on the Trust's ability to incur additional indebtedness.
See "Description of Notes--Covenants."
The Notes will be represented by a single Global Security (as defined
herein) registered in the name of The Depository Trust Company ("DTC") or its
nominee. Interests in the Global Security will be shown on, and transfers
thereof will be effected only through, records maintained by DTC and its
participants. Except as described in "Description of Notes--Book-Entry
System," Notes in definitive form will not be issued. The Notes will trade in
DTC's Same-Day Funds Settlement System until maturity, and secondary market
trading activity in the Notes will therefore settle in immediately available
funds. All payments of principal and interest will be made by the Trust in
immediately available funds. See "Description of Notes--Same-Day Settlement
and Payment."
---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT
RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED THE
MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
---------------
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE(1) DISCOUNT(2) TRUST(1)(3)
----------------- ------------ -----------
Per Note............................. 99.815% 0.625% 99.190%
Total................................ $99,815,000 $625,000 $99,190,000
- -------
(1) Plus accrued interest, if any, from January 19, 1995.
(2) The Trust has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended.
(3) Before deducting estimated expenses of $225,000 payable by the Trust.
---------------
The Notes offered hereby are offered severally by the Underwriters, as
specified herein, subject to receipt and acceptance by them and subject to
their right to reject any order in whole or in part. It is expected that
delivery of the Notes will be ready in book-entry form only through the
facilities of DTC in New York, New York on or about January 19, 1995, against
payment therefor in immediately available funds.
GOLDMAN, SACHS & CO. J.P. MORGAN SECURITIES INC.
---------------
The date of this Prospectus Supplement is January 11, 1995.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES AT A
LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
----------------
THE TRUST
Federal Realty Investment Trust (the "Trust") is an owner, operator and
redeveloper of community and neighborhood shopping centers. Founded in 1962,
the Trust is a self-administered real estate investment trust that manages,
leases and supervises renovation of its properties. At December 31, 1994, the
Trust owned 52 retail properties, primarily community and neighborhood
shopping centers, one enclosed mall, and one apartment complex. The shopping
center portfolio has approximately 11.1 million rentable square feet and 1,500
tenants. At September 30, 1994, the occupancy rate of the core shopping center
portfolio (which excludes centers acquired in the previous twelve months and
centers under redevelopment) was 94%. Including all shopping centers owned at
September 30, 1994, the occupancy rate was 93%.
An important part of the Trust's strategy is to acquire older, well-located
centers and to enhance their operating performance through a program of
renovation, expansion, re-configuration, re-leasing and re-merchandising. The
Trust has focused primarily on community and neighborhood shopping centers
that are anchored by supermarkets, drug stores or high volume, value oriented
retailers that provide consumer necessities. The Trust's shopping center
leases typically are structured to include minimum rents and percentage rents
based on tenants' sales volumes and reimbursement of operating and real estate
tax expenses.
The Trust continually evaluates its properties for renovation, re-tenanting
and expansion opportunities. Similarly, the Trust regularly reviews its
portfolio and from time to time considers selling certain of its properties.
The Trust's operating results are affected by general economic and real estate
conditions, including conditions specific to the markets where the Trust's
properties are located.
The Trust has benefited, and expects to benefit, from the following
characteristics of its operations:
. During 1993, 96% of the Trust's rental income was minimum rent plus
expense recoveries, and therefore, was not contingent upon the sales
performance of the Trust's tenants.
. In 1993, the Trust's rental income was derived from over 1,500 tenants,
with no single tenant or corporate entity accounting for more than 5% of
rental income.
. Property net operating income (rental income plus other property income,
less rental expenses and real estate taxes) increased each year an
average of 7% from $48.5 million in 1989 to $62.8 million in 1993 for
properties owned during all of the periods.
. For the years 1995-2000, scheduled lease expirations are 5.1%, 3.4%,
4.1%, 3.8%, 5.0% and 1.7% of rentable square feet.
. The Trust's typical shopping center lease includes provisions for at
least partial recapture of property operating expenses and real estate
taxes. In 1993, the Trust recovered 71% of property operating expenses
and 89% of real estate taxes.
The Trust, a District of Columbia business trust of unlimited duration,
maintains its offices at 4800 Hampden Lane, Bethesda, Maryland 20814
(telephone 301/652-3360).
S-2
RECENT DEVELOPMENTS
ACQUISITIONS AND REDEVELOPMENT
During 1994, the Trust purchased four shopping centers and one retail
building totaling 485,000 square feet. The shopping centers include Idylwood
Plaza in Falls Church, Virginia, North Lake Commons in Lake Zurich, Illinois,
Garden Market Shopping Center in Western Springs, Illinois and Queen Anne
Plaza in Norwell, Massachusetts. The average occupancy at their time of
purchase was 97%. In addition, in April of 1994 the Trust purchased a 3.9 acre
parcel of land containing an Acme supermarket which adjoins its Bala Cynwyd
Shopping Center in Bala Cynwyd, Pennsylvania. These properties were acquired
for a total cash investment of approximately $49.5 million.
During the first nine months of 1994 the Trust spent $27.5 million in
improvements to its properties. These improvements included $9.7 million for
the retenanting and redevelopment of Congressional Plaza in Rockville,
Maryland, $3.8 million to complete the redevelopment of Ellisburg Circle
Shopping Center in Cherry Hill, New Jersey, and $1.7 million to begin the
redevelopment and retenanting of Gaithersburg Square Shopping Center in
Gaithersburg, Maryland.
The Trust intends to continue its acquisition and redevelopment activities
in 1995. Acquisitions are targeted for the Trust's core major metropolitan
markets of New York/New Jersey, Philadelphia and Baltimore/Washington, D.C. as
well as the Chicago, Illinois and Boston, Massachusetts markets. In addition,
the Trust is targeting for acquisition retail buildings in densely developed
urban and suburban areas and is also pursuing site acquisitions in its core
markets to permit the Trust to develop new shopping centers.
Planned redevelopment and re-merchandising activities in 1995 include the
first phase of redevelopment of Brick Plaza in Brick, New Jersey, as well as
the completion of the Gaithersburg Square and Congressional Plaza renovations
begun in 1994. Capital improvements planned for the Trust's properties in 1995
are budgeted at $43.3 million.
FINANCINGS
The Trust has funded its acquisitions, redevelopment projects and major debt
repayment requirements through a variety of equity and debt issues. In April
1994 the Trust raised net proceeds of $61.3 million from a public offering of
2.5 million shares. In a concurrent offering of 840,000 shares to an
institutional investor, the Trust raised net proceeds of $21.7 million. In
January 1994 the Trust placed a $22.5 million one year mortgage on Northeast
Plaza in Atlanta, Georgia. This mortgage, which had been extended to January
1996, will be prepaid with a portion of the proceeds of this offering.
In October 1994, the Trust modified its unsecured medium-term revolving
credit facilities with four banks, increasing the Trust's availability of
funds from $85.0 million to $130.0 million. The Trust had $54.7 million drawn
under these facilities at December 31, 1994. The facilities have covenants
requiring a minimum shareholders' equity and a maximum ratio of debt to net
worth.
In April 1994, $39.8 million of the Trust's 5 1/4% convertible subordinated
debentures due 2002 were redeemed at a price equal to 120% of their principal
amount or $47.8 million. Only $289,000 of this issue remains outstanding.
S-3
USE OF PROCEEDS
The net proceeds to the Trust from the sale of the Notes offered hereby, are
estimated to be $98,965,000. The Trust intends to use the majority of the
proceeds to repay debt, principally the Trust's revolving credit facilities
and a $22.5 million mortgage scheduled to mature in 1996. The remaining net
proceeds are expected to be used for property acquisitions and improvements.
CAPITALIZATION
The following table sets forth the capitalization of the Trust as of
September 30, 1994, and as adjusted to give effect to the sale of the Notes
offered hereby and application of a portion of the proceeds therefrom.
SEPTEMBER 30, 1994
-------------------
AS
HISTORICAL ADJUSTED
---------- --------
(IN THOUSANDS)
Debt:
Mortgages payable........... $103,028 $ 80,528
Obligations under capital
leases..................... 136,580 136,580
5 1/4% Convertible Subordi-
nated Debentures........... 75,289 75,289
8 7/8% Notes due January 15,
2000....................... -- 100,000
Other notes payable......... 34,053 6,053
-------- --------
Total debt................ 348,950 398,450
Shareholders' equity:
Common shares of beneficial
interest, no par value..... 495,914 495,914
Accumulated distributions in
excess of Trust net income. (138,278) (138,278)
Other....................... (7,659) (7,659)
-------- --------
Total shareholders' equi-
ty....................... 349,977 349,977
-------- --------
Total capitalization.... $698,927 $748,427
======== ========
S-4
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth selected consolidated financial data for the
Trust and should be read in conjunction with the Consolidated Financial
Statements and Notes incorporated by reference herein.
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------------ ------------------
1989 1990 1991 1992 1993 1993 1994
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT RATIO INFORMATION AND PER SHARE DATA)
OPERATING DATA
Revenues
Rental income......... $ 72,771 $ 80,698 $ 88,350 $ 89,971 $105,948 $ 77,185 $ 94,168
Interest.............. 6,588 6,545 4,675 5,514 3,894 2,858 3,046
Other property income. 3,493 3,706 4,627 4,712 5,495 3,943 4,068
-------- -------- -------- -------- -------- -------- --------
82,852 90,949 97,652 100,197 115,337 83,986 101,282
Expenses
Interest.............. 33,129 34,709 38,147 35,201 31,550 23,474 23,533
Depreciation and amor-
tization............. 16,174 19,091 21,922 23,033 25,375 18,643 21,736
Property expenses..... 24,817 26,751 29,254 29,795 36,843 26,999 36,057
General and adminis-
trative.............. 3,569 5,005 3,364 4,744 4,675 3,286 5,206
-------- -------- -------- -------- -------- -------- --------
77,689 85,556 92,687 92,773 98,443 72,402 86,532
-------- -------- -------- -------- -------- -------- --------
Income before investors'
share of operations,
gain on sale of real
estate and extraordi-
nary item.............. 5,163 5,393 4,965 7,424 16,894 11,584 14,750
Investors' share of op-
erations............... (381) (499) (641) (437) (780) (673) (495)
-------- -------- -------- -------- -------- -------- --------
Income before gain on
sale of real estate and
extraordinary item..... 4,782 4,894 4,324 6,987 16,114 10,911 14,255
Gain on sale of real es-
tate................... 7,215 947 61 2,501 -- -- --
-------- -------- -------- -------- -------- -------- --------
Income before extraordi-
nary item.............. 11,997 5,841 4,385 9,488 16,114 10,911 14,255
Extraordinary item...... -- -- 415 (58) 2,016 (1,027) --
-------- -------- -------- -------- -------- -------- --------
Net income.............. $ 11,997 $ 5,841 $ 4,800 $ 9,430 $ 18,130 $ 9,884 $ 14,255
======== ======== ======== ======== ======== ======== ========
Net cash provided by op-
erating activities(1).. $ 18,696 $ 23,484 $ 26,111 $ 28,236 $ 35,183 $ 23,469 $ 30,563
Weighted average out-
standing shares........ 14,672 16,695 17,304 22,767 27,009 26,713 30,368
Distributions made...... $ 19,174 $ 23,688 $ 25,426 $ 33,319 $ 40,611 $ 29,782 $ 34,171
Distributions made per
share.................. 1.36 1.42 1.49 1.525 1.545 1.155 1.17
OTHER DATA
Funds from opera-
tions(2)............... $ 20,956 $ 23,985 $ 26,246 $ 30,020 $ 41,489 $ 29,554 $ 35,991
Ratio of earnings to
fixed charges(3)(4).... 1.14x 1.13x 1.11x 1.20x 1.50x 1.46x 1.58x
Ratio of funds from
operations to fixed
charges(2)(4).......... 1.59x 1.63x 1.66x 1.84x 2.29x 2.24x 2.47x
BALANCE SHEET DATA
Real estate assets, at
cost................... $514,552 $555,879 $566,056 $598,867 $758,088 $698,911 $822,549
Total assets............ 565,779 553,396 566,062 603,811 690,943 635,875 734,401
Mortgages payable....... 76,081 75,271 99,466 120,075 81,237 109,352 103,028
Capital lease obliga-
tions.................. 128,535 128,016 126,393 125,619 137,308 124,963 136,580
Notes payable........... 29,357 31,222 11,665 6,117 30,519 38,221 34,053
Senior notes............ 50,000 50,000 50,000 50,000 -- -- --
Convertible subordinated
debentures............. 105,630 104,576 92,003 46,218 115,167 43,847 75,289
Total liabilities....... 419,665 424,050 414,582 380,933 406,744 355,269 384,424
Shareholders' equity.... 146,114 129,346 151,480 222,878 284,199 280,606 349,977
- --------
(1) Determined in accordance with Financial Accounting Standards Board
Statement No. 95.
(2) Defined as income before depreciation and amortization and extraordinary
items less gain on sale of real estate. Funds from operations differs from
net cash provided by operating activities primarily because funds from
operations does not include changes in operating assets and liabilities.
Funds from operations is a supplemental measure of performance that does
not replace net income as a measure of performance or net cash provided by
operating activities as a measure of liquidity. See "Management's
Discussion" for additional discussion.
(3) For purposes of computing this ratio, earnings consist of income before
gain on sale of real estate and extraordinary item plus fixed charges.
(4) Fixed charges consist of interest on borrowed funds (including capitalized
interest), amortization of debt discount and expenses and the portion of
rent expense representing an interest factor.
S-5
MANAGEMENT'S DISCUSSION
RESULTS OF OPERATIONS--NINE MONTHS ENDED SEPTEMBER 30, 1994 AND 1993
Funds from operations is defined as income before depreciation and
amortization and extraordinary items less gains on sale of real estate.
Management believes that funds from operations is an appropriate supplemental
measure of the Trust's operating performance because it believes that
reductions for depreciation and amortization charges are usually not
meaningful in evaluating income-producing real estate, which have historically
been appreciating assets. The Trust acquires, evaluates and sells income-
producing properties based upon operating income without taking into account
property depreciation and amortization charges and utilizes funds from
operations, together with other factors, in setting shareholder distribution
levels. Gains on sale of real estate and extraordinary items are also excluded
from this supplemental measure of performance because such amounts are not
part
of the ongoing operations of the Trust's portfolio. Funds from operations does
not replace net income as a measure of performance or net cash provided by
operating activities as a measure of liquidity.
Funds from operations increased 22% to $36.0 million in the first nine
months of 1994 from $29.6 million in the first nine months of 1993. If funds
from operations is adjusted to remove the effect of a nonrecurring write off
of a mortgage note receivable, funds from operations increased 24% to $36.7
million from $29.6 million.
The Trust's shopping center leases generally provide for minimum rents, with
periodic increases. Most shopping center tenants pay a majority of on-site
operating expenses. Many leases also contain a percentage rent clause which
calls for additional rents based on tenant sales, so that at a given sales
volume, if prices increase, so does rental income. These features in the Trust
leases reduce the Trust's exposure to higher costs caused by inflation,
although inflation has not been significant in recent years.
During the first nine months of 1994, rental income, which consists of
minimum rent, percentage rent and cost recoveries, increased 22% to $94.2
million from 1993's $77.2 million. If rental income is adjusted to remove the
effect of properties purchased in 1993 and 1994, rental income increased 7.0%,
despite a $700,000 reduction in rental income at Congressional Plaza, whose
occupancy was reduced during its redevelopment. The components of rental
income with the greatest change are minimum rent and common area maintenance
recovery (CAM recovery). Minimum rent increased 20% from the first nine months
of 1993 to the comparable period of 1994; removing the effect of properties
purchased in 1993 and 1994, the increase was 4%. CAM recovery on the
portfolio, adjusted to remove the effect of properties purchased in 1993 and
1994, increased $2.8 million due to the corresponding increase in CAM expenses
such as snow removal, landscaping and security costs.
Other income, which includes items which tend to fluctuate from period to
period, such as utility reimbursements, telephone income, merchant association
dues, lease termination fees, late fees and temporary tenant income, increased
from $3.9 million for the first nine months of 1993 to $4.1 million for the
first nine months of 1994.
Rental expenses increased from $19.4 million for the first nine months of
1993 to $27.2 million for the first nine months of 1994. If rental expenses
are adjusted to remove the effect of properties purchased in 1993 and 1994,
rental expenses increased 14% or $2.5 million, primarily because of an
increase in snow removal due to the heavy snows of 1994 and because of
increased security costs. Real estate taxes have increased primarily because
of the 1993 and 1994 acquisitions. Depreciation and amortization charges
increased because of the new acquisitions, but also because of depreciation on
recent tenant work and property improvements.
While interest expense remained relatively constant at $23.5 million in both
periods, the components have changed. Decreases in interest expense, resulting
from the repayment of several
S-6
mortgages and the senior notes in 1993 and the redemption on April 30, 1994 of
the 5 1/4% convertible subordinated debentures due 2002 were offset by
increases in interest expense because of the issuance of the 5 1/4%
convertible subordinated debentures due 2003, the interest portion of the
capital lease payment on Bethesda Row, and interest on increased usage of the
revolving credit facilities.
Administrative expenses are increasing as the Trust grows and as it seeks
new acquisition and development opportunities. A major component of the
increase in 1994 over 1993 is an increase in costs connected with the review
and analysis of properties which were not acquired. During the third quarter
of 1994 the Trust wrote down a mortgage note receivable and accrued interest
on the note, totalling $758,000. The mortgage note was issued in 1982 in
connection with the sale by the Trust of a shopping center in Delaware.
Although the Trust will continue to pursue payment of the mortgage note, due
to the current cash flow of the collateral property, collectibility is not
certain.
Income before extraordinary item increased from $10.9 million during the
first nine months of 1993 to $14.3 million during the comparable period of
1994 because of the contribution of 1993 and 1994 acquisitions and because of
growth in the core portfolio.
During the first nine months of 1993 the Trust incurred losses on the early
extinguishment of debt of $1.0 million due to the prepayment of two mortgages
and the redemption of its 8 3/4% convertible subordinated debentures and
senior notes.
As a result of the foregoing items, primarily the increases in property
income, net income rose from $9.9 million in the first nine months of 1993 to
$14.3 million in the first nine months of 1994.
LIQUIDITY AND CAPITAL RESOURCES
The Trust meets its liquidity requirements through net cash provided by
operating activities, long-term borrowing through debt offerings and
mortgages, medium and short-term borrowing under revolving credit facilities,
and equity offerings. Because all or a significant portion of the Trust's net
cash provided by operating activities is distributed to shareholders, capital
outlays for property acquisitions, renovation projects and debt repayments
require funding from borrowing or equity offerings.
During 1994, the Trust spent approximately $49.5 million in cash to acquire
five retail properties with an aggregate of 485,000 square feet. Through
September 30, 1994, the Trust also spent $27.5 million on improvements to its
properties. In November 1994, the Trust exercised an option to purchase the
ground underlying the Northeast Shopping Center in Philadelphia, Pennsylvania
for $4.1 million.
In April 1994, $39.8 million of the Trust's 5 1/4% convertible subordinated
debentures due 2002 were redeemed at a price equal to 120% of their principal
amount or $47.8 million.
These expenditures were funded by sales of equity and additional borrowings.
In April 1994 the Trust raised net proceeds of $61.3 million from a public
offering of 2.5 million shares. In a concurrent offering of 840,000 shares to
an institutional investor, the Trust raised net proceeds of $21.7 million. In
January 1994 the Trust placed a $22.5 million one year mortgage on Northeast
Plaza in Atlanta, Georgia. This mortgage, which had been extended to January
1996, will be prepaid with a portion of the proceeds of this offering.
In October 1994, the Trust modified its unsecured medium-term revolving
credit facilities with four banks, increasing the total availability to $130.0
million. The facilities have covenants requiring a minimum shareholders'
equity and a maximum ratio of debt to net worth, and are used to fund
acquisitions and other cash requirements until conditions are favorable for
issuing equity or long-term debt. At December 31, 1994, there was $54.7
million outstanding on these facilities.
S-7
PROPERTIES
At September 30, 1994, the Trust owned or had leasehold interests in 50
neighborhood and community shopping centers, one enclosed mall (Willow Lawn)
and one apartment complex. The following table sets forth information
concerning the Trust's properties as of September 30, 1994.
PERCENT
LEASED AT
YEAR RENTABLE ACQUISITION TOTAL SEPTEMBER 30, PRINCIPAL
ACQUIRED SQUARE FEET COST COST 1994 TENANTS
-------- ----------- ------------ ------------ ------------- ---------------------
SHOPPING CENTERS
Allwood 1988 52,000 $ 3,920,000 $ 4,147,000 100% Grand Union
Clifton, N.J.(1)
Andorra 1988 252,000 14,778,000 16,202,000 93 Clover
Philadelphia, Pa. Andorra Theater
Acme Markets
Bala Cynwyd 1993 228,000 18,115,000 18,577,000 89 Lord & Taylor
Bala Cynwyd, Pa. Acme Markets
Barracks Road 1985 450,000 20,822,000 30,462,000 98 Rose's
Charlottesville, Va. Safeway
Superfresh
Bethesda Row 1993 223,000 18,823,000 19,295,000 94 Giant Food
Bethesda, Md.(1)(5) Giant Pharmacy
Blue Star 1988 398,000 29,922,000 30,844,000 99 Caldor
Watchung, N.J.(1) Shop Rite
Toys R Us
Brainerd Village 1987 216,000 9,926,000 12,269,000 69 Office Depot
Chattanooga, Tn. 50 Off
Petstuff
Brick Plaza 1989 314,000 24,715,000 29,869,000 75 A&P Supermarkets
Brick Township, N.J.(1) Steinbach's
H.L. Green
Brunswick 1988 261,000 12,456,000 12,978,000 100 Caldor
North Brunswick, Grand Union
N.J.(1) Schwartz Furniture
Clifton 1988 80,000 3,646,000 3,772,000 100 Acme Markets
Clifton, N.J.(1) Channel Home
Congressional Plaza 1965 274,000 10,217,000 22,599,000 72 Fresh Fields
Rockville, Md.(2) Tower Records
Container Store
Crossroads 1993 197,000 16,246,000 16,810,000 85 Gold Standard Liquors
Highland Park, Il. TJ Maxx
Dedham Plaza 1993 255,000 25,287,000 25,556,000 99 Ames
Dedham, Ma. Workout Plus
Eastgate 1986 159,000 7,383,000 11,528,000 98 Southern Season
Chapel Hill, N.C. Food Lion
Ellisburg Circle 1992 255,000 15,337,000 24,177,000 95 Shop Rite
Cherry Hill, N.J. Bed, Bath & Beyond
Falls Plaza 1967 67,000 1,265,000 2,463,000 100 Giant Food
Falls Church, Va. CVS Pharmacy
Feasterville 1980 98,000 1,600,000 3,826,000 96 Genuardi Markets
Feasterville, Pa.(1) Eric Theater
Office Max
Federal Plaza 1989 243,000 28,111,000 59,133,000 98 Bed, Bath & Beyond
Rockville, Md. CompUSA
T.J. Maxx
Flourtown 1980 106,000 2,153,000 3,105,000 90 Channel Home
Flourtown, Pa. Genuardi Markets
Gaithersburg Square 1993 162,000 12,972,000 14,849,000 81 CVS Pharmacy
Gaithersburg, Md. Fresh Fields
Garden Market 1994 126,000 7,506,000 7,506,000 93 Dominick's
Western Springs, Il.
Governor Plaza 1985 269,000 6,973,000 16,845,000 100 Office Depot
Glen Burnie, Md. Frank's Nursery
Syms
Hamilton 1988 180,000 5,405,000 6,730,000 91 Steven's Furniture
Hamilton, N.J.(1) Shop Rite
A.C.Moore
Huntington 1988 275,000 16,008,000 19,186,000 97 Service Merchandise
Huntington, N.Y.(1) Bed, Bath & Beyond
Toys R Us
Idylwood Plaza 1994 73,000 14,334,000 14,402,000 100 Annie Sez
Falls Church, Va Fresh Fields
Lancaster 1980 106,000 2,103,000 4,570,000 92 Giant Eagle
Lancaster, Pa.(1) A.C. Moore
Langhorne Square 1985 189,000 3,694,000 11,880,000 98 Marshalls
Levittown, Pa. Luxury Linens
S-8
PERCENT
LEASED AT
YEAR RENTABLE ACQUISITION TOTAL SEPTEMBER 30, PRINCIPAL
ACQUIRED SQUARE FEET COST COST 1994 TENANTS
-------- ----------- ------------ ------------ ------------- -----------------------
Laurel Centre 1986 379,000 $ 29,983,000 $ 40,799,000 92% Giant Food
Laurel, Md. Marshalls
Toys R Us
Lawrence Park 1980 334,000 7,160,000 12,167,000 99 Best Products
Broomall, Pa.(1) Acme Markets
Rickel Home Center
Loehmann's Plaza 1983 245,000 16,333,000 20,633,000 98 Holiday Spa
Fairfax, Va.(3) Linens N Things
Scan Furniture
Mid-Pike Plaza 1982 301,000 10,335,000 15,265,000 99 Syms
Rockville, Md.(1) Toys R Us
G Street Fabrics
North City Plaza 1987 111,000 2,500,000 3,009,000 92 Kmart
New Castle, Pa.(4)
Northeast 1983 303,000 11,748,000 19,114,000 97 Burlington Coat Factory
Philadelphia, Pa. Marshalls
Northeast Plaza 1986 446,000 33,166,000 38,340,000 88 Levitz Furniture
Atlanta, Ga. Sportstown
Publix
North Lake Commons 1994 121,000 10,871,000 11,133,000 97 Dominick's
Lake Zurich, Il
Old Keene Mill 1976 92,000 1,636,000 3,498,000 95 Fresh Fields
Springfield, Va. Sassafras
Pan Am 1993 218,000 21,623,000 23,242,000 96 Micro Center
Fairfax, Va. Safeway
MJ Designs
Perring Plaza 1985 413,000 9,261,000 23,470,000 96 Metro Foods
Baltimore, Md. Home Depot
Burlington Coat Factory
Quince Orchard Plaza 1993 241,000 11,146,000 12,653,000 98 Circuit City
Gaithersburg, Md. MJ Design
U.S. Dept. of Energy
Roseville 1973 140,000 2,126,000 4,159,000 100 F&M Distributors
Roseville, Mi. Handy Andy
Rutgers 1988 217,000 14,429,000 14,754,000 99 Foodtown
Franklin, N.J.(1) Kmart
Shillington 1980 74,000 1,387,000 2,907,000 77 Rite Aid
Shillington, Pa.(1) Stacey's Buffet
Town & Country Plaza 1990 214,000 4,766,000 5,337,000 90 Winn-Dixie
Hammond, La.(5) Weiner's Department
Store
Town & Country 1973 236,000 3,387,000 8,249,000 100 Burlington Coat Factory
Springfield, Il. National Supermarkets
Troy 1980 205,000 5,193,000 10,085,000 97 Kmart
Parsippany-Troy, Pathmark
N.J.(1) CompUSA
Tysons Station 1978 50,000 841,000 3,097,000 94 Sassafras
Falls Church, Va. Linens N Things
Westfalls 1972 60,000 1,073,000 3,113,000 100 Staples
Falls Church, Va.
Wildwood 1969 84,000 10,196,000 14,944,000 97 Sutton Place
Bethesda, Md. Gourmet
CVS Pharmacy
Williamsburg 1986 239,000 9,918,000 11,928,000 92 Rose's
Williamsburg, Va. Peebles
Food Lion
Willow Grove 1984 220,000 8,243,000 23,441,000 93 Toys R Us
Willow Grove, Pa. Marshalls
Office Max
The Shops at Willow Lawn 1983 451,000 10,915,000 47,671,000 89 Leggett Stores
Richmond, Va.(5) J.C. Penney
The Limited
---------- ------------ ------------
Total or Average 10,902,000 $571,953,000 $816,588,000 93%
========== ============ ============ ===
APARTMENT COMPLEX
Rollingwood Apartments 1971 282 units $ 2,798,000 $ 5,961,000 98%
Silver Spring, Md.
- --------
(1) The Trust has a leasehold interest in this center.
(2) The Trust owns a 49% equity interest in this center.
(3) The Trust owns a 1% general partnership interest and manages the
partnership.
(4) The Trust owns an 88% general partnership interest in this center.
(5) The Trust owns this center subject to a ground lease.
S-9
DESCRIPTION OF NOTES
The following description of the particular terms of the Notes offered
hereby (referred to in the accompanying Prospectus as the "Debt Securities")
supplements, and to the extent inconsistent therewith replaces, the
description of the general terms and provisions of Debt Securities set forth
in the Prospectus, to which description reference is hereby made. The
following statements relating to the Notes and the Senior Indenture are
summaries of provisions contained therein and do not purport to be complete.
Such statements are qualified by reference to the provisions of the Notes and
the Senior Indenture, including the definitions therein of certain terms. The
Senior Indenture is an exhibit to the registration statement of which the
Prospectus accompanying this Prospectus Supplement is a part. Capitalized
terms not otherwise defined herein shall have the meanings given to them in
the Prospectus.
GENERAL
The 8 7/8% Notes due January 15, 2000 (the "Notes") will be limited to
$100,000,000 aggregate principal amount and will mature on January 15, 2000.
The Notes will not be redeemable prior to maturity. The Notes will be
unsecured and unsubordinated obligations of the Trust and will rank equally
with other unsecured and unsubordinated indebtedness of the Trust.
The Notes will only be issued in fully registered book-entry form without
coupons in denominations of $1,000 and integral multiples thereof, except
under the limited circumstances described below under "--Book-Entry System."
INTEREST
The Notes will bear interest at the rate set forth on the cover page of this
Prospectus Supplement from January 19, 1995, or the most recent Interest
Payment Date (as defined below) to which interest has been paid or provided
for, payable semi-annually on January 15 and July 15 of each year, beginning
July 15, 1995 (each, an "Interest Payment Date"), to the person in whose name
a Note (or any predecessor Note) is registered at the close of business on the
January 1 or July 1, as the case may be, next preceding such Interest Payment
Date.
COVENANTS
Limitations on Incurrence of Debt. The Notes will provide that the Trust
will not, and will not permit any Subsidiary to, incur any Debt (as defined
below) if, immediately after giving effect to the incurrence of such Debt and
the application of the proceeds thereof, the aggregate principal amount of all
outstanding Debt of the Trust and its Subsidiaries on a consolidated basis
determined in accordance with generally accepted accounting principles is
greater than 65% of the sum of (without duplication) (i) the Trust's Total
Assets as of the end of the calendar quarter covered in the Trust's Annual
Report on Form 10-K or Quarterly Report on Form 10-Q, as the case may be, most
recently filed with the Securities and Exchange Commission (or, if such filing
is not permitted under the Securities Exchange Act of 1934, with the Trustee)
prior to the incurrence of such additional Debt and (ii) the purchase price of
any real estate assets or mortgages receivable acquired, and the amount of any
securities offering proceeds received (to the extent such proceeds were not
used to acquire real estate assets or mortgages receivable or used to reduce
Debt), by the Trust or any Subsidiary since the end of such calendar quarter,
including those proceeds obtained in connection with the incurrence of such
additional Debt.
In addition to the foregoing limitation on the incurrence of Debt, the Notes
will provide that the Trust will not, and will not permit any Subsidiary to,
incur any Debt secured by any mortgage, lien,
S-10
charge, pledge, encumbrance or security interest of any kind upon any of the
property of the Trust or any Subsidiary if, immediately after giving effect to
the incurrence of such Debt and the application of the proceeds thereof, the
aggregate principal amount of all outstanding Debt of the Trust and its
Subsidiaries on a consolidated basis which is secured by any mortgage, lien,
charge, pledge, encumbrance or security interest on property of the Trust or
any Subsidiary is greater than 40% of the Trust's Total Assets; provided that
for purposes of this limitation, the amount of obligations under capital
leases shown as a liability on the Trust's consolidated balance sheet shall be
deducted from Debt and from Total Assets.
In addition to the foregoing limitations on the incurrence of Debt, the
Notes will provide that the Trust will not and will not permit any Subsidiary
to, incur any Senior Debt if the ratio of Consolidated Income Available for
Senior Debt Service (as defined below) to the Annual Senior Debt Service
Charge (as defined below) for the four consecutive fiscal quarters most
recently ended prior to the date on which such Senior Debt is to be incurred
shall have been less than 1.5, on an unaudited pro forma basis after giving
effect thereto and to the application of the proceeds therefrom, and
calculated on the assumption that (i) such Senior Debt and any other Senior
Debt incurred by the Trust and its Subsidiaries since the first day of such
four-quarter period and the application of the proceeds therefrom, including
to refinance other Senior Debt, had occurred at the beginning of such period;
(ii) the repayment or retirement of any other Senior Debt by the Trust and 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 Senior Debt under any revolving credit
facility shall be computed based upon the average daily balance of such Senior
Debt during such period); (iii) in the case of Acquired Debt (as defined
below) or Senior Debt incurred in connection with any acquisition since the
first day of such four-quarter period, the related acquisition had occurred as
of the first day of such period with the appropriate adjustments with respect
to such acquisition being included in such unaudited pro forma calculation;
and (iv) in the case of any acquisition or disposition by the Trust or its
Subsidiaries of any asset or group of assets since the first day of such four-
quarter period, whether by merger, stock purchase or sale, or asset purchase
or sale, such acquisition or disposition or any related repayment of Senior
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 unaudited pro forma calculation.
Furthermore, the Notes also will provide that the Trust will not, and will
not permit any Subsidiary to, incur any Debt if the ratio of Consolidated
Income Available for Debt Service (as defined below) to the Annual Debt
Service Charge (as defined below) 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 1.3, on an unaudited pro forma basis after
giving effect thereto and to the application of the proceeds therefrom, and
calculated on the assumption that (i) such Debt and any other Debt incurred by
the Trust and 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 Trust and 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) in the case of
Acquired Debt or Debt incurred in connection with any acquisition since the
first day of such four-quarter period, the related acquisition had occurred as
of the first day of such period with the appropriate adjustments with respect
to such acquisition being included in such unaudited pro forma calculation;
and (iv) in the case of any acquisition or disposition by the Trust or its
Subsidiaries of any asset or group of assets since the first day of such four-
quarter period, whether 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
unaudited pro forma calculation.
S-11
As used herein,
"Acquired Debt" means Debt (or Senior Debt, as the case may be) of a Person
(i) existing at the time such Person becomes a Subsidiary or (ii) assumed in
connection with the acquisition of assets from such Person, in each case,
other than Debt (or Senior Debt, as the case may be) incurred in connection
with, or in contemplation of, such Person becoming a Subsidiary or such
acquisition. Acquired Debt shall be deemed to be incurred on the date of the
related acquisition of assets from any Person or the date the acquired Person
becomes a Subsidiary.
"Annual Debt Service Charge" as of any date means the maximum amount which
is payable in any period for interest on, and original issue discount of, Debt
of the Trust and its Subsidiaries and the amount of dividends which are
payable in respect of any Disqualified Stock (as defined below).
"Annual Senior Debt Service Charge" as of any date means the maximum amount
which is payable in any period for interest on, and original issue discount
of, Senior Debt of the Trust and its Subsidiaries.
"Capital Stock" means, with respect to any Person, any capital stock
(including preferred stock), shares, interests, participations or other
ownership interests (however designated) of such Person and any rights (other
than debt securities convertible into or exchangeable for corporate stock),
warrants or options to purchase any thereof.
"Consolidated Income Available for Debt Service" and "Consolidated Income
Available for Senior Debt Service" for any period means Funds from Operations
(as defined below) of the Trust and its Subsidiaries plus amounts which have
been deducted for interest on Debt of the Trust and its Subsidiaries.
"Debt" means any indebtedness of the Trust, or any Subsidiary, whether or
not contingent, in respect of (without duplication) (i) borrowed money or
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 Trust or any Subsidiary,
(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 or services, except
any such balance that constitutes an accrued expense or trade payable, or all
conditional sale obligations or obligations under any title retention
agreement, (iv) the principal amount of all obligations of the Trust or any
Subsidiary with respect to redemption, repayment or other repurchase of any
Disqualified Stock or (v) any lease of property by the Trust or any Subsidiary
as lessee which is reflected on the Trust's consolidated balance sheet as a
capitalized lease in accordance with generally accepted accounting principles
to the extent, in the case of items of indebtedness under (i) through (iii)
above, that any such items (other than letters of credit) would appear as a
liability on the Trust's consolidated balance sheet in accordance with
generally accepted accounting principles, and also includes, to the extent not
otherwise included, any obligation of the Trust 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 or for the purposes of
guaranteeing the payment of all amounts due and owing pursuant to leases to
which the Trust is a party and has assigned its interest, provided that such
assignee of the Trust is not in default of any amounts due and owing under
such leases), Debt of another Person (other than the Trust or any Subsidiary)
(it being understood that Debt shall be deemed to be incurred by the Trust or
any Subsidiary whenever the Trust or such Subsidiary shall create, assume,
guarantee or otherwise become liable in respect thereof).
"Disqualified Stock" means, with respect to any Person, any Capital Stock of
such Person which by the terms of such Capital Stock (or by the terms of any
security into which it is convertible or for
S-12
which it is exchangeable or exercisable), upon the happening of any event or
otherwise (i) matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, (ii) is convertible into or exchangeable or
exercisable for Debt or Disqualified Stock or (iii) is redeemable at the
option of the holder thereof, in whole or in part, in each case on or prior to
the Stated Maturity of the Notes.
"Funds from Operations" for any period means income before depreciation and
amortization and extraordinary items less gain on sale of real estate.
"Senior Debt" means Debt other than subordinated Debt and payments under
Disqualified Stock of the Trust.
"Total Assets" as of any date means the sum of (i) the Trust's Undepreciated
Real Estate Assets and (ii) all other assets of the Trust determined in
accordance with generally accepted accounting principles (but excluding
goodwill).
"Undepreciated Real Estate Assets" as of any date means the cost (original
cost plus capital improvements) of real estate assets of the Trust and its
Subsidiaries on such date, before depreciation and amortization determined on
a consolidated basis in accordance with generally accepted accounting
principles.
See "Description of Debt Securities--Certain Covenants" in the Prospectus
for a description of additional covenants applicable to the Trust.
DEFEASANCE
The provisions of Article 14 of the Senior Indenture relating to defeasance
and covenant defeasance, which are described in the accompanying Prospectus,
will apply to the Notes.
BOOK-ENTRY SYSTEM
The Notes will be represented by a single global security (the "Global
Security") and registered in the name of DTC or its nominee. Upon the issuance
of the Global Security, DTC or its nominee will credit, on its book-entry
registration and transfer system, the respective principal amounts of the
Notes represented by the Global Security to the accounts designated by the
Underwriters. Ownership of beneficial interests in the Global Security will be
limited to institutions that have accounts with DTC or its nominee
("Participants") and to persons that may hold interests through Participants.
Ownership of beneficial interests in the Global Security will be shown only
on, and the transfer of those ownership interests will be effected only
through, records maintained by such Participants. The laws of some
jurisdictions may require that certain purchasers of securities take physical
delivery of such securities in definitive form. Such limits and laws may
impair the ability to transfer beneficial interests in the Global Security.
Notwithstanding any provision of the Senior Indenture or the Notes, the
Global Security may not be exchanged in whole or in part for Notes registered,
and no transfer of the Global Security in whole or in part may be registered,
in the name of any Person other than DTC or any nominee of DTC unless (i) DTC
has notified the Trust that it is unwilling or unable to continue as
depositary for the Global Security or has ceased to be qualified to act as
such as required by the Senior Indenture or (ii) there shall have occurred and
be continuing an Event of Default with respect to the Notes. All Notes issued
in exchange for the Global Security or any portion thereof will be registered
in such names as DTC may direct.
As long as DTC or its nominee is the registered holder and owner of the
Global Security, DTC or such nominee, as the case may be, will be considered
the sole owner and holder of the Notes for all purposes of such Notes and for
all purposes under the Senior Indenture. Except in the limited circumstances
referred to above, owners of beneficial interests in the Global Security will
not be entitled to have the Notes registered in their names, will not receive
or be entitled to receive physical delivery
S-13
of certificated Notes in definitive form and will not be considered to be the
owners or holders of any Notes under the Senior Indenture or the Notes.
Payment of principal of, and interest and premium, if any, on the Notes will
be made to DTC or its nominee, as the case may be, as the registered owner or
holder of the Global Security.
Payments, transfers, exchanges and other matters relating to beneficial
interests in the Global Security may be subject to various policies and
procedures adopted by DTC from time to time. Neither the Trust nor the Trustee
will have any responsibility or liability for any aspect of the records
relating to, or payments made on account of, beneficial ownership interests in
the Global Security for any Notes or for maintaining, supervising or reviewing
any records relating to such beneficial ownership interests or for any other
aspect of the relationship between DTC and its Participants or the
relationship between such Participants and the owners of beneficial interests
in the Global Security owning through such Participants.
The following is based on information furnished by DTC:
DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York
Banking Law, 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 Securities Exchange Act of 1934, as amended. DTC holds
securities that its Participants deposit with DTC. DTC also facilitates the
settlement among Participants of securities transactions, such as transfers
and pledges, in deposited securities through electronic computerized book-
entry changes in Participants' accounts, thereby eliminating the need for
physical movement of securities certificates. Direct Participants include
securities brokers and dealers (including the Underwriters), banks, trust
companies, clearing corporations, and certain other organizations ("Direct
Participants"). DTC is owned by a number of its Direct Participants and by
the New York Stock Exchange, Inc., the American Stock Exchange, Inc. and
the National Association of Securities Dealers, Inc. Access to the DTC
system is also available to others such as securities brokers and dealers,
banks and trust companies that clear through or maintain a custodial
relationship with a Direct Participant, either directly or indirectly. The
rules applicable to DTC and its Participants are on file with the
Securities and Exchange Commission.
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for the Notes will be made by the Underwriters in immediately
available funds. All payments of principal and interest will be made by the
Trust in immediately available funds, so long as DTC continues to make its
Same-Day Funds Settlement System available to the Trust.
Secondary trading in long-term notes and debentures of corporate issuers is
generally settled in clearinghouse or next-day funds. In contrast, the Notes
will trade in DTC's Same-Day Funds Settlement System, and secondary market
trading activity in the Notes will therefore be required by DTC to settle in
immediately available funds. No assurance can be given as to the effect, if
any, of settlement in immediately available funds on trading activity in the
Notes.
S-14
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement,
the Trust has agreed to sell to each of the Underwriters named below, and each
of the Underwriters has severally agreed to purchase, the principal amount of
the Notes set forth opposite its name below:
PRINCIPAL
AMOUNT
UNDERWRITER OF NOTES
----------- ------------
Goldman, Sachs & Co. .......................................... $ 50,000,000
J.P. Morgan Securities Inc. ................................... 50,000,000
------------
Total....................................................... $100,000,000
============
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all of the Notes, if any are
taken.
The Underwriters propose to offer the Notes in part directly to the public
at the initial public offering price set forth on the cover page of this
Prospectus Supplement and in part to certain securities dealers at such price
less a concession of .375% of the principal amount of the Notes. The
Underwriters may allow, and such dealers may reallow, a concession not to
exceed .25% of the principal amount of the Notes to certain brokers and
dealers. After the Notes are released for sale to the public, the offering
price and other selling terms may from time to time be varied by the
Underwriters.
The Notes are a new issue of securities with no established trading market.
The Trust has been advised by the Underwriters that the Underwriters 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. No assurance can be given as to the
liquidity of the trading market for the Notes.
The Trust has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended.
S-15
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE-
SENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER
TO BUY ANY SECURITIES OTHER THAN THE SECURITIES DESCRIBED IN THIS PROSPECTUS
SUPPLEMENT OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH SE-
CURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY
SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE TRUST SINCE
THE DATE HEREOF OR THEREOF OR THAT THE INFORMATION CONTAINED HEREIN OR THEREIN
IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF SUCH INFORMATION.
-----------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
PAGE
----
The Trust.................................................................. S-2
Recent Developments........................................................ S-3
Use of Proceeds............................................................ S-4
Capitalization............................................................. S-4
Selected Consolidated Financial Data....................................... S-5
Management's Discussion ................................................... S-6
Properties................................................................. S-8
Description of Notes....................................................... S-10
Underwriting............................................................... S-15
PROSPECTUS
Available Information....................................................... 2
Incorporation of Certain Documents by Reference............................. 2
The Trust................................................................... 3
Use of Proceeds............................................................. 4
Ratios of Earnings to Fixed Charges......................................... 4
Description of Debt Securities.............................................. 4
Description of Preferred Shares............................................. 15
Description of Common Shares................................................ 20
Plan of Distribution........................................................ 22
Legal Opinions.............................................................. 23
Experts..................................................................... 23
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$100,000,000
[LOGO OF FEDERAL REALTY INVESTMENT TRUST APPEARS HERE]
8 7/8% Notes due
January 15, 2000
-----------------------
PROSPECTUS SUPPLEMENT
-----------------------
GOLDMAN, SACHS & CO.
J.P. MORGAN SECURITIES INC.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
[LOGO OF FEDERAL REALTY INVESTMENT TRUST APPEARS HERE]
$300,000,000
DEBT SECURITIES, PREFERRED SHARES AND COMMON SHARES
Federal Realty Investment Trust (the "Trust") may from time to time offer in
one or more series (i) its unsecured debt securities (the "Debt Securities"),
(ii) its preferred shares (the "Preferred Shares"), and (iii) its common
shares, no par value (the "Common Shares"), with an aggregate public offering
price of up to $300,000,000 (or its equivalent based on the exchange rate at
the time of sale) in amounts, at prices and on terms to be determined at the
time of offering. The Debt Securities, Preferred Shares, and Common Shares
(collectively, the "Securities") may be offered, separately or together, in
separate series in amounts, at prices and on terms to be set forth in a
supplement to this Prospectus (a "Prospectus Supplement").
The Debt Securities will be direct unsecured obligations of the Trust and may
be either senior Debt Securities ("Senior Securities") or subordinated Debt
Securities ("Subordinated Securities"). The Senior Securities will rank equally
with all other unsecured and unsubordinated indebtedness of the Trust. The
Subordinated Securities will be subordinated to all existing and future Senior
Debt of the Trust, as defined. See "Description of Debt Securities."
The specific terms of the Securities in respect of which this Prospectus is
being delivered will be set forth in the applicable Prospectus Supplement and
will include, where applicable: (i) in the case of Debt Securities, 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 Trust or repayment at the
option of the Holder, terms for sinking fund payments, terms for conversion
into Preferred Shares or Common Shares, covenants and any initial public
offering price; (ii) in the case of Preferred Shares, the specific title and
stated value, any dividend, liquidation, redemption, conversion, voting and
other rights, and any initial public offering price; and (iii) in the case of
Common Shares, any initial public offering price. In addition, such specific
terms may include limitations on direct or beneficial ownership and
restrictions on transfer of the Securities, in each case as may be appropriate
to preserve the status of the Trust as a real estate investment trust ("REIT")
for federal income tax purposes.
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 Securities
covered by such Prospectus Supplement.
The Securities may be offered directly, through agents designated from time
to time by the Trust, or to or through underwriters or dealers. If any agents
or underwriters are involved in the sale of any of the 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 Securities may be sold without delivery of the applicable
Prospectus Supplement describing the method and terms of the offering of such
series of Securities.
---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
---------------
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED THE
MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
---------------
The date of this Prospectus is December 13, 1993.
AVAILABLE INFORMATION
The Trust is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy statements and other
information can be inspected and copied at the Public Reference Section
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549; Chicago Regional Office, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661; and New York Regional Office, 7 World Trade Center,
New York, New York 10048. Such reports, proxy statements and other information
concerning the Trust can also be inspected at the office of the New York Stock
Exchange, 20 Broad Street, New York, New York 10005.
The Trust will provide without charge to each person to whom a copy of this
Prospectus is delivered, upon their written or oral request, a copy of any or
all of the documents incorporated herein by reference (other than exhibits to
such documents). Written requests for such copies should be addressed to Kathy
Klein, Director-Corporate Communications, Federal Realty Investment Trust, 4800
Hampden Lane, Bethesda, Maryland 20814 (telephone 301/652-3360).
The Trust has filed with the Commission a registration statement on Form S-3
(the "Registration Statement") under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to the Securities offered hereby. For
further information with respect to the Trust and the Securities offered
hereby, reference is made to the Registration Statement and exhibits thereto.
Statements contained in this Prospectus as to the contents of any contract or
other documents are not necessarily complete, and in each instance, reference
is made to the copy of such contract or documents filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Trust with the Commission are
incorporated in this Prospectus by reference and are made a part hereof:
1. The Trust's Annual Report on Form 10-K for the fiscal year ended
December 31, 1992.
2. The Trust's Quarterly Reports on Form 10-Q for the quarters ended
March 31, June 30, and September 30, 1993.
3. The Trust's Current Report on Form 8-K dated September 24, 1993.
Each document filed subsequent to the date of this Prospectus pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act and prior to termination
of the offering of all Securities to which this Prospectus relates shall be
deemed to be incorporated by reference in this Prospectus and shall be part
hereof from the date of filing of such document.
Any statement contained 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 herein, in any
accompanying Prospectus Supplement relating to a specific offering of
Securities or in any other subsequently filed document that is also
incorporated or 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.
2
THE TRUST
Federal Realty Investment Trust (the "Trust") is an owner, operator and
redeveloper of community and neighborhood shopping centers. Founded in 1962,
the Trust is a self-administered real estate investment trust ("REIT") that
manages, leases and supervises renovation of its properties. At December 13,
1993, the Trust owned 45 community and neighborhood shopping centers, one
enclosed mall, and one apartment complex. The shopping center portfolio has
approximately 10.1 million rentable square feet and 1,400 tenants. At September
30, 1993, the occupancy rate of the shopping centers, excluding centers
acquired or sold in the previous twelve months, was 95.5%.
The Trust's properties are located in eleven states with approximately 77% of
the Trust's rental income for the nine months ended September 30, 1993
generated by the properties located in three major metropolitan areas: New
York/New Jersey, Philadelphia and Baltimore/Washington, D.C. The Trust's
strategy is to acquire centers located in well-established, densely populated
communities with attractive retailing demographics and limited opportunities
for new competing developments. The typical Trust property is located on a
major traffic artery, with good visibility and access.
The Trust's strategy is to acquire older, well-located centers and to enhance
their operating performance through a program of renovation, expansion, re-
configuration, re-leasing and re-merchandising. The Trust has focused primarily
on community and neighborhood shopping centers that are anchored by
supermarkets, drug stores or high volume, value oriented retailers that provide
consumer necessities. The Trust's shopping center leases typically are
structured to include minimum rents and percentage rents based on tenants'
sales volumes and reimbursement of operating and real estate tax expenses.
The Trust continually evaluates its properties for renovation, re-tenanting
and expansion opportunities. Similarly, the Trust regularly reviews its
portfolio and from time to time considers selling certain of its properties.
The Trust's operating results are affected by general economic and real estate
conditions, including conditions specific to the markets where the Trust's
properties are located.
The Trust's management believes that now is an opportune time to expand the
Trust's portfolio of properties. Management's belief is based on several
factors, including tight real estate credit conditions and years of excess in
real estate construction and financing. In its view, many property owners are
in the market to sell properties, often as a result of the owners' financial
distress or pressure from their real estate lenders. Consequently, in 1992 and
to-date in 1993 the Trust raised $164.7 million of equity, issued $75 million
of convertible subordinated debt, prepaid $89.1 million of higher coupon debt
and established $70 million of unsecured bank credit facilities in order to
position itself to acquire additional properties. Thus far in 1993, the Trust
has acquired five shopping centers containing 1.1 million square feet for $77.1
million.
The Trust continues to seek to acquire community and neighborhood shopping
centers similar to those in its portfolio. The Trust is currently negotiating
the purchase of several shopping centers. While there can be no assurance, the
Trust anticipates that it will acquire additional shopping centers in the next
six months.
In June 1993, Standard & Poor's raised the ratings on the Trust's convertible
subordinated debentures from BBB- to BBB reflecting the Trust's significantly
improved capital structure and the continued strong performance of its shopping
center portfolio. Ratings were withdrawn on the Trust's senior notes due to
their redemption in May 1993, but the implied senior rating was raised to BBB+.
In September 1993, Moody's Investors Service also upgraded the rating of the
Trust's convertible subordinated debt to Baa2 from Ba1.
The Trust has made 124 consecutive quarterly distributions and has increased
its distribution rate for each of the last 26 years. The Trust believes this is
the longest record of annual distribution increases in the REIT industry. The
current annual indicated distribution rate is $1.56 per share.
The Trust, a District of Columbia business trust of unlimited duration,
maintains its offices at 4800 Hampden Lane, Bethesda, Maryland 20814 (telephone
301/652-3360).
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USE OF PROCEEDS
Unless otherwise specified in the applicable Prospectus Supplement for any
offering of Securities, the Trust intends to use the majority of the net
proceeds from the sale of Securities offered by the Trust to repay debt
(including repayments of amounts drawn on lines of credit for property
acquisitions), make improvements to properties, acquire additional properties
and for working capital.
RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth the Trust's consolidated ratios of earnings to
fixed charges for the periods shown:
NINE MONTHS
YEARS ENDED DECEMBER 31, ENDED SEPTEMBER 30,
---------------------------------------------------- ----------------------------
1988 1989 1990 1991 1992 1992 1993
----- ----- ----- ----- ----- --------- ---------
1.20X 1.14X 1.13X 1.11X 1.20X 1.19X 1.46X
The ratios of earnings to fixed charges were computed by dividing earnings by
fixed charges. For this purpose, earnings consist of income before gain on sale
of real estate and extraordinary items and fixed charges. Fixed charges consist
of interest expense (including interest costs capitalized) and the portion of
rent expense representing an interest factor. To date, the Trust has not issued
any Preferred Shares; therefore, the ratios of earnings to combined fixed
charges and preferred share dividends are unchanged from the ratios presented
in this section.
DESCRIPTION OF DEBT SECURITIES
GENERAL
The Senior Securities are to be issued under an indenture to be dated as of
December 1, 1993, as supplemented from time to time (the "Senior Indenture"),
between the Trust and Signet Trust Company, Trustee, and the Subordinated
Securities are to be issued under an indenture dated as of December 1, 1993, as
supplemented from time to time (the "Subordinated Indenture"), between the
Trust and First Union National Bank of North Carolina, Trustee. The term
"Trustee" as used herein shall refer to either Signet Trust Company or First
Union National Bank of North Carolina as appropriate for Senior Securities or
Subordinated Securities. The forms of the Senior Indenture and the Subordinated
Indenture (being sometimes referred to herein collectively as the "Indentures"
and individually as an "Indenture") are filed as exhibits to the registration
statement. The Indentures are subject to and governed by the Trust Indenture
Act of 1939, as amended (the "TIA"). The statements made under this heading
relating to the Debt Securities and the Indentures are summaries of the
provisions thereof and do not purport to be complete and are qualified in their
entirety by reference to the Indentures and such Debt Securities. Parenthetical
references below are to the Indentures and capitalized terms used but not
defined herein shall have the respective meanings set forth in the Indentures.
TERMS
The Debt Securities will be direct, unsecured obligations of the Trust. The
indebtedness represented by the Senior Securities will rank equally with all
other unsecured and unsubordinated indebtedness of the Trust. The indebtedness
represented by the Subordinated Securities will be subordinated in right of
payment to the prior payment in full of the Senior Debt of the Trust as
described under "Subordination."
Each Indenture provides that the Debt Securities may be issued without limit
as to aggregate principal amount, 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 Trust or as established in one or
more indentures
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supplemental to such 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
of each Indenture).
Each 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
either 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 of each Indenture). 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 of each Indenture), and, except as otherwise
indicated herein, any action described herein to be taken by each 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
applicable Indenture.
Reference is made to the Prospectus Supplement relating to the series of Debt
Securities being offered for the specific terms thereof, including:
(1) the title of such Debt Securities and whether such Debt Securities
are Senior Securities or Subordinated 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, or (if applicable) the portion of the principal
amount of such Debt Securities that is convertible into Common Shares or
Preferred Shares, or the method by which any such portion shall be
determined;
(4) if convertible, in connection with the preservation of the Trust's
status as a REIT, any applicable limitations on the ownership or
transferability of the Common Shares or Preferred Shares into which such
Debt Securities are convertible;
(5) the date or dates, or the method for determining such date or dates,
on which the principal of such Debt Securities will be payable;
(6) 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;
(7) the date or dates, or the method for determining such date or dates,
from which any such interest will accrue, the Interest Payment Dates on
which any such interest will be payable, the Regular Record Dates for such
Interest Payment Dates, or the method by which such Dates shall be
determined, the Persons 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;
(8) the place or places where the principal of (and premium, if any) and
interest, if any, on such Debt Securities will be payable, where such Debt
Securities may be surrendered for conversion or registration of transfer or
exchange and where notices or demands to or upon the Trust in respect of
such Debt Securities and the applicable Indenture may be served;
(9) the period or periods within which, the price or prices at which and
the other terms and conditions upon which such Debt Securities may be
redeemed, as a whole or in part, at the option of the Trust, if the Trust
is to have such an option;
(10) the obligation, if any, of the Trust to redeem, repay or purchase
such Debt Securities pursuant to any sinking fund or analogous provision or
at the option of a Holder thereof, and the period or periods within which,
the price or prices at which and the other terms and conditions upon which
such Debt Securities will be redeemed, repaid or purchased, as a whole or
in part, pursuant to such obligation;
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(11) if other than U.S. dollars, the currency or currencies in which such
Debt Securities are denominated and payable, which may be a foreign
currency or units of two or more foreign currencies or a composite currency
or currencies, and the terms and conditions relating thereto;
(12) whether the amount of payments of principal of (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
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;
(13) 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 applicable Indenture;
(14) whether such Debt Securities will be issued in certificated or book-
entry form;
(15) 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 terms and conditions relating thereto;
(16) the applicability, if any, of the defeasance and covenant defeasance
provisions of Article XIV of the applicable Indenture;
(17) the terms, if any, upon which such Debt Securities may be
convertible into Common Shares or Preferred Shares of the Trust and the
terms and conditions upon which such conversion will be effected,
including, without limitation, the initial conversion price or rate and the
conversion period;
(18) whether and under what circumstances the Trust will pay Additional
Amounts as contemplated in the applicable Indenture on such Debt Securities
in respect of any tax, assessment or governmental charge and, if so,
whether the Trust will have the option to redeem such Debt Securities in
lieu of making such payment; and
(19) any other terms of such Debt Securities not inconsistent with the
provisions of the applicable Indenture (Section 301 of each Indenture).
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") (Section 502 of each Indenture). Special
U.S. federal income tax, accounting and other considerations applicable to
Original Issue Discount Securities will be described in the applicable
Prospectus Supplement.
Except as may be set forth in any Prospectus Supplement, the Debt Securities
will not contain any provisions that would limit the ability of the Trust to
incur indebtedness or that would afford Holders of Debt Securities protection
in the event of a highly leveraged or similar transaction involving the Trust
or in the event of a change of control. Restrictions on ownership and transfers
of the Trust's Common Shares and Preferred Shares are designed to preserve its
status as a REIT and, therefore, may act to prevent or hinder a change of
control. See "Description of Common Shares" and "Description of Preferred
Shares." 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 Trust that are described below,
including any addition of a covenant or other provision providing event risk or
similar protection.
DENOMINATIONS, INTEREST, REGISTRATION AND TRANSFER
Unless otherwise described in the applicable Prospectus Supplement, the Debt
Securities of any series will be issuable in denominations of $1,000 and
integral multiples thereof (Section 302 of each Indenture).
Unless otherwise specified in the applicable Prospectus Supplement, the
principal of (and applicable 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 Signet Trust Company, 7 St. Paul Street, 2nd Floor,
Baltimore, Maryland 21202 in the case of the Senior Securities and First Union
National Bank of North Carolina, 230 S. Tryon Street, 8th Floor, Charlotte,
North Carolina 28288 in the case of the Subordinated Securities, provided that,
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at the option of the Trust, 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 of each
Indenture).
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 applicable Trustee,
notice whereof shall be given to each 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 applicable
Indenture (Section 307 of each Indenture).
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 applicable 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 thereof at the corporate trust
office of the applicable Trustee referred to above. 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 Trust may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith (Section 305
of each Indenture). If the applicable Prospectus Supplement refers to any
transfer agent (in addition to the applicable Trustee) initially designated by
the Trust with respect to any series of Debt Securities, the Trust 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 Trust
will be required to maintain a transfer agent in each Place of Payment for such
series. The Trust may at any time designate additional transfer agents with
respect to any series of Debt Securities (Section 1002 of each Indenture).
Neither the Trust nor either 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
that 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 of each
Indenture).
MERGER, CONSOLIDATION OR SALE
The Trust may consolidate with, or sell, lease or convey all or substantially
all of its assets to, or merge with or into, any other corporation or trust or
entity provided that (a) either the Trust shall be the continuing corporation,
or the successor corporation (if other than the Trust) formed by or resulting
from any such consolidation or merger or which shall have received the transfer
of such assets shall expressly assume payment of the principal of (and premium,
if any) and interest on all of the Debt Securities and the due and punctual
performance and observance of all of the covenants and conditions contained in
each Indenture; (b) immediately after giving effect to such transaction and
treating any indebtedness that becomes an obligation of the Trust or any
Subsidiary as a result thereof as having been incurred by the Trust 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 (c) an officers' certificate and legal opinion covering such conditions
shall be delivered to each Trustee (Sections 801 and 803 of each Indenture).
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CERTAIN COVENANTS
Existence. Except as permitted under "Merger, Consolidation or Sale," the
Trust will do or cause to be done all things necessary to preserve and keep in
full force and effect its corporate existence, rights (charter and statutory)
and franchises; provided, however, that the Trust 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 its business (Section 1004 of each
Indenture).
Maintenance of Properties. The Trust will cause all of its material
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 Trust may be necessary so that the
business carried on in connection therewith may be properly and advantageously
conducted at all times (Section 1005 of each Indenture).
Insurance. The Trust 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 full insurable value with insurers of recognized responsibility
and having a rating of at least A-:XII in Best's Key Rating Guide (Section 1006
of each Indenture).
Payment of Taxes and Other Claims. The Trust 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 Trust 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 Trust or any
Subsidiary; provided, however, that the Trust 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
(Section 1007 of each Indenture).
Provision of Financial Information. Whether or not the Trust is subject to
Section 13 or 15(d) of the Exchange Act, the Trust will within 15 days of each
of the respective dates by which the Trust would have been required to file
annual reports, quarterly reports and other documents with the Commission if
the Trust were so subject (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, quarterly reports
and other documents that the Trust would have been required to file with the
Commission pursuant to Section 13 or 15(d) of the Exchange Act if the Trust
were subject to such Sections, (ii) file with the applicable Trustee copies of
the annual reports, quarterly reports and other documents that the Trust would
have been required to file with the Commission pursuant to Section 13 or 15(d)
of the Exchange Act if the Trust were subject to such Sections and (iii)
promptly upon written request and payment of the reasonable cost of duplication
and delivery, supply copies of such documents to any prospective Holder
(Section 1008 of each Indenture).
Additional Covenants. Any additional covenants of the Trust with respect to
any series of Debt Securities will be set forth in the Prospectus Supplement
relating thereto.
EVENTS OF DEFAULT, NOTICE AND WAIVER
Each Indenture provides that the following events are "Events of Default"
with respect to any series of Debt Securities issued thereunder: (a) default
for 30 days in the payment of any installment of interest on any Debt Security
of such series; (b) default in the payment of the principal of (or premium, if
any, on) any Debt Security of such series at its Maturity; (c) default in
making any sinking fund payment as required for any Debt Security of such
series; (d) default in the performance or breach of any other covenant or
warranty of the Trust 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; (e) a default under any bond,
debenture, note or other evidence of indebtedness for money borrowed by the
Trust (including obligations under leases required to be
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capitalized on the balance sheet of the lessee under generally accepted
accounting principles but not including any indebtedness or obligations for
which recourse is limited to property purchased) in an aggregate principal
amount in excess of $5,000,000 or under any mortgage, indenture or instrument
under which there may be issued or by which there may be secured or evidenced
any indebtedness for money borrowed by the Trust (including such leases but not
including such indebtedness or obligations for which recourse is limited to
property purchased) in an aggregate principal amount in excess of $5,000,000 by
the Trust, whether such indebtedness now exists or shall hereafter be created
which default shall have resulted in such indebtedness becoming or being
declared due and payable prior to the date on which it would otherwise have
become due and payable or such obligations being accelerated, without such
acceleration having been rescinded or annulled; (f) certain events of
bankruptcy, insolvency or reorganization, or court appointment of a receiver,
liquidator or trustee of the Trust or any Significant Subsidiary or either of
its properties; and (g) any other Event of Default provided with respect to a
particular series of Debt Securities (Section 501 of each Indenture). The term
"Significant Subsidiary" means each significant subsidiary (as defined in
Regulation S-X promulgated under the Securities Act) of the Trust.
If an Event of Default under either Indenture with respect to Debt Securities
of any series at the time Outstanding occurs and is continuing, then in every
such case the applicable Trustee or the Holders of not less than 25% in
principal amount of the Outstanding Debt Securities of that series may declare
the principal amount (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) of all the Debt Securities of
that series to be due and payable immediately by written notice thereof to the
Trust (and to the applicable 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 either
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 applicable 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
applicable Indenture, as the case may be) may rescind and annul such
declaration and its consequences if (a) the Trust shall have deposited with the
applicable Trustee all required payments of the principal of (and premium, if
any) and interest on the Debt Securities of such series (or of all Debt
Securities then Outstanding under the applicable Indenture, as the case may
be), plus certain fees, expenses, disbursements and advances of the applicable
Trustee and (b) all Events of Default, other than the non-payment of
accelerated principal (or specified portion thereof), with respect to Debt
Securities of such series (or of all Debt Securities then Outstanding under the
applicable Indenture, as the case may be) have been cured or waived as provided
in each Indenture (Section 502 of each Indenture). Each 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 applicable 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 (or premium, if any) or interest on any
Debt Security of such series or (y) in respect of a covenant or provision
contained in the applicable Indenture that cannot be modified or amended
without the consent of the Holder of each Outstanding Debt Security affected
thereby (Section 513 of each Indenture).
Each Trustee is required to give notice to the Holders of Debt Securities
within 90 days of a default under the applicable Indenture unless such default
shall have been cured or waived; provided, however, that such 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 (or premium, if any) or interest on any Debt Security of such series or in
the payment of any sinking fund installment in respect of any Debt Security of
such series) if the Responsible Officers of such Trustee consider such
withholding to be in the interest of such Holders (Section 601 of each
Indenture).
Each Indenture provides that no Holders of Debt Securities of any series may
institute any proceedings, judicial or otherwise, with respect to such
Indenture or for any remedy thereunder, except in the case of failure of the
applicable Trustee, for 60 days, to act after it has received a written request
to institute
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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 of
each Indenture). 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 of each Indenture).
Subject to provisions in each Indenture relating to its duties in case of
default, neither Trustee is under an obligation to exercise any of its rights
or powers under such Indenture at the request or direction of any Holders of
any series of Debt Securities then Outstanding under such Indenture, unless
such Holders shall have offered to the Trustee thereunder reasonable security
or indemnity (Section 602 of each Indenture). 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 each 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 applicable Trustee, or of
exercising any trust or power conferred upon such Trustee. However, each
Trustee may refuse to follow any direction which is in conflict with any law or
the applicable Indenture, which may involve such Trustee in personal liability
or which may be unduly prejudicial to the Holders of Debt Securities of such
series not joining therein (Section 512 of each Indenture).
Within 120 days after the close of each fiscal year, the Trust must deliver
to each Trustee a certificate, signed by one of several specified officers,
stating whether or not such officer has knowledge of any default under the
applicable Indenture and, if so, specifying each such default and the nature
and status thereof (Section 1009 of each Indenture).
MODIFICATION OF THE INDENTURES
Modifications and amendments of either 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 issued under such 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, (a) change the Stated Maturity of the principal of, or any
installment of interest (or premium, if any) on, any such Debt Security; (b)
reduce the principal amount of, or the rate or amount of interest on, or any
premium payable on redemption of, any such Debt Security, or reduce the amount
of principal of an Original Issue Discount Security that would be due and
payable upon declaration of acceleration of the maturity thereof or would be
provable in bankruptcy, or adversely affect any right of repayment of the
Holder of any such Debt Security; (c) change the Place of Payment, or the coin
or currency, for payment of principal of, premium, if any, or interest on any
such Debt Security; (d) impair the right to institute suit for the enforcement
of any payment on or with respect to any such Debt Security; (e) reduce the
above-stated percentage of Outstanding Debt Securities of any series necessary
to modify or amend the applicable 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 applicable Indenture; or (f)
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 (Section 902 of each Indenture).
The Holders of not less than a majority in principal amount of Outstanding
Debt Securities issued under either Indenture have the right to waive
compliance by the Trust with certain covenants in such Indenture (Section 1011
of each Indenture).
Modifications and amendments of either Indenture may be made by the Trust and
the respective Trustee thereunder without the consent of any Holder of Debt
Securities for any of the following purposes: (i) to evidence the succession of
another Person to the Trust as obligor under such Indenture; (ii) to add to the
covenants of the Trust for the benefit of the Holders of all or any series of
Debt Securities or to surrender any right or power conferred upon the Trust in
such Indenture; (iii) to add Events of Default for the benefit
10
of the Holders of all or any series of Securities; (iv) to add or change any
provisions of either Indenture to facilitate the issuance of, or to liberalize
certain terms of, Debt Securities in bearer form, or to permit or facilitate
the issuance of Debt Securities in uncertificated form, provided that such
action shall not adversely affect the interests of the Holders of the Debt
Securities of any series in any material respect; (v) to change or eliminate
any provisions of either Indenture, provided that any such change or
elimination shall become effective only when there are no Debt Securities
Outstanding of any series created prior thereto which are entitled to the
benefit of such provision; (vi) to secure the Debt Securities; (vii) to
establish the form or terms of Debt Securities of any series, including the
provisions and procedures, if applicable, for the conversion of such Debt
Securities into Common Shares or Preferred Shares of the Trust; (viii) to
provide for the acceptance of appointment by a successor Trustee or facilitate
the administration of the trusts under either Indenture by more than one
Trustee; (ix) to cure any ambiguity, defect or inconsistency in either
Indenture, provided that such action shall not adversely affect the interests
of Holders of Debt Securities of any series issued under such Indenture; or (x)
to supplement any of the provisions of either 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 (Section 901 of each
Indenture).
Each 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, (i) the principal amount of an Original Issue Discount Security
that shall be deemed to be outstanding shall be the amount of the principal
thereof that would be due and payable as of the date of such determination upon
declaration of acceleration of the maturity thereof, (ii) the principal amount
of a Debt Security denominated in a Foreign Currency that shall be deemed
outstanding shall be the U.S. dollar equivalent, determined on the issue date
for such Debt Security, of the principal amount (or, in the case of an Original
Issue Discount Security, the U.S. dollar equivalent on the issue date of such
Debt Security of the amount determined as provided in (i) above), (iii) the
principal amount of an Indexed Security that shall be deemed outstanding shall
be the principal face amount of such Indexed Security at original issuance,
unless otherwise provided with respect to such Indexed Security pursuant to
Section 301 of each Indenture, and (iv) Debt Securities owned by the Trust or
any other obligor upon the Debt Securities or any Affiliate of the Trust or of
such other obligor shall be disregarded (Section 101 of each Indenture).
Each Indenture contains provisions for convening meetings of the Holders of
Debt Securities of a series (Section 1501 of each Indenture). A meeting may be
called at any time by the applicable Trustee, and also, upon request, by the
Trust or the Holders of at least 10% in principal amount of the Outstanding
Debt Securities of such series, in any such case upon notice given as provided
in the Indenture (Section 1502 of each Indenture). Except for any consent that
must be given by the Holder of each Debt Security affected by certain
modifications and amendments of either 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 either 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 representing a majority in principal amount of the
Outstanding Debt Securities of a series; provided, however, that if any action
is to be taken at such meeting with respect to a consent or waiver which may be
given by the Holders of not less than a specified percentage in principal
amount of the Outstanding Debt Securities of a series, the Persons holding or
representing such specified percentage in
11
principal amount of the Outstanding Debt Securities of such series will
constitute a quorum (Section 1504 of each Indenture).
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 either 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 such
Indenture (Section 1504 of each Indenture).
SUBORDINATION
Upon any distribution to creditors of the Trust in a liquidation, dissolution
or reorganization, the payment of the principal of and interest on the
Subordinated Securities will be subordinated to the extent provided in the
Subordinated Indenture in right of payment to the prior payment in full of all
Senior Debt (Sections 1601 and 1602 of the Subordinated Indenture), but the
obligation of the Trust to make payment of the principal and interest on the
Subordinated Securities will not otherwise be affected (Section 1608 of the
Subordinated Indenture). No payment of principal or interest may be made on the
Subordinated Securities at any time if a default on Senior Debt exists that
permits the holders of such Senior Debt to accelerate its maturity and the
default is the subject of judicial proceedings or the Trust receives notice of
the default (Section 1603 of the Subordinated Indenture). After all Senior Debt
is paid in full and until the Subordinated Securities are paid in full, holders
will be subrogated to the rights of holders of Senior Debt to the extent that
distributions otherwise payable to holders have been applied to the payment of
Senior Debt (Section 1607 of the Subordinated Indenture). By reason of such
subordination, in the event of a distribution of assets upon insolvency,
certain general creditors of the Trust may recover more, ratably, than holders
of the Subordinated Securities.
Senior Debt is defined in the Subordinated Indenture as the principal of and
interest on, or substantially similar payments to be made by the Trust in
respect of, the following, whether outstanding at the date of execution of the
Subordinated Indenture or thereafter incurred, created or assumed: (a)
indebtedness of the Trust for money borrowed or represented by purchase-money
obligations, (b) indebtedness of the Trust evidenced by notes, debentures, or
bonds, or other securities issued under the provisions of an indenture, fiscal
agency agreement or other instrument, (c) obligations of the Trust as lessee
under leases of property either made as part of any sale and leaseback
transaction to which the Trust is a party or otherwise, (d) indebtedness of
partnerships and joint ventures which is included in the consolidated financial
statements of the Trust, (e) indebtedness, obligations and liabilities of
others in respect of which the Trust is liable contingently or otherwise to pay
or advance money or property or as guarantor, endorser or otherwise or which
the Trust has agreed to purchase or otherwise acquire, and (f) any binding
commitment of the Trust to fund any real estate investment or to fund any
investment in any entity making such real estate investment, in each case other
than (1) any such indebtedness, obligation or liability referred to in clauses
(a) through (f) above as to which, in the instrument creating or evidencing the
same pursuant to which the same is outstanding, it is provided that such
indebtedness, obligation or liability is not superior in right of payment to
the Subordinated Securities or ranks pari passu with the Subordinated
Securities, (2) any such indebtedness, obligation or liability which is
subordinated to indebtedness of the Trust to substantially the same extent as
or to a greater extent than the Subordinated Securities are subordinated, and
(3) the Subordinated Securities (Section 101 of the Subordinated Indenture). At
September 30, 1993, Senior Debt aggregated approximately $300 million. There
are no restrictions in the Subordinated Indenture upon the creation of
additional Senior Debt.
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
Under each Indenture, the Trust may discharge certain obligations to Holders
of any series of Debt Securities issued thereunder that have not already been
delivered to the applicable Trustee for cancellation
12
and 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 applicable Trustee, in trust, funds in such currency or
currencies, currency unit or units or composite currency or currencies in which
such Debt Securities are payable in an amount sufficient to pay 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 401 of each Indenture).
Each Indenture provides that, if the provisions of Article Fourteen thereof
are made applicable to the Debt Securities of or within any series pursuant to
Section 301 of such Indenture, the Trust may elect either (a) to defease and be
discharged from any and all obligations with respect to such Debt Securities
(except for the obligation to pay Additional Amounts, if any, upon the
occurrence of certain events of tax, assessment or governmental charge with
respect to payments on such Debt Securities and 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 of each Indenture) or (b) to be released
from its obligations with respect to such Debt Securities under Sections 1004
to 1008, inclusive, of each Indenture (being the restrictions described under
"Certain Covenants") or, if provided pursuant to Section 301 of each Indenture,
its obligations with respect to any other covenant, 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 of
each Indenture), in either case upon the irrevocable deposit by the Trust with
the applicable Trustee, in trust, of an amount, in such currency or currencies,
currency unit or units or composite currency or currencies in which such Debt
Securities are payable at Stated Maturity, or Government Obligations (as
defined below), or both, applicable to such Debt Securities which through the
scheduled payment of principal and interest in accordance with their terms will
provide money in an amount sufficient to pay the principal of (and premium, if
any) and interest on such Debt Securities, and any mandatory sinking fund or
analogous payments thereon, on the scheduled due dates therefor (Section 1404
of each Indenture).
Such a trust may only be established if, among other things, the Trust has
delivered to the applicable Trustee an Opinion of Counsel (as specified in each
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 of each Indenture).
"Government Obligations" means securities which are (i) direct obligations of
the United States of America or the government which issued the Foreign
Currency in which the Debt Securities of a particular series are payable, 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 or such government which issued
the Foreign Currency in which the Debt Securities of such series are payable,
the payment of which is unconditionally guaranteed as a full faith and credit
obligation by the United States of America or such other government, which, in
either case, are not callable or redeemable at the option of 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 a
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 (Section 101 of each
Indenture).
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Unless otherwise provided in the applicable Prospectus Supplement, if after
the Trust has deposited funds and/or Government Obligations to effect
defeasance or covenant defeasance with respect to Debt Securities of any
series, (a) the Holder of a Debt Security of such series is entitled to, and
does, elect pursuant to Section 301 of either Indenture or the terms of such
Debt Security to receive payment in a currency, currency unit or composite
currency other than that in which such deposit has been made in respect of such
Debt Security, or (b) a Conversion Event (as defined below) occurs in respect
of the currency, currency unit or composite currency in which such deposit has
been made, the indebtedness represented by such Debt Security shall be deemed
to have been, and will be, fully discharged and satisfied through the payment
of the principal of (and premium, if any) and interest on such Debt Security as
they become due out of the proceeds yielded by converting the amount so
deposited in respect of such Debt Security into the currency, currency unit or
composite currency in which such Debt Security becomes payable as a result of
such election or such cessation of usage based on the applicable market
exchange rate (Section 1405 of each Indenture). "Conversion Event" means the
cessation of use of (i) a currency, currency unit or composite currency both by
the government of the country which issued such currency and for the settlement
of transactions by a central bank or other public institutions of or within the
international banking community, (ii) the ECU both within the European Monetary
System and for the settlement of transactions by public institutions of or
within the European Communities or (iii) any currency unit or composite
currency other than the ECU for the purposes for which it was established.
Unless otherwise provided in the applicable Prospectus Supplement, all payments
of principal of (and premium, if any) and interest on any Debt Security that is
payable in a Foreign Currency that ceases to be used by its government of
issuance shall be made in U.S. dollars (Section 101 of each Indenture).
In the event the Trust 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 (d) under "Events of Default, Notice and Waiver" with respect to
Sections 1004 to 1008, inclusive, of each Indenture (which Sections would no
longer be applicable to such Debt Securities) or described in clause (g) under
"Events of Default, Notice and Waiver" with respect to any other covenant as to
which there has been covenant defeasance, the amount in such currency, currency
unit or composite currency in which such Debt Securities are payable, and
Government Obligations on deposit with the applicable Trustee, will be
sufficient to pay amounts due on such Debt Securities at the time of their
Stated Maturity but may not be sufficient to pay amounts due on such Debt
Securities at the time of the acceleration resulting from such Event of
Default. However, the Trust 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.
CONVERSION RIGHTS
The terms and conditions, if any, upon which the Debt Securities are
convertible into Common Shares or Preferred Shares will be set forth in the
applicable Prospectus Supplement relating thereto. Such terms will include
whether such Debt Securities are convertible into Common Shares or Preferred
Shares, the conversion price (or manner of calculation thereof), the conversion
period, provisions as to whether conversion will be at the option of the
Holders or the Trust, the events requiring an adjustment of the conversion
price and provisions affecting conversion in the event of the redemption of
such Debt Securities.
GLOBAL SECURITIES
The Debt Securities of a series may be issued in whole or in part in the form
of one or more global securities (the "Global Securities") that will be
deposited with, or on behalf of, a depositary (the "Depositary") identified in
the applicable Prospectus Supplement relating to such series. Global Securities
14
may be issued in either registered or bearer form and in either temporary or
permanent form. The specific terms of the depositary arrangement with respect
to a series of Debt Securities will be described in the applicable Prospectus
Supplement relating to such series.
DESCRIPTION OF PREFERRED SHARES
GENERAL
The Trust is authorized to issue an unlimited number of preferred shares (the
"Preferred Shares") of which no Preferred Shares were outstanding at December
13, 1993.
The following description of the Preferred Shares sets forth certain general
terms and provisions of the Preferred Shares to which any Prospectus Supplement
may relate. The statements below describing the Preferred Shares are in all
respects subject to and qualified in their entirety by reference to the
applicable provisions of the Trust's Third Amended and Restated Declaration of
Trust (the "Declaration of Trust") and Bylaws and applicable statement of
designations (the "Statement of Designations").
TERMS
Subject to the limitations prescribed by Declaration of Trust, the Board of
Trustees is authorized to fix the number of shares constituting each series of
Preferred Shares and the designations and powers, preferences and relative,
participating, optional or other special rights and qualifications, limitations
or restrictions thereof, including such provisions as may be desired concerning
voting, redemption, dividends, dissolution or the distribution of assets,
conversion or exchange, and such other subjects or matters as may be fixed by
resolution of the Board of Trustees. The Preferred Shares will, when issued, be
fully paid and nonassessable by the Trust (except as described under
"Shareholder Liability" below) and will have no preemptive rights.
Reference is made to the Prospectus Supplement relating to the Preferred
Shares offered thereby for specific terms, including:
(1) The title and stated value of such Preferred Shares;
(2) The number of such Preferred Shares offered, the liquidation
preference per share and the offering price of such Preferred Shares;
(3) The dividend rate(s), period(s) and/or payment date(s) or method(s)
of calculation thereof applicable to such Preferred Shares;
(4) The date from which dividends on such Preferred Shares shall
accumulate, if applicable;
(5) The procedures for any auction and remarketing, if any, for such
Preferred Shares;
(6) The provision for a sinking fund, if any, for such Preferred Shares;
(7) The provision for redemption, if applicable, of such Preferred
Shares;
(8) Any listing of such Preferred Shares on any securities exchange;
(9) The terms and conditions, if applicable, upon which such Preferred
Shares will be convertible into Common Shares of the Trust, including the
conversion price (or manner of calculation thereof);
(10) Any other specific terms, preferences, rights, limitations or
restrictions of such Preferred Shares;
(11) A discussion of federal income tax considerations applicable to such
Preferred Shares;
(12) The relative ranking and preferences of such Preferred Shares as to
dividend rights and rights upon liquidation, dissolution or winding up of
the affairs of the Trust;
(13) Any limitations on issuance of any series of Preferred Shares
ranking senior to or on a parity with such series of Preferred Shares as to
dividend rights and rights upon liquidation, dissolution or winding up of
the affairs of the Trust; and
(14) Any limitations on direct or beneficial ownership and restrictions
on transfer, in each case as may be appropriate to preserve the status of
the Trust as a REIT.
15
RANK
Unless otherwise specified in the Prospectus Supplement, the Preferred Shares
will, with respect to dividend rights and rights upon liquidation, dissolution
or winding up of the Trust, rank (i) senior to all classes or series of Common
Shares or other capital shares of the Trust, and to all equity securities
ranking junior to such Preferred Shares; (ii) on a parity with all equity
securities issued by the Trust the terms of which specifically provide that
such equity securities rank on a parity with the Preferred Shares; and (iii)
junior to all equity securities issued by the Trust the terms of which
specifically provide that such equity securities rank senior to the Preferred
Shares. The term "equity securities" does not include convertible debt
securities.
DIVIDENDS
Holders of the Preferred Shares of each series will be entitled to receive,
when, as and if declared by the Board of Trustees of the Trust, out of assets
of the Trust legally available for payment, cash dividends at such rates and on
such dates as will be set forth in the applicable Prospectus Supplement. Each
such dividend shall be payable to holders of record as they appear on the share
transfer books of the Trust on such record dates as shall be fixed by the Board
of Trustees of the Trust.
Dividends on any series of the Preferred Shares may be cumulative or non-
cumulative, as provided in the applicable Prospectus Supplement. Dividends, if
cumulative, will be cumulative from and after the date set forth in the
applicable Prospectus Supplement. If the Board of Trustees of the Trust fails
to declare a dividend payable on a dividend payment date on any series of the
Preferred Shares for which dividends are noncumulative, then the holders of
such series of the Preferred Shares will have no right to receive a dividend in
respect of the dividend period ending on such dividend payment date, and the
Trust will have no obligation to pay the dividend accrued for such period,
whether or not dividends on such series are declared payable on any future
dividend payment date.
If Preferred Shares of any series are outstanding, no dividends will be
declared or paid or set apart for payment on the Preferred Shares of the Trust
of any other series ranking, as to dividends, on a parity with or junior to the
Preferred Shares of such series for any period unless (i) if such series of
Preferred Shares has a cumulative dividend, full cumulative dividends have been
or contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof set apart for such payment on the Preferred Shares of such
series for all past dividend periods and the then current dividend period or
(ii) if such series of Preferred Shares does not have a cumulative dividend,
full dividends for the then current dividend period have been or
contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof set apart for such payment on the Preferred Shares of such
series. When dividends are not paid in full (or a sum sufficient for such full
payment is not so set apart) upon Preferred Shares of any series and the shares
of any other series of Preferred Shares ranking on a parity as to dividends
with the Preferred Shares of such series, all dividends declared upon Preferred
Shares of such series and any other series of Preferred Shares ranking on a
parity as to dividends with such Preferred Shares shall be declared pro rata so
that the amount of dividends declared per Preferred Share of such series and
such other series of Preferred Shares shall in all cases bear to each other the
same ratio that accrued dividends per share on the Preferred Shares of such
series (which shall not include any accumulation in respect of unpaid dividends
for prior dividend periods if such Preferred Shares do not have a cumulative
dividend) and such other series of Preferred Shares bear to each other. No
interest, or sum of money in lieu of interest, shall be payable in respect of
any dividend payment or payments on Preferred Shares of such series which may
be in arrears.
Except as provided in the immediately preceding paragraph, unless (i) if such
series of Preferred Shares has a cumulative dividend, full cumulative dividends
on the Preferred Shares of such series have been or contemporaneously are
declared and paid or declared and a sum sufficient for the payment thereof set
apart for payment for all past dividend periods and the then current dividend
period and (ii) if such series of
16
Preferred Shares does not have a cumulative dividend, full dividends on the
Preferred Shares of such series have been or contemporaneously are declared and
paid or declared and a sum sufficient for the payment thereof set apart for
payment for the then current dividend period, no dividends (other than in
Common Shares or other capital shares ranking junior to the Preferred Shares of
such series as to dividends and upon liquidation) shall be declared or paid or
set aside for payment or other distribution shall be declared or made upon the
Common Shares, or any other capital shares of the Trust ranking junior to or on
a parity with the Preferred Shares of such series as to dividends or upon
liquidation, nor shall any Common Shares, or any other capital shares of the
Trust ranking junior to or on a parity with the Preferred Shares of such series
as to dividends or upon liquidation be redeemed, purchased or otherwise
acquired for any consideration (or any moneys be paid to or made available for
a sinking fund for the redemption of any such shares) by the Trust (except by
conversion into or exchange for other capital shares of the Trust ranking
junior to the Preferred Shares of such series as to dividends and upon
liquidation).
Any dividend payment made on shares of a series of Preferred Shares shall
first be credited against the earliest accrued but unpaid dividend due with
respect to shares of such series which remains payable.
REDEMPTION
If so provided in the applicable Prospectus Supplement, the Preferred Shares
will be subject to mandatory redemption or redemption at the option of the
Trust, as a whole or in part, in each case upon the terms, at the times and at
the redemption prices set forth in such Prospectus Supplement.
The Prospectus Supplement relating to a series of Preferred Shares that is
subject to mandatory redemption will specify the number of such Preferred
Shares that shall be redeemed by the Trust in each year commencing after a date
to be specified, at a redemption price per share to be specified, together with
an amount equal to all accrued and unpaid dividends thereon (which shall not,
if such Preferred Shares do not have a cumulative dividend, include any
accumulation in respect of unpaid dividends for prior dividend periods) to the
date of redemption. The redemption price may be payable in cash or other
property, as specified in the applicable Prospectus Supplement. If the
redemption price for Preferred Shares of any series is payable only from the
net proceeds of the issuance of capital shares of the Trust, the terms of such
Preferred Shares may provide that, if no such capital shares shall have been
issued or to the extent the net proceeds from any issuance are insufficient to
pay in full the aggregate redemption price then due, such Preferred Shares
shall automatically and mandatorily be converted into the applicable capital
shares of the Trust pursuant to conversion provisions specified in the
applicable Prospectus Supplement.
Notwithstanding the foregoing, unless (i) if such series of Preferred Shares
has a cumulative dividend, full cumulative dividends on all shares of any
series of Preferred Shares shall have been or contemporaneously are declared
and paid or declared and a sum sufficient for the payment thereof set apart for
payment for all past dividend periods and the then current dividend period and
(ii) if such series of Preferred Shares does not have a cumulative dividend,
full dividends on the Preferred Shares of any series have been or
contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof set apart for payment for the then current dividend period,
no shares of any series of Preferred Shares shall be redeemed unless all
outstanding Preferred Shares of such series are simultaneously redeemed;
provided, however, that the foregoing shall not prevent the purchase or
acquisition of Preferred Shares of such series to preserve the REIT status of
the Trust or pursuant to a purchase or exchange offer made on the same terms to
holders of all outstanding Preferred Shares of such series, and, unless (i) if
such series of Preferred Shares has a cumulative dividend, full cumulative
dividends on all outstanding shares of any series of Preferred Shares have been
or contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof set apart for payment for all past dividend periods and the
then current dividend period and (ii) if such series of Preferred Shares does
not have a cumulative dividend, full dividends on the Preferred Shares of any
series have been or contemporaneously are declared and paid or declared and a
sum sufficient for the payment thereof set apart for payment for the then
current dividend period, the Trust shall not purchase or otherwise acquire
directly or indirectly any Preferred Shares of such series (except by
conversion
17
into or exchange for capital shares of the Trust ranking junior to the
Preferred Shares of such series as to dividends and upon liquidation);
provided, however, that the foregoing shall not prevent the purchase or
acquisition of Preferred Shares of such series to preserve the REIT status of
the Trust or pursuant to a purchase or exchange offer made on the same terms to
holders of all outstanding Preferred Shares of such series.
If fewer than all of the outstanding shares of Preferred Shares of any series
are to be redeemed, the number of shares to be redeemed will be determined by
the Trust and such shares may be redeemed pro rata from the holders of record
of such shares in proportion to the number of such shares held by such holders
(with adjustments to avoid redemption of fractional shares) or by lot in a
manner determined by the Trust.
Notice of redemption will be mailed at least 30 days but not more than 60
days before the redemption date to each holder of record of Preferred Shares of
any series to be redeemed at the address shown on the share transfer books of
the Trust. Each notice shall state: (i) the redemption date; (ii) the number of
shares and series of the Preferred Shares to be redeemed; (iii) the redemption
price; (iv) the place or places where certificates for such Preferred Shares
are to be surrendered for payment of the redemption price; (v) that dividends
on the shares to be redeemed will cease to accrue on such redemption date; and
(vi) the date upon which the holder's conversion rights, if any, as to such
shares shall terminate. If fewer than all the Preferred Shares of any series
are to be redeemed, the notice mailed to each such holder thereof shall also
specify the number of Preferred Shares to be redeemed from each such holder. If
notice of redemption of any Preferred Shares has been given and if the funds
necessary for such redemption have been set aside by the Trust in trust for the
benefit of the holders of any Preferred Shares so called for redemption, then
from and after the redemption date dividends will cease to accrue on such
Preferred Shares, and all rights of the holders of such shares will terminate,
except the right to receive the redemption price.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding up of
the affairs of the Trust, then, before any distribution or payment shall be
made to the holders of any Common Shares, excess shares or any other class or
series of capital shares of the Trust ranking junior to the Preferred Shares in
the distribution of assets upon any liquidation, dissolution or winding up of
the Trust, the holders of each series of Preferred Shares shall be entitled to
receive out of assets of the Trust legally available for distribution to
shareholders liquidating distributions in the amount of the liquidation
preference per share (set forth in the applicable Prospectus Supplement), plus
an amount equal to all dividends accrued and unpaid thereon (which shall not
include any accumulation in respect of unpaid dividends for prior dividend
periods if such Preferred Shares do not have a cumulative dividend). After
payment of the full amount of the liquidating distributions to which they are
entitled, the holders of Preferred Shares will have no right or claim to any of
the remaining assets of the Trust. In the event that, upon any such voluntary
or involuntary liquidation, dissolution or winding up, the available assets of
the Trust are insufficient to pay the amount of the liquidating distributions
on all outstanding Preferred Shares and the corresponding amounts payable on
all shares of other classes or series of capital shares of the Trust ranking on
a parity with the Preferred Shares in the distribution of assets, then the
holders of the Preferred Shares and all other such classes or series of capital
shares shall share ratably in any such distribution of assets in proportion to
the full liquidating distributions to which they would otherwise be
respectively entitled.
If liquidating distributions shall have been made in full to all holders of
Preferred Shares, the remaining assets of the Trust shall be distributed among
the holders of any other classes or series of capital shares ranking junior to
the Preferred Shares upon liquidation, dissolution or winding up, according to
their respective rights and preferences and in each case according to their
respective number of shares. For such purposes, the consolidation or merger of
the Trust with or into any other corporation, trust or entity, or the sale,
lease or conveyance of all or substantially all of the property or business of
the Trust, shall not be deemed to constitute a liquidation, dissolution or
winding up of the Trust.
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VOTING RIGHTS
Holders of the Preferred Shares will not have any voting rights, except as
set forth below or as otherwise from time to time required by law or as
indicated in the applicable Prospectus Supplement.
Whenever dividends on any Preferred Shares shall be in arrears for six
consecutive quarterly periods, the holders of such Preferred Shares (voting
separately as a class with all other series of Preferred Shares upon which like
voting rights have been conferred and are exercisable) will be entitled to vote
for the election of two additional Trustees of the Trust at the next annual
meeting of shareholders and at each subsequent meeting until (i) if such series
of Preferred Shares has a cumulative dividend, all dividends accumulated on
such shares of Preferred Shares for the past dividend periods and the then
current dividend period shall have been fully paid or declared and a sum
sufficient for the payment thereof set aside for payment or (ii) if such series
of Preferred Shares does not have a cumulative dividend, four consecutive
quarterly dividends shall have been fully paid or declared and a sum sufficient
for the payment thereof set aside for payment. In such case, the entire Board
of Trustees of the Trust will be increased by two Trustees.
Unless provided otherwise for any series of Preferred Shares, so long as any
Preferred Shares remain outstanding, the Trust will not, without the
affirmative vote or consent of the holders of at least two-thirds of the shares
of each series of Preferred Shares outstanding at the time, given in person or
by proxy, either in writing or at a meeting (such series voting separately as a
class), (i) authorize or create, or increase the authorized or issued amount
of, any class or series of capital shares ranking prior to such series of
Preferred Shares with respect to payment of dividends or the distribution of
assets upon liquidation, dissolution or winding up or reclassify any authorized
capital shares of the Trust into any such shares, or create, authorize or issue
any obligation or security convertible into or evidencing the right to purchase
any such shares; or (ii) amend, alter or repeal the provisions of the Trust's
Declaration of Trust or the Statement of Designations for such series of
Preferred Shares, whether by merger, consolidation or otherwise (an "Event"),
so as to materially and adversely affect any right, preference, privilege or
voting power of such series of Preferred Shares or the holders thereof;
provided, however, with respect to the occurrence of any of the Events set
forth in (ii) above, so long as the Preferred Shares remain outstanding with
the terms thereof materially unchanged, taking into account that upon the
occurrence of an Event, the Trust may not be the surviving entity, the
occurrence of any such Event shall not be deemed to materially and adversely
affect such rights, preferences, privileges or voting power of holders of
Preferred Shares and provided further that (x) any increase in the amount of
the authorized Preferred Shares or the creation or issuance of any other series
of Preferred Shares, or (y) any increase in the amount of authorized shares of
such series or any other series of Preferred Shares, in each case ranking on a
parity with or junior to the Preferred Shares of such series with respect to
payment of dividends or the distribution of assets upon liquidation,
dissolution or winding up, shall not be deemed to materially and adversely
affect such rights, preferences, privileges or voting powers.
The foregoing voting provisions will not apply if, at or prior to the time
when the act with respect to which such vote would otherwise be required shall
be effected, all outstanding shares of such series of Preferred Shares shall
have been redeemed or called for redemption and sufficient funds shall have
been deposited in trust to effect such redemption.
CONVERSION RIGHTS
The terms and conditions, if any, upon which any series of Preferred Shares
are convertible into Common Shares will be set forth in the applicable
Prospectus Supplement relating thereto. Such terms will include the number of
Common Shares into which the Preferred Shares are convertible, the conversion
price (or manner of calculation thereof), the conversion period, provisions as
to whether conversion will be at the option of the holders of the Preferred
Shares or the Trust, the events requiring an adjustment of the conversion price
and provisions affecting conversion in the event of the redemption of such
series of Preferred Shares.
SHAREHOLDER LIABILITY
As discussed below under "Description of Common Shares--Shareholder
Liability," the Declaration of Trust provides that no shareholder, including
holders of Preferred Shares, shall be personally liable for the
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acts and obligations of the Trust and that the funds and property of the Trust
shall be solely liable for such acts or obligations. The Declaration of Trust
provides that, to the extent practicable, each written instrument creating an
obligation of the Trust shall contain a provision to that effect. The
Declaration of Trust also provides that the Trust shall indemnify and hold
harmless shareholders against all claims and liabilities and related reasonable
expenses to which they may become subject by reason of their being or having
been shareholders. In some jurisdictions, however, with respect to tort and
contract claims where shareholder liability is not so negated, claims for taxes
and certain statutory liability, shareholders may be personally liable to the
extent that such claims are not satisfied by the Trust. The Trust carries
public liability insurance that the Trustees consider adequate. Thus, any risk
of personal liability to shareholders is limited to situations in which the
Trust's assets plus its insurance coverage would be insufficient to satisfy the
claims against the Trust and its shareholders.
RESTRICTIONS ON OWNERSHIP
As discussed below under "Description of Common Shares--REIT Qualification,"
for the Trust to qualify as a REIT under the Internal Revenue Code of 1986, as
amended (the "Code"), not more than 50% in value of its outstanding capital
shares may be owned, directly or constructively, by five or fewer individuals
(as defined in the Code to include certain entities) during the last half of a
taxable year. To assist the Trust in meeting this requirement, the Trust may
take certain other actions to limit the beneficial ownership, directly or
indirectly, by a single person of more than 9.8% of the Trust's outstanding
equity securities, including any Preferred Shares of the Trust. Therefore, the
Statement of Designations for each series of Preferred Shares will contain
certain provisions restricting the ownership and transfer of the Preferred
Shares. The applicable Prospectus Supplement will specify any additional
ownership limitation relating to a series of Preferred Shares.
DESCRIPTION OF COMMON SHARES
GENERAL
The Common Shares are issued pursuant to the Declaration of Trust. The Common
Shares (no par or stated value) are equal with respect to distribution and
liquidation rights, are not convertible, have no preemptive rights to subscribe
for additional Common Shares, are nonassessable (except as described under
"Shareholder Liability" below) and are transferable in the same manner as
shares of a corporation. Each shareholder is entitled to one vote in person or
by proxy for each Common Share registered in his name and has the right to vote
on the election or removal of Trustees, amendments to the Declaration of Trust,
proposals to terminate, reorganize, merge or consolidate the Trust or to sell
or dispose of substantially all of the Trust's property and with respect to
certain business combinations. The Trust will have perpetual existence unless
and until dissolved and terminated. Except with respect to the foregoing
matters, no action taken by the shareholders at any meeting shall in any way
bind the Trustees. The Common Shares offered by the Trust will be, when issued,
fully paid and nonassessable (except as described under "Shareholder Liability"
below).
Without shareholder approval, the Trust may issue an unlimited number of
securities, warrants, rights, or other options to purchase Common Shares and
other securities convertible into Common Shares.
Several provisions in the Declaration of Trust may have the effect of
deterring a take-over of the Trust. These provisions (i) establish the
percentage of outstanding Common Shares required to approve certain matters,
including removal of a Trustee, amendment of any section of the Declaration of
Trust that provides for a shareholder vote, the reorganization, merger,
consolidation, sale or termination of the Trust and a sale of substantially all
of the assets of the Trust, at 80% unless the matter to be acted upon is
approved or recommended by the Board of Trustees in which event the percentage
is 66 2/3%; (ii) restrict ownership of the Trust's outstanding capital shares
by a single person to 9.8% of such capital shares unless otherwise approved by
the Board of Trustees to assist in protecting and preserving the qualification
of the Trust as a real estate
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investment trust under the Code; and (iii) include a "fair price" provision
that would deter a "two-stage" take-over transaction by requiring an 80% vote
of outstanding Common Shares for certain defined "business combinations" with
shareholders owning more than 9.8% of Common Shares or their affiliates if the
transaction is neither approved by the Board of Trustees nor meets certain
price and procedural conditions.
In addition, the Declaration of Trust includes provisions for (i) the
classification of Trustees into three classes serving three year staggered
terms and (ii) the authorization of Trustees to issue an unlimited number of
Common Shares and to issue additional classes of equity securities in unlimited
numbers with such rights, qualifications, limitations or restrictions as are
stated in the Board of Trustees' resolution establishing such class of
securities.
In 1989 the Trustees adopted a Shareholder Rights Plan (the "Plan"). Under
the Plan, one right was issued for each outstanding Common Share and a right
will be attached to each Share issued in the future. The rights authorize the
holders to purchase Common Shares at a price below market upon the occurrence
of certain events, including, unless approved by the Board of Trustees,
acquisition by a person or group of certain levels of beneficial ownership of
the Trust or a tender offer. The rights are redeemable by the Trust for $.01
and expire in 1999.
REIT QUALIFICATION
The Trust operates in a manner intended to qualify for treatment as a real
estate investment trust ("REIT") under Sections 856 to 860 of the Code. In
general, a REIT that distributes to its shareholders at least 95% of its
taxable income (other than net capital gain) for a taxable year and that meets
certain other conditions will not be taxed on income (including net capital
gain) distributed for that year. If the Trust fails to qualify as a REIT in any
taxable year, it will be taxed as a corporation for that year on all its
income, regardless of whether that income is distributed to shareholders, and
its shareholders will be separately taxed on the amount of any such
distributions. Under such circumstances, the Trust also will be disqualified
from being treated as a REIT for the ensuing four taxable years. Failure to
qualify as a REIT could result in the Trust incurring indebtedness and perhaps
liquidating investments in order to pay its taxes.
Among the requirements which must be met in order for the Trust to qualify as
a REIT is that not more than 50% in value of the outstanding capital shares,
including in some circumstances capital shares into which outstanding
securities (including the Securities) might be converted, may be owned actually
or constructively by five or fewer individuals or certain other entities at any
time during the last half of the Trust's taxable year. To assist the Trust in
meeting this requirement, the Trust (a) by lot or other equitable means, may
prevent the transfer of and/or may call for redemption a number of capital
shares sufficient for the continued qualification of the Trust as a REIT and
(b) may refuse to register the transfer of capital shares and may take certain
other actions to limit the beneficial ownership, directly or indirectly, by a
single person of more than 9.8% of the Trust's outstanding equity securities.
Capital shares reserved for issuance upon conversion of any class of then
outstanding convertible securities of the Trust may be considered outstanding
capital shares for purposes of this provision if the effect thereof would be to
cause a single person to own or to be deemed to own more than 9.8% of the
Trust's outstanding capital shares. Without shareholder approval, the Trust may
issue an unlimited number of securities, warrants, rights or other options to
purchase Common Shares and other securities convertible into Common Shares.
SHAREHOLDER LIABILITY
The Declaration of Trust provides that no shareholder shall be personally
liable in connection with the Trust's property or the affairs of the Trust. The
Declaration of Trust further provides that the Trust shall indemnify and hold
harmless shareholders against all claims and liabilities and related reasonable
expenses to which they may become subject by reason of their being or having
been shareholders. In addition, the Trust is required to, and as a matter of
practice does, insert a clause in its contracts that provides that shareholders
shall not be personally liable thereunder. However, in respect to tort claims
and contract claims
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where shareholder liability is not so negated, claims for taxes and certain
statutory liability, the shareholders may, in some jurisdictions, be personally
liable to the extent that such claims are not satisfied by the Trust. The Trust
carries public liability insurance that the Trustees consider adequate. Thus,
any risk of personal liability to shareholders is limited to situations in
which the Trust's assets plus its insurance coverage would be insufficient to
satisfy the claims against the Trust and its shareholders.
REGISTRAR AND TRANSFER AGENT
The Registrar and Transfer Agent for the Common Shares is American Stock
Transfer & Trust Company, New York, New York.
PLAN OF DISTRIBUTION
The Trust may sell Securities to or through underwriters, and also may sell
Securities directly to other purchasers or through agents.
The distribution of the Securities may be effected from time to time in one
or more transactions at a fixed price or prices, which may be changed, or at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices.
In connection with the sale of Securities, underwriters may receive
compensation from the Trust or from purchasers of Securities, for whom they may
act as agents, in the form of discounts, concessions, or commissions.
Underwriters may sell 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 agents. Underwriters, dealers, and agents that participate in the
distribution of Securities may be deemed to be underwriters, and any discounts
or commissions they receive from the Trust, and any profit on the resale of
Securities they realize may be deemed to be underwriting discounts and
commissions, under the Securities Act. Any such underwriter or agent will be
identified, and any such compensation received from the Trust will be
described, in the Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement, each series
of Securities will be a new issue with no established trading market, other
than the Common Shares which are listed on the New York Stock Exchange. Any
Common Shares sold pursuant to a Prospectus Supplement will be listed on such
exchange, subject to official notice of issuance. The Trust may elect to list
any series of Debt Securities or Preferred Shares on an exchange, but is not
obligated to do so. It is possible that one or more underwriters may make a
market in a series of Securities, but will not be obligated to do so and may
discontinue any market making at any time without notice. Therefore, no
assurance can be given as to the liquidity of the trading market for the
Securities.
Under agreements the Trust may enter into, underwriters, dealers, and agents
who participate in the distribution of Securities may be entitled to
indemnification by the Trust against certain liabilities, including liabilities
under the Securities Act.
Underwriters, dealers and agents may engage in transactions with, or perform
services for, or be customers of, the Trust in the ordinary course of business.
If so indicated in the Prospectus Supplement, the Trust will authorize
underwriters or other persons acting as the Trust's agents to solicit offers by
certain institutions to purchase Securities from the Trust pursuant to
contracts providing for payment and delivery on a future date. Institutions
with which such contracts may be made include commercial and savings banks,
insurance companies, pension funds, investment companies, educational and
charitable institutions and others, but in all cases such institutions must be
approved by the Trust. The obligations of any purchaser under any such contract
will be subject to
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the condition that the purchase of the Securities shall not at the time of
delivery be prohibited under the laws of the jurisdiction to which such
purchaser is subject. The underwriters and such other agents will not have any
responsibility in respect of the validity or performance of such contracts.
LEGAL OPINIONS
The legality of the Securities offered hereby is being passed upon for the
Trust by Kirkpatrick & Lockhart, 1800 M Street, N.W., Washington, D.C. 20036.
Certain REIT tax matters relating to the Trust are being passed upon by
Goodwin, Procter & Hoar, Exchange Place, Boston, Massachusetts 02109. Brown &
Wood, One World Trade Center, New York, New York 10048-0557 will act as counsel
to any underwriters, dealers or agents.
EXPERTS
The Consolidated Financial Statements and Schedules of the Trust as of
December 31, 1992 and 1991 and for each of the years in the three year period
ended December 31, 1992 incorporated herein by reference have been incorporated
herein in reliance on the reports dated February 18, 1993, of Grant Thornton,
independent certified public accountants, also incorporated by reference
herein, and upon the authority of said firm as experts in accounting and
auditing. The statement of revenue and certain expenses of Crossroads Shopping
Center, included in the Trust's Current Report on Form 8-K, dated September 24,
1993, incorporated by reference herein, has been incorporated herein in
reliance on the report dated August 27, 1993, of Coopers & Lybrand, independent
certified public accountants, also incorporated by reference herein, and upon
the authority of said firm as experts in accounting and auditing. The
historical summaries of gross income and direct operating expenses of certain
properties included in the Trust's Current Report on Form 8-K, dated September
24, 1993, incorporated by reference herein, have been incorporated herein in
reliance on the reports dated September 9, 1993, of Stoy, Malone & Company,
P.C., independent certified public accountants, also incorporated by reference
herein, and upon the authority of said firm as experts in accounting and
auditing.
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