Filed Pursuant to Rule 424(B)(3)
Registration No. 333-97945
Registration No. 333-63619
The information in this prospectus supplement and the accompanying prospectus
is not complete and may be changed. This prospectus supplement and the
accompanying prospectus are not an offer to sell these securities and are
not soliciting an offer to buy these securities in any state where
the offer or sale is not permitted.
Subject to Completion
Preliminary Prospectus Supplement dated August 12, 2002
PROSPECTUS SUPPLEMENT
(To prospectus dated September 30, 1998)
$150,000,000
[LOGO] FEDERAL REALTY
INVESTMENT TRUST
% Notes due August , 2007
-----------------
We will pay interest on the notes on March and September of each year,
beginning March , 2003. Interest will accrue from August , 2002. We may
redeem the notes in whole or in part at any time before maturity at the
redemption price described in this prospectus supplement.
The notes will be unsecured obligations and rank equally with our other
unsecured senior indebtedness. The notes will be issued only in registered form
in denominations of $1,000.
Investing in our notes involves risks that are described in the "Risk
Factors" section beginning on page S-7 of this prospectus supplement and in our
Annual Report on Form 10-K for the year ended December 31, 2001.
-----------------
Per Note Total
-------- -----
Public offering price (1)........... % $
Underwriting discount............... % $
Proceeds, before expenses, to us (1) % $
(1) Plus accrued interest from August , 2002, if settlement occurs after
that date
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus supplement or the accompanying prospectus is truthful or
complete. Any representation to the contrary is a criminal offense.
The notes will be ready for delivery in book-entry form only through The
Depository Trust Company on or about August , 2002.
-----------------
Merrill Lynch & Co. Salomon Smith Barney Wachovia Securities
Commerzbank Securities
Banc of America Securities LLC
HVB Real Estate Capital
Fleet Securities, Inc.
PNC Capital Markets, Inc.
Wells Fargo Brokerage Services, LLC
-----------------
The date of this prospectus supplement is August , 2002.
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
Page
----
WHERE YOU CAN FIND MORE INFORMATION.............. S-1
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS S-2
PROSPECTUS SUPPLEMENT SUMMARY.................... S-3
RISK FACTORS..................................... S-7
SECOND QUARTER HIGHLIGHTS........................ S-7
USE OF PROCEEDS.................................. S-9
RATIOS OF EARNINGS TO FIXED CHARGES.............. S-9
CAPITALIZATION................................... S-10
SELECTED CONSOLIDATED FINANCIAL DATA............. S-11
DESCRIPTION OF NOTES............................. S-13
UNDERWRITING..................................... S-19
EXPERTS.......................................... S-20
LEGAL MATTERS.................................... S-20
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..................... 21
Federal Income Tax Considerations................ 22
Plan of Distribution............................. 23
Legal Opinions................................... 24
Experts.......................................... 24
-----------------
You should rely only on the information contained or incorporated by
reference in this prospectus supplement and the accompanying prospectus. We
have not, and the underwriters have not, authorized any other person to provide
you with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not, and the
underwriters are not, making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted. You should assume that
the information appearing in this prospectus supplement, the accompanying
prospectus and the documents incorporated by reference is accurate only as of
their respective dates. Our business, financial condition, results of
operations and prospects may have changed since those dates.
i
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports and other information with the
SEC. You may read and copy materials that we have filed with the SEC, including
the registration statement, at the following location:
Public Reference Room
450 Fifth Street, N.W.
Room 1024
Washington, DC 20549
You may obtain information on the operation of the SEC's Public Reference
Room by calling the SEC at (800) SEC-0330.
The SEC also maintains an Internet web site that contains reports, proxy
statements and other information regarding issuers, including us, who file
electronically with the SEC. The address of that site is www.sec.gov. Reports,
proxy statements and other information concerning Federal Realty Investment
Trust may also be inspected at the offices of the New York Stock Exchange,
which are located at 20 Broad Street, New York, NY 10005.
The SEC allows us to "incorporate by reference" the information we file with
it, which means that we can disclose important information to you by referring
you to another document filed separately with the SEC. The information
incorporated by reference is considered to be part of this prospectus
supplement and the accompanying prospectus, and information we file later with
the SEC will automatically update and supersede the information in this
prospectus supplement, the accompanying prospectus and any document we
previously filed with the SEC. In particular, the information appearing in the
accompanying prospectus under "Description of Common Shares" has been
superseded in its entirety, and the information appearing in the accompanying
prospectus under the caption "Federal Income Tax Considerations" has been
superseded in part, by information appearing in the filings listed below. We
incorporate by reference the filings listed below, which we have previously
filed with the SEC, and any future filings made with the SEC prior to the
termination of this offering under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934. All of these filings, which contain important
information about us, are considered a part of this prospectus supplement and
the accompanying prospectus.
The file number for each of the listed documents is 1-07533.
(1) Our Annual Report on Form 10-K for the fiscal year ended December 31,
2001.
(2) Our Quarterly Report on Form 10-Q for the quarter ended March 31, 2002.
(3) Our Quarterly Report on Form 10-Q for the quarter ended June 30, 2002.
(4) Our Current Reports on Form 8-K filed on the following dates:
. February 12, 2002;
. March 12, 2002;
. March 28, 2002;
. April 30, 2002.
. June 5, 2002;
. June 11, 2002; and
. August 12, 2002.
(5) Description of our common shares included in our Registration Statement
on Form 8-A/A filed on June 6, 2002.
(6) Description of our common share purchase rights included in our
Registration Statement on Form 8-A/A filed on March 11, 1999.
S-1
You may obtain copies of documents incorporated by reference in this
document, without charge, by writing us at the following address or calling us
at the telephone number listed below:
Andrew P. Blocher
Vice President, Investor Relations and Capital Markets
FEDERAL REALTY INVESTMENT TRUST
1626 E. Jefferson Street
Rockville, Maryland 20852
(301) 998-8100 or (800) 658-8980
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
We make forward-looking statements in this prospectus supplement and the
accompanying prospectus, and in documents that are incorporated by reference in
the prospectus supplement and the accompanying prospectus, that are subject to
risks and uncertainties. Forward-looking statements include information
concerning our possible or assumed future results of operations. Also,
statements including words such as "believes," "expects," "anticipates,"
"intends," "plans," "estimates," or similar expressions are forward-looking
statements. Many factors, some of which are discussed elsewhere in this
prospectus supplement and the accompanying prospectus and in the documents
incorporated by reference in the prospectus supplement and the accompanying
prospectus, could affect our future financial results and could cause actual
results to differ materially from those expressed in forward-looking statements
contained or incorporated by reference in this prospectus supplement and the
accompanying prospectus. Important factors that could cause actual results to
differ materially from current expectations reflected in the forward-looking
statements included and incorporated by reference in this prospectus supplement
and the accompanying prospectus include, among others, the risk factors
discussed in the filings made by us with the SEC that are identified above and
incorporated by reference in this prospectus supplement and the accompanying
prospectus.
Forward-looking statements are not guarantees of performance. They involve
risks, uncertainties and assumptions. Our future results and shareholder values
may differ materially from those expressed in these forward-looking statements.
Many of the factors that will determine these results and values are beyond our
ability to control or predict. For those statements, we claim the protection of
the safe harbor for forward-looking statements contained in the Private
Securities Litigation Reform Act of 1995.
S-2
PROSPECTUS SUPPLEMENT SUMMARY
The following is only a summary. It should be read together with the more
detailed information included elsewhere in this prospectus supplement and the
accompanying prospectus. In addition, important information is incorporated
by reference into this prospectus supplement and the accompanying prospectus.
The Trust
Federal Realty Investment Trust is an equity real estate investment trust
specializing in the ownership, management, development and redevelopment of
high quality retail and mixed-use properties. As of June 30, 2002, we own or
have an interest in 58 community and neighborhood shopping centers comprising
over 12 million square feet, primarily located in densely populated and
affluent communities throughout the Northeast and Mid-Atlantic United States.
In addition, we own 56 urban retail and mixed-use properties comprising over
2 million square feet located in strategic metropolitan markets across the
United States and one apartment complex.
We operate in a manner intended to qualify as a real estate investment trust
pursuant to provisions of the Internal Revenue Code. Our offices are located at
1626 East Jefferson Street, Rockville, Maryland 20852. Our telephone number is
(301) 998-8100 or (800) 658-8980.
Our Competitive Strengths
We believe that we distinguish ourselves from other owners and operators of
retail and mixed-use properties in a number of ways, including by our:
. Diverse tenant base. As of June 30, 2002, we had in excess of 2,100
tenants. No single tenant currently represents more than 2.6% of our
annualized base rent and our top 10 tenants as a group only represent
approximately 17% of our annualized base rent.
. Attractive locations with strong market demographics. Our core
portfolio is located in some of the nation's strongest markets which are
characterized by dense populations, affluent residents and limited land
available for the development of competing properties.
. Seasoned management team. Our senior management team is comprised of
executives with an average of approximately 14 years experience in the
management, redevelopment, leasing, acquisition and construction of real
estate.
Our Business and Growth Strategy
Our primary objective is to acquire and redevelop community and neighborhood
shopping centers that are anchored by supermarkets, drug stores or high-volume,
value-oriented retailers that provide consumer necessities. We evaluate each
investment opportunity on its individual merits, allocating capital to those
investments which we believe will contribute to increasing our cash flow over
both the short and long term. The cornerstones of our business strategy include
the following elements:
. Acquisition of older, well-located shopping centers and retail buildings
in densely populated and affluent areas with possibilities for enhancing
their operating performance through renovation, expansion,
reconfiguration and/or retenanting;
. Continual evaluation of our existing properties, including undeveloped
or underdeveloped portions of Santana Row and Bethesda Row, for
redevelopment, retenanting and expansion opportunities; and
. Identification and acquisition of opportunities to develop ground-up
grocery anchored shopping centers in and around our strongest existing
markets.
S-3
The Offering
All capitalized terms not defined herein have the meanings specified in
"Description of Notes" in this prospectus supplement or in "Description of Debt
Securities" in the accompanying prospectus. For a more complete description of
the terms of the notes specified in the following summary, see "Description of
Notes."
Securities Offered........ $150,000,000 aggregate
principal amount of %
Notes due August , 2007.
Maturity.................. The notes will mature on
August , 2007.
Interest Payment Dates.... Interest on the notes
will be payable
semi-annually in arrears
on March and September
of each year,
commencing March , 2003,
and at maturity.
Ranking................... The notes will rank pari
passu with all of our
other unsecured and
unsubordinated
indebtedness, except that
the notes will be
effectively subordinated
to the prior claims of
each secured mortgage
lender to any specific
property which secures
such lender's mortgage.
After giving effect to
the use of proceeds from
this offering, we will
have outstanding
approximately $291.8
million of secured
indebtedness
collateralized by 14
properties and
approximately $706.4
million of unsecured
indebtedness ranking pari
passu with the notes.
Use of Proceeds........... Our net proceeds from
this offering are
estimated to be $148.6
million after deducting
underwriting discounts
and estimated expenses of
this offering. We will
use these net proceeds
for the repayment of
outstanding indebtedness,
including amounts
outstanding under the
construction loan for the
Santana Row development
in San Jose, California,
and for other general
corporate purposes. See
"Use of Proceeds"
beginning on page S-9 for
more information.
Limitations on Incurrence The notes contain various
of Debt................. covenants, including the
following:
(1) we will not, and will
not permit any subsidiary
to, incur any Debt if,
immediately after giving
effect to the incurrence
of such Debt and the
application of the
proceeds thereof, the
aggregate principal
amount of all of our
outstanding Debt and our
subsidiaries on a
consolidated basis
determined in accordance
with generally accepted
accounting principles is
greater than 65% of the
sum of (without
duplication) (a) Total
Assets as of the end of
the calendar quarter
covered in our Annual
Report on Form 10-K or
Quarterly Report on Form
10-Q, as the case may be,
most recently filed with
the SEC (or, if such
filing is not permitted
under the Securities
Exchange Act of
S-4
1934, with the Trustee)
prior to the incurrence
of such additional Debt
and (b) 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
us or any subsidiary
since the end of such
calendar quarter,
including those proceeds
obtained in connection
with the incurrence of
such additional Debt;
(2) we will not, and will
not permit any subsidiary
to, incur any Debt
secured by any mortgage,
lien, charge, pledge,
encumbrance or security
interest of any kind upon
any of our or any of our
subsidiaries' property
if, immediately after
giving effect to the
incurrence of such Debt
and the application of
the proceeds thereof, the
aggregate principal
amount of all of our and
our subsidiaries'
outstanding Debt on a
consolidated basis which
is secured by any
mortgage, lien, charge,
pledge, encumbrance or
security interest on our
or our subsidiaries'
property is greater than
40% of the sum of
(without duplication) (a)
Total Assets as of the
end of the calendar
quarter covered in our
Annual Report on Form
10-K or Quarterly Report
on Form 10-Q, as the case
may be, most recently
filed with the SEC (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 (b)
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
us or any subsidiary
since the end of such
calendar quarter,
including those proceeds
obtained in connection
with the incurrence of
such additional Debt;
provided that for
purposes of this
limitation, the amount of
obligations under capital
leases shown as a
liability on our
consolidated balance
sheet shall be deducted
from Debt and from Total
Assets;
(3) we will not, and will
not permit any subsidiary
to, incur any Debt if the
ratio of Consolidated
Income Available for Debt
Service to the Annual
Debt Service Charge for
the four consecutive
fiscal quarters most
recently ended prior to
the date on which such
additional Debt is to be
incurred shall have been
less than 1.5 to 1, on an
unaudited pro forma basis
after giving effect
thereto and to the
application of the
proceeds therefrom and
calculated on the
assumption that (a) such
Debt and any other
S-5
Debt incurred by us and
our 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; (b) the repayment
or retirement of any
other Debt by us and our
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); (c)
in the case of Acquired
Debt (as defined below)
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 (d) in
the case of any
acquisition or
disposition by us or our
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; and
(4) we, together with our
subsidiaries, will
maintain an Unencumbered
Total Asset Value in an
amount not less than 125%
of the aggregate
outstanding principal
amount of all of our and
our subsidiaries'
unsecured Debt.
Optional Redemption....... The notes are redeemable
at any time at our
option, in whole or in
part, at a redemption
price equal to the
greater of (1) 100% of
the principal amount of
the notes being redeemed,
or (2) the sum of the
present values of the
remaining scheduled
payments of principal and
interest thereon
discounted to the
redemption date on a
semi-annual basis at the
Adjusted Treasury Rate
plus 25 basis points
plus, in each case,
accrued interest thereon
to the redemption date.
See "Description of
Notes--Optional
Redemption."
S-6
RISK FACTORS
Investing in the notes involves risks. As with other publicly traded
securities, the value of the notes will depend on various market conditions and
other factors which may change from time to time. In particular, the market
value of the notes may fluctuate depending on market interest rates relative to
the interest rate on the notes, the extent of investor interest in us, our
reputation and the reputation of REITs generally, and the market's perception
of our growth potential and the value of our assets. Specific factors which
could adversely affect our financial condition, our results of operations and
the market's perception of us and hence the market value of the notes include
the following:
. Our financial condition and results of operations are subject to all the
risks normally associated with the real estate industry, including risks
that we may be unable to renew leases or relet space at favorable rents
as leases expire, that new acquisitions and our development,
construction and renovation projects, including our Santana Row project,
may fail to perform as expected, that competition for acquisitions could
result in increased prices and, because real estate is illiquid, that we
may not be able to sell properties when appropriate.
. Our financial condition and results of operations are subject to the
risks normally associated with debt financing, including the possibility
of increases in interest rates that would result in increased interest
expense and the possibility that we will not be able to refinance our
debt on favorable terms.
. To qualify as a REIT, we have to distribute at least 90% of our net
taxable income, excluding net capital gains. Consequently, to fund
future growth and capital needs, we are dependent on third-party sources
of capital, including future debt and equity offerings. This capital may
not be available or may be available only on unfavorable terms.
. Our status as a REIT is dependent on compliance with complex tax rules
and regulations and various factual matters and circumstances that may
not be totally within our control. Our failure to qualify as a REIT
would likely have a significant adverse effect on the value of our
outstanding securities, including the notes.
. The success of our Santana Row development project in San Jose,
California, will depend on many factors which cannot be assured and are
not entirely within our control. These factors include among others, the
demand for retail and residential space, the cost of operations,
including utilities and insurance, the availability and cost of capital
and the general economy, particularly in the Silicon Valley market.
For additional information about the foregoing risks and additional risk
factors relevant to an investment in the notes, we refer you to the section
captioned "Risk Factors" in our Annual Report on Form 10-K for the year ended
December 31, 2001, which is incorporated by reference into this prospectus
supplement.
SECOND QUARTER HIGHLIGHTS
2002 Second Quarter Results of Operations
Financial Results. On August 12, 2002, we announced our results of
operations for the quarter ended June 30, 2002. For the quarter ended June 30,
2002, our funds from operations, or "FFO," were $27.7 million, or $0.66 per
diluted share. This compares to $27.3 million or $0.68 per diluted share
reported for the same period in the prior year.
Portfolio Results. Our rental income for the quarter ended June 30, 2002
(which excludes income from properties sold during the quarter) was $71.5
million. This represents an increase of 6.4% over the $67.2
S-7
million reported for the same period in the prior year. On a same-center basis,
which excludes the impact of properties acquired, developed or sold during the
analyzed periods, rental income increased 2.8% from $66.5 million to $68.4
million and net operating income increased 5.4% from $49.3 million to $52.0
million.
At June 30, 2002, our occupancy improved to 95.9%, compared to 95.6% at June
30, 2001 and 95.5% at March 31, 2002. During the second quarter, we signed
leases for over 440,000 square feet of retail space. On a comparable retail
space basis, we leased over 416,000 square feet at an average increase in rent
per square foot of 12%. The weighted-average new rent on these same space
leases was $18.52 per square foot compared to the previous average rent of
$16.51 per square foot.
Santana Row Update
Santana Row is our multi-phase, mixed-use project being built on 42 acres in
San Jose, California in the heart of Silicon Valley. Phase I of the project
includes Santana Row, the "1,500 foot long main street" and nine buildings
which will contain approximately 538,000 square feet of retail space, 501
residential units (comprised of lofts, townhomes, executive villas and
traditional apartments), a boutique hotel with approximately 214 guest rooms
and the supporting infrastructure. Crate & Barrel, a 40,000 square foot anchor
tenant, opened its Santana Row location on June 27, 2002. The other Phase I
retail space at Santana Row is scheduled to begin opening on September 19, 2002.
As of July 31, 2002 the retail leasing status of the Santana Row project was
as follows:
Santana Row Retail Leasing Status
-------------------------------------------------------------
Percentage of Available Retail Percentage of First Floor "Main
Square Footage Street" Square Footage
------------------------------ -------------------------------
Leased.................... 56% 88%
Executed Letters of Intent 19% 7%
-- -
Total.................. 75% 95%
== ==
We estimate the total cost of Phase I of Santana Row to be $500 million,
which includes the acquisition and infrastructure costs for 19 acres of
undeveloped land on which we have entitlements to build an additional 700
residential units and approximately 150,000 square feet of additional retail
space. As of July 31, 2002, costs of approximately $329 million have been
funded. We expect to fund the remaining $171 million cost-to-complete from the
remaining $144 million of undrawn capacity under our Santana Row construction
loan and with unused capacity under our $300 million line of credit.
We have not determined the scope of future phases of Santana Row and will
not do so until the success of Phase I and future demand for retail and
residential space is determined. However, as Phase I utilizes only part of the
retail and residential entitlements of the property, and as Phase I contains
infrastructure for future phases, we expect to identify and execute
economically viable additional phases to the project. Future phases will be
smaller in scope and will compete for our capital with other investment
opportunities that are consistent with our business strategy.
Recent Appointments to Our Board of Trustees
On July 25, 2002, we announced the nomination and appointment of Amy Lane
and Joseph Vassalluzzo to serve on our Board of Trustees. Prior to retiring in
February 2002, Ms. Lane, 49, spent twenty-five years in investment banking
focusing principally on the retail industry. At her retirement, Ms. Lane had
been a managing director since 1997 at Merrill Lynch, Pierce, Fenner & Smith
Incorporated, where she led Merrill Lynch's Global Retail Investment Banking
Group from 1997 to 2002 and was a member of Merrill Lynch's Investment Banking
Management Committee and Investment Banking Promotions Committee. Previously
she worked at Salomon Smith Barney Inc. and Morgan Stanley & Co. Incorporated.
Ms. Lane is a member of the Compensation Committee of our Board of Trustees.
S-8
Mr. Vassalluzzo, 54, has been an executive at Staples, Inc. since 1989 and
has served as its vice chairman since 2002. As vice chairman he oversees the
domestic and foreign real estate growth of Staples' retail and commercial
operations, merger and acquisition activities, and legal functions. Previously,
Mr. Vassalluzzo served as the President of Staples' Realty and Development
Division where he was responsible for Staples' expansion from 30 to over 1,250
retail stores in North America and over 180 retail stores in the United
Kingdom, Germany, the Netherlands and Portugal. Mr. Vassalluzzo is a member of
the Audit Committee of our Board of Trustees.
Sale of 2.2 Million Common Shares
In June we sold 2.2 million common shares through a public offering. Net
proceeds of approximately $56.6 million were used to repay amounts outstanding
under our $300 million line of credit. We expect to reborrow such amounts from
time to time for the redevelopment of existing properties within our portfolio,
the acquisition of retail properties consistent with our business strategy and
other general corporate purposes including the retirement of debt.
USE OF PROCEEDS
The net proceeds to us from the sale of the notes offered hereby are
estimated to be $148.6 million. We will use these net proceeds for the
repayment of outstanding indebtedness, including amounts outstanding under the
construction loan for the Santana Row development in San Jose, California, and
for other general corporate purposes.
RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth our consolidated ratios of earnings to fixed
charges and our ratios of earnings to combined fixed charges and preferred
stock dividends for the periods shown:
Six Months Ended
Year Ended December 31, June 30,
------------------------ -------------
1997 1998 1999 2000 2001 2001 2002
---- ---- ---- ---- ---- ---- -----
Ratio of earnings to fixed charges....................... 1.7x 1.7x 1.7x 1.5x 1.5x 1.5x 1.2x (1)
Ratio of earnings to combined fixed charges and preferred
share dividends........................................ 1.6x 1.5x 1.5x 1.4x 1.3x 1.4x 1.1x (1)
(1) Excluding a one-time $8.5 million restructuring charge incurred in the
first quarter of 2002, for the six months ended June 30, 2002, the ratio of
earnings to fixed charges would have been 1.4x, and the ratio of earnings to
combined fixed charges and preferred share dividends would have been 1.2x.
The ratios of earnings to fixed charges were computed by dividing earnings
by fixed charges. For this purpose, earnings consist of income before gain
(loss) on sale of real estate plus fixed charges. Fixed charges consist of
interest on borrowed funds (including capitalized interest), amortization of
debt discount and expense and the portion of rent expense representing an
interest factor. The ratios of earnings to combined fixed charges and preferred
stock dividends were computed by dividing earnings by the sum of fixed charges
and preferred stock dividend requirements.
S-9
CAPITALIZATION
The following table sets forth our unaudited historical capitalization as of
June 30, 2002, and on an as adjusted basis to give effect to the completion of
this offering and the use of the net proceeds from this offering.
June 30, 2002
----------------------
Historical As Adjusted
---------- -----------
- (in thousands)
Debt (including obligations under capital leases):
Obligations under capital leases...................... $ 104,513 $ 104,513
Mortgages and construction loans payable.............. 419,634 271,034
Notes payable......................................... 171,374 171,374
Senior notes and debentures........................... 385,000 385,000
5.25% Convertible subordinated debentures............. 75,000 75,000
% Notes due August , 2007......................... -- 150,000
---------- ----------
Total debt........................................ 1,155,521 1,156,921
---------- ----------
Investors' interest in consolidated assets............... 31,045 31,045
Shareholders' equity:
7.95% Series A Cumulative Redeemable Preferred Shares. 100,000 100,000
8.5% Series B Cumulative Redeemable Preferred Shares.. 135,000 135,000
Common shares of beneficial interest, $0.01 par....... 447 447
Additional paid in capital............................ 809,535 809,535
Accumulated dividends in excess of Trust net income... (338,292) (338,292)
Less: Treasury shares and other....................... (53,631) (53,631)
---------- ----------
Total shareholders' equity........................ 653,059 653,059
---------- ----------
Total capitalization........................... $1,839,625 $1,841,025
========== ==========
S-10
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth our selected consolidated financial data and
should be read in conjunction with the consolidated financial statements and
notes incorporated by reference in the accompanying prospectus. Our selected
operating, other and balance sheet data for the years ended December 31, 2001,
2000 and 1999 and for the periods then ended have been derived from financial
statements audited by Arthur Andersen LLP, independent accountants. Our
selected operating, other and balance sheet data for the years ended December
31, 1998 and 1997 and for the periods then ended have been derived from
financial statements audited by Grant Thornton LLP, independent accountants.
Our selected operating, other and balance sheet data for the years 1997 through
2001 have been reclassified to conform to the presentation in 2002 as they
relate to income from operations of discontinued assets and the presentation of
tax loans receivable issued in connection with employee stock plans as
contra-equity. The unaudited financial data for the six months ended June 30,
2002 and 2001 include all adjustments, consisting of normal recurring accruals,
which we consider necessary for the fair presentation of our financial position
and the results of operations for such period. The results for the six-month
period may not be indicative of the results to be expected for the full year.
Six months ended
June 30, Year ended December 31,
------------------ ------------------------------------------------
(in thousands, except ratio
information and per share data) 2002 2001 2001 2000 1999 1998
------------------------------- -------- -------- -------- -------- -------- --------
Operating Data:
Revenues
Rental income............................. $141,965 $132,998 $274,567 $255,634 $241,356 $218,062
Other property income..................... 6,981 5,897 13,953 11,023 11,203 10,261
Interest and other income................. 2,118 3,597 6,590 7,532 7,649 5,936
-------- -------- -------- -------- -------- --------
151,064 142,492 295,110 274,189 260,208 234,259
Expenses
Interest.................................. 31,773 34,680 69,313 66,418 61,492 55,125
Depreciation and amortization............. 31,752 28,595 59,171 52,559 49,359 45,435
Property expenses......................... 47,004 43,117 91,063 81,842 77,715 71,887
General, administrative and other (1)..... 14,985 6,455 14,281 13,318 15,120 16,461
-------- -------- -------- -------- -------- --------
125,514 112,847 233,828 214,137 203,686 188,908
-------- -------- -------- -------- -------- --------
Income before investors' share of operations
and gain (loss) on sale of real estate..... 25,550 29,645 61,282 60,052 56,522 45,351
Investors' share of operations.............. (2,276) (2,806) (5,170) (6,544) (3,899) (3,124)
-------- -------- -------- -------- -------- --------
Income before gain (loss) on sale of real
estate and discontinued operations......... 23,274 26,839 56,112 53,508 52,623 42,227
Income from operations of discontinued
assets..................................... 1,276 1,663 3,459 3,334 2,870 2,733
-------- -------- -------- -------- -------- --------
Income before gain (loss) of sale of real
estate..................................... 24,550 28,502 59,571 56,842 55,493 44,960
Gain (loss) on sale of real estate.......... 9,454 7,898 9,185 3,681 (7,050) --
-------- -------- -------- -------- -------- --------
Net income.................................. 34,004 36,400 68,756 60,523 48,443 44,960
Dividends on preferred stock................ (9,712) (3,975) (9,034) (7,950) (7,950) (7,950)
-------- -------- -------- -------- -------- --------
Net income available for common
shareholders............................... $ 24,292 $ 32,425 $ 59,722 $ 52,573 $ 40,493 $ 37,010
======== ======== ======== ======== ======== ========
Weighted average shares
Basic..................................... 40,286 38,908 39,164 38,796 39,574 39,174
Diluted................................... 41,568 39,946 40,266 39,910 40,638 40,080
Distributions declared on common shares..... $ 40,155 $ 37,402 $ 75,863 $ 72,512 $ 71,630 $ 69,512
Distributions declared per common share..... $ .96 $ .94 $ 1.90 $ 1.84 $ 1.78 $ 1.74
Other Data:
Net cash provided by operating activities
(2)........................................ $ 64,256 $ 58,037 $108,545 $106,146 $102,183 $ 90,427
Net cash provided by (used in) financing
activities (2)............................. $ 60,518 $ 86,762 $129,799 $ 15,214 $ (8,362) $ 97,406
Net cash used in investing activities (2)... $123,614 $124,681 $232,138 $121,741 $ 99,313 $187,646
Funds from operations (3)................... $ 46,781 $ 53,638 $110,432 $102,173 $ 96,795 $ 86,536
Ratio of earnings to fixed charges (4)(5)... 1.2x 1.5x 1.5x 1.5x 1.7x 1.7x
Ratio of earnings to combined fixed
charges and preferred dividends (4)(6)..... 1.1x 1.4x 1.3x 1.4x 1.5x 1.5x
Ratio of funds from operations to combined
fixed charges and preferred dividends
(3)(4)(7).................................. 1.4x 1.9x 1.9x 2.0x 2.2x 2.2x
(in thousands, except ratio
information and per share data) 1997
------------------------------- --------
Operating Data:
Revenues
Rental income............................. $185,770
Other property income..................... 9,697
Interest and other income................. 6,036
--------
201,503
Expenses
Interest.................................. 47,288
Depreciation and amortization............. 40,966
Property expenses......................... 61,901
General, administrative and other (1)..... 11,744
--------
161,899
--------
Income before investors' share of operations
and gain (loss) on sale of real estate..... 39,604
Investors' share of operations.............. (1,342)
--------
Income before gain (loss) on sale of real
estate and discontinued operations......... 38,262
Income from operations of discontinued
assets..................................... 1,867
--------
Income before gain (loss) of sale of real
estate..................................... 40,129
Gain (loss) on sale of real estate.......... 6,375
--------
Net income.................................. 46,504
Dividends on preferred stock................ (1,877)
--------
Net income available for common
shareholders............................... $ 44,627
========
Weighted average shares
Basic..................................... 38,475
Diluted................................... 38,988
Distributions declared on common shares..... $ 66,636
Distributions declared per common share..... $ 1.70
Other Data:
Net cash provided by operating activities
(2)........................................ $ 72,170
Net cash provided by (used in) financing
activities (2)............................. $213,175
Net cash used in investing activities (2)... $279,343
Funds from operations (3)................... $ 79,733
Ratio of earnings to fixed charges (4)(5)... 1.7x
Ratio of earnings to combined fixed
charges and preferred dividends (4)(6)..... 1.6x
Ratio of funds from operations to combined
fixed charges and preferred dividends
(3)(4)(7).................................. 2.5x
(table continued on following page)
S-11
Six months ended
June 30 Year ended December 31,
--------------------- ------------------------------------------------------
(in thousands, except ratio
information and per share data) 2002 2001 2001 2000 1999 1998 1997
------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Balance Sheet Data:
Real estate assets, at cost........ $2,180,660 $1,981,002 $2,104,304 $1,854,913 $1,721,459 $1,642,136 $1,453,639
Total assets....................... $1,946,905 $1,732,046 $1,834,881 $1,618,885 $1,532,764 $1,483,170 $1,315,383
Total debt (8)..................... $1,155,521 $1,140,493 $1,110,468 $1,034,446 $ 920,630 $ 846,928 $ 670,890
Total liabilities.................. $1,293,846 $1,261,508 $1,245,590 $1,153,425 $1,032,221 $ 954,370 $ 762,763
Redeemable preferred shares........ $ 235,000 $ 100,000 $ 235,000 $ 100,000 $ 100,000 $ 100,000 $ 100,000
Shareholders' equity............... $ 653,059 $ 470,538 $ 589,291 $ 465,460 $ 500,543 $ 528,800 $ 552,620
Number of common shares outstanding 43,188 39,974 40,071 39,469 40,201 40,080 39,148
--------
(1) General, administrative, and other expenses includes $8.5 million of
restructuring costs in the six months ended June 30, 2002, $2.8 million of
costs related to an unconsummated merger in 1999 and $4.7 million of
restructuring costs in 1998.
(2) Determined in accordance with Financial Accounting Standards Board
Statement No. 95. See Consolidated Statements of Cash Flows incorporated by
reference in this prospectus supplement.
(3) The Trust has historically reported its funds from operations in addition
to its net income and net cash provided by operating activities. FFO is a
supplemental measure of real estate companies' operating performance. Since
January 1, 2000, the National Association of Real Estate Investment Trusts
(NAREIT) has defined FFO as income available for common shareholders before
depreciation and amortization of real estate assets and before
extraordinary items less gains (losses) on sale of real estate. Prior to
January 1, 2000, FFO also excluded significant nonrecurring events. FFO
does not replace net income as a measure of performance or net cash
provided by operating activities as a measure of liquidity. Rather, FFO has
been adopted by real estate investment trusts to provide a consistent
measure of operating performance in the industry. Nevertheless, FFO, as
presented by the Trust, may not be comparable to FFO as presented by other
real estate investment trusts.
(4) For purposes of computing these ratios, earnings consist of income before
gain (loss) on sale of real estate plus fixed charges. 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.
(5) Excluding a one-time $8.5 million restructuring charge incurred in the
first quarter of 2002, for the six months ended June 30, 2002, the ratio of
earnings to fixed charges would have been 1.4x.
(6) Excluding a one-time $8.5 million restructuring charge incurred in the
first quarter of 2002, for the six months ended June 30, 2002, the ratio of
earnings to combined fixed charges and preferred share dividends would have
been 1.2x.
(7) Excluding a one-time $8.5 million restructuring charge incurred in the
first quarter of 2002, for the six months ended June 30, 2002, the ratio of
FFO to combined fixed charges and preferred share dividends would have been
1.5x.
(8) Includes obligations under capital leases.
S-12
DESCRIPTION OF NOTES
The following description of the particular terms of the notes offered
hereby supplements the description of the general terms and provisions of Debt
Securities set forth in the accompanying prospectus under the caption
"Description of Debt Securities." Certain terms used herein are defined in that
section of the accompanying prospectus.
General
We are offering $150 million of our % notes maturing on August , 2007.
The notes are to be issued as a separate series of Debt Securities under the
Senior Indenture, which is more fully described in the accompanying prospectus.
We will pay interest on the notes semi-annually in arrears on March and
September of each year, commencing March , 2003, to the registered holders
of the notes on the preceding or .
The defeasance and covenant defeasance provisions of the Senior Indenture
apply to the notes.
Optional Redemption
We may redeem the notes at any time in whole or from time to time in part at
a redemption price equal to the greater of (1) 100% of the principal amount of
the notes being redeemed, or (2) as determined by the Quotation Agent (as
defined below), the sum of the present values of the remaining scheduled
payments of principal and interest thereon (not including any portion of such
payments of interest accrued as of the redemption date) discounted to the
redemption date on a semi-annual basis (assuming a 360-day year consisting of
twelve 30-day months) at the Adjusted Treasury Rate (as defined below) plus 25
basis points plus, in each case, accrued interest thereon to the redemption
date.
As used herein:
"Adjusted Treasury Rate" means, with respect to any redemption date, the
rate per year equal to the semi-annual equivalent yield to maturity of the
Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for such redemption date.
"Comparable Treasury Issue" means the United States Treasury security
selected by the Quotation Agent as having a maturity comparable to the
remaining term of the notes to be redeemed that would be utilized, at the time
of selection and in accordance with customary financial practice, in pricing
new issues of corporate debt securities of comparable maturity to the remaining
term of such notes.
"Comparable Treasury Price" means, with respect to any redemption date, (1)
the average of the Reference Treasury Dealer Quotations for such redemption
date, after excluding the highest and lowest such Reference Treasury Dealer
Quotations, or (2) if the Trustee obtains fewer than three such Reference
Treasury Dealer Quotations, the average of all such Quotations.
"Quotation Agent" means the Reference Treasury Dealer appointed by us.
"Reference Treasury Dealer" means (1) each of Merrill Lynch, Pierce, Fenner
& Smith Incorporated, Salomon Smith Barney Inc. and Wachovia Securities, Inc.
and their respective successors; provided, however, that if any of the
foregoing cease to be a primary U.S. Government securities dealer (a "Primary
Treasury Dealer"), we will substitute therefor another Primary Treasury Dealer;
and (2) any other Primary Treasury Dealer selected by us.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any redemption date, the average, as determined
by us, of the bid and asked prices for the Comparable Treasury Issue (expressed
in each case as a percentage of its principal amount) quoted in writing to the
Trustee by such Reference Treasury Dealer at 5:00 p.m., New York City time, on
the third Business Day preceding such redemption date.
S-13
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each holder of the notes to be redeemed.
Unless we default in payment of the redemption price, on and after the
redemption date, interest will cease to accrue on the notes or portions thereof
called for redemption.
Covenants
Limitations on Incurrence of Debt. The notes will provide that we 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 of
our outstanding Debt and our subsidiaries on a consolidated basis determined in
accordance with generally accepted accounting principles is greater than 65% of
the sum of (without duplication) (1) Total Assets (as defined below) as of the
end of the calendar quarter covered in our Annual Report on Form 10-K or
Quarterly Report on Form 10-Q, as the case may be, most recently filed with the
SEC (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 (2)
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 us 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 we will not, and will not permit any subsidiary to, incur any
Debt secured by any mortgage, lien, charge, pledge, encumbrance or security
interest of any kind upon any of our or any of our subsidiary's property if,
immediately after giving effect to the incurrence of such Debt and the
application of the proceeds thereof, the aggregate principal amount of all of
our and our subsidiaries' outstanding Debt on a consolidated basis which is
secured by any mortgage, lien, charge, pledge, encumbrance or security interest
on our or our subsidiaries' property is greater than 40% of the sum of (without
duplication) (1) Total Assets as of the end of the calendar quarter covered in
our Annual Report on Form 10-K or Quarterly Report on Form 10-Q, as the case
may be, most recently filed with the SEC (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 (2) 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 us or any subsidiary since the end of such calendar quarter,
including those proceeds obtained in connection with the incurrence of such
additional Debt; provided that for purposes of this limitation, the amount of
obligations under capital leases shown as a liability on our consolidated
balance sheet shall be deducted from Debt and from Total Assets.
Furthermore, the notes also will provide that we 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 1.5 to 1, on an unaudited pro forma basis after giving effect
thereto and to the application of the proceeds therefrom, and calculated on the
assumption that (1) such Debt and any other Debt incurred by us and our
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; (2) the repayment or retirement of
any other Debt by us and our 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); (3) in the case of Acquired Debt (as
defined below) 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
(4) in the case of any acquisition or disposition by us or our 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-14
Maintenance of Unencumbered Total Asset Value. The notes will provide that
we, together with our subsidiaries, will at all times maintain an Unencumbered
Total Asset Value (as defined below) in an amount not less than 125% of the
aggregate outstanding principal amount of all our and our subsidiaries'
unsecured Debt.
As used herein,
"Acquired Debt" means Debt of a Person (1) existing at the time such
Person becomes a subsidiary or (2) assumed in connection with the acquisition
of assets from such Person, in each case, other than Debt 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, our
and our subsidiaries' Debt and the amount of dividends which are payable in
respect of any Disqualified Stock.
"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" for any period means our
and our subsidiaries' Funds from Operations plus amounts which have been
deducted for interest on our and our subsidiaries' Debt.
"Debt" means any of our or any of our subsidiaries' indebtedness, whether
or not contingent, in respect of (without duplication) (1) borrowed money or
evidenced by bonds, notes, debentures or similar instruments, (2) indebtedness
secured by any mortgage, pledge, lien, charge, encumbrance or any security
interest existing on property owned by us or any subsidiary, (3) 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, (4) the principal amount of all of our or any of our subsidiaries'
obligations with respect to redemption, repayment or other repurchase of any
Disqualified Stock or (5) any lease of property by us or any subsidiary as
lessee which is reflected on our 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 (1) through (3) above, that
any such items (other than letters of credit) would appear as a liability on
our consolidated balance sheet in accordance with generally accepted accounting
principles, and also includes, to the extent not otherwise included, any
obligation of us 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 we are a party and have
assigned our interest, provided that such assignee of ours is not in default of
any amounts due and owing under such leases), Debt of another Person (other
than us or any subsidiary) (it being understood that Debt shall be deemed to be
incurred by us or any subsidiary whenever we 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 which it is exchangeable or
exercisable), upon the happening of any event or otherwise (1) matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, (2)
is convertible into or exchangeable or exercisable for Debt or Disqualified
Stock or (3) 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.
S-15
"Total Assets" as of any date means the sum of (1) our and all of our
subsidiaries' Undepreciated Real Estate Assets and (2) all of our and all of
our subsidiaries' other assets 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 our and our subsidiaries' real estate assets
on such date, before depreciation and amortization determined on a consolidated
basis in accordance with generally accepted accounting principles.
"Unencumbered Total Asset Value" as of any date means the sum of (a) those
Undepreciated Real Estate Assets not encumbered by any mortgage, lien, charge,
pledge or security interest and (b) all of our and our subsidiaries' other
assets on a consolidated basis determined in accordance with generally accepted
accounting principals (but excluding intangibles and accounts receivable), in
each case which are unencumbered by any mortgage, lien, charge, pledge or
security interest.
See "Description of Debt Securities--Certain Covenants" in the accompanying
prospectus for a description of additional covenants applicable to us.
Book-Entry Form
We have established a depositary arrangement with The Depository Trust
Company (the "Depositary") with respect to the notes, the terms of which are
summarized below. Upon issuance, the notes will be represented by a single
Global Security and will be deposited with, or on behalf of, the Depositary and
will be registered in the name of the Depositary or a nominee of the
Depositary. No Global Security may be transferred except as a whole by a
nominee of the Depositary to the Depositary or to another nominee of the
Depositary, or by the Depositary or such nominee to a successor of the
Depositary or a nominee of such successor.
So long as the Depositary or its nominee is the registered owner of a Global
Security, the Depositary or its nominee, as the case may be, will be the sole
Holder of the notes for all purposes under the Senior Indenture. Except as
otherwise provided in this section, the Beneficial Owners of the Global
Security or Securities representing the notes will not be entitled to receive
physical delivery of Certificated notes and will not be considered the Holders
thereof for any purpose under the Senior Indenture, and no Global Security
representing the notes shall be exchangeable or transferable. Accordingly, each
Beneficial Owner must rely on the procedures of the Depositary and, if such
Beneficial Owner is not a Participant (as defined below), on the procedures of
the Participant through which such Beneficial Owner owns its interest in order
to exercise any rights of a Holder under such Global Security or the Senior
Indenture. The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of such securities in certificated form. Such
laws may impair the ability to transfer beneficial interests in a Global
Security representing the notes.
The Global Security representing the notes will be exchangeable for
Certificated Notes of like tenor and terms and of differing authorized
denominations aggregating a like principal amount, only if (1) the Depositary
notifies us that it is unwilling or unable to continue as Depositary for the
Global Securities or the Depositary ceases to be a clearing agency registered
under the Exchange Act (if so required by applicable law or regulation) and, in
each case, a successor Depositary is not appointed by us within 90 days after
we receive such notice or become aware of such unwillingness, inability or
ineligibility, (2) we, in our discretion, determine that the Global Security
shall be exchangeable for Certificated Notes or (3) there shall have occurred
and be continuing an Event of Default under the Senior Indenture with respect
to the notes and Beneficial Owners representing a majority in aggregate
principal amount of the notes represented by the Global Security advise the
Depositary to cease acting as depositary. Upon any such exchange, the
Certificated Notes shall be registered in the names of the Beneficial Owners of
the Global Security representing the notes, which names shall be provided by
the Depositary's relevant Participants (as identified by the Depositary) to the
Securities Registrar.
The information below concerning the Depositary and the Depositary's system
has been furnished by the Depositary, and we take no responsibility for the
accuracy thereof. The Depositary will act as securities depository for the
notes. The notes will be issued as fully registered securities registered in
the name of Cede &
S-16
Co. (the Depositary's partnership nominee). One fully registered Global
Security will be issued for the notes, in the aggregate principal amount of
such issue, and will be deposited with the Depositary.
The Depositary 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 Exchange
Act. The Depositary holds securities that its participants ("Participants")
deposit with the Depositary. The Depositary 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 of the Depositary ("Direct
Participants") include securities brokers and dealers, banks, trust companies,
clearing corporations and certain other organizations. The Depositary 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 Depositary's 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 ("Indirect Participants"). The rules applicable
to the Depositary and its Participants are on file with the SEC.
Purchases of notes under the Depositary's system must be made by or through
Direct Participants, which will receive a credit for such notes on the
Depositary's records. The ownership interest of each actual purchaser of each
note represented by a Global Security ("Beneficial Owner") is in turn to be
recorded on the Direct Participants' and Indirect Participants' records.
Beneficial Owners will not receive written confirmation from the Depositary of
their purchase, but Beneficial Owners are expected to receive written
confirmations providing details of the transaction, as well as periodic
statements of their holdings, from the Direct Participants or Indirect
Participants through which such Beneficial Owner entered into the transaction.
Transfers of ownership interests in a Global Security representing the notes
are to be accomplished by entries made on the books of Participants acting on
behalf of Beneficial Owners. Beneficial Owners of a Global Security
representing the notes will not receive Certificated Notes representing their
ownership interests therein, except in the event that use of the book-entry
system for such notes is discontinued.
To facilitate subsequent transfers, the Global Security representing the
notes which are deposited with, or on behalf of, the Depositary are registered
in the name of the Depositary's partnership nominee, Cede & Co. The deposit of
the Global Security with, or on behalf of, the Depositary and their
registration in the name of Cede & Co. effect no change in beneficial
ownership. The Depositary has no knowledge of the actual Beneficial Owners of
the Global Security representing the notes; the Depositary's records reflect
only the identity of the Direct Participants to whose accounts such notes are
credited, which may or may not be the Beneficial Owners. The Participants will
remain responsible for keeping account of their holdings on behalf of their
customers.
Conveyance of notices and other communications by the Depositary to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
Neither the Depositary nor Cede & Co. will consent or vote with respect to
the Global Security representing the notes. Under its usual procedures, the
Depositary mails an Omnibus Proxy to us as soon as possible after the
applicable record date. The Omnibus Proxy assigns Cede & Co.'s consenting or
voting rights to those Direct Participants to whose accounts the notes are
credited on the applicable record date (identified in a listing attached to the
Omnibus Proxy).
Principal, premium, if any, and/or interest payments on the Global Security
representing the notes will be made to the Depositary. The Depositary's
practice is to credit Direct Participants' accounts on the applicable payment
date in accordance with their respective holdings shown on the Depositary's
records unless the Depositary has reason to believe that it will not receive
payment on such date. Payments by Participants to
S-17
Beneficial Owners will be governed by standing instructions and customary
practices, as is the case with securities held for the accounts of customers in
bearer form or registered in "street name," and will be the responsibility of
such Participant and not of the Depositary, the Trustee or us, subject to any
statutory or regulatory requirements as may be in effect from time to time.
Payment of principal, premium, if any, and/or interest to the Depositary is the
responsibility of us or the Paying Agent, disbursement of such payments to
Direct Participants shall be the responsibility of the Depositary, and
disbursement of such payments to the Beneficial Owners shall be the
responsibility of Direct Participants and Indirect Participants.
If applicable, redemption notices shall be sent to Cede & Co. If less than
all of the notes within an issue are being redeemed, the Depositary's practice
is to determine by lot the amount of the interest of each Direct Participant in
such issue to be redeemed.
The Depositary may discontinue providing its services as securities
depository with respect to the notes at any time by giving reasonable notice to
us or the Trustee. Under such circumstances, in the event that a successor
securities depository is not obtained, Certificated Notes are required to be
printed and delivered. We may decide to discontinue use of the system of
book-entry transfers through the Depositary (or a successor securities
depository). In that event, Certificated Notes will be printed and delivered.
S-18
UNDERWRITING
We intend to offer the notes through the underwriters named below. Subject
to the terms and conditions contained in an underwriting agreement and the
related pricing agreement between us and the underwriters, we have agreed to
sell to the underwriters, and the underwriters severally have agreed to
purchase from us, the principal amount of the notes listed opposite their names
below.
Principal
Underwriter Amount
----------- ------
Merrill Lynch, Pierce, Fenner & Smith
Incorporated............................. $
Salomon Smith Barney Inc............................
Wachovia Securities, Inc............................
Commerzbank Capital Markets Corp....................
Banc of America Securities LLC......................
Bayerische Hypo- und Vereinsbank AG, New York Branch
Fleet Securities, Inc...............................
PNC Capital Markets, Inc............................
Wells Fargo Brokerage Services, LLC.................
------------
Total.................................... $150,000,000
============
The underwriters have agreed to purchase all of the notes sold pursuant to
the underwriting agreement if any of these notes are purchased. If an
underwriter defaults, the underwriting agreement provides that the purchase
commitments of the nondefaulting underwriters may be increased or the
underwriting agreement may be terminated.
We have agreed to indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act of 1933, as amended, or to
contribute to payments the underwriters may be required to make in respect of
those liabilities.
The underwriters are offering the notes, subject to prior sale, when, as and
if issued to and accepted by them, subject to approval of legal matters by
their counsel, including the validity of the notes, and other conditions
contained in the underwriting agreement, such as the receipt by the
underwriters of officers' certificates and legal opinions. The underwriters
reserve the right to withdraw, cancel or modify offers to the public and to
reject orders in whole or in part.
Commissions and Discounts
The underwriters have advised us that they propose initially to offer the
notes to the public at the public offering price on the cover page of this
prospectus supplement, and to dealers at that price less a concession not in
excess of % of the principal amount of the notes to other dealers. The
underwriters may allow, and the dealers may reallow, a discount not in excess
of % of the principal amount of the notes to other dealers. After the initial
public offering, the public offering price, concession and discount may be
changed.
The expenses of the offering, not including the underwriting discount, are
estimated to be $500,000 and are payable by us.
New Issue of Notes
The notes are a new issue of securities with no established trading market.
We do not intend to apply for listing of the notes on any national securities
exchange or for quotation of the notes on any automated dealer quotation
system. We have been advised by the underwriters that they presently intend to
make a market in the notes after completion of the offering. However, they are
under no obligation to do so and may discontinue any market-making activities
at any time without any notice. We cannot assure the liquidity of the trading
market for the notes or that an active public market for the notes will
develop. If an active public trading market for the notes does not develop, the
market price and liquidity of the notes may be adversely affected.
S-19
Price Stabilization and Short Positions
In connection with the offering, the underwriters are permitted to engage in
transactions that stabilize the market price of the notes. Such transactions
consist of bids or purchases to peg, fix or maintain the price of the notes. If
the underwriters create a short position in the notes in connection with the
offering, i.e., if they sell more notes than are on the cover page of this
prospectus supplement, the underwriters may reduce that short position by
purchasing notes in the open market. Purchases of a security to stabilize the
price or to reduce a short position could cause the price of the security to be
higher than it might be in the absence of such purchases.
Neither we nor any of the underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the notes. In addition, neither we nor
any of the underwriters makes any representation that the underwriters will
engage in these transactions or that these transactions, once commenced, will
not be discontinued without notice.
Other Relationships
Some of the underwriters and their affiliates have engaged in, and may in
the future engage in, investment banking and other commercial dealings in the
ordinary course of business with us. They have received customary fees and
commissions for these transactions. Wachovia Bank, National Association, an
affiliate of Wachovia Securities, Inc., acts as lead arranger and
administrative agent under our credit facility.
EXPERTS
The consolidated financial statements and schedules appearing in our Annual
Report on Form 10-K for the periods indicated in their reports, incorporated by
reference into this prospectus supplement and elsewhere in the registration
statement, have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report with respect thereto, and are
incorporated by reference herein in reliance upon the authority of said firm as
experts in giving said report. Arthur Andersen LLP has not consented to the
incorporation by reference of their reports in this prospectus supplement, and
we have dispensed with the requirement to file their consent in reliance upon
Rule 437a of the Securities Act of 1933. Because Arthur Andersen LLP has not
consented to the incorporation by reference of their reports in this prospectus
supplement, you will not be able to recover against Arthur Andersen LLP under
Section 11 of the Securities Act of 1933 for any untrue statement of a material
fact contained in the financial statements and financial statement schedules
audited by Arthur Andersen LLP or any omission to state a material fact
required to be stated therein.
LEGAL MATTERS
The legality of the notes and certain tax matters will be passed upon for
Federal Realty Investment Trust by Hogan & Hartson L.L.P., Washington, D.C.
Sidley Austin Brown & Wood LLP, New York, New York, will act as counsel to the
underwriters.
S-20
[LOGO] FEDERAL REALTY
INVESTMENT TRUST
$500,000,000
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
of beneficial interest, no par or stated value (the "Common Shares"), with an
aggregate public offering price of up to $500,000,000 (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 (the "Senior Securities") or subordinated
Debt Securities (the "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 the 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 the initial public offering price; and (iii) in the case of
Common Shares, the 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
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 date of this Prospectus is September 30, 1998.
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; Midwest Regional Office, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661; and Northeast Regional Office, 7 World Trade Center,
New York, New York 10048. The Commission also maintains a web site at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants, including the Trust, that file
electronically with the Commission. 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, Vice President, Corporate Communications, Federal Realty Investment
Trust, 1626 East Jefferson Street, Rockville, Maryland 20852-4041 (telephone
301/998-8100).
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"), of which this Prospectus forms a part, 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, 1997.
2. The Trust's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1998 and June 30, 1998.
3. The Trust's Current Reports on Form 8-K filed with the Commission on
February 24, 1998, March 10, 1998, March 11, 1998, May 11, 1998 and August
7, 1998.
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 a 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 retail properties. Founded in 1962 as a District of Columbia
business trust of unlimited duration, the Trust is a self-administered equity
real estate investment trust ("REIT"). The Trust consolidates the financial
statements of various entities which it controls. At June 30, 1998 the Trust
owned 114 retail properties and one apartment complex.
An important part of the Trust's strategy is to acquire older,
well-located properties in prime, densely populated and affluent areas and to
enhance their operating performance through a program of renovation, expansion,
reconfiguration and retenanting. The Trust's traditional focus has been on
community and neighborhood shopping centers that are anchored by supermarkets,
drug stores or high volume, value oriented retailers that provide consumer
necessities. Late in 1994 the Trust expanded this strategy to include retail
buildings and shopping centers in prime established main street shopping areas.
In addition, the Trust amended its by-laws in 1996 to permit investments west
of the Mississippi River. The Trust continually evaluates its properties for
renovation, retenanting and expansion opportunities. Similarly, the Trust
regularly reviews its portfolio and from time to time considers selling certain
of its properties. For several years the Trust has been seeking sites in its
core markets suitable for the construction of new retail properties. Several
sites have been identified and beginning in 1998 the Trust is focusing
considerable time and resources on ground up development.
The Trust's portfolio of properties has grown from 42 as of January 1,
1993 to 115 at June 30, 1998. During this period the Trust acquired 78 retail
properties for approximately $675 million. During this same period five
shopping centers were sold. Also during this period the Trust spent over
$250 million to renovate, expand, improve and retenant its properties. The
majority of the acquisitions were funded with cash. Of the properties not fully
acquired by cash, one was acquired by means of capital and ground leases, one
was acquired for Common Shares and the assumption of a mortgage, one was
acquired for cash and the assumption of a municipal bond issue and the others
were acquired for cash with minority investments by third parties. This growth
was financed through borrowing and equity offerings, since each year the Trust
has distributed all or the majority of its cash provided by operating
activities to its shareholders.
The Trust's 114 retail properties, consisting of 55 shopping centers and
59 main street retail properties, are located in 16 states and the District of
Columbia. Twenty-one of the properties are located in the Washington, D.C.
metropolitan area; twenty are in California; fourteen are in Connecticut;
eleven are in Pennsylvania, primarily in the Philadelphia area; ten are in New
Jersey; ten are in Texas; seven are in Illinois; three are in Virginia; four
are in Massachusetts; six are in New York; two are in Florida; two are in
Arizona; and there is one in each of the following states: Georgia, Michigan,
North Carolina and Oregon.
The Trust continues to seek older, well-located shopping centers and
retail buildings to acquire and then to enhance their revenue potential through
a program of renovation, retenanting and remerchandising. The Trust has also
located sites where it intends to develop new retail properties.
The Trust has made 144 consecutive quarterly distributions and has
increased its distribution rate for each of the last 31 years. This is the
longest record of annual distribution increases in the REIT industry. The
current annual indicated distribution rate is $1.76 per share.
The Trust maintains its offices at 1626 East Jefferson Street, Rockville,
Maryland 20852-4041 (telephone 301/998-8100).
3
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:
Six Months
Years Ended December 31, Ended June 30,
------------------------------------------------------ ---------------------
1993 1994 1995 1996 1997 1997 1998
--------- --------- --------- --------- --------- --------- ---------
1.50x 1.61x 1.55x 1.59x 1.70x 1.70x 1.74x
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. In October 1997, the
Trust issued $100 million of 7.95% Series A Cumulative Redeemable Preferred
Shares ("Series A Preferred Shares"). The ratio of earnings to combined fixed
charges and preferred dividends was 1.64x for the year ended December 31, 1997,
and 1.54x for the six month period ended June 30, 1998. There were no preferred
dividends paid by the Trust prior to 1997; as a result, the ratio of earnings
to combined fixed charges and preferred dividends for the years ended December
31, 1993 through December 31, 1996, and the six months ended June 30, 1997, are
unchanged from the ratios presented in this section.
DESCRIPTION OF DEBT SECURITIES
General
The Senior Securities are to be issued under an indenture dated as of
September 1, 1998, as supplemented from time to time (the "Senior Indenture"),
between the Trust and First Union National Bank, 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, Trustee. The term "Trustee" as used herein
shall refer to First Union National Bank 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
4
a resolution of the Board of Trustees of the Trust or as established in one or
more indentures 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).
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;
5
(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 First Union National Bank, 230 S. Tryon Street, 9th Floor,
Charlotte, North Carolina
6
28288-1179 in the case of the Senior Securities and the Subordinated
Securities, provided that, 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).
7
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
8
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 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 proceedings in respect
9
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
10
right or power conferred upon the Trust in such Indenture; (iii) to add Events
of Default for the benefit of the Holders of all or any series of Debt
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 principal amount of the Outstanding
Debt Securities of such series will constitute a quorum (Section 1504 of each
Indenture).
11
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 or 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 June 30, 1998, Senior Debt aggregated approximately
$648 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 and that either have
become due and payable or will become due and payable within one year (or
scheduled for
12
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 U. S. 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).
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
13
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 are 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
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.
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DESCRIPTION OF PREFERRED SHARES
General
The Trust is authorized to issue an unlimited number of preferred shares
(the "Preferred Shares"). On October 6, 1997, the Trust issued 4,000,000 shares
of 7.95% Series A Cumulative Redeemable Preferred Shares (liquidation
preference $25.00 per share); no other Preferred Shares are outstanding.
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 the 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
15
(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.
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
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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 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
17
current dividend period, the Trust shall not purchase or otherwise acquire
directly or indirectly any Preferred Shares of such series (except by
conversion 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.
19
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 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--Restrictions on
Ownership," 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.
20
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 takeover 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 investment trust under the Code; and (iii)
include a "fair price" provision that would deter a "two-stage" takeover
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.
Restrictions on Ownership
For the Trust to qualify as a REIT under the Code, 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
21
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 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.
FEDERAL INCOME TAX CONSIDERATIONS
The Trust believes it has operated, and the Trust intends to continue to
operate, in such manner as to qualify as a REIT under the Code, but no
assurance can be given that it will at all times so qualify. The provisions of
the Code pertaining to REITs are highly technical and complex. The following is
a brief and general summary of certain provisions that currently govern the
federal income tax treatment of the Trust and its shareholders. For the
particular provisions that govern the federal income tax treatment of the Trust
and its shareholders, reference is made to Sections 856 through 860 of the Code
and the treasury regulations promulgated thereunder. The following summary is
qualified in its entirety by such reference.
Under the Code, if certain requirements are met in a taxable year, a REIT
generally will not be subject to federal income tax with respect to income that
it distributes to its shareholders. If the Trust fails to qualify during any
taxable year as a REIT, unless certain relief provisions are available, it will
be subject to tax (including any applicable alternative minimum tax) on its
taxable income at regular corporate rates, which could have a material adverse
effect upon its shareholders.
To qualify as a REIT, the Trust must comply with a number of annual
requirements regarding its income, assets and distributions. These requirements
impose a number of restrictions on the Trust's operations. For example, the
Trust may not lease property if the lease has the effect of giving the Trust a
share of the net income of the lessee. The amount of personal property that may
be included under a lease may not exceed a defined, low level, and the Trust
may not provide services to its tenants, other than customary services and de
minimis non-customary services. The Trust's ability to acquire non-real estate
assets is restricted, and a 100% tax is imposed on any gain that the Trust
realizes from sales of property to customers in the ordinary course of business
(other than property acquired by reason of certain foreclosures), effectively
preventing the Trust from participating
22
directly in condominium projects and other projects involving the development
of property for resale. Minimum distribution requirements also generally
require the Trust to distribute at least 95% of its taxable income each year
(excluding any net capital gain).
In any year in which the Trust qualifies to be taxed as a REIT,
distributions made to its shareholders out of current or accumulated earnings
and profits will be taxed to shareholders as ordinary income except that
distributions of net capital gains designated by the Trust as capital gain
dividends will be taxed as long-term capital gain income to the shareholders. A
portion of such gains may be taxed at the 25% rate applicable to "Section 1250"
gains. To the extent that distributions exceed current or accumulated earnings
and profits, they will constitute a return of capital, rather than dividend or
capital gain income, and will reduce the basis for the shareholder's Securities
with respect to which the distribution is paid or, to the extent that they
exceed such basis, will be taxed in the same manner as gain from the sale of
those Securities.
Investors are urged to consult their own tax advisors with respect to the
appropriateness of an investment in the Securities offered hereby and with
respect to the tax consequences arising under federal law and the laws of any
state, municipality or other taxing jurisdiction, including tax consequences
resulting from such investor's own tax characteristics. In particular, foreign
investors should consult their own tax advisors concerning the tax consequences
of an investment in the Trust, including the possibility of United States
income tax withholding on Trust distributions.
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.
23
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 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 LLP, 1800 Massachusetts Avenue, N.W.,
Washington, D.C. 20036-1800. Certain REIT tax matters relating to the Trust are
being passed upon by Goodwin, Procter & Hoar LLP, Exchange Place, Boston,
Massachusetts 02109. Brown & Wood LLP, 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, 1997 and 1996 and for each of the years in the three year period
ended December 31, 1997 incorporated herein by reference have been incorporated
herein in reliance on the reports dated February 5, 1998 of Grant Thornton LLP,
independent certified public accountants, also incorporated by reference
herein, and upon the authority of said firm as experts in accounting and
auditing.
With respect to the unaudited interim financial information included in the
Trust's Quarterly Reports on Form 10-Q for the quarters ended March 31, 1998
and June 30, 1998 which are incorporated herein by reference, Grant Thornton
LLP has applied limited procedures in accordance with professional standards
for a review of such information. However, as stated in their reports dated May
5, 1998 and August 5, 1998 included in the Trust's Quarterly Reports on Form
10-Q for the quarters ended March 31, 1998 and June 30, 1998 and incorporated
by reference herein, they did not audit and they do not express an opinion on
that interim financial information. Accordingly, the degree of reliance on
their reports on such information should be restricted in light of the limited
nature of the review procedures applied. Grant Thornton LLP is not subject to
the liability provisions of Section 11 of the Securities Act of 1933 for their
reports on the unaudited interim financial information because those reports
are not "reports" or a "part" of the registration statement prepared or
certified by an accountant within the meaning of Sections 7 and 11 of the
Securities Act.
24
================================================================================
$150,000,000
[LOGO] Federal Realty Investment Trust
% Notes due August 2007
-----------------------
PROSPECTUS SUPPLEMENT
-----------------------
Merrill Lynch & Co.
Salomon Smith Barney
Wachovia Securities
Commerzbank Securities
Banc of America Securities LLC
HVB Real Estate Capital
Fleet Securities, Inc.
PNC Capital Markets, Inc.
Wells Fargo Brokerage Services, LLC
August , 2002
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