Filed Pursuant to Rule 424(b)(3)
Registration No. 333-119067
PROSPECTUS
WEINGARTEN REALTY INVESTORS
$1,500,000,000
COMMON SHARES, PREFERRED SHARES, DEPOSITARY SHARES,
DEBT SECURITIES AND WARRANTS
__________
We may offer, from time to time, in one or more series or classes and in
amounts, at prices and on terms that we will determine at the time of offering,
with an aggregate public offering price of up to $1,500,000,000:
- unsecured debt securities that may be either senior debt securities or
subordinated debt securities;
- whole or fractional preferred shares of beneficial interest;
- preferred shares of beneficial interest represented by depositary
shares;
- common shares of beneficial interest; or
- warrants to purchase preferred shares of beneficial interest or common
shares of beneficial interest.
We will provide the specific terms of these securities in supplements to
this prospectus. You should read this prospectus and the supplements carefully
before you invest in any of these securities.
We may offer the securities directly, through agents designated from time
to time, 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. For more information on this
topic, please see "Plan of Distribution" on page 34. No securities may be sold
without the delivery of the applicable prospectus supplement describing the
method and terms of the offering of such securities.
Our common shares of beneficial interest trade on the New York Stock
Exchange under the symbol "WRI."
____________
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is October 1, 2004.
You should rely only on the information contained or incorporated by
reference in this prospectus and any applicable prospectus supplement. We have
not authorized anyone else to provide you with different information. If anyone
provides you with different or inconsistent information, you should not rely on
it. We will not make an offer to sell these securities in any state where the
offer or sale is not permitted. You should assume that the information
appearing in this prospectus, as well as the information we previously filed
with the Securities and Exchange Commission and incorporated by reference, is
accurate only as of the date of the documents containing the information.
TABLE OF CONTENTS
Cautionary Statement Concerning Forward-Looking Statements . . . . . . . . . . (i)
About This Prospectus. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
The Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Ratios of Earnings to Combined Fixed Charges and Preferred Share Dividends . . 1
Description of Capital Shares. . . . . . . . . . . . . . . . . . . . . . . . . 2
Description of Depositary Shares . . . . . . . . . . . . . . . . . . . . . . . 4
Restrictions on Ownership. . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Description of Debt Securities . . . . . . . . . . . . . . . . . . . . . . . . 10
Description of Warrants. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Federal Income Tax Consequences. . . . . . . . . . . . . . . . . . . . . . . . 25
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Legal Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Experts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Where You Can Find More Information. . . . . . . . . . . . . . . . . . . . . . 36
Incorporation of Documents by Reference. . . . . . . . . . . . . . . . . . . . 36
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
Certain statements contained herein constitute forward-looking statements
as such term is defined in Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
Forward-looking statements are not guarantees of performance. Our future
results, financial condition and business may differ materially from those
expressed in these forward-looking statements. You can find many of these
statements by looking for words such as "plans," "intends," "estimates,"
"anticipates," "expects," "believes" or similar expressions in this prospectus
and the applicable prospectus summary. These forward-looking statements are
subject to numerous assumptions, risks and uncertainties. Many of the factors
that will determine these items are beyond our ability to control or predict.
For these statements, we claim the protection of the safe harbor
forward-looking statements contained in the Private Securities Litigation Reform
Act of 1995. You are cautioned not to place undue reliance on our
forward-looking statements, which speak only as of the date of this prospectus
and the applicable prospectus summary or the date of any document incorporated
by reference. All subsequent written and oral forward-looking statements
attributable to us or any person acting on our behalf are expressly qualified in
their entirety by the cautionary statements contained or referred to in this
section. We do not undertake any obligation to release publicly any revisions to
our forward-looking statements to reflect events or circumstances after the date
of this prospectus and the applicable prospectus summary.
i
ABOUT THIS PROSPECTUS
This prospectus is part of a "shelf" registration statement that we filed
with the SEC. By using a shelf-registration statement, we may sell, from time to
time, in one or more offerings, any combination of the securities described in
this prospectus. The total dollar amount of the securities we sell through these
offerings will not exceed $1,500,000,000. This prospectus only provides you with
a general description of the securities we may offer. Each time we sell
securities, we will provide you with a prospectus supplement that contains
specific information about the terms of the securities being offered. The
prospectus supplement may also add, update or change information contained in
this prospectus. You should read both this prospectus and any prospectus
supplement together with the additional information described under the heading
"Where You Can Find More Information" on page 36.
THE COMPANY
We are a real estate investment trust based in Houston, Texas. We develop,
acquire and own anchored neighborhood community shopping centers. To a lesser
degree, we develop, acquire and own industrial real estate. We have engaged in
these activities since 1948.
As of June 30, 2004, we owned or had an equity interest in operating
properties consisting of approximately 45.6 million square feet of building
area. These properties consist of 278 shopping centers generally in the 100,000
to 400,000 square foot range and 62 industrial projects. Our properties are
located in 20 states that span the southern half of the United States from coast
to coast. Our shopping centers are anchored primarily by supermarkets,
drugstores and other retailers that sell basic necessity-type items. As of June
30, 2004, we leased to approximately 5,000 different tenants under 6,800
separate leases. The weighted average occupancy rate of all of our improved
properties as of June 30, 2004 was 94.2%.
Our executive offices are located at 2600 Citadel Plaza Drive, Suite 300,
Houston, Texas 77008, and our telephone number is (713) 866-6000. Our website
address is www.weingarten.com. The information contained on our website is not
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part of this prospectus.
USE OF PROCEEDS
Unless otherwise described in the applicable prospectus supplement, we
intend to use the net proceeds from the sale of the securities for:
- repayment or refinancing of debt;
- acquisition of additional properties or real estate-related
securities;
- development of new properties;
- redevelopment of existing properties; and
- working capital and general purposes.
Pending the use thereof, we intend, generally, to invest any net proceeds in
short-term, interest-bearing securities.
RATIOS OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED SHARE DIVIDENDS
The following table sets forth the ratio of earnings to fixed charges and
the ratio of earnings to combined fixed charges and preferred share dividends
for the periods shown:
1
Six Months
Ended
June 30, Years Ended December 31,
----------------- -------------------------------------
2003 2004 1999 2000 2001 2002 2003
---- ---- ----- ----- ----- ----- -----
Ratio of earnings to combined fixed charges and
preferred share dividends . . . . . . . . . . . . . 1.78x 1.97x 2.29x 1.80x 1.92x 2.05x 1.81x
Ratio of funds from operations before interest
expense to combined fixed charges and preferred
share dividends . . . . . . . . . . . . . . . . . . 2.52x 2.60x 2.79x 2.60x 2.59x 2.65x 2.52x
The ratios of earnings to combined fixed charges and preferred share
dividends were computed by dividing earnings by the sum of fixed charges and
preferred share dividends. The ratios of funds from operations before interest
expense to combined fixed charges and preferred share dividends were computed by
dividing funds from operations before interest expense by the sum of fixed
charges and preferred share dividends.
For these purposes, earnings consist of income before extraordinary items
plus fixed charges (excluding interest costs capitalized) and preferred share
dividends. Funds from operations before interest expense consists of net income
plus depreciation and amortization of real estate assets, interest on
indebtedness and extraordinary charges, less gains and losses on sales of
properties and securities.
DESCRIPTION OF CAPITAL SHARES
We are a Texas real estate investment trust. Your rights as a shareholder
are governed by the Texas Real Estate Investment Trust Act, our declaration of
trust and our bylaws. The following summary of terms, rights and preferences of
the shares of beneficial interest is not complete. You should read our
declaration of trust and bylaws for more complete information.
AUTHORIZED SHARES
Our declaration of trust provides that we may issue up to 160,000,000
shares of beneficial interest, consisting of 150,000,000 common shares, par
value $0.03 per share, and 10,000,000 preferred shares, par value $.03 per
share. At August 31, 2004, 88,846,406 common shares, 3,000,000 depositary
shares, each representing one-thirtieth of a 6.75% Series D Cumulative
Redeemable Preferred Share, and 2,900,000 depositary shares, each representing
one-one hundredth of a share of 6.95% Series E Cumulative Redeemable Preferred
Shares were issued and outstanding. In addition, we have 1,880,645 common
shares available for issuance upon the exercise of options granted under our
employee and trust manager share option plans. Mellon Investor Services, LLC is
the transfer agent and registrar of our common shares and preferred shares.
SHAREHOLDER LIABILITY
Under Texas law, you will not be personally liable for any obligation of
ours solely because you are a shareholder. Under our declaration of trust, our
shareholders are not personally liable for our debts or obligations and will not
be subject to any personal liability in tort, contract or otherwise, to any
person in connection with our property or affairs by reason of being a
shareholder.
Notwithstanding these limitations, common law theories of "piercing the
corporate veil" may be used to impose liability on shareholders in certain
instances. Also, to the extent that we conduct operations in another
jurisdiction where the law of that jurisdiction (1) does not recognize the
limitations of liability afforded by contract, Texas law or our declaration of
trust, and (2) does not provide similar limitations of liability applicable to
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real estate investment trusts or other trusts, a third party could attempt,
under limited circumstances, to assert a claim against our shareholders based
upon our obligations.
COMMON SHARES
Dividends. Subject to any preferential rights of any outstanding series of
preferred shares, the holders of our common shares are entitled to such
dividends and distributions as may be declared from time to time by the board of
directors from funds available therefore. We may pay dividends in either cash,
property or in common shares. Payment and declaration of dividends on our
common shares and purchases of shares thereof by us will be subject to certain
restrictions if we fail to pay dividends on our preferred shares.
Distributions and Liquidation Rights. Upon any liquidation, dissolution or
winding up of us, holders of our common shares will be entitled to share equally
and ratably in any assets available for distribution to them after payment or
provision for payment of our debts and other liabilities and the preferential
amounts owing with respect to any outstanding preferred shares.
No Preemptive Rights. No holders of our common shares have preemptive or
other rights to purchase or subscribe for any common shares.
REIT Restrictions on Ownership and Transfer. Our common shares are subject
to certain restrictions upon ownership and transfer which were adopted for the
purpose of enabling us to preserve our status as a REIT. For a description of
such restrictions, see "-Restrictions on Ownership."
Voting Rights. Each outstanding common share owned by a shareholder
entitles that holder to one vote on all matters submitted to a vote of
shareholders, including the election of trust managers. The right to vote is
subject to the provisions of our declaration of trust regarding the restriction
on the transfer of shares of beneficial interest, which we describe under "-
Restrictions on Ownership," below. There is no cumulative voting in the election
of trust managers.
Subject to the terms of our declaration of trust regarding the restrictions
on transfer of shares of beneficial interest, each common share has the same
dividend, distribution, liquidation and other rights as each other common share.
According to the terms of our declaration of trust and bylaws and Texas
law, all matters submitted to the shareholders for approval, except for those
matters listed below, are approved if a majority of all the votes cast at a
meeting of shareholders duly called and at which a quorum is present are voted
in favor of approval. The following matters require approval other than by a
majority of all votes cast:
- the election of trust managers (which provides that trust managers
remain on the board unless and until a nominee for that board seat
receives the affirmative vote of the holders of 66 2/3% of our common
shares);
- the amendment of our declaration of trust by shareholders (which
requires the affirmative vote of 66 2/3% of all votes entitled to be
cast on the matter);
- our termination, winding up of affairs and liquidation (which requires
the affirmative vote of 66 2/3% of all the votes entitled to be cast
on the matter); and
- our merger or consolidation with another entity or sale of all or
substantially all of our property (which requires the approval of the
board of trust managers and an affirmative vote of two-thirds of all
the votes entitled to be cast on the matter).
Stock Exchange Listing. Our common shares are traded on the New York Stock
Exchange under the trading symbol "WRI."
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PREFERRED SHARES
Our declaration of trust authorizes our board of trust managers to issue up
to 10,000,000 preferred shares from time to time, in one or more series, to
establish the number of shares in each series and to fix the designations,
powers, preferences and nights of each series and the qualifications,
limitations or restrictions thereof.
Future Series of Preferred Shares. The applicable prospectus supplement
shall set forth with respect to each series that may be issued and sold pursuant
hereto:
- the designation of such shares and the number of shares that
constitute such series;
- the dividend rate (or the method of calculation thereof), if any, on
the shares of such series and the priority as to the payment of
dividends with respect to other classes or series of our capital
shares;
- the dividend periods (or the method of calculation thereof);
- the voting rights, if any, of the shares;
- the terms and amount of a sinking fund, if any;
- the liquidation preference and the priority as to payment of such
liquidation preference with respect to other classes or series of our
capital shares and any other rights of the shares of such series upon
our liquidation or winding-up;
- whether or not and on what terms the shares of such series will be
subject to redemption or repurchase at our option;
- whether and on what terms the shares of such series will be
convertible into or exchangeable for our other debt or equity
securities;
- whether the shares of such series of preferred shares will be listed
on a securities exchange;
- any limitations on direct or beneficial ownership and restrictions on
transfer in addition to those described in " - Restrictions on
Ownership," in each case as may be appropriate to preserve our status
as a real estate investment trust;
- any special United States federal income tax considerations applicable
to such series; and
- the other rights and privileges and any qualifications, limitations or
restrictions of such rights or privileges of such series not
inconsistent with our declaration of trust, our bylaws and the Texas
Real Estate Investment Trust Act.
The terms of any preferred shares we issue will be set forth in resolutions
adopted by our board of trust managers. We will file such resolutions as an
exhibit to the registration statement that includes this prospectus, or as an
exhibit to a filing with the SEC that is incorporated by reference into this
prospectus. The description of preferred shares in any prospectus supplement
will not describe all of the terms of the preferred shares in detail. You
should read the applicable resolutions for a complete description of all of the
terms.
DESCRIPTION OF DEPOSITARY SHARES
General. We may issue receipts for depositary shares, each of which will
represent a fractional interest of a particular series of a class of preferred
shares, as specified in the applicable prospectus supplement. The preferred
shares of each series represented by depositary shares will be deposited under a
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separate deposit agreement among us, the depositary named in the deposit
agreement and the holders of the depositary receipts. Immediately following our
issuance and delivery of the preferred shares to the depositary, we will cause
the depositary to issue, on our behalf, the depositary receipts. Subject to the
terms of the applicable depositary agreement, each owner of a depositary receipt
will be entitled, in proportion to the fractional interest of a share of a
particular series of a preferred share represented by the depositary shares
evidenced by the depositary receipts, to all the rights and preferences of the
preferred shares represented by the depositary shares (including dividend,
voting, conversion, redemption and liquidation rights ) as designated by our
board of trust managers. The summary of our depositary shares set forth below
is not complete. You should refer to the applicable prospectus supplement,
provisions of the deposit agreement and the depositary receipts that will be
filed with the SEC as part of the offering of any depositary shares. To obtain
copies of these documents, see "Where You Can Find More Information" on page 36.
As of the date of this prospectus, the following depositary shares are
outstanding:
6.75% SERIES D CUMULATIVE REDEEMABLE PREFERRED SHARES AND DEPOSITARY SHARES
On April 30, 2003, we issued 100,000 shares of 6.75% Series D Cumulative
Redeemable Preferred Shares and 3,000,000 depositary shares for $75.0 million.
Each depositary share represents a 1/30 fractional interest in a share of Series
D Preferred. The Series D Preferred has a liquidation preference of $750.00 per
share (equivalent to $25.00 per depositary share) and the holders are entitled
to cumulative dividends from the date of original issuance of $50.625 per share
(equivalent to $1.6875 per depositary share). The Series D Preferred ranks on
parity with the Series E Preferred described below with respect to the payment
of dividends and payments upon liquidation. We may not redeem the Series D
Preferred Shares before April 30, 2008. The redemption price per share of
Series D Preferred is $750.00 (equivalent to $25.00 per depositary share), plus
any accrued and unpaid dividends through the date of such redemption. The
Series D Preferred and the depositary shares have no maturity date and will
remain outstanding indefinitely unless redeemed. The Series D Preferred and the
depositary shares are not convertible into or exchangeable for any of our other
securities. The Series D Preferred shareholders and holders of the depositary
shares generally have no voting rights, except if we fail to pay dividends for
six quarters. In that event, the holders of the Series D Preferred and Series E
Preferred, voting together as a single class, have the right to elect two trust
managers who shall serve until all dividend arrearages have been paid. In such
case, the entire board of trust managers will be increased by two trust
managers.
The Series D Preferred is not be listed for trading on any exchange. The
depositary shares are listed for trading on the New York Stock Exchange.
6.95% SERIES E CUMULATIVE REDEEMABLE PREFERRED SHARES AND DEPOSITARY SHARES
On July 8, 2004, we issued 29,000 shares of 6.95% Series E Cumulative
Redeemable Preferred Shares and 2,900,000 depositary shares for $72.5 million.
Each depositary share represents a 1/100 fractional interest in a share of
Series E Preferred. The Series E Preferred has a liquidation preference of
$2,500 per share (equivalent to $25 per depositary share). The Series E
Preferred ranks on a parity with the Series D Preferred with respect to the
payment of dividends and payments upon liquidation. We may not redeem the
Series E Preferred Shares before July 8, 2009. The redemption price per share
of Series E Preferred is $2,500 (equivalent to $25.00 per depositary share),
plus accrued and unpaid dividends through the date of such redemption. The
Series E Preferred and the depositary shares have no maturity date and will
remain outstanding indefinitely unless redeemed. The Series E Preferred and the
depositary shares are not convertible into or exchangeable for any of our other
securities. The Series E Preferred shareholders and the holders of the
depositary shares generally have no voting rights, except if we fail to pay
dividends for six quarters. In that event, the holders of the Series D
Preferred and Series E Preferred, voting together as a single class, have the
right to elect two trust managers who shall serve until all dividend arrearages
have been paid. In such case, the entire board of trust managers will be
increased by two trust managers.
The Series E Preferred is not listed for trading on any exchange. The
depositary shares are listed for trading on the New York Stock Exchange.
See "-Description of Preferred Shares."
5
Dividends and Other Distributions. The depositary will distribute all cash
dividends or other cash distributions received on behalf of the preferred shares
proportionately to the record holders of the related depositary receipts owned
by such holder. Such distributions are subject to certain obligations of holders
to file proofs, certificates and other information and to pay certain charges
and expenses to the depositary.
In the event of a non-cash distribution, the depositary will distribute
property it receives to the record holders of depositary receipts entitled to
the property unless the depositary determines that it is not feasible to make
such distribution, in which case the depositary may, with our approval, sell
such property and distribute the net proceeds of such sale to holders. Such
distributions by the depositary are subject to certain obligations of holders to
file proofs, certificates and other information and to pay certain changes and
expenses to the depositary.
Withdrawal of Shares. Unless the related depositary shares have previously
been called for redemption, upon surrender of the depositary receipts at the
corporate trust office of the depositary, the holders thereof will be entitled
to delivery at such office, to or upon such holder's order, of the number of
whole or fractional preferred shares and any money or other property represented
by the depositary shares evidenced by such depositary receipts. Holders of
depositary receipts will be entitled to receive whole or fractional shares of
the related preferred shares on the basis of the proportion of preferred shares
represented by each depositary share as specified in the applicable prospectus
supplement, but holders of such preferred shares will not thereafter be entitled
to receive depositary shares therefor. If the depositary receipts delivered by
the holder evidence a number of depositary shares in excess of the number of
depositary shares representing the preferred shares to be withdrawn, the
depositary will deliver to such holder at the same time a new depositary receipt
evidencing such excess number of depositary shares.
Redemption. Whenever we redeem preferred shares held by the depositary, the
depositary will redeem as of the same redemption date the number of depositary
shares representing the preferred shares so redeemed, provided we have paid in
full to the depositary the redemption price of the preferred shares to be
redeemed plus an amount equal to any accrued and unpaid dividends thereon to the
date fixed for redemption. With respect to noncumulative preferred shares,
dividends will be paid for the current dividend period only. The redemption
price per depositary share will be equal to the redemption price and any other
amounts per share payable with respect to the preferred shares. If less than all
the depositary shares are to be redeemed, the depositary shares to be redeemed
will be selected by the depositary by lot.
After the date fixed for redemption, the depositary shares called for
redemption will no longer be deemed o be outstanding and all rights of the
holders of the depositary receipts evidencing the depositary shares called for
redemption will cease. However, the holders will have the right to receive any
moneys payable upon redemption and any money or other property that the holders
of such depositary receipts were entitled to at the time of redemption when they
surrender their depositary receipts to the depositary.
Voting Rights. Upon receipt of notice of any meeting at which the holders
of the preferred shares are entitled to vote, the depositary will mail the
information contained in such notice to the record holders of the depositary
receipts related to such preferred shares. Each record holder of depositary
receipts on the record date will be entitled to instruct the depositary as to
the exercise of the voting rights of the preferred shares related to such
holder's depositary receipts. The record date for depositary receipts will be
the same date as the record date for preferred shares. The depositary will vote
the preferred shares related to such depositary receipts in accordance with such
instructions, and we will agree to take all reasonable action that the
depositary deems necessary to enable it to vote the preferred shares. The
depositary will abstain from voting preferred shares represented by such
depositary shares to the extent it does not receive specific instructions from
the holders of depositary receipts.
Liquidation Preference. In the event of our liquidation, dissolution or
winding-up, whether voluntary or involuntary, each holder of a depositary
receipt will be entitled to the fraction of the liquidation preference accorded
each preferred share represented by the depositary share evidenced by such
depositary receipt, as set forth in the applicable prospectus supplement.
Conversion of Preferred Shares. The depositary shares, as such, are not
convertible into common shares or any of our other securities or property.
Nevertheless, if so specified in the applicable prospectus supplement relating
to an offering of depositary shares, the depositary receipts may be surrendered
by holders thereof to the depositary with written instructions to the depositary
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to instruct us to cause conversion of the preferred shares represented by the
depositary shares into whole common shares, other preferred shares or other
shares of capital shares. We have agreed that upon receipt of such instructions
and any amounts payable in respect thereof, we will cause the conversion thereof
utilizing the same procedures as those provided for delivery of preferred shares
to effect such conversion. If the depositary shares evidenced by a depositary
receipt are to be converted in part only, one or more new depositary receipts
will be issued for any depositary shares not to be converted. No fractional
common shares will be issued upon conversion. If conversion will result in a
fractional share being issued, we will pay in cash an amount equal to the value
of the fractional interest based upon the closing price of the common shares on
the last business day prior to the conversion.
Amendment and Termination of the Deposit Agreement. The form of depositary
receipt evidencing the depositary shares which represent the preferred shares
and any provision of the deposit agreement may at any time be amended by
agreement between the depositary and us. However, any amendment that materially
and adversely alters the rights of the holders of depositary receipts will not
be effective unless it has been approved by the existing holders of at least a
majority of the depositary shares evidenced by outstanding depositary receipts.
We may terminate the deposit agreement upon not less than 30 days' prior
written notice to the depositary if (1) such termination is to preserve our
status as a REIT or (2) a majority of each class of preferred shares affected by
such termination consents to such termination. Upon termination of the deposit
agreement, the depositary shall deliver or make available to each holder of
depositary receipts, upon surrender of the depositary receipts held by such
holder, such number of whole or fractional preferred shares as are represented
by the depositary shares evidenced by such depositary receipts. In addition, the
deposit agreement will automatically terminate if:
- all outstanding depositary shares have been redeemed;
- there has been a final distribution in respect of the related
preferred shares in connection with any liquidation, dissolution or
winding-up and such distribution has been distributed to the holders
of depositary receipts evidencing the depositary shares representing
such preferred shares; or
- each related preferred share shall have been converted into capital
shares that are not represented by depositary shares.
Fees of Depositary. We will pay all transfer and other taxes and
governmental charges arising solely from the existence of the deposit agreement.
In addition, we will pay the fees and expenses of the depositary in connection
with the performance of its duties under the deposit agreement. However, holders
of depositary receipts will pay the depositary's fees and expenses for any
duties that holders request to be performed which are outside those expressly
provided for in the deposit agreement.
Resignation and Removal of Depositary. The depositary may resign at any
time by delivering to us notice of its resignation, and we may remove the
depositary at any time. Any such resignation or removal will take effect upon
the appointment of a successor depositary. A successor depositary must be
appointed within 60 days after delivery of the notice of resignation or removal.
A successor depositary must be a bank or trust company having its principal
office in the United States and having a combined capital and surplus of at
least $50,000,000.
Miscellaneous. The depositary will forward to holders of depositary
receipts any reports and communications from us which it receives with respect
to the related preferred shares. Neither us nor the depositary will be liable if
it is prevented from or delayed in, by law or any circumstances beyond its
control, performing its obligations under the deposit agreement. The obligations
of us and the depositary under the deposit agreement will be limited to
performing their duties thereunder in good faith and without negligence, gross
negligence or willful misconduct. We and the depositary will not be obligated to
prosecute or defend any legal proceeding in respect of any depositary receipts,
depositary shares or preferred shares represented thereby unless satisfactory
indemnity is furnished. We and the depositary may rely on written advice of
counsel or accountants, or information provided by persons presenting preferred
shares represented thereby for deposit, holders of depositary receipts or other
7
persons believed to be competent to give such information, and on documents
believed to be genuine and signed by a proper party.
If the depositary shall receive conflicting claims, requests or
instructions from any holders of depositary receipts, on the one hand, and us,
on the other hand, the depositary shall be entitled to act on such claims,
requests or instructions received from us.
RESTRICTIONS ON OWNERSHIP
MAINTAINING REIT STATUS
In order for us to qualify as a REIT under the Internal Revenue Code, not
more than 50% in value of our outstanding capital shares may be owned, directly
or indirectly, by five or fewer individuals during the last half of a taxable
year. In addition, our capital shares must be beneficially owned by 100 or more
persons during at least 335 days of a taxable year of 12 months, or during a
proportionate part of a shorter taxable year. For purposes of restrictions on
ownership, "capital shares" means our common shares and any securities
convertible into common shares.
Because the board believes it is essential for us to continue to qualify as
a REIT, our declaration of trust generally provides that no holder may own, or
be deemed to own by virtue of the attribution provisions of the Internal Revenue
Code, more than 9.8% of our total outstanding capital shares. Any transfer of
shares will not be valid if it would:
- create a direct or indirect ownership of shares in excess of 9.8% of
our total outstanding capital shares;
- result in shares being owned by fewer than 100 persons;
- result in our being "closely held" within the meaning of Section
856(h) of the Internal Revenue Code; or
- result in our disqualification as a REIT.
Shares held by a person in excess of 9.8% of our total outstanding capital
shares will automatically be deemed to be transferred to us as trustee of a
trust for the exclusive benefit of the transferees to whom those shares may
ultimately be transferred without violating the 9.8% ownership limit. Such
excess shares shall be treated as treasury shares. While in trust, these shares
will not be entitled to vote (except as required by law), and will not be
entitled to participate in dividends or other distributions. All certificates
representing capital shares will bear a legend referring to the restrictions
described above.
These restrictions on ownership may have the effect of precluding the
acquisition of control unless our board of trust managers and shareholders
determine that maintenance of REIT status is no longer in our best interests.
BUSINESS COMBINATIONS
Our declaration of trust requires that except in certain circumstances, a
business combination between us and a related person must be approved by the
affirmative vote of the holders of not less than 80% of our outstanding common
shares, including the affirmative vote of the holders of not less than 50% of
the outstanding common shares not owned by the related person. However, the 50%
voting requirement is not applicable if the business combination is approved by
the affirmative vote of the holders of not less than 90% of our outstanding
common shares. Our declaration of trust provides that a "business combination"
is:
(1) any merger or consolidation, if and to the extent permitted by law, of
us or our subsidiary, with or into a related person;
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(2) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition of more than 35% of the book value of the total assets of us and our
subsidiaries (taken as a whole) as of the end of the fiscal year ending prior to
the time the determination is being made, to or with a related person;
(3) the issuance or transfer by us or our subsidiary (other than by way of
a pro rata distribution to all shareholders) of any securities by us or our
subsidiary to a related person;
(4) any reclassification of securities (including any reverse share split)
or recapitalization by us, the effect of which would be to increase the voting
power of the related person;
(5) the adoption of any plan or proposal for the liquidation or dissolution
of us proposed by or on behalf of a related person which involves any transfer
of assets, or any other transaction, in which the related person has any direct
or indirect interest (except proportionally as a shareholder);
(6) any series or combination of transactions having, directly or
indirectly, the same or substantially the same effect as any of the foregoing;
and
(7) any agreement, contract or other arrangement providing, directly or
indirectly, for any of the foregoing.
A "related person" generally is defined in the declaration of trust to
include any individual, corporation, partnership or other person and the
affiliates and associates of any such individual, corporation, partnership or
other person which individually or together is the beneficial owner in the
aggregate of more than 50% of our outstanding common shares.
The 80% and 50% voting requirements outlined above will not apply, however,
if:
(1) the trust managers by a vote of not less than 80% of the trust managers
then holding office (a) have expressly approved in advance the acquisition of
our common shares that caused the related person to become a related person or
(b) have expressly approved the business combination prior to the date on which
the related person involved in the business combination shall have become a
related person; or
(2) the business combination is solely between us and another corporation,
100% of the voting stock of which is owned directly or indirectly by us; or
(3) the business combination is proposed to be consummated within one year
of the consummation of a fair tender offer (as defined in the declaration of
trust) by the related person in which the business combination, the cash or fair
market value of the property, securities or other consideration to be received
per share by all remaining holders of our common shares in the business
combination is not less than the price offered in the fair tender offer;
(4) all of the following conditions shall have been met:
(a) the business combination is a merger or consolidation, the
consummation of which is proposed to take place within one year of the
date of the transaction pursuant to which such person became a related
person and the cash or fair market value of the property, securities
or other consideration to be received per share by all remaining
holders of common shares in the business combination is not less than
the highest per-share price, with appropriate adjustments for
recapitalizations and for share splits and share dividends, paid by
the related person in acquiring any of its holdings of our common
shares, which shall constitute a "fair price;"
(b) the consideration to be received by such holders is either
cash or, if the related person shall have acquired the majority of its
holdings of our common shares for a form of consideration other than
cash, in the same form of consideration with which the related person
acquired such majority;
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(c) after such person has become a related person and prior to
consummation of such business combination:
- there shall have been no reduction in the annual rate of dividends, if
any, paid per share on our common shares (adjusted as appropriate for
recapitalizations and for share splits, reverse share splits and share
dividends), except any reduction in such rate that is made
proportionately with any decline in our net income for the period for
which such dividends are declared and except as approved by a majority
of the trust managers continuing in office; and
- such related person shall not have received the benefit, directly or
indirectly (except proportionately as a shareholder), of any loans,
advances, guarantees, pledges or other financial assistance or any tax
credits or other tax advantages provided by us prior to the
consummation of such business combination (other than in connection
with financing a fair tender offer); and
(d) proxy statement that conforms in all respects with the
provisions of the Exchange Act and the rules and regulations
thereunder shall be mailed to holders of our common shares at least 30
days prior to the consummation of the business combination for the
purpose of soliciting shareholder approval of the business
combination; or
(5) the "rights" (as defined below) shall have become exercisable.
If a person has become a related person and within one year after the date
of the transaction pursuant to which the related person became a related person,
which shall be considered as the "acquisition date,"
(1) a business combination meeting all of the requirements of paragraphs
(4)(a)(b)(c) and (d) above regarding the applicability of the 80% voting
requirement shall not have been consummated;
(2) a fair tender offer shall not have been consummated; and
(3) we have not been dissolved and liquidated,
then, in such event the beneficial owner of each common share (not including
shares beneficially owned by the related person) shall have the right (each a
"right" and collectively the "rights") which may be exercised subject to certain
conditions, commencing at the opening of business on the one-year anniversary
date of the acquisition date and continuing for a period of 90 days thereafter,
subject to certain extensions, to sell to us on the terms set forth herein one
share upon exercise of such right. At 5:00 P.M., Houston, Texas time, on the
last day of the exercise period, each right not exercised shall become void, all
rights in respect thereof shall cease as of such time and the certificates shall
no longer represent rights.
Stock Exchange Listing. Our Series D Cumulative Redeemable Preferred
Shares and our Series E Cumulative Redeemable Preferred Shares are listed for
trading on the New York Stock Exchange.
DESCRIPTION OF DEBT SECURITIES
We will prepare and distribute a prospectus supplement that describes the
specific terms of the debt securities. In this section of the prospectus, we
describe the general terms we expect all debt securities will have. We also
identify some of the specific terms that will be described in a prospectus
supplement. Although we expect that any debt securities we offer with this
prospectus will have the general terms we describe in this section, our debt
securities may have terms that are different from or inconsistent with the
general terms we describe here. Therefore, you should read the prospectus
supplement carefully.
Any senior debt securities will be issued under a senior indenture dated as
of May 1, 1995 between us and JPMorgan Chase Bank, as trustee, and any
subordinated debt securities will be issued under a subordinated indenture dated
as of May 1, 1995 between us and JPMorgan Chase Bank, as trustee. The term
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"trustee" as used in this prospectus refers to any bank that we may appoint as
trustee under the terms of the applicable indenture, in its capacity as trustee
for the senior securities or the subordinated securities.
We have summarized specific terms and provisions of the indentures. The
summary is not complete. The indentures have been incorporated by reference as
exhibits to the registration statement of which this prospectus is a part. We
urge you to read the indentures because they, and not this description, fully
define the rights of holders of debt securities. The indentures are subject to
the Trust Indenture Act of 1939, as amended. To obtain copies of the indentures,
see "Where You Can Find More Information" on page 36.
GENERAL
Unless otherwise provided in the prospectus supplement, the debt securities
(whether senior or subordinated) will be our direct, unsecured general
obligations. The senior debt securities will rank equally with all of our other
unsecured and unsubordinated indebtedness. The subordinated debt securities will
be subordinated and junior in right of payment to the prior payment in full of
our present and future senior debt securities. See "- Subordinated Debt
Securities" on page 14.
The indentures do not limit the amount of debt securities that we can
offer. Each indenture allows us to issue debt securities up to the principal
amount that may be authorized by us. We may issue additional debt securities
without your consent. We may issue debt securities in one or more series. 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.
Without your consent, we may engage in a highly leveraged transaction, a
restructuring, a transaction involving a change in control, or a merger or
similar transaction that may adversely affect holders of debt securities. We
will not list the debt securities on any securities exchange.
ADDITIONAL TERMS OF DEBT SECURITIES
A prospectus supplement and any supplemental indentures relating to any
series of debt securities being offered will include specific terms relating to
the offering. These terms will include some or all of the following:
- the type and title of debt securities offered;
- any limit upon the total principal amount of the series of debt
securities;
- the total principal amount and priority of the debt securities;
- the percentage of the principal amount at which the debt securities
will be issued and any payments due if the maturity of the debt
securities is accelerated;
- the dates on which the principal of and premium, if any, on the debt
securities will be payable or the method of determining such date;
- the interest rates (which may be fixed or variable) that the debt
securities will bear, or the method for determining such rates;
- the dates from which the interest on the debt securities will accrue
and be payable, or the method of determining those dates;
- the date or dates on which interest will be payable and the record
date or dates to determine the persons who will receive payment;
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- the place where principal of, premium, if any, and interest, on the
debt securities will be payable or at which the debt securities may be
surrendered for registration of transfer or exchange;
- the period or periods within which, the price or prices at which, the
currency (if other than U.S. dollars) in which, and the other terms
and conditions upon which, the debt securities may be redeemed, in
whole or in part, at our option, if we have that option;
- the obligation, if any, we have to redeem or repurchase the debt
securities pursuant to any sinking fund or similar provisions or upon
the happening of a specified event or at the option of a holder; and
the period or periods within which, the price at which, and the other
terms and conditions upon which, such debt securities shall be
redeemed or purchased, in whole or in part;
- the denominations in which the debt securities are authorized to be
issued;
- if the amount of principal of, or premium, if any, or interest on, the
debt securities may be determined with reference to an index or
pursuant to a formula or other method, the method in which such
amounts will be determined;
- the amount or percentage payable if we accelerate the maturity of the
debt securities, if other than the principal amount;
- any changes to or additional events of default or covenants set forth
in the indentures;
- the terms of subordination, if any;
- any special tax implications of the debt securities, including
provisions for original issue discount securities;
- provisions, if any, granting special rights to the holders of the debt
securities if certain specified events occur; the circumstances, if
any, under which we will pay additional amounts on the debt securities
held by non-U.S. persons for taxes, assessments or similar charges;
- whether the debt securities will be issued in registered or bearer
form or both;
- the date as of which any debt securities in bearer form and any
temporary global security representing outstanding securities are
dated, if other than the original issuance date of the debt
securities;
- the forms of the securities and interest coupons, if any, of the
series;
- if other than the trustee under the applicable indenture, the identity
of the registrar and any paying agent for the debt securities;
- any means of defeasance or covenant defeasance that may be specified
in the debt securities;
- whether the debt securities are to be issued in whole or in part in
the form of one or more temporary or permanent global securities and,
if so, the identity of the depositary or its nominee, if any, for the
global security or securities and the circumstances under which
beneficial owners of interest in the global security may exchange
those interests for certificated debt securities to be registered in
the name of, or to be held by, the beneficial owners or their
nominees;
- if the debt securities may be issued or delivered, or any installation
of principal or interest may be paid, only upon receipt of certain
certificates or other documents or satisfaction of other conditions in
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addition to those specified in the applicable indenture, the form of
those certificates, documents or conditions;
- any definitions for the debt securities for that series that are
different from or in addition to the definitions included in the
applicable indentures;
- in the case of the subordinated indenture, the relative degree to
which the debt securities shall be senior to or junior to other
securities, whether currently outstanding or to be offered in the
future, and to other debt, in right of payment;
- whether the debt securities are to be guaranteed and, if so, by
identity of the guarantors and the terms of the guarantees;
- the terms, if any, upon which the debt securities may be converted or
exchanged into or for our common shares, preferred shares or other
securities or property;
- any restrictions on the registration, transfer or exchange of the debt
securities; and
- any other terms consistent with the indenture.
DENOMINATIONS, INTEREST, REGISTRATION AND TRANSFER
Unless the prospectus supplement states differently, the debt securities of
any series issued in registered form will be issuable in denominations of $1,000
and integral multiples of $1,000. Unless the prospectus supplement states
otherwise, the debt securities of any series issued in bearer form will be
issuable in denominations of $5,000.
Unless otherwise provided in the applicable prospectus supplement, the
trustee will pay the principal of and any premium and interest on the debt
securities and will register the transfer of any debt securities at its offices.
However, at our option, we may distribute interest payments by mailing a check
to the address of each holder of debt securities that appears on the register
for the debt securities.
Any interest on a debt security not punctually paid or duly provided for on
any interest payment date will cease to be payable to the holder on the
applicable regular record date. This defaulted interest may be paid to the
person in whose name the debt security is registered at the close of business on
a special record date for the payment of the defaulted interest. We will set the
special record date and give the holder of the debt security at least 10 days'
prior notice. In the alternative, this defaulted interest may be paid at any
time in any other lawful manner, all as fully described in the applicable
indenture.
Subject to any 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 to the
applicable trustee of the debt securities. In addition, subject to any
limitations imposed upon debt securities issued in book-entry form, a holder may
surrender the debt securities to the trustee for conversion or registration of
transfer. Every debt security surrendered for conversion, registration of
transfer or exchange will be duly endorsed or accompanied by a written
instrument of transfer from the holder. A holder will not have to pay a service
charge for any registration of transfer or exchange of any debt securities, but
we may require payment of a sum sufficient to cover any applicable tax or other
governmental charge.
If the prospectus supplement refers to any transfer agent, in addition to
the applicable trustee that we initially designated with respect to any series
of debt securities, we may at any time rescind the designation of the transfer
agent or approve a change in the location through which the transfer agent acts,
except that we will be required to maintain a transfer agent in each place of
payment for the series. We may at any time designate additional transfer agents
with respect to any series of debt securities.
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Neither we nor the trustee will be required to:
- 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;
- 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
- issue, register the transfer of or exchange any debt security that has
been surrendered for repayment at the holder's option, except the
portion, if any, of the debt security not to be repaid.
SENIOR DEBT SECURITIES
Any additional senior debt securities we issue will rank equally in right
of payment with the senior debt securities offered by this prospectus and the
applicable prospectus supplement. Further, the senior indenture does not
prohibit us from issuing additional debt securities that may rank equally in
right of payment to the senior debt securities. Any senior debt securities
offered pursuant to the senior indenture will be senior in right of payment to
all subordinated debt securities issued under the subordinated indenture.
SUBORDINATED DEBT SECURITIES
The subordinated debt securities will have a junior position to all of our
senior debt. Under the subordinated indenture, payment of the principal,
interest and any premium on the subordinated debt securities will generally be
subordinated and junior in right of payment to the prior payment in full of all
senior debt. The subordinated indenture provides that no payment of principal,
interest and any premium on the subordinated debt securities may be made in the
event:
- of any insolvency, bankruptcy or similar proceeding involving us or
our properties; or
- we fail to pay the principal, interest, any premium or any other
amounts on any senior debt when due.
The subordinated indenture will not limit the amount of senior debt that we
may incur. All series of subordinated debt securities as well as other
subordinated debt issued under the subordinated indenture will rank equally with
each other in right of payment.
The subordinated indenture prohibits us from making a payment of principal,
premium, interest or sinking fund payments for the subordinated debt securities
during the continuance of any default on senior debt or any default under any
agreement pursuant to which the senior debt was issued beyond the grace period,
unless and until the default on the senior debt is cured or waived.
Upon any distribution of our assets in connection with any dissolution,
winding up, liquidation, reorganization, bankruptcy or other similar proceeding,
the holders of all senior debt securities will first be entitled to receive
payment in full of the principal, any premium and interest due on the senior
debt before the holders of the subordinated debt securities are entitled to
receive any payment. Because of this subordination, if we become insolvent, our
creditors who are not holders of senior debt or of the subordinated debt
securities may recover less, ratably, than holders of senior debt but may
recover more, ratably, than holders of the subordinated debt securities.
GLOBAL CERTIFICATES
Unless the prospectus supplement otherwise provides, we will issue debt
securities as one or more global certificates that will be deposited with The
Depository Trust Company. Unless otherwise specified in the applicable
prospectus supplement, debt securities issued in the form of a global
certificate to be deposited with DTC will be represented by a global certificate
registered in the name of DTC or its nominee. This means that we will not issue
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certificates to each holder. Generally, we will issue global securities in the
total principal amount of the debt securities in a series. Debt securities in
the form of a global certificate may not be transferred except as a whole among
DTC, its nominee or a successor to DTC and any nominee of that successor.
We may determine not to use global certificates for any series. In that
event, we will issue debt securities in certificated form.
The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of securities in certificated form. Those laws
and some conditions on transfer of global securities may impair the ability to
transfer interests in global securities.
OWNERSHIP OF GLOBAL SECURITIES
So long as DTC or its nominee is the registered owner of a global security,
that entity will be the sole holder of the debt securities represented by that
instrument. Both we and the trustee are only required to treat DTC or its
nominee as the legal owner of those securities for all purposes under the
indentures.
Unless otherwise specified in this prospectus or the prospectus supplement,
no actual purchaser of debt securities represented by a global security will be
entitled to receive physical delivery of certificated securities or will be
considered the holder of those securities for any purpose under the indentures.
In addition, no actual purchaser will be able to transfer or exchange global
securities unless otherwise specified in this prospectus or the prospectus
supplement. As a result, each actual purchaser must rely on the procedures of
DTC to exercise any rights of a holder under the applicable indenture. Also, if
an actual purchaser is not a DTC participant, the actual purchaser must rely on
the procedures of the participant through which it owns its interest in a global
security.
THE DEPOSITORY TRUST COMPANY
DTC acts as securities depositary for notes. DTC is:
- a limited-purpose trust company organized under the New York Banking
Law;
- a "banking organization" under the New York Banking Law;
- a member of the Federal Reserve System;
- a "clearing corporation" under the New York Uniform Commercial Code;
and
- a "clearing agency" registered under the provision of Section 17A of
the Securities Exchange Act of 1934.
DTC holds securities that its direct participants deposit with DTC. DTC
also facilitates the settlement among direct participants of securities
transactions, such as transfers and pledges, in deposited securities through
electronic computerized book-entry changes in direct participants' accounts,
thereby eliminating the need for physical movement of securities certificates.
Direct participants of DTC include securities brokers and dealers
(including underwriters), banks, trust companies, clearing corporations, and
certain other organizations. DTC is owned by a number of its direct participants
and by The New York Stock Exchange, Inc., the American Stock Exchange, Inc. and
the National Association of Securities Dealers, Inc. Indirect participants of
DTC, such as securities brokers and dealers, banks and trust companies, can also
access the DTC system if they maintain a custodial relationship with a direct
participant.
If you are not a direct participant or an indirect participant and you wish
to purchase, sell or otherwise transfer ownership of, or other interests in, the
notes, you must do so through a direct participant or an indirect participant.
15
DTC agrees with and represents to DTC participants that it will administer its
book-entry system in accordance with its rules and by-laws and requirements of
law. The SEC has on file a set of the rules applicable to DTC and its direct
participants.
To facilitate subsequent transfers, all notes deposited with DTC are
registered in the name of DTC's nominee, Cede & Co. The deposit of notes with
DTC and their registration in the name of Cede & Co. has no effect on beneficial
ownership. DTC has no knowledge of the actual beneficial owners of the notes.
DTC'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 DTC to direct
participants, by direct participants to indirect participants and by direct 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.
BOOK-ENTRY FORMAT
Under the book-entry format, the trustee will pay interest or principal
payments to Cede & Co., as nominee of DTC. DTC will forward the payment to the
direct participants, who will then forward the payment to the indirect
participants or to the beneficial owners. You may experience some delay in
receiving your payments under this system.
Initial settlement for the global notes will be made in immediately
available funds. Secondary market trading between DTC's participants will occur
in the ordinary way in accordance with DTC's rules and will be settled in
immediately available funds using DTC's Same-Day Funds Settlement System.
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the notes among participants of DTC, it is under no
obligation to perform or continue to perform the foregoing procedures and these
procedures may be changed or discontinued at any time.
The trustee will not recognize you as a holder under the indenture, and you
can only exercise the rights of a holder indirectly through DTC and its direct
participants. DTC has advised us that it will only take action regarding a note
if one or more of the direct participants to whom the note is credited direct
DTC to take such action. DTC can only act on behalf of its direct participants.
Your ability to pledge notes to indirect participants, and to take other
actions, may be limited because you will not possess a physical certificate that
represents your notes.
CERTIFICATED NOTES
Unless and until they are exchanged, in whole or in part, for notes in
definitive form in accordance with the terms of the notes, notes may not be
transferred except as a whole by DTC to a nominee of DTC; as a whole by a
nominee of DTC to DTC or another nominee of DTC; or as a whole by DTC or nominee
of DTC to a successor of DTC or a nominee of such successor.
We will issue notes to you or your nominees, in fully certificated
registered form, rather than to DTC or its nominees, only if:
- we advise the trustee in writing that DTC is no longer willing or able
to discharge its responsibilities properly or that DTC is no longer a
registered clearing agency under the Securities Exchange Act of 1934,
and the trustee or we are unable to locate a qualified successor
within 90 days;
- there has occurred and is continuing an Event of Default or any event
which after notice or lapse of time or both would be an Event of
Default, in which case we will issue notes to a holder of a beneficial
interest in the notes at the request of that beneficial holder; or
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- we, at our option, elect to terminate use of the book-entry system
through DTC.
If any of the above events occurs, DTC is required to notify all direct
participants that notes in fully certificated registered form are available
through DTC. DTC will then surrender the global notes along with instructions
for re-registration. The trustee will re-issue the notes in full certificated
registered form and will recognize the registered holders of the certificated
notes as holders under the senior indenture.
TRANSFER OR EXCHANGE OF DEBT SECURITIES
You may transfer or exchange debt securities (other than global securities)
without a service charge at the corporate trust office of the trustee. You may
also surrender debt securities (other than global securities) for conversion or
registration of transfer without a service charge at the corporate trust office
of the trustee. You must execute a proper form of transfer and pay any taxes or
other governmental charges resulting from that action.
TRANSFER AGENT
If we designate a transfer agent (in addition to the trustee) in a
prospectus supplement, we may at any time rescind this designation or approve a
change in the location through which any such transfer agent acts. We will,
however, be required to maintain a transfer agent in each place of payment for a
series of debt securities. We may at any time designate additional transfer
agents for a series of debt securities.
CERTAIN COVENANTS
Under the indentures, we are required to:
- pay the principal, interest and any premium on the debt securities
when due;
- maintain a place of payment;
- deliver a report to the trustee at the end of each fiscal year
certifying our compliance with all of our obligations under the
indentures;
- deposit sufficient funds with any paying agent on or before the due
date for any principal, interest or any premium;
- maintain an unencumbered total asset value (as defined in the
indentures) in an amount of not less than 100% of the aggregate
principal amount of all our outstanding debt;
- except as described under " - Merger, Consolidation and Sale of
Assets," do or cause to be done all things necessary to preserve and
keep in full force and effect our existence, rights (declaration of
trust and statutory) and franchises, unless the board of trust
managers determines that the preservation thereof is no longer
desirable in the conduct of our business;
- cause all of our material properties used or useful for the conduct of
our business to be maintained and kept in good condition, repair and
working order and we will cause to be made all necessary repairs,
renewals, replacements, betterments and improvements of our material
properties to be made, all as in our judgment may be necessary so that
the business carried on in connection therewith may be properly and
advantageously conducted at all times;
- keep all of our insurable properties insured against loss or damage at
least equal to their then full insurable value with insurers of
recognized responsibility and, if such insurer has publicly rated
debt, the rating for such debt must be at least investment grade with
the nationally recognized rating agencies; pay or discharge or cause
to be paid or discharged, before they shall become delinquent, (1) all
taxes, assessments and governmental charges levied or imposed upon us
17
or upon our income, profits or property, and (2) all lawful claims for
labor, materials and supplies which, if unpaid, might by law become a
lien upon our property; provided, however, we are not required to pay
or discharge any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith; and
- transmit by mail to all holders of debt securities, without cost to
such holders, and file with the trustee copies of the annual reports,
quarterly reports and other documents which we file with the SEC
pursuant to Sections 13 and 15(d) of the Exchange Act.
Under the indentures, we may not:
- incur or permit a subsidiary to incur any debt (as defined in the
indentures) which causes the aggregate principal amount of all our
outstanding debt to become greater than 60% of the sum of (1) our
total assets (as defined in the indentures) at the end of the calendar
quarter covered in our then most recent 10-K or 10-Q and (2) the
purchase price of any real estate assets or mortgages receivable
acquired and any securities offering proceeds received since the end
of such calendar quarter to the extent such proceeds were not used by
us to acquire real estate assets or mortgages receivable or used to
reduce debt;
- incur or permit a subsidiary to incur any debt if our ratio of
consolidated income available for debt service (as defined in the
indentures) to the annual service charge (as defined in the
indentures) shall have been less than 2.5 for the four quarters then
most recently ended; and
- incur any debt or permit a subsidiary to incur any debt secured by any
mortgage lien, charge, pledge, encumbrance or security interest in
which the aggregate principal amount of all our outstanding secured
debt is greater than 40% of our total assets.
EVENTS OF DEFAULT, NOTICE AND WAIVER
Events of default under the indentures for any series of debt securities
include:
- failure for 30 days to pay interest on any debt securities of that
series;
- failure to pay principal of, or premium, if any, on any debt
securities of that series;
- failure to pay any sinking fund payment when due;
- failure to perform or breach of any covenant or warranty contained in
the indentures (other than a covenant added to the indentures solely
for the benefit of a particular series of debt securities), which
continues for 60 days after written notice as provided in the
indenture;
- default under any of our other debt instruments with an aggregate
principal amount outstanding of at least $10,000,000; or
- events of bankruptcy, insolvency or reorganization, or court
appointment of a receiver, liquidator or trustee.
An event of default for a particular series of debt securities does not
necessarily constitute an event of default for any other series of debt
securities issued under an indenture. The trustee may withhold notice to the
holders of debt securities of any default (except in the payment of principal or
interest) if it considers such withholding of notice to be in the best interests
of the holders.
If an event of default for any series of debt securities occurs and
continues, the trustee or the holders of at least 25% of the total principal
amount of the debt securities of the series may declare the entire principal of
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that series due and payable immediately. If an event of default occurs due to
bankruptcy, insolvency or reorganization or court appointment of a receiver,
liquidator or trustee, no advance notice of acceleration is required;
acceleration is automatic.
Each indenture provides that, if an event of default has occurred, the
trustee is to use the degree of care a prudent person would use in the conduct
of his own affairs. Subject to those provisions, the trustee is under no
obligation to exercise any of its rights or powers under an indenture at the
request of any of the holders of the debt securities of a series unless they
have furnished to the trustee reasonable security or indemnity.
Each indenture provides that, after a declaration of acceleration, but
before a judgment or decree for payment of the money due has been obtained by
the trustee, the holders of a majority in aggregate principal amount of the debt
securities of that series, by written notice to us and the trustee, may rescind
and annul such declaration if:
- we have paid, or deposited with the trustee a sum sufficient to pay:
- all overdue interest on all debt securities of the applicable
series;
- the principal of and premium, if any, on any debt securities of
the applicable series which have become due other than by such
declaration of acceleration, plus interest thereon at the rate
borne by the debt securities;
- to the extent that payment of such interest is lawful, interest
upon overdue interest at the rate borne by the debt securities;
and
- all sums paid or advanced by the trustee under the indenture and
the reasonable compensation, expenses, disbursements and advances
of the trustee, its agents and counsel; and
- all events of default, other than the non-payment of principal of the
debt securities which have become due solely by such declaration of
acceleration, have been cured or waived.
The 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 the trustee may
withhold notice to the holders of any series of debt securities of any default
with respect to such series (except a default in the payment of the principal
of, and premium, if any, or interest on any debt security of such series or in
the payment of any sinking fund installment in respect of any debt security of
such series) if the trustee considers such withholding to be in the interest of
the holders.
LIMITATION ON SUITS
The indentures limit the right of holders of debt securities to institute
legal proceedings. No holder of any debt securities will have the right to bring
a claim under an indenture unless:
- the holder has given written notice to the trustee of default under
the terms of that series of debt;
- the holders of not less than 25% of the aggregate principal amount of
debt securities of that series shall have made a written request to
the trustee to bring the claim and furnished the trustee reasonable
indemnification as it may require;
- the trustee has not commenced an action within 60 days of receipt of
the notice, request and offer of indemnity; and
- no direction inconsistent with a request has been given to the trustee
by the holders of not less than a majority of the aggregate principal
amount of the debt securities.
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The holders of a majority in aggregate principal amount of any series of
debt securities may direct the time, method and place of conducting any
proceeding for any remedy available to the trustee or exercising any power
conferred on the trustee with respect to the securities of any series; provided,
however, that
- the direction does not conflict with any rule of law or an indenture,
- the trustee may take any action it deems proper and which is
consistent with the direction of the holders; and
- the trustee is not required to take any action that would unduly
prejudice the holders of the debt securities not taking part in the
action or would impose personal liability on the trustee.
MODIFICATION OF THE INDENTURES
In order to change or modify an indenture, we must obtain the consent of
holders of at least a majority in principal amount of all outstanding debt
securities affected by that change. The consent of holders of at least a
majority in principal amount of each series of outstanding debt securities is
required to waive compliance by us with specific covenants in an indenture. We
must obtain the consent of each holder affected by a change:
- to extend the maturity, or to reduce the principal, redemption premium
or interest rate;
- change the place of payment, or the coin or currency, for payment;
- limit the right to sue for payment; or
- reduce the level of consents needed to approve a change to an
indenture; or 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 level of consents needed to
approve a change to an indenture.
DEFEASANCE
Unless stated otherwise in a prospectus supplement, we will be able to
discharge our obligations under debt securities at any time by taking the
actions described below. The discharge of all obligations using this process is
known as "defeasance." If we defease debt securities, all obligations under the
series of debt securities that is defeased will be deemed to have been
discharged, except for:
- the rights of holders of outstanding debt securities to receive,
solely from funds deposited for this purpose, payments in respect of
the principal of, premium, if any, and interest on those debt
securities when the payments are due;
- the obligations with respect to the debt securities concerning issuing
temporary debt securities, registration of debt securities, mutilated,
destroyed, lost or stolen debt securities, and the maintenance of an
office or agency for payment and money for security payments held in
trust;
- the rights, powers, trusts, duties and immunities of the trustee; and
- the defeasance provisions of the indenture.
We will also be able to free ourselves from certain covenants that are
described in the indentures by taking the actions described below. The
discharge of obligations using this process is known as "covenant defeasance."
If we defease covenants under debt securities, then certain events (not
including non-payment, enforceability of any guarantee, bankruptcy and
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insolvency events) described under " - Events of Default, Notice and Waiver"
will no longer constitute an event of default with respect to the debt
securities.
Unless stated otherwise in a prospectus supplement, in order to exercise
either defeasance or covenant defeasance as to the outstanding debt securities
of a series:
- we must irrevocably deposit with the trustee, in trust, for the
benefit of the holders of the debt securities of the applicable
series, an amount in (1) currency in which those debt securities are
then specified as payable at maturity, (2) government securities (as
defined in the applicable indenture) or (3) any combination thereof,
as will be sufficient, in the opinion of a nationally recognized firm
of independent public accountants expressed in a written certification
thereof delivered to the trustee, to pay and discharge the principal
of, premium, if any, and interest on the debt securities of the
applicable series on the stated maturity of such principal or
installment of principal or interest and any mandatory sinking fund
payments;
- in the case of defeasance, we will deliver to the trustee an opinion
of counsel confirming that either:
- we have received from, or there has been published by, the
Internal Revenue Service a ruling, or
- since the date we issued the applicable debt securities, there
has been a change in the applicable federal income tax law,
the effect of either being that the holders of the outstanding debt
securities of the applicable series will not recognize income, gain or loss
for federal income tax purposes as a result of such defeasance and will be
subject to 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 had not
occurred;
- in the case of covenant defeasance, we will deliver to the trustee an
opinion of counsel to the effect that the holders of the debt
securities of the applicable series will not recognize income, gain or
loss for federal income tax purposes as a result of such covenant
defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been
the case if such covenant defeasance had not occurred;
- no default or event of default shall have occurred and be continuing
on the date of such deposit or insofar as Sections 501(6) and 501(7)
of the indentures are concerned, at any time during the period ending
on the 91st day after the date of deposit;
- the defeasance or covenant defeasance shall not result in a breach or
violation of, or constitute a default under, the indenture or any
other material agreement or instrument to which we are a party or by
which we are bound;
- we will deliver to the trustee an officers' certificate and an opinion
of counsel, each stating that all conditions precedent provided for
that relate to either the defeasance or the covenant defeasance, as
the case may be, have been met; and
- we will deliver to the trustee an opinion of counsel to the effect
that either (1) as a result of the deposit pursuant to the first
bullet in this paragraph and the election to defease, registration is
not required under the Investment Company Act of 1940, as amended,
with respect to the trust funds representing the deposit, or (2) all
necessary registrations under the Investment Company Act have been
effected.
CONVERSION
Debt securities may be convertible into or exchangeable for common shares
or preferred shares. The prospectus supplement will describe the terms of any
conversion rights. To protect our status as a REIT, debt securities are not
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convertible if, as a result of that conversion, any person would then be deemed
to own, directly or indirectly, more than 9.8% of our capital shares. See
"Restrictions On Ownership" on page 8.
MERGER, CONSOLIDATION AND SALE OF ASSETS
Each indenture generally permits us to consolidate or merge with another
entity. The indentures also permit us to sell all or substantially all of our
property and assets. If this happens, the remaining or acquiring entity must
assume all of our responsibilities and liabilities under the indentures
including the payment of all amounts due on the debt securities and performance
of the covenants in the indentures. However, we will only consolidate or merge
with or into any other entity or sell all or substantially all of our assets
according to the terms and conditions of the indentures. The remaining or
acquiring entity will be substituted for us in the indentures with the same
effect as if it had been an original party to the indentures. Thereafter, the
successor entity may exercise our rights and powers under any indenture, in our
name or in its own name. Any act or proceeding required or permitted to be done
by our board of trust managers or any of our officers may be done by the board
or officers of the successor entity.
MODIFICATIONS AND AMENDMENTS
Unless stated otherwise in a prospectus supplement, we and the trustee may
modify and amend either indenture with the consent of the holders of a majority
in aggregate principal amount of the outstanding debt securities of all series
affected by the modification or amendment; provided, however, that no
modification or amendment may, without the consent of the holder of each
outstanding debt security of all series affected by the modification or
amendment:
- change the stated maturity of the principal of, or any installment of
interest on, any debt security;
- reduce the principal amount thereof or the rate of interest thereon or
any premium payable upon the redemption thereof;
- change the currency in which the principal or premium, if any, of any
debt security or the interest thereon is payable;
- reduce the percentage in principal amount of outstanding debt
securities of any series for which the consent of the holders is
required for any such supplemental indenture, or for any waiver of
compliance with certain provisions of the indenture or certain
defaults; or
- modify any of the provisions that relate to supplemental indentures
and that require the consent of holders, that relate to the waiver of
past defaults, that relate to the waiver of certain covenants, except
to increase the percentage in principal amount of outstanding debt
securities required to take such actions or to provide that certain
other provisions of the indenture cannot be modified or waived without
the consent of the holder of each debt security affected thereby.
Unless we say otherwise in a prospectus supplement, we and the trustee may
modify and amend either indenture without the consent of the holders if the
modification or amendment does only the following:
- evidences the succession of another person to us and the assumption by
any such successor of any covenants under the indenture and in the
debt securities of any series;
- adds to our covenants for the benefit of the holders of all or any
series of debt securities or surrenders any of our rights or powers;
- adds any additional event of default for the benefit of the holders of
all or any series of debt securities;
- adds or changes any provisions to the extent necessary to provide that
bearer securities may be registrable as to principal, to change or
eliminate any restrictions on the payment of principal of or any
22
premium or interest on bearer securities, to permit bearer securities
to be issued in exchange for registered securities or bearer of
securities of other authorized denominations, or to permit or
facilitate the issuance of securities in uncertificated form;
- changes or eliminates any provision affecting only debt securities not
yet issued;
- secures the debt securities of any series;
- establishes the form or terms of debt securities of any series not yet
issued;
- evidences and provides for successor trustees or adds or changes any
provisions of the indenture to the extent necessary to permit or
facilitate the appointment of a separate trustee or trustees for
specific series of debt securities;
- cures any ambiguity, corrects or supplements any provisions which may
be defective or inconsistent with any other provision, or makes any
other provisions with respect to matters or questions arising under
the indenture which shall not be inconsistent with the provisions of
the indenture; provided, however, that no such modification or
amendment may adversely affect the interest of holders of debt
securities of any series then outstanding in any material respect; or
- supplements any provision of the indenture to such extent as shall be
necessary to permit the facilitation of defeasance and discharge of
any series of debt securities; provided, however, that any such action
may not adversely affect the interest of holders of debt securities of
any series then outstanding in any material respect.
ORIGINAL ISSUE DISCOUNT
We may issue debt securities under either indenture for less than their
stated principal amount. Such securities may be treated as "original issue
discount securities," and they may be subject to special tax consequences. In
addition, some debt securities that are offered and sold at their stated
principal amount may, under certain circumstances, be treated as issued at an
original issue discount for federal income tax purposes. We will describe the
federal income tax consequences and other special consequences applicable to
securities treated as original issue discount securities in the prospectus
supplement relating to such securities. "Original issue discount security"
generally means any debt security that:
- does not provide for the payment of interest prior to maturity; or
- is issued at a price lower than its face value and provides that upon
redemption or acceleration of its stated maturity an amount less than
its principal amount shall become due and payable.
GOVERNING LAW
Unless stated otherwise in a prospectus supplement, each indenture and the
debt securities will be governed by the laws of the State of New York.
DESCRIPTION OF WARRANTS
We may issue warrants for the purchase of preferred shares or common
shares. We may issue warrants independently or together with debt securities,
preferred shares or common shares or attached to or separate from the offered
securities. We will issue each series of warrants under a separate warrant
agreement between us and a bank or trust company as warrant agent, as specified
in the applicable prospectus supplement.
The warrant agent will act solely as our agent in connection with the
warrants and will not act for or on behalf of warrant holders. The following
sets forth certain general terms and provisions of the warrants that may be
23
offered under this registration statement. Further terms of the warrants and the
applicable warrant agreements will be set forth in the applicable prospectus
supplement.
The applicable prospectus supplement will describe the terms of the
warrants in respect of which this prospectus is being delivered, including,
where applicable, the following:
- the title of such warrants;
- the aggregate number of such warrants;
- the price or prices at which such warrants will be issued;
- the type and number of securities purchasable upon exercise of such
warrants;
- the designation and terms of the other offered securities, if any,
with which such warrants are issued and the number of such warrants
issued with each such offered security;
- the date, if any, on and after which such warrants and the related
securities will be separately transferable;
- the price at which each security purchasable upon exercise of such
warrants may be purchased;
- the date on which the right to exercise such warrants shall commence
and the date on which such right shall expire;
- the minimum or maximum amount of such warrants that may be exercised
at any one time;
- information with respect to book-entry procedures, if any;
- any anti-dilution protection;
- a discussion of certain federal income tax considerations; and
- any other terms of such warrants, including terms, procedures and
limitations relating to the transferability, exercise and exchange of
such warrants.
Warrant certificates will be exchangeable for new warrant certificates of
different denominations and warrants may be exercised at the corporate trust
office of the warrant agent or any other office indicated in the applicable
prospectus supplement. Prior to the exercise of their warrants, holders of
warrants will not have any of the rights of holders of the securities
purchasable upon such exercise or to any dividend payments or voting rights as
to which holders of the preferred shares or common shares purchasable upon such
exercise may be entitled.
Each warrant will entitle the holder to purchase for cash such number of
preferred shares or common shares, at such exercise price as shall, in each
case, be set forth in, or be determinable as set forth in, the applicable
prospectus supplement relating to the warrants offered thereby. Unless otherwise
specified in the applicable prospectus supplement, warrants may be exercised at
any time up to 5:00 p.m. New York City time on the expiration date set forth in
applicable prospectus supplement. After 5:00 p.m. time on the expiration date,
unexercised warrants will become void.
Warrants may be exercised as set forth in the applicable prospectus
supplement relating to the warrants. Upon receipt of payment and the warrant
certificate properly completed and duly executed at the corporate trust office
of the warrant agent or any other office indicated in the applicable prospectus
supplement, we will, as soon as practicable, forward the securities purchasable
24
upon such exercise. If less than all of the warrants are presented by such
warrant certificate of exercise, a new warrant certificate will be issued for
the remaining amount of warrants.
FEDERAL INCOME TAX CONSEQUENCES
This section summarizes the material federal income tax issues that you, as
a holder of our securities, may consider relevant. Because this section is a
summary, it does not address all of the tax issues that may be important to you.
Locke Liddell & Sapp LLP has acted as our special tax counsel, has reviewed this
summary, and is of the opinion that the discussion contained herein fairly
summarizes the federal income tax consequences that are likely to be material to
a holder of our securities. The discussion does not address all aspects of
taxation that may be relevant to a particular holder of our securities in light
of their personal investment or tax circumstances, or to certain types of
holders of our securities that are subject to special treatment under the
federal income tax laws, such as insurance companies, tax-exempt organizations,
financial institutions or broker-dealers, and non-U.S. individuals or foreign
corporations.
The statements in this section and the opinion of Locke Liddell & Sapp LLP
are based on the current federal income tax laws governing qualification as a
REIT. We cannot assure you that new laws, interpretations of law or court
decisions, any of which may take effect retroactively, will not cause any
statement in this section to be inaccurate.
WE URGE YOU TO CONSULT YOUR OWN TAX ADVISOR REGARDING THE SPECIFIC TAX
CONSEQUENCES TO YOU OF OWNERSHIP OF OUR SECURITIES AND OF OUR TAXATION AS A
REIT. SPECIFICALLY, YOU SHOULD CONSULT YOUR OWN TAX ADVISOR REGARDING THE STATE,
LOCAL, FOREIGN, AND OTHER TAX CONSEQUENCES OF SUCH OWNERSHIP AND TAXATION, AND
REGARDING POTENTIAL CHANGES IN APPLICABLE TAX LAWS.
TAXATION OF OUR COMPANY
We elected to be taxed as a REIT under the federal income tax laws
commencing with our taxable year ended December 31, 1985. We believe that we
have been organized and have operated in such a manner so as to qualify for
taxation as a REIT under the federal income tax laws, and we intend to continue
to operate in such a manner, but no assurance can be given that we will operate
in a manner so as to qualify or remain qualified as a REIT. This section
discusses the laws governing the federal income tax treatment of a REIT. These
laws are highly technical and complex.
In the opinion of Locke Liddell & Sapp LLP, we qualified to be taxed as a
REIT for our taxable year ended December 31, 2003, and our organization and
currently proposed method of operation will enable us to continue to qualify as
a REIT for our taxable year ending December 31, 2004. Investors should be aware
that Locke Liddell & Sapp LLP's opinion is based upon customary assumptions, is
conditioned upon certain representations made by us, including representations
regarding the nature of our properties and the conduct of our business, and is
not binding upon the Internal Revenue Service or any court. In addition, Locke
Liddell & Sapp LLP's opinion is based on existing federal income tax law
governing qualification as a REIT, which is subject to change either
prospectively or retroactively. Moreover, our qualification and taxation as a
REIT depend upon our ability to meet on a continuing basis, through actual
annual operating results, certain qualification tests set forth in the federal
tax laws. Those qualification tests involve the percentage of income that we
earn from specified sources, the percentage of our assets that falls within
specified categories, the diversity of our stock ownership, and the percentage
of our earnings that we distribute. Locke Liddell & Sapp LLP will not review our
compliance with those tests on a continuing basis. Accordingly, no assurance can
be given that the actual results of our operations for any particular taxable
year will satisfy such requirements. For a discussion of the tax consequences of
our failure to qualify as a REIT, see "-Failure to Qualify."
If we qualify as a REIT, we generally will not be subject to federal income
tax on the taxable income that we distribute to our shareholders. The benefit of
that tax treatment is that it avoids the "double taxation," or taxation at both
the corporate and shareholder levels, that generally results from owning stock
in a corporation. However, we will be subject to federal tax in the following
circumstances:
25
- We will pay federal income tax on taxable income, including net
capital gain, that we do not distribute to shareholders during, or
within a specified time period after, the calendar year in which the
income is earned.
- We may be subject to the "alternative minimum tax" on any items of tax
preference that we do not distribute or allocate to shareholders.
- We will pay income tax at the highest corporate rate on:
- Net income from the sale or other disposition of property
acquired through foreclosure ("foreclosure property") that we
hold primarily for sale to customers in the ordinary course of
business, and
- Other non-qualifying income from foreclosure property.
- We will pay 100% tax on net income from sales or other dispositions of
property, other than foreclosure property, that we hold primarily for
sale to customers in the ordinary course of business.
- If we fail to satisfy the 75% gross income test or the 95% gross
income test, as described below under "Requirements for
Qualification-Income Tests," and nonetheless continue to qualify as a
REIT because we meet other requirements, we will pay a 100% tax on:
- The gross income attributable to the greater of (i) the amount by
which we fail the 75% gross income test and (ii) the amount by
which 90% of our gross income exceeds the amount of income
qualifying under the 95% gross income test; multiplied, in each
case, by
- A fraction intended to reflect our profitability.
- If we fail to distribute during a calendar year at least the sum of:
- 85% or our REIT ordinary income for the year;
- 95% of our REIT capital gain net income for the year; and
- any undistributed taxable income from the earlier periods,
we will pay a 4% nondeductible excise tax on the excess of the
required distribution over the amount we actually distributed.
- We may elect to retain any pay income tax on our net long-term capital
gain. In that case, a U.S. shareholder would be taxed on its
proportionate share of our undistributed long-term capital gain (to
the extent that we make a timely designation of such gain to the
shareholder) and would receive a credit or refund for its
proportionate share of the tax we paid.
- We will be subject to a 100% tax on transactions with a taxable REIT
subsidiary that are not conducted on an arm's-length basis.
- If we acquire any asset from a C corporation, or a corporation that
generally is subject to full corporate-level tax, in a merger or other
transaction in which we acquire a basis in the asset that is
determined by reference either to the C corporation's basis in the
asset or to another asset, we will pay tax at the highest regular
corporate rate applicable if we recognize gain on the sale or
disposition of the asset during the 10-year period after we acquire
the asset. The amount of gain on which we will pay tax is the lesser
of:
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- The amount of gain that we recognize at the time of the sale or
disposition; and
- The amount of gain we would have recognized if we had sold the asset
at the time we acquired it.
REQUIREMENTS FOR QUALIFICATION
A REIT is a corporation, trust or association that meets each of the
following requirements:
1. It is managed by one or more trustees or directors;
2. Its beneficial ownership is evidenced by transferable shares, or by
transferable certificates of beneficial interest;
3. It would be taxable as a domestic corporation, but for the REIT
provisions of the federal income tax laws;
4. It is neither a financial institution nor an insurance company subject
to special provisions of the federal income tax laws;
5. At least 100 persons are beneficial owners of its shares or ownership
certificates;
6. Not more than 50% in value of its outstanding shares or ownership
certificates is owned, directly or indirectly, by five or fewer
individuals, which the federal income tax laws define to include
certain entities, during the last half of any taxable year;
7. It elects to be a REIT, or has made such election for a previous
taxable year, and satisfies all relevant filing and other
administrative requirements established by the Internal Revenue
Service that must be met to elect and maintain REIT status; and
8. It meets certain other qualification tests, described below, regarding
the nature of its income and assets.
We must meet requirements 1 through 4 during our entire taxable year and
must meet requirement 5 during at least 335 days of a taxable year of 12 months,
or during a proportionate part of a taxable year of less than 12 months. For
purposes of determining share ownership under requirement 6, an "individual"
generally includes a supplemental unemployment compensation benefits plan, a
private foundation, or a portion of a trust permanently set aside or used
exclusively for charitable purposes. An "individual," however, generally does
not include a trust that is a qualified employee pension or profit sharing trust
under the federal income tax laws, and beneficiaries of such a trust will be
treated as holding our shares in proportion to their actuarial interests in the
trust for purposes of requirement 6.
Our outstanding common shares are owned by a sufficient number of investors
and in appropriate proportions to permit us to satisfy the share ownership
requirements. To protect against violations of the share ownership requirements,
our declaration of trust generally provides that no person is permitted to own,
applying constructive ownership tests set forth in the Internal Revenue Code,
more than 9.8% of our outstanding common shares. In addition, our declaration of
trust contains restrictions on transfers of capital shares, as well as
provisions that automatically convert common shares into excess securities to
the extent that the ownership otherwise might jeopardize our REIT status. These
restrictions, however may not ensure that we will, in all cases, be able to
satisfy the share ownership requirements. If we fail to satisfy these share
ownership requirements, except as provided in the next sentence, our status as a
REIT will terminate. However, if we comply with the rules contained in
applicable Treasury Regulations that require us to ascertain the actual
ownership of our shares and we do not know, or would not have known through the
exercise of reasonable diligence, that we failed to meet the 50% requirement
described above, we will be treated as having met this requirement. See the
section below entitled "-Failure to Qualify."
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To monitor our compliance with the share ownership requirements, we are
required to and we do maintain records disclosing the actual ownership of our
common shares. To do so, we will demand written statements each year from the
record holders of certain percentages of shares in which the record holders are
to disclose the actual owners of the shares (i.e., the persons required to
include in gross income the REIT dividends). A list of those persons failing or
refusing to comply with this demand will be maintained as part of our records.
Shareholders who fail or refuse to comply with the demand must submit a
statement with their tax returns disclosing the actual ownership of the shares
and certain other information.
We currently satisfy, and expect to continue to satisfy, the share
ownership requirements discussed above. We also currently satisfy, and expect to
continue to satisfy, the requirements that are separately described below
concerning the nature and amounts of our income and assets and the levels of
required annual distributions.
A corporation that is a "qualified REIT subsidiary" is not treated as a
corporation separate from its parent REIT. All assets, liabilities, and items of
income, deduction, and credit of a "qualified REIT subsidiary" are treated as
assets, liabilities, and items of income, deduction, and credit of the REIT. A
"qualified REIT subsidiary" is a corporation, all of the capital stock of which
is owned by the REIT. Thus, in applying the requirements described herein, any
"qualified REIT subsidiary" that we own will be ignored, and all assets,
liabilities, and items of income, deduction, and credit of such subsidiary will
be treated as our assets, liabilities, and items of income, deduction, and
credit.
An unincorporated domestic entity, such as a partnership or limited
liability company, that has a single owner, generally is not treated as an
entity separate from its parent for federal income tax purposes. An
unincorporated domestic entity with two or more owners is generally treated as a
partnership for federal income tax purposes. In the case of a REIT that is a
partner in a partnership that has other partners, the REIT is treated as owning
its proportionate share of the assets of the partnership and as earning its
allocable share of the gross income of the partnership for purposes of the
applicable REIT qualification tests. Thus, our proportionate share of the
assets, liabilities and items of income of any partnership, joint venture, or
limited liability company that is treated as a partnership for federal income
tax purposes in which we acquire an interest, directly or indirectly, will be
treated as our assets and gross income for purposes of applying the various REIT
qualification requirements.
A REIT is permitted to own up to 100% of the stock of one or more "taxable
REIT subsidiaries." A taxable REIT subsidiary is a fully taxable corporation
that may earn income that would not be qualifying income if earned directly by
the parent REIT. However, a taxable REIT subsidiary may not directly or
indirectly operate or manage any hotels or health care facilities or provide
rights to any brand name under which any hotel or health care facility is
operated. The subsidiary and the REIT must jointly elect to treat the subsidiary
as a taxable REIT subsidiary. A taxable REIT subsidiary will pay income tax at
regular corporate rates on any income that it earns. In addition, the taxable
REIT subsidiary rules limit the deductibility of interest paid or accrued by a
taxable REIT subsidiary to its parent REIT to assure that the taxable REIT
subsidiary is subject to an appropriate level of corporate taxation. Further,
the rules impose a 100% excise tax on transactions between a taxable REIT
subsidiary and its parent REIT or the REIT's tenants that are not conducted on
an arm's-length basis.
INCOME TESTS
We must satisfy two gross income tests annually to maintain our
qualification as a REIT. First, at least 75% of our gross income for each
taxable year must consist of defined types of income that we derive, directly or
indirectly, from investments relating to real property or mortgages on real
property or qualified temporary investment income. Qualifying income for
purposes of that 75% gross income test generally includes:
- Rents from real property;
- Interest on loans secured by real property;
- Dividends or other distributions on, and gains from the sale of,
shares in other REITs;
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- Gain from the sale of real estate assets;
- Income derived from the temporary investment of new capital that is
attributable to the issuance of our shares of beneficial interest or a
public offering of our debt with a maturity date of at least five
years and that we receive during the one-year period beginning on the
date on which we received such new capital;
- Income from the operation and gain from the sale of property acquired
in connection with the foreclosure of a mortgage securing that
property;
- Abatements and refunds of real property taxes; and
- Amounts received as consideration for entering into agreements to make
loans secured by real property or to purchase or lease real property.
Second, in general, at least 95% of our gross income for each taxable year
must consist of income that is qualifying income for purposes of the 75% gross
income test, other types of interest and dividends, gain from the sale or
disposition of stock or securities, income from certain hedging instruments or
any combination of these. Gross income from our sale of property that we hold
primarily for sale to customers in the ordinary course of business is excluded
from both the numerator and the denominator in both income tests. The following
paragraphs discuss the specific application of the gross income tests to us.
Rents from Real Property. Rent that we receive from our real property will
qualify as "rents from real property," which is qualifying income for purposes
of the 75% and 95% gross income tests, only if the following conditions are met.
First, the rent must not be based in whole or in part on the income or
profits of any person. Participating rent, however, will qualify as "rents from
real property" if it is based on percentages of receipts or sales and the
percentages:
Are fixed at the time the leases are entered into;
Are not renegotiated during the term of the leases in a manner that has the
effect of basing rent on income or profits; and
Conform with normal business practice.
More generally, the rent will not qualify as "rents from real property" if,
considering the lease and all the surrounding circumstances, the arrangement
does not conform with normal business practice, but is in reality used as a
means of basing the rent on income or profits. We generally do not intend to
lease property and receive rentals based on the tenant's income or profit.
Second, we must not own, actually or constructively, 10% or more of the
stock or the assets or net profits of any lessee (a "related party tenant")
other than a taxable REIT subsidiary. The constructive ownership rules generally
provide that, if 10% or more in value of our stock is owned, directly or
indirectly, by or for any person, we are considered as owning the stock owned,
directly or indirectly, by or for such person.
As described above, we may own up to 100% of the stock of the stock of one
or more taxable REIT subsidiaries. As an exception to the related party tenant
rule described in the preceding paragraph, rent that we receive from a taxable
REIT subsidiary will qualify as "rents from real property" as long as (1) the
taxable REIT subsidiary is a qualifying taxable REIT subsidiary, (2) at least
90% of the leased space in the property is leased to persons other than taxable
REIT subsidiaries and related party tenants, and (3) the amount paid by the
taxable REIT subsidiary to rent space at the property is substantially
comparable to rents paid by other tenants of the property for comparable space.
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Third, the rent attributable to the personal property leased in connection
with the lease of a party must not be greater than 15% of the total rent
received under the lease. The rent attributable to the personal property
contained in a property is the amount that bears the same ratio to total rent
for the taxable year as the average of the fair market values of the personal
property at the beginning and at the end of the taxable year bears to the
average of the aggregate fair market values of both the real and personal
property contained in the property at the beginning and at the end of such
taxable year (the "personal property ratio").
Fourth, we cannot furnish or render noncustomary services to the tenants of
our properties, or manage or operate our properties, other than through an
independent contractor who is adequately compensated and from whom we do not
derive or receive any income or through a taxable REIT subsidiary. However, we
need not provide services through an "independent contractor," but instead may
provide services directly or indirectly to our tenants, if the services are
"usually or customarily rendered" in connection with the rental of space for
occupancy only and are not considered to be provided for the tenants'
convenience. In addition, we may provide a minimal amount of noncustomary
services to the tenants of a property, other than through an independent
contractor, as long as our income from the services does not exceed 1% of our
income from the related property. Finally, we may own up to 100% of the stock
of one or more taxable REIT subsidiaries, which may provide noncustomary
services to our tenants without tainting our rents from the related properties.
We believe that the only material services generally to be provided to
tenants will be those usually or customarily rendered in connection with the
rental of space for occupancy only. We do not intend to provide services that
might be considered rendered primarily for the convenience of the tenants.
Consequently, we believe that substantially all of our rental income will be
qualifying income under gross income tests, and that our provision of services
will not cause the rental income to fail to be included under that test.
If a portion of the rent that we receive from a property does not qualify
as "rents from real property" because the rent attributable to personal property
exceeds 15% of the total rent for a taxable year, the portion of the rent that
is attributable to personal property will not be qualifying income for purposes
of either the 75% or 95% gross income test.
In addition to the rent, the lessees are required to pay certain additional
charges. To the extent that such additional charges represent (1) reimbursements
of amounts that we are obligated to pay to third parties, such as a lessee's
proportionate share of a property's operational or capital expenses, or (2)
penalties for nonpayment or late payment of such amounts, such charges should
qualify as "rents from real property." However, to the extent that such charges
do not qualify as "rents from real property," they instead may be treated as
interest that qualifies for the 95% gross income test.
Interest. The term "interest" generally does not include any amount
received or accrued, directly or indirectly, if the determination of such amount
depends in whole or in part on the income or profits of any person. However, an
amount received or accrued generally will not be excluded from the term
"interest" solely by being based on a fixed percentage or percentages of
receipts of sales. Furthermore, to the extent that interest from a loan that is
based on the residual cash proceeds from the sale of the property securing the
loan constitutes a "shared appreciation provision," income attributable to such
participation feature will be treated as gain from the sale of the secured
property.
Prohibited Transactions. A REIT will incur a 100% tax on the net income
derived from any sale or other disposition of property, other than foreclosure
property, that the REIT holds primarily for sale to customers in the ordinary
course of trade or business. We believe that none of our assets will be held
primarily for sale to customers and that a sale of any of our assets will not be
in the ordinary course of our business. Whether a REIT holds an asset "primarily
for sale to customers in the ordinary course of business" depends, however, on
the facts and circumstances in effect from time to time, including those related
to a particular asset. Nevertheless, we will attempt to comply with the terms of
safe-harbor provisions in the federal income tax laws prescribing when an asset
sale will not be characterized as a prohibited transaction. We cannot assure
you, however, that we can comply with the safe-harbor provisions or that we will
avoid owning property that may be characterized as property that we hold
"primarily for sale to customers in the ordinary course of a trade or business."
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Foreclosure Property. We will be subject to tax at the maximum corporate
rate on any income from foreclosure property, other than income that otherwise
would be qualifying income for purposes of the 75% gross income test, less
expenses directly connected with the production of that income. However, gross
income from foreclosure property will qualify under the 75% and 95% gross income
tests. Foreclosure property is any real property, including interests in real
property, and any personal property incident to such real property:
- That is acquired by a REIT as the result of the REIT having bid on
such property at foreclosure, or having otherwise reduced such
property to ownership or possession by agreement or process of law,
after there was a default or default was imminent on a lease of such
property or on indebtedness that such property secured;
- For which the related loan was acquired by the REIT at a time when the
default was not imminent or anticipated; and
- For which the REIT makes a proper election to treat the property as
foreclosure property.
Property generally ceases to be foreclosure property at the end of the
third taxable year following the taxable year in which the REIT acquired the
property or longer if an extension is granted by the Secretary of the Treasury.
This grace period terminates and foreclosure property ceases to be foreclosure
property on the first day;
On which a lease is entered into for the property that, by its terms, will
give rise to income that does not qualify for purposes of the 75% gross income
test, or any amount is received or accrued, directly or indirectly, pursuant to
a lease entered into on or after such day that will give rise to income that
does not qualify for purposes of the 75% gross income test;
On which any construction takes place on the property, other than
completion of a building or any other improvement, where more than 10% of the
construction was completed before default became imminent; or
Which is more than 90 days after the day on which the REIT acquired the
property and the property is used in a trade or business which is conducted by
the REIT, other than through an independent contractor from whom the REIT does
not derive or receive any income.
Failure to Satisfy Gross Income Tests. If we fail to satisfy one or both of
the gross income tests for any taxable year, we nevertheless may qualify as a
REIT for that year if we qualify for relief under certain provisions of the
federal income tax laws Those relief provisions generally will be available if:
- Our failure to meet such tests is due to reasonable cause and not due
to willful neglect;
- We attach a schedule of the sources of our income to our tax return;
and
- Any incorrect information on the schedule was not due to fraud with
intent to evade tax.
We cannot predict, however, whether in all circumstances we would qualify
for the relief provisions. In addition, as discussed above in "-Taxation of Our
Company," even if the relief provisions apply, we would incur a 100% tax on the
gross income attributable to the greater of (i) the amount by which we fail the
75% gross income test and (ii) the amount by which 90%, of our gross income
exceeds the amount of qualifying income under the 95% gross income test,
multiplied by a fraction intended to reflect our profitability.
ASSET TESTS
To maintain our qualification as a REIT, we also must satisfy the following
asset tests at the end of each quarter of each taxable year.
First, at least 75% of the value of our total assets must consist of:
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- cash or cash items, including certain receivables;
- government securities;
- interests in real property, including leaseholds and options to
acquire real property and leaseholds;
- interests in mortgages on real property;
- shares in other REITs; and
- investments in stock or debt instruments during the one-year period
following our receipt of new capital that we raise through equity
offerings or public offerings of debt with at least a five-year term.
Second, of our investments not included in the 75% asset class, the value
of our interest in any one issuer's securities may not exceed 5% of the value of
our total assets.
Third, we may not own more than 10% of the voting power or value of any one
issuer's outstanding securities.
Fourth, no more than 20% of the value of our total assets may consist of
the securities of one or more taxable REIT subsidiaries.
Fifth, no more than 25% of the value of our total assets may consist of
securities, other than government securities and securities that constitute real
estate assets.
For purposes of the second and third asset tests, the term "securities"
does not include stock in another REIT, equity or debt securities of a qualified
REIT subsidiary or taxable REIT subsidiary, mortgage loans that constitute real
estate assets, or equity interests in a partnership. The term "securities,"
however, generally includes debt securities issued by a partnership or another
REIT, except that certain "straight debt" securities are not treated as
"securities" for purposes of the 10% value test (for example, qualifying debt
securities of a corporation of which we own no equity interest or of a
partnership if we own at least a 20% profits interest in the partnership).
We will monitor the status of our assets for purposes of the various asset
tests and will manage our portfolio in order to comply at all times with such
tests. If we fail to satisfy the asset test at the end of a calendar quarter, we
will not lose our REIT status if:
- We satisfied the asset tests at the end of the preceding calendar
quarter; and
- The discrepancy between the value of our assets and the asset test
requirements arose from changes in the market values of our assets and
was not wholly or partly caused by the acquisition of one or more
non-qualifying assets.
If we did not satisfy the condition described in the second item, above, we
still could avoid disqualification by eliminating any discrepancy within 30 days
after the close of the calendar quarter in which it arose.
DISTRIBUTION REQUIREMENTS
Each taxable year, we must distribute dividends, other than capital gain
dividends and deemed distributions of retained capital gain, to our shareholders
in an aggregate amount at least equal to:
- The sum of:
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- 90% of our "REIT taxable income," computed without regard to the
dividends paid deduction and our net capital gain or loss; and
- 90% of our after-tax net income, if any, from foreclosure
property; minus
- the sum of certain items of non-cash income.
We must pay such distributions in the taxable year to which they relate, or
in the following taxable year if we declare the distribution before we timely
file our federal income tax return for the year and pay the distribution on or
before the first regular dividend payment date after such declaration.
We will pay federal income tax on taxable income, including net capital
gain, that we do not distribute to shareholders. Furthermore, if we fail to
distribute during a calendar year, or by the end of January following the
calendar year in the case of distributions with declaration and record dates
falling in the last three months of the calendar year, at least the sum of:
- 85% of our REIT ordinary income for such year;
- 95% of our REIT capital gain income for such year; and
- any undistributed taxable income for prior periods.
We will incur a 4% nondeductible excise tax on the excess of such required
distribution over the amounts we actually distribute. We may elect to retain
and pay income tax on the net long-term capital gain we receive in a taxable
year. If we so elect, we will be treated as having distributed any such
retained amount for purposes of the 4% nondeductible excise tax described above.
We have made, and we intend to continue to make, timely distributions sufficient
to satisfy the annual distribution requirements and to avoid corporate income
tax and the 4% nondeductible excise tax.
It is possible that, from time to time, we may experience timing
differences between the actual receipt of income and actual payment of
deductible expenses and the inclusion of that income and deduction of such
expenses in arriving at our REIT taxable income. For example, we may not deduct
recognized capital losses from our "REIT taxable income." Further, it is
possible that, from time to time, we may be allocated a share of net capital
gain attributable to the sale of depreciated property that exceeds our allocable
share of cash attributable to that sale. As a result of the foregoing, we may
have less cash than is necessary to distribute all of our taxable income and
thereby avoid corporate income tax and the excise tax imposed on certain
undistributed income. In such a situation, we may need to borrow funds or issue
additional securities.
Under certain circumstances, we may be able to correct a failure to meet
the distribution requirement for a year by paying "deficiency dividends" to our
shareholders in a later year. We may include such deficiency dividends in our
deduction for dividends paid for the earlier year. Although we may be able to
avoid income tax on amounts distributed as deficiency dividends, we will be
required to pay interest to the Internal Revenue Service based upon the amount
of any deduction we take for deficiency dividends.
RECORDKEEPING REQUIREMENTS
We must maintain certain records in order to qualify as a REIT. In
addition, to avoid a monetary penalty, we must request on an annual basis
information from our shareholders designated to disclose the actual ownership of
our outstanding shares. We have complied, and intend to continue to comply,
with these requirements.
FAILURE TO QUALIFY
If we fail to qualify as a REIT in any taxable year, and no relief
provision applies, we would be subject to federal income tax and any applicable
alternative minimum tax on our taxable income at regular corporate rates. In
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calculating our taxable income in a year in which we fail to qualify as a REIT,
we would not be able to deduct amounts paid out to shareholders. In fact, we
would not be required to distribute any amounts to shareholders in that year.
In such event, to the extent of our current and accumulated earnings and
profits, all distributions to shareholders would be taxable as ordinary income.
Subject to certain limitations of the federal income tax laws, corporate
shareholders might be eligible for the dividends received deduction. Unless we
qualified for relief under specific statutory provisions, we also would be
disqualified from taxation as a REIT for the four taxable years following the
year during which we ceased to qualify as a REIT. We cannot predict whether in
all circumstances we would qualify for such statutory relief.
TAXABLE REIT SUBSIDIARIES
As described above, we may own up to 100% of the stock of one or more
taxable REIT subsidiaries. A taxable REIT subsidiary is a fully taxable
corporation that may earn income that would not be qualifying income if earned
directly by us. A taxable REIT subsidiary may provide services to our lessees
and perform activities unrelated to our lessees, such as third-party management,
development, and other independent business activities. However, a taxable REIT
subsidiary may not directly or indirectly operate or manage any hotels or health
care facilities or provide rights to any brand name under which any hotel or
health care facility is operated. We and our corporate subsidiary must elect
for the subsidiary to be treated as a taxable REIT subsidiary. A corporation of
which a qualifying taxable REIT subsidiary directly or indirectly owns more than
35% of the voting power or value of the stock will automatically be treated as a
taxable REIT subsidiary. Overall, no more than 20% of the value of our assets
may consist of securities of one or more taxable REIT subsidiaries, and no more
than 25% of the value of our assets may consist of the securities of taxable
REIT subsidiaries and other taxable subsidiaries and other assets that are not
qualifying assets for purposes of the 75% asset test.
STATE AND LOCAL TAXES
We and/or you may be subject to taxation by various states and localities,
including those in which we or you transact business, own property or reside.
The state and local tax treatment may differ from the federal income tax
treatment described above. Consequently, you should consult your own tax
advisors regarding the effect of state and local tax laws upon an investment in
our securities.
PLAN OF DISTRIBUTION
We may sell the securities being offered hereby in one or more of the
following ways from time to time:
- through agents to the public or to investors;
- to underwriters for resale to the public or to investors;
- directly to investors; or
- through a combination of any of these methods of sale.
We will set forth in a prospectus supplement the terms of the offering of
securities, including:
- the name or names of any agents or underwriters;
- the purchase price of the securities being offered and the
proceeds we will receive from the sale;
- any over-allotment options under which underwriters may purchase
additional securities from us;
- any agency fees or underwriting discounts and other items
constituting agents or underwriters compensation;
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- any initial public offering price;
- any discounts or concessions allowed or reallowed or paid to
dealers; and
- any securities exchanges on which such securities may be listed.
AGENTS
We may designate agents who agree to use their reasonable efforts to
solicit purchases for the period of their appointment or to sell securities on a
continuing basis.
We may also engage certain companies to act as our agent ( Offering Agent)
for one or more offerings, from time to time, of our common shares. If we reach
agreement with an Offering Agent with respect to a specific offering, including
the number of common shares and any minimum price below which sales may not be
made, then the Offering Agent will try to sell such common shares on the agreed
terms. The Offering Agent could make sales in privately negotiated transactions
and/or any other method permitted by law, including sales deemed to be an
at-the-market offering as defined in Rule 415 promulgated under the Securities
Act, including sales made directly on the New York Stock Exchange, or sales made
to or through a market maker other than on an exchange. At-the-market offerings
may not exceed 10% of the aggregate market value of our outstanding voting
securities held by non-affiliates on a date within 60 days prior to the filing
of the registration statement of which this prospectus is a part. The Offering
Agent will be deemed to be an underwriter within the meaning of the Securities
Act, with respect to any sales effected through an at-the-market offering.
UNDERWRITERS
If we use underwriters for a sale of securities, the underwriters will
acquire the securities for their own account. The underwriters may resell the
securities in one or more transactions, including negotiated transactions, at a
fixed public offering price or at varying prices determined at the time of sale.
The obligations of the underwriters to purchase the securities will be subject
to the conditions set forth in the applicable underwriting agreement. We may
change from time to time any public offering price and any discounts or
concessions the underwriters allow or reallow or pay to dealers. We may use
underwriters with whom we have a material relationship. We will describe in the
prospectus supplement naming the underwriter the nature of any such
relationship.
DIRECT SALES
We may also sell securities directly to one or more purchasers without
using underwriters or agents. Underwriters, dealers and agents that participate
in the distribution of the securities may be underwriters as defined in the
Securities Act and any discounts or commissions they receive from us and any
profit on their resale of the securities may be treated as underwriting
discounts and commissions under the Securities Act. We will identify in the
applicable prospectus supplement any underwriters, dealers or agents and will
describe their compensation. We may have agreements with the underwriters,
dealers and agents to indemnify them against specified civil liabilities,
including liabilities under the Securities Act. Underwriters, dealers and agents
may engage in transactions with or perform services for us in the ordinary
course of their businesses.
TRADING MARKETS AND LISTING OF SECURITIES
Unless otherwise specified in the applicable prospectus supplement, each
class or series of securities will be a new issue with no established trading
market, other than our common stock, which is listed on the New York Stock
Exchange. We may elect to list any other class or series of securities on any
exchange, but we are not obligated to do so. It is possible that one or more
underwriters may make a market in a class or series of securities, but the
underwriters will not be obligated to do so and may discontinue any market
making at any time without notice. We cannot give any assurance as to the
liquidity of the trading market for any of the securities.
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STABILIZATION ACTIVITIES
Any underwriter may engage in over-allotment, stabilizing transactions,
short covering transactions and penalty bids in accordance with Regulation M
under the Exchange Act. Over-allotment involves sales in excess of the offering
size, which create a short position. Stabilizing transactions permit bids to
purchase the underlying security so long as the stabilizing bids do not exceed a
specified maximum. Short covering transactions involve purchases of the
securities in the open market after the distribution is completed to cover short
positions. Penalty bids permit the underwriters to reclaim a selling concession
from a dealer when the securities originally sold by the dealer are purchased in
a covering transaction to cover short positions. Those activities may cause the
price of the securities to be higher than it would otherwise be. If commenced,
the underwriters may discontinue any of the activities at any time.
LEGAL MATTERS
Unless otherwise noted in a prospectus supplement, Locke Liddell & Sapp
LLP, Dallas, Texas, will pass on the legality of the securities offered through
this prospectus and certain tax matters. Counsel for any underwriters or agents
will be noted in the applicable prospectus supplement.
EXPERTS
The financial statements and the related financial statement schedules
incorporated in this prospectus by reference from our Annual Report on Form 10-K
for the year ended December 31, 2003, as amended in the Current Report on Form
8-K filed on September 8, 2004, and the Current Report on Form 8-K filed on
September 9, 2004, have been audited by Deloitte & Touche LLP, an independent
registered public accounting firm, as stated in their reports, which are
incorporated herein by reference, and have been so incorporated in reliance upon
the reports of such firm given upon their authority as experts in accounting and
auditing.
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the reporting requirements of the Securities and Exchange
Act of 1934, as amended, and file annual, quarterly and current reports, proxy
statements and other information with the SEC. You may read and copy any
document we file at the SEC's public reference room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. You can request copies of these documents by writing to
the SEC and paying a fee for the copying cost. Please call the SEC at
1-800-SEC-0330 for more information about the operation of the public reference
room. Our SEC filings are also available to the public at the SEC's web site at
www.sec.gov. In addition, you may read and copy our SEC filings at the offices
------------
of the New York Stock Exchange, 20 Broad Street, New York, New York 10005 or at
the SEC's Public Reference Room at Room 1200, 450 Fifth Street, N.W.,
Washington, D.C. 20549. Our website address is www.weingarten.com.
------------------
This prospectus is only part of a registration statement we filed with the
SEC under the Securities Act of 1933, as amended, and therefore omits certain
information contained in the registration statement. We have also filed exhibits
and schedules to the registration statement that we have excluded from this
prospectus, and you should refer to the applicable exhibit or schedule for a
complete description of any statement referring to any contract or document. You
may inspect or obtain a copy of the registration statement, including exhibits
and schedules, as described in the previous paragraph.
INCORPORATION OF DOCUMENTS BY REFERENCE
This prospectus "incorporates by reference" information that we have filed
with the SEC under the Exchange Act, which means that we are disclosing
important information to you by referring you to those documents. Any statement
contained in this prospectus or in any document incorporated or deemed to be
incorporated by reference into this prospectus will be deemed to be modified or
superseded for purposes of this prospectus to the extent that a statement
contained in this prospectus or any subsequently filed document which also is,
or is deemed to be, incorporated by reference into this prospectus modifies or
supercedes that statement. Any statement so modified or superseded will not be
deemed, except as so modified or superseded, to constitute a part of this
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prospectus. We incorporate by reference the following documents listed below and
any future filings made with the SEC under Sections 13(a), 13(c), 14 or 15(d) of
the Exchange Act (other than Current Reports furnished under Items 2.02 or 7 of
Form 8-K):
- Annual Report on Form 10-K for the year ended December 31, 2003.
- Quarterly Report on Form 10-Q for the quarter ended June 30,
2004.
- Current Report on Form 8-K filed with the SEC under Item 8.01 on
September 8, 2004.
- Current Report on Form 8-K filed with the SEC under Item 2.01 on
September 9, 2004.
- Schedule 14A filed with the SEC on March 17, 2004.
- The description of our common shares of beneficial interest
contained in our registration statement on Form 8-A filed March
17, 1988.
- The description of our 6.75% Series D Cumulative Redeemable
Preferred Shares contained in our registration statement on Form
8-A filed April 17, 2003.
- The description of our 6.95% Series E Cumulative Redeemable
Preferred Shares contained in our registration statement on Form
8-A filed on July 8, 2004.
You may request copies of these filings at no cost by writing or
telephoning our Investor Relations Department at the following address and
telephone number:
Weingarten Realty Investors
2600 Citadel Plaza Drive
Suite 300
Houston, Texas 77008
(713) 866-6000.
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