-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, GDeYAEqT3P3KCdLDdQ5AGJftjMGOZS9dX8Etgb0Mt1TMo5nWpK/97KnHrBLlG85K igr4C08qYPUsPB/EgXK6OA== 0000912057-94-002896.txt : 19940901 0000912057-94-002896.hdr.sgml : 19940901 ACCESSION NUMBER: 0000912057-94-002896 CONFORMED SUBMISSION TYPE: 424B2 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19940830 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DUKE REALTY INVESTMENTS INC CENTRAL INDEX KEY: 0000783280 STANDARD INDUSTRIAL CLASSIFICATION: 6798 IRS NUMBER: 351740409 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 424B2 SEC ACT: 1933 Act SEC FILE NUMBER: 033-54997 FILM NUMBER: 94547322 BUSINESS ADDRESS: STREET 1: 8888 KEYSTONE CROSSING STE 1200 CITY: INDIANAPOLIS STATE: IN ZIP: 46240 BUSINESS PHONE: 3178464700 424B2 1 PROSPECTUS SUPPLEMENT Filed Pursuant to Rule 424(b)(2) Registration No. 33-54997 SUBJECT TO COMPLETION PRELIMINARY PROSPECTUS SUPPLEMENT DATED AUGUST 30, 1994 PROSPECTUS SUPPLEMENT (TO PROSPECTUS DATED AUGUST 29, 1994) 3,000,000 SHARES [ LOGO ] DUKE REALTY INVESTMENTS, INC. COMMON STOCK --------------------- Duke Realty Investments, Inc. (the "Company") is a self-administered and self-managed real estate investment trust that began operations through a predecessor in 1972. The Company owns a diversified portfolio of 120 income- producing industrial, office and retail properties, encompassing approximately 11.9 million square feet and located in eight states, and 10 buildings encompassing approximately 1.5 million square feet currently under development. The Company also owns approximately 1,000 acres of land for future development. The Company has the largest commercial real estate operations in Indianapolis and Cincinnati and is one of the largest real estate companies in the Midwest. The Company expects to continue to pay regular quarterly dividends to its shareholders. All of the shares of Common Stock offered hereby are being sold by the Company. The Common Stock is listed on the New York Stock Exchange under the symbol DRE. The last reported sale price for the Common Stock on August 25, 1994 was $26.75 per share. --------------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PRICE TO UNDERWRITING PROCEEDS TO PUBLIC DISCOUNT (1) COMPANY (2) Per Share.................................. $ $ $ (1) The Company has agreed to indemnify the several Underwriters against certain liabilities, including liabilities under the Securities Act of 1933, as amended. See "Underwriting." (2) Before deducting expenses payable by the Company estimated at $575,000. (3) The Company has granted the several Underwriters an option to purchase up to an additional 450,000 shares of Common Stock to cover over-allotments. If all such shares are purchased, the total Price to Public, Underwriting Discount and Proceeds to Company will be $ , $ and $ , respectively. See "Underwriting."
--------------------- THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL. ------------------- The shares of Common Stock are offered by the several Underwriters, subject to prior sale, when, as and if delivered to and accepted by them, subject to approval of certain legal matters by counsel for the Underwriters. The Underwriters reserve the right to withdraw, cancel or modify such offer and to reject orders in whole or in part. It is expected that delivery of the shares of Common Stock offered hereby will be made in New York, New York on or about , 1994. --------------------- MERRILL LYNCH & CO. ALEX. BROWN & SONS INCORPORATED DEAN WITTER REYNOLDS INC. A.G. EDWARDS & SONS, INC. LEGG MASON WOOD WALKER INCORPORATED --------------------- The date of this Prospectus Supplement is September , 1994. [ MAP ] IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON SHARES AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. S-2 PROSPECTUS SUPPLEMENT SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS OR INCORPORATED HEREIN AND THEREIN BY REFERENCE. UNLESS INDICATED OTHERWISE, (I) THE INFORMATION CONTAINED OVER-ALLOTMENT OPTIONS AND (II) INFORMATION IS PRESENTED AS OF JUNE 30, 1994. ALL REFERENCES TO THE "COMPANY" IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS INCLUDE THE COMPANY, THOSE ENTITIES OWNED OR CONTROLLED BY THE COMPANY AND PREDECESSORS OF THE COMPANY, UNLESS THE CONTEXT INDICATES OTHERWISE. THE COMPANY The Company is a self-administered and self-managed real estate investment trust (a "REIT") that began operations through a predecessor in 1972. The Company owns a diversified portfolio of 120 income-producing industrial, office and retail properties (the "Properties"), encompassing approximately 11.9 million square feet and located in eight states, and 10 buildings encompassing approximately 1.5 million square feet currently under development. The Company also owns approximately 1,000 acres of unencumbered land (the "Land") for future development, of which approximately 80% is zoned for industrial use and which is typically located adjacent to the Properties. The Company provides leasing, management, construction, development and other tenant-related services for the Properties and certain properties owned by third parties. The Company has the largest commercial real estate operations in Indianapolis and Cincinnati and is one of the largest real estate companies in the Midwest. The Company believes that the Midwest offers a relatively strong and stable economy compared to other regions of the United States and provides significant growth potential due to its central location, established manufacturing base, skilled work force and moderate labor costs. The Company has developed over 33 million square feet of commercial property since its founding. The Company is one of the most active developers of industrial properties in the United States, based on square footage under construction. During the last five years, the Company developed an average of approximately 2.0 million square feet per year. Since the Company completed its reorganization and Common Stock offering in October of 1993, it has completed development of 701,000 square feet and has acquired 894,000 square feet of commercial properties which are 82% leased. Also, the Company currently has under development approximately 1.5 million square feet of commercial space that is 85% pre-leased and is expected to be completed by June, 1995. The Company manages approximately 24 million square feet of property, including 12 million square feet owned by third parties. The Company manages approximately 30% of all suburban office, warehousing and light manufacturing space in Indianapolis, and approximately 18% of all office, warehousing and light manufacturing space in Cincinnati. In addition to providing services to services to over 1,200 tenants in approximately 150 properties owned by others. Based on published industry reports, the Company believes that it was responsible in 1993 for approximately 35% of the net absorption (gross space leased minus lease terminations and expirations) of warehousing and light manufacturing space in Indianapolis and approximately 36% of the net absorption of warehousing and light manufacturing space in Cincinnati. The Company believes its dominant position in its markets gives it a competitive advantage in its real estate activities. After completion of this offering (the "Offering"), the seven senior officers of the Company, who collectively have over 120 years of experience in the real estate industry and have been with the Company for an average of 17 years, will beneficially own Common Stock and partnership interests ("Units") exchangeable for Common Stock that represent approximately 17% of the Company's Common Stock on a fully diluted basis. S-3 The following table provides an overview of the Properties. SUMMARY OF PROPERTIES
PERCENT OF TOTAL PERCENT ANNUAL NET EFFECTIVE OCCUPANCY OF TOTAL NET EFFECTIVE ANNUAL AT TYPE OF PROPERTY SQUARE FEET SQUARE FEET RENT (1) RENT JUNE 30, 1994 - ------------------------------------------ ------------ --------------- ------------- --------------- --------------- Industrial................................ 6,997,968 59% $ 27,243,000 36% 96.10% Office.................................... 3,819,029 32% 39,540,000 52% 92.94% Retail.................................... 1,062,879 9% 9,045,000 12% 91.22% ------------ --- ------------- --- ----- Total..................................... 11,879,876 100% $ 75,828,000 100% 94.65% ------------ --- ------------- --- ----- ------------ --- ------------- --- ----- - ------------------------ June 30, 1994. Annual net effective rent equals the average annual rental property revenue over the terms of the respective leases, excluding additional rent due as operating expense reimbursements, landlord allowances for operating expenses and percentage rents.
RECENT DEVELOPMENTS REORGANIZATION AND 1993 OFFERING. In October, 1993, the Company acquired substantially all of the properties and businesses of Duke Associates, a related full-service commercial real estate firm operating primarily in the Midwest (the "Reorganization"). As part of the Reorganization, the Company effected a 1 for 4.2 Reverse Stock Split relating to its existing shares and issued an additional 14,000,833 shares of Common Stock through an offering (the "1993 Offering"), raising gross proceeds of $332.5 million. In July, 1994, the Company increased its quarterly dividend from $.45 to $.47 per share. DEVELOPMENT AND ACQUISITION ACTIVITY. Since the Reorganization and the 1993 Offering, the Company has completed the development of and placed in service four properties with 701,000 square feet having a total cost of $12.2 million and has acquired four properties with 894,000 square feet and the remaining 55% joint venture interest in a previously developed property at a total cost of $40.6 million. In addition, the Company has initiated the development of 10 buildings encompassing 1,479,000 square feet having a total cost of $69.7 million, which are expected to be completed and placed in service by June, 1995. These property additions (the "New Properties"), totalling 3,074,000 square feet, consist of 71% industrial, 7% office, 15% retail, and 7% medical office projects. The total cost (including allocation of land) of the New Properties is approximately $122.5 million. The New Properties have an average occupancy rate as of August 25, 1994 of 83% and provide an initial 10.8% weighted average annual unleveraged return on cost assuming no further lease-up. However, the Company expects the stabilized weighted average annual unleveraged return on cost (computed as property annual contractual net operating income ("NOI") divided by total project costs) to be in excess of 12% with anticipated leasing activity. The annual contractual NOI expected to be generated from the New Properties, once placed in service, is anticipated to be $13.0 million and increase to $15 million with anticipated leasing activity. Those New Properties expected to be placed in service by October, 1994, are anticipated to generate annualized contractual NOI of $7 million. By June, 1995, when all of the New Properties are expected to be in service, the New Properties are anticipated to produce an additional $8 million of annualized contractual NOI. owned land basis of $8.2 million. The $8.2 million land investment represents non-cash allocations of the portion of unencumbered Land inventory obtained through the 1993 Reorganization and since used for new development. The anticipated weighted average unleveraged annual return on cost for the New Properties net of the Land basis is 13% compared to the 12% previously discussed. The total net cost of the New Properties will be approximately S-4 $114.3 million. These costs will be funded on a permanent basis by the net proceeds of this Offering which are expected to be approximately $75.2 million with the remainder of the costs to be funded by debt financings having a weighted average interest rate of 8.45% and a term of 6.6 years. The cost of the New Properites incurred to date has been financed with interim financing including the Company's $60 million revolving line of credit. Following the Offering, the revolving line of credit facility will be fully available for additional development and acquisition activities which the Company is currently pursuing. The Company is currently negotiating to substantially increase the amount of its revolving line of credit. The following table sets forth information regarding the New Properties. All of the New Properties are wholly-owned by the Company except for Xetron. RECENT ACTIVITY
COMPLETION OR PERCENT INITIAL ANTICIPATED PROPERTY SQUARE LEASED OR LEASE COMPLETION PROJECT/CLIENT LOCATION TYPE FEET PRE-LEASED(10) TERM - ----------------------- ------------------- ---------------- ---------- --------- --------- ----------- COMPLETED DEVELOPMENT: 1st Qtr. 94 Xetron(1) Cincinnati, OH Industrial 100,193 100% 10 years 2nd Qtr. 94 Daydream Publishing Indianapolis, IN Industrial 98,000 100% 10 years 1st Qtr. 94 Caterpillar Indianapolis, IN Industrial 336,000 100% 6 years 2nd Qtr. 94 Redken Hebron, KY Industrial 166,400 100% 5 years --------- 700,593 --------- COMPLETED ACQUISITIONS: 2nd Qtr. 94 Xerox(2) Columbus, OH Office (2) 100% Varies Coldwater 2nd Qtr. 94 Crossing(4) Ft. Wayne, IN Retail 246,365 95% Varies Park 100 Bldg 2nd Qtr. 94 126(5) Indianapolis, IN Industrial 60,100 100% Varies 3rd Qtr. 94 Park 100 Bldg 98(6) Indianapolis, IN Industrial 373,000 27% N/A --------- 894,305 --------- UNDER CONSTRUCTION: 3rd Qtr. 94 Veteran's Admin. Columbus, OH Medical 118,000 100% 20 years 3rd Qtr. 94 Indiana Insurance Columbus, OH Office 49,600 94% 10 years 3rd Qtr. 94 Galyan's Columbus, OH Retail 74,636 100% 20 years 3rd Qtr. 94 Sports Unlimited(7) Cincinnati, OH Retail 67,148 100% 20 years 4th Qtr. 94 Kohl's Cincinnati, OH Retail 80,684 100% 25 years 4th Qtr. 94 Silver Burdett Indianapolis, IN Industrial 553,900 100% 7 years 4th Qtr. 94 Park 100 Bldg 97(8) Indianapolis, IN Industrial 280,800 44% 5 years 1st Qtr. 95 Sterling Software Columbus, OH Office 57,660 100% 15 years 2nd Qtr. 95 St. Francis(9) Greenwood, IN Medical 95,579 36%(11) Varies 2nd Qtr. 95 John Alden Columbus, OH Office 101,200 100% 15 years --------- 1,479,207 --------- 3,074,105 --------- --------- - ------------------------------ (1) Developed through a joint venture in which the Company's unaffiliated joint venture partner provided 100% of the financing. The Company has a 10% limited partner equity interest. (2) Originally developed prior to the Reorganization in a joint venture; the Company has acquired the 55% interest of its unaffiliated joint venture partner. (3) Originally developed in a joint venture; the Company has acquired the 57% interest of its unaffiliated joint venture partner. (4) A retail center anchored by Cub Foods, Walgreens, and Ben Franklin; Walmart square feet, respectively). (5) A warehouse facility at Park 100 Business Park where the Company currently owns or manages 1.7 million square feet of similar space having a 2.6% vacancy rate. (6) A bulk warehouse facility at Park 100 Business Park where the Company currently owns or manages 4.4 million square feet of similar space which is fully occupied. Land is available for 300,000 square feet of additional development.
S-5 (7) Anchor tenant of 51,000 square feet has a lease term of 20 years. (8) This bulk warehouse was originally committed to without any pre-leasing. A five year lease has been signed for 122,400 square feet of space. The building is located at Park 100 Business Park where the Company currently owns or manages 4.4 million square feet of similar space which is fully occupied. (9) Medical office building to be attached to the new $80 million ambulatory care center on the St. Francis Hospital south campus. The Company owns the building and has a leasehold interest in the land underlying the building. (10) Represents completed leasing activity through August 25, 1994. (11) This represents leases for which tenants have committed, but for which the actual leases have not been executed.
LAND ACTIVITY. Upon completion of the Reorganization and the 1993 Offering, the Company had approximately 1,128 acres of unencumbered Land to be used primarily for its development activities. Subsequent to the 1993 Offering, the Company has used 125 acres of Land in its development activities. Approximately 58 acres have been sold and 15 acres have been leased. Additionally, the Company acquired 63 acres during the second quarter of 1994 bringing the Company's total unencumbered Land inventory held for development to approximately 1,000 acres. THIRD PARTY DEVELOPMENT AND MANAGEMENT ACTIVITIES. Since the Reorganization and the 1993 Offering, the Company has increased the square footage of property managed for third parties from 11.8 million to 12.1 million square feet and has obtained the following third party construction and development contracts:
SQUARE FOOTAGE PROPERTY LOCATION UNDER DEVELOPMENT PRODUCT TYPE COMPLETION DATE - ---------------------- ------------------ ------------------ ------------ ------------------ Federated Cincinnati, OH 200,000 Office October 1994 Hendrickson-Turner Lebanon, IN 120,000 Industrial February 1995 ETS Indianapolis, IN 56,000 Industrial November 1994 Honey Baked Ham Cincinnati, OH 28,000 Office December 1993 A-Copy Milford, CT 27,400 Office April 1994 Jewish Hospital Cincinnati, OH 18,000 Office January 1995 Goodwill Industries Indianapolis, IN 11,250 Retail September 1994
THE OFFERING Common Stock Offered........................................ 3,000,000 shares (1) Common Stock to be Outstanding After the Offering........... 23,495,630 shares (2) Use of Proceeds............................................. Principally to retire interim financing incurred to fund the Company's development and acquisition activities and to fund current development and acquisition projects. New York Stock Exchange Symbol.............................. DRE - ------------------------ (1) Assumes the Underwriters' over-allotment option to purchase up to 450,000 shares of Common Stock is not exercised. See "Underwriting." (2) Includes 833,333 unregistered shares of Common Stock and 4,449,486 Units issued by Duke Realty Limited Partnership (the "Operating Partnership") which are exchangeable by the holder for shares of Common Stock. Does not include Common Stock issuable upon exercise of outstanding employee stock options, which represented 681,500 shares at June 30, 1994.
S-6 SUMMARY CONSOLIDATED FINANCIAL DATA
PRO FORMA FOR REORGANIZATION (1) ----------------------------- SIX MONTHS SIX MONTHS YEAR ENDED ENDED ENDED DECEMBER 31, JUNE 30, JUNE 30, ---------------- 1994 1993 1993 1992 ---------- ---------- ------- ------- (IN THOUSANDS, EXCEPT PROPERTIES AND PER OPERATING DATA: Revenues: Rental properties....................................... $41,843 $39,065 $79,639 $74,439 Property management, maintenance and leasing fees....... 5,393 4,836 11,496 12,248 Construction and development fees....................... 2,963 1,328 4,875 4,370 Interest and other income............................... 1,068 1,095 1,893 1,105 ---------- ---------- ------- ------- Total operating revenue................................... $51,267 $46,324 $97,903 $92,162 ---------- ---------- ------- ------- ---------- ---------- ------- ------- Interest expense.......................................... $ 8,723 $ 8,450 $17,280 $16,900 Depreciation and amortization............................. 8,138 9,163 18,078 18,026 Equity in earnings of unconsolidated companies............ 593 147 598 223 Income before minority interest........................... 15,534 11,228 24,978 18,366 Net income................................................ $11,420 $ 8,922 $19,076 $14,346 ---------- ---------- ------- ------- ---------- ---------- ------- ------- Net income per share...................................... $ 0.71 $ 0.56 $ 1.19 $ 0.89 ---------- ---------- ------- ------- ---------- ---------- ------- ------- OTHER DATA: Funds from Operations (2)................................. $23,238 $20,502 $42,166 $36,624 Funds from Operations per share/Unit...................... $ 1.13 $ 1.00 $ 2.06 $ 1.79 Common Stock outstanding (3).............................. 20,478 20,478 20,478 20,478 Number of Properties at end of period..................... 120 114 114 111 Square feet available at end of period.................... 11,880 10,867 10,867 10,573
JUNE 30, 1994 -------- BALANCE SHEET DATA: Total assets.............................................. $692,487 Total debt................................................ $301,394 Shareholders' equity...................................... $343,493
- ------------------------ (1) Reflects October, 1993 Reorganization of the Company, including the Reverse Stock Split, the acquisition by the Company of substantially all of the assets of Duke Associates (a group of approximately 170 affiliated partnerships and corporations) and the issuance of an additional 14,001 shares of Common Stock. Presented as if the companies were combined as of January 1, 1992. (2) Funds from Operations, as defined by the National Association of Real Estate Investment Trusts ("NAREIT"), is net income adjusted for depreciation and amortization and gains or losses from property sales. Funds from Operations does not represent cash flows from operations as defined by generally accepted accounting principles, should not be considered as an alternative to net income as an indicator of the Company's operating performance and is not indicative of cash available to fund all cash flow needs. (3) Includes 4,432 Units as of June 30, 1994 held by persons other than the Company which are exchangeable for Common Stock.
S-7 THE COMPANY The Company is a self-administered and self-managed REIT that began operations through a predecessor in 1972. The Company owns a diversified portfolio of 120 income-producing industrial, office and retail Properties, encompassing approximately 11.9 million square feet and located in eight states, and 10 buildings encompassing approximately 1.5 million square feet currently under development. The Company also owns approximately 1,000 acres of unencumbered Land for future development, of which approximately 80% is zoned for industrial use and which is typically located adjacent to the Properties. The Company provides leasing, management, construction, development and other tenant-related services for the Properties and certain properties owned by third parties. The Company has the largest commercial real estate operations in Indianapolis and Cincinnati and is one of the largest real estate companies in the Midwest. The Company believes that the Midwest offers a relatively strong and stable economy compared to other regions of the United States and provides significant growth potential due to its central location, established manufacturing base, skilled work force and moderate labor costs. The Company has developed over 33 million square feet of commercial property industrial properties in the United States, based on square footage under construction. During the last five years, the Company developed an average of approximately 2.0 million square feet per year. Since the Company completed its Reorganization and 1993 Offering, it has completed development of 701,000 square feet and has acquired 894,000 square feet of commercial properties which are 82% leased. Also, the Company currently has under development approximately 1.5 million square feet of commercial space that is 85% pre-leased and is expected to be completed by June, 1995. The Company manages approximately 24 million square feet of property, including 12 million square feet owned by third parties. The Company manages approximately 30% of all suburban office, warehousing and light manufacturing space in Indianapolis, and approximately 18% of all office, warehousing and light manufacturing space in Cincinnati. In addition to providing services to approximately 1,000 tenants in the Properties, the Company provides such services to over 1,200 tenants in approximately 150 properties owned by others. Based on published industry reports, the Company believes that it was responsible in 1993 for approximately 35% of the net absorption (gross space leased minus lease terminations and expirations) of warehousing and light manufacturing space in Indianapolis and for approximately 36% of the net absorption of warehousing and light manufacturing space in Cincinnati. The Company believes its dominant position in its market gives it a competitive advantage in its real estate activities. After completion of the Offering, the seven senior officers of the Company, who collectively have over 120 years of experience in the real estate industry and have been with the Company for an average of 17 years, will beneficially own Common Stock and Units exchangeable for Common Stock that represent approximately 17% of the Company's Common Stock on a fully diluted basis. BUSINESS STRATEGY The Company's business objective is to increase its Funds from Operations per share by (i) maintaining and increasing property occupancy and rental rates through the aggressive management of its portfolio of existing properties; (ii) expanding existing properties; (iii) developing and acquiring new properties; and (iv) providing a full line of real estate services to the Company's tenants and to third parties. As a fully integrated commercial real estate firm, the Company believes that its in-house leasing, management, development and construction services and the Company's significant base of commercially zoned and unencumbered land in existing business parks should give the Company a competitive advantage in its future development activities. risks can be done most effectively at regional or local levels. As a result, the Company intends to continue its emphasis on increasing its market share and effective rents in its existing markets primarily within the Midwest. The Company also expects to utilize its approximately 1,000 acres of Land and its many business relationships with more than S-8 2,200 commercial tenants to expand its build-to-suit business (development projects substantially pre-leased to a single tenant) and to pursue other development and acquisition opportunities in its existing markets and elsewhere, primarily in the Midwest. The Company believes that this regional focus will allow it to assess market supply and demand for real estate more effectively as well as to capitalize on its strong relationships with its tenant base. The Company's policy is to develop and seek to acquire Class A commercial properties located in markets with high growth potential for Fortune 500 companies and other quality regional and local firms. The Company's industrial and suburban office development focuses on business parks and mixed-use developments suitable for development of multiple projects on a single site and where the Company can create and control the business environment. These business parks and mixed-use developments generally include restaurants and other amenities which the Company believes create an atmosphere that is particularly efficient and desirable. The Company's retail development focuses on community, power and neighborhood centers in its existing markets. As a fully integrated real estate company, the Company is able to arrange for or provide to its industrial, office and retail tenants not only well located and well maintained facilities, but also additional services such as build-to-suit construction, tenant finish construction, expansion flexibility and advertising and marketing services. THE MIDWEST REAL ESTATE MARKET The Company believes that the Midwest offers a relatively strong and stable economy compared to other regions of the United States and provides significant growth potential due to its central location, established manufacturing base, skilled work force and moderate labor costs. In addition, the interstate highway systems serving Indianapolis, Cincinnati and Columbus, principal markets in which the Properties are located, help make those cities prime warehouse and distribution locations. According to the Chicago Association of Commerce and Industry, these three cities rank first, third and fourth, respectively, in being centrally located to the top 100 markets in the United States. Employment statistics are generally a useful measure of the viability of a industrial space in a geographic area is usually linked to the levels of business activity and disposable income. According to the applicable state labor statistics departments and the United States Department of Labor's Bureau of Labor Statistics, the unemployment rate for June, 1994 was 4.0%, 4.7% and 4.2% in the Indianapolis, Cincinnati and Columbus metropolitan areas, respectively, compared to 6.2% for the United States. Additionally, total employment has increased 10.1%, 9.7% and 10.6% since January 1, 1989 for the Indianapolis, Cincinnati and Columbus metropolitan areas, respectively, compared to 8.3% for the United States. INDIANAPOLIS, INDIANA. With over 1.4 million residents, Indianapolis is Indiana's largest metropolitan area. With a central location at the intersection of four interstate highways, Indianapolis continues to attract new growth by offering a skilled workforce and stable economic base. Indianapolis' economic base includes distribution, government, manufacturing, retail trade, service and tourism related industries. According to the Indianapolis Chamber of Commerce, United Airlines, Federal Express and Dow-Elanco are establishing major new facilities in Indianapolis which are expected to create 20,000 new jobs. The Indianapolis industrial market continues to improve as evidenced by a declining vacancy rate. According to CB Commercial Real Estate Group, Inc. ("CB Commercial"), the industrial vacancy rate has decreased 1.2% over the twelve months ended March 31, 1994 to 4.0%, which is strong as compared to the national industrial vacancy average of 7.9%, as reported by CB Commercial. According to LANDAUER REAL ESTATE COUNSELORS' 1994 REAL ESTATE MARKET FORECAST, Indianapolis is rated as the best warehouse and distribution market in the United States. CINCINNATI, OHIO. Cincinnati is the second largest metropolitan area in Ohio with a population of over 1.5 million. With an unemployment rate which is below the national average, Cincinnati's economic base is healthy and diverse. Balanced between major Fortune 500 employers (a total of 17 are headquartered in the S-9 region, including Proctor & Gamble, US Shoe, Chiquita Brands, Kroger Company and Federated Department Stores) and entrepreneurial enterprises, Cincinnati's economic base includes banking, distribution, manufacturing, retail trade and service related industries. Relatively low taxes, an expanding airport (a major North American hub for Delta Airlines) and aggressive state and local incentive packages designed to attract new business have contributed to major corporate relocations in Cincinnati. Additionally, PLACES RATED ALMANAC, in its most recent edition, ranked Cincinnati as North America's best city in which to live. as reported by CB Commercial declined by 1.6% to 4.8% over the twelve months ended March 31, 1994, which is below the national average of 7.9%. COLUMBUS, OHIO. The Columbus metropolitan area has a population of approximately 1.4 million and is the third largest metropolitan area in Ohio. The city's central location, well-trained workforce and high quality of life have established Columbus as a major transportation and distribution center. Major retail corporations such as Sears, Eddie Bauer, JC Penney, Consolidated Stores and The Limited have developed regional distribution centers in the area. Columbus' economic base includes distribution, government, manufacturing, retail trade and service related industries. The industrial vacancy rate of 3.2% as of March 31, 1994 was the third lowest of the 37 markets researched by CB Commercial in the United States. This vacancy rate represents a decrease of 1.6% over the previous twelve months and is well below the national average of 7.9% as reported by CB Commercial. RECENT DEVELOPMENTS REORGANIZATION AND 1993 OFFERING. As part of its 1993 Reorganization, the Company acquired substantially all of the properties and businesses of Duke Associates, a related full-service commercial real estate firm operating primarily in the Midwest. The Company also effected a 1 for 4.2 Reverse Stock Split relating to its existing shares and in the 1993 Offering issued an additional 14,000,833 shares of Common Stock, raising gross proceeds of $332.5 million. In July, 1994, the Company increased its quarterly dividend from $.45 to $.47 per share. DEVELOPMENT AND ACQUISITION ACTIVITY. Since the Reorganization and the 1993 Offering, the Company has completed the development of and placed in service four properties with 701,000 square feet having a total cost of $12.2 million and has acquired four properties with 894,000 square feet and the remaining 55% joint venture interest in a previously developed property at a total cost of $40.6 million. In addition, the Company has initiated the development of 10 buildings encompassing 1,479,000 square feet having a total cost of $69.7 million, which are expected to be completed and placed in service by June, 1995. These property additions (the "New Properties"), totalling 3,074,000 square feet, consist of 71% industrial, 7% office, 15% retail, and 7% medical office projects. The total cost (including allocation of land) of the New Properties is approximately $122.5 million. The New Properties have an average occupancy rate as of August 25, 1994 of 83% and provide an initial 10.8% weighted average annual unleveraged return on cost (computed as property annual contractual NOI divided by total costs) assuming no further lease-up. However, the Company of 12% with anticipated leasing activity. The annual contractual NOI expected to be generated from the New Properties, once placed in service, is anticipated to be $13 million and increase to $15 million with anticipated leasing activity. Those New Properties expected to be placed in service by October, 1994, are anticipated to generate annualized contractual NOI of $7 million. By June, 1995, when all of the New Properties are expected to be in service, the New Properties are anticipated to produce an additional $8 million of annualized contractual NOI. The total cost of the New Properties of $122.5 million includes currently owned land basis of $8.2 million. The $8.2 million land investment represents non-cash allocations of the portion of unencumbered Land inventory obtained through the 1993 Reorganization and since used for new development. The anticipated weighted average unleveraged annual return cost for the New Properties net of the Land basis is 13% S-10 compared to the 12% previously discussed. The total net cost of the New Properties will be approximately $114.3 million. These costs will be funded on a permanent basis by the net proceeds of this Offering which are expected to be approximately $75.2 million with the remainder of the costs to be funded by debt financings having a weighted average interest rate of 8.45% and a term of 6.6 years. The cost of the New Properties incurred to date has been financed with interim financing including the Company's $60 million revolving line of credit. Following the Offering, the revolving line of credit facility will be fully available for additional development and acquisition activity which the Company is currently pursuing. The Company is currently negotiating to substantially increase the amount of its revolving line of credit. The following table sets forth information regarding the New Properties. All of the New Properties are wholly-owned by the Company except for Xetron. RECENT ACTIVITY
COMPLETION OR PERCENT INITIAL ANTICIPATED PROPERTY SQUARE LEASED OR LEASE COMPLETION PROJECT/CLIENT LOCATION TYPE FEET PRE-LEASED (10) TERM - --------------------- ---------------------- --------------- --------- --------- ------------------- --------- COMPLETED DEVELOPMENT: 1st Qtr. 94 Xetron(1) Cincinnati, OH Industrial 100,193 100% 10 years Indianapolis, Indianapolis, 1st Qtr. 94 Caterpillar IN Industrial 336,000 100% 6 years 2nd Qtr. 94 Redken Hebron, KY Industrial 166,400 100% 5 years --------- 700,593 --------- COMPLETED ACQUISITIONS: 2nd Qtr. 94 Xerox(2) Columbus, OH Office (2) 100% Varies 2nd Qtr. 94 C.R. Services(3) Hebron, KY Industrial 214,840 100% 10 years 2nd Qtr. 94 Coldwater Crossing(4) Ft. Wayne, IN Retail 246,365 93% Varies Indianapolis, 2nd Qtr. 94 Park 100 Bldg 126(5) IN Industrial 60,100 100% Varies Indianapolis, 3rd Qtr. 94 Park 100 Bldg 98(6) IN Industrial 373,000 27% N/A --------- 894,305 --------- UNDER CONSTRUCTION: 3rd Qtr. 94 Veteran's Admin. Columbus, OH Medical 118,000 100% 20 years 3rd Qtr. 94 Indiana Insurance Columbus, OH Office 49,600 94% 10 years 3rd Qtr. 94 Galyan's Columbus, OH Retail 74,636 100% 20 years 3rd Qtr. 94 Sports Unlimited(7) Cincinnati, OH Retail 67,148 100% 20 years 4th Qtr. 94 Kohl's Cincinnati, OH Retail 80,684 100% 25 years Indianapolis, 4th Qtr. 94 Silver Burdett IN Industrial 553,900 100% 7 years Indianapolis, 4th Qtr. 94 Park 100 Bldg 97(8) IN Industrial 280,800 44% 5 years 1st Qtr. 95 Sterling Software Columbus, OH Office 57,660 100% 15 years 2nd Qtr. 95 St. Francis(9) Greenwood, IN Medical 95,579 36%(11) Varies 2nd Qtr. 95 John Alden Columbus, OH Office 101,200 100% 15 years --------- --------- 3,074,105 --------- --------- - ------------------------------ (1) Developed through a joint venture in which the Company's unaffiliated joint venture partner provided 100% of the financing. The Company has a 10% limited partner equity interest. (2) Originally developed prior to the Reorganization in a joint venture; the Company has acquired the 55% interest of its unaffiliated joint venture partner. (3) Originally developed in a joint venture; the Company has acquired the 57% interest of its unaffiliated joint venture partner. (4) A retail center anchored by Cub Foods, Walgreens, and Ben Franklin; Walmart and Service Merchandise also own stores in this center (114,000 and 50,000 square feet, respectively). (5) A warehouse facility at Park 100 Business Park where the Company currently owns or manages 1.7 million square feet of similar space having a 2.6% vacancy rate. (6) A bulk warehouse facility at Park 100 Business Park where the Company currently owns or manages 4.4 million square feet of similar space which is fully occupied. Land is available for 300,000 square feet of additional development.
S-11 (7) Anchor tenant of 51,000 square feet has a lease term of 20 years. (8) This bulk warehouse was originally committed to without any pre-leasing. A five year lease has been signed for 122,400 square feet of space. The building is located at Park 100 Business Park where the Company currently owns or manages 4.4 million square feet of similar space which is fully occupied. (9) Medical office building to be attached to the new $80 million ambulatory care center on the St. Francis Hospital south campus. The Company owns the building and has a leasehold interest in the land underlying the building. (10) Represents completed leasing activity through August 25, 1994. (11) This represents leases for which tenants have committed, but for which the actual leases have not been executed.
LAND ACTIVITY. Upon completion of the Reorganization and the 1993 Offering, the Company had approximately 1,128 acres of unencumbered Land to be used primarily for its development activities. Subsequent to the 1993 Offering, the Company has used 125 acres of Land in its development activities. Approximately 58 acres have been sold and 15 acres have been leased. Additionally, the Company unencumbered Land inventory held for development to approximately 1,000 acres. THIRD PARTY DEVELOPMENT AND MANAGEMENT ACTIVITIES. Since the Reorganization and the 1993 Offering, the Company has increased the square footage of property managed for third parties from 11.8 million to 12.1 million square feet has obtained the following third party construction and development contracts:
SQUARE FOOTAGE PRODUCT COMPLETION PROPERTY LOCATION UNDER DEVELOPMENT TYPE DATE - ---------------------- ------------------ ------------------ ----------- ------------------ Federated Cincinnati, OH 200,000 Office October 1994 Hendrickson-Turner Lebanon, IN 120,000 Industrial February 1995 ETS Indianapolis, IN 56,000 Industrial November 1994 American Trans Air Indianapolis, IN 45,000 Office August 1994 Honey Baked Ham Cincinnati, OH 28,000 Office December 1993 A-Copy Milford, CT 27,400 Office April 1994 Jewish Hospital Cincinnati, OH 18,000 Office January 1994 Goodwill Industries Indianapolis, IN 11,250 Retail September 1994
USE OF PROCEEDS The net proceeds to the Company from the sale of the Common Stock offered hereby are estimated at approximately $75.2 million (approximately $86.6 million if the Underwriters' over-allotment option is exercised in full), assuming an offering price of $26.75 per share (the closing price of the Common Stock on the New York Stock Exchange on August 25, 1994). The Company intends to use approximately $60 million of the proceeds of the Offering to retire interim financing which has been incurred to fund the Company's development and acquisition activities and the remainder of the proceeds to fund current development and acquisition projects. Pending such uses, the net proceeds may be invested in short-term income producing investments such as commercial paper, government securities or money market funds that invest in government securities. S-12 PRICE RANGE OF COMMON STOCK AND DIVIDEND HISTORY The Common Stock is listed on the New York Stock Exchange under the symbol DRE. The following table sets forth the high and low sale prices of the Common Stock of the periods indicated and the dividend paid per share for each such period.
PER SHARE (1) -------------------- DIVIDENDS QUARTERLY PERIOD HIGH LOW PER SHARE (1) - -------------------------------------------------------------------------------- --------- --------- --------------- 1992 First Quarter................................................................. $ 16.80 $ 13.65 $ 0.42 Second Quarter................................................................ 18.38 15.23 0.42 Third Quarter................................................................. 17.33 15.75 0.42 Fourth Quarter................................................................ 16.80 14.70 0.42 1993 First Quarter................................................................. 22.05 15.75 0.42 Second Quarter................................................................ 21.53 18.38 0.42 Third Quarter................................................................. 24.68 19.42 0.42 Fourth Quarter (2)............................................................ 26.00 22.13 0.45 1994 First Quarter................................................................. 26.00 21.00 0.45 Second Quarter................................................................ 27.25 23.50 0.47 Third Quarter (through August 25, 1994)....................................... 27.13 25.38 -- - ------------------------ (1) All information for periods prior to the Fourth Quarter of 1993 has been adjusted for the 1 for 4.2 Reverse Stock Split effected in October, 1993 as part of the Reorganization. (2) In October, 1993 the Company acquired substantially all of the properties and businesses of Duke Associates, a related full-service commercial real estate firm operating primarily in the Midwest. As part of this Reorganization, the Company effected a 1 for 4.2 Reverse Stock Split of its existing shares and issued an additional 14,000,833 shares of Common Stock in the 1993 Offering.
The last reported sale price of the Common Stock on the New York Stock Exchange on August 25, 1994 was $26.75 per share. As of August 25, 1994, there were 1,695 registered holders of Common Stock. Since its organization in 1986, the Company has paid regular and uninterrupted dividends. The Company intends to continue to declare quarterly amounts of future dividends as such dividends are subject to the Company's cash flow from operations, earnings, financial condition, capital requirements and such other factors as the board of directors deems relevant. If the shares being issued in this Offering are outstanding on the applicable record date, the holders thereof on such record date will be entitled to receive any dividend which may be declared by and at the discretion of the Board of Directors for the Third Quarter. DIVIDEND REINVESTMENT PLAN The Company has an Automatic Dividend Reinvestment Plan (the "Plan") which allows stockholders to acquire additional shares of Common Stock by automatically reinvesting cash dividends. Common Stock is acquired pursuant to the Plan at a price equal to the prevailing market price of such Common Stock, without payment of any brokerage commission or service charge. The Plan also allows participating stockholders to purchase Common Stock pursuant to the same terms and in the same manner as cash dividends are invested in amounts of not less than $100 and more than $3,000 per calendar quarter, without payment of any brokerage commission or service charge. Stockholders who do not participate in the Plan continue to receive cash dividends, as declared. As of August 25, 1994, approximately 19% of the Company's registered stockholders participated in the Plan. S-13 CAPITALIZATION The following table sets forth the capitalization of the Company as of June 30, 1994 and as adjusted to give effect to the Offering and the anticipated use of the proceeds thereof as described under "Use of Proceeds."
AT JUNE 30, 1994 ------------------------ HISTORICAL AS ADJUSTED ---------- ----------- (IN THOUSANDS) Mortgage and Construction Debt.................................................. $ 301,394 $301,394(2) ---------- ----------- Shareholders' Equity: Preferred Stock ($.01 par value), 5,000 shares authorized, none issued Common Stock ($.01 par value), 45,000 shares authorized; 16,046 outstanding; 19,046 outstanding as adjusted Additional paid-in-capital.................................................... 377,450 452,681 Distributions in excess of net income......................................... (34,117) (34,117) ---------- ----------- Total Shareholders' Equity.................................................... 343,493 418,754 ---------- ----------- Total Capitalization............................................................ $ 644,887 $720,148 ---------- ----------- ---------- ----------- - ------------------------ (1) Does not include 4,449 shares reserved for issuance upon exchange of issued and outstanding Units. (2) Includes the effect of the $60 million mortgage loan closed subsequent to June 30, 1994 and assumes that the proceeds from the Offering and the mortgage loan are used to fully retire the Company's line of credit facility and fund new development and acquisition costs.
S-14 SELECTED CONSOLIDATED FINANCIAL DATA The following sets forth selected financial and operating information on a pro forma basis for the Company for the years ended December 31, 1993 and 1992 and for the six months ended June 30, 1993. The pro forma information is presented as if the 1993 Offering and the Reorganization had occurred as of January 1, 1992. Also set forth are selected historical financial data for the Company as of and for the six months ended June 30, 1994, which were derived from the Company's financial statements, which are incorporated by reference in the accompanying Prospectus. The following selected financial information should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" for the Company and the financial statements incorporated by reference in the accompanying Prospectus.
PRO FORMA FOR REORGANIZATION (1) ----------------------------- YEAR ENDED SIX MONTHS SIX MONTHS DECEMBER 31, 30, 1994 30, 1993 1993 1992 ---------- ---------- ------- ------- (IN THOUSANDS, EXCEPT PROPERTIES AND PER SHARE DATA) OPERATING DATA: Revenues: Rental properties....................................... $ 41,843 $39,065 $79,639 $74,439 Property management, maintenance and leasing fees....... 5,393 4,836 11,496 12,248 Construction and development fees....................... 2,963 1,328 4,875 4,370 Interest and other income............................... 1,068 1,095 1,893 1,105 ---------- ---------- ------- ------- Total operating revenue................................... $ 51,267 $46,324 $97,903 $92,162 ---------- ---------- ------- ------- ---------- ---------- ------- ------- Interest expense.......................................... $ 8,723 $ 8,450 $17,280 $16,900 Depreciation and amortization............................. 8,138 9,163 18,078 18,026 Equity in earnings of unconsolidated companies............ 593 147 598 223 Income before minority interest........................... 15,534 11,228 24,978 18,366 Net income................................................ $ 11,420 $ 8,922 $19,076 $14,346 ---------- ---------- ------- ------- ---------- ---------- ------- ------- Net income per share...................................... $ 0.71 $ 0.56 $ 1.19 $ 0.89 ---------- ---------- ------- ------- ---------- ---------- ------- ------- OTHER DATA: Funds from Operations (2)................................. $ 23,238 $20,502 $42,166 $36,624 Funds from Operations per share/Unit...................... $ 1.13 $ 1.00 $ 2.06 $ 1.79 Common Stock outstanding (3).............................. 20,478 20,478 20,478 20,478 Number of Properties at end of period..................... 120 114 114 111
JUNE 30, 1994 --------- BALANCE SHEET DATA: Rental property, before accumulated depreciation.......... $589,317 Total assets.............................................. $692,487 Total debt................................................ $301,394 Shareholders' equity...................................... $343,493 - -------------------------- (1) Reflects October, 1993 Reorganization of the Company, including the Reverse Stock Split, the acquisition by the Company of substantially all of the assets of Duke Associates (a group of approximately 170 affiliated partnerships and corporations) and the issuance of an additional 14,001 shares of Common Stock. Presented as if the companies were combined as of January 1, 1992. (2) Funds from Operations, as defined by NAREIT, is net income adjusted for depreciation and amortization and gains or losses from property sales. Funds from Operations does not represent cash flows from operations as defined by generally accepted accounting principles, should not be considered as an alternative to net income as an indicator of the Company's operating performance and is not indicative of cash available to fund all cash flow needs. (3) Includes 4,432 Units as of June 30, 1994 held by persons other than the Company which are exchangeable for Common Stock.
S-15 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS REORGANIZATION AND 1993 OFFERING In the Reorganization, the Company acquired substantially all of the properties and businesses of Duke Associates, a related full-service commercial real estate firm operating primarily in the Midwest, effected a 1 for 4.2 Reverse Stock Split of its existing shares and issued an additional 14,000,833 shares of Common Stock in the 1993 Offering. Substantially all of the $309.3 million of net proceeds of the 1993 Offering were used to repay indebtedness of the reorganized Company. As a result of the Reorganization, the Company's Properties are owned through the Operating Partnership, of which the Company is the sole general partner and owner of approximately 78% of the Units. Following the Offering, the Company will own approximately 81% of the Units. RESULTS OF OPERATIONS -- SIX MONTHS ENDED JUNE 30, 1994 COMPARED TO PRO FORMA FOR THE SIX MONTHS ENDED JUNE 30, 1993 The revenues from rental properties increased from $39.1 million on a pro months ended June 30, 1994. This $2.7 million increase is primarily attributed to an expansion of the property portfolio, an increase in the occupancy of the Properties and increasing net effective rents, offset by the establishment of a reserve for accrued straight-line rents receivable of $750,000. Service operations and other revenue increased from $7.3 million on a pro forma basis for the six months ended June 30, 1993 to $9.4 million for the six months ended June 30, 1994. This $2.1 million increase results primarily from increased leasing fees of the managed properties portfolio and increased construction management and development fees resulting from increased construction and development activity. Primarily as a result of the revenue increases above, net income increased from $8.9 million on a pro forma basis for the six months ended June 30, 1993 to $11.4 million for the six months ended June 30, 1994. The occupancy at June 30, 1994 for all of the Properties in which the Company owns a whole or partial interest was 96.1% for the industrial properties (91.2% at June 30, 1993), 92.9% for the office and medical office properties (88.3% at June 30, 1993), and 91.2% for the retail properties (91.3% at June 30, 1993), for an overall occupancy rate of 94.6% (90.8% at June 30, 1993). Management expects occupancy to remain stable because only 6% and 12% of the Company's portfolio is subject to leases expiring in the rest of 1994 and 1995, respectively. FUNDS FROM OPERATIONS Management believes that Funds from Operations is the industry standard for reporting the operations of real estate investment trusts. Funds from Operations were $23.2 million or $1.13 per fully diluted share for the six months ended June 30, 1994 compared to $20.5 million or $1.00 per fully diluted share on a pro forma basis for the six months ended June 30, 1993. This growth is due primarily to portfolio expansion, increased average occupancy of the portfolio and increased earnings from the service operations. At June 30, 1994, the Company had approximately 1.5 million square feet of property under development which was approximately 85% pre-leased. This development is expected to contribute significantly to the Company's future growth of Funds from Operations. See "Recent Developments." While management believes that Funds from Operations is the most relevant and widely used measure of the Company's operating performance, such amounts do not represent cash flow from operations as defined by generally accepted accounting principles, should not be considered as an alternative to net income as an indicator of the Company's operating performance, and are not indicative of cash available to fund all cash flow needs. S-16 The Company pays regular quarterly dividends with a general policy of distributing no more than 90% of Funds from Operations. The dividend paid in May, 1994 and the dividend payable August 31, 1994 represent 81% of the first and second quarter Funds from Operations, respectively. The Company has in place a $60.0 million revolving credit facility which is being used to fund existing and new development costs, property acquisitions and to provide working capital when needed. The Company is currently in negotiations with the line of credit lenders to substantially increase the size of the credit facility. The Company closed in August, a seven year, $60.0 million mortgage loan commitment from an institutional lender which bears interest at a fixed rate of 8.72%. Approximately $41 million of this commitment was funded in August, 1994 with the remaining $19 million expected to be funded in September and December of 1994. The proceeds were used to fund land purchases, retire existing debt, replenish working capital and to fund development in process. Additional development costs for new projects and acquisitions will be funded through the proceeds of this Offering, the existing revolving line of credit, the remaining mortgage loan commitment and other construction and acquisition financing. The Company intends to limit its debt to no more than 50% of its total market capitalization. The Company's debt to total market capitalization at June 30, 1994 was 36.7%. Following the Offering, the Company's debt to total market capitalization will be 32.4%, assuming a stock price of $26.75 per share. After the Offering, the Company could incur up to $327.1 million of additional debt and remain within its 50% debt to total market capitalization guideline, assuming a stock price of $26.75 per share. At June 30, 1994, the Company had mortgage debt outstanding of $243.9 million, a construction loan outstanding of $944,000 and $56.5 million outstanding on its revolving line of credit, for total debt outstanding of $301.4 million. The mortgage debt bears a weighted average interest rate of 6.93% and matures at varying dates through 2018. Scheduled principal amortization on the mortgage debt was $784,000 for the six months ended June 30,1994 and will be $761,000 for the remainder of 1994. The construction loan bears interest at prime plus 1% and matures in October of 1994. The revolving line of credit bears interest at LIBOR plus 2% (effective rate of 6.133% at June 30, 1994) and matures in March 1996. Upon closing of the $60.0 million permanent loan, the pro forma total debt outstanding would bear a weighted average interest rate of 7.29%, of which only 2.6% is currently floating rate debt. A the revolving line of credit, making it fully available for future acquisitions and development. The total debt in unconsolidated subsidiaries at June 30, 1994 is $49.2 million, of which the Company's percentage share is $11.0 million. The unconsolidated subsidiary debt has a weighted average interest rate of 6.6% of which only 16.2% is currently floating rate debt. Rental and Service Operation revenue have been the principal sources of capital used to fund the Company's operating expenses, debt service and recurring capital expenditures. Recurring capital expenditures for the first six months of 1994 were $2.2 million. Funds Available for Distribution (Funds from Operations adjusted for straight-line rent and recurring capital expenditures) for the six months ended June 30, 1994 were $20.3 million, resulting in a payout ratio for the dividends for such period of 92.7% of Funds Available for Distribution. At June 30, 1994, scheduled maturities of the mortgage debt were as follows:
MATURITIES -------------- YEAR (IN THOUSANDS) --------------------------------------------------- Through December 31, 1994.......................... $ 761 1995............................................... 6,032 1996............................................... 61,647 1997............................................... 4,124 1998............................................... 88,079 1999............................................... 1,936 2000............................................... 2,350 2001............................................... 2,291 2002............................................... 2,494 2003............................................... 67,643 Thereafter......................................... 6,593 -------------- Total.......................................... $243,950 -------------- --------------
S-17 PROPERTIES GENERAL The Company owns whole or partial interests in (i) the Properties, consisting of 120 industrial, office and retail income-producing properties located in Indiana, Ohio, Illinois, Michigan, Tennessee, Kentucky, Wisconsin and Missouri; (ii) 10 buildings currently under development and (iii) the Land, development in Indiana, Ohio, Illinois, Kentucky, and Tennessee. The Properties are comprised of a broad range of product types which include bulk and medium bulk warehouse and distribution facilities, light manufacturing facilities, multi-tenant flex space buildings, suburban office buildings, downtown office buildings, and neighborhood, power and community shopping centers. Substantially all of the Properties were originally developed by the Company. The total square footage in the Properties is approximately 11.9 million, consisting of approximately 7.0 million square feet of industrial space, approximately 3.8 million square feet of office space and approximately 1.1 million square feet of retail space. The average annual net effective rental per leased square foot at June 30, 1994 was $6.66. The total annual net effective rental income of the Properties based upon tenants in occupancy as of June 30, 1994 is approximately $75.8 million, with $27.2 million relating to the industrial Properties, $39.6 million relating to the office Properties and $9.0 million relating to the retail Properties. At June 30, 1994, the Properties were approximately 95% leased. The following table gives a summary of the location and type of Properties by square footage. SQUARE FOOTAGE OF PROPERTIES BY STATE AND TYPE OF PROPERTY
STATE INDUSTRIAL OFFICE RETAIL TOTAL - ----------------------------------------- ---------- ---------- ---------- ------------ Indiana.................................. 3,919,381 1,084,610 440,335 5,444,326 Ohio..................................... 1,806,047 2,489,200 418,827 4,714,074 Illinois................................. 126,000 -- 170,963 296,963 Tennessee................................ 323,700 -- -- 323,700 Kentucky................................. 669,240 -- -- 669,240 Missouri................................. -- -- 32,754 32,754 Michigan................................. -- 245,219 -- 245,219 Wisconsin................................ 153,600 -- -- 153,600 ---------- ---------- ---------- ------------ Total................................ 6,997,968 3,819,029 1,062,879 11,879,876 ---------- ---------- ---------- ------------ ---------- ---------- ---------- ------------ Percent of total..................... 59% 32% 9% 100% ---------- ---------- ---------- ------------
The following table sets forth the aggregate average percent leased for all of the Properties during the last three years. AVERAGE OCCUPANCY (ALL PROPERTIES)
SQUARE FEET AVERAGE YEAR AVAILABLE OCCUPANCY - -------------------------------------------------------------------- ------------ ------------- Through June 30, 1994............................................... 11,879,876 93.9% 1993................................................................ 10,864,245 92.1% 1992................................................................ 10,572,874 89.3% 1991................................................................ 10,062,903 84.1%
The following table shows lease expirations for leases in place as of June 30, 1994 for each of the ten years beginning with the remainder of 1994 for the Properties, assuming none of the tenants exercises early termination or renewal options. S-18 LEASE EXPIRATIONS (ALL PROPERTIES)
ANNUAL NET PERCENT OF EFFECTIVE ANNUAL NET PERCENT OF NET RENTABLE ANNUAL NET RENT PER EFFECTIVE TOTAL LEASED AREA (IN SQ. EFFECTIVE SQ. FT. RENT SQ. FT. YEAR OF NUMBER OF FT.) SUBJECT RENT UNDER UNDER REPRESENTED REPRESENTED LEASE LEASES TO EXPIRING EXPIRING EXPIRING BY EXPIRING BY EXPIRING EXPIRATION EXPIRING LEASES LEASES (1) LEASES (1) LEASES LEASES - ----------- ----------- ------------ ------------- ----------- ------------- ------------- 1994 114 646,616 $ 3,882,820 $ 6.00 5.12% 5.75% 1995 191 1,323,616 8,411,276 $ 6.35 11.09% 11.77% 1996 206 1,711,087 9,782,094 $ 5.72 12.90% 15.22% 1997 143 1,080,216 7,248,617 $ 6.71 9.56% 9.61% 1998 136 1,562,538 9,046,254 $ 5.79 11.93% 13.90% 2000 28 883,312 5,889,516 $ 6.67 7.77% 7.86% 2001 20 408,274 3,047,436 $ 7.46 4.02% 3.63% 2002 11 267,898 2,903,379 $ 10.90 3.85% 2.38% 2003 9 154,192 1,809,197 $ 11.73 2.39% 1.37% 2004 and 30 1,827,387 14,828,563 $ 8.14 19.53% 16.24% thereafter --- ------------ ------------- TOTAL 976 11,244,159 $ 75,828,104 $ 6.74 --- ------------ ------------- --- ------------ ------------- - ------------------------ (1) Represents annual net effective rent due from tenants in occupancy as of June 30, 1994. Annual net effective rent equals the average annual rental property revenue over the terms of the respective leases, excluding additional rent due as operating expense reimbursements, landlord allowances for operating expenses and percentage rents.
INDUSTRIAL PROPERTIES The industrial Properties are primarily in industrial or business parks that have been developed by the Company and include all types of warehouse and light manufacturing buildings from multi-tenant flex space facilities providing leased space as small as 1,200 square feet to bulk distribution facilities providing leased space of more than 500,000 square feet. Approximately 73% of the square footage of the industrial properties is contained in bulk distribution facilities. The diversity of industrial buildings allows the Company to cater to many segments of the industrial market and renders the Company less dependent upon any specific market segment. The following table sets forth the aggregate average percent leased and annual net effective rental per leased square foot of available square footage for all of the industrial Properties during the last three years. S-19 AVERAGE OCCUPANCY AND AVERAGE RENTALS (INDUSTRIAL PROPERTIES)
ANNUAL NET EFFECTIVE RENTAL SQUARE FEET AVERAGE PER LEASED SQUARE YEAR AVAILABLE OCCUPANCY FOOT (1) - ------------------------------------------------------------ ----------- -------------- ----------------- 1993........................................................ 6,235,835 93.2% $4.06(3) 1992........................................................ 5,962,235 89.7% $3.91 1991........................................................ 5,962,235 84.8% $3.92 - ------------------------ (1) Calculated as the average annual rental property revenue over the terms of the respective leases, excluding tenant reimbursements for operating expenses and excluding landlord allowances for operating expenses, divided by the average total square feet under lease during the year. (2) The average annual net effective rental per square foot decreased in the first six months of 1994 because the increase in square footage available relates primarily to bulk warehouse space which provides a lower average annual net effective rent per square foot. (3) During 1993 and the first six months of 1994, 822,128 and 895,194 square feet, respectively, were leased or renewed at an average annual net effective rental per leased square foot of $4.83.
The following table shows lease expirations for leases in place as of June 30, 1994, for each of the ten years beginning with the remainder of 1994, for the industrial Properties, assuming none of the tenants exercises early termination or renewal options. LEASE EXPIRATIONS (INDUSTRIAL PROPERTIES)
ANNUAL NET NET PERCENT OF PERCENT OF RENTABLE EFFECTIVE ANNUAL NET TOTAL AREA (IN ANNUAL NET RENT PER EFFECTIVE LEASED SQ. NUMBER SQ. FT.) EFFECTIVE SQ. FT. RENT FT. YEAR OF OF SUBJECT TO RENT UNDER UNDER REPRESENTED REPRESENTED LEASE LEASES EXPIRING EXPIRING EXPIRING BY EXPIRING BY EXPIRING EXPIRATION EXPIRING LEASES LEASES(1) LEASES(1) LEASES LEASES - ---------- -------- ---------- ----------- --------- ----------- ----------- 1994 41 482,663 $ 2,197,220 $ 4.55 8.07% 7.18% 1995 62 754,801 2,689,445 $ 3.56 9.87% 11.22% 1996 73 1,119,598 3,978,869 $ 3.55 14.61% 16.65% 1997 38 596,879 2,288,973 $ 3.83 8.40% 8.88% 1998 45 1,085,355 4,249,120 $ 3.91 15.60% 16.14% 1999 30 901,996 3,623,537 $ 4.02 13.30% 13.41% 2001 7 271,576 1,519,722 $ 5.60 5.58% 4.04% 2002 1 600 4,660 $ 7.77 .02% .01% 2003 -- -- -- -- -- -- 2004 and 10 876,938 4,009,043 $ 4.57 14.70% 13.03% thereafter --- ---------- ----------- TOTAL 320 6,725,295 $27,242,775 $ 4.05 --- ---------- ----------- --- ---------- ----------- - ------------------------ (1) Represents annual net effective rent due from tenants in occupancy as of June 30, 1994. Annual net effective rent equals the average annual rental property revenue over the terms of the respective leases, excluding additional rent due as operating expense reimbursements, landlord allowances for operating expenses and percentage rents.
S-20 OFFICE PROPERTIES The Company's portfolio of office Properties includes three downtown buildings as well as 39 suburban office buildings located in developed business parks and mixed-use developments with excellent interstate access and visibility. The Company believes that all of its office Properties are among the highest in quality available to tenants in its markets. This diverse mix of office buildings is occupied by tenants spanning all segments of the office market. The following table sets forth the aggregate average percent leased and annual net effective rental per leased square foot of available square footage for all of the office Properties during the last three years. AVERAGE OCCUPANCY AND AVERAGE RENTALS (OFFICE PROPERTIES)
ANNUAL NET EFFECTIVE RENTAL SQUARE FEET AVERAGE PER LEASED SQUARE YEAR AVAILABLE OCCUPANCY FOOT (1) - ------------------------------------------------------------ ----------- -------------- ----------------- Through June 30, 1994....................................... 3,819,029 92.1% $10.92(2) 1993........................................................ 3,811,904 90.5% $10.91(2) 1992........................................................ 3,811,904 88.9% $10.89 - ------------------------ (1) Calculated as the average annual rental property revenue over the terms of the respective leases, excluding tenant reimbursements for operating expenses and excluding landlord allowances for operating expenses, divided by the average total square feet under lease during the year. (2) During 1993 and the first six months of 1994, 670,686 and 196,791 square feet, respectively, were leased or renewed at an average annual net effective rental per leased square foot of $10.28.
The following table shows lease expirations for leases in place as of June 30, 1994, for each of the ten years beginning with the remainder of 1994, for the office Properties, assuming none of the tenants exercises early termination or renewal options. S-21 LEASE EXPIRATIONS (OFFICE PROPERTIES)
NET RENTABLE ANNUAL NET PERCENT OF PERCENT OF AREA (IN EFFECTIVE ANNUAL NET TOTAL SQ. FT.) ANNUAL NET RENT PER EFFECTIVE LEASED SQ. NUMBER SUBJECT EFFECTIVE SQ. FT. RENT FT. YEAR OF OF TO RENT UNDER UNDER REPRESENTED REPRESENTED LEASE LEASES EXPIRING EXPIRING EXPIRING BY EXPIRING BY EXPIRING EXPIRATION EXPIRING LEASES LEASES (1) LEASES (1) LEASES LEASES - ---------- -------- --------- ----------- ---------- ----------- ----------- 1994 52 122,042 $ 1,255,969 $10.29 3.18% 3.44% 1995 104 499,305 5,024,927 $10.06 12.71% 14.07% 1996 89 437,194 4,395,010 $10.05 11.12% 12.32% 1997 71 384,878 3,887,406 $10.10 9.83% 10.84% 1998 64 396,145 3,927,893 $ 9.92 9.93% 11.16% 1999 42 431,209 4,796,290 $11.12 12.13% 12.15% 2000 9 199,693 2,767,454 $13.86 7.00% 5.63% 2001 10 107,798 1,261,727 $11.70 3.19% 3.04% 2002 4 174,853 2,055,108 $11.75 5.20% 4.93% 2003 5 117,696 1,479,320 $12.57 3.74% 3.32% 2004 and 9 678,544 8,689,089 $12.81 21.97% 19.10% thereafter --- --------- ----------- TOTAL 459 3,549,357 $39,540,193 $11.14 --- --------- ----------- --- --------- ----------- - ------------------------ June 30, 1994. Annual net effective rent equals the average annual rental property revenue over the terms of the respective leases, excluding additional rent due as operating expense reimbursements, landlord allowances for operating expenses and percentage rents.
RETAIL PROPERTIES The retail Properties, which also cater to a variety of retail markets, include one regional shopping center, 10 neighborhood shopping centers, three shopping centers designed primarily to serve the business parks in which they are located and three free-standing single tenant buildings. The retail Properties are generally located in upscale suburban and high growth areas. The following table sets forth the aggregate average percent leased and annual net effective rental per leased square foot for all of the retail Properties during the last three years. AVERAGE OCCUPANCY AND AVERAGE RENTALS (RETAIL PROPERTIES)
ANNUAL NET EFFECTIVE RENTAL SQUARE FEET AVERAGE PER LEASED SQUARE YEAR AVAILABLE OCCUPANCY FOOT (1) - ------------------------------------------------------------ ----------- -------------- ----------------- Through June 30, 1994....................................... 1,062,879 90.8% $8.92(2) 1993........................................................ 816,506 91.2% $9.04(2) 1992........................................................ 795,506 87.2% $8.85 1991........................................................ 795,506 81.0% $8.70 - ------------------------ (1) Calculated as the average annual rental property revenue over the terms of the respective leases, excluding tenant reimbursements for operating expenses and excluding landlord allowances for operating expenses, divided by the average total square feet under lease during the year. (2) During 1993 and the first six months of 1994, 73,668 and 60,008 square feet, respectively, were leased or renewed at an average annual net effective rental per leased square foot of $11.28.
S-22 The following table shows lease expirations for leases in place as of June 30, 1994, for each of the ten years beginning with the remainder of 1994, for or renewal options. LEASE EXPIRATIONS (RETAIL PROPERTIES)
NET ANNUAL RENTABLE NET PERCENT OF PERCENT OF AREA (IN EFFECTIVE ANNUAL NET TOTAL SQ. FT.) ANNUAL NET RENT PER EFFECTIVE LEASED SQ. NUMBER SUBJECT EFFECTIVE SQ. FT. RENT FT. YEAR OF OF TO RENT UNDER UNDER REPRESENTED REPRESENTED LEASE LEASES EXPIRING EXPIRING EXPIRING BY EXPIRING BY EXPIRING EXPIRATION EXPIRING LEASES LEASES(1) LEASES(1) LEASES LEASES - ---------- -------- -------- ---------- --------- ----------- ----------- 1994 21 41,911 $ 429,631 $10.25 4.75% 4.32% 1995 26 69,510 696,904 $10.03 7.71% 7.17% 1996 43 154,295 1,408,215 $ 9.13 15.57% 15.91% 1997 34 98,459 1,072,238 $10.89 11.85% 10.16% 1998 27 81,038 869,241 $10.73 9.61% 8.36% 1999 16 45,818 559,125 $12.20 6.18% 4.73% 2000 6 48,730 439,876 $ 9.03 4.86% 5.03% 2001 3 28,900 265,987 $ 9.20 2.94% 2.98% 2002 6 92,445 843,611 $ 9.13 9.33% 9.54% 2003 4 36,496 329,877 $ 9.04 3.65% 3.76% 2004 and 11 271,905 2,130,431 $ 7.84 23.55% 28.04% thereafter --- -------- ---------- TOTAL 197 969,507 $9,045,136 $ 9.33 --- -------- ---------- --- -------- ---------- - ------------------------ (1) Represents annual net effective rent due from tenants in occupancy as of June 30, 1994. Annual net effective rent equals the average annual rental property revenue over the terms of the respective leases, excluding additional rent due as operating expense reimbursements, landlord allowances for operating expenses and percentage rents.
LAND Substantially all the Land is located adjacent to the Properties in industrial or business parks that have been developed by the Company. Approximately 80% of the Land is zoned for industrial use, with the remainder zoned for either office or retail use. All of the Land is unencumbered, has available to it appropriate utilities and is ready for immediate development. 13.3 million square feet of commercial development can be constructed on the Land. The Company believes that the Land gives it a competitive advantage over other real estate companies operating in its markets. The following table describes the acreage and zoning of the Land as of June 30, 1994. S-23 LAND HELD FOR DEVELOPMENT
YEAR COMPANY'S DESCRIPTION/LOCATION ZONED USE ACQUIRED ACREAGE OWNERSHIP - -------------------------------------- ----------- ----------- ----------- -------------- Park 100 Business Park Industrial 1972-1993 353.1 100% Indianapolis, IN South Park Business Center Industrial 1989 36.1 100% Greenwood, IN Park 50 TechneCenter Industrial 1977/1989 60.9 100% Cincinnati, OH World Park Industrial 1987/1991 126.5 100% Cincinnati, OH Southpark Business Center Industrial 1989 16.8 100% Hebron, KY Governor's Pointe Industrial 1986 51.1 100%(1) Cincinnati, OH Haywood Oaks TechneCenter Industrial 1988 26.7 100% Nashville, TN Park 101 Industrial 1986 60.1 100% Decatur, IL Southpointe Industrial 1994 53.7 100% Columbus, OH Parkwood Crossing Office 1989 45.0 50%(2) Indianapolis, IN Hamilton Crossing Office 1988 94.9 50%(2) Carmel, IN Merchant Street Office 1990 5.6 100% Cincinnati, OH Tri-County Office Park Office 1986 3.2 100% Cincinnati, OH American Center Office 1990 2.6 100% Nashville, TN Corporate Park at Tuttle Crossing Office 1989/1994 16.5 100% Columbus, OH Fidelity Drive Office 1984 10.0 100% Cincinnati, OH South Park Business Center Retail 1989 20.1 100% Greenwood, IN Governor's Plaza Retail 1988 1.1 100% Cincinnati, OH Greenwood Corner Retail 1986 0.4 100% Indianapolis, IN
S-24
DESCRIPTION/LOCATION ZONED USE ACQUIRED ACREAGE OWNERSHIP - -------------------------------------- ----------- ----------- ----------- -------------- Coldwater Crossing Retail 1994 8.4 100% Ft. Wayne, IN Sawmill Road Retail 1994 1.5 100% Columbus, OH - ------------------------ (1) Pursuant to a land contract whereby the Company is the purchaser. (2) This Land is owned by a partnership in which the Company is a 50% partner.
TENANTS The Company's Properties have a diverse and stable base of approximately 1,000 tenants. Many of the tenants are Fortune 500 companies and engage in a wide variety of businesses, including manufacturing, retailing, wholesale trade, distribution, and professional services. Approximately 50% of the square footage of the Properties is occupied by tenants with a net worth based on book value of $100 million or greater. More than 80% of the gross leasable area of the Properties is occupied by tenants who have been in business for more than 10 years. The Company renewed 70% of the tenants available to be renewed over the 18 months ended June 30, 1994, on approximately 2 million square feet up for renewal. No single tenant accounts for more than 5% of the Company's total revenues. The following table sets forth information regarding the 10 largest tenants of the Properties based upon 1993 base contractual rental revenue.
LEASE PERCENTAGE 1993 BASE PERCENTAGE OF EXPIRATION SQUARE OF TOTAL RENTAL BASE RENTAL TENANT LOCATION DATE FOOTAGE SQUARE FEET REVENUES (4) RENTAL REVENUES - ------------------------- ------------ ----------- --------- ----------- --------------- --------------- (IN THOUSANDS) General Electric......... Cincinnati Varies(1) 269,011 2.3% $ 3,896 4.7% SDRC..................... Cincinnati 4/30/11 240,513 2.0% 2,286 2.7% Lenscrafters, Inc........ Cincinnati 12/31/99 156,779 1.3% 2,250 2.7% LCI Communications....... Cincinnati 11/30/05 164,639 1.4% 2,195 2.6% Associated Group......... Indianapolis Varies(2) 188,988 1.6% 1,845 2.2% Cincinnati Enquirer...... Cincinnati 6/30/12 117,301 1.0% 1,689 2.0% Cincinnati Bell Telephone............... Cincinnati 4/14/96 92,551 .8% 1,629 2.0% Ordernet Services, Inc..................... Cincinnati 9/30/00 106,300 .9% 1.613 2.0% Champion Spark Plugs..... Indianapolis 10/14/98 512,777 4.3% 1,327 1.6% --------- --- ------- --- TOTAL.................... 2,006,443 16.9% $20,550 24.7% --------- --- ------- --- --------- --- ------- --- - ------------------------ (1) General Electric represents a total of 10 leases, with maturities ranging from 1994 to 1997. (2) Associated Group (Blue Cross/Blue Shield) represents a total of seven leases under various tenant names, with maturities ranging from 1996 to 1998. (3) Tenant has exercised an option to terminate 114,434 square feet of the indicated space to relocate in October, 1994 into a new facility being developed on a third party fee basis by the Company. The Company has obtained management of the new facility and is negotiating with prospects to re-lease the space to be vacated. (4) Base rental revenues represent the annualized gross contractual rent as of December 31, 1993 including landlord operating expense allowances and excluding tenant operating expense reimbursements.
S-25 TABLE OF PROPERTIES The following table sets forth information concerning the Company's properties as of June 30, 1994.
COMPANY'S SQUARE PERCENT NAME/LOCATION OWNERSHIP YEAR BUILT FEET LEASED (1) SIGNIFICANT TENANTS (2) - -------------------------- ---------- -------------- ------- ---------- ----------------------------------- INDUSTRIAL Indianapolis, Indiana PARK 100 BUSINESS PARK Building 38 100% 1978 6,000 100% Langford's Collision (100%) Building 43 100% 1971 26,871 100% Integrated Clinical (100%) Building 74 10%-50%(3) 1988 257,400 100% South Carolina Tees (35%), Ternes Building 76 10%-50%(3) 1988 81,695 100% Telamon Corp. (26%), Howard W. Sams (19%), Pro-Vet Cos., Inc. (25%), Ingersoll-Rand (20%) Building 77 100% 1988 193,400 100% Service Graphics (65%), Federal Mogul Corp. (35%) Building 78 10%-50%(3) 1988 512,777 100% Champion Spark Plug (100%) Building 79 100% 1988 66,000 80% Encor Technologies, Inc. (53%), Braun Media Services, Inc. (13%) Building 80 100% 1988 66,000 88% Data Chem., Inc. (26%), Arcane Leasing Resources (13%), SSI Medical Services (10%), Hercules Hydraulics (12%), Coast to Coast Analytical (20%)
S-26
COMPANY'S SQUARE PERCENT NAME/LOCATION OWNERSHIP YEAR BUILT FEET LEASED (1) SIGNIFICANT TENANTS (2) - -------------------------- ---------- -------------- ------- ---------- ----------------------------------- Building 83 100% 1989 96,000 100% Midwest Roll Forming (30%), Tank Construction (10%), Telamon Corp. (25%), State Lottery Commission (22%), Bel Hybrids & Magnetics (13%) Building 84 100% 1989 96,000 100% Magnetech Corp. (27%), Datagraphic, Nina International, Inc. (25%) Building 85 10%-50%(3) 1989 180,100 100% Pepsico, Inc. (100%) Building 87 10%-50%(3) 1989 350,000 100% Epson America, Inc. (100%) Building 89 10%-50%(3) 1990 311,600 100% Becton Dickinson & Co. (100%) Building 91 10%-50%(3) 1990 144,000 100% Pepsico, Inc. (60%), Cabot Safety Corp. (40%) Building 92 10%-50%(3) 1991 45,917 100% Keebler Company (100%) Building 95 100% 1993 336,000 100% Caterpillar Logistics (100%) Building 109 100% 1985 46,000 82% Createc Corp. (16%), First Data Resources (12%), NBG Ent. (11%), Quick Change (12%), Wabash Valley Power Assoc. (12%) Building 117 10%-50%(3) 1988 135,600 99% Accordia School Benefits (29%) Building 120 10%-50%(3) 1989 54,982 100% Nat'l Retail Hardware (38%), Peoples Bank & Trust (40%)
S-27
COMPANY'S SQUARE PERCENT NAME/LOCATION OWNERSHIP YEAR BUILT FEET LEASED (1) SIGNIFICANT TENANTS (2) - -------------------------- ---------- -------------- ------- ---------- ----------------------------------- Building 122 100% 1990 73,274 96% Haynes & Pittenger (38%), RJE Interiors, Inc. (14%), Acordia Health Industry (28%) Building 125 100% 1994 98,000 100% Day Dream Publishing, Inc. (100%) Ackerman Chacco Co., Inc. (14%), Amarr Cos., Inc. (13%), Commercial Movers, Inc. (11%) SHADELAND STATION Buildings 204 & 205 100% 1984 48,600 87% Southwestern Bell (80%) HUNTER CREEK BUSINESS PARK Building 1 10%-50%(3) 1989 86,500 100% Trilithic (41%), Nissin Int'l Transport (22%), Exhaust Prod. Warehouse (15%), Lazarus Real Estate, Inc. (22%) Building 2 10%-50%(3) 1989 202,560 100% Wal-Mart Stores (100%) HILLSDALE TECHNECENTER Building 4 100% 1987 73,874 88% Dugdale Communications (13%), Community Hospitals (31%), Net Midwest, Inc. (12%) Building 5 100% 1987 67,500 92% Wiltrout Sales (17%), Advanced Automation Tech. (12%) Building 6 100% 1987 64,000 100% Adminastar (100%)
S-28
COMPANY'S SQUARE PERCENT NAME/LOCATION OWNERSHIP YEAR BUILT FEET LEASED (1) SIGNIFICANT TENANTS (2) - -------------------------- ---------- -------------- ------- ---------- ----------------------------------- Carmel, Indiana HAMILTON CROSSING Building 1 100% 1989 51,825 86% Charles Schwab & Co. (30%), Bacompt Systems, Inc. (28%) Greenwood, Indiana SOUTH PARK BUSINESS CENTER Building 2 100% 1990 86,806 99% Acordia Construction Benefits (10%), Pro Industries (11%) Cincinnati, Ohio (4) PARK 50 TECHNECENTER Building 20 100% 1987 96,000 60% Computer Technology (31%) Building 25 100% 1989 78,328 100% Zonic Corp. (45%), SDRC (25%), Hyper Shoppes, Inc. (30%) GOVERNOR'S POINTE 4700 Building 100% 1987 76,400 89% Allen Bradley Co. (19%), Konica Business Machines (12%) 4800 Building 100% 1989 80,000 92% General Electric (50%), Community Mutual Ins. Co. (27%) 4900 Building 100% 1987 76,400 90% Federated Dept. Stores (57%), Intergraph Corporation (13%) WORLD PARK Building 5 100% 1987 59,700 75% Amerimed Equip. (17%), Pak/ Teem, Inc. (11%)
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COMPANY'S SQUARE PERCENT NAME/LOCATION OWNERSHIP YEAR BUILT FEET LEASED (1) SIGNIFICANT TENANTS (2) - -------------------------- ---------- -------------- ------- ---------- ----------------------------------- Building 6 100% 1987 92,400 100% Caterpillar Logistics (56%), Omnicare, Inc. (26%), Copy Duplicating Products (11%) Building 7 100% 1987 96,000 100% CTL-Aerospace (100%) Building 8 100% 1989 192,000 100% Container Corp. (38%), Duplex Products, Inc. (31%), Dobson Moving & Storage (13%), Perkins Building 9 100% 1989 58,800 89% Lenscrafters (20%), Philips Medical Systems (20%) Building 11 100% 1989 96,000 90% Cincinnati Screen Supply (20%), The U.S. Shoe Corp. (70%) Building 14 100% 1989 166,400 100% Kenco/Microage (62%), Suntory Water Group (12%) Building 15 100% 1990 93,600 100% Stolle Research & Develop (100%) Building 16 100% 1989 93,600 100% Valvoline, Inc. (100%) ENTERPRISE BUSINESS PARK Building A 100% 1990 87,400 95% The Future Now, Inc. (38%), Advanced Office Systems (14%) Building B 100% 1990 84,940 87% General Electric Supply (11%), Payless Cashways, Inc. (18%) Cincinnati, Ohio (4) TRI-COUNTY BUSINESS PARK Xetron 10%(5) 1994 100,193 100% Xetron (100%)
S-30
COMPANY'S SQUARE PERCENT NAME/LOCATION OWNERSHIP YEAR BUILT FEET LEASED (1) SIGNIFICANT TENANTS (2) - -------------------------- ---------- -------------- ------- ---------- ----------------------------------- OTHER INDUSTRIAL -- CINCINNATI U.S. Post Office 40%(6) 1992 57,886 100% U.S. Postal Service (100%) Building Columbus, Ohio PET FOODS Pet Foods Distribution 100% 1993 120,000 100% Pet Foods (100%) Building Hebron, Kentucky (7) SOUTHPARK BUSINESS CENTER Building 1 100% 1990 96,000 100% James & Loretta England (44%), Surgical Laser Technology (33%), Quality Food & Vending (13%), Building 3 100% 1991 192,000 73% Cincinnati Terminal Warehouse (73%) CR Services 100% 1994 214,840 100% SKF USA, Inc. (100%) Redken Laboratories 100% 1994 166,400 100% Redken Laboratories, Inc. (100%) Decatur, Illinois PARK 101 BUSINESS CENTER Building 3 100% 1979 75,600 74% Illinois Power Company (12%) Building 8 100% 1980 50,400 84% Federal Express (14%), Decatur Office Systems (14%), Hinckley- Schmitt, Inc. (13%)
S-31
COMPANY'S SQUARE PERCENT NAME/LOCATION OWNERSHIP YEAR BUILT FEET LEASED (1) SIGNIFICANT TENANTS (2) - -------------------------- ---------- -------------- ------- ---------- ----------------------------------- Nashville, Tennessee HAYWOOD OAKS TECHNECENTER Building 2 100% 1988 50,400 100% Beacon Int'l, U.S.A. (19%), Major Video Concepts (31%), Synermed, Inc. (17%) Building 3 100% 1988 52,800 100% Copper & Brass Sales (23%), ATEC Associates, Inc. (30%), Tennessee Scale Works (14%), Virogroup, Inc. (25%) Building 4 100% 1988 46,800 100% US Telecom Inc/ Sprint (62%), Product Assembly (17%) Building 5 100% 1988 60,300 96% Allen-Bradley Co., Inc. (28%) Building 6 100% 1989 113,400 100% Primus Automotive (48%) Milwaukee, Wisconsin subsidiary of The Woolworth Companies (100%) OFFICE Indianapolis, Indiana PARK 100 BUSINESS PARK Building 34 100% 1979 22,272 82% James H. Drew Corp. (20%), Indiana Properties, Inc. (12%), Million & Co., P.C. (12%)
S-32
COMPANY'S SQUARE PERCENT NAME/LOCATION OWNERSHIP YEAR BUILT FEET LEASED (1) SIGNIFICANT TENANTS (2) - -------------------------- ---------- -------------- ------- ---------- ----------------------------------- Building 116 100% 1988 35,700 100% Technalysis, Inc. (37%), Woolpert Consultants (37%) Building 118 100% 1988 35,700 100% Benicorp Ins. (33%), Kosene & Kosene Dev. (12%), Construction Magazine Grp. (15%), Acordia Senior Benefits (20%), Policy Management Systems (20%) Building 119 100% 1989 53,300 97% Anthem Health Sys. (91%) CopyRite Building 50%(9) 1992 48,000 100% Alco Standard Corporation (100%) WOODFIELD AT THE CROSSING Two Woodfield Crossing 100% 1987 117,818 90% General Accident Ins. Co. (19%) Three Woodfield Crossing 100% 1989 259,777 90% E.F.S., Inc. (20%), Medi-Span, Inc. (10%) PARKWOOD CROSSING Parkwood I 50%(10) 1990 108,281 98% Tandem Computer (12%), VanGuard Services (11%) 7240 Shadeland Station 67%(11) 1985 45,585 98% Den-Mat Corp. (14%), James River Paper Co., Inc. (44%) 7330 Shadeland Station 100% 1988 42,619 100% American Family Ins. (78%), Medcor Data (12%) 7340 Shadeland Station 100% 1989 32,235 100% Truevision, Inc. (75%), Analysts International (25%)
S-33
COMPANY'S SQUARE PERCENT NAME/LOCATION OWNERSHIP YEAR BUILT FEET LEASED (1) SIGNIFICANT TENANTS (2) - -------------------------- ---------- -------------- ------- ---------- ----------------------------------- 7351 Shadeland Station 100% 1983 27,740 76% Mgmt. Computer (23%), Northside Counseling (11%), Garrison & Kiefer (14%), Action Systems Associates (10%) 7369 Shadeland Station 100% 1989 15,551 100% Truevision, Inc. (70%), Fairbanks Hospital, Inc. (14%), Techsoft Systems, Inc. (16%) 7400 Shadeland Station 100% 1990 49,544 100% Edward B. Morris Assoc. (27%), Ryland Mortgage Company (12%) KEYSTONE AT THE CROSSING F.C. Tucker Building 100% 1978 4,840 100% F. C. Tucker (100%) (12) 3520 Commerce Crossing 100% 1976 30,000 100% Indiana Wesleyan University (100%) (13) Carmel, Indiana CARMEL MEDICAL CENTER Building I (14) 100% 1985 40,060 100% Indiana Institute for Low Back Care (17%), Carmel OB/ GYN (12%) Vincent Hosp. & Health (31%) Greenwood, Indiana SOUTH PARK BUSINESS CENTER Building 1 100% 1989 39,715 96% Alverno Admin (11%), Brylane L.P. (29%), Cummins Engine Co., Inc. (12%)
S-34
COMPANY'S SQUARE PERCENT NAME/LOCATION OWNERSHIP YEAR BUILT FEET LEASED (1) SIGNIFICANT TENANTS (2) - -------------------------- ---------- -------------- ------- ---------- ----------------------------------- Building 3 100% 1990 35,900 100% United Home Life Ins. (50%), Personnel Management, Inc. (24%), Philip Morris U.S.A. (12%) Cincinnati, Ohio(4) GOVERNOR'S HILL 8600 Governor's Hill 100% 1986 200,584 88% Lenscrafters (72%) 8700 Governor's Hill 100% 1985 58,617 100% General Electric Corp. (100%) 8790 Governor's Hill 100% 1985 58,177 99% General Electric Corp. (28%), Tandem Computers, Inc. (14%) 8800 Governor's Hill 100% 1985 28,700 100% Southern Ohio Telephone (85%) GOVERNOR'S POINTE 4605 Governor's Pointe 100% 1990 175,485 100% GE Capital (72%), Cincom Systems, Inc. (16%) 4705 Governor's Pointe 100% 1988 140,984 100% Federated Dept. Stores (81%), Ford Motor Company (19%) 4770 Governor's Pointe 100% 1986 76,037 66% Siemens Energy (7%) PARK 50 TECHNECENTER SDRC Building 100% 1991 221,215 100% SDRC (100%) 400 TechneCenter Drive 100% 1985 70,644 83% Philip Morris U.S.A. (11%), DOWNTOWN CINCINNATI 311 Elm Street (15) 100% 1902/1986(16) 90,127 100% Star Bank (75%), Space Design Interior, Inc. (25%) 312 Plum Street 100% 1987 230,000 90% Cincinnati Bell (29%), Savings & Loan Data Corp. (26%)
S-35
COMPANY'S SQUARE PERCENT NAME/LOCATION OWNERSHIP YEAR BUILT FEET LEASED (1) SIGNIFICANT TENANTS (2) - -------------------------- ---------- -------------- ------- ---------- ----------------------------------- 312 Elm Street (17) 100% 1992 378,000 87% Cincinnati Enquirer (28%), Prudential Insurance Co. (24%), GSA (20%) KENWOOD COMMONS Building I 50%(18) 1986 46,470 100% Digital Communications (100%) Building II 50%(18) 1986 46,434 88% Bethesda Health Care (16%), Cross & Associates (18%) OTHER OFFICE -- CINCINNATI Triangle Office Park 100% 1965/1985(19) 172,650 84% Accufax (10%) Fidelity Drive Building 100% 1972 38,000 100% Reuben H. Donnelley Corp. (100%) Tri-County Office Park 100% 1971, 1973(&20) 102,166 59% Pope & Assoc. (13%) 1982 Columbus, Ohio THE CORPORATE PARK AT TUTTLE CROSSING 4600 Lakehurst 100% 1990 106,300 100% Ordernet Services (100%) 4650 Lakehurst 100% 1990 164,639 100% LCI Communications (Litel) (100%) 5555 Parkcenter 100% 1992 83,971 100% Xerox (33%), Metal Forge (30%), VOCA (28%) Livonia, Michigan SEVEN MILE CROSSING 38705 Seven Mile (21) 100% 1988 113,066 95% Amoco Oil Co. (12%)
S-36
COMPANY'S SQUARE PERCENT NAME/LOCATION OWNERSHIP YEAR BUILT FEET LEASED (1) SIGNIFICANT TENANTS (2) - -------------------------- ---------- -------------- ------- ---------- ----------------------------------- RETAIL Indianapolis, Indiana PARK 100 BUSINESS PARK Woodland Shoppes 100% 1989 19,716 70% McTee, Inc. (18%), D.K. Brunchies, Building 121 Inc. (18%), Dr. Jeffrey Golder (11%) Park 100 Retail Center 100% 1978 14,504 80% Little Bit of Italy (20%), The Cleaning Shop (10%), Shoe Hospital Corp. (10%), Park 100 Liquors (21%) CASTLETON CORNER Michael's Plaza 100% 1984 46,374 92% Michael's Arts & Crafts (40%), Hoosier Cash & Carry (28%) Cub Plaza 100% 1986 60,136 93% Pet Food Supermarket (38%), Outback Steakhouse, Inc. (12%) Fort Wayne, Indiana Coldwater Crossing 100% 1990 246,365 93% Cub Foods (26%), Regal Cinemas, Inc. (13%) Greenwood, Indiana GREENWOOD CORNER First Indiana Bank 100% 1988 2,400 100% First Indiana Bank (100%) Branch Greenwood Corner Shoppes 100% 1986 50,840 97% Fraziers Distributing (11%), Drug Emporium (45%) Dayton, Ohio Sugarcreek Plaza 100% 1988 77,940 98% Drug Emporium (31%)
S-37
COMPANY'S SQUARE PERCENT - -------------------------- ---------- -------------- ------- ---------- ----------------------------------- Cincinnati, Ohio (4) Governor's Plaza 100% 1990 181,493 100% Wal-Mart (63%) King's Mall Shopping 100% 1990 52,661 83% Body Dynamics (26%), Evenson Cards Center I Shop (11%), Grand Oriental (12%) King's Mall Shopping 100% 1988 67,725 100% Pet Food Supermarket (37%), Center II Discovery Zone (15%) Steinberg's 85%(22) 1993 21,008 100% Steinberg's Inc. (100%) Park 50 Plaza 100% 1989 18,000 28% Park 50 Copy (13%) Ellisville, Missouri Ellisville Plaza 100% 1987 32,754 84% Pier I Imports (22%), Fitzpatrick Pharmacy (12%), Outback Steakhouse (20%) Bloomington, Illinois Lakewood Plaza Shopping 100% 1987 84,410 94% Shoe Carnival (21%), Whitlock Center Automotive (14%) Champaign, Illinois Market View 100% 1985 86,553 72% T.J. Maxx (29%), Silo #425 (14%) Livonia, Michigan Cooker Restaurant 100%(23) N/A N/A 100% Cooker Restaurant INDUSTRIAL -- UNDER CONSTRUCTION Indianapolis, Indiana PARK 100 BUSINESS PARK Building 96 100% 1994 553,900 100% Silver Burdett Ginn, Inc. (100%) Building 97 100% 1994 280,800 44% Butler-MacDonald, Inc. (44%)
S-38
COMPANY'S SQUARE PERCENT NAME/LOCATION OWNERSHIP YEAR BUILT FEET LEASED (1) SIGNIFICANT TENANTS (2) - -------------------------- ---------- -------------- ------- ---------- ----------------------------------- OFFICE -- UNDER CONSTRUCTION Columbus, Ohio TUTTLE CROSSING Miller, Inc. (39%) Building 4 100% 1994 57,660 100% Sterling Software, Inc. (100%) Building 5 100% 1994 101,200 60% John Alden Life Insurance (60%) MEDICAL OFFICE -- UNDER CONSTRUCTION Columbus, Ohio Veterans Administration 100% 1994 118,000 100% VA Hospital (100%) Clinic Greenwood, Indiana St. Francis Medical 100%(24) 1994 95,579 21%(25) -- Building RETAIL -- UNDER CONSTRUCTION Columbus, Ohio Galyan's Trading Company 100% 1994 74,636 100% Galyan's Trading Co. (100%) Cincinnati, Ohio (4) Kohl's 100% 1994 80,684 100% Kohl's (100%) Sports Unlimited 85% 1994 67,148 100% Cincinnati Sports (76%), Fore Seasons Golf, Inc. (10%), Brown Group Retail, Inc. (14%) - ------------------------ (1) Includes space leased, even if not occupied, as of June 30, 1994. (2) Includes tenants leasing 10% or more of square footage in any one Property (with the percentage of square footage in parentheses) or the largest tenant if no tenant is over 10%. (3) These buildings are owned by a partnership in which the Company is a joint venture partner. The Company owns a 10% capital interest in the partnership and will receive a 50% interest in the residual cash flow after payment of a preferred return to the other partner on its capital interest.
S-39 (4) Properties designated to be in Cincinnati, Ohio may be in the greater Cincinnati area. (5) The Company owns a 10% interest in this building as a limited partner and shares in the cash flow from the building in accordance with such ownership interest. (6) This building is owned by a limited partnership in which the Company has a 1% general partnership interest and a 39% limited partnership interest. The Company shares in the cash flow from such building in accordance with the Company's ownership interest. (7) Although located in Hebron, Kentucky, this is considered part of the greater Cincinnati, Ohio, or Covington, Kentucky area. (8) The Company owns a 33-1/3% interest in this building as a limited partner and shares in the cash flow from the building in accordance with such ownership interest. (9) The Company owns a 50% general partnership interest in this building with the other 50% being owned by the tenant in the building. The Company shares in the cash flow from the building in accordance with such partnership interest. (10) This building is owned by Parkwood Crossing Joint Venture, a partnership in which the Company is a joint venture partner. The Company has a 50% general partnership interest and shares in the cash flow from such building in accordance with such ownership interest after payment of a cumulative preferred return to the other partner. (11) The Company owns a 66.67% general partnership interest in the partnership owning this building. The remaining interest is owned by a former tenant in the building. The Company shares in the cash flow of this building in accordance with the Company's partnership interest. (12) The Company has a leasehold interest in the land underlying this building with a lease term expiring October 31, 2067. (13) The Company has a leasehold interest in the building and the underlying land with a lease term expiring May 9, 2006. (14) The Company owns these buildings and has a leasehold interest in the land underlying these buildings, with the lease term expiring November 16, 2043. (15) The Company has a leasehold interest in the building and the underlying land with a lease term expiring December 31, 2020. The Company has an option to purchase the fee interest in the property at any time. (16) This building was renovated in 1986. (17) A portion of the land underlying this building is held by the Company as a leasehold interest, with the lease term expiring March 31, 2021. (18) These buildings are owned by Kenwood Office Associates, a partnership in which the Company has a 50% general partnership interest. The Company shares in the cash flow from such buildings in accordance with the Company's ownership interest. (19) This building was renovated in 1985. (20) Tri-County Office Park has four buildings. One was built in 1971, two were built in 1973, and one was built in 1982. (21) The Company has a leasehold interest in the land underlying these buildings, with a lease term expiring May 31, 2057, and the Company owns the buildings. (22) The Company has a contractual obligation to acquire a 100% ownership interest in this building, which should occur prior to November 1, 1994.
S-40 (23) The Company holds the land under this building under a long-term lease with the lease term expiring May 31, 2057 and subleases the land to the tenant with the sublease term expiring on August 31, 2009. In the event of a to the building upon termination of the sublease. (24) The Company will hold a leasehold interest in the land underlying this owned building upon completion for a term of 50 years commencing when the building is completed, with two 20-year options. (25) This represents leases for which tenants have committed, but for which the actual leases have not been executed.
S-41 MANAGEMENT The directors and executive officers of the Company are as follows:
NAME AGE PRINCIPAL OCCUPATIONS AND OTHER DIRECTORSHIPS - ------------------------- --- --------------------------------------------------------------------------------- John W. Wynne (1) 61 Director and Chairman of the Board; Director of First Indiana Corporation; retired from Bose McKinney & Evans, attorneys. Mr. Wynne is one of the original founders of the Company. Thomas L. Hefner (1) 47 Director; President and Chief Executive Officer. Mr. Hefner joined the Company in 1981 and became Chief Operating Officer in 1986. Before joining the Company he served as a Vice President of Indiana National Bank and Senior Vice President of INB Mortgage Corporation. He has also served as the General Manager of the Company's Indiana operations. Daniel C. Staton (1) 41 Director; Executive Vice President and Chief Operating Officer. Mr. Staton joined the Company in 1981 and has been responsible for the Company's Ohio operations since 1983. Darell E. Zink, Jr. (1) 47 Director; Executive Vice President, Chief Financial Officer and Assistant Secretary; Director of Inland Mortgage Corporation. Mr. Zink, Jr. joined the Company in 1982. He is a former partner of the Indianapolis law firm of Bose McKinney & Evans. Geoffrey Button 45 Director; Executive Director of Wyndham Investments Limited, a property holding company of Allied Lyons Pension Funds which has been an investor in a substantial number of properties developed by the Company; Director of Major Realty, a Florida-based development company. wholly-owned subsidiary of G E Capital Services; formerly managing partner of Golenbock and Barrell, attorneys, from 1987 to 1989. John D. Peterson 60 Director; Chairman and Chief Executive Officer of City Securities Corporation, a securities brokerage firm headquartered in Indianapolis, Indiana which he has served in a variety of positions since 1955; Director of Capital Industries, Inc., a distributor of truck parts and related services, and Lilly Industries, Inc., a manufacturer of industrial coatings. Dr. Sydney C. Reagan 78 Director; Professor Emeritus of Real Estate at Southern Methodist University; Owner of Dr. Syd Reagan Real Estate, a commercial real estate investment and brokerage firm. From 1982 to 1984, Dr. Reagan was Senior Vice President of Robert Laam Company, a commercial real estate brokerage firm. Dr. Reagan was Chairman of the Real Estate Department from 1955 to 1976 and Professor at the Cox School of Business at Southern Methodist University from 1955 to 1981. Dr. Reagan is also a Director of First American Savings Banc. James E. Rogers 46 Director; Chairman, President and Chief Executive Officer of PSI Energy, Inc. since 1988. Mr. Rogers also serves as Chairman and Chief Executive Officer of PSI Resources, Inc. (holding company of PSI Energy, Inc.). Upon the completion of the merger of PSI Resources, Inc. and Cincinnati Gas and Electric, Mr. Rogers will become the Vice Chairman of the merged company (CIN Energy) which will be the thirteenth largest electric generating system in the United States. Mr. Rogers is a Director of NBD Indiana, Inc. and Bankers Life Holding Corporation.
S-42
NAME AGE PRINCIPAL OCCUPATIONS AND OTHER DIRECTORSHIPS - ------------------------- --- --------------------------------------------------------------------------------- Lee Stanfield 87 Director; Currently an independent real estate developer, investor and converted to Mortgage Growth Investors, a publicly traded REIT. Prior to that time, Mr. Stanfield was Senior Vice President and Chief Financial Officer of Winston-Muss Corp., a housing and shopping center developer. Jay J. Strauss 58 Director; Chairman and Chief Executive Officer of Regent Realty Group, Inc., a general real estate and mortgage banking firm. Mr. Strauss served from 1984 to 1988 as Chairman and Chief Executive Officer of Focus Financial Group, a mortgage banking firm. From 1978 to 1984, Mr. Strauss served as President and Chief Executive Officer of the Abacus Group, another mortgage banking firm, and was Chairman of the real estate division of Walter E. Heller & Company (presently known as Heller Financial, Inc.), a commercial finance company. David R. Mennel (1) 40 General Manager of Services Operations. Mr. Mennel was with the accounting firm of Peat Marwick Mitchell and Company and the property development firm of Melvin Simon & Associates before joining the Company in 1978. He was previously the Treasurer of the Company. Gary A. Burk (1) 42 President of Construction Services. Mr. Burk joined the Company in 1979, and has been responsible for the Company's construction management operations since 1986. Michael Coletta (1) 43 Vice President of Asset and Property Management. Mr. Coletta joined the Company in 1981 and was awarded the Certified Property Manager designation by the Institute of Real Estate Management in 1989. Dayle M. Eby 42 Vice President, General Counsel and Secretary. Ms. Eby joined the Company in 1989. Prior to that time, Ms. Eby was with the law firm of Bose McKinney & Evans. Dennis D. Oklak 40 Vice President and Treasurer. Mr. Oklak joined the Company in 1986 and has served as the Tax Manager and Controller of Development. Prior to joining the Company, Mr. Oklak was a Senior Manager with the public accounting firm of Deloitte Haskins + Sells. Prior to that time, Mr. Kennedy was a Project Manager for Charles Pankow Builders, Inc. Richard Horn 36 Vice President of Acquisitions. Mr. Horn joined the Company in 1984. He has served in leasing and development for the Company and has overseen the Nashville and Michigan operations of the Company since 1988 and 1990, respectively. - ------------------------ (1) One of the seven senior officers of the Company
S-43
NAME AGE PRINCIPAL OCCUPATIONS AND OTHER DIRECTORSHIPS - ------------------------- --- --------------------------------------------------------------------------------- Robert Fessler 36 Vice President, Ohio Industrial Group. Mr. Fessler joined the Company in 1987. He has been in his current position since 1989 and has overseen the development of approximately 3,000,000 square feet of industrial property. Prior to joining the Company, Mr. Fessler was a leasing representative with Trammel Crow. Donald Hunter 35 Vice President, Columbus Group. Mr. Hunter joined the Company in 1989 and is responsible for the Columbus development and management activities of the Company. Prior to joining the Company, Mr. Hunter was with Cushman and Wakefield, a national real estate firm. Wayne Lingafelter 36 Vice President, Indiana Office Group. Mr. Lingafelter joined the Company in 1987 and assumed his current duties in 1992. Prior to that time, Mr. Lingafelter was with the management consulting firm of DRI, Inc. William E. Linville 39 Vice President, Indiana Industrial Group. Mr. Linville joined the Company in 1987. Prior to that time, Mr. Linville was Vice President and Regional Manager of the CB Commercial Brokerage Office in Indianapolis. Francis B. Quinn 40 Vice President, Retail Group. Mr. Quinn joined the Company in 1982. Prior to that time, Mr. Quinn was with F.C. Tucker, an Indiana real estate firm.
FEDERAL INCOME TAX CONSIDERATIONS GENERAL The following discussion summarizes certain Federal income tax consequences law. The discussion is focused on the classification of the Company as a REIT and does not address all tax considerations applicable to prospective investors, nor does the discussion give a detailed description of any state, local, or foreign tax considerations. This discussion does not describe all of the aspects of Federal income taxation that may be relevant to a prospective shareholder in light of his or her particular circumstances or to certain types of shareholders (including insurance companies, tax-exempt entities, financial institutions or broker-dealers, foreign corporations and persons who are not citizens or residents of the United States) subject to special treatment under the Federal income tax laws. As used in this section, the term "Company" refers solely to Duke Realty Investments, Inc. EACH PROSPECTIVE PURCHASER IS ADVISED TO CONSULT WITH HIS OR HER OWN TAX ADVISOR REGARDING THE SPECIFIC TAX CONSEQUENCES TO HIM OR HER OF THE PURCHASE, OWNERSHIP AND SALE OF COMMON STOCK IN AN ENTITY ELECTING TO BE TAXED AS A REAL ESTATE INVESTMENT TRUST, INCLUDING THE FEDERAL, STATE AND LOCAL TAX CONSEQUENCES OF SUCH PURCHASE, OWNERSHIP, SALE AND ELECTION AND OF POTENTIAL CHANGES IN APPLICABLE TAX LAWS. TAXATION OF THE COMPANY GENERAL. The Company expects to continue to be taxed as a REIT for Federal income tax purposes. Management believes that the Company was organized and has operated in such a manner as to meet the requirements for qualification and taxation as a REIT under the Internal Revenue Code of 1986, as amended (the "Code"), and that the Company intends to continue to operate in such a manner. No assurance, however, can be given that the Company will continue to operate in a manner so as to remain qualified as a REIT. In the opinion of Rogers & Wells, which has acted as special tax counsel to the Company ("Special Counsel"), assuming the Company was organized in conformity with and has satisfied the requirements for qualification and taxation as a REIT under the Code for each of its taxable years from and including the first S-44 year for which the Company made the election to be taxed as a REIT, and the assumptions and representations referred to below are true, the proposed methods of operation of the Company, the Operating Partnership and Duke Realty Services Limited Partnership (the "Services Partnership") will permit the Company to continue to qualify to be taxed as a REIT for its current and subsequent taxable years. This opinion is based upon certain assumptions relating to the organization and operation of Duke Services, Inc. ("DSI"), the Operating Partnership and the Services Partnership and is conditioned upon certain matters relating to the Company's past operations and the intended manner of future operation of the Company, the Operating Partnership, and the Services Partnership. The opinion is further conditioned upon either the Company's receipt of a favorable ruling from the IRS as to the Operating Partnership's and DSI's shares of gross income of the Services Partnership or the Operating Partnership and DSI not otherwise being allocated more non-qualifying income than is consistent with the 95% income test. See "Taxation of the Company -- Income Tests." Special Counsel is not aware of any facts or circumstances which are inconsistent with these assumptions and representations other than as stated in "Taxation of the Company -- Income Tests." Unlike a tax ruling, an opinion of counsel is not binding upon the IRS, and no assurance can be given that the IRS will not challenge the status of the Company as a REIT for Federal income tax purposes. The Company's qualification and taxation as a REIT has depended and will depend upon, among other things, the Company's ability to meet on a continuing basis, through ownership of assets, actual annual operating results, receipt of qualifying real estate income, distribution levels and diversity of stock ownership, the various qualification tests imposed under the Code discussed below. Special Counsel has not reviewed past compliance with these tests and will not review compliance with these tests on a periodic or continuing basis. Accordingly, no assurance can be given respecting the satisfaction of such tests. See "Taxation of the Company -- Failure to Qualify." The following is a general summary of the Code sections which govern the Federal income tax treatment of a REIT and its shareholders. These sections of the Code are highly technical and complex. This summary is qualified in its entirety by the applicable Code provisions, Treasury Regulations, and administrative and judicial interpretations thereof as currently in effect. If the Company qualifies for taxation as a REIT and distributes to its shareholders at least 95% of its REIT taxable income, it generally is not subject to Federal corporate income taxes on net income that it currently distributes to shareholders. This treatment substantially eliminates the "double taxation" (at the corporate and shareholder levels) that generally results from investment in a corporation. However, the Company will be subject to Federal income tax as follows: (i) the Company will be taxed at regular corporate rates on any undistributed REIT taxable income, including undistributed net capital gains; (ii) under certain circumstances, the Company may be subject to the "alternative minimum tax" on its items of tax preference, if any; (iii) if the certain sales or other dispositions of property other than foreclosure property held primarily for sale to customers in the ordinary course of business), such income will be subject to a 100% tax; (iv) if the Company should fail to satisfy the 75% gross income test or the 95% gross income test (as discussed below), and has nonetheless maintained its qualification as a REIT because certain other requirements have been met, it will be subject to a 100% tax on the gross income attributable to the greater of the amount by which the Company fails the 75% or 95% test, multiplied by a fraction intended to reflect the Company's profitability; (v) if the Company should fail to distribute during each calendar year at least the sum of (1) 85% of its REIT ordinary income for such year; (2) 95% of its REIT capital gain net income for such year; and (3) any undistributed taxable income from prior years, it would be subject to a 4% excise tax on the excess of such required distribution over the amounts actually distributed; (vi) if the Company has (1) net income from the sale or other disposition of "foreclosure property" (which is, in general, property acquired by the Company by foreclosure or otherwise on default on a loan secured by the property) which is held primarily for sale to customers in the ordinary course of business; or (2) other non-qualifying income from foreclosure property, it will be subject to tax on such income at the highest corporate level; and (vii) if the Company acquires any asset from a C corporation (I.E., generally a corporation subject to tax at the corporate level) in a transaction in which the S-45 basis of the asset in the Company's hands is determined by reference to the basis of the asset (or any other property) in the hands of the C corporation, and the Company recognizes gain on the disposition of such asset during the 10-year period (the "Restriction Period") beginning on the date on which such asset was acquired by the Company, then, pursuant to guidelines issued by the IRS, the excess of the fair market value of such property at the beginning of the applicable Restriction Period over the Company's adjusted basis in such asset as of the beginning of such Restriction Period will be subject to a tax at the highest regular corporate rate. The results described above with respect to the recognition of built-in gain assume that the Company will make an election pursuant to IRS Notice 88-19 or applicable future administrative rules or Treasury Regulations. REQUIREMENTS FOR QUALIFICATION. The Code defines a REIT as a corporation, trust or association: (1) which is managed by one or more trustees or directors; (2) the beneficial ownership of which is evidenced by transferable shares or by a domestic corporation but for Sections 856 through 859 of the Code; (4) which is neither a financial institution nor an insurance company subject to certain provisions of the Code; (5) which has the calendar year as its taxable year; (6) the beneficial ownership of which is held by 100 or more persons; (7) during the last half of each taxable year not more than 50% in value of the outstanding stock of which is owned, directly or indirectly, by five or fewer individuals (as defined in the Code to include certain entities); and (8) which meets certain income and assets tests, described below. The Company believes it currently satisfies requirements (1) through (7). INCOME TESTS. In order to qualify as a REIT, there are three gross income tests that must be satisfied annually. First, at least 75% of the Company's gross income (excluding gross income from prohibited transactions) for each taxable year must be derived directly or indirectly from investments relating to real property (including "rents from real property", gain from the sale of real property and, in certain circumstances, interest) or from qualified types of temporary investments. Second, at least 95% of the Company's gross income (excluding gross income from prohibited transactions) for each taxable year must be derived from the same items which qualify under the 75% income test or from dividends, interest and gain from the sale or disposition of stock or securities, or from any combination of the foregoing. Third, less than 30% of the Company's gross income (including gross income from prohibited transactions) must be derived from gain in connection with the sale or other disposition of stock or securities held for less than one year, property in a prohibited transaction, and real property held for less than four years (other than involuntary conversions and foreclosure property). Rents received by the Company will qualify as "rents from real property" in satisfying the gross income tests for a REIT described above only if several conditions (related to the relationship of the tenant to the Company, the method of determining the rent payable and nature of the property leased) are met. The Company does not anticipate receiving rents in excess of a de minimis amount that fail to meet these conditions. Finally, for rents received to qualify as "rents from real property," the Company generally must not operate or manage the property or furnish or render services to tenants, other than through an "independent contractor" that is adequately compensated and from whom the Company derives no income; provided, however, that the Company may perform services "usually or customarily rendered" in connection with the rental of occupant." The Company provides certain management, development, construction and other tenant-related services (collectively, "Real Estate Services") with respect to the Properties through the Operating Partnership, which is not an independent contractor. However, with the possible exception of certain services to one or more relatively minor tenants, the services provided to tenants by the Operating Partnership are believed to constitute services usually or customarily furnished or rendered in the geographic market of the Properties in connection with rental of space for occupancy. To the extent services to tenants do not constitute services which are usually or customarily furnished, such services are performed by an independent contractor. S-46 The Company derives a portion of its income from the Operating Partnership's interest as a limited partner in the Services Partnership and its ownership of DSI which is a general partner of the Services Partnership. The Services Partnership receives fees for Real Estate Services with respect to properties that are not owned directly by the Operating Partnership, which fees will not qualify as rents from real property. In addition, the Services Partnership receives fees in consideration for the performance of management and administrative services with respect to Properties not entirely owned by the Operating Partnership. All or a portion of such management and administrative fees will also not qualify as "rents from real property" for purposes of the 75% or 95% gross income tests. Although certain of the Real Estate Services fees allocated from the Services Partnership do not qualify under the 75% or 95% gross income tests as "rents from real property," the Company believes that, at least presently and in the near term, the aggregate amount of such fees (and any other non-qualifying income) allocated to the Company in any taxable year will not cause the Company to exceed the limits on non-qualifying income under the 75% or 95% gross income tests described above. Pursuant to Treasury Regulations, a partner's capital interest in a partnership determines its proportionate interest in the partnership's gross income from partnership assets for purposes of the 75% and 95% gross income tests. The Operating Partnership's capital interest in the Services Partnership is 9% and DSI's capital interest in the Services Partnership is 1%. The partnership agreement of the Services Partnership provides, however, for varying allocations of gross income which differ from capital interests, subject to certain limitations on the aggregate amount of gross income which may be allocated to the Operating Partnership and DSI. The Company has requested a for applying the 75% and 95% gross income tests. Although the Company anticipates a favorable ruling from the IRS, if the Company's ruling request is denied, the Company may be required to return a portion of income and cash distributions received from the Services Partnership to DMI Partnership. Should the potential amount of non-qualifying income in the future create a risk as to the qualification of the Company as a REIT, the Company intends to take action to avoid non-qualification as a REIT. In lieu of the Services Partnership, the Company may elect to have certain Real Estate Services performed through a services corporation in which the Company holds nonvoting stock interests. If this should occur, the Company would be entitled to receive dividends as a shareholder of the services corporation which should be qualifying income for the purposes of the 95% gross income test. However, the Company would not have voting control of this services corporation and the amount of dividends available for distribution to the Company would be reduced below comparable distributions from the Services Partnership because such a services corporation would be subject to a corporate level tax on its taxable income, thereby reducing the amount of cash available for distribution. Furthermore, the Company would need to monitor the value of its stock in a services corporation to ensure that the various asset tests described below are not violated. If the Company fails to satisfy one or both of the 75% or 95% gross income tests for any taxable year, it may nevertheless qualify as a REIT for such year if it is entitled to relief under certain provisions of the Code. It is not possible, however, to state whether in all circumstances the Company would be entitled to the benefit of these relief provisions. Even if these relief provisions apply, a tax would be imposed on certain excess net income. ASSET TESTS. In order for the Company to maintain its qualification as a REIT, at the close of each quarter of its taxable year, it must also satisfy three tests relating to the nature of its assets. First, at least 75% of the value of the Company's total assets must be represented by "real estate assets," cash, cash items, and government securities. Second, not more than 25% of the Company's total assets may be represented by securities other than those in the 75% assets class. Third, of the assets held in securities other than those in the 75% assets class, the value of any one issuer's securities owned by the Company may not exceed 5% of the value of the Company's total assets, and the Company may not own more than 10% of any one issuer's outstanding voting securities (excluding securities of a qualified REIT subsidiary [as defined in S-47 The Company is deemed to directly hold its proportionate share of all real estate and other assets of the Operating Partnership and should be considered to hold its proportionate share of all assets deemed owned by the Operating Partnership and DSI through their ownership of partnership interests in the Services Partnership and other partnerships. As a result, management believes that more than 75% of the Company's assets are real estate assets. In addition, management does not expect the Company to hold (1) any securities representing more than 10% of any one issuer's voting securities other than DSI, which is a qualified REIT subsidiary, nor (2) securities of any one issuer exceeding 5% of the value of the Company's gross assets (determined in accordance with generally accepted accounting principles). In the event that the Company decides, for the reasons noted above, to conduct Real Estate Services through a services corporation, the Company would expect to create a structure whereby the value of its stock holdings in such services corporation (through the stock held by the Operating Partnership and DSI) would represent less than 5% of the value of the Company's total assets and would represent less than 10% of the services corporation's outstanding voting securities. ANNUAL DISTRIBUTION REQUIREMENTS. The Company, in order to qualify as a REIT, generally must distribute dividends (other than capital gain dividends) to its shareholders in an amount at least equal to (A) the sum of (i) 95% of the Company's "REITs taxable income" (computed without regard to the dividends paid deduction and the REIT's net capital gain), and (ii) 95% of the net income (after tax), if any, from foreclosure property, minus (B) the sum of certain items of non-cash income. In addition, if the Company disposes of any asset during its Restriction Period, the Company will be required to distribute at least 95% of the built-in gain (after tax), if any, recognized on the disposition of such asset. Such distributions must be paid in the taxable year to which they relate, or in the following taxable year if declared before the Company timely files its tax return for such year and if paid on or before the first regular dividend payment after such declaration. To the extent that the Company does not distribute all of its net capital gain or distributes at least 95%, but less than 100%, of its "REIT taxable income," as adjusted, it will be subject to tax on the undistributed amount at regular capital gains and ordinary corporate tax rates. Furthermore, if the Company should fail to distribute during each calendar year at least the sum of (i) 85% of its REIT ordinary income for such year, (ii) 95% of its REIT net capital gain income for such will be subject to regular capital gains and ordinary corporate tax rates on undistributed income and also may be subject to a 4% excise tax on undistributed income in certain events. The Company believes that it has made and intends to continue to make timely distributions sufficient to satisfy the annual distribution requirements. In this regard, the partnership agreement of the Operating Partnership authorizes the Company, as general partner, to take such steps as may be necessary to cause the Operating Partnership to distribute to its partners an amount sufficient to permit the Company to meet these distribution requirements. It is possible, however, that the Company, from time to time, may not have sufficient cash or other liquid assets to meet the 95% distribution requirement due primarily to the expenditure of cash for nondeductible expenses such as principal amortization or capital expenditures. In such event, the Company may borrow or may cause the Operating Partnership to arrange for short-term or other borrowing to permit the payment of required dividends or pay dividends in the form of taxable stock dividends. If the amount of nondeductible expenses exceeds non-cash deductions, the Operating Partnership may refinance its indebtedness to reduce principal payments and borrow funds for capital expenditures. FAILURE TO QUALIFY. If the Company fails to qualify for taxation as a REIT in any taxable year, the Company will be subject to tax (including any applicable corporate alternative minimum tax) on its taxable income at regular corporate rates. Unless entitled to relief under specific statutory provisions, the Company also will be disqualified from taxation as a REIT for the four taxable years following the year during which qualification was lost. It is not possible to state whether in all circumstances the Company would be entitled to such statutory relief. S-48 OTHER TAX CONSIDERATIONS EFFECT OF TAX STATUS OF OPERATING PARTNERSHIP AND SERVICES PARTNERSHIP AND OTHER PARTNERSHIPS ON REIT QUALIFICATION. All of the Company's investments are through DSI and the Operating Partnership, which in turn hold interests in other partnerships, including the Services Partnership. The Company believes that the Operating Partnership, and each other partnership in which it holds an interest, is properly treated as a partnership for tax purposes (and not as an association taxable as a corporation). If, however, the Operating Partnership were treated as an association taxable as a corporation, the Company would cease to qualify as a REIT. If the Services Partnership or any of the other partnerships were treated as an association taxable as a corporation and the Operating voting interests or the value of such interest exceeded 5% of the value of the Company's assets, the Company would cease to qualify as a REIT. Furthermore, in such a situation, any partnerships treated as a corporation would be subject to corporate income taxes, and distributions from any such partnership to the Company would be treated as dividends, which are not taken into account in satisfying the 75% gross income test described above and which therefore could make it more difficult for the Company to meet the 75% asset test described above. TAX ALLOCATIONS WITH RESPECT TO THE PROPERTIES. The Operating Partnership was formed by way of contributions of appreciated property (including certain of the Properties) to the Operating Partnership. When property is contributed to a partnership in exchange for an interest in the partnership, the partnership generally takes a carryover basis in that property for tax purposes equal to the adjusted basis of the contributing partner in the property, rather than a basis equal to the fair market value of the property at the time of contribution (this difference is referred to as "Book-Tax Difference"). The partnership agreement of the Operating Partnership requires allocations of income, gain, loss and deduction with respect to a contributed Property be made in a manner consistent with the special rules of Section 704(c) of the Code and the regulations thereunder, which will tend to eliminate the Book-Tax Differences with respect to the contributed Properties over the life of the Operating Partnership. However, because of certain technical limitations, the special allocation rules of Section 704(c) may not always entirely eliminate the Book-Tax Differences on an annual basis or with respect to a specific taxable transaction such as a sale. Thus, the carryover basis of the contributed Properties in the hands of the Operating Partnership could cause the Company (i) to be allocated lower amounts of depreciation and other deductions for tax purposes than would be allocated to the Company if all Properties were to have a tax basis equal to their fair market value at the time of contribution, and (ii) possibly to be allocated taxable gain in the event of a sale of such contributed Properties in excess of the economic or book income allocated to the Company as a result of such sale. The foregoing principles also apply in determining the earnings and profits of the Company for purposes of determining the portion of distributions taxable as dividend income. The application of these rules over time may result in a higher portion of distributions being taxed as dividends than would have occurred had the Company purchased its interests in the Properties at their agreed values. subject to state, local or other taxation in various state, local or other jurisdictions, including those in which they transact business or reside. The tax treatment in such jurisdictions may differ from the Federal income tax consequences discussed above. S-49 UNDERWRITING Subject to the terms and conditions contained in the underwriting agreement (the "Underwriting Agreement"), the Company has agreed to sell to each of the Underwriters named below, and each of the Underwriters for whom Merrill Lynch, Pierce, Fenner & Smith Incorporated, Alex. Brown & Sons Incorporated, Dean Witter Reynolds Inc., A.G. Edwards & Sons, Inc. and Legg Mason Wood Walker, Incorporated are acting as representatives (the "Representatives") has severally agreed to purchase, the respective number of shares of Common Stock set forth below opposite their respective names. The Underwriting Agreement provides that the obligations of the Underwriters are subject to certain conditions precedent and that the Underwriters will be obligated to purchase all of the shares of Common Stock if any are purchased.
NUMBER OF SHARES UNDERWRITER OF COMMON STOCK - --------------------------------------------------------------------------- ----------------- Merrill Lynch, Pierce, Fenner & Smith Incorporated..................................................... Alex. Brown & Sons Incorporated............................................ Dean Witter Reynolds Inc................................................... A.G. Edwards & Sons, Inc................................................... Legg Mason Wood Walker, Incorporated....................................... ----------------- Total.......................................................... 3,000,000 ----------------- -----------------
John D. Peterson, a Director of the Company, is Chairman of the Board and Chief Executive Officer of City Securities Corporation, which is acting as one of the Underwriters in the Offering. The Representatives have advised the Company that the Underwriters propose initially to offer the Common Stock to the public at the public offering price set forth on the cover page of this Prospectus Supplement, and to certain dealers at such price less a concession not in excess of $ per share. The of $ per share on sales to certain other dealers. After the Offering, the public offering price, concession and discounts may be changed. The Company has granted an option to the Underwriters, exercisable during the 30-day period after the date of this Prospectus Supplement, to purchase up to an aggregate of 450,000 additional shares of Common Stock at the price to the public set forth on the cover page to this Prospectus Supplement, less the underwriting discount. The Underwriters may exercise this option only to cover over-allotments, if any. To the extent that the Underwriters exercise this option, each Underwriter will be obligated, subject to certain conditions, to purchase the number of additional shares of Common Stock proportionate to such Underwriter's initial amount reflected in the foregoing table. The Company and the executive officers of the Company and the Directors have agreed that for a period of 90 days from the date of this Prospectus Supplement they will not, without prior and written consent of the Representatives, offer, sell or otherwise dispose of any shares of Common Stock or any security convertible into or exercisable for shares of Common Stock (except for issuances by the Company pursuant to the Stock Option or Dividend Reinvestment Plans and certain other agreements). The Company has agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act of 1933, as amended, or to contribute to payments the Underwriters may be required to make in respect thereof. LEGAL MATTERS In addition to the matters discussed under "Legal Matters" in the accompanying Prospectus, the description of Federal income tax matters contained in this Prospectus Supplement entitled "Federal Income Tax Considerations" is based upon the opinion of Rogers & Wells. S-50 PROSPECTUS $320,000,000 DUKE REALTY INVESTMENTS, INC. COMMON STOCK, PREFERRED STOCK AND DEBT SECURITIES Duke Realty Investments, Inc. (the "Company") may from time to time offer in one or more series (i) shares of Common Stock, $.01 par value ("Common Stock"), (ii) shares of preferred stock, $.01 par value ("Preferred Stock") and (iii) unsecured debt securities ("Debt Securities") with an aggregate public offering price of up to $320,000,000 (or its equivalent based on the exchange rate at the time of sale) in amounts, at prices and on terms to be determined at the time of offering. The Common Stock, Preferred Stock and Debt Securities, (collectively, the "Securities") may be offered, separately or together, in separate series in amounts, at prices and on terms to be set forth in one or more supplements to The specific terms of the Securities in respect of which this Prospectus is being delivered will be set forth in the applicable Prospectus Supplement and will include, where applicable: (i) in the case of Common Stock, any initial public offering price or, if applicable, information regarding the exchange of units of partnership interest ("Units") of Duke Realty Limited Partnership (the "Operating Partnership") for Common Stock; (ii) in the case of Preferred Stock, the specific title and stated value, any dividend, liquidation, redemption, conversion, voting and other rights, and any initial public offering price; and (iii) in the case of Debt Securities, the specific title, aggregate principal amount, currency, form (which may be registered or bearer, or certificated or global), authorized denominations, maturity, rate (or manner of calculation thereof) and time of payment of interest, terms for redemption at the option of the Company or repayment at the option of the holder, terms for sinking fund payments, terms for conversion into Preferred Stock or Common Stock of the Company, covenants and any initial public offering price. In addition, such specific terms may include limitations on direct or beneficial ownership and restrictions on transfer of the Securities, in each case as may be appropriate to preserve the status of the Company as a real estate investment trust ("REIT") for federal income tax purposes. The applicable Prospectus Supplement will also contain information, where applicable, about certain United States federal income tax considerations relating to, and any listing on a securities exchange of, the Securities covered by such Prospectus Supplement. The Securities may be offered directly, through agents designated from time to time by the Company 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 an accompanying Prospectus Supplement. See "Plan of Distribution." No Securities may be sold without delivery of a Prospectus Supplement describing the method and terms of the offering of such series of Securities. ------------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ------------------- MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL. The date of this Prospectus is August 29, 1994. AVAILABLE INFORMATION The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance therewith, files reports and other information with the Securities and Exchange Commission (the "Commission"). Such reports, proxy statements and other information can be inspected and copied at the Public Reference Section maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549; Chicago Regional Office, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661; and New York Regional Office, 7 World Trade Center, New York, New York 10048. Such reports, proxy statements and other information concerning the Company can also be inspected at the offices of the New York Stock Exchange, 20 Broad Street, New York, New York 10005. The Company will provide without charge to each person to whom a copy of this Prospectus is delivered, upon their written or oral request, a copy of any or all of the documents incorporated herein by reference (other than exhibits to such documents). Written requests for such copies should be addressed to 8888 Keystone Crossing, Suite 1200, Indianapolis, Indiana 46240, Attn: Investor Relations, telephone number (317) 574-3531. The Company has filed with the Commission a registration statement on Form S-3 (the "Registration Statement") under the Securities Act of 1933 as amended (the "Securities Act"), with respect to the Securities offered hereby. For further information with respect to the Company and the Securities offered hereby, reference is made to the Registration Statement and exhibits thereto. Statements contained in this Prospectus as to the contents of any contract or other documents are not necessarily complete, and in each instance, reference is made to the copy of such contract or documents filed as an exhibit to the Registration Statement, each such statement being qualified in all respects by such reference. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents filed by the Company under the Exchange Act with the Commission are incorporated in this Prospectus by reference and are made a part hereof: 1. The Company's Annual Report on Form 10-K for the year ended December 31, 1993. 2. The Company's Quarterly Reports on Form 10-Q for the quarters ended March 31, 1994 and June 30, 1994. 3. The Company's Current Report on Form 8-K dated August 26, 1994. 4. The financial statements of Duke Associates contained on pages F-22 Statement on Form S-2, as amended, File No. 33-64038. Each document filed subsequent to the date of this Prospectus pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act and prior to termination of the offering of all Securities to which this Prospectus relates shall be deemed to be incorporated by reference in this Prospectus and shall be part hereof from the date of filing of such document. Any statement contained herein or in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained in this Prospectus (in the case of a statement in a previously-filed document incorporated or deemed to be incorporated by reference herein), in any accompanying Prospectus Supplement relating to a specific offering of Securities or in any other subsequently filed document that is also incorporated or deemed to be incorporated by reference herein, modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus or any accompanying Prospectus Supplement. Subject to the foregoing, all information appearing in this Prospectus and each accompanying Prospectus Supplement is qualified in its entirety by the information appearing in the documents incorporated by reference. 2 THE COMPANY The Company is a fully integrated commercial real estate firm which, at June 30, 1994, owned direct or indirect interests in a portfolio of 120 income-producing industrial, office and retail properties (the "Properties"), together with approximately 1,000 acres of land (the "Land") for future development. The Properties consist of industrial, office and retail properties, located in Indiana, Ohio, Illinois, Kentucky, Michigan, Missouri, Tennessee and Wisconsin. As of June 30, 1994, the Properties consisted of 11.9 million square feet, which were approximately 95% leased to approximately 1,000 tenants. All of the Company's interests in the Properties and Land are held by, and substantially all of its operations relating to the Properties and Land are conducted through the Operating Partnership. The Operating Partnership holds a 100% interest in all but 22 of the Properties and substantially all of the Land. The Company controls the Operating Partnership as the sole general partner and owner, as of June 30, 1994, of approximately 78% of the outstanding Units. Beginning October 4, 1994 (or earlier upon the occurrence of certain change of control events), each Unit may be exchanged by the holder thereof for one share the number of Units owned by the Company and, therefore, the Company's percentage interest in the Operating Partnership, will increase. In addition to owning the Properties and the Land, the Operating Partnership also provides services associated with leasing, property management, real estate development, construction and miscellaneous tenant services (the "Related Businesses") for the Properties. The Company also provides services associated with the Related Businesses to third parties and owners of indirectly owned Properties through Duke Realty Services Limited Partnership on a fee basis. The Company's experienced staff of approximately 350 employees at June 30, 1994 provides a full range of real estate services from executive offices headquartered in Indianapolis, and from five regional offices located in the Cincinnati, Columbus, Decatur, Detroit and Nashville metropolitan areas. The Company is an Indiana corporation that was originally incorporated in the State of Delaware in 1985, and reincorporated in the State of Indiana in 1992. The Company's executive offices are located at 8888 Keystone Crossing, Suite 1200, Indianapolis, Indiana 46240, and its telephone number is (317) 574-3531. USE OF PROCEEDS The Company is required by the terms of the partnership agreement for the Operating Partnership to invest the net proceeds of any sale of Common Stock or Preferred Stock in the Operating Partnership in exchange for additional Units. Unless otherwise specified in the applicable Prospectus Supplement, the Company and the Operating Partnership intend to use the net proceeds from the sale of Securities for general corporate purposes, including the development and acquisition of additional properties and other acquisition transactions, the payment of certain outstanding debt, and improvements to certain properties in the Company's portfolio. RATIOS OF EARNINGS TO FIXED CHARGES The following table sets forth the Company's consolidated ratios of earnings to fixed charges for the periods shown:
SIX MONTHS YEAR ENDED DECEMBER 31, ENDED JUNE ----------------------------------------------------------------- 30, 1994 1993 1992 1991 1990 1989 - ------------- --------- ------------ ------------ ------------ ------------ 2.46x 1.56x .88x(1) .75x(1) .75x(1) .92x(1) - ------------ (1) Earnings were inadequate to cover fixed charges by $637,000 in 1989, $1,886,000 in 1990, $2,006,000 in 1991 and $903,000 in 1992. These deficiencies occurred prior to the Company's reorganization in October, 1993.
3 The ratios of earnings to fixed charges were computed by dividing earnings by fixed charges. For this purpose, earnings consist of income from continued operations and fixed charges. Fixed charges consist of interest expense (including interest costs capitalized) and the amortization of debt issuance costs. To date, the Company has not issued any Preferred Stock; therefore, the ratios of earnings to combined fixed charges and preferred share dividends are unchanged from the ratios presented in this section. DESCRIPTION OF DEBT SECURITIES GENERAL The Debt Securities will be direct unsecured obligations of the Company and may be either senior Debt Securities ("Senior Securities") or subordinated Debt Securities ("Subordinated Securities"). The Debt Securities will be issued under one or more indentures. Senior Securities and Subordinated Securities may be issued pursuant to separate indentures (respectively, a "Senior Indenture" and a "Subordinated Indenture"), in each case between the Company and a trustee (a "Trustee"). The Indentures will be subject to and governed by the Trust Indenture Act of 1939, as amended (the "TIA"). The statements made under this heading relating to the Debt Securities and the Indentures are summaries of the anticipated provisions thereof and do not purport to be complete and are qualified in their entirety by reference to the Indentures and such Debt Securities. TERMS The indebtedness represented by Subordinated Securities will be subordinated in right of payment to the prior payment in full of the Senior Debt of the Company as described under "-- Subordination." Except as set forth in any Prospectus Supplement, the Debt Securities may be issued without limit as to aggregate principal amount, in one or more series, in each case as established from time to time by the Company or as established in the applicable Indenture or in one or more indentures supplemental to such Indenture. All Debt Securities of one series need not be issued at the same time and, unless otherwise provided, a series may be reopened, without the consent of the holders of the Debt Securities of such series, for issuances of additional Debt Securities of such series. It is anticipated that any Indenture will provide that there may be more than one Trustee thereunder, each with respect to one or more series of Debt Securities. Any Trustee under an Indenture may resign or be removed with respect to one or more series of Debt Securities, and a successor Trustee may be appointed to act with respect to such series. In the event that two or more persons are acting as Trustee with respect to different series of Debt Indenture separate and apart from the trust administered by any other Trustee, and, except as otherwise indicated herein, any action described herein to be taken by each Trustee may be taken by each such Trustee with respect to, and only with respect to, the one or more series of Debt Securities for which it is Trustee under the applicable Indenture. The Prospectus Supplement relating to the series of Debt Securities being offered will contain the specific terms thereof, including: (1) The title of such Debt Securities and whether such Debt Securities are Senior Securities or Subordinated Securities; (2) The aggregate principal amount of such Debt Securities and any limit on such aggregate principal amount; (3) The percentage of the principal amount at which such Debt Securities will be issued and, if other than the principal amount thereof, the portion of the principal amount thereof payable upon declaration of acceleration of the maturity thereof, or (if applicable) the portion of the principal amount of such Debt Securities that is convertible into Common Stock or Preferred Stock, or the method by which any such portion shall be determined; 4 (4) If convertible, the terms on which such Debt Securities are convertible, including the initial conversion price or rate and the conversion period and any applicable limitations on the ownership or transferability of the Common Stock or Preferred Stock receivable on conversion; (5) The date or dates, or the method for determining such date or dates, on which the principal of such Debt Securities will be payable; (6) The rate or rates (which may be fixed or variable), or the method by which such rate or rates shall be determined, at which such Debt Securities will bear interest, if any; (7) The date or dates, or the method for determining such date or dates, from which any such interest will accrue, the dates on which any such interest will be payable, the record dates for such interest payment dates, or the method by which such dates shall be determined, the persons to whom such interest shall be payable, and the basis upon which interest shall be calculated if other than that of a 360-day year of twelve 30-day months; (8) The place or places where the principal of (and premium, if any) and interest, if any, on such Debt Securities will be payable, where such Debt Securities may be surrendered for conversion or registration of transfer or exchange and where notices or demands to or upon the Company in respect of such Debt Securities and the applicable Indenture may be (9) The period or periods within which, the price or prices at which and the other terms and conditions upon which such Debt Securities may be redeemed, as a whole or in part, at the option of the Company, if the Company is to have such an option; (10) The obligation, if any, of the Company to redeem, repay or purchase such Debt Securities pursuant to any sinking fund or analogous provision or at the option of a holder thereof, and the period or periods within which, the price or prices at which and the other terms and conditions upon which such Debt Securities will be redeemed, repaid or purchased, as a whole or in part, pursuant to such obligation; (11) If other than U.S. dollars, the currency or currencies in which such Debt Securities are denominated and payable, which may be a foreign currency or units of two or more foreign currencies or a composite currency or currencies, and the terms and conditions relating thereto; (12) Whether the amount of payments of principal of (and premium, if any) or interest, if any, on such Debt Securities may be determined with reference to an index, formula or other method (which index, formula or method may, but need not be, based on a currency, currencies, currency unit or units or composite currency or currencies) and the manner in which such amounts shall be determined; (13) The events of default or covenants of such Debt Securities, to the extent different from those described herein; (14) Whether such Debt Securities will be issued in certificated or book-entry form; (15) Whether such Debt Securities will be in registered or bearer form and, if in registered form, the denominations thereof if other than $1,000 and any integral multiple thereof and, if in bearer form, the denominations thereof and terms and conditions relating thereto; (16) The applicability, if any, of the defeasance and covenant defeasance provisions described herein, or any modification thereof; (17) Whether and under what circumstances the Company will pay any additional amounts on such Debt Securities in respect of any tax, assessment or governmental charge and, if so, whether the Company will have the option to redeem such Debt Securities in lieu of making such payment; and (18) Any other terms of such Debt Securities. 5 The Debt Securities may provide for less than the entire principal amount thereof to be payable upon declaration of acceleration of the maturity thereof ("Original Issue Discount Securities"). Special U.S. federal income tax, Securities will be described in the applicable Prospectus Supplement. Except as may be set forth in any Prospectus Supplement, the Debt Securities will not contain any provisions that would limit the ability of the Company to incur indebtedness or that would afford holders of Debt Securities protection in the event of a highly leveraged or similar transaction involving the Company or in the event of a change of control. Restrictions on ownership and transfers of the Company's Common Stock and Preferred Stock are designed to preserve its status as a REIT and, therefore, may act to prevent or hinder a change of control. See "Description of Common Stock -- Certain Provisions Affecting Change of Control" and "Description of Preferred Stock -- Restrictions on Ownership." Reference is made to the applicable Prospectus Supplement for information with respect to any deletions from, modifications of, or additions to, the events of default or covenants of the Company that are described below, including any addition of a covenant or other provision providing event risk or similar protection. DENOMINATION, INTEREST, REGISTRATION AND TRANSFER Unless otherwise described in the applicable Prospectus Supplement, the Debt Securities of any series will be issuable in denominations of $1,000 and integral multiples thereof. Unless otherwise specified in the applicable Prospectus Supplement, the principal of (and applicable premium, if any) and interest on any series of Debt Securities will be payable at the corporate trust office of the Trustee, the address of which will be stated in the applicable Prospectus Supplement; provided that, at the option of the Company, payment of interest may be made by check mailed to the address of the person entitled thereto as it appears in the applicable register for such Debt Securities or by wire transfer of funds to such person at an account maintained within the United States. Subject to certain limitations imposed upon Debt Securities issued in book-entry form, the Debt Securities of any series will be exchangeable for other Debt Securities of the same series and of a like aggregate principal amount and tenor of different authorized denominations upon surrender of such Debt Securities at the corporate trust office of the applicable Trustee referred to above. In addition, subject to certain limitations imposed upon Debt Securities issued in book-entry form, the Debt Securities of any series may be surrendered for conversion or registration of transfer or exchange thereof at the corporate trust office of the applicable Trustee. Every Debt Security surrendered for conversion, registration of transfer or exchange must be duly endorsed or accompanied by a written instrument of transfer. No service charge Securities, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. If the applicable Prospectus Supplement refers to any transfer agent (in addition to the applicable Trustee) initially designated by the Company with respect to any series of Debt Securities, the Company may at any time rescind the designation of any such transfer agent or approve a change in the location through which any such transfer agent acts, except that the Company will be required to maintain a transfer agent in each place of payment for such series. The Company may at any time designate additional transfer agents with respect to any series of Debt Securities. Neither the Company nor any Trustee shall be required to (i) issue, register the transfer of or exchange Debt Securities of any series during a period beginning at the opening of business 15 days before any selection of Debt Securities of that series to be redeemed and ending at the close of business on the day of mailing of the relevant notice of redemption; (ii) register the transfer of or exchange any Debt Security, or portion thereof, called for redemption, except the unredeemed portion of any Debt Security being redeemed in part; or (iii) issue, register the transfer of or exchange any Debt Security that has been surrendered for repayment at the option of the holder, except the portion, if any, of such Debt Security not to be so repaid. 6 MERGER, CONSOLIDATION OR SALE The Company will be permitted to consolidate with, or sell, lease or convey all or substantially all of its assets to, or merge with or into, any other entity provided that (a) either the Company shall be the continuing entity, or the successor entity (if other than the Company) formed by or resulting from any such consolidation or merger or which shall have received the transfer of such assets shall expressly assume payment of the principal of (and premium, if any) and interest on all of the Debt Securities and the due and punctual performance and observance of all of the covenants and conditions contained in each Indenture; (b) immediately after giving effect to such transaction and treating any indebtedness that becomes an obligation of the Company or any subsidiary as a result thereof as having been incurred by the Company or such subsidiary at the time of such transaction, no event of default under the Indentures, and no event which, after notice or the lapse of time, or both, would become such an event of default, shall have occurred and be continuing; and (c) an officers' certificate and legal opinion covering such conditions shall be delivered to each Trustee. CERTAIN COVENANTS the Company will be required to do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence, rights (by articles of incorporation, by-laws and statute) and franchises; PROVIDED, HOWEVER, that the Company shall not be required to preserve any right or franchise if it determines that the preservation thereof is no longer desirable in the conduct of its business. MAINTENANCE OF PROPERTIES. The Company will be required to cause all of its material properties used or useful in the conduct of its business or the business of any subsidiary to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment and will cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of the Company may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times. INSURANCE. The Company will be required to, and will be required to cause each of its subsidiaries to, keep all of its insurable properties insured against loss or damage at least equal to their then full insurable value with insurers of recognized responsibility and, if described in the applicable Prospectus Supplement, having a specified rating from a recognized insurance rating service. PAYMENT OF TAXES AND OTHER CLAIMS. The Company will be required to pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (i) all taxes, assessments and governmental charges levied or imposed upon it or any subsidiary or upon the income, profits or property of the Company or any subsidiary, and (ii) all lawful claims for labor, materials and supplies which, if unpaid, might by law become a lien upon the property of the Company or any subsidiary; PROVIDED, HOWEVER, that the Company shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith. PROVISION OF FINANCIAL INFORMATION. Whether or not the Company is subject to Section 13 or 15(d) of the Exchange Act, the Company will be required within 15 days of each of the respective dates by which the Company would have been required to file annual reports, quarterly reports and other documents with the Commission if the Company were so subject to (i) transmit by mail to all holders of Debt Securities, as their names and addresses appear in the applicable register for such Debt Securities, without cost to such holders, copies of the annual reports, quarterly reports and other documents that the Company would have been required to file with the Commission pursuant to Section 13 or 15(d) the applicable Trustee copies of the annual reports, quarterly reports and other documents that the Company would have been required to file with the Commission pursuant to Section 13 or 15(d) of the Exchange Act if the Company were subject to such Sections, and (iii) promptly upon written request and payment of the reasonable cost of duplication and delivery, supply copies of such documents to any prospective holder. 7 ADDITIONAL COVENANTS. Any additional covenants of the Company with respect to any series of Debt Securities will be set forth in the Prospectus Supplement relating thereto. EVENTS OF DEFAULT, NOTICE AND WAIVER Each Indenture will provide that the following events are "Events of Default" with respect to any series of Debt Securities issued thereunder: (a) default for 30 days in the payment of any installment of interest on any Debt Security of such series; (b) default in the payment of principal of (or premium, if any, on) any Debt Security of such series at its maturity; (c) default in making any sinking fund payment as required for any Debt Security of such series; (d) default in the performance or breach of any other covenant or warranty of the Company contained in the Indenture (other than a covenant added to the Indenture solely for the benefit of a series of Debt Securities issued thereunder other than such series), continued for 60 days after written notice as provided in the applicable Indenture; (e) a default under any bond, debenture, note or other evidence of indebtedness for money borrowed by the Company or the Operating Partnership (including obligations under leases required to be capitalized on the balance sheet of the lessee under generally accepted accounting principles but not including any indebtedness or obligations for which recourse is limited to property purchased) in an aggregate principal amount in excess of $5,000,000 or under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any indebtedness for money borrowed by the Company or the Operating Partnership (including such leases, but not including such indebtedness or obligations for which recourse is limited to property purchased) in an aggregate principal amount in excess of $5,000,000, whether such indebtedness now exists or shall hereafter be created which default shall have resulted in such indebtedness becoming or being declared due and payable prior to the date on which it would otherwise have become due and payable or such obligations being accelerated, without such acceleration having been rescinded or annulled; (f) certain events of bankruptcy, insolvency or reorganization, or court appointment of a receiver, Company; and (g) any other event of default provided with respect to a particular series of Debt Securities. The term "Significant Subsidiary" means each significant subsidiary (as defined in Regulation S-X promulgated under the Securities Act) of the Company. If an event of default under any Indenture with respect to Debt Securities of any series at the time outstanding occurs and is continuing, then in every such case the applicable Trustee or the holders of not less than 25% in principal amount of the outstanding Debt Securities of that series will have the right to declare the principal amount (or, if the Debt Securities of that series are Original Issue Discount Securities or indexed securities, such portion of the principal amount as may be specified in the terms thereof) of all the Debt Securities of that series to be due and payable immediately by written notice thereof to the Company (and to the applicable Trustee if given by the holders). However, at any time after such a declaration of acceleration with respect to Debt Securities of such series (or of all Debt Securities then outstanding under any Indenture, as the case may be) has been made, but before a judgment or decree for payment of the money due has been obtained by the applicable Trustee, the holders of not less than a majority in principal amount of outstanding Debt Securities of such series (or of all Debt Securities then outstanding under the applicable Indenture, as the case may be) may rescind and annul such declaration and its consequences if (a) the Company shall have deposited with the applicable Trustee all required payments of the principal of (and premium, if any) and interest on the Debt Securities of such series (or of all Debt Securities then outstanding under the applicable Indenture, as the case may be), plus certain fees, expenses, disbursements and advances of the applicable Trustee and (b) all events of default, other than the non-payment of accelerated principal (or specified portion thereof), with respect to Debt Securities of such series (or of all Debt Securities then outstanding under the applicable Indenture, as the case may be) have been cured or waived as provided in such Indenture. Any Indenture will also provide that the holders of not less than a majority in principal amount of the outstanding Debt Securities of any series (or of all Debt Securities then outstanding under the applicable Indenture, as the case may be) may waive any past default with respect to such series and its consequences, except a default (x) in the payment of the principal of (or premium, if any) 8 or interest on any Debt Security of such series or (y) in respect of a covenant or provision contained in the applicable Indenture that cannot be modified or affected thereby. Each Trustee will be required to give notice to the holders of Debt Securities within 90 days of a default under the applicable Indenture unless such default shall have been cured or waived; PROVIDED, HOWEVER, that such Trustee may withhold notice to the holders of any series of Debt Securities of any default with respect to such series (except a default in the payment of the principal of (or premium, if any) or interest on any Debt Security of such series or in the payment of any sinking fund installment in respect of any Debt Security of such series) if specified responsible officers of such Trustee consider such withholding to be in the interest of such holders. Each Indenture will provide that no holders of Debt Securities of any series may institute any proceedings, judicial or otherwise, with respect to such Indenture or for any remedy thereunder, except in the cases of failure of the applicable Trustee, for 60 days, to act after it has received a written request to institute proceedings in respect of an event of default from the holders of not less than 25% in principal amount of the outstanding Debt Securities of such series, as well as an offer of indemnity reasonably satisfactory to it. This provision will not prevent, however, any holder of Debt Securities from instituting suit for the enforcement of payment of the principal of (and premium, if any) and interest on such Debt Securities at the respective due dates thereof. Subject to provisions in each Indenture relating to its duties in case of default, no Trustee will be under any obligation to exercise any of its rights or powers under an Indenture at the request or direction of any holders of any series of Debt Securities then outstanding under such Indenture, unless such holders shall have offered to the Trustee thereunder reasonable security or indemnity. The holders of not less than a majority in principal amount of the outstanding Debt Securities of any series (or of all Debt Securities then outstanding under an Indenture, as the case may be) shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the applicable Trustee, or of exercising any trust or power conferred upon such Trustee. However, a Trustee may refuse to follow any direction which is in conflict with any law or the applicable Indenture, which may involve such Trustee in personal liability or which may be unduly prejudicial to the holders of Debt Securities of such series not joining therein. Within 120 days after the close of each fiscal year, the Company will be required to deliver to each Trustee a certificate, signed by one of several knowledge of any default under the applicable Indenture and, if so, specifying each such default and the nature and status thereof. MODIFICATION OF THE INDENTURES Modifications and amendments of an Indenture will be permitted to be made only with the consent of the holders of not less than a majority in principal amount of all outstanding Debt Securities issued under such Indenture which are affected by such modification or amendment; PROVIDED, HOWEVER, that no such modification or amendment may, without the consent of the holder of each such Debt Security affected thereby, (a) change the stated maturity of the principal of, or any installment of interest (or premium, if any) on, any such Debt Security; (b) reduce the principal amount of, or the rate or amount of interest on, or any premium payable on redemption of, any such Debt Security, or reduce the amount of principal of an Original Issue Discount Security that would be due and payable upon declaration of acceleration of the maturity thereof or would be provable in bankruptcy, or adversely affect any right of repayment of the holder of any such Debt Security; (c) change the place of payment, or the coin or currency, for payment of principal of, premium, if any, or interest on any such Debt Security; (d) impair the right to institute suit for the enforcement of any payment on or with respect to any such Debt Security; (e) reduce the above-stated percentage of outstanding Debt Securities of any series necessary to modify or amend the applicable Indenture, to waive compliance with certain provisions thereof or certain defaults and consequences thereunder or to reduce the quorum or voting requirements set forth in the applicable Indenture; or 9 (f) modify any of the foregoing provisions or any of the provisions relating to the waiver of certain past defaults or certain covenants, except to increase the required percentage to effect such action or to provide that certain other provisions may not be modified or waived without the consent of the holder of such Debt Security. The holders of not less than a majority in principal amount of outstanding Debt Securities issued under an Indenture will have the right to waive compliance by the Company with certain covenants in such Indenture. Modifications and amendments of an Indenture will be permitted to be made by the Company and the respective Trustee thereunder without the consent of any holder of Debt Securities for any of the following purposes: (i) to evidence the succession of another person to the Company as obligor under such Indenture; (ii) to add to the covenants of the Company for the benefit of the holders of all or any series of Debt Securities or to surrender any right or power the benefit of the holders of all or any series of Debt Securities; (iv) to add or change any provisions of an Indenture to facilitate the issuance of, or to liberalize certain terms of, Debt Securities in bearer form, or to permit or facilitate the issuance of Debt Securities in uncertificated form, PROVIDED that such action shall not adversely affect the interests of the holders of the Debt Securities of any series in any material aspect; (v) to change or eliminate any provisions of an Indenture, PROVIDED that any such change of elimination shall become effective only when there are no Debt Securities outstanding of any series created prior thereto which are entitled to the benefit of such provision; (vi) to secure the Debt Securities; (vii) to establish the form or terms of Debt Securities of any series, including the provisions and procedures, if applicable, for the conversion of such Debt Securities into Common Stock or Preferred Stock of the Company; (viii) to provide for the acceptance of appointment by a successor Trustee or facilitate the administration of the trusts under an Indenture by more than one Trustee; (ix) to cure any ambiguity, defect or inconsistency in an Indenture, PROVIDED that such action shall not adversely affect the interests of holders of Debt Securities of any series issued under such Indenture; or (x) to supplement any of the provisions of an Indenture to the extent necessary to permit or facilitate defeasance and discharge of any series of such Debt Securities, PROVIDED that such action shall not adversely affect the interests of the holders of the Debt Securities of any series. Each Indenture will provide that in determining whether the holders of the requisite principal amount of outstanding Debt Securities of a series have given any request, demand, authorization, direction, notice, consent or waiver thereunder or whether a quorum is present at a meeting of holders of Debt Securities, (i) the principal amount of an Original Issue Discount Security that shall be deemed to be outstanding shall be the amount of the principal thereof that would be due and payable as of the date of such determination upon declaration of acceleration of the maturity thereof, (ii) the principal amount of any Debt Security denominated in a foreign currency that shall be deemed outstanding shall be the U.S. dollar equivalent, determined on the issue date for such Debt Security, of the principal amount (or, in the case of Original Issue Discount Security, the U.S. dollar equivalent on the issue date of such Debt Security of the amount determined as provided in (i) above), (iii) the principal amount of an indexed security that shall be deemed outstanding shall be the principal face amount of such indexed security at original issuance, Indenture, and (iv) Debt Securities owned by the Company or any other obligor upon the Debt Securities or any affiliate of the Company or of such other obligor shall be disregarded. Each Indenture will contain provisions for convening meetings of the holders of Debt Securities of a series. A meeting will be permitted to be called at any time by the applicable Trustee, and also, upon request, by the Company or the holders of at least 10% in principal amount of the outstanding Debt Securities of such series, in any such case upon notice given as provided in the Indenture. Except for any consent that must be given by the holder of each Debt Security affected by certain modifications and amendments of an Indenture, any resolution presented at a meeting or adjourned meeting duly reconvened at which a quorum is present may be adopted by the affirmative vote of the holders of a majority in principal amount of the 10 outstanding Debt Securities of that series; PROVIDED, HOWEVER, that, except as referred to above, any resolution with respect to any request, demand, authorization, direction, notice, consent, waiver or other action that may be made, given or taken by the holders of a specified percentage, which is less than a majority, in principal amount of the outstanding Debt Securities of a series may be adopted at a meeting or adjourned meeting or adjourned meeting duly reconvened at which a quorum is present by the affirmative vote of the holders of such specified percentage in principal amount of the outstanding Debt Securities of that series. Any resolution passed or decision taken at any meeting of holders of Debt Securities of any series duly held in accordance with an Indenture will be binding on all holders of Debt Securities of that series. The quorum at any meeting called to adopt a resolution, and at any reconvened meeting, will be persons holding or representing a majority in principal amount of the outstanding Debt Securities of a series; PROVIDED, HOWEVER, that if any action is to be taken at such meeting with respect to a consent or waiver which may be given by the holders of not less than a specified percentage in principal amount of the outstanding Debt Securities of a series, the persons holding or representing such specified percentage in principal amount of the outstanding Debt Securities of such series will constitute a quorum. Notwithstanding the foregoing provisions, any Indenture will provide that if any action is to be taken at a meeting of holders of Debt Securities of any series with respect to any request, demand, authorization, direction, notice, consent, waiver and other action that such Indenture expressly provides may be made, given or taken by the holders of a specified percentage in principal such series and one or more additional series: (i) there shall be no minimum quorum requirement for such meeting, and (ii) the principal amount of the outstanding Debt Securities of such series that vote in favor of such request, demand, authorization, direction, notice, consent, waiver or other action shall be taken into account in determining whether such request, demand, authorization, direction, notice, consent, waiver or other action has been made, given or taken under such Indenture. SUBORDINATION Upon any distribution to creditors of the Company in a liquidation, dissolution or reorganization, the payment of the principal of and interest on any Subordinated Securities will be subordinated to the extent provided in the applicable Indenture in right of payment to the prior payment in full of all Senior Debt (as defined below), but the obligation of the Company to make payment of the principal and interest on such Subordinated Securities will not otherwise be affected. No payment of principal or interest will be permitted to be made on Subordinated Securities at any time if a default on Senior Debt exists that permits the holders of such Senior Debt to accelerate its maturity and the default is the subject of judicial proceedings or the Company receives notice of the default. After all Senior Debt is paid in full and until the Subordinated Securities are paid in full, holders will be subrogated to the rights of holders of Senior Debt to the extent that distributions otherwise payable to holders have been applied to the payment of Senior Debt. By reason of such subordination, in the event of a distribution of assets upon insolvency, certain general creditors of the Company may recover more, ratably, than holders of Subordinated Securities. Senior Debt will be defined in the applicable Indenture as the principal of and interest on, or substantially similar payments to be made by the Company in respect of, the following, whether outstanding at the date of execution of the applicable Indenture or thereafter incurred, created or assumed: (a) indebtedness of the Company for money borrowed or represented by purchase-money obligations, (b) indebtedness of the Company evidenced by notes, debentures, or bonds, or other securities issued under the provisions of an indenture, fiscal agency agreement or other agreement, (c) obligations of the Company as lessee under leases of property either made as part of any sale and leaseback transaction to which the Company is a party or otherwise, (d) indebtedness of partnerships and joint ventures which is included in the consolidated financial statements of the Company, (e) indebtedness, obligations and liabilities of others in respect of which the Company is liable contingently or otherwise to the Company has agreed to purchase or otherwise acquire, and (f) any binding commitment of the Company to fund any real estate investment or to fund any investment in any entity making such real estate investment, in each case other than (1) any such indebtedness, obligation or 11 liability referred to in clauses (a) through (f) above as to which, in the instrument creating or evidencing the same pursuant to which the same is outstanding, it is provided that such indebtedness, obligation or liability is not superior in right of payment to the Subordinated Securities or ranks PARI PASSU with the Subordinated Securities, (2) any such indebtedness, obligation or liability which is subordinated to indebtedness of the Company to substantially the same extent as or to a greater extent than the Subordinated Securities are subordinated, and (3) the Subordinated Securities. There will not be any restrictions in an Indenture relating to Subordinated Securities upon the creation of additional Senior Debt. If this Prospectus is being delivered in connection with a series of Subordinated Securities, the accompanying Prospectus Supplement or the information incorporated herein by reference will set forth the approximate amount of Senior Debt outstanding as of the end of the Company's most recent fiscal quarter. DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE The Company may be permitted under the applicable Indenture to discharge certain obligations to holders of any series of Debt Securities issued thereunder that have not already been delivered to the applicable Trustee for cancellation and that either have become due and payable or will become due and payable within one year (or scheduled for redemption within one year) by irrevocably depositing with the applicable Trustee, in trust, funds in such currency or currencies, currency unit or units or composite currency or currencies in which such Debt Securities are payable in an amount sufficient to pay the entire indebtedness on such Debt Securities in respect of principal (and premium, if any) and interest to the date of such deposit (if such Debt Securities have become due and payable) or to the stated maturity or redemption date, as the case may be. An Indenture may provide that, if certain provisions thereof are made applicable to the Debt Securities of or within any series pursuant to such Indenture, the Company may elect either (a) to defease and be discharged from any and all obligations with respect to such Debt Securities (except for the obligation to pay additional amounts, if any, upon the occurrence of certain events of tax, assessment or governmental charge with respect to payments on such Debt Securities, to replace temporary or mutilated, destroyed, lost or stolen Debt Securities, to maintain an office or agency in respect of such Debt Securities and to hold moneys for payment in trust) ("defeasance") or (b) to be released from its obligations with respect to such Debt Securities under an Indenture (being the restrictions described under "-- Certain Covenants") or, if provided pursuant to an Indenture, its obligations with respect to any other covenant, and any omission to comply with such obligations shall not constitute an event of default with respect to such Debt Securities ("covenant defeasance"), in either case upon the irrevocable deposit by the Company with the applicable Trustee, in trust, of an amount, in such currency or currencies, currency unit or units or composite currency or currencies in which such Debt Securities are payable at stated maturity, or Government Obligations (as defined below), or both, applicable to such Debt Securities which through the scheduled payment of principal and interest in accordance with their terms will provide money in an amount sufficient to pay the principal of (and premium, if any) and interest on such Debt Securities, and any mandatory sinking fund or analogous payments thereon, on the scheduled due dates therefor. Such a trust will only be permitted to be established if, among other things, the Company has delivered to the applicable Trustee an opinion of counsel (as specified in the applicable Indenture) to the effect that the holders of such Debt Securities will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such defeasance or covenant defeasance and will be subject to U.S. federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such defeasance or covenant defeasance had not occurred, and such opinion of counsel, in the case of defeasance, will be required to refer to and be based upon a ruling of the Internal Revenue Service or a change in applicable United States federal income tax law occurring after the date of the Indenture. "Government Obligations" means securities which are (i) direct obligations of the United States of America or the government which issued the foreign currency in which the Debt Securities of a particular 12 series are payable, for the payment of which its full faith and credit is pledged or (ii) obligations of a person controlled or supervised by and acting as an agency or instrumentality of the United States of America or such government which issued the foreign currency in which the Debt Securities of such series are payable, the payment of which is unconditionally guaranteed as a government, which, in either case, are not callable or redeemable at the option of the issuer thereof, and shall also include a depository receipt issued by a bank or trust company as custodian with respect to any such Government Obligation or a specific payment of interest on or principal of any such Government Obligation held by such custodian for the account of the holder of a depository receipt, PROVIDED that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount receiving by the custodian in respect of the Government Obligation or the specific payment of interest on or principal of the Government Obligation evidenced by such depository receipt. Unless otherwise provided in the applicable Prospectus Supplement, if after the Company has deposited funds and/or Government Obligations to effect defeasance or covenant defeasance with respect to Debt Securities of any series, (a) the holder of a Debt Security of such series is entitled to, and does, elect pursuant to the applicable Indenture or the terms of such Debt Security to receive payment in a currency, currency unit or composite currency other than that in which such deposit has been made in respect of such Debt Security, or (b) a Conversion Event (as defined below) occurs in respect of the currency, currency unit or composite currency in which such deposit has been made, the indebtedness represented by such Debt Security will be deemed to have been, and will be, fully discharged and satisfied through the payment of the principal of (and premium, if any) and interest on such Debt Security as they become due out of the proceeds yielded by converting the amount so deposited in respect of such Debt Security into the currency, currency unit or composite currency in which such Debt Security becomes payable as a result of such election or such cessation of usage based on the applicable market exchange rate. "Conversion Event" means the cessation of use of (i) a currency, currency unit or composite currency both by the government of the country which issued such currency and for the settlement of transactions by a central bank or other public institutions of or within the international banking community, (ii) the ECU both within the European Monetary System and for the settlement of transactions by public institutions of or within the European Communities or (iii) any currency unit or composite currency other than the ECU for the purposes for which it was established. Unless otherwise provided in the applicable Prospectus Supplement, all payments of principal of (and premium, if any) and interest on any Debt Security that is payable in a foreign currency that ceases to be used by its In the event the Company effects covenant defeasance with respect to any Debt Securities and such Debt Securities are declared due and payable because of the occurrence of any event of default other than the event of default described in clause (d) under "Events of Default, Notice and Waiver" with respect to specified sections of an Indenture (which sections would no longer be applicable to such Debt Securities) or described in clause (g) under "Events of Default, Notice and Waiver" with respect to any other covenant as to which there has been covenant defeasance, the amount in such currency, currency unit or composite currency in which such Debt Securities are payable, and Government Obligations on deposit with the applicable Trustee, will be sufficient to pay amounts due on such Debt Securities at the time of their stated maturity but may not be sufficient to pay amounts due on such Debt Securities at the time of the acceleration resulting from such event of default. However, the Company would remain liable to make payment of such amounts due at the time of acceleration. The applicable Prospectus Supplement may further describe the provisions, if any, permitting such defeasance or covenant defeasance, including any modifications to the provisions described above, with respect to the Debt Securities of or within a particular series. 13 CONVERSION RIGHTS The terms and conditions, if any, upon which the Debt Securities are convertible into Common Stock or Preferred Stock will be set forth in the applicable Prospectus Supplement relating thereto. Such terms will include whether such Debt Securities are convertible into shares of Common Stock or Preferred Stock, the conversion price (or manner of calculation thereof), the conversion period, provisions as to whether conversion will be at the option of the holders or the Company, the events requiring an adjustment of the conversion price and provisions affecting conversion in the event of the redemption of such Debt Securities and any restrictions on conversion, including restrictions directed at maintaining the Company's REIT status. GLOBAL SECURITIES The Debt Securities of a series may be issued in whole or in part in the form of one or more global securities (the "Global Securities") that will be deposited with, or on behalf of, a depositary identified in the applicable Prospectus Supplement relating to such series. Global Securities may be issued in either registered or bearer form and in either temporary or permanent form. The specific terms of the depositary arrangement with respect to a series of Debt Securities will be described in the applicable Prospectus Supplement relating to such series. GENERAL The Company is authorized to issue 5,000,000 shares of preferred stock, $.01 par value per share, of which no Preferred Stock was outstanding at June 30, 1994. The following description of the Preferred Stock sets forth certain general terms and provisions of the Preferred Stock to which any Prospectus Supplement may relate. The statements below describing the Preferred Stock are in all respects subject to and qualified in their entirety by reference to the applicable provisions of the Company's Amended and Restated Articles of Incorporation (the "Articles of Incorporation") and Bylaws and any applicable amendment to the Articles of Incorporation designating terms of a series of Preferred Stock (a "Designating Amendment"). TERMS Subject to the limitations prescribed by the Articles of Incorporation, the board of directors is authorized to fix the number of shares constituting each series of Preferred Stock and the designations and powers, preferences and relative, participating, optional or other special rights and qualifications, limitations or restrictions thereof, including such provisions as may be desired concerning voting, redemption, dividends, dissolution or the distribution of assets, conversion or exchange, and such other subjects or matters as may be fixed by resolution of the board of directors. The Preferred Stock will, when issued, be fully paid and nonassessable by the Company (except as described under "-- Shareholder Liability" below) and will have no preemptive rights. Reference is made to the Prospectus Supplement relating to the Preferred Stock offered thereby for specific terms, including: (1) The title and stated value of such Preferred Stock; (2) The number of shares of such Preferred Stock offered, the liquidation preference per share and the offering price of such Preferred Stock; (3) The dividend rate(s), period(s) and/or payment date(s) or method(s) of calculation thereof applicable to such Preferred Stock; (4) The date from which dividends on such Preferred Stock shall accumulate, if applicable; (5) The procedures for any auction and remarketing, if any, for such Preferred Stock; 14 (6) The provision for a sinking fund, if any, for such Preferred Stock; (7) The provision for redemption, if applicable, of such Preferred Stock; (8) Any listing of such Preferred Stock on any securities exchange; (9) The terms and conditions, if applicable, upon which such Preferred Stock will be convertible into Common Stock of the Company, including the conversion price (or manner of calculation thereof); (10) Any other specific terms, preferences, rights, limitations or (11) A discussion of federal income tax considerations applicable to such Preferred Stock; (12) The relative ranking and preferences of such Preferred Stock as to dividend rights and rights upon liquidation, dissolution or winding up of the affairs of the Company; (13) Any limitations on issuance of any series of Preferred Stock ranking senior to or on a parity with such series of Preferred Stock as to dividend rights and rights upon liquidation, dissolution or winding up of the affairs of the Company; and (14) Any limitations on direct or beneficial ownership and restrictions on transfer, in each case as may be appropriate to preserve the status of the Company as a REIT. RANK Unless otherwise specified in the Prospectus Supplement, the Preferred Stock will, with respect to dividend rights and rights upon liquidation, dissolution or winding up of the Company, rank (i) senior to all classes or series of Common Stock of the Company, and to all equity securities ranking junior to such Preferred Stock; (ii) on a parity with all equity securities issued by the Company the terms of which specifically provide that such equity securities rank on a parity with the Preferred Stock; and (iii) junior to all equity securities issued by the Company the terms of which specifically provide that such equity securities rank senior to the Preferred Stock. The term "equity securities" does not include convertible debt securities. DIVIDENDS Holders of the Preferred Stock of each series will be entitled to receive, when, as and if declared by the board of directors of the Company, out of assets of the Company legally available for payment, cash dividends at such rates and on such dates as will be set forth in the applicable Prospectus Supplement. Each such dividend shall be payable to holders of record as they appear on the share transfer books of the Company on such record dates as shall be fixed by the board of directors of the Company. Dividends on any series of the Preferred Stock may be cumulative or non-cumulative, as provided in the applicable Prospectus Supplement. Dividends, if cumulative, will be cumulative from and after the date set forth in the applicable Prospectus Supplement. If the board of directors of the Company fails to declare a dividend payable on a dividend payment date on any series of the Preferred Stock for which dividends are non-cumulative, then the holders of such series of the Preferred Stock will have no right to receive a dividend in respect of the dividend period ending on such dividend payment date, and the Company will have no obligation to pay the dividend accrued for such period, whether or not dividends on such series are declared payable on any future dividend payment date. declared or paid or set apart for payment on any capital stock of the Company of any other series ranking, as to dividends, on a parity with or junior to the Preferred Stock of such series for any period unless (i) if such series of Preferred Stock has a cumulative dividend, full cumulative dividends have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for such payment on the Preferred Stock of such series for all past dividend periods and the then current dividend period or (ii) if such series of Preferred Stock does not have a cumulative dividend, full dividends for the then current dividend period have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment 15 thereof set apart for such payment on the Preferred Stock of such series. When dividends are not paid in full (or a sum sufficient for such full payment is not so set apart) upon Preferred Stock of any series and the shares of any other series of Preferred Stock ranking on a parity as to dividends with the Preferred Stock of such series, all dividends declared upon Preferred Stock of such series and any other series of Preferred Stock ranking on a parity as to dividends with such Preferred Stock shall be declared pro rata so that the amount of dividends declared per share of Preferred Stock of such series and such other series of Preferred Stock shall in all cases bear to each other the same ratio that accrued dividends per share on the Preferred Stock of such series (which shall not include any accumulation in respect of unpaid dividends for prior dividend periods if such Preferred Stock does not have a cumulative dividend) and such other series of Preferred Stock bear to each other. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on Preferred Stock of such series which may be in arrears. Except as provided in the immediately preceding paragraph, unless (i) if such series of Preferred Stock has a cumulative dividend, full cumulative dividends on the Preferred Stock of such series have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for payment for all past dividend periods and the then current dividend period, and (ii) if such series of Preferred Stock does not have a cumulative dividend, full dividends on the Preferred Stock of such series have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for payment for the then current dividend period, no dividends (other than in shares of Common Stock or other capital upon liquidation) shall be declared or paid or set aside for payment or other distribution shall be declared or made upon the Common Stock, or any other capital shares of the Company ranking junior to or on a parity with the Preferred Stock of such series as to dividends or upon liquidation, nor shall any shares of Common Stock, or any other capital shares of the Company ranking junior to or on a parity with the Preferred Stock of such series as to dividends or upon liquidation be redeemed, purchased or otherwise acquired for any consideration (or any moneys be paid to or made available for a sinking fund for the redemption of any such shares) by the Company (except by conversion into or exchange for other capital shares of the Company ranking junior to the Preferred Stock of such series as to dividends and upon liquidation). REDEMPTION If so provided in the applicable Prospectus Supplement, the Preferred Stock will be subject to mandatory redemption or redemption at the option of the Company, as a whole or in part, in each case upon the terms, at the times and at the redemption prices set forth in such Prospectus Supplement. The Prospectus Supplement relating to a series of Preferred Stock that is subject to mandatory redemption will specify the number of shares of such Preferred Stock that shall be redeemed by the Company in each year commencing after a date to be specified, at a redemption price per share to be specified, together with an amount equal to all accrued and unpaid dividends thereon (which shall not, if such Preferred Stock does not have a cumulative dividend, include any accumulation in respect of unpaid dividends for prior dividend periods) to the date of redemption. The redemption price may be payable in cash or other property, as specified in the applicable Prospectus Supplement. If the redemption price for Preferred Stock of any series is payable only from the net proceeds of the issuance of capital shares of the Company, the terms of such Preferred Stock may provide that, if no such capital shares shall have been issued or to the extent the net proceeds from any issuance are insufficient to pay in full the aggregate redemption price then due, such Preferred Stock shall automatically and mandatorily be converted into the applicable capital shares of the Company pursuant to conversion provisions specified in the applicable Prospectus Supplement. Notwithstanding the foregoing, unless (i) if such series of Preferred Stock has a cumulative dividend, full cumulative dividends on all shares of any series of Preferred Stock shall have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for payment 16 such series of Preferred Stock does not have a cumulative dividend, full dividends of the Preferred Stock of any series have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for payment for the then current dividend period, no shares of any series of Preferred Stock shall be redeemed unless all outstanding Preferred Stock of such series is simultaneously redeemed; PROVIDED, HOWEVER, that the foregoing shall not prevent the purchase or acquisition of Preferred Stock of such series to preserve the REIT status of the Company or pursuant to a purchase or exchange offer made on the same terms to holders of all outstanding Preferred Stock of such series. In addition, unless (i) if such series of Preferred Stock has a cumulative dividend, full cumulative dividends on all outstanding shares of any series of Preferred Stock have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for payment for all past dividends periods and the then current dividend period, and (ii) if such series of Preferred Stock does not have a cumulative dividend, full dividends on the Preferred Stock of any series have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for payment for the then current dividend period, the Company shall not purchase or otherwise acquire directly or indirectly any shares of Preferred Stock of such series (except by conversion into or exchange for capital shares of the Company ranking junior to the Preferred Stock of such series as to dividends and upon liquidation); PROVIDED, HOWEVER, that the foregoing shall not prevent the purchase or acquisition of Preferred Stock of such series to preserve the REIT status of the Company or pursuant to a purchase or exchange offer made on the same terms to holders of all outstanding Preferred Stock of such series. If fewer than all of the outstanding shares of Preferred Stock of any series are to be redeemed, the number of shares to be redeemed will be determined by the Company and such shares may be redeemed pro rata from the holders of record of such shares in proportion to the number of such shares held or for which redemption is requested by such holder (with adjustments to avoid redemption of fractional shares) or by lot in a manner determined by the Company. Notice of redemption will be mailed at least 30 days but not more than 60 days before the redemption date to each holder of record of Preferred Stock of any series to be redeemed at the address shown on the share transfer books of the Company. Each notice shall state: (i) the redemption date; (ii) the number of shares and series of the Preferred Stock to be redeemed; (iii) the redemption to be surrendered for payment of the redemption price; (v) that dividends on the shares to be redeemed will cease to accrue on such redemption date; and (vi) the date upon which the holder's conversion rights, if any, as to such shares shall terminate. If fewer than all the shares of Preferred Stock of any series are to be redeemed, the notice mailed to each such holder thereof shall also specify the number of shares of Preferred Stock to be redeemed from each such holder. If notice of redemption of any Preferred Stock has been given and if the funds necessary for such redemption have been set aside by the Company in trust for the benefit of the holders of any Preferred Stock so called for redemption, then from and after the redemption date dividends will cease to accrue on such Preferred Stock, and all rights of the holders of such shares will terminate, except the right to receive the redemption price. 17 LIQUIDATION PREFERENCE Upon any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company, then, before any distribution or payment shall be made to the holders of any Common Stock or any other class or series of capital shares of the Company ranking junior to the Preferred Stock in the distribution of assets upon any liquidation, dissolution or winding up of the Company, the holders of each series of Preferred Stock shall be entitled to receive out of assets of the Company legally available for distribution to shareholders liquidating distributions in the amount of the liquidation preference per share (set forth in the applicable Prospectus Supplement), plus an amount equal to all dividends accrued and unpaid thereon (which shall not include any accumulation in respect of unpaid dividends for prior dividend periods if such Preferred Stock does not have a cumulative dividend). After payment of the full amount of the liquidating distributions to which they are entitled, the holders of Preferred Stock will have no right or claim to any of the remaining assets of the Company. In the event that, upon any such voluntary or involuntary liquidation, dissolution or winding up, the available assets of the Company are insufficient to pay the amount of the liquidating distributions on all outstanding Preferred Stock and the corresponding amounts payable on all shares of other classes or series of capital shares of the Company ranking on a parity with the Preferred Stock in the distribution of assets, then the holders of the Preferred Stock and all other such classes or series of capital shares shall share ratably in any such distribution of assets in proportion to the full liquidating distributions to which they would otherwise be respectively entitled. Preferred Stock, the remaining assets of the Company shall be distributed among the holders of any other classes or series of capital shares ranking junior to the Preferred Stock upon liquidation, dissolution or winding up, according to their respective rights and preferences and in each case according to their respective number of shares. For such purposes, the consolidation or merger of the Company with or into any other corporation, trust or entity, or the sale, lease or conveyance of all or substantially all of the property or business of the Company, shall not be deemed to constitute a liquidation, dissolution or winding up of the Company. VOTING RIGHTS Holders of the Preferred Stock will not have any voting rights, except as set forth below or as otherwise from time to time required by law or as indicated in the applicable Prospectus Supplement. Whenever dividends on any shares of Preferred Stock shall be in arrears for six or more consecutive quarterly periods, the holders of such shares of Preferred Stock (voting separately as a class with all other series of preferred stock upon which like voting rights have been conferred and are exercisable) will be entitled to vote for the election of two additional directors of the Company at a special meeting called by the holders of record of at least ten percent (10%) of any series of Preferred stock so in arrears (unless such request is received less than 90 days before the date fixed for the next annual or special meeting of the stockholders) or at the next annual meeting of stockholders, and at each subsequent annual meeting until (i) if such series of Preferred Stock has a cumulative dividend, all dividends accumulated on such shares of Preferred Stock for the past dividend periods and the then current dividend period shall have been fully paid or declared and a sum sufficient for the payment thereof set aside for payment or (ii) if such series of Preferred Stock does not have a cumulative dividend, four consecutive quarterly dividends shall have been fully paid or declared and a sum sufficient for the payment thereof set aside for payment. In such case, the entire board of directors of the Company will be increased by two directors. Unless provided otherwise for any series of Preferred Stock, so long as any shares of Preferred Stock remain outstanding, the Company will not, without the affirmative vote or consent of the holders of at least two-thirds of the shares of each series of Preferred Stock outstanding at the time, given in person or by proxy, either in writing or at a meeting (such series voting separately as a class), (i) authorize or create, or increase the authorized or issued amount of, any class or series of capital stock ranking prior to such series of Preferred liquidation, dissolution or winding up or reclassify any authorized capital stock of the Company into such shares, or create, authorize or issue any obligation or security convertible into or evidencing the right to purchase any such 18 shares; or (ii) amend, alter or repeal the provisions of the Company's Articles of Incorporation or the Designating Amendment for such series of Preferred Stock, whether by merger, consolidation or otherwise (an "Event"), so as to materially and adversely affect any right, preference, privilege or voting power of such series of Preferred Stock or the holders thereof; PROVIDED, HOWEVER, with respect to the occurrence of any of the Events set forth in (ii) above, so long as the Preferred Stock remains outstanding with the terms thereof materially unchanged, taking into account that upon the occurrence of an Event, the Company may not be the surviving entity, the occurrence of any such Event shall not be deemed to materially and adversely affect such rights, preferences, privileges or voting power of holders of Preferred Stock and provided further that (x) any increase in the amount of the authorized Preferred Stock or the creation or issuance of any other series of Preferred Stock, or (y) any increase in the amount of authorized shares of such series or any other series of Preferred Stock, in each case ranking on a parity with or junior to the Preferred Stock of such series with respect to payment of dividends or the distribution of assets upon liquidation, dissolution or winding up, shall not be deemed to materially and adversely affect such rights, preferences, privileges or voting powers. The foregoing voting provisions will not apply if, at or prior to the time when the act with respect to which such vote would otherwise be required shall be effected, all outstanding shares of such series of Preferred Stock shall have been redeemed or called for redemption and sufficient funds shall have been deposited in trust to effect such redemption. Under Indiana law, notwithstanding anything to the contrary set forth above, holders of each series of Preferred Stock will be entitled to vote as a class upon any proposed amendment to the Articles of Incorporation, whether or not entitled to vote thereon by the Articles of Incorporation, if the amendment would (i) increase or decrease the aggregate number of authorized shares of such series; (ii) effect an exchange or reclassification of all or part of the shares of the series into shares of another series; (iii) effect an exchange or reclassification, or create the right of exchange, of all or part of the shares of another class or series into shares of the series; (iv) change the of the series; (v) change the shares of all or part of the series into a different number of shares of the same series; (vi) create a new series having rights or preferences with respect to distributions or dissolution that are prior, superior or substantially equal to the shares of the series; (vii) increase the rights, preferences or number of authorized shares of any class or series that, after giving effect to the amendment, have rights or preferences with respect to distributions or to dissolution that are prior, superior or substantially equal to the shares of the series; (viii) limit or deny an existing preemptive right of all or part of the shares of the series; or (ix) cancel or otherwise affect rights to distributions or dividends that have accumulated but have not yet been declared on all or part of the shares of the series. CONVERSION RIGHTS The terms and conditions, if any, upon which any series of Preferred Stock is convertible into shares of Common Stock will be set forth in the applicable Prospectus Supplement relating thereto. Such terms will include the number of shares of Common Stock into which the shares of Preferred Stock are convertible, the conversion price (or manner of calculation thereof), the conversion period, provisions as to whether conversion will be at the option of the holders of the Preferred Stock or the Company, the events requiring an adjustment of the conversion price and provisions affecting conversion in the event of the redemption of such series of Preferred Stock. SHAREHOLDER LIABILITY As discussed below under "Description of Common Stock -- General," applicable Indiana law provides that no shareholder, including holders of Preferred Stock, shall be personally liable for the acts and obligations of the Company and that the funds and property of the Company shall be the only recourse for such acts or obligations. RESTRICTIONS ON OWNERSHIP As discussed below under "Description of Common Stock -- Certain Provisions Affecting Change of Control," for the Company to qualify as a REIT under the Internal Revenue Code of 1986, as amended (the 19 "Code"), not more than 50% in value of its outstanding capital shares may be owned, directly or indirectly, by five or fewer individuals (as defined in the Code to include certain entities) during the last half of a taxable year. To assist the Company in meeting this requirement, the Company may take certain actions to limit the beneficial ownership, directly or indirectly, by a single person of the Company's outstanding equity securities, including any Preferred Stock of the Company. Therefore, the Designating Amendment for each series of Preferred Stock may contain provisions restricting the ownership and transfer of additional ownership limitation relating to a series of Preferred Stock. REGISTRAR AND TRANSFER AGENT The Registrar and Transfer Agent for the Preferred Stock will be set forth in the applicable Prospectus Supplement. DESCRIPTION OF COMMON STOCK GENERAL The authorized capital stock of the Company includes 45,000,000 shares of Common Stock, $.01 par value per share. Each outstanding share of Common Stock entitles the holder to one vote on all matters presented to shareholders for a vote. Holders of Common Stock have no preemptive rights. At June 30, 1994, there were 16,046,144 shares of Common Stock outstanding. Shares of Common Stock currently outstanding are listed for trading on the New York Stock Exchange (the "NYSE"). The Company will apply to the NYSE to list the additional shares of Common Stock to be sold pursuant to any Prospectus Supplement, and the Company anticipates that such shares will be so listed. The Articles of Incorporation of the Company provide for the board of directors to be divided into three classes of directors, each class to consist as nearly as possible of one-third of the directors. At each annual meeting of shareholders, the class of directors to be elected at such meeting will be elected for a three-year term and the directors in the other two classes will continue in office. The overall effect of the provisions in the Articles of Incorporation with respect to the classified board may be to render more difficult a change of control of the Company or removal of incumbent management. Holders of Common Stock have no right to cumulative voting for the election of directors. Consequently, at each annual meeting of shareholders, the holders of a plurality of the shares of Common Stock are able to elect all of the successors of the class of directors whose term expires at that meeting. Directors may be removed only for cause and only with the affirmative vote of the holders of a majority of the shares of Common Stock entitled to vote in the election of directors. All shares of Common Stock issued will be duly authorized, fully paid, and non-assessable. Distributions may be paid to the holders of Common Stock if and when declared by the board of directors of the Company out of funds legally available therefor. The Company intends to continue to pay quarterly dividends. Under Indiana law, shareholders are generally not liable for the Company's debts or obligations. If the Company is liquidated, subject to the right of any holders of preferred stock, if any, to receive preferential distributions, each outstanding share of Common Stock will be entitled to participate pro rata in the assets remaining after payment of, or adequate provision for, all known debts and liabilities of the Company. GENERAL. Pursuant to Indiana law, the Company cannot merge with or sell all or substantially all of the assets of the Company, except pursuant to a resolution approved by shareholders holding a majority of the shares voting on the resolution. The Company's Articles of Incorporation also contain provisions which may discourage certain types of transactions involving an actual or threatened change of control of the Company, including: (i) a requirement that, in the case of certain mergers, sales of assets, liquidations or dissolutions, or reclassifications or recapitalizations involving persons owning 10% or more of the capital stock of the Company, such transactions be approved by a vote of the holders of 80% of the issued and outstanding 20 shares of capital stock of the Company or three-fourths of the continuing directors, or provide for payment of a price to affected shareholders for their shares not less than as specified in the Articles of Incorporation; (ii) a requirement that any amendment or alteration of certain provisions of the Articles of Incorporation affecting change of control be approved by the holders of 80% of the issued and outstanding capital stock of the Company; and (iii) a staggered board of directors and a limitation on removal of directors to removal for cause as described above. The partnership agreement for the Operating Partnership also contains provisions which could discourage transactions involving an actual or threatened change of control of the Company, including (i) a requirement that holders of at least 90% of the outstanding Units held by the Company and other Unit holders approve any voluntary sale, exchange or other disposition, including merger or consolidation (other than a disposition occurring upon a financing or refinancing of the Operating Partnership), of all or substantially all of the assets of the Operating Partnership in a single transaction or a series of related transactions; (ii) a restriction against any assignment or transfer by the Company of its interest in the Operating Partnership; and (iii) a requirement that holders of more than 90% of the Units approve any merger, consolidation or other combination of the Company with or into another entity, or sale of all or substantially all of the Company's assets, or any reclassification or recapitalization or change of outstanding shares of Common Stock (other than certain changes in par value, stock splits, stock dividends or combinations) unless after the transaction substantially all of the assets of the surviving entity are contributed to the Operating Partnership in exchange for Units. On these matters, the Company's Units will be voted at the discretion and do not hold Units. OWNERSHIP LIMITS. For the Company to qualify as a REIT under the Code, no more than 50% in value of its outstanding capital shares may be owned, directly or indirectly, by five or fewer individuals (as defined in the Code to include certain entities) during the last half of a taxable year or during a proportionate part of a shorter taxable year. The Common Stock must also be beneficially owned by 100 or more persons during at least 335 days of a taxable year or during a proportionate part of a shorter taxable year. Because the Company expects to continue to qualify as a REIT, the Articles of Incorporation of the Company contain restrictions on the acquisition of Common Stock intended to ensure compliance with these requirements. The Articles of Incorporation contain a restriction which authorizes, but does not require, the board of directors to refuse to give effect to a transfer of Common Stock which, in its opinion, might jeopardize the status of the Company as a REIT. This provision also renders null and void any purported acquisition of shares which would result in the disqualification of the Company as a REIT. The provision also gives the board of directors the authority to take such actions as it deems advisable to enforce the provision. Such actions might include, but are not limited to, refusing to give effect to, or seeking to enjoin, a transfer which might jeopardize the Company's status as a REIT. The provision also requires any shareholder to provide the Company such information regarding his direct and indirect ownership of Common Stock as the Company may reasonably require. REGISTRAR AND TRANSFER AGENT The Registrar and Transfer Agent for the Common Stock is Bank One, Indianapolis, N.A., Indianapolis, Indiana. PLAN OF DISTRIBUTION The Company may sell Securities in or through underwriters, and also may sell Securities directly to other purchasers or through agents. The distribution of the Securities may be effected from time to time in one or more transaction at a fixed price or prices, which may be changed, or at market prices prevailing at the time of sale, at prices related to such prevailing market prices or at negotiated prices. The Common Stock may also be issued to certain holders of Units in exchange for their Units pursuant to the partnership agreement of the Operating Partnership. 21 In connection with the sale of Securities, underwriters may receive compensation from the Company or from purchasers of Securities, for whom they may act as agents, in the form of discounts, concessions, or commissions. Underwriters may sell Securities to or through dealers, and such dealers may the underwriters and/or commissions from the purchasers for whom they may act as agents. Underwriters, dealers, and agents that participate in the distribution of Securities may be deemed to be underwriters, and any discounts or commissions they receive from the Company, and any profit on the resale of Securities they realize may be deemed to be underwriting discounts and commissions, under the Securities Act. Any such underwriter or agent will be identified, and any such compensation received from the Company will be described, in the Prospectus Supplement. Unless otherwise specified in the related Prospectus Supplement, each series of Securities will be a new issue with no established trading market, other than the Common Stock which is listed on the NYSE. Any shares of Common Stock sold pursuant to a Prospectus Supplement will be listed on such exchange, subject to official notice of issuance. The Company may elect to list any series of Debt Securities or Preferred Shares on an exchange, but is not obligated to do so. It is possible that one or more underwriters may make a market in a series of Securities, but will not be obligated to do so and may discontinue any market making at any time without notice. Therefore, no assurance can be given as to the liquidity of the trading market for the Securities. Under agreements the Company may enter into, underwriters, dealers, and agents who participate in the distribution of Securities may be entitled to indemnification by the Company against certain liabilities, including liabilities under the Securities Act. Underwriters, dealers and agents may engage in transactions with, or perform services for, or be customers of, the Company in the ordinary course of business. If so indicated in the applicable Prospectus Supplement, the Company will authorize underwriters or other persons acting as the Company's agents to solicit offers by certain institutions to purchase Securities from the Company pursuant to contracts providing for payment and delivery on a future date. Institutions with which such contracts may be made include commercial and savings banks, insurance companies, pension funds, investment companies, educational and charitable institutions and others, but in all cases such institutions must be approved by the Company. The obligations of any purchaser under any such contract will be subject to the condition that the purchase of the Securities shall not at the time of delivery be prohibited under the laws of the jurisdiction to which such purchaser is subject. The underwriters and such other agents will not have any responsibility in respect of the validity or performance of such contracts. LEGAL OPINIONS Company by Bose McKinney & Evans, Indianapolis, Indiana. John W. Wynne and Darell E. Zink, Jr., officers and directors of the Company, were partners in Bose McKinney & Evans through 1987 and 1982, respectively, and were of counsel to that firm until December, 1990. The spouses of Michael Coletta and Dayle M. Eby, both officers and shareholders of the Company, are partners in Bose McKinney & Evans. Rogers & Wells, New York, New York will act as counsel to any underwriters, dealers or agents. EXPERTS The Consolidated Financial Statements and Schedules of the Company as of December 31, 1993, and 1992, and for each of the years in the three-year period ended December 31, 1993, and the Combined Financial Statements of Duke Associates as of December 31, 1992 and 1991, and for each of the years in the three-year period ended December 31, 1992, each incorporated herein by reference have been incorporated herein in reliance on the reports of KPMG Peat Marwick LLP, independent certified public accountants, also incorporated by reference herein, and upon the authority of said firm as experts in accounting and auditing. 22 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- NO DEALER, SALESMAN OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IN CONNECTION WITH THE OFFERING MADE BY THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY SALE MADE HEREUNDER AND THEREUNDER SHALL, UNDER ANY CIRCUMSTANCE, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS SUPPLEMENT OR IN THE PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY STATE IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. ------------------- TABLE OF CONTENTS PROSPECTUS SUPPLEMENT
PAGE --------- Prospectus Supplement Summary..................... S-3 The Company....................................... S-8 Recent Developments............................... S-10 Use of Proceeds................................... S-12 Price Range of Common Stock and Dividend History.......................................... S-13 Capitalization.................................... S-14 Selected Consolidated Financial Data.............. S-15 Management's Discussion and Analysis of Financial Condition and Results of Operations.............. S-16 Properties........................................ S-18 Management........................................ S-42 Federal Income Tax Considerations................. S-44 Underwriting...................................... S-50 Legal Matters..................................... S-50 PROSPECTUS Available Information............................. 2 Incorporation of Certain Documents by Reference... 2 The Company....................................... 3 Use of Proceeds................................... 3 Ratios of Earnings to Fixed Charges............... 3 Description of Debt Securities.................... 4 Description of Preferred Stock.................... 14 Description of Common Stock....................... 20 Plan of Distribution.............................. 21 Legal Opinions.................................... 22 Experts........................................... 22
3,000,000 SHARES [LOGO] COMMON STOCK ------------------- PROSPECTUS SUPPLEMENT ------------------- MERRILL LYNCH & CO. ALEX. BROWN & SONS INCORPORATED DEAN WITTER REYNOLDS INC. A.G. EDWARDS & SONS, INC. LEGG MASON WOOD WALKER INCORPORATED SEPTEMBER , 1994 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- APPENDIX Inside front cover page of Prospectus Supplement: On the inside front cover page of the Prospectus Supplement is graphic material entitled "Duke Realty Investments Portfolio Location Map" consisting of (1) a map of the continental United States on which the states of Missouri, Wisconsin, Illinois, Michigan, Indiana, Kentucky, Tennessee and Ohio are shaded is shown as the Corporate Headquarters; the cities of Decatur, Illinois, Detroit, Michigan, Columbus, Ohio, Cincinnati, Ohio and Nashville, Tennessee are shown as Regional Office locations; and the cities of Milwaukee, Wisconsin, St. Louis, Missouri, Bloomington, Illinois, Champaign, Illinois, Decatur, Illinois, Indianapolis, Indiana, Nashville, Tennessee, Detroit, Michigan, Fort Wayne, Indiana, Columbus, Ohio, Dayton, Ohio, Cincinnati, Ohio and Covington, Kentucky are shown as Duke Markets. Inside back cover page of Prospectus Supplement: On the inside back cover page of the Prospectus Supplement are five photographs, as follows: (1) An aerial photograph of a business park, captioned "Park 100 Business Park - Indianapolis IN." (2) A photograph of a building captioned "The Corporate Park at Tuttle Crossing, Xerox (5555 Parkcenter) (Acquired April 1994) - Columbus, OH." (3) A photograph of a building captioned "Park 100 Business Park, Caterpillar Logistics (Building 95) (Completed January 1994) - Indianapolis, IN." (4) A photograph of a building captioned "Southpark Business Center, Redken Laboratories (Completed May 1994) - Covington, KY (Greater Cincinnati Airport Area)." (5) A photograph of a building captioned "Sports Unlimited (Partially Completed July 1994) - Cincinnati, OH." -----END PRIVACY-ENHANCED MESSAGE-----