PROSPECTUS
KIMCO REALTY
CORPORATION
Debt Securities, Preferred Stock,
Depositary Shares, Common Stock and Common Stock Warrants
We may from time to time offer the following securities on terms to
be determined at the time of the offering:
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Unsecured Senior Debt Securities; |
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Shares or Fractional Shares of Preferred Stock, par value
$1.00 per share; |
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Depositary Shares representing Shares of Preferred Stock;
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Shares of Common Stock, par value $.01 per share
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Warrants to Purchase Common Stock; |
Our common stock is traded on the New York Stock Exchange under the
symbol KIM. We will make applications to list any shares of common stock sold
pursuant to a supplement to this prospectus on the NYSE. We have not determined
whether we will list any other securities we may offer on any exchange or over-the-counter market. If we decide to seek
listing of any securities, the supplement to this prospectus will disclose the
exchange or market.
Our debt securities, preferred stock, depositary shares representing
shares of preferred stock, common stock and common stock warrants may be offered
separately, together or as units, in separate classes or series, in amounts, at
prices and on terms to be set forth in a supplement to this prospectus. When we
offer securities, we will provide specific terms of such securities in
supplements to this prospectus.
In addition, the specific terms may include limitations on direct or
beneficial ownership and restrictions on transfer of the securities offered by
this prospectus, in each case as may be appropriate to preserve our status as a
real estate investment trust, or REIT, for federal income tax purposes.
The securities offered by this prospectus may be offered directly,
through agents designated from time to time by us, or to or through underwriters
or dealers. If any agents or underwriters are involved in the sale of any of the
securities offered by this prospectus, their names, and any applicable purchase
price, fee, commission or discount arrangement between or among them, will be
set forth, or will be calculable from the information set forth, in the
applicable prospectus supplement. None of the securities offered by this
prospectus may be sold without delivery of the applicable prospectus supplement
describing the method and terms of the offering of those securities.
Each prospectus supplement will also contain information, where
applicable, about United States federal income tax considerations and any legend
or statement required by state law or the Securities and Exchange Commission.
Investing in our securities involves risks. See Risk Factors
beginning on page 5.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these securities or
determined if this prospectus is truthful or complete and any representation to
the contrary is a criminal offense.
The date of this Prospectus is May 8, 2006.
We have not authorized any dealer, salesman or other person to
give any information or to make any representation other than those contained or
incorporated by reference in this prospectus and the accompanying supplement to
this prospectus. You must not rely upon any information or representation not
contained or incorporated by reference in this prospectus or the accompanying
prospectus supplement. This prospectus and the accompanying supplement to this
prospectus do not constitute an offer to sell or the solicitation of an offer to
buy any securities other than the registered securities to which they relate,
nor do this prospectus and the accompanying supplement to this prospectus
constitute an offer to sell or the solicitation of an offer to buy securities in
any jurisdiction to any person to whom it is unlawful to make such offer or
solicitation in such jurisdiction. The information contained in this prospectus
and the supplement to this prospectus is accurate as of the dates on their
covers. When we deliver this prospectus or a supplement or make a sale pursuant
to this prospectus or a supplement, we are not implying that the information is
current as of the date of the delivery or sale.
TABLE OF
CONTENTS
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When used in this prospectus, the Company, we, us, or our
refers to Kimco Realty Corporation and its direct and indirect subsidiaries on a
consolidated basis.
ABOUT THIS
PROSPECTUS
This prospectus is part of an automatic shelf registration statement
that we filed with the Securities and Exchange Commission, or SEC, as a
well-known seasoned issuer as defined in Rule 405 under the Securities
Act of 1933, as amended, or the Securities Act. Under the automatic shelf
registration process, we may, over time, sell any combination of the securities
described in this prospectus or in any applicable prospectus supplement in one
or more offerings. This prospectus provides you with a general description of
the securities we may offer. As allowed by SEC rules, this prospectus does not
contain all the information you can find in the registration statement or the
exhibits to the registration statement. Each time we sell securities, we will
provide a prospectus supplement that will contain specific information about the
terms of that offering. A prospectus supplement may also add, update or change
information contained in this prospectus. You should read both this prospectus
and any prospectus supplement together with additional information described
under the next heading Where You Can Find More Information before considering
an investment in the securities offered by that prospectus supplement.
WHERE CAN
YOU FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the Securities and Exchange Commission. Our SEC filings
are available to the public over the Internet at the SECs web site at
http://www.sec.gov. You may also read and copy any document we file with the SEC
at the SECs public reference room at 100 F Street, N.E., Room 1580,
Washington, DC 20549.
You may also obtain copies of our SEC filings at prescribed rates by
writing to the Public Reference Section of the SEC at 100 F Street, N.E.,
Room 1580, Washington, DC 20549. Please call l-800-SEC-0330 for further
information on the operations at the public reference room. Our SEC filings are
also available at the offices of the New York Stock Exchange, 20 Broad
Street, New York, New York 10005.
Statements contained in this prospectus as to the contents of any
contract or other document are not necessarily complete, and in each instance
reference is made to the copy of that contract or other document filed as an
exhibit to the registration statement, each such statement being qualified in
all respects by that reference and the exhibits and schedules thereto. For
further information about us and the securities offered by this prospectus, you
should refer to the registration statement and such exhibits and schedules which
may be obtained from the SEC at its principal office in Washington, D.C.
upon payment of any fees prescribed by the SEC.
INCORPORATION OF CERTAIN DOCUMENTS
BY REFERENCE
The documents listed below have been filed by us under the Securities
Exchange Act of 1934, as amended (the Securities Exchange Act), with the SEC
and are incorporated by reference in this prospectus:
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Annual Report on Form 10-K for the year ended
December 31, 2005; |
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Current Reports on Form 8-K filed on January 12,
2006, February 3, 2006, February 13, 2006, March 10, 2006,
March 30, 2006, April 25, 2006 and May 8, 2006; |
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Definitive proxy statement filed on April 12,
2006; and |
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The description of the Class F Preferred Stock and
Depositary Shares contained in our Registration Statement on Form 8-A (File No. 001-10889), filed on June 3, 2003,
including any subsequently filed amendments and reports filed for the
purpose of updating the description. |
We are also incorporating by reference into this prospectus all
documents that we have filed or will file with the SEC as prescribed by
Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act since the
date of this
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prospectus and prior to the termination of the sale of the securities
offered by this prospectus and the accompanying prospectus supplement.
This means that important information about us appears or will appear
in these documents and will be regarded as appearing in this prospectus. To the
extent that information appearing in a document filed later is inconsistent with
prior information, the later statement will control and the prior information,
except as modified or superseded, will no longer be a part of this prospectus.
Copies of all documents which are incorporated by reference in this
prospectus and the applicable prospectus supplement (not including the exhibits
to such information, unless such exhibits are specifically incorporated by
reference) will be provided without charge to each person, including any
beneficial owner of the securities offered by this prospectus, to whom this
prospectus or the applicable prospectus supplement is delivered, upon written or
oral request. Requests should be directed to our secretary, 3333 New Hyde
Park Road, New Hyde Park, New York 11042-0020 (telephone number: (516) 869-9000). You may also obtain
copies of these filings, at no cost, by accessing our website at
http://www.kimcorealty.com; however, the information found on our website is not
considered part of this prospectus or any accompanying prospectus supplement.
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DISCLOSURE
REGARDING FORWARD-LOOKING STATEMENTS
This prospectus, including the documents that we incorporate by
reference, contains certain historical and forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act. We intend such forward-looking
statements to be covered by the safe harbor provisions for forward-looking
statements contained in the Private Securities Litigation Reform Act of 1995 and
include this statement for purposes of complying with these safe harbor
provisions. Forward-looking statements, which are based on certain assumptions
and describe our future plans, strategies and expectations, are generally
identifiable by use of the words believe, expect, intend, anticipate,
estimate, project or similar expressions. Our ability to predict results or
the actual effect of future plans or strategies is inherently uncertain. Factors
which may cause actual results to differ materially from current expectations
include, but are not limited to, (i) changes in general economic and local
real estate conditions, (ii) the inability of major tenants to continue
paying their rent obligations due to bankruptcy, insolvency or general downturn
in their business, (iii) financing risks, such as the inability to obtain
equity or debt financing on favorable terms, (iv) changes in governmental
laws and regulations (including changes to laws governing the taxation of
REITs), (v) the level and volatility of interest rates, (vi) the
availability of suitable acquisition opportunities and (vii) increases in
operating costs. The forward-looking statements included in this prospectus are
made only as of the date of this prospectus and we undertake no obligation to
publicly update these forward-looking statements to reflect new information,
future events or otherwise. In light of these risks, uncertainties and
assumptions, the forward-looking events might or might not occur. Accordingly,
there is no assurance that our expectations will be realized.
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THE
COMPANY
Overview
We began operations through a predecessor in 1966, and today are one
of the nations largest publicly-traded owners and operators of neighborhood and
community shopping centers (measured by gross leasable area, which we refer to
as GLA).
As of April 21, 2006, we owned interests in 1,117 properties,
totaling approximately 143.2 million square feet of GLA located in
45 states, Canada, Mexico and Puerto Rico.
Our ownership interests in real estate consist of our consolidated
portfolio and in portfolios in which we own an economic interest, such as Kimco
Income REIT, the RioCan Venture, Kimco Retail Opportunity Portfolio and other
properties or portfolios where we also retain management. We believe our
portfolio of neighborhood and community shopping center properties is the
largest (measured by GLA) currently held by any publicly-traded REIT.
We believe that we have operated, and we intend to continue to
operate, in such a manner to qualify as a REIT under the Internal Revenue Code
of 1986, as amended (the Code). We are self-administered and self-managed
through present management, which has owned and managed neighborhood and
community shopping centers for more than 35 years. We have not engaged, nor
do we expect to retain, any external advisors in connection with the operation
of our properties. Our executive officers are engaged in the day-to-day management and operation of our
real estate exclusively, and we administer nearly all operating functions for
our properties, including leasing, legal, construction, data processing,
maintenance, finance and accounting. Our executive offices are located at 3333
New Hyde Park Road, New Hyde Park, New York 11042-0020 and our telephone number is (516) 869-9000.
In order to maintain our qualification as a REIT for federal income
tax purposes, we are required to distribute at least 90% of our net taxable
income, excluding capital gains, each year. Dividends on any preferred stock
issued by us are included as distributions for this purpose. Historically, our
distributions have exceeded, and we expect that our distributions will continue
to exceed, our net taxable income each year. A portion of such distributions may
constitute a return of capital. As a result of the foregoing, our consolidated
net worth may decline. We, however, do not believe that consolidated
stockholders equity is a meaningful reflection of net real estate values.
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RISK
FACTORS
You should carefully consider the risks and uncertainties
described below and in our reports we file with the SEC under
Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act that are
incorporated by reference herein, as well as all of the information set forth in
this prospectus and any accompanying prospectus supplement before investing in
our securities.
Loss of our
tax status as a real estate investment trust would have significant adverse
consequences to us and the value of our securities.
We elected to be taxed as a REIT for federal income tax purposes
under the Code commencing with our taxable year beginning January 1, 1992.
We currently intend to operate so as to qualify as a REIT and believe that our
current organization and method of operation comply with the rules and
regulations promulgated under the Code to enable us to qualify as a REIT.
Qualification as a REIT involves the application of highly technical
and complex Code provisions for which there are only limited judicial and
administrative interpretations. The determination of various factual matters and
circumstances not entirely within our control may affect our ability to qualify
as a REIT. For example, in order to qualify as a REIT, at least 95% of our gross
income in any year must be derived from qualifying sources, and we must satisfy
a number of requirements regarding the composition of our assets. Also, we must
make distributions to stockholders aggregating annually at least 90% of our net
taxable income, excluding capital gains. In addition, new legislation,
regulations, administrative interpretations or court decisions could
significantly change the tax laws with respect to qualification as a REIT, the
federal income tax consequences of such qualification or the desirability of an
investment in a REIT relative to other investments. Although we believe that we
are organized and have operated in such a manner, we can give no assurance that
we have qualified or will continue to qualify as a REIT for tax purposes.
If we lose our REIT status, we will face serious tax consequences
that will substantially reduce the funds available to make payment of principal
and interest on the debt securities we issue and to pay dividends to our
stockholders. If we fail to qualify as a REIT:
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we would not be allowed a deduction for distributions to
stockholders in computing our taxable income and would be subject to
federal income tax at regular corporate rates; |
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we also could be subject to the federal alternative minimum
tax and possibly increased state and local taxes; and |
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unless we are entitled to relief under statutory
provisions, we could not elect to be subject to tax as a REIT for four
taxable years following the year during which we were disqualified.
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In addition, if we fail to qualify as a REIT, we would not be
required to make distributions to stockholders. As a result of all these
factors, our failure to qualify as a REIT also could impair our ability to
expand our business and raise capital, and would adversely affect the value of
our securities.
Adverse
market conditions and competition may impede our ability to generate sufficient
income to pay expenses and maintain properties.
The economic performance and value of our properties are subject to
all of the risks associated with owning and operating real estate including:
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changes in the national, regional and local economic
climate; |
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local conditions, including an oversupply of space in
properties like those that we own, or a reduction in demand for properties
like those that we own; |
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the attractiveness of our properties to tenants;
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the ability of tenants to pay rent; |
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competition from other available properties; |
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changes in market rental rates; |
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the need to periodically pay for costs to repair, renovate
and re-let space; |
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changes in operating costs, including costs for
maintenance, insurance and real estate taxes; |
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the fact that the expenses of owning and operating
properties are not necessarily reduced when circumstances such as market
factors and competition cause a reduction in income from the
properties; and |
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changes in laws and governmental regulations, including
those governing usage, zoning, the environment and taxes.
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Downturns
in the retailing industry likely will have a direct impact on our
performance.
Our properties consist primarily of community and neighborhood
shopping centers and other retail properties. Our performance therefore is
linked to economic conditions in the market for retail space generally. The
market for retail space has been or could be adversely affected by weakness in
the national, regional and local economies, the adverse financial condition of
some large retailing companies, the ongoing consolidation in the retail sector,
the excess amount of retail space in a number of markets, and increasing
consumer purchases through catalogues and the internet. To the extent that any
of these conditions occur, they are likely to impact market rents for retail
space.
Failure by
any anchor tenant with leases in multiple locations to make rental payments to
us, because of a deterioration of its financial condition or otherwise, could
impact our performance.
Our performance depends on our ability to collect rent from tenants.
At any time, our tenants may experience a downturn in their business that may
significantly weaken their financial condition. As a result, our tenants may
delay a number of lease commencements, decline to extend or renew leases upon
expiration, fail to make rental payments when due, close stores or declare
bankruptcy. Any of these actions could result in the termination of the tenants
leases and the loss of rental income attributable to the terminated leases. In
addition, lease terminations by an anchor tenant or a failure by that anchor
tenant to occupy the premises could result in lease terminations or reductions
in rent by other tenants in the same shopping centers under the terms of some
leases. In that event, we may be unable to re-lease the vacated space at
attractive rents or at all. The occurrence of any of the situations described
above, particularly if it involves a substantial tenant with leases in multiple
locations, could impact our performance.
We may be
unable to collect balances due from any tenants in bankruptcy.
We cannot assure you that any tenant that files for bankruptcy
protection will continue to pay us rent. A bankruptcy filing by or relating to
one of our tenants or a lease guarantor would bar all efforts by us to collect
pre-bankruptcy debts from the tenant or the lease guarantor, or their property,
unless we receive an order permitting us to do so from the bankruptcy court. A
tenant or lease guarantor bankruptcy could delay our efforts to collect past due
balances under the relevant leases, and could ultimately preclude collection of
these sums. If a lease is assumed by the tenant in bankruptcy, all
pre-bankruptcy balances due under the lease must be paid to us in full. However,
if a lease is rejected by a tenant in bankruptcy, we would have only a general
unsecured claim for damages. Any unsecured claim we hold may be paid only to the
extent that funds are available and only in the same percentage as is paid to
all other holders of unsecured claims, and there are restrictions under
bankruptcy laws which limit the amount of the claim we can make if a lease is
rejected. As a result, it is likely that we will recover substantially less than
the full value of any unsecured claims we hold.
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Real estate
property investments are illiquid, and therefore we may not be able to dispose
of properties when appropriate or on favorable terms.
Real estate property investments generally cannot be disposed of
quickly. In addition, the federal tax code imposes a penalty tax on a REITs
disposition of certain properties that are not applicable to other types of real
estate companies. Therefore, we may not be able to vary our portfolio in
response to economic or other conditions promptly or on favorable terms.
We do not
have exclusive control over our joint venture investments, so we are unable to
ensure that our objectives will be pursued.
We have invested in some cases as a co-venturer or partner in
properties, instead of owning directly. These investments involve risks not
present in a wholly owned ownership structure. In these investments, we do not
have exclusive control over the development, financing, leasing, management and
other aspects of these investments. As a result, the co-venturer or partner
might have interests or goals that are inconsistent with our interests or goals,
take action contrary to our interests or otherwise impede our objectives. The
coventurer or partner also might become insolvent or bankrupt.
Our
financial covenants may restrict our operating and acquisition
activities.
Our revolving credit facility and the indenture under which our
senior unsecured debt is issued contain certain financial and operating
covenants, including, among other things, certain coverage ratios, as well as
limitations on our ability to incur secured and unsecured debt, make dividend
payments, sell all or substantially all of our assets and engage in mergers and
consolidations and certain acquisitions. These covenants may restrict our
ability to pursue certain business initiatives or certain acquisition
transactions. In addition, failure to meet any of the financial covenants could
cause an event of default under and/or
accelerate some or all of our indebtedness, which would have a material adverse
effect on us.
We may be
subject to environmental regulations.
Under various federal, state, and local laws, ordinances and
regulations, we may be considered an owner or operator of real property and may
be responsible for paying for the disposal or treatment of hazardous or toxic
substances released on or in our property or disposed of by us, as well as
certain other potential costs which could relate to hazardous or toxic
substances (including governmental fines and injuries to persons and property).
This liability may be imposed whether or not we knew about, or were responsible
for, the presence of hazardous or toxic substances.
Our ability
to lease or develop properties is subject to competitive
pressures.
We face competition in the acquisition, development, operation and
sale of real property from individuals and businesses who own real estate,
fiduciary accounts and plans and other entities engaged in real estate
investment. Some of these competitors have greater financial resources than we
do. This results in competition for the acquisition of properties, for tenants
who lease or consider leasing space in our existing and subsequently acquired
properties and for other real estate investment opportunities.
Changes in
market conditions could adversely affect the market price of our publicly traded
securities.
As with other publicly traded securities, the market price of our
publicly traded securities depends on various market conditions, which may
change from time to time. Among the market conditions that may affect the market
price of our publicly traded securities are the following:
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the extent of institutional investor interest in the
Company; |
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the reputation of REITs generally and the reputation of
REITs with portfolios similar to ours; |
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the attractiveness of the securities of REITs in comparison
to securities issued by other entities (including securities issued by
other real estate companies); |
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our financial condition and performance; |
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the markets perception of our growth potential and
potential future cash dividends; |
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an increase in market interest rates, which may lead
prospective investors to demand a higher distribution rate in relation to
the price paid for our shares; and |
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general economic and financial market conditions.
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Anti-takeover Effect of
Restrictions on Ownership
For us to qualify as a REIT under the Code, not more than 50% in
value of our outstanding stock may be owned, actually or constructively, by five
or fewer individuals (as defined in the Code to include certain entities) during
the last half of a taxable year. Our stock also must be beneficially owned by
100 or more persons during at least 335 days of a taxable year of
12 months or during a proportionate part of a shorter taxable year. In
addition, rent from related party tenants (generally, a tenant of a REIT owned,
actually or constructively, 10% or more by the REIT, or a 10% owner of the REIT)
is not qualifying income for purposes of the income tests under the Code.
Subject to the exceptions specified in our charter, no holder may
own, or be deemed to own by virtue of the constructive ownership provisions of
the Code, more than 9.8% in value of the outstanding shares of our common stock
or any class or series of our preferred stock. Our charter also contains
restrictions relating to ownership of our shares which would cause our shares to
be beneficially owned by less than 100 persons, cause us to be closely held
within the meaning of the Code or otherwise result in our failure to qualify as
a REIT. See Description of Common Stock Restrictions on Ownership and
Description of Preferred Stock Restrictions on Ownership. These
ownership limits and other provisions restricting the ownership our common stock
and preferred stock could delay or prevent a transaction or a change in control
of the Company that might involve a premium price for the stock or otherwise be
in the best interest of the stockholders.
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USE OF
PROCEEDS
Unless otherwise described in the applicable prospectus supplement,
we intend to use the net proceeds from the sale of the securities offered by
this prospectus for general corporate purposes, which may include the
acquisition of neighborhood and community shopping centers as suitable
opportunities arise, the expansion and improvement of certain properties in our
portfolio, and the repayment or refinancing of indebtedness outstanding at that
time. The factors which we will consider in any refinancing will include the
amount and characteristics of any debt securities issued and may include, among
others, the impact of such refinancing on our interest coverage, debt-to-capital ratio, liquidity and earnings
per share. If we identify any specific use for the net proceeds from the sale of
securities, we will describe such use in the accompanying prospectus supplement.
RATIOS OF
EARNINGS TO FIXED CHARGES
All periods presented below have been adjusted to reflect the impact
of operating properties sold and classified as discontinued operations during
the year ended December 31, 2005 and for properties classified as held for
sale as of December 31, 2005, in accordance with SFAS No. 144,
Accounting for the Impairment or Disposal of Long-Lived Assets.
Our ratios of earnings to fixed charges for the years ended
December 31, 2005, 2004, 2003, 2002 and 2001 were 3.3, 3.4, 3.2, 3.4 and
3.3, respectively. Our ratios of earnings to combined fixed charges and
preferred stock dividend requirements for the years ended December 31,
2005, 2004, 2003, 2002 and 2001 were 3.0, 3.1, 2.8, 2.8 and 2.6, respectively.
For purposes of computing these ratios, earnings have been calculated
by adding fixed charges (excluding capitalized interest), amortization of
capitalized interest and distributed income of equity investees to pre-tax
income from continuing operations before adjustment for minority interests in
consolidated subsidiaries or income/loss from unconsolidated partnerships. Fixed
charges consist of interest costs, whether expensed or capitalized, the interest
component of rental expense, and amortization of debt discounts and issue costs,
whether expensed or capitalized.
DESCRIPTION
OF DEBT SECURITIES
Our unsecured senior debt securities are to be issued under an
indenture, dated as of September 1, 1993, as amended by the first
supplemental indenture, dated as of August 4, 1994, the second supplemental
indenture, dated as of April 7, 1995, and as further amended or
supplemented from time to time, between us and The Bank of New York (successor
by merger to IBJ Schroder Bank & Trust Company), as trustee. The
indenture has been filed as an exhibit to the registration statement of which
this prospectus is a part and is available for inspection at the corporate trust
office of the trustee at 101 Barclay Street, 8th Floor, New York, New York
10286 or as described above under Where You Can Find More Information. The
indenture is subject to, and governed by, the Trust Indenture Act of 1939,
as amended. The statements made hereunder relating to the indenture and the debt
securities to be issued thereunder are summaries of some of the provisions
thereof and do not purport to be complete and are subject to, and are qualified
in their entirety by reference to, all provisions of the indenture and the debt
securities. All section references appearing herein are to sections of the
indenture.
General
The debt securities will be our direct, unsecured obligations and
will rank equally with all of our other unsecured and unsubordinated
indebtedness. The indenture provides that the debt securities may be issued
without limit as to aggregate principal amount, in one or more series, in each
case as established from time to time in or pursuant to authority granted by a
resolution of our board of directors or as established in one or more indentures
supplemental to the indenture. All debt securities of one series need not be
issued at the same time and, unless otherwise provided, a series may be
reopened, without the consent of the holders of the debt securities of such
series, for issuances of additional debt securities of that series
(Section 301).
The indenture provides that there may be more than one trustee
thereunder, each with respect to one or
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more series of debt securities. Any trustee under the indenture may
resign or be removed with respect to one or more series of debt securities, and
a successor trustee may be appointed to act with respect to that series
(Section 608). In the event that two or more persons are acting as trustee
with respect to different series of debt securities, each trustee shall be a
trustee of a trust under the indenture separate and apart from the trust
administered by any other trustee (Section 609), and, except as otherwise
indicated herein, any action described herein to be taken by the trustee may be
taken by each trustee with respect to, and only with respect to, the one or more
series of debt securities for which it is trustee under the indenture.
For a detailed description of a specific series of debt securities,
you should consult the prospectus supplement for that series. The prospectus
supplement may contain any of the following information, where applicable:
(1) the title and series designation of those debt securities;
(2) the aggregate principal amount of those debt securities and
any limit on the aggregate principal amount;
(3) 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
those debt securities which is convertible into our common stock or our
preferred stock, or the method by which any portion shall be determined;
(4) if convertible, any applicable limitations on the ownership
or transferability of our common stock or our preferred stock into which those
debt securities are convertible which exist to preserve our status as a REIT;
(5) the date or dates, or the method for determining the date or
dates, on which the principal of those debt securities will be payable;
(6) the rate or rates (which may be fixed or variable), or the
method by which the rate or rates shall be determined, at which those debt
securities will bear interest, if any;
(7) the date or dates, or the method for determining the date or
dates, from which any interest will accrue, the interest payment dates on which
that interest will be payable, the regular record dates for the interest payment
dates, or the method by which that date shall be determined, the person to whom
that 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 (a) the principal of (and
premium, if any) and interest, if any, on those debt securities will be payable,
(b) those debt securities may be surrendered for conversion or registration
of transfer or exchange and (c) notices or demands to or upon us in respect
of those debt securities and the indenture may be served;
(9) the period or periods within which, the price or prices at
which, and the terms and conditions upon which those debt securities may be
redeemed, as a whole or in part, at our option, if we are to have that option;
(10) our obligation, if any, to redeem, repay or purchase those
debt securities pursuant to any sinking fund or analogous provision or at the
option of a holder of those debt securities and the period or periods within
which, the price or prices at which and the terms and conditions upon which
those debt securities will be redeemed, repaid or purchased, as a whole or in
part, pursuant to that obligation;
(11) if other than U.S. dollars, the currency or currencies
in which those debt securities are denominated and payable, which may be units
of two or more foreign currencies or a composite currency or currencies, and the
terms and conditions relating thereto;
10
(12) whether the amount of payments of principal of (and
premium, if any) or interest, if any, on those 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 those amounts
shall be determined;
(13) any additions to, modifications of or deletions from the
terms of those debt securities with respect to the events of default or
covenants set forth in the indenture;
(14) whether those debt securities will be issued in
certificated or book-entry form or both;
(15) whether those debt securities will be in registered or
bearer form and, if in registered form, their denominations if other than $1,000
and any integral multiple of $1,000 and, if in bearer form, their denominations
and the terms and conditions relating thereto;
(16) the applicability, if any, of the defeasance and covenant
defeasance provisions of article fourteen of the indenture;
(17) if those debt securities are to be issued upon the exercise
of debt warrants, the time, manner and place for those debt securities to be
authenticated and delivered;
(18) the terms, if any, upon which those debt securities may be
convertible into our common stock or our preferred stock and the terms and
conditions upon which that conversion will be effected, including, without
limitation, the initial conversion price or rate and the conversion period;
(19) whether and under what circumstances we will pay additional
amounts as contemplated in the indenture on those debt securities in respect of
any tax, assessment or governmental charge and, if so, whether we will have the
option to redeem those debt securities in lieu of making such payment; and
(20) any other terms of those debt securities not inconsistent
with the provisions of the indenture (Section 301).
The debt securities may provide for less than the entire principal
amount thereof to be payable upon declaration of acceleration of their maturity.
We refer to this type of debt securities as original issue discount securities.
Any material or applicable special U.S. federal income tax, accounting and
other considerations applicable to original issue discount securities will be
described in the applicable prospectus supplement.
Except as described under Certain Covenants Limitations on
Incurrence of Debt and under Merger, Consolidation or Sale, the indenture
does not contain any other provisions that would limit our ability to incur
indebtedness or to substantially reduce or eliminate our assets, which may have
an adverse effect on our ability to service our indebtedness (including the debt
securities) or that would afford holders of the debt securities protection in
the event of:
(1) a highly leveraged or similar transaction involving us, our
management, or any affiliate of any of those parties,
(2) a change of control, or
(3) a reorganization, restructuring, merger or similar
transaction involving us that may adversely affect the holders of our debt
securities.
Furthermore, subject to the limitations set forth under Merger,
Consolidation or Sale, we may, in the future, enter into certain transactions,
such as the sale of all or substantially all of our assets or a merger or
consolidation involving us, that would increase the amount of our indebtedness
or substantially reduce or eliminate
11
our assets, which may have an adverse effect on our ability to
service our indebtedness, including the debt securities. In addition,
restrictions on ownership and transfers of our common stock and our preferred
stock are designed to preserve our status as a REIT and, therefore, may act to
prevent or hinder a change of control. You should refer to the applicable
prospectus supplement for information with respect to any deletions from,
modifications of or additions to the events of default or our covenants that are
described below, including any addition of a covenant or other provision
providing event risk or similar protection.
A significant number of our properties are owned through our
subsidiaries. Therefore, our rights and those of our creditors, including
holders of debt securities, to participate in the assets of those subsidiaries
upon the liquidation or recapitalization of those subsidiaries or otherwise will
be subject to the prior claims of those subsidiaries respective creditors
(except to the extent that our claims as a creditor may be recognized).
Denominations,
Interest, Registration and Transfer
Unless otherwise described in the applicable prospectus supplement,
the debt securities of any series will be issuable in denominations of $1,000
and integral multiples of $1,000 (Section 302).
Unless otherwise specified in the applicable prospectus supplement,
the principal of (and premium, if any) and interest on any series of debt
securities will be payable at the corporate trust office of the trustee,
initially located at 101 Barclay Street, 8th Floor, New York, New York
10286, provided that, at our option, payment of interest may be made by check
mailed to the address of the person entitled thereto as it appears in the
security register or by wire transfer of funds to that person at an account
maintained within the United States (Sections 301, 305, 306, 307 and
1002).
Any interest not punctually paid or duly provided for on any interest
payment date with respect to a debt security will forthwith cease to be payable
to the holder of that debt security on the applicable regular record date and
may either be paid to the person in whose name that debt security is registered
at the close of business on a special record date for the payment of the
interest not punctually paid or duly provided for to be fixed by the trustee,
notice whereof shall be given to the holder of that debt security not less than
10 days prior to the special record date, or may be paid at any time in any
other lawful manner, all as more completely described in the indenture.
Subject to certain limitations imposed upon debt securities issued in
book-entry form, the debt securities of any series will be exchangeable for
other debt securities of the same series and of a like aggregate principal
amount and tenor of different authorized denominations upon surrender of those
debt securities at the corporate trust office of the trustee. In addition,
subject to certain limitations imposed upon debt securities issued in book-entry
form, the debt securities of any series may be surrendered for conversion or
registration of transfer or exchange thereof at the corporate trust office of
the trustee. Every debt security surrendered for conversion, registration of
transfer or exchange shall be duly endorsed or accompanied by a written
instrument of transfer. No service charge will be imposed for any registration
of transfer or exchange of any debt securities, but we may require payment of a
sum sufficient to cover any tax or other governmental charge payable in
connection with the registration of transfer or exchange of debt securities
(Section 305). If the applicable prospectus supplement refers to any
transfer agent (in addition to the trustee) initially designated by us with
respect to any series of debt securities, we may at any time rescind the
designation of that transfer agent or approve a change in the location through
which that transfer agent acts, except that we will be required to maintain a
transfer agent in each place of payment for that series. We may at any time
designate additional transfer agents with respect to any series of debt
securities (Section 1002).
Neither we nor any trustee shall be required to:
(1) 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;
(2) 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
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(3) issue, register the transfer of or exchange any debt
security which has been surrendered for repayment at the option of the holder of
that debt security, except the portion, if any, of that debt security not to be
so repaid (Section 305).
Merger,
Consolidation or Sale
We may consolidate with, or sell, lease or convey all or
substantially all of our assets to, or merge with or into, any other
corporation, provided that:
(1) either we shall be the continuing corporation, or the
successor corporation (if other than us) formed by or resulting from that
consolidation or merger or which shall have received the transfer of our 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 the indenture;
(2) immediately after giving effect to that transaction and
treating any indebtedness which becomes an obligation of ours or of any of our
subsidiaries as a result thereof as having been incurred by us or that
subsidiary at the time of that transaction, no event of default under the
indenture, and no event which, after notice or the lapse of time, or both, would
become an event of default, shall have occurred and be continuing; and
(3) an officers certificate and legal opinion covering the
above conditions shall be delivered to the trustee (Sections 801 and 803).
Certain
Covenants
Limitations on Incurrence of Debt. We will not, and
will not permit any of our subsidiaries to, incur any Debt (as defined below)
if, immediately after giving effect to the incurrence of that additional Debt,
the aggregate principal amount of all outstanding Debt of ours and of our
subsidiaries on a consolidated basis determined in accordance with generally
accepted accounting principles is greater than 65% of the sum of:
(1) our Undepreciated Real Estate Assets (as defined below) as
of the end of the calendar quarter covered in our annual report on Form 10-K or quarterly report on Form 10-Q, as the case may be, most
recently filed with the SEC (or, if that filing is not permitted under the
Securities Exchange Act, with the trustee) prior to the incurrence of that
additional Debt; and
(2) the purchase price of any real estate assets acquired by us
or any of our subsidiaries since the end of that calendar quarter, including
those obtained in connection with the incurrence of that additional Debt
(Section 1004).
In addition to the foregoing limitation on the incurrence of Debt, we
will not, and will not permit any of our subsidiaries to, incur any Debt secured
by any mortgage, lien, charge, pledge, encumbrance or security interest of any
kind upon any of our property or the property of any of our subsidiaries if,
immediately after giving effect to the incurrence of that additional Debt, the
aggregate principal amount of all of our outstanding Debt and the outstanding
Debt of our subsidiaries on a consolidated basis which is secured by any
mortgage, lien, charge, pledge, encumbrance or security interest on our property
or the property of any of our subsidiaries is greater than 40% of the sum of:
(1) our Undepreciated Real Estate Assets as of the end of the
calendar quarter covered in our annual report on Form 10-K or quarterly report on Form 10-Q, as the case may be, most
recently filed with the SEC (or, if such filing is not permitted under the
Securities Exchange Act, with the trustee) prior to the incurrence of that
additional Debt; and
13
(2) the purchase price of any real estate assets acquired by us
or any of our subsidiaries since the end of that calendar quarter, including
those obtained in connection with the incurrence of that additional Debt
(Section 1004).
In addition to the foregoing limitations on the incurrence of Debt,
we will not, and will not permit any of our subsidiaries to, incur any Debt if
Consolidated Income Available for Debt Service (as defined below) for any 12
consecutive calendar months within the 15 calendar months immediately preceding
the date on which that additional Debt is to be incurred shall have been less
than 1.5 times the Maximum Annual Service Charge (as defined below) on our Debt
and the Debt of all of our subsidiaries to be outstanding immediately after the
incurring of that additional Debt (Section 1004).
Restrictions on Dividends and Other
Distributions. We will not, in respect of any shares of any class
of our stock:
(1) declare or pay any dividends (other than dividends payable
in the form of our stock) on our stock;
(2) apply any of our property or assets to the purchase,
redemption or other acquisition or retirement of our stock;
(3) set apart any sum for the purchase, redemption or other
acquisition or retirement of our stock; or
(4) make any other distribution, by reduction of capital or
otherwise if, immediately after that declaration or other action referred to
above, the aggregate of all those declarations and other actions since the date
on which the indenture was originally executed shall exceed the sum of:
(a) Funds from Operations (as defined below) from June 30,
1993 until the end of the calendar quarter covered in our annual report on Form 10-K or quarterly report on Form 10-Q, as the case may be, most
recently filed with the SEC (or, if that filing is not permitted under the
Securities Exchange Act, with the trustee) prior to that declaration or other
action; and
(b) $26,000,000; provided, however, that the foregoing
limitation shall not apply to any declaration or other action referred to above
which is necessary to maintain our status as a REIT under the Code if the
aggregate principal amount of all our outstanding Debt and the outstanding Debt
of our subsidiaries at that time is less than 65% of our Undepreciated Real
Estate Assets as of the end of the calendar quarter covered in our annual report
on Form 10-K or quarterly report
on Form 10-Q, as the case may be,
most recently filed with the SEC (or, if that filing is not permitted under the
Securities Exchange Act, with the trustee) prior to that declaration or other
action (Section 1005).
Notwithstanding the foregoing, we will not be prohibited from making
the payment of any dividend within 30 days of the declaration of that
dividend if at the date of declaration that payment would have complied with the
provisions of the immediately preceding paragraph (Section 1005).
Existence. Except as permitted under Merger,
Consolidation or Sale, we will do or cause to be done all things necessary to
preserve and keep in full force and effect our corporate existence, rights
(charter and statutory) and franchises; provided, however, that we will not be
required to preserve any right or franchise if we determine that the
preservation of that right or franchise is no longer desirable in the conduct of
our business and that the loss of that right or franchise is not disadvantageous
in any material respect to the holders of the debt securities
(Section 1006).
Maintenance of Properties. We will cause all of our
properties used or useful in the conduct of our business or the business of any
of our subsidiaries 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
to those properties, all as in our judgment may be necessary so that the
14
business carried on in connection with those properties may be
properly and advantageously conducted at all times; provided, however, that we
and our subsidiaries will not be prevented from selling or otherwise disposing
for value our respective properties in the ordinary course of business
(Section 1007).
Insurance. We will, and will cause each of our
subsidiaries to, keep all of our insurable properties insured against loss or
damage at least in an amount equal to their then full insurable value with
insurers of recognized responsibility and having a rating of at least A: VIII in
Bests Key Rating Guide (Section 1008).
Payment of Taxes and Other Claims. We will pay or
discharge or cause to be paid or discharged, before the same shall become
delinquent,
(1) all taxes, assessments and governmental charges levied or
imposed upon us or any of our subsidiaries or upon our income, profits or
property or the income, profits or property of any of our subsidiaries, and
(2) all lawful claims for labor, materials and supplies which,
if unpaid, might by law become a lien upon our property or the property of any
of our subsidiaries; provided, however, that we will not be required to pay or
discharge or cause to be paid or discharged any tax, assessment, charge or claim
whose amount, applicability or validity is being contested in good faith by
appropriate proceedings (Section 1009).
Provision of Financial Information. Whether or not
we are subject to Section 13 or 15(d) of the Securities Exchange Act, we
will, to the extent permitted under the Securities Exchange Act, file with the
SEC the annual reports, quarterly reports and other documents which we would
have been required to file with the SEC pursuant to Section 13 or 15(d) of
the Securities Exchange Act if we were so subject, those documents to be filed
with the SEC on or prior to the respective dates by which we would have been
required so to file those documents if we were so subject. We will also in any
event:
(1) within 15 days of each date by which we would have been
required to file those documents with the SEC pursuant to Section 13 or
15(d) of the Securities Exchange Act:
(a) transmit by mail to all holders of debt securities, as their
names and addresses appear in the security register, without cost to the holders
of debt securities, copies of the annual reports and quarterly reports which we
would have been required to file with the SEC pursuant to Section 13 or
15(d) of the Securities Exchange Act if we were subject to those
Sections, and
(b) file with the trustee copies of the annual reports,
quarterly reports and other documents which we would have been required to file
with the SEC pursuant to Section 13 or 15(d) of the Securities Exchange Act
if we were subject to those Sections, and
(2) if filing those documents by us with the SEC is not
permitted under the Securities Exchange Act, promptly upon written request and
payment of the reasonable cost of duplication and delivery, supply copies of
those documents to any prospective holder of debt securities
(Section 1010).
Maintenance of Unencumbered Total Asset Value. We
will at all times maintain an Unencumbered Total Asset Value in an amount of not
less than one hundred percent (100%) of the aggregate principal amount of all
our outstanding Debt and the outstanding Debt of our subsidiaries that is
unsecured (Section 1014).
15
Definitions
Used for the Debt Securities
As used in the Indenture and the descriptions thereof herein,
Consolidated Income Available for Debt Service for any
period means our Consolidated Net Income (as defined below) and the Consolidated
Net Income of our subsidiaries plus amounts which have been deducted for:
(1) interest on our Debt and interest on the Debt of our
subsidiaries,
(2) provision for our taxes and the taxes of our subsidiaries
based on income,
(3) amortization of debt discount,
(4) property depreciation and amortization, and
(5) the effect of any noncash charge resulting from a change in
accounting principles in determining Consolidated Net Income for that period.
Consolidated Net Income for any period means the amount of
our consolidated net income (or loss) and the consolidated net income (or loss)
of our subsidiaries for that period determined on a consolidated basis in
accordance with generally accepted accounting principles.
Debt of ours or any of our subsidiaries means any
indebtedness of ours or any of our subsidiaries, whether or not contingent, in
respect of:
(1) borrowed money or evidenced by bonds, notes, debentures or
similar instruments,
(2) indebtedness secured by any mortgage, pledge, lien, charge,
encumbrance or any security interest existing on property owned by us or any of
our subsidiaries,
(3) letters of credit or amounts representing the balance
deferred and unpaid of the purchase price of any property except any balance
that constitutes an accrued expense or trade payable, or
(4) any lease of property by us or any of our subsidiaries as
lessee which is reflected on our consolidated balance sheet as a capitalized
lease in accordance with generally accepted accounting principles,
in the case of items of indebtedness under (1) through
(3) above to the extent that those items (other than letters of credit)
would appear as a liability on our consolidated balance sheet in accordance with
generally accepted accounting principles, and also includes, to the extent not
otherwise included, any obligation by us or any of our subsidiaries to be liable
for, or to pay, as obligor, guarantor or otherwise (other than for purposes of
collection in the ordinary course of business), indebtedness of another person
(other than us or any of our subsidiaries) (it being understood that Debt shall
be deemed to be incurred by us or any of our subsidiaries whenever we or that
subsidiary shall create, assume, guarantee or otherwise become liable in respect
thereof).
Funds from Operations for any period means our Consolidated
Net Income and the Consolidated Net Income of our subsidiaries for that period
without giving effect to depreciation and amortization, gains or losses from
extraordinary items, gains or losses on sales of real estate, gains or losses on
investments in marketable securities and any provision/benefit for income taxes
for that period, plus funds from operations of unconsolidated joint ventures,
all determined on a consistent basis for that period.
Maximum Annual Service Charge as of any date means the
maximum amount which may become payable in any period of 12 consecutive calendar
months from that date for interest on, and required amortization of, Debt. The
amount payable for amortization shall include the amount of any sinking fund or
other analogous fund
16
for the retirement of Debt and the amount payable on account of
principal on any Debt which matures serially other than at the final maturity
date of that Debt.
Total Assets as of any date means the sum of (1) our
Undepreciated Real Estate Assets and (2) all our other assets determined in
accordance with generally accepted accounting principles (but excluding goodwill
and amortized debt costs).
Undepreciated Real Estate Assets as of any date means the
amount of our real estate assets and the real estate assets of our subsidiaries
on that date, before depreciation and amortization determined on a consolidated
basis in accordance with generally accepted accounting principles.
Unencumbered Total Asset Value as of any date means the sum
of our Total Assets which are unencumbered by any mortgage, lien, charge, pledge
or security interest that secures the payment of any obligations under any Debt.
Events of
Default, Notice and Waiver
The indenture provides that the following events are events of
default with respect to any series of debt securities issued thereunder:
(1) default for 30 days in the payment of any installment
of interest on any debt security of that series;
(2) default in the payment of the principal of (or premium, if
any, on) any debt security of that series at its maturity;
(3) default in making any sinking fund payment as required for
any debt security of that series;
(4) default in the performance of any of our other covenants
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 that
series), continued for 60 days after written notice as provided in the
indenture;
(5) default in the payment of an aggregate principal amount
exceeding $10,000,000 of any evidence of our indebtedness or any mortgage,
indenture or other instrument under which indebtedness is issued or by which
that indebtedness is secured, that default having occurred after the expiration
of any applicable grace period and having resulted in the acceleration of the
maturity of that indebtedness, but only if that indebtedness is not discharged
or that acceleration is not rescinded or annulled;
(6) certain events of bankruptcy, insolvency or reorganization,
or court appointment of a receiver, liquidator or trustee of ours or any of our
significant subsidiaries (as defined in Regulation S-X promulgated under the
Securities Act) or either of our properties; and
(7) any other event of default provided with respect to a
particular series of debt securities (Section 501).
If an event of default under the indenture with respect to debt
securities of any series at the time outstanding occurs and is continuing, then
in all of those cases the trustee or the holders of not less than 25% in
principal amount of the outstanding debt securities of that series may declare
the principal amount (or, if the debt securities of that series are original
issue discount securities or indexed securities, that portion of the principal
amount as may be specified in the terms thereof) of all of the debt securities
of that series to be due and payable immediately by written notice thereof to us
(and to the trustee if given by the holders of debt securities). However, at any
time after a declaration of acceleration with respect to debt securities of that
series (or of all debt securities then outstanding under the indenture, as the
case may be) has been made, but before a judgment or decree for payment of the
money due has been obtained by the trustee, the holders of not less than a
majority in principal
17
amount of outstanding debt securities of that series (or of all debt
securities then outstanding under the indenture, as the case may be) may rescind
and annul that declaration and its consequences if:
(1) we shall have deposited with the trustee all required
payments of the principal of (and premium, if any) and interest on the debt
securities of that series (or of all debt securities then outstanding under the
indenture, as the case may be), plus certain fees, expenses, disbursements and
advances of the trustee, and
(2) all events of default, other than the non-payment of
accelerated principal (or specified portion thereof), with respect to debt
securities of that series (or of all debt securities then outstanding under the
indenture, as the case may be) have been cured or waived as provided in the
indenture (Section 502). The indenture also provides that the holders of
not less than a majority in principal amount of the outstanding debt securities
of any series (or of all debt securities then outstanding under the indenture,
as the case may be) may waive any past default with respect to that series and
its consequences, except a default:
(a) in the payment of the principal of (or premium, if any) or
interest on any debt security of that series, or
(b) in respect of a covenant or provision contained in the
indenture that cannot be modified or amended without the consent of the holder
of each outstanding debt security affected thereby (Section 513).
The trustee is required to give notice to the holders of debt
securities within 90 days of a default under the indenture; provided,
however, that the trustee may withhold notice to the holders of any series of
debt securities of any default with respect to that series (except a default in
the payment of the principal of (or premium, if any) or interest on any debt
security of that series or in the payment of any sinking fund installment in
respect of any debt security of that series) if the responsible officers of the
trustee consider that withholding to be in the interest of those holders of debt
securities (Section 601).
The indenture provides that no holders of debt securities of any
series may institute any proceedings, judicial or otherwise, with respect to the
indenture or for any remedy thereunder, except in the case of failure of the
trustee, for 60 days, to act after it has received a written request to
institute proceedings in respect of an event of default from the holders of not
less than 25% in principal amount of the outstanding debt securities of that
series, as well as an offer of indemnity reasonably satisfactory to it
(Section 507). This provision will not prevent, however, any holder of debt
securities from instituting suit for the enforcement of payment of the principal
of (and premium, if any) and interest on those debt securities at the respective
due dates thereof (Section 508).
Subject to provisions in the indenture relating to its duties in case
of default, the trustee is under no obligation to exercise any of its rights or
powers under the indenture at the request or direction of any holders of any
series of debt securities then outstanding under the indenture, unless those
holders shall have offered to the trustee reasonable security or indemnity
satisfactory to it (Section 602). The holders of not less than a majority
in principal amount of the outstanding debt securities of any series (or of all
debt securities then outstanding under the indenture, as the case may be) shall
have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the trustee, or of exercising any trust or power
conferred upon the trustee. However, the trustee may refuse to follow any
direction which is in conflict with any law or the indenture, which may involve
the trustee in personal liability or which may be unduly prejudicial to the
holders of debt securities of those series not joining therein
(Section 512).
Within 120 days after the close of each fiscal year, we must
deliver to the trustee a certificate, signed by one of several specified
officers, stating whether or not that officer has knowledge of any default under
the indenture and, if so, specifying each of those defaults and the nature and
status thereof (Section 1011).
18
Modification
Modifications and amendments of the indenture and debt securities may
be made only with the consent of the holders of not less than a majority in
principal amount of all outstanding debt securities which are affected by such
modification or amendment; provided, however, that no modification or amendment
may, without the consent of the holder of each of the debt securities affected
thereby,
(1) change the stated maturity of the principal of, or any
installment of interest (or premium, if any) on, any debt security;
(2) reduce the principal amount of, or the rate or amount of
interest on, or any premium payable on redemption of, any 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 debt security;
(3) change the place of payment, or the coin or currency, for
payment of principal of (or premium, if any) or interest on any debt security;
(4) impair the right to institute suit for the enforcement of
any payment on or with respect to any debt security;
(5) reduce the above-stated percentage of outstanding debt
securities of any series necessary to modify or amend the indenture, to waive
compliance with certain provisions thereof or certain defaults and consequences
thereunder or to reduce the quorum or voting requirements set forth in the
indenture; or
(6) 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 that action or to provide
that certain other provisions may not be modified or waived without the consent
of the holder of that debt security (Section 902).
The holders of not less than a majority in principal amount of
outstanding debt securities have the right to waive compliance by us with some
of the covenants in the indenture (Section 1013).
Modifications and amendments of the indenture may be made by us and
the trustee without the consent of any holder of debt securities for any of the
following purposes:
(1) to evidence the succession of another person to us as
obligor under the indenture;
(2) to add to our covenants for the benefit of the holders of
all or any series of debt securities or to surrender any right or power
conferred upon us in the indenture;
(3) to add events of default for the benefit of the holders of
all or any series of debt securities;
(4) to add or change any provisions of the indenture to
facilitate the issuance of, or to liberalize some of the terms of, debt
securities in bearer form, or to permit or facilitate the issuance of debt
securities in uncertificated form, provided that such action shall not adversely
affect the interests of the holders of the debt securities of any series in any
material respect;
(5) to change or eliminate any provisions of the indenture,
provided that any of those changes or elimination shall become effective only
when there are no debt securities outstanding of any series created prior
thereto which are entitled to the benefit of that provision;
(6) to secure the debt securities;
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(7) to establish the form or terms of debt securities of any
series, including the provisions and procedures, if applicable, for the
conversion of those debt securities into our common stock or our preferred
stock;
(8) to provide for the acceptance of appointment by a successor
trustee or facilitate the administration of the trusts under the indenture by
more than one trustee;
(9) to cure any ambiguity, defect or inconsistency in the
indenture, provided that such action shall not adversely affect the interests of
the holders of debt securities of any series in any material respect; or
(10) to supplement any of the provisions of the indenture to the
extent necessary to permit or facilitate defeasance and discharge of any series
of those debt securities, provided that such action shall not adversely affect
the interests of the holders of the debt securities of any series in any
material respect (Section 901).
The indenture provides that in determining whether the holders of the
requisite principal amount of outstanding debt securities of a series have given
any request, demand, authorization, direction, notice, consent or waiver
thereunder or whether a quorum is present at a meeting of holders of debt
securities,
(1) 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 that determination upon
declaration of acceleration of the maturity thereof,
(2) the principal amount of a debt security denominated in a
foreign currency that shall be deemed outstanding shall be the U.S. Dollar
equivalent, determined on the issue date for that debt security, of the
principal amount (or, in the case of an original issue discount security, the
U.S. Dollar equivalent on the issue date of that debt security of the
amount determined as provided in (1) above),
(3) the principal amount of an indexed security that shall be
deemed outstanding shall be the principal face amount of that indexed security
at original issuance, unless otherwise provided with respect to that indexed
security pursuant to Section 301 of the indenture, and
(4) debt securities owned by us or any other obligor upon the
debt securities or any of our affiliates or of that other obligor shall be
disregarded (Section 101).
The indenture contains provisions for convening meetings of the
holders of debt securities of a series (Section 1501). A meeting may be
called at any time by the trustee, and also, upon request, by us or the holders
of at least 10% in principal amount of the outstanding debt securities of that
series, in any of those cases upon notice given as provided in the indenture
(Section 1502). Except for any consent that must be given by the holder of
each debt security affected by certain modifications and amendments of the
indenture, any resolution presented at a meeting or adjourned meeting duly
reconvened at which a quorum is present may be adopted by the affirmative vote
of the holders of a majority in principal amount of the outstanding debt
securities of that series; provided, however, that, except as referred to above,
any resolution with respect to any request, demand, authorization, direction,
notice, consent, waiver or other action that may be made, given or taken by the
holders of a specified percentage, which is less than a majority, in principal
amount of the outstanding debt securities of a series may be adopted at a
meeting or adjourned meeting duly reconvened at which a quorum is present by the
affirmative vote of the holders of that specified percentage in principal amount
of the outstanding debt securities of that series. Any resolution passed or
decision taken at any meeting of holders of debt securities of any series duly
held in accordance with the indenture will be binding on all holders of debt
securities of that series. The quorum at any meeting called to adopt a
resolution, and at any reconvened meeting, will be persons holding or
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 that
meeting with respect to a consent or waiver which may be given by the holders of
not less than a specified percentage in principal
20
amount of the outstanding debt securities of a series, the persons
holding or representing that specified percentage in principal amount of the
outstanding debt securities of that series will constitute a quorum
(Section 1504).
Notwithstanding the foregoing provisions, if any action is to be
taken at a meeting of holders of debt securities of any series with respect to
any request, demand, authorization, direction, notice, consent, waiver or other
action that the indenture expressly provides may be made, given or taken by the
holders of a specified percentage in principal amount of all outstanding debt
securities affected thereby, or of the holders of that series and one or more
additional series:
(1) there shall be no minimum quorum requirement for that
meeting, and
(2) the principal amount of the outstanding debt securities of
that series that vote in favor of that request, demand, authorization,
direction, notice, consent, waiver or other action shall be taken into account
in determining whether that request, demand, authorization, direction, notice,
consent, waiver or other action has been made, given or taken under the
indenture (Section 1504).
Discharge,
Defeasance and Covenant Defeasance
We may discharge certain obligations to holders of any series of debt
securities that have not already been delivered to the 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 trustee, in trust, funds in the currency or currencies,
currency unit or units or composite currency or currencies in which those debt
securities are payable in an amount sufficient to pay the entire indebtedness on
those debt securities in respect of principal (and premium, if any) and interest
to the date of that deposit (if those debt securities have become due and
payable) or to the stated maturity or redemption date, as the case may be
(Section 401).
The indenture provides that, if the provisions of article fourteen of
the indenture are made applicable to the debt securities of or within any series
pursuant to Section 301 of the indenture, we may elect either:
(1) to defease and be discharged from any and all obligations
with respect to those 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 those debt
securities and the obligations to register the transfer or exchange of those
debt securities, to replace temporary or mutilated, destroyed, lost or stolen
debt securities, to maintain an office or agency in respect of those debt
securities and to hold moneys for payment in trust) (defeasance)
(Section 1402); or
(2) to be released from its obligations with respect to those
debt securities under Sections 1004 to 1010, inclusive, and
Section 1014 of the indenture (being the restrictions described under
Certain Covenants) or, if provided pursuant to Section 301 of the
indenture, its obligations with respect to any other covenant, and any omission
to comply with those obligations shall not constitute a default or an event of
default with respect to those debt securities (covenant defeasance)
(Section 1403),
in either case upon the irrevocable deposit by us with the trustee,
in trust, of an amount, in the currency or currencies, currency unit or units or
composite currency or currencies in which those debt securities are payable at
stated maturity, or Government Obligations (as defined below), or both,
applicable to those 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
those debt securities, and any mandatory sinking fund or analogous payments
thereon, on the scheduled due dates therefor.
That type of trust may only be established if, among other things, we
have delivered to the trustee an opinion of counsel to the effect that the
holders of those debt securities will not recognize income, gain or loss for
U.S. federal income tax purposes as a result of that 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
that defeasance or covenant defeasance had not occurred, and that opinion of
counsel, in the case of defeasance,
21
must refer to and be based upon a ruling of the Internal Revenue
Service or a change in applicable U.S. federal income tax law occurring
after the date of the indenture (Section 1404).
Government Obligations means securities which are:
(1) direct obligations of the United States of America or the
government which issued the foreign currency in which the debt securities of a
particular series are payable, for the payment of which its full faith and
credit is pledged, or
(2) obligations of a person controlled or supervised by and
acting as an agency or instrumentality of the United States of America or that
government which issued the foreign currency in which the debt securities of
that series are payable, the payment of which is unconditionally guaranteed as a
full faith and credit obligation by the United States of America or that other
government,
which, in either case, are not callable or redeemable at the option
of the issuer thereof, and shall also include a depository receipt issued by a
bank or trust company as custodian with respect to that Government Obligation or
a specific payment of interest on or principal of that Government Obligation
held by the custodian for the account of the holder of a depository receipt,
provided that (except as required by law) the custodian is not authorized to
make any deduction from the amount payable to the holder of the depository
receipt from any amount received by the custodian in respect of the Government
Obligation or the specific payment of interest on or principal of the Government
Obligation evidenced by the depository receipt (Section 101).
Unless otherwise provided in the applicable prospectus supplement, if
after we have deposited funds or Government Obligations or both to effect
defeasance or covenant defeasance with respect to debt securities of any series,
(1) the holder of a debt security of that series is entitled to,
and does, elect pursuant to Section 301 of the indenture or the terms of
that debt security to receive payment in a currency, currency unit or composite
currency other than that in which the deposit has been made in respect of that
debt security, or
(2) a Conversion Event (as defined below) occurs in respect of
the currency, currency unit or composite currency in which the deposit has been
made,
then, the indebtedness represented by that debt security shall be
deemed to have been, and will be, fully discharged and satisfied through the
payment of the principal of (and premium, if any) and interest on that debt
security as they become due out of the proceeds yielded by converting the amount
so deposited in respect of that debt security into the currency, currency unit
or composite currency in which that debt security becomes payable as a result of
that election or cessation of usage based on the applicable market exchange rate
(Section 1405). Conversion Event means the cessation of use of:
(1) a currency, currency unit or composite currency both by the
government of the country which issued that currency and for the settlement of
transactions by a central bank or other public institutions of or within the
international banking community,
(2) the European Currency Unit, or ECU, both within the European
Monetary System and for the settlement of transactions by public institutions of
or within the European Communities, or
(3) any currency unit or composite currency other than the ECU
for the purposes for which it was established.
Unless otherwise provided in the applicable prospectus supplement,
all payments of principal of (and premium, if any) and interest on any debt
security that is payable in a foreign currency that ceases to be used by its
government of issuance shall be made in U.S. Dollars (Section 101).
22
In the event we effect covenant defeasance with respect to any debt
securities and those 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 (4) under Events of Default, Notice and Waiver with respect to
Sections 1004 to 1010, inclusive, and Section 1014 of the indenture
(which Sections would no longer be applicable to those debt securities) or
described in clause (7) 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 those
debt securities are payable, and Government Obligations on deposit with the
trustee, will be sufficient to pay amounts due on those debt securities at the
time of their stated maturity but may not be sufficient to pay amounts due on
those debt securities at the time of the acceleration resulting from that event
of default. However, we would remain liable to make payment of those amounts due
at the time of acceleration.
The applicable prospectus supplement may further describe the
provisions, if any, permitting that defeasance or covenant defeasance, including
any modifications to the provisions described above, with respect to the debt
securities of or within a particular series.
Conversion
Rights
The terms and conditions, if any, upon which the debt securities are
convertible into other debt securities, our common stock or our preferred stock
will be set forth in the applicable prospectus supplement relating thereto.
Those terms will include whether those debt securities are convertible into
other debt securities, our common stock or our preferred stock, the conversion
price (or manner of calculation thereof), the conversion period, provisions as
to whether conversion will be at our option or the option of the holders of debt
securities, the events requiring an adjustment of the conversion price and
provisions affecting conversion in the event of the redemption of those debt
securities.
Global
Securities
The debt securities of a series may be issued in whole or in part in
the form of one or more global securities that will be deposited with, or on
behalf of, a depositary identified in the applicable prospectus supplement
relating to that 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 that series.
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DESCRIPTION
OF COMMON STOCK
We have the authority to issue 300,000,000 shares of common
stock, par value $.01 per share, and 153,000,000 shares of excess
stock, par value $.01 per share. At March 31, 2006, we had outstanding
240,448,614 shares of common stock and no shares of excess stock. Prior to
August 4, 1994, we were incorporated as a Delaware corporation. On
August 4, 1994, we reincorporated as a Maryland corporation pursuant to an
Agreement and Plan of Merger approved by our stockholders.
The following description of our common stock sets forth certain
general terms and provisions of the common stock to which any prospectus
supplement may relate, including a prospectus supplement providing that common
stock will be issuable upon conversion of our debt securities or our preferred
stock or upon the exercise of common stock warrants issued by us. The statements
below describing the common stock are in all respects subject to and qualified
in their entirety by reference to the applicable provisions of our charter and
bylaws.
Holders of our common stock will be entitled to receive dividends
when, as and if authorized by our board of directors and declared by us, out of
assets legally available therefor. Payment and declaration of dividends on the
common stock and purchases of shares thereof by us will be subject to certain
restrictions if we fail to pay dividends on our preferred stock. Upon our
liquidation, dissolution or winding up, holders of common stock will be entitled
to share equally and ratably in any assets available for distribution to them,
after payment or provision for payment of our debts and other liabilities and
the preferential amounts owing with respect to any of our outstanding preferred
stock. The common stock will possess ordinary voting rights in the election of
directors and in respect of other corporate matters, with each share entitling
the holder thereof to one vote. Holders of common stock will not have cumulative
voting rights in the election of directors, which means that holders of more
than 50% of all of the shares of our common stock voting for the election of
directors will be able to elect all of the directors if they choose to do so
and, accordingly, the holders of the remaining shares will be unable to elect
any directors. Holders of shares of common stock will not have preemptive
rights, which means they have no right to acquire any additional shares of
common stock that may be issued by us at a subsequent date. The common stock
will, when issued, be fully paid and nonassessable and will not be subject to
preemptive or similar rights.
Under Maryland law and our charter, a distribution (whether by
dividend, redemption or other acquisition of shares) to holders of shares of
common stock may be made only if, after giving effect to the distribution, we
are able to pay our indebtedness as it becomes due in the usual course of
business and our total assets are greater than our total liabilities plus the
amount necessary to satisfy the preferential rights upon dissolution of
stockholders whose preferential rights on dissolution are superior to the
holders of common stock and we can pay our debts as they become due. We have
complied with these requirements in all of our prior distributions to holders of
common stock.
Restrictions
on Ownership
For us to qualify as a REIT under the Code, not more than 50% in
value of our outstanding stock may be owned, actually or constructively, by five
or fewer individuals (as defined in the Code to include certain entities) during
the last half of a taxable year. Our stock also must be beneficially owned by
100 or more persons during at least 335 days of a taxable year of
12 months or during a proportionate part of a shorter taxable year. In
addition, rent from related party tenants (generally, a tenant of a REIT owned,
actually or constructively, 10% or more by the REIT, or a 10% owner of the REIT)
is not qualifying income for purposes of the income tests under the Code.
Subject to the exceptions specified in our charter, no holder may
beneficially own, or be deemed to own by virtue of the constructive ownership
provisions of the Code, more than 9.8% in value of the outstanding shares of our
common stock. The constructive ownership rules under the Code are complex and
may cause common stock owned actually or constructively by a group of related
individuals or entities or both to be deemed constructively owned by one
individual or entity. As a result, the acquisition of less than 9.8% of our
common stock (or the acquisition of an interest in an entity which owns,
actually or constructively, our common stock) by an individual or entity could
cause that individual or entity (or another individual or entity) to own
constructively in excess of 9.8% of our common stock, and thus subject such
common stock to the ownership limit.
24
In addition, because rent from related party tenants is not
qualifying rent for purposes of the gross income tests under the Code, our
charter provides that no individual or entity may own, or be deemed to own by
virtue of the attribution provisions of the Code (which differ from the
attribution provisions applied to the ownership limit), in excess of 9.8% in
value of our outstanding common stock. We refer to this ownership limitation as
the related party limit. Our board of directors may waive the ownership limit
and the related party limit with respect to a particular stockholder if evidence
satisfactory to our board of directors and our tax counsel is presented that
such ownership will not then or in the future jeopardize our status as a REIT.
As a condition of that waiver, our board of directors may require opinions of
counsel satisfactory to it or an undertaking or both from the applicant with
respect to preserving our REIT status. The foregoing restrictions on
transferability and ownership will not apply if our board of directors
determines that it is no longer in our best interests to attempt to qualify, or
to continue to qualify, as a REIT. If shares of common stock in excess of the
ownership limit or the related party limit, or shares which would otherwise
cause the REIT to be beneficially owned by less than 100 persons or which would
otherwise cause us to be closely held within the meaning of the Code or would
otherwise result in our failure to qualify as a REIT, are issued or transferred
to any person, that issuance or transfer shall be null and void to the intended
transferee, and the intended transferee would acquire no rights to the stock.
Shares transferred in excess of the ownership limit or the related party limit,
or shares which would otherwise cause us to be closely held within the meaning
of the Code or would otherwise result in our failure to qualify as a REIT, will
automatically be exchanged for shares of a separate class of stock, which we
refer to as excess stock, that will be transferred by operation of law to us as
trustee for the exclusive benefit of the person or persons to whom the shares
are ultimately transferred, until that time as the intended transferee
retransfers the shares. While these shares are held in trust, they will not be
entitled to vote or to share in any dividends or other distributions (except
upon liquidation). The shares may be retransferred by the intended transferee to
any person who may hold those shares at a price not to exceed either:
(1) the price paid by the intended transferee, or
(2) if the intended transferee did not give value for such
shares, a price per share equal to the market value of the shares on the date of
the purported transfer to the intended transferee,
at which point the shares will automatically be exchanged for
ordinary common stock. In addition, such shares of excess stock held in trust
are purchasable by us for a 90-day
period at a price equal to the lesser of the price paid for the stock by the
intended transferee and the market price for the stock on the date we determine
to purchase the stock. This period commences on the date of the violative
transfer if the intended transferee gives us notice of the transfer, or the date
our board of directors determines that a violative transfer has occurred if no
notice is provided.
All certificates representing shares of common stock will bear a
legend referring to the restrictions described above.
All persons who own, directly or by virtue of the attribution
provisions of the Code, more than a specified percentage of the outstanding
shares of common stock must file an affidavit with us containing the information
specified in our charter within 30 days after January 1 of each year. In
addition, each common stockholder shall upon demand be required to disclose to
us in writing such information with respect to the actual and constructive
ownership of shares as our board of directors deems necessary to comply with the
provisions of the Code applicable to a REIT or to comply with the requirements
of any taxing authority or governmental agency.
The registrar and transfer agent for our common stock is The Bank of
New York.
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DESCRIPTION
OF COMMON STOCK WARRANTS
We may issue common stock warrants for the purchase of our common
stock. Common stock warrants may be issued independently or together with any of
the other securities offered by this prospectus that are offered by any
prospectus supplement and may be attached to or separate from the securities
offered by this prospectus. Each series of common stock warrants will be issued
under a separate warrant agreement to be entered into between us and a warrant
agent specified in the applicable prospectus supplement. The warrant agent will
act solely as our agent in connection with the common stock warrants of such
series and will not assume any obligation or relationship of agency or trust for
or with any holders or beneficial owners of common stock warrants.
The applicable prospectus supplement will describe the terms of the
common stock warrants in respect of which this prospectus is being delivered,
including, where applicable, the following:
(1) the title of those common stock warrants;
(2) the aggregate number of those common stock warrants;
(3) the price or prices at which those common stock warrants
will be issued;
(4) the designation, number and terms of the shares of common
stock purchasable upon exercise of those common stock warrants;
(5) the designation and terms of the other securities offered by
this prospectus with which the common stock warrants are issued and the number
of those common stock warrants issued with each security offered by this
prospectus;
(6) the date, if any, on and after which those common stock
warrants and the related common stock will be separately transferable;
(7) the price at which each share of common stock purchasable
upon exercise of those common stock warrants may be purchased;
(8) the date on which the right to exercise those common stock
warrants shall commence and the date on which that right shall expire;
(9) the minimum or maximum amount of those common stock warrants
which may be exercised at any one time;
(10) information with respect to book-entry procedures, if any;
(11) a discussion of federal income tax considerations; and
(12) any other material terms of those common stock warrants,
including terms, procedures and limitations relating to the exchange and
exercise of those common stock warrants.
DESCRIPTION
OF PREFERRED STOCK
We are authorized to issue 3,600,000 shares of preferred stock,
par value $1.00 per share, 345,000 shares of 73/4% Class A Cumulative Redeemable Preferred
Stock, $1.00 par value per share, 230,000 shares of 81/2% Class B Cumulative Redeemable Preferred
Stock, $1.00 par value per share, 460,000 shares of 83/8% Class C Cumulative Redeemable Preferred
Stock, $1.00 par value per share, 700,000 shares of 71/2% Class D Cumulative Convertible Preferred
Stock, $1.00 par value per share, 65,000 shares of Class E
Floating Rate Cumulative Redeemable Preferred Stock, $1.00 par value per
share, and 700,000 shares of 6.65% Class F Cumulative Redeemable
Preferred Stock, $1.00 par value per share. We are also authorized to issue
345,000 shares of Class A Excess Preferred Stock, $1.00 par value
per share, 230,000 shares of Class B Excess Preferred Stock,
$1.00 par
26
value per share, 460,000 shares of Class C Excess Preferred
Stock, $1.00 par value per share, 700,000 shares of Class D
Excess Preferred Stock, $1.00 par value per share, 65,000 shares of
Class E Excess Preferred Stock, $1.00 par value per share, and
700,000 shares of Class F Excess Preferred Stock, $1.00 par value
per share, which are reserved for issuance upon conversion of certain
outstanding Class A preferred stock, Class B preferred stock,
Class C preferred stock, Class D preferred stock, Class E
preferred stock or Class F preferred stock, as the case may be, as
necessary to preserve our status as a REIT. At May 1, 2006,
700,000 shares of Class F preferred stock, represented by 7,000,000
depositary shares, were outstanding.
Under our charter, our board of directors may from time to time
establish and issue one or more classes or series of preferred stock and fix the
designations, powers, preferences and rights of the shares of such classes or
series and the qualifications, limitations or restrictions thereon, including,
but not limited to, the fixing of the dividend rights, dividend rate or rates,
conversion rights, voting rights, rights and terms of redemption (including
sinking fund provisions) and the liquidation preferences.
The following description of our preferred stock sets forth certain
general terms and provisions of our 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 our charter (including the applicable articles
supplementary) and bylaws.
General
Subject to limitations prescribed by Maryland law and our charter,
our board of directors is authorized to fix the number of shares constituting
each class or 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 those provisions
as may be desired concerning voting, redemption, dividends, dissolution or the
distribution of assets, conversion or exchange, and those other subjects or
matters as may be fixed by resolution of our board of directors or duly
authorized committee thereof. The preferred stock will, when issued, be fully
paid and nonassessable and, except as may be determined by our board of
directors and set forth in the Articles Supplementary setting forth the
terms of any class or series of preferred stock, will not have, or be subject
to, any preemptive or similar rights.
You should refer to the prospectus supplement relating to the class
or series of preferred stock offered thereby for specific terms, including:
(1) The class or series, title and stated value of that
preferred stock;
(2) The number of shares of that preferred stock offered, the
liquidation preference per share and the offering price of that preferred stock;
(3) The dividend rate(s), period(s) and/or payment date(s) or method(s) of
calculation thereof applicable to that preferred stock;
(4) Whether dividends on that preferred stock shall be
cumulative or not and, if cumulative, the date from which dividends on that
preferred stock shall accumulate;
(5) The procedures for any auction and remarketing, if any, for
that preferred stock;
(6) Provisions for a sinking fund, if any, for that preferred
stock;
(7) Provisions for redemption, if applicable, of that preferred
stock;
(8) Any listing of that preferred stock on any securities
exchange;
(9) The terms and conditions, if applicable, upon which that
preferred stock will be convertible into our common stock, including the
conversion price (or manner of calculation thereof);
27
(10) Whether interests in that preferred stock will be
represented by our depositary shares;
(11) The relative ranking and preference of the preferred stock
as to distribution rights and rights upon our liquidation, dissolution or
winding up if other than as described in this prospectus;
(12) Any limitations on issuance of any other series of
preferred stock ranking senior to or on a parity with the preferred stock as to
distribution rights and rights upon our liquidation, dissolution or winding up;
(13) A discussion of certain federal income tax considerations
applicable to that preferred stock;
(14) Any limitations on actual, beneficial or constructive
ownership and restrictions on transfer of that preferred stock and, if
convertible, the related common stock, in each case as may be appropriate to
preserve our status as a REIT; and
(15) Any other material terms, preferences, rights, limitations
or restrictions of that preferred stock.
Rank
Unless otherwise specified in the applicable prospectus supplement
and the articles supplementary setting forth the terms of any class or series of
preferred stock, the preferred stock will, with respect to rights to the payment
of dividends and distribution of our assets and rights upon our liquidation,
dissolution or winding up, rank:
(1) senior to all classes or series of our common stock and
excess stock and to all of our equity securities the terms of which provide that
those equity securities are junior to the preferred stock;
(2) on a parity with all of our equity securities other than
those referred to in clauses (1) and (3); and
(3) junior to all of our equity securities the terms of which
provide that those equity securities will rank senior to it.
For these purposes, the term equity securities does not include
convertible debt securities.
Dividends
Holders of shares of our preferred stock of each class or series
shall be entitled to receive, when, as and if authorized by our board of
directors and declared by us, out of our assets legally available for payment,
cash dividends at rates and on dates that will be set forth in the applicable
prospectus supplement and the articles supplementary setting forth the terms of
any class or series of preferred stock. Each dividend shall be payable to
holders of record as they appear on our stock transfer books on the record dates
as shall be fixed by our board of directors.
Dividends on any class or series of our preferred stock may be
cumulative or non-cumulative, as provided in the applicable prospectus
supplement and the articles supplementary setting forth the terms of any class
or series of preferred stock. Dividends, if cumulative, will accumulate from and
after the date set forth in the applicable prospectus supplement and the
articles supplementary setting forth the terms of any class or series of
preferred stock. If our board of directors fails to authorize a dividend payable
on a dividend payment date on any class or series of our preferred stock for
which dividends are noncumulative, then the holders of that class or series of
our preferred stock will have no right to receive a dividend in respect of the
dividend period ending on that dividend payment date, and we will have no
obligation to pay the dividend accrued for that period, whether or not dividends
on that class or series are declared payable on any future dividend payment
date.
If any shares of our preferred stock of any class or series are
outstanding, no full dividends shall be authorized or paid or set apart for
payment on our preferred stock of any other class or series ranking, as to
dividends, on a parity with or junior to the preferred stock of that class or
series for any period unless:
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(1) if that class or series of preferred stock has a cumulative
dividend, full cumulative dividends have been or contemporaneously are
authorized and paid or authorized and a sum sufficient for the payment thereof
set part for that payment on the preferred stock of that class or series for all
past dividend periods and the then current dividend period, or
(2) if that class or series of preferred stock does not have a
cumulative dividend, full dividends for the then current dividend period have
been or contemporaneously are authorized and paid or authorized and a sum
sufficient for the payment thereof set apart for that payment on the preferred
stock of that class or series.
When dividends are not paid in full (or a sum sufficient for their
full payment is not so set apart) upon the shares of preferred stock of any
class or series and the shares of any other class or series of preferred stock
ranking on a parity as to dividends with the preferred stock of that class or
series, all dividends declared upon shares of preferred stock of that class or
series and any other class or series of preferred stock ranking on a parity as
to dividends with that preferred stock shall be authorized pro rata so that the
amount of dividends authorized per share on the preferred stock of that class or
series and that other class or series of preferred stock shall in all cases bear
to each other the same ratio that accrued and unpaid dividends per share on the
shares of preferred stock of that class or series (which shall not include any
accumulation in respect of unpaid dividends for prior dividend periods if that
preferred stock does not have a cumulative dividend) and that other class or
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 that series that may be in arrears.
Except as provided in the immediately preceding paragraph, unless:
(1) if that class or series of preferred stock has a cumulative dividend,
full cumulative dividends on the preferred stock of that class or series have
been or contemporaneously are authorized and paid or authorized and a sum
sufficient for the payment thereof set apart for payment for all past dividend
periods and the then current dividend period; and (2) if that class or
series of preferred stock does not have a cumulative dividend, full dividends on
the preferred stock of that class or series have been or contemporaneously are
authorized and paid or authorized and a sum sufficient for the payment thereof
set aside for payment for the then current dividend period, then no dividends
(other than in our common stock or other stock ranking junior to the preferred
stock of that class or series as to dividends and upon our liquidation,
dissolution or winding up) shall be authorized or paid or set aside for payment
or other distribution shall be authorized or made upon our common stock, excess
stock or any of our other stock ranking junior to or on a parity with the
preferred stock of that class or series as to dividends or upon liquidation, nor
shall any common stock, excess stock or any of our other stock ranking junior to
or on a parity with the preferred stock of such class or series as to dividends
or upon our liquidation, dissolution or winding up 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 shares of that stock) by
us (except by conversion into or exchange for other of our stock ranking junior
to the preferred stock of that class or series as to dividends and upon our
liquidation, dissolution or winding up).
Any dividend payment made on shares of a class or series of preferred
stock shall first be credited against the earliest accrued but unpaid dividend
due with respect to shares of that class or series which remains payable.
Redemption
If the applicable prospectus supplement and the articles
supplementary setting forth the terms of any class or series of preferred stock
so states, the shares of preferred stock will be subject to mandatory redemption
or redemption at our option, in whole or in part, in each case on the terms, at
the times and at the redemption prices set forth in that prospectus supplement
and the articles supplementary setting forth the terms of any class or series of
preferred stock.
The prospectus supplement relating to a class or series of preferred
stock that is subject to mandatory redemption will specify the number of shares
of that preferred stock that shall be redeemed by us 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 that 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
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prospectus supplement. If the redemption price for preferred stock of
any series is payable only from the net proceeds of the issuance of our stock,
the terms of that preferred stock may provide that, if no such stock 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, that preferred stock
shall automatically and mandatorily be converted into shares of our applicable
stock pursuant to conversion provisions specified in the applicable prospectus
supplement. Notwithstanding the foregoing, unless:
(1) if that class or series of preferred stock has a cumulative
dividend, full cumulative dividends on all shares of any class or series of
preferred stock shall have been or contemporaneously are authorized and paid or
authorized and a sum sufficient for the payment thereof set apart for payment
for all past dividend periods and the then current dividend period; and
(2) if that class or series of preferred stock does not have a
cumulative dividend, full dividends on the preferred stock of any class or
series have been or contemporaneously are authorized and paid or authorized and
a sum sufficient for the payment thereof set apart for payment for the then
current dividend period.
Unless otherwise specified in the applicable prospectus supplement
and the articles supplementary setting forth the terms of any class or series of
preferred stock , no shares of any class or series of preferred stock shall be
redeemed unless all outstanding shares of preferred stock of that class or
series are simultaneously redeemed; provided, however, that the foregoing shall
not prevent the purchase or acquisition of shares of preferred stock of that
class or series pursuant to a purchase or exchange offer made on the same terms
to holders of all outstanding shares of preferred stock of that class or series.
In addition, unless:
(1) if that class or series of preferred stock has a cumulative
dividend, full cumulative dividends on all outstanding shares of any class or
series of preferred stock have been or contemporaneously are authorized and paid
or authorized and a sum sufficient for the payment thereof set apart for payment
for all past dividend periods and the then current dividend period; and
(2) if that class or series of preferred stock does not have a
cumulative dividend, full dividends on the preferred stock of any class or
series have been or contemporaneously are authorized and paid or authorized and
a sum sufficient for the payment thereof set apart for payment for the then
current dividend period;
(3) we shall not purchase or otherwise acquire directly or
indirectly any shares of preferred stock of that class or series (except by
conversion into or exchange for our stock ranking junior to the preferred stock
of that class or series as to dividends and upon our liquidation, dissolution or
winding up).
If fewer than all of the outstanding shares of preferred stock of any
class or series are to be redeemed, the number of shares to be redeemed will be
determined by us and those shares may be redeemed pro rata from the holders of
record of those shares in proportion to the number of those shares held by those
holders (with adjustments to avoid redemption of fractional shares) or any other
equitable method determined by us that will not result in the issuance of any
excess preferred stock.
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 a
share of preferred stock of any class or series to be redeemed at the address
shown on our stock transfer books. Each notice shall state:
(1) the redemption date;
(2) the number of shares and class or series of the preferred
stock to be redeemed;
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(3) the redemption price;
(4) the place or places where certificates for that preferred
stock are to be surrendered for payment of the redemption price;
(5) that dividends on the shares to be redeemed will cease to
accrue on that redemption date; and
(6) the date upon which the holders conversion rights, if any,
as to those shares shall terminate.
If fewer than all the shares of preferred stock of any class or
series are to be redeemed, the notice mailed to each holder thereof shall also
specify the number of shares of preferred stock to be redeemed from each holder.
If notice of redemption of any shares of preferred stock has been given and if
the funds necessary for that redemption have been set apart by us in trust for
the benefit of the holders of any shares of preferred stock so called for
redemption, then from and after the redemption date dividends will cease to
accrue on those shares of preferred stock, those shares of preferred stock shall
no longer be deemed outstanding and all rights of the holders of those shares
will terminate, except the right to receive the redemption price.
Liquidation
Preference
Upon our voluntary or involuntary liquidation, dissolution or winding
up, then, before any distribution or payment shall be made to the holders of any
common stock, excess stock or any other class or series of our stock ranking
junior to that class or series of preferred stock in the distribution of assets
upon our liquidation, dissolution or winding up, the holders of each class or
series of preferred stock shall be entitled to receive out of our assets legally
available for distribution to stockholders 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 that class or series of 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 that class or series of
preferred stock will have no right or claim to any of our remaining assets. If,
upon our voluntary or involuntary liquidation, dissolution or winding up, our
legally available assets are insufficient to pay the amount of the liquidating
distributions on all outstanding shares of that class or series of preferred
stock and the corresponding amounts payable on all shares of other classes or
series of our stock ranking on a parity with that class or series of preferred
stock in the distribution of assets upon our liquidation, dissolution or winding
up, then the holders of that class or series of preferred stock and all other
classes or series of stock shall share ratably in that distribution of assets in
proportion to the full liquidating distributions to which they would otherwise
be respectively entitled.
If liquidating distributions shall have been made in full to all
holders of shares of that class or series of preferred stock, our remaining
assets shall be distributed among the holders of any other classes or series of
stock ranking junior to that class or series of preferred stock upon our
liquidation, dissolution or winding up, according to their respective rights and
preferences and in each case according to their respective number of shares. For
those purposes, neither our consolidation or merger with or into any other
corporation, trust or other entity nor the sale, lease, transfer or conveyance
of all or substantially all of our property or business shall be deemed to
constitute our liquidation, dissolution or winding up.
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 and the articles
supplementary setting forth the terms of any class or series of preferred stock,
holders of preferred stock will not have any voting rights.
Whenever dividends on any shares of that class or series of preferred
stock shall be in arrears for six or more quarterly periods, regardless of
whether those quarterly periods are consecutive, the holders of those shares of
that class or series of preferred stock (voting separately as a class with all
other classes or 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 to our board of directors (and our entire board of
directors will be increased by two directors) at
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a special meeting called by one of our officers at the request of a
holder of that class or series of preferred stock or, if that special meeting is
not called by that officer within 30 days, at a special meeting called by a
holder of that class or series of preferred stock designated by the holders of
record of at least 10% of the shares of any of those classes or series of
preferred stock (unless that 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:
(1) if that class or series of preferred stock has a cumulative
dividend, then all dividends accumulated on those 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 apart
for payment, or
(2) if that class or series of preferred stock does not have a
cumulative dividend, then four consecutive quarterly dividends shall have been
fully paid or declared and a sum sufficient for the payment thereof set apart
for payment.
Unless provided otherwise for any series of preferred stock, so long
as any shares of preferred stock remain outstanding, we shall not, without the
affirmative vote or consent of the holders of at least two-thirds of the shares
of each class or series of preferred stock outstanding at the time, given in
person or by proxy, either in writing or at a meeting (that class or series
voting separately as a class),
(1) authorize or create, or increase the authorized or issued
amount of, any class or series of stock ranking senior to that class or series
of preferred stock with respect to payment of dividends or the distribution of
assets upon our liquidation, dissolution or winding up or reclassify any of our
authorized stock into those shares, or create, authorize or issue any obligation
or security convertible into or evidencing the right to purchase those
shares; or
(2) amend, alter or repeal the provisions of the charter in
respect of that class or series of preferred stock, whether by merger,
consolidation or otherwise, so as to materially and adversely affect any right,
preference, privilege or voting power of that class or series of preferred
stock; provided, however, that any increase in the amount of the authorized
preferred stock or the creation or issuance of any other class or series of
preferred stock, or any increase in the number of authorized shares of that
class or series, in each case ranking on a parity with or junior to the
preferred stock of that class or series with respect to payment of dividends and
the distribution of assets upon liquidation, dissolution or winding up, shall
not be deemed to materially and adversely affect those 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 that vote would otherwise be required
shall be effected, all outstanding shares of that class or series of preferred
stock shall have been redeemed or called for redemption upon proper notice and
sufficient funds shall have been irrevocably deposited in trust to effect that
redemption.
Conversion
Rights
The terms and conditions, if any, upon which shares of any class or
series of preferred stock are convertible into common stock, debt securities or
another series of preferred stock will be set forth in the applicable prospectus
supplement relating thereto and the articles supplementary setting forth the
terms of any class or series of preferred stock. Such terms will include the
number of shares of common stock or those other series of preferred stock or the
principal amount of debt securities into which the preferred stock is
convertible, the conversion price (or manner of calculation thereof), the
conversion period, provisions as to whether conversion will be at our option or
at the option of the holders of that class or series of preferred stock, the
events requiring an adjustment of the conversion price and provisions affecting
conversion in the event of the redemption of that class or series of preferred
stock.
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Restrictions
on Ownership
As discussed above under Description of Common Stock
Restrictions on Ownership, for us to qualify as a REIT under the Code, not more
than 50% in value of our outstanding stock may be owned, actually or
constructively, by five or fewer individuals (as defined in the Code to include
certain entities) during the last half of a taxable year. Our stock also must be
beneficially owned by 100 or more persons during at least 335 days of a
taxable year of 12 months (or during a proportionate part of a shorter
taxable year). In addition, rent from related party tenants (generally, a tenant
of a REIT owned, actually or constructively 10% or more by the REIT, or a 10%
owner of the REIT) is not qualifying income for purposes of the gross income
tests under the Code. Therefore, the applicable articles supplementary for each
class or series of preferred stock will contain certain provisions restricting
the ownership and transfer of that class or series of preferred stock. Except as
otherwise described in the applicable prospectus supplement relating thereto,
the provisions of each applicable articles supplementary relating to the
ownership limit for any class or series of preferred stock will provide as
follows:
Our preferred stock ownership limit provision will provide that,
subject to some exceptions, no holder of that class or series of preferred stock
may own, or be deemed to own by virtue of the constructive ownership provisions
of the Code, preferred stock in excess of the preferred stock ownership limit,
which will be equal to 9.8% of the outstanding preferred stock of any class or
series. The constructive ownership rules under the Code are complex and may
cause preferred stock owned actually or constructively by a group of related
individuals and/or entities to be
deemed to be constructively owned by one individual or entity. As a result, the
acquisition of less than 9.8% of any class or series of our preferred stock (or
the acquisition of an interest in an entity which owns, actually or
constructively, preferred stock) by an individual or entity could cause that
individual or entity (or another individual or entity) to own constructively in
excess of 9.8% of that class or series of preferred stock, and thus subject that
preferred stock to the preferred stock ownership limit.
Our board of directors will be entitled to waive the preferred stock
ownership limit with respect to a particular stockholder if evidence
satisfactory to our board of directors, with advice of our tax counsel, is
presented that the ownership will not then or in the future jeopardize our
status as a REIT. As a condition of that waiver, our board of directors may
require opinions of counsel satisfactory to it or an undertaking or both from
the applicant with respect to preserving our REIT status.
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DESCRIPTION
OF DEPOSITARY SHARES
General
We may issue depositary shares, each of which will represent a
fractional interest of a share of a particular class or series of our preferred
stock, as specified in the applicable prospectus supplement. Shares of a class
or series of preferred stock represented by depositary shares will be deposited
under a separate deposit agreement among us, the depositary named therein and
the holders from time to time of the depositary receipts issued by the preferred
stock depositary which will evidence the depositary shares. Subject to the terms
of the deposit agreement, each owner of a depositary receipt will be entitled,
in proportion to the fractional interest of a share of a particular class or
series of preferred stock represented by the depositary shares evidenced by that
depositary receipt, to all the rights and preferences of the class or series of
preferred stock represented by those depositary shares (including dividend,
voting, conversion, redemption and liquidation rights).
The depositary shares will be evidenced by depositary receipts issued
pursuant to the applicable deposit agreement. Immediately following the issuance
and delivery of a class or series of preferred stock by us to the preferred
stock depositary, we will cause the preferred stock depositary to issue, on our
behalf, the depositary receipts. Copies of the applicable form of deposit
agreement and depositary receipt may be obtained from us upon request, and the
statements made hereunder relating to the deposit agreement and the depositary
receipts to be issued thereunder are summaries of certain provisions thereof and
do not purport to be complete and are subject to, and qualified in their
entirety by reference to, all of the provisions of the applicable deposit
agreement and related depositary receipts.
Dividends and
Other Distributions
The preferred stock depositary will distribute all cash dividends or
other cash distributions received in respect of a class or series of preferred
stock to the record holders of depositary receipts evidencing the related
depositary shares in proportion to the number of those depositary receipts owned
by those holders, subject to certain obligations of holders to file proofs,
certificates and other information and to pay certain charges and expenses to
the preferred stock depositary.
In the event of a distribution other than in cash, the preferred
stock depositary will distribute property received by it to the record holders
of depositary receipts entitled thereto, subject to certain obligations of
holders to file proofs, certificates and other information and to pay certain
charges and expenses to the preferred stock depositary, unless the preferred
stock depositary determines that it is not feasible to make that distribution,
in which case the preferred stock depositary may, with our approval, sell that
property and distribute the net proceeds from that sale to those holders.
No distribution will be made in respect of any depositary share to
the extent that it represents any class or series of preferred stock converted
into excess preferred stock or otherwise converted or exchanged.
Withdrawal of
Preferred Stock
Upon surrender of the depositary receipts at the corporate trust
office of the preferred stock depositary (unless the related depositary shares
have previously been called for redemption or converted into excess preferred
stock or otherwise), the holders thereof will be entitled to delivery at that
office, to or upon that holders order, of the number of whole or fractional
shares of the class or series of preferred stock and any money or other property
represented by the depositary shares evidenced by those depositary receipts.
Holders of depositary receipts will be entitled to receive whole or fractional
shares of the related class or series of preferred stock on the basis of the
proportion of preferred stock represented by each depositary share as specified
in the applicable prospectus supplement, but holders of those shares of
preferred stock will not thereafter be entitled to receive depositary shares
therefor. If the depositary receipts delivered by the holder evidence a number
of depositary shares in excess of the number of depositary shares representing
the number of shares of preferred stock to be withdrawn, the preferred stock
depositary will deliver to that holder at the same time a new depositary receipt
evidencing the excess number of depositary shares.
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Redemption
Whenever we redeem shares of a class or series of preferred stock
held by the preferred stock depositary, the preferred stock depositary will
redeem as of the same redemption date the number of depositary shares
representing shares of the class or series of preferred stock so redeemed,
provided we shall have paid in full to the preferred stock depositary the
redemption price of the preferred stock to be redeemed plus an amount equal to
any accrued and unpaid dividends thereon to the date fixed for redemption. The
redemption price per depositary share will be equal to the corresponding
proportion of the redemption price and any other amounts per share payable with
respect to that class or series of preferred stock. If fewer than all the
depositary shares are to be redeemed, the depositary shares to be redeemed will
be selected pro rata (as nearly as may be practicable without creating
fractional depositary shares) or by any other equitable method determined by us
that will not result in the issuance of any excess preferred stock.
From and after the date fixed for redemption, all dividends in
respect of the shares of a class or series of preferred stock so called for
redemption will cease to accrue, the depositary shares so called for redemption
will no longer be deemed to be outstanding and all rights of the holders of the
depositary receipts evidencing the depositary shares so called for redemption
will cease, except the right to receive any moneys payable upon their redemption
and any money or other property to which the holders of those depositary
receipts were entitled upon their redemption and surrender thereof to the
preferred stock depositary.
Voting
Upon receipt of notice of any meeting at which the holders of a class
or series of preferred stock deposited with the preferred stock depositary are
entitled to vote, the preferred stock depositary will mail the information
contained in that notice of meeting to the record holders of the depositary
receipts evidencing the depositary shares which represent that class or series
of preferred stock. Each record holder of depositary receipts evidencing
depositary shares on the record date (which will be the same date as the record
date for that class or series of preferred stock) will be entitled to instruct
the preferred stock depositary as to the exercise of the voting rights
pertaining to the amount of preferred stock represented by that holders
depositary shares. The preferred stock depositary will vote the amount of that
class or series of preferred stock represented by those depositary shares in
accordance with those instructions, and we will agree to take all reasonable
action which may be deemed necessary by the preferred stock depositary in order
to enable the preferred stock depositary to do so. The preferred stock
depositary will abstain from voting the amount of that class or series of
preferred stock represented by those depositary shares to the extent it does not
receive specific instructions from the holders of depositary receipts evidencing
those depositary shares. The preferred stock depositary shall not be responsible
for any failure to carry out any instruction to vote, or for the manner or
effect of any vote made, as long as that action or non-action is in good faith
and does not result from negligence or willful misconduct of the preferred stock
depositary.
Liquidation
Preference
In the event of our liquidation, dissolution or winding up, whether
voluntary or involuntary, the holders of each depositary receipt will be
entitled to the fraction of the liquidation preference accorded each share of
preferred stock represented by the depositary shares evidenced by that
depositary receipt, as set forth in the applicable prospectus supplement.
Conversion
The depositary shares, as such, are not generally convertible into
our common stock (except as set forth in the proviso below) or any of our other
securities or property, except in connection with certain conversions in
connection with the preservation of our status as a REIT; provided that the
depositary shares representing our Class D preferred stock are convertible
into our common stock. Nevertheless, if so specified in the applicable
prospectus supplement relating to an offering of depositary shares, the
depositary receipts may be surrendered by holders thereof to the preferred stock
depositary with written instructions to the preferred stock depositary to
instruct us to cause conversion of a class or series of preferred stock
represented by the depositary shares evidenced by those depositary receipts into
whole shares of our common stock, other shares of a class or series of preferred
stock (including excess preferred stock) or other shares of stock, and we have
agreed that upon receipt of those
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instructions and any amounts payable in respect thereof, we will
cause the conversion thereof utilizing the same procedures as those provided for
delivery of preferred stock to effect that conversion. If the depositary shares
evidenced by a depositary receipt are to be converted in part only, a new
depositary receipt or receipts will be issued for any depositary shares not to
be converted. No fractional shares of common stock will be issued upon
conversion, and if that conversion would result in a fractional share being
issued, an amount will be paid in cash by us equal to the value of the
fractional interest based upon the closing price of the common stock on the last
business day prior to the conversion.
Amendment and
Termination of the Deposit Agreement
The form of depositary receipt evidencing the depositary shares which
represent the preferred stock and any provision of the deposit agreement may at
any time be amended by agreement between us and the preferred stock depositary.
However, any amendment that materially and adversely alters the rights of the
holders of depositary receipts or that would be materially and adversely
inconsistent with the rights granted to the holders of the related class or
series of preferred stock will not be effective unless that amendment has been
approved by the existing holders of at least two thirds of the depositary shares
evidenced by the depositary receipts then outstanding. No amendment shall impair
the right, subject to certain exceptions in the deposit agreement, of any holder
of depositary receipts to surrender any depositary receipt with instructions to
deliver to the holder the related class or series of preferred stock and all
money and other property, if any, represented thereby, except in order to comply
with law. Every holder of an outstanding depositary receipt at the time any of
those types of amendments becomes effective shall be deemed, by continuing to
hold that depositary receipt, to consent and agree to that amendment and to be
bound by the deposit agreement as amended thereby.
We may terminate the deposit agreement upon not less than
30 days prior written notice to the preferred stock depositary if:
(1) such termination is necessary to preserve our status as a
REIT, or
(2) a majority of each class or series of preferred stock
subject to that deposit agreement consents to that termination, whereupon the
preferred stock depositary shall deliver or make available to each holder of
depositary receipts, upon surrender of the depositary receipts held by that
holder, that number of whole or fractional shares of each class or series of
preferred stock as are represented by the depositary shares evidenced by those
depositary receipts together with any other property held by the preferred stock
depositary with respect to those depositary receipts.
We have agreed that if the deposit agreement is terminated to
preserve our status as a REIT, then we will use our best efforts to list each
class or series of preferred stock issued upon surrender of the related
depositary shares on a national securities exchange. In addition, the deposit
agreement will automatically terminate if:
(1) all outstanding depositary shares issued thereunder shall
have been redeemed,
(2) there shall have been a final distribution in respect of
each class or series of preferred stock subject to that deposit agreement in
connection with our liquidation, dissolution or winding up and that distribution
shall have been distributed to the holders of depositary receipts evidencing the
depositary shares representing that class or series of preferred stock , or
(3) each share of preferred stock subject to that deposit
agreement shall have been converted into our stock not so represented by
depositary shares.
Charges of
Preferred Stock Depositary
We will pay all transfer and other taxes and governmental charges
arising solely from the existence of the deposit agreement. In addition, we will
pay the fees and expenses of the preferred stock depositary in connection with
the performance of its duties under the deposit agreement. However, holders of
depositary receipts will pay the
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fees and expenses of the preferred stock depositary for any duties
requested by those holders to be performed which are outside of those expressly
provided for in the deposit agreement.
Resignation
and Removal of Preferred Stock Depositary
The preferred stock depositary may resign at any time by delivering
notice to us of its election to do so, and we may at any time remove the
preferred stock depositary, that resignation or removal to take effect upon the
appointment of a successor preferred stock depositary. A successor preferred
stock depositary must be appointed within 60 days after delivery of the
notice of resignation or removal and must be a bank or trust company having its
principal office in the United States and having a combined capital and surplus
of at least $50,000,000.
Miscellaneous
The preferred stock depositary will forward to holders of depositary
receipts any reports and communications from us which are received by it with
respect to the related preferred stock.
Neither we nor the preferred stock depositary will be liable if it is
prevented from or delayed in, by law or any circumstances beyond its control,
performing its obligations under the deposit agreement. Our obligations and
those of the preferred stock depositary under the deposit agreement will be
limited to performing our respective duties thereunder in good faith and without
negligence (in the case of any action or inaction in the voting of a class or
series of preferred stock represented by the depositary shares), gross
negligence or willful misconduct, and neither we nor the preferred stock
depositary will be obligated to prosecute or defend any legal proceeding in
respect of any depositary receipts, depositary shares or shares of a class or
series of preferred stock represented thereby unless satisfactory indemnity is
furnished. We and the preferred stock depositary may rely on written advice of
counsel or accountants, or information provided by persons presenting shares of
a class or series of preferred stock represented thereby for deposit, holders of
depositary receipts or other persons believed in good faith to be competent to
give that information, and on documents believed in good faith to be genuine and
signed by a proper party.
In the event the preferred stock depositary shall receive conflicting
claims, requests or instructions from any holders of depositary receipts, on the
one hand, and us, on the other hand, the preferred stock depositary shall be
entitled to act on those claims, requests or instructions received from us.
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MATERIAL
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
TO US OF OUR REIT
ELECTION
The following is a summary of the federal income tax considerations
to us related to our REIT election which are anticipated to be material to
purchasers of the securities offered by this prospectus. This summary is for
general information only and is not tax advice. Your tax treatment will vary
depending upon the terms of the specific securities that you acquire, as well as
your particular situation. This discussion does not attempt to address any
aspects of federal income taxation relevant to your ownership of the securities
offered by this prospectus. Instead, the material United States federal income
tax considerations relevant to your ownership of the securities offered by this
prospectus may be provided in the applicable prospectus supplement relating
thereto.
The information in this section is based on:
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the Internal Revenue Code; |
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current, temporary and proposed Treasury Regulations
promulgated under the Internal Revenue Code; |
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the legislative history of the Internal Revenue Code;
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current administrative interpretations and practices of the
Internal Revenue Service; and |
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court decisions, |
in each case, as of the date of this prospectus. In addition, the
administrative interpretations and practices of the Internal Revenue Service
include its practices and policies as expressed in private letter rulings which
are not binding on the Internal Revenue Service, except with respect to the
particular taxpayers who requested and received those rulings. Future
legislation, Treasury Regulations, administrative interpretations and practices
and/or court decisions may adversely
affect the tax considerations contained in this discussion or the desirability
of an investment in a REIT relative to other investments. Any change could apply
retroactively to transactions preceding the date of the change. Except as
described below, we have not requested and do not intend to request a ruling
from the IRS that we qualify as a REIT, and the statements in this prospectus
are not binding on the Internal Revenue Service or any court. Thus, we can
provide no assurance that the tax considerations contained in this discussion
will not be challenged by the Internal Revenue Service or if challenged, will be
sustained by a court. This summary does not discuss any state, local or foreign
tax consequences associated with our election to be taxed as a REIT.
You are advised to consult the applicable prospectus supplement, as
well as your own tax advisor, regarding the tax consequences to you of the
acquisition, ownership and sale of the securities offered by this prospectus,
including the federal, state, local, foreign and other tax consequences, our
election to be taxed as a REIT for federal income purposes, and potential
changes in the tax laws.
General. We elected to be taxed as a REIT under
Sections 856 through 860 of the Internal Revenue Code, commencing with our
taxable year beginning January 1, 1992. We believe we have been organized
and have operated in a manner which allows us to qualify for taxation as a REIT
under the Internal Revenue Code commencing with our taxable year beginning
January 1, 1992. We intend to continue to be organized and operate in this
manner. However, qualification and taxation as a REIT depend upon our ability to
meet the various qualification tests imposed under the Internal Revenue Code,
including through actual annual operating results, asset composition,
distribution levels and diversity of stock ownership. Accordingly, no assurance
can be given that we have been organized and have operated, or will continue to
be organized and operate, in a manner so as to qualify or remain qualified as a
REIT. See Failure to Qualify.
The sections of the Internal Revenue Code and the corresponding
Treasury Regulations that relate to the qualification and operation of a REIT
are highly technical and complex. The following sets forth the material aspects
of the sections of the Internal Revenue Code that govern the federal income tax
treatment of a REIT. This summary is qualified in its entirety by the applicable
Internal Revenue Code provisions, rules and regulations promulgated thereunder,
and administrative and judicial interpretations thereof.
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As a condition to the closing of each offering of the securities
offered by this prospectus, other than offerings of medium term notes and as
otherwise specified in the applicable prospectus supplement, our tax counsel may
render an opinion to the underwriters of that offering to the effect that,
commencing with our taxable year which began January 1, 1992, we have been
organized in conformity with the requirements for qualification as a REIT, and
our proposed method of operation will enable us to continue to meet the
requirements for qualification and taxation as a REIT under the Internal Revenue
Code. It must be emphasized that this opinion will be based on various
assumptions and representations to be made by us as to factual matters,
including representations to be made in a factual certificate to be provided by
one of our officers. Our tax counsel will have no obligation to update its
opinion subsequent to its date. In addition, this opinion will be based upon our
factual representations set forth in this prospectus and set forth in the
applicable prospectus supplement. Moreover, our qualification and taxation as a
REIT depends upon our ability to meet the various qualification tests imposed
under the Internal Revenue Code discussed below, including through actual annual
operating results, asset composition, distribution levels and diversity of stock
ownership, the results of which have not been and will not be reviewed by our
tax counsel. Accordingly, no assurance can be given that our actual results of
operation in any particular taxable year will satisfy those requirements. See
Failure to Qualify. Further, the anticipated income tax treatment
described in this prospectus may be changed, perhaps retroactively, by
legislative, administrative or judicial action at any time.
If we qualify for taxation as a REIT, we generally will not be
required to pay federal corporate income taxes on our net income that is
currently distributed to stockholders. We will be required to pay federal income
tax, however, as follows:
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We will be required to pay tax at regular corporate rates
on any undistributed REIT taxable income, including undistributed net
capital gains. |
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We may be required to pay the alternative minimum tax on
our items of tax preference. |
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If we have (1) net income from the sale or other
disposition of foreclosure property which is held primarily for sale to
customers in the ordinary course of business or (2) other
nonqualifying income from foreclosure property, we will be required to pay
tax at the highest corporate rates on this income. Foreclosure property is
generally defined as property acquired by foreclosure or after a default
on a loan secured by the property or a lease of the property. |
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We will be required to pay a 100% tax on any net income
from prohibited transactions. Prohibited transactions are, in general,
sales or other dispositions of property, other than foreclosure property,
held primarily for sale to customers in the ordinary course of business.
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If we fail to satisfy the 75% gross income test or the 95%
gross income test, as described below, but have otherwise maintained our
qualification as a REIT, we will be required to pay a 100% tax on an
amount equal to (1) the gross income attributable to the greater of
(a) the amount by which 75% of our gross income exceeds the amount
qualifying under the 75% gross income test described below and
(b) the amount by which 95% (90% for our taxable years ending on or
prior to December 31, 2004) of our gross income exceeds the
amount qualifying under the 95% gross income test described below,
multiplied by (2) a fraction intended to reflect our profitability.
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If we fail to satisfy any of the REIT asset tests (other
than a de minimis failure of the 5% and 10% asset tests), as described
below, due to reasonable cause and not due to willful neglect and we
nonetheless maintain our REIT qualification because of specified cure
provisions, we will be required to pay a tax equal to the greater of
$50,000 or the highest corporate tax rate multiplied by the net income
generated by the nonqualifying assets that caused us to fail such test.
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If we fail to satisfy any provision of the Internal Revenue
Code that would result in our failure to qualify as a REIT (other than a
violation of the REIT gross income tests or certain violations of asset
tests described below) and the violation is due to reasonable cause, we
may retain our REIT qualification but we will be required to pay a penalty
of $50,000 for each such failure. |
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If we fail to distribute during each calendar year at least
the sum of (1) 85% of our REIT ordinary income for such taxable year,
(2) 95% of our REIT capital gain net income for such year, and
(3) any undistributed taxable income from prior periods, we will be
required to pay a 4% excise tax on the excess of that required
distribution over the amounts actually distributed. |
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If we acquire any asset from a corporation which is or has
been a C corporation in a transaction in which the basis of the asset in
our hands is determined by reference to the basis of the asset in the
hands of the C corporation, and we subsequently recognize gain on the
disposition of the asset during the ten-year period beginning on the date
we acquired the asset, then we will be required to pay tax at the highest
regular corporate tax rate on this gain to the extent of the excess of
(a) the fair market value of the asset over (b) our adjusted
basis in the asset, in each case determined as of the date we acquired the
asset. A C corporation is generally defined as a corporation required to
pay full corporate level tax. The results described in this paragraph with
respect to the recognition of gain assume that we or the C corporation, as
applicable, have made or refrained from making and the C corporation will
refrain from making a timely election under the relevant Treasury
Regulations in order to obtain the results described in this paragraph
with respect to the recognition of gain. |
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We will be subject to a 100% penalty tax on any
redetermined rents, redetermined deductions or excess interest. In
general, redetermined rents are rents from real property that are
overstated as a result of services furnished by a taxable REIT subsidiary
of ours to any of our tenants. See Taxable REIT Subsidiaries.
Redetermined deductions and excess interest represent amounts that are
deducted by a taxable REIT subsidiary of ours for amounts paid to us that
are in excess of the amounts that would have been deducted based on arms
length negotiations. |
Requirements for Qualification. The Internal
Revenue Code defines a REIT as a corporation, trust or association:
(1) that is managed by one or more trustees or directors,
(2) that issues transferable shares or transferable certificates
to evidence beneficial ownership,
(3) that would be taxable as a domestic corporation, but for
Sections 856 through 860 of the Internal Revenue Code,
(4) that is not a financial institution or an insurance company
within the meaning of the Internal Revenue Code,
(5) that is beneficially owned by 100 or more persons,
(6) not more than 50% in value of the outstanding stock of which
is owned, directly or constructively, by five or fewer individuals, including
specified entities, during the last half of each taxable year, and
(7) that meets other tests, described below, regarding the
nature of its income and assets and the amount of its distributions.
The Internal Revenue Code provides that conditions (1) to
(4) must be met during the entire taxable year and that condition
(5) must be met during at least 335 days of a taxable year of
12 months, or during a proportionate part of a taxable year of less than
12 months. Conditions (5) and (6) do not apply until after the
first taxable year for which an election is made to be taxed as a REIT. For
purposes of condition (6), pension funds and other specified tax-exempt entities
generally are treated as individuals, except that a look-through exception
applies to pension funds.
We believe that we have been organized and operated in a manner that
has allowed us to satisfy conditions (1) through (7) inclusive, during
the relevant time periods. In addition, our charter provides, and the articles
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supplementary for any series of preferred stock will provide, for
restrictions regarding ownership and transfer of our stock, which restrictions
are intended to assist us in continuing to satisfy the share ownership
requirements described in (5) and (6) above. The ownership and
transfer restrictions pertaining generally to our common stock and preferred
stock are described in Description of Common Stock Restrictions on
Ownership and Transfer and Description of Preferred Stock Restrictions
on Ownership and Transfer or, to the extent those restrictions differ from
those described in this prospectus, those restrictions will be described in the
applicable prospectus supplement. These restrictions, however, may not ensure
that we will, in all cases, be able to satisfy the share ownership requirements
described in (5) and (6) above. If we fail to satisfy these share
ownership requirements, except as provided in the next sentence, our status as a
REIT will terminate. If, however, we comply with the rules contained in the
applicable Treasury Regulations requiring us to attempt to ascertain the actual
ownership of our shares, and we do not know, and would not have known through
the exercise of reasonable diligence, that we failed to meet the requirement set
forth in condition (6) above, we will be treated as having met this
requirement. See the section below entitled Failure to Qualify.
In addition, we may not maintain our status as a REIT unless our
taxable year is the calendar year. We have and will continue to have a calendar
taxable year.
Ownership of Qualified REIT Subsidiaries and Interests in Limited
Liability Companies and Partnerships. We own and operate a number
of properties through subsidiaries. A corporation which is a qualified REIT
subsidiary shall not be treated as a separate corporation, and all assets,
liabilities, and items of income, deduction, and credit of a qualified REIT
subsidiary shall be treated as assets, liabilities and items of the REIT. Thus,
in applying the requirements described herein, our qualified REIT subsidiaries
will be ignored, and all assets, liabilities and items of income, deduction, and
credit of those subsidiaries will be treated as our assets, liabilities and
items. A qualified REIT subsidiary is not required to pay federal income tax,
and our ownership of the stock of a qualified REIT subsidiary does not violate
the restrictions on ownership of securities as described below under
Asset Tests. We have received a ruling from the IRS to the effect that
all of the subsidiaries that were held by us prior to January 1, 1992, the
effective date of our election to be taxed as a REIT, will be qualified REIT
subsidiaries upon the effective date of our REIT election. Moreover, with
respect to each subsidiary of ours formed subsequent to January 1, 1992 and
prior to January 1, 1998, we have owned 100% of the stock of that
subsidiary at all times during the period that subsidiary has been in existence.
For tax years beginning on or after January 1, 1998, any corporation, other
than a taxable REIT subsidiary, wholly owned by a REIT is permitted to be
treated as a qualified REIT subsidiary regardless of whether that subsidiary
has always been owned by the REIT.
In the case of a REIT which is a partner in a partnership or a member
in a limited liability company treated as a partnership for federal income tax
purposes, the REIT will be deemed to own its proportionate share of the assets
of the partnership or limited liability company, as the case may be, based on
its interest in partnership capital, subject to special rules relating to the
10% REIT asset test described below. Also, the REIT will be deemed to be
entitled to its proportionate share of the income of that entity. The character
of the assets and gross income of the partnership or limited liability company
will retain the same character in the hands of the REIT for purposes of
Section 856 of the Internal Revenue Code, including satisfying the gross
income tests and the asset tests described below. Thus, our proportionate share
of the assets, liabilities and items of income of the partnerships and limited
liability companies treated as partnerships for federal income tax purposes in
which we are a partner or member will be treated as our assets, liabilities and
items of income for purposes of applying the requirements described in this
prospectus.
Ownership of Interests in Taxable REIT
Subsidiaries. A taxable REIT subsidiary is a corporation other
than a REIT in which a REIT directly or indirectly holds stock, and that has
made a joint election with the REIT to be treated as a taxable REIT subsidiary.
A taxable REIT subsidiary also includes any corporation other than a REIT with
respect to which a taxable REIT subsidiary owns securities possessing more than
35% of the total voting power or value of the outstanding securities of such
corporation. Other than some activities relating to lodging and health care
facilities, a taxable REIT subsidiary may generally engage in any business,
including the provision of customary or noncustomary services to tenants of its
parent REIT.
A taxable REIT subsidiary is subject to federal income tax, and state
and local income tax where applicable, as a regular C corporation. In addition,
sections of the Internal Revenue Code which apply to tax years beginning after
December 31, 2000 generally intended to insure that transactions between a
REIT and its taxable
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REIT subsidiary occur at arms length and on commercially reasonable
terms, include a provision that may prevent a taxable REIT subsidiary from
deducting interest on debt funded directly or indirectly by its parent REIT if
certain tests regarding the taxable REIT subsidiarys debt to equity ratio and
interest expense are not satisfied. See Asset Tests. A REITs ownership
of securities of taxable REIT subsidiaries will not be subject to the 10% or 5%
asset test described below, and their operations will be subject to the
provisions described above. See Asset Tests.
As a result of the modifications to the sections of the Internal
Revenue Code which are described above and which are effective for taxable years
beginning after December 31, 2000, we modified our ownership of Kimco
Realty Service, Inc. (the Service Company). Effective January 1, 2001, we
made a joint election with the Service Company to treat the Service Company as a
taxable REIT subsidiary. In addition, effective January 1, 2001, we
contributed the note that was issued to us from the Service Company to the
capital of the Service Company and acquired 100% of the voting stock of the
Service Company. Thus, we currently own 100% of the stock of the Service Company
and there is no debt outstanding between the Service Company and us. In
addition, we currently hold an interest in other taxable REIT subsidiaries and
may acquire securities in additional taxable REIT subsidiaries in the future.
Income Tests. We must satisfy two gross income
requirements annually to maintain our qualification as a REIT:
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First, each taxable year we must derive directly or
indirectly at least 75% of our gross income, excluding gross income from
prohibited transactions, from (a) investments relating to real
property or mortgages on real property, including rents from real property
and, in some circumstances, interest or (b) some type of temporary
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Second, each taxable year we must derive at least 95% of
our gross income, excluding gross income from prohibited transactions,
from (a) the real property investments described above,
(b) dividends, interest and gain from the sale or disposition of
stock or securities or (c) from any combination of the foregoing.
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For these purposes, the term interest generally does not include
any amount received or accrued, directly or indirectly, if the determination of
that amount depends in whole or in part on the income or profits of any person.
However, an amount received or accrued generally will not be excluded from the
term interest solely by reason of being based on a fixed percentage or
percentages of receipts or sales.
Rents we receive from a tenant will qualify as rents from real
property in satisfying the gross income requirements for a REIT described above
only if the following conditions are met:
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First, the amount of rent must not be based in whole or in
part on the income or profits of any person. However, an amount received
or accrued generally will not be excluded from the term rents from real
property solely by reason of being based on a fixed percentage or
percentages of receipts or sales. |
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Second, we, or an actual or constructive owner of 10% or
more of our capital stock, must not actually or constructively own 10% or
more of the interests in the assets or net profits of the tenant, or, if
the tenant is a corporation, 10% or more of the voting power or value of
all classes of stock of the tenant. Rents received from such tenant that
is a taxable REIT subsidiary, however, will not be excluded from the
definition of rents from real property if at least 90% of the space at
the property to which the rents relate is leased to third parties, and the
rents paid by the taxable REIT subsidiary are substantially comparable to
rents paid by our other tenants for comparable space. Whether rents paid
by our taxable REIT subsidiary are substantially comparable to rents paid
by our other tenants is determined at the time the lease with the taxable
REIT subsidiary is entered into, extended, and modified, if such
modification increases the rents due under such lease. Notwithstanding the
foregoing, however, if a lease with a controlled taxable REIT subsidiary
is modified and such modification results in an increase in the rents
payable by such taxable REIT subsidiary, any such increase will not
qualify as rents from real property. For purposes of this rule, a
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taxable REIT subsidiary in which we own stock possessing
more than 50% of the voting power or more than 50% of the total value of
the outstanding stock of such taxable REIT subsidiary.
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Third, rent attributable to personal property, leased in
connection with a lease of real property, is not greater than 15% of the
total rent received under the lease. If this condition is not met, then
the portion of the rent attributable to personal property will not qualify
as rents from real property. |
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Finally, we generally must not operate or manage our
property or furnish or render services to our tenants, subject to a 1% de
minimis exception, other than through an independent contractor from whom
we derive no revenue. We may, however, directly perform services that are
usually or customarily rendered in connection with the rental of space
for occupancy only and are not otherwise considered rendered to the
occupant of the property. In addition, we may employ a taxable REIT
subsidiary which may be wholly or partially owned by us to provide, on an
arms length basis, both customary and noncustomary services to our
tenants without causing the rent we receive from those tenants to fail to
qualify as rents from real property. Any amounts we receive from a
taxable REIT subsidiary with respect to the taxable REIT subsidiarys
provision of noncustomary services will, however, be nonqualified income
under the 75% gross income test and, except to the extent received through
the payment of dividends, the 95% gross income test. |
We have received a ruling from the Internal Revenue Service providing
that the performance of the types of services provided by us will not cause the
rents received with respect to those leases to fail to qualify as rents from
real property. In addition, we generally do not intend to receive rent which
fails to satisfy any of the above conditions. Notwithstanding the foregoing, we
may have taken and may continue to take some of the actions set forth above to
the extent we believe those actions will not, based on the advice of our tax
counsel, jeopardize our status as a REIT.
Income we receive that is attributable to the rental of parking
spaces at the properties will constitute rents from real property for purposes
of the REIT gross income tests if certain services provided with respect to the
parking spaces are performed by independent contractors from whom we derive no
revenue, either directly or indirectly, or by a taxable REIT subsidiary, and
certain other conditions are met. We believe that the income we receive that is
attributable to parking spaces meets these tests and, accordingly, will
constitute rents from real property for purposes of the REIT gross income tests.
From time to time, we enter into hedging transactions with respect to
one or more of our assets or liabilities. Our hedging activities may include
entering into interest rate swaps, caps, and floors, options to purchase these
items, and futures and forward contracts. Any income we derive from a hedging
transaction will be nonqualifying income for purposes of the 75% gross income
test. Except to the extent provided by Treasury Regulations, however, income
from a hedging transaction, including gain from the sale or disposition of such
a transaction, entered into prior to January 1, 2005 will be qualifying
income for purposes of the 95% gross income test, but only to the extent that
the transaction hedges indebtedness incurred or to be incurred by us to acquire
or carry real estate. Income from such a hedging transaction entered into on or
after January 1, 2005 that is clearly identified as such as specified in
the Internal Revenue Code will not constitute gross income for purposes of the
95% gross income test, and therefore will be exempt from this test. The term
hedging transaction, as used above, generally means any transaction we enter
into in the normal course of our business primarily to manage risk of interest
rate changes or fluctuations with respect to borrowings made or to be made by
us.
To the extent that we hedge with other types of financial
instruments, the income from those transactions is not likely to be treated as
qualifying income for purposes of the gross income tests. We intend to structure
any hedging transactions in a manner that does not jeopardize our status as a
REIT. To the extent our taxable REIT subsidiary pays dividends, such dividend
income will qualify under the 95%, but not the 75%, REIT gross income test. We
intend to monitor the amount of the dividend and other income from our taxable
REIT subsidiaries and we intend to take actions to keep this income, and any
other nonqualifying income, within the limitations of the REIT income tests.
While we expect these actions will prevent a violation of the REIT income tests,
we cannot guarantee that such actions will in all cases prevent such a
violation.
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If we fail to satisfy one or both of the 75% or 95% gross income
tests for any taxable year, we may nevertheless qualify as a REIT if we are
entitled to relief under the Internal Revenue Code. Commencing with our taxable
year beginning January 1, 2005, we may avail ourselves of the relief
provisions if:
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following our identification of the failure to meet the 75%
or 95% gross income tests for any taxable year, we file a schedule with
the Internal Revenue Service setting forth each item of our gross income
for purposes of the 75% or 95% gross income tests for such taxable year in
accordance with Treasury Regulations to be issued; and |
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our failure to meet these tests was due to reasonable cause
and not due to willful neglect. |
It is not possible, however, to state whether in all circumstances we
would be entitled to the benefit of these relief provisions. As discussed above
under General, even if these relief provisions apply, a tax would be
imposed with respect to our nonqualifying income. We may not always be able to
comply with the gross income tests for REIT qualification despite periodic
monitoring of our income.
Prohibited Transaction Income. Any gain that we realize on the sale
of any property held as inventory or otherwise held primarily for sale to
customers in the ordinary course of business will be treated as income from a
prohibited transaction that is subject to a 100% penalty tax. This prohibited
transaction income may also have an adverse effect upon our ability to satisfy
the income tests for qualification as a REIT. Under existing law, whether
property is held as inventory or primarily for sale to customers in the ordinary
course of business is a question of fact that depends on all the facts and
circumstances with respect to the particular transaction. We hold our properties
for investment with a view to long-term appreciation, we are engaged in the
business of acquiring, developing, owning and operating our properties and we
make such occasional sales of the properties as are consistent with our
investment objectives. There can be no assurance, however, that the Internal
Revenue Service might not contend that one or more of those sales is subject to
the 100% penalty tax.
Penalty Tax. Any redetermined rents, redetermined
deductions or excess interest we generate will be subject to a 100% penalty tax.
In general, redetermined rents are rents from real property that are overstated
as a result of services furnished by a taxable REIT subsidiary to any of our
tenants, and redetermined deductions and excess interest represent amounts that
are deducted by a taxable REIT subsidiary for amounts paid to us that are in
excess of the amounts that would have been deducted based on arms length
negotiations. Rents we receive will not constitute redetermined rents if they
qualify for the safe harbor provisions contained in the Internal Revenue Code.
Safe harbor provisions are provided where:
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Amounts are received by a REIT for services customarily
furnished or rendered in connection with the rental of real property. This
safe harbor, however, is no longer available commencing with our taxable
year beginning January 1, 2005; |
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Amounts are excluded from the definition of impermissible
tenant service income as a result of satisfying a 1% de minimis exception;
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The taxable REIT subsidiary renders a significant amount of
similar services to unrelated parties and the charges for such services
are substantially comparable; |
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Rents paid to the REIT by tenants who are not receiving
services from the taxable REIT subsidiary are substantially comparable to
the rents paid by the REITs tenants leasing comparable space who are
receiving such services from the taxable REIT subsidiary and the charge
for the services is separately stated; and |
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The taxable REIT subsidiarys gross income from the service
is not less than 150% of the subsidiarys direct cost in furnishing the
service. |
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Asset Tests. At the close of each quarter of our
taxable year, we also must satisfy the following tests relating to the nature
and composition of our assets.
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First, at least 75% of the value of our total assets must
be represented by real estate assets, cash, cash items and government
securities. For purposes of this test, real estate assets include stock or
debt instruments that are purchased with the proceeds of a stock offering
or a long-term public debt offering with a term of at least five years,
but only for the one-year period beginning on the date we receive these
proceeds. |
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Second, not more than 25% of our total assets may be
represented by securities other than those includible in the 75% asset
test. |
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Third, for taxable years ending on or prior to
December 31, 2000, of the investments included in the 25% asset
class, the value of any one issuers securities owned by us may not exceed
5% of the value of our total assets and we may not own more than 10% of
any one issuers outstanding voting securities. |
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Finally, for taxable years beginning after
December 31, 2000, (a) not more than 20% of the value of our
total assets may be represented by securities of one or more taxable REIT
subsidiaries and (b) except for the securities of a taxable REIT
subsidiary and securities included in the 75% asset test, not more than 5%
of the value of our assets may be represented by securities of any one
issuer and we may not own more than 10% of the total vote or value of the
outstanding securities of any one issuer. Certain types of securities,
including certain straight debt securities, are disregarded as
securities solely for purposes of the 10% value test. In addition,
commencing with our taxable year beginning January 1, 2005, solely
for the purposes of the 10% value test, the determination of our interest
in the assets of a partnership or limited liability company in which we
own an interest will be based on our proportionate interest in any
securities issued by the partnership or limited liability company,
excluding for these purposes securities described in the Internal Revenue
Code. |
We currently have numerous direct and indirect wholly-owned
subsidiaries. As set forth above, the ownership of more than 10% of the voting
securities of any one issuer by a REIT is prohibited unless such subsidiary is a
taxable REIT subsidiary. However, if our subsidiaries are qualified REIT
subsidiaries as defined in the Internal Revenue Code, those subsidiaries will
not be treated as separate corporations for federal income tax purposes. Thus,
our ownership of stock of a qualified REIT subsidiary will not cause us to
fail the asset tests.
Prior to January 1, 2001, we owned 100% of the nonvoting
preferred stock of the Service Company and did not own any of the voting
securities of the Service Company. Effective January 1, 2001, we made a
joint election with the Service Company to treat the Service Company as a
taxable REIT subsidiary. In addition, effective January 1, 2001, we acquired
100% of the voting stock of the Service Company and currently own 100% of the
stock of the Service Company. We believe, and will represent to our counsel for
purposes of its opinion, that (i) the value of the securities of the
Service Company held by us did not exceed at the close of any quarter during a
taxable year that ended on or prior to December 31, 2000 5% of the total
value of our assets and (ii) the value of the securities of all our taxable
REIT subsidiaries has not exceeded and will not exceed more than 20% of the
value of our total assets at the close of each quarter during a taxable year
that begins after December 31, 2000. Our tax counsel, in rendering its
opinion as to our qualification as a REIT, will be relying on our
representations to that effect with respect to the value of those securities and
assets. No independent appraisals will be obtained to support this conclusion.
There can be no assurance that the Internal Revenue Service will not contend
that the value of the securities of the Service Company held by us exceeds the
applicable value limitation.
After initially meeting the asset tests at the close of any quarter,
we will not lose our status as a REIT for failure to satisfy the asset tests at
the end of a later quarter solely by reason of changes in asset values. If the
failure to satisfy the asset tests results from an acquisition of securities or
other property during a quarter, the failure can be cured by the disposition of
sufficient nonqualifying assets within 30 days after the close of the
quarter. We intend to maintain adequate records of the value of our assets to
ensure compliance with the asset tests and to take such other actions within
30 days after the close of any quarter as may be required to cure any
noncompliance. If we fail to
45
cure any noncompliance with the asset tests within the 30 day
cure period, we would cease to qualify as a REIT unless we are eligible for
certain relief provisions discussed below.
Certain relief provisions may be available to us if we discover a
failure to satisfy the asset tests described above after the 30 day cure
period. Under these provisions, we will be deemed to have met the 5% and 10%
REIT asset tests if the value of our nonqualifying assets (i) does not
exceed the lesser of (a) 1% of the total value of our assets at the end of
the applicable quarter or (b) $10,000,000 and (ii) we dispose of the
nonqualifying assets or otherwise satisfy such tests within (a) six months
after the last day of the quarter in which the failure to satisfy the asset
tests is discovered or (b) the period of time prescribed by Treasury
Regulations to be issued. For violations of any asset tests due to reasonable
cause and not due to willful neglect and that are, in the case of the 5% and 10%
asset tests, in excess of the de minimis exception described above, we may avoid
disqualification as a REIT after the 30 day cure period, by taking steps
including (i) the disposition of sufficient assets to meet the asset test
within (a) six months after the last day of the quarter in which the
failure to satisfy the asset tests is discovered or (b) the period of time
prescribed by Treasury Regulations to be issued, (ii) paying a tax equal to
the greater of (a) $50,000 or (b) the highest corporate tax rate
multiplied by the net income generated by the nonqualifying assets, and
(iii) disclosing certain information to the Internal Revenue Service.
Although we believe we have satisfied the asset tests described above and plan
to take steps to ensure that we satisfy such tests for any quarter with respect
to which retesting is to occur, there can be no assurance that we will always be
successful or will not require a reduction in our overall interest in an issuer
(including a taxable REIT subsidiary). If we fail to cure any noncompliance with
the asset tests in a timely manner and the relief provisions described above are
not available, we would cease to qualify as a REIT. See Failure to
Qualify below.
Annual Distribution Requirements. To maintain our
qualification as a REIT, we are required to distribute dividends, other than
capital gain dividends, to our stockholders in an amount at least equal to the
sum of:
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90% of our REIT taxable income, and |
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90% of our after tax net income, if any, from foreclosure
property; minus |
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the excess of the sum of specified items of non-cash income
items over 5% of our REIT taxable income. |
Our REIT taxable income is computed without regard to the dividends
paid deduction and our net capital gain. In addition, for purposes of this test,
non-cash income items includes income attributable to leveled stepped rents,
original issue discount or purchase money discount debt, cancellation of
indebtedness, and a like-kind exchange that is later determined to be taxable.
In addition, if we dispose of any asset we acquired from a
corporation which is or has been a C corporation in a transaction in which our
basis in the asset is determined by reference to the basis of the asset in the
hands of that C corporation, within the ten-year period following our
acquisition of such asset, we would be required to distribute at least 90% of
the after-tax gain, if any, we recognized on the disposition of the asset, to
the extent that gain does not exceed the excess of (a) the fair market
value of the asset, over (b) our adjusted basis in the asset, in each case,
on the date we acquired the asset.
We generally must pay, or be treated as paying, the distributions
described above in the taxable year to which they relate. At our election, a
distribution will be treated as paid in a taxable year if it is declared before
we timely file our tax return for such year and paid on or before the first
regular dividend payment after that declaration, provided such payment is made
during the twelve-month period following the close of such year. These
distributions generally are taxable to our stockholders, other than tax-exempt
entities, in the year in which paid. This is so even though distributions relate
to the prior years for purposes of our 90% distribution requirement. The amount
distributed must not be preferential. To avoid being preferential, every
stockholder of the class of stock to which a distributions is made must be
treated the same as every other stockholder of that class, and no class of stock
may be treated other than according to its dividend rights as a class. To the
extent that we do not distribute all of our net capital gain or distribute at
least 90%, but less than 100%, of our REIT taxable income, as adjusted, we will
be subject to tax on the undistributed amount at regular corporate tax rates. We
believe we have made, and intend to
46
continue to make, timely distributions sufficient to satisfy these
annual distribution requirements and to minimize our corporate tax obligations.
We expect that our REIT taxable income will be less than our cash
flow because of depreciation and other non-cash charges included in computing
our REIT taxable income. Accordingly, we anticipate that we generally will have
sufficient cash or liquid assets to enable us to satisfy our distribution
requirement. However, it is possible that, from time to time, we may not have
sufficient cash or other liquid assets to meet the distribution requirement due
to timing differences between the actual receipt of income and actual payment of
deductible expenses and the inclusion of that income and deduction of those
expenses in arriving at our taxable income. In the event that those timing
differences occur, in order to meet the distribution requirement, we may be
required to borrow funds in order to pay dividends, or pay dividends in the form
of taxable stock dividends.
Under some circumstances, we may be able to rectify an inadvertent
failure to meet the 90% distribution requirement for a year by paying
deficiency dividends to our stockholders in a later year, which may be
included in our deduction for dividends paid for the earlier year. Thus, we may
be able to avoid being taxed on amounts distributed as deficiency dividends. We
will be required, however, to pay interest based upon the amount of any
deduction claimed for deficiency dividends and would be subject to any
applicable penalty provisions.
In addition, we will be required to pay a 4% excise tax to the extent
we fail to distribute during each calendar year, or in the case of distributions
with declaration and record dates falling in the last three months of the
calendar year, by the end of January immediately following such year, at least
the sum of 85% of our REIT ordinary income for such year and 95% of our REIT
capital gain income for the year, plus, in each case, any undistributed taxable
income from prior periods. Any REIT taxable income and net capital gain on which
this excise tax is imposed for any year is treated as an amount distributed that
year for purposes of calculating the tax.
For purposes of the 90% distribution requirement and excise tax
described above, distributions declared during the last three months of the
taxable year, payable to our stockholders of record on a specified date during
such period and paid during January of the following year, will be treated as
paid by us and received by our stockholders on December 31 of the year in
which they are declared.
Failure to Qualify. Commencing with our taxable
year beginning January 1, 2005, specified cure provisions are available to
us in the event that we violate a provision of the Internal Revenue Code that
would otherwise result in our failure to qualify as a REIT. Except with respect
to violations of the REIT income tests and assets tests (for which the cure
provisions are described above), and provided the violation is due to reasonable
cause and not due to willful neglect, these cure provisions generally impose a
$50,000 penalty for each violation in lieu of a loss of REIT status. If we fail
to qualify for taxation as a REIT in any taxable year, and the relief provisions
do not apply, we will be subject to tax, including any applicable alternative
minimum tax, on our taxable income at regular corporate rates. That failure to
qualify for taxation as a REIT could have an adverse effect on the market value
and marketability of the securities offered by this prospectus. Distributions to
stockholders in any year in which we fail to qualify as a REIT will not be
deductible by us nor will they be required to be made. As a result, our failure
to qualify as a REIT would substantially reduce the cash available for
distribution by us to our stockholders. In that event, to the extent of current
and accumulated earnings and profits, all distributions to stockholders will be
taxable as ordinary income and, subject to specified limitations in the Internal
Revenue Code, corporate distributees may be eligible for the dividends received
deduction. Unless entitled to relief under specific statutory provisions, we
will also 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 we would be entitled to that statutory
relief.
Other Tax Matters. Some of our investments are
through partnerships which may involve special tax risks. These risks include
possible challenge by the IRS of (a) allocations of income and expense
items, which could affect the computation of our income, and (b) the status
of the partnerships as partnerships, as opposed to associations taxable as
corporations, for income tax purposes. Treasury Regulations that are effective
as of January 1, 1997 provide that a domestic partnership is generally
taxed as a partnership unless it elects to be taxed as an association taxable as
a corporation. None of the partnerships in which we are a partner has made or
intends to make that election. These Treasury Regulations provide that a
partnerships claimed classification will be respected for periods prior to
January 1, 1997 if the entity had a reasonable basis for its claimed
classification, and that partnership
47
had not been notified in writing on or before May 8, 1996 that
the classification of that entity was under examination. If any of the
partnerships were treated as an association for a prior period, and (i) if
our ownership in any of those partnerships exceeded 10% of the partnerships
voting interest or (ii) the value of that interest exceeded 5% of the value
of our assets, we could cease to qualify as a REIT for that period and possibly
future periods. Moreover, the deemed change in classification of that
partnership from an association to a partnership effective as of January 1,
1997 would be a taxable event. We believe that each of the partnerships has been
properly treated for tax purposes as a partnership, and not as an association
taxable as a corporation. However, no assurance can be given that the Internal
Revenue Service may not successfully challenge the status of any of the
partnerships.
We may be subject to state or local taxation in various state or
local jurisdictions, including those in which we transact business. Our state or
local tax treatment may not conform to the federal income tax consequences
described above. Consequently, prospective investors should consult their own
tax advisors regarding the effect of state and local tax laws on an investment
in us.
PLAN OF
DISTRIBUTION
We may sell the securities offered by this prospectus to one or more
underwriters for public offering and sale by them or may sell the securities
offered by this prospectus to investors directly or through agents. Any
underwriter or agent involved in the offer and sale of the securities offered by
this prospectus will be named in the applicable prospectus supplement. We have
reserved the right to sell or exchange securities directly to investors on our
or their own behalf in those jurisdictions where we are authorized to do so.
We may distribute the securities from time to time in one or more
transactions:
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at a fixed price or prices, which may be changed; |
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at market prices prevailing at the time of sale; |
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at prices related to such prevailing market prices; or
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at negotiated prices. |
Underwriters may offer and sell the securities offered by this
prospectus at a fixed price or prices, which may be changed, at prices related
to the prevailing market prices at the time of sale or at negotiated prices. We
also may, from time to time, authorize underwriters acting as our agents to
offer and sell the securities offered by this prospectus upon the terms and
conditions as are set forth in the applicable prospectus supplement. In
connection with the sale of securities offered by this prospectus, underwriters
may be deemed to have received compensation from us in the form of underwriting
discounts or commissions and may also receive commissions from purchasers of
securities offered by this prospectus for whom they may act as agent.
Underwriters may sell the securities offered by this prospectus to or through
dealers, and those dealers may receive compensation in the form of discounts,
concessions or commissions from the underwriters and/or commissions from the purchasers for
whom they may act as agent.
Any underwriting compensation paid by us to underwriters or agents in
connection with the offering of the securities offered by this prospectus, and
any discounts, concessions or commissions allowed by underwriters to
participating dealers, will be set forth in the applicable prospectus
supplement. Underwriters, dealers and agents participating in the distribution
of the securities offered by this prospectus may be deemed to be underwriters,
and any discounts and commissions received by them and any profit realized by
them on resale of the securities offered by this prospectus may be deemed to be
underwriting discounts and commissions, under the Securities Act. Underwriters,
dealers and agents may be entitled, under agreements entered into with us, to
indemnification against and contribution toward certain civil liabilities,
including liabilities under the Securities Act.
If so indicated in the applicable prospectus supplement, we will
authorize dealers acting as our agents to solicit offers by certain institutions
to purchase the securities offered by this prospectus from us at the public
48
offering price set forth in that prospectus supplement pursuant to
delayed delivery contracts providing for payment and delivery on the date or
dates stated in that prospectus supplement.
Each delayed delivery contract will be for an amount not less than,
and the aggregate principal amount of the securities offered by this prospectus
sold pursuant to delayed delivery contracts shall be not less nor more than, the
respective amounts stated in the applicable prospectus supplement. Institutions
with whom delayed delivery contracts, when authorized, may be made include
commercial and savings banks, insurance companies, pension funds, investment
companies, educational and charitable institutions, and other institutions but
will in all cases be subject to our approval. Delayed delivery contracts will
not be subject to any conditions except:
(1) the purchase by an institution of the securities offered by
this prospectus covered by its delayed delivery contracts shall not at the time
of delivery be prohibited under the laws of any jurisdiction in the United
States to which that institution is subject, and
(2) if the securities offered by this prospectus are being sold
to underwriters, we shall have sold to those underwriters the total principal
amount of the securities offered by this prospectus less the principal amount
thereof covered by delayed delivery contracts.
To facilitate the offering of securities, certain persons
participating in the offering may engage in transactions that stabilize,
maintain, or otherwise affect the price of the securities. This may include
over-allotments or short sales of the securities, which involve the sale by
persons participating in the offering of more securities than we sold to them.
In these circumstances, these persons would cover such over-allotments or short
positions by making purchases in the open market or by exercising their
over-allotment option, if any. In addition, these persons may stabilize or
maintain the price of the securities by bidding for or purchasing securities in
the open market or by imposing penalty bids, whereby selling concessions allowed
to dealers participating in the offering may be reclaimed if securities sold by
them are repurchased in connection with stabilization transactions. The effect
of these transactions may be to stabilize or maintain the market price of the
securities at a level above that which might otherwise prevail in the open
market. These transactions may be discontinued at any time.
Certain of the underwriters and their affiliates may be customers of,
engage in transactions with, and perform services for us and our subsidiaries in
the ordinary course of business.
EXPERTS
The financial statements and managements assessment of the
effectiveness of internal control over financial reporting (which is included in
Managements Report on Internal Control over Financial Reporting) for Kimco
Realty Corporation and the audited combined historical summary of revenues and
certain expenses of the Puerto Rico Portfolio incorporated in this prospectus by
reference to the Annual Report on Form 10-K for the year ended
December 31, 2005 and the Current Report on Form 8-K dated May 8, 2006 of Kimco
Realty Corporation, respectively, have been so incorporated in reliance on the
reports of PricewaterhouseCoopers LLP, an independent registered accounting
firm, given on the authority of said firm as experts in auditing and accounting.
LEGAL
MATTERS
The validity of the securities offered by this prospectus will be
passed upon for us by Latham & Watkins LLP, New York, New York. Any
underwriters, dealers or agents will be advised about the other issues relating
to any offering by their own legal counsel. Latham & Watkins LLP and
any counsel for any underwriters, dealers or agents will rely on Venable LLP,
Baltimore, Maryland, as to certain matters of Maryland law. Certain members of
Latham & Watkins LLP and their families own beneficial interests in
less than 1% of our common stock.
49
Table of Contents
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