-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MA7V/aiHjmMiPC5vz9uon+k4NY3Tu+h2TjEc3MgsOTDQlbHWUYbkbmIvDrP0Zjr/ lDUdA99kUhEvUsioJ6UQIw== 0000892626-96-000252.txt : 19960726 0000892626-96-000252.hdr.sgml : 19960726 ACCESSION NUMBER: 0000892626-96-000252 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 19960725 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMLI RESIDENTIAL PROPERTIES TRUST CENTRAL INDEX KEY: 0000914724 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 363925916 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3 SEC ACT: 1933 Act SEC FILE NUMBER: 333-08819 FILM NUMBER: 96598926 BUSINESS ADDRESS: STREET 1: 125 S WACKER DR STREET 2: STE 3100 CITY: CHICAGO STATE: IL ZIP: 60606 BUSINESS PHONE: 3129845037 FORMER COMPANY: FORMER CONFORMED NAME: AMLI RESIDENTIAL PROPERTIES INC DATE OF NAME CHANGE: 19931112 S-3 1 As filed with the Securities and Exchange Commission on July 25, 1996 Registration No. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 AMLI RESIDENTIAL PROPERTIES TRUST (Exact name of Registrant as specified in its charter) Maryland 36-3925916 (State of organization) (I.R.S. Employer Identification Number) ------------------------------ 125 South Wacker Drive Suite 3100 Chicago, Illinois 60606 (312) 984-5037 (Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices) ------------------------------ ALLAN J. SWEET 125 South Wacker Drive Suite 3100 Chicago, Illinois 60606 (312) 984-5037 (Name, address, including zip code, and telephone number, including area code, of agent for service) ------------------------------ COPY TO: Edward J. Schneidman Mayer, Brown & Platt 190 South LaSalle Street Chicago, Illinois 60603 Approximate date of commencement of proposed sale to the public: From time to time after the Registration Statement becomes effective. ------------------------------ If the only securities being registered on this form are being offered pursuant to dividend or interest reinvestment plans, please check the following box: [ ] If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box: [X] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] _________________________ If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] ____________________ If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ] CALCULATION OF REGISTRATION FEE
TITLE OF EACH CLASS PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF OF SECURITIES TO AMOUNT TO OFFERING PRICE AGGREGATE OFFERING REGISTRATION BE REGISTERED BE REGISTERED PER SHARE (1) PRICE (1) FEE - ------------------ ------------- --------------- ------------------ ------------ Common Shares of Beneficial Interest, par value $0.01 143,500 per share shares $20.375 $2,923,813 $1,008 (1) Estimated solely for purposes of determining the registration fee, based on the average of the high and low sales price on July 23, 1996. ------------------------------ The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any State in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such State. PROSPECTUS SUBJECT TO COMPLETION PRELIMINARY PROSPECTUS DATED JULY 25, 1996 AMLI RESIDENTIAL PROPERTIES TRUST 143,500 Common Shares This Prospectus relates to 143,500 Common Shares of Beneficial Interest, par value $.01 per share (the "Common Shares" and such 143,500 Common Shares, the "Shares"), of Amli Residential Properties Trust, a Maryland real estate investment trust (the "Company"), which may be offered from time to time by certain selling shareholder (the "Selling Shareholder"). The Shares may be issued from time to time upon exchange of 143,500 limited partnership interests ("Units") in Amli Residential Properties, L.P. (the "Operating Partnership") which were issued to the Selling Shareholder on May 3, 1996, as consideration in the acquisition by the Company of certain real property. See "Selling Shareholder". The Shares are being registered to permit public secondary trading of the Shares from time to time after the date of this Prospectus, but the registration of the Shares does not necessarily mean that any of the Shares will be offered or sold by the Selling Shareholder. The Common Shares are listed on the New York Stock Exchange (the "NYSE") under the symbol "AML." To ensure that the Company maintains its qualification as a real estate investment trust ("REIT"), ownership by any person is limited to 5% of the outstanding Common Shares and preferred shares of beneficial interest of the Company, with certain exceptions. See "Description of Capital Shares-Description of Common Shares-Restrictions on Transfer." The Selling Shareholder may from time to time offer and sell the Shares on the NYSE or otherwise at market prices then prevailing or at prices and upon terms then obtainable. Sales may be made in ordinary brokerage transactions, in block transactions, in privately negotiated transactions, pursuant to Rule 144 ("Rule 144") under the Securities Act of 1933, as amended (the "Securities Act"), or otherwise. If the Shares are sold through brokers, customary brokerage commissions and charges are expected to be paid by the Selling Shareholder. The Company will not receive any of the proceeds from the sale of any of the Shares by the Selling Shareholder but has agreed to bear certain expenses of registration and sale of the Shares. On July 23, 1996, the last reported sale price of the Common Stock on the NYSE was $20.375 per share. ------------------------------ THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ------------------------------ THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL. ------------------------------ The date of this Prospectus is ____________________, 1996 No person is authorized in connection with any offering made hereby to give any information or to make any representation not contained in this Prospectus, and, if given or made, such information or representation must not be relied upon as having been authorized by the Company or the Selling Shareholder. This Prospectus does not constitute an offer to sell or a solicitation of an offer to buy any security other than the Common Shares offered hereby, nor does it constitute an offer to sell or a solicitation of an offer to buy any of the securities offered hereby to any person in any jurisdiction in which it is unlawful to make such an offer or solicitation to such person. Neither the delivery of this Prospectus nor any sale made hereunder shall under any circumstance create any implication that the information contained herein is correct as of any date subsequent to the date hereof. AVAILABLE INFORMATION The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files reports and other information with the Securities and Exchange Commission (the "Commission"). Reports, proxy material and other information concerning the Company can be inspected and copied at the offices of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 or at its regional offices, Citicorp Center, 500 West Madison Street, Chicago, Illinois 60661 and Seven World Trade Center, New York, New York 10048. Copies of such material can be obtained from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. The Company's outstanding Common Shares are listed on the New York Stock Exchange (the "NYSE") under the symbol "AML", and all such reports, proxy material and other information filed by the Company with the NYSE may be inspected at the offices of the NYSE at 20 Broad Street, New York, New York 10005 or at the Commission's worldwide web site at http://www.sec.gov. The Company has filed with the Commission a registration statement on Form S-3 (together with all amendments and exhibits, the "Registration Statement") under the Securities Act of 1933, as amended (the "Securities Act"), with respect to the securities offered hereby. This prospectus ("Prospectus"), which constitutes a part of the Registration Statement, does not contain all the information set forth in the Registration Statement, certain items of which are contained in exhibits to the Registration Statement as permitted by the rules and regulations of the Commission. Statements made in this Prospectus as to the content of any contract, agreement or other document referred to are not necessarily complete. With respect to each such contract, agreement or other document filed or incorporated by reference as an exhibit to the Registration Statement, reference is made to the exhibit for a more complete description of the matter involved, and each such statement shall be deemed qualified in its entirety by such reference. INCORPORATION BY REFERENCE The following documents filed by the Company with the Commission (File No. 1-12784) pursuant to the Exchange Act are incorporated by reference in this Prospectus: (1) The Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995; (2) The Company's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1996; (3) The Company's Current Reports on Form 8-K dated January 18, 1996 and January 30, 1996 (two Reports dated this date); and (4) Description of the Common Shares included in the Registration Statement on Form 8-A dated February 1, 1994. All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to the termination of the offering made hereby shall be deemed to be incorporated by reference in this Prospectus and to be a part hereof from the date of filing of such documents. 2 Any statement contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein, or in any other subsequently filed document which is or is deemed to be incorporated by reference herein, modifies or supersedes any such statement. Any such statement so modified or superseded will not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. The Company will provide without charge to each person, including any beneficial owner, to whom this Prospectus is delivered, on the request of such person, a copy of any of the foregoing documents incorporated herein by reference (other than the exhibits to such documents unless such exhibits are specifically incorporated by reference into such documents). Requests should be directed to Amli Residential Properties Trust, 125 South Wacker Drive, Chicago, Illinois 60606, Attention: Secretary, telephone (312) 984-5037. 3 THE COMPANY The Company and its affiliates constitute a self-administered and self-managed real estate investment trust (a "REIT") which was organized in February, 1994 to continue and expand the multifamily property business conducted by Amli Realty Co. and its affiliates ("Amli") since 1980. The Company and its affiliates own, manage, lease, acquire and develop institutional quality apartment communities. The Company's communities (the "Communities") are located in specific markets in the Southwest, Southeast and Midwest areas of the United States. The Company also holds general partnership interests in co-investment ventures involving residential apartment communities (the "Co-investment Communities"). Additionally, the Company engages in development activities on its own and through co-investment joint ventures. The business of the Company is operated through the Operating Partnership, Amli Management Company (the "Management Company"), Amli Institutional Advisors, Inc. ("AIA") and Amli Residential Construction, Inc. ("Amrescon" and together with the Management Company and AIA, the "Service Companies"). The Company is the sole general partner of the Operating Partnership, a Delaware limited partnership, through which it owns the Communities and its interests in the Co-Investment Communities. As of July 1, 1996, the Company held an 82% partnership interest in the Operating Partnership. The Management Company provides management and leasing services to each of the Communities, the Co-Investment Communities and several additional properties in which the Company has no interest. AIA, a "QPAM" (qualified professional asset manager), renders real estate investment advice to institutional capital sources, primarily pension plans, endowments, foundations and insurance companies. The Company actively pursues co-investments through relationships administered by AIA, in this way seeking to diversify the sources of its equity capital for investment in apartment communities. Amrescon provides general contracting, construction management and landscaping services to the Company and its managed ventures. The Company was formed as a Maryland real estate investment trust on December 16, 1993. The Company's executive offices are located at 125 South Wacker Drive, Suite 3100, Chicago, Illinois 60606 and its telephone number is (312) 984-5037. The Company's principal office is in Chicago, Illinois with regional offices in Dallas, Texas and Atlanta, Georgia. USE OF PROCEEDS The Company will not receive any of the proceeds of the sale of the Shares offered hereby. All proceeds from the sale of the Shares will be received by the Selling Shareholder. SELLING SHAREHOLDER The name of the Selling Shareholder is Peachtree City Multifamily Partners, L.P. Prior to the offering, the Selling Shareholder owned 143,500 Common Shares (assuming conversion of all Units owned by the Selling Shareholder into Common Shares). The maximum number of Common Shares offered hereby by the Selling Shareholder is 143,500. Since the Selling Shareholder may sell all, some or none of the Shares, no estimate can be made of the number of Shares that will be owned by the Selling Shareholder upon completion of the offering to which this Prospectus relates. Assuming all Common Shares offered hereby are sold, the Selling Shareholder will own no Common Shares after the offering (based on the total number of Common Shares and Units held by the Selling Shareholder as of the date hereof), amounting to less than one percent of the outstanding Common Shares. In 1994, the Operating Partnership acquired land in Marietta, Georgia on which it subsequently built and leased a 232 unit phase of an apartment community. The Selling Shareholder received a $200,000 fee from the seller of the land in connection with this transaction. There were no other transactions and no other material relationships between the Selling Shareholder and the Company or Amli, or any of their affiliates, within the past three years. 4 DESCRIPTION OF CAPITAL SHARES SHARES OF BENEFICIAL INTEREST AND SHAREHOLDER LIABILITY The Declaration of Trust of the Company provides that the Company may issue up to 150,000,000 shares of beneficial interest, par value $.01 per share. No holder of any class of shares of beneficial interest of the Company will have any preemptive right to subscribe for any securities of the Company except as may be granted by the Board of Trustees in authorizing the issuance of a class of preferred shares of beneficial interest. Any class of preferred shares which may be issued in the future, together with the Series A Cumulative Redeemable Preferred Shares of Beneficial Interest, par value $.01 per share (the "Series A Preferred Shares") are referred to herein as "Preferred Shares." The Company's Declaration of Trust authorizes the Trustees to classify or reclassify any unissued Common Shares or Preferred Shares by setting or changing the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications or terms or conditions of redemption. Both Maryland statutory law governing real estate investment trusts organized under the laws of that state and the Company's Declaration of Trust provide that no shareholder of the Company will be personally liable for any obligations of the Company. The Company's Declaration of Trust further provides, with certain limited exceptions, that the Company shall indemnify each shareholder against claims or liabilities to which the shareholder may become subject by reason of his being or having been a shareholder and that the Company shall reimburse each shareholder for all legal and other expenses reasonably incurred by him in connection with any such claim or liability. In addition, it is the Company's policy to include a clause in its contracts, including the Partnership Agreement of the Operating Partnership, which provides that shareholders assume no personal liability for obligations entered into on behalf of the Company. However, with respect to tort claims, contractual claims where shareholder liability is not so negated, claims for taxes and certain statutory liability, a shareholder may, in some jurisdictions, be personally liable to the extent that such claims are not satisfied by the Company. Inasmuch as the Company will carry public liability insurance which it considers adequate, any risk of personal liability to shareholders is limited to situations in which the Company's assets plus its insurance coverage would be insufficient to satisfy the claims against the Company and its shareholders. DESCRIPTION OF COMMON SHARES General The summary of certain terms and provisions of the Common Shares contained in this Prospectus does not purport to be complete and is subject to, and qualified in its entirety by reference to, the terms and provisions of the Company's Declaration of Trust, as amended, and Bylaws, as amended, which are incorporated by reference herein. All outstanding Common Shares issued are duly authorized, fully paid and, except as described under "Shares of Beneficial Interest and Shareholder Liability," non-assessable. Subject to the provisions of the Company's Declaration of Trust regarding Excess Shares (as defined below), each outstanding Common Share entitles the holder thereof to one vote on all matters voted on by shareholders, including the election of Trustees. Holders of Common Shares do not have the right to cumulate their votes in the election of Trustees, which means that the holders of a majority of the outstanding Common Shares can elect all of the Trustees then standing for election. Distributions may be paid to the holders of Common Shares if and when declared by the Board of Trustees of the Company out of funds legally available therefor, subject to the provisions of the Company's Declaration of Trust regarding Excess Shares. The Company currently pays regular quarterly dividends. Holders of Common Shares have no conversion, redemption, preemptive or exchange rights to subscribe to any securities of the Company. If the Company is liquidated, each outstanding Common Share will be entitled to participate pro rata in the assets remaining after payment of, or adequate provision for, all known debts and liabilities of the Company and the rights of holders of any Preferred Shares. The rights of holders of Common Shares are subject to the rights and preferences established by the Board of Trustees for any Preferred Shares which have been or may 5 be issued by the Company. For a description of the rights and preferences of the Series A Preferred Shares, see "Description of Series A Preferred Shares." Restrictions on Transfer The Company's Declaration of Trust contains certain restrictions on the number of Common Shares and Preferred Shares that individual shareholders may own. For the Company to qualify as a REIT under the Code, no more than 50% in value of its shares of beneficial interest (after taking into account options to acquire shares of beneficial interest) may be owned, directly or indirectly, by five or fewer individuals (as defined in the Code to include certain entities and constructive ownership among specified family members) during the last half of a taxable year (other than the first taxable year) or during a proportionate part of a shorter taxable year. The shares of beneficial interest must also be beneficially owned (other than during the first taxable year) by 100 or more persons during at least 335 days of a taxable year or during a proportionate part of a shorter taxable year. Because the Company expects to qualify as a REIT, the Declaration of Trust of the Company contains restrictions on the acquisition of Common Shares and Preferred Shares intended to ensure compliance with these requirements. Subject to certain exceptions specified in the Company's Declaration of Trust, no holder may own, or be deemed to own by virtue of the attribution provisions of the Code, more than 5% (the "Ownership Limit") of the number or value of the issued and outstanding shares of beneficial interest of the Company. The Company's Board of Trustees, upon receipt of a ruling from the Internal Revenue Service (the "Service"), an opinion of counsel or other evidence satisfactory to the Board of Trustees, and upon such other conditions as the Board of Trustees may direct, may also exempt a proposed transferee from the Ownership Limit. As a condition of such exemption, the intended transferee must give written notice to the Company of the proposed transfer no later than the fifteenth day prior to any transfer which, if consummated, would result in the intended transferee owning shares in excess of the Ownership Limit. The Board of Trustees of the Company may require such opinions of counsel, affidavits, undertakings or agreements as it may deem necessary or advisable in order to determine or ensure the Company's status as a REIT. Any transfer of Common Shares or Preferred Shares that would (i) create a direct or indirect ownership of shares in excess of the Ownership Limit, (ii) result in the shares being beneficially owned by fewer than 100 persons as provided in Section 856(a) of the Code, or (iii) result in the Company being "closely held" within the meaning of Section 856(h) of the Code, shall be null and void, and the intended transferee will acquire no rights to the shares. The foregoing restrictions on transferability and ownership will not apply if the Board of Trustees determines, which determination must be approved by the shareholders, that it is no longer in the best interests of the Company to attempt to qualify, or to continue to qualify, as a REIT. The Company's Board of Trustees by resolution has excluded from the foregoing ownership restriction Amli, Gregory T. Mutz and Baldwin & Lyons, Inc. ("Baldwin & Lyons"), a publicly traded casualty insurance company based in Indianapolis which is Amli's largest stockholder, who collectively may own up to 34.9% of the outstanding shares of beneficial interest of the Company as a group, or, subject to certain limitations, individually (subject to the group restrictions) up to 29.9% of the outstanding shares of beneficial interest of the Company. The Company's Declaration of Trust excludes certain investors (and their transferees) from whom apartment communities were obtained in exchange for Units or Common Shares in connection with the formation of the Company and who would exceed the Ownership Limit as a result of the ownership of such Common Shares or the exchange of such Units for Common Shares. In no event will such persons be entitled to acquire additional shares of beneficial interest of the Company such that the five largest beneficial owners of shares of beneficial interest of the Company hold more than 50% of the total outstanding shares. Any purported transfer of shares that would result in a person owning shares in excess of the Ownership Limit or cause the Company to become "closely held" under Section 856(h) of the Code that is not otherwise permitted as provided above will constitute excess shares ("Excess Shares"), which will be transferred pursuant to the Declaration of Trust to the Company as trustee for the exclusive benefit of the person or persons to whom the Excess Shares are ultimately transferred, until such time as the purported transferee retransfers the Excess Shares. While these Excess Shares are held in trust, they will not be entitled to vote or to share in any dividends or other distributions. Subject to the Ownership Limit, the Excess Shares may be transferred by the purported transferee to any person (if the Excess Shares would not be Excess Shares in the hands of such person) at a price not to exceed 6 the price paid by the purported transferee (or, if no consideration was paid, fair market value), at which point the Excess Shares will automatically be exchanged for the shares to which the Excess Shares are attributable. In addition, such Excess Shares held in trust are subject to purchase by the Company at a purchase price equal to the lesser of the price paid for the shares by the purported transferee (or, if no consideration was paid, fair market value) and the fair market value of the shares of beneficial interest (as reflected in the last reported sales price reported on the NYSE on the trading day immediately preceding the relevant date, or if not then traded on the NYSE, the last reported sales price of such shares on the trading day immediately preceding the relevant date as reported on any exchange or quotation system over which such shares may be traded, or if not then traded over any exchange or quotation system, then the market price of such shares on the relevant date as determined in good faith by the Board of Trustees of the Company) on the date the Company elects to purchase. All certificates representing shares of beneficial interest will bear a legend referring to the restrictions described above. Transfer Agent and Registrar Harris Trust and Savings Bank has been appointed as transfer agent and registrar for the Common Shares. DESCRIPTION OF SERIES A PREFERRED SHARES The summary of certain terms and provisions of the Series A Preferred Shares contained in this Prospectus does not purport to be complete and is subject to, and qualified in its entirety by reference to, the terms and provisions of the Articles Supplementary relating to the Series A Preferred Shares and the Company's Declaration of Trust, as amended, and Bylaws, as amended, which are incorporated by reference herein. General The Company's Board of Trustees is authorized to issue, from the authorized but unissued shares of beneficial interest of the Company, preferred shares in series and to establish from time to time the number of preferred shares to be included in such series and to fix the designation and any preferences, conversion and other rights, voting powers, restrictions, limitations as to distributions, qualifications and terms and conditions of redemption of the shares of each such series. The outstanding Series A Preferred Shares are validly issued, fully paid and, except as set forth under "-Shares of Beneficial Interest and Shareholder Liability", nonassessable. The holders of the Series A Preferred Shares have no preemptive rights with respect to any shares of the capital securities of the Company or any other securities of the Company convertible into or carrying rights or options to purchase any such shares. The Series A Preferred Shares are not subject to any sinking fund or other obligation of the Company to redeem or retire the Series A Preferred Shares. Ranking The Series A Preferred Shares will rank senior to the Common Shares with respect to payment of dividends and amounts upon liquidation, dissolution or winding up. While any Series A Preferred Shares are outstanding, the Company may not authorize, create or increase the authorized amount of any class or any security convertible into shares of any class that ranks senior to the Series A Preferred Shares with respect to the payment of dividends or amounts upon liquidation, dissolution or winding up without the consent of the holders of two-thirds of the outstanding Series A Preferred Shares and all other shares of Voting Preferred Shares (as defined below), voting as a single class. However, the Company may create additional classes of shares, increase the authorized number of preferred shares or issue series of preferred shares ranking on a parity with the Series A Preferred Shares with respect, in each case, to the payment of dividends and 7 amounts upon liquidation, dissolution and winding up (a "Parity Share") without the consent of any holder of Series A Preferred Shares. See "- Voting Rights" below. Distributions Holders of the Series A Preferred Shares shall be entitled to receive, when and as declared by the Board of Trustees, out of funds legally available for the payment of distributions, cumulative preferential cash distributions in an amount per share equal to the greater (i) $1.72 per annum or (ii) the cash distribution (determined on each of the quarterly dividend payment dates referred to below) on the number of Common Shares, or portion thereof, into which a Series A Preferred Share is convertible. Such distributions shall be cumulative from the date of original issue and shall be payable quarterly in arrears on the Tuesday which is nearest to the twenty-first (21st) day of February, May, August and November or, if not a business day, the next succeeding business day, (each, a "Dividend Payment Date"). Such distribution and any distribution payable on the Series A Preferred Shares for any partial distribution period will be computed on the basis of the actual number of days in such period. Distributions will be payable to holders of record as they appear in the records of the Company at the close of business on the applicable record date, which shall be on such date designated by the Board of Trustees of the Company for the payment of distributions that is not more than 50 days prior to such Dividend Payment Date (each, a "Dividend Record Date"). Except as provided in the next sentence, no distributions will be declared or paid on any Parity Shares unless full cumulative distributions have been declared and paid or are contemporaneously declared and funds sufficient for payment set aside on the Series A Preferred Shares for all prior distribution periods. If accrued dividends on the Series A Preferred Shares for all prior dividend periods have not been paid in full, then any dividend declared on the Series A Preferred Shares and on any Parity Shares for any dividend period will be declared ratably in proportion to accrued and unpaid dividends on the Series A Preferred Shares and such Parity Shares. The Company will not (i) declare, pay or set apart funds for the payment of any dividend or other distribution with respect to any Junior Shares (as defined below) or (ii) redeem, purchase or otherwise acquire for consideration any Junior Shares through a sinking fund or otherwise (other than a redemption or purchase or other acquisition of Common Shares made for purposes of any employee incentive or benefit plan of the Company or any entity in which the Company, either directly or indirectly, owns more than a 50% economic interest), unless (A) all cumulative dividends with respect to the Series A Preferred Shares and any Parity Shares at the time such dividends are payable have been paid or declared and funds have been set apart for payment of such dividends and (B) sufficient funds have been paid or declared and set apart for the payment of the dividend for the current dividend period with respect to the Series A Preferred Shares and any Parity Shares. The limitations in this paragraph do not restrict the Company's ability to take the actions in this paragraph with respect to any Parity Shares. As used herein, (i) the term "dividend" does not include dividends or other distributions payable solely in Fully Junior Shares on Junior Shares, or in options, warrants or rights to holders of Junior Shares to subscribe for or purchase any Fully Junior Shares, (ii) the term "Junior Shares" means the Common Shares and any other class of capital shares of the Company now or hereafter issued and outstanding that ranks junior to the Series A Preferred Shares as to the payment of distributions or amounts upon liquidation, dissolution and winding up and (iii) the term "Fully Junior Shares" means Junior Shares that rank junior to the Series A Preferred Shares both as to the payment of dividends and amounts upon liquidation, dissolution and winding up. Redemption Except as required by the limitation on ownership (see "-Restrictions on Transfer"), the Series A Preferred Shares are not redeemable prior to January 25, 2001. On and after January 25, 2001 the Company, at its option, upon not less than 30 nor more than 90 days' written notice, may redeem the Series A Preferred Shares, in whole or in part, at any time or from time to time, (i) for one Common Share per Series A Preferred Share (subject to possible future adjustment in certain circumstances) plus accumulated, accrued and unpaid distributions, provided that for twenty (20) consecutive trading days within the thirty (30) trading days ending on the date on which notice 8 of redemption is given by the Company, the closing price of the Common Shares on the NYSE equals or exceeds the conversion price per share (see "- Conversion Rights"), or (ii) cash at a redemption price equal to $20.00 per share, plus accumulated, accrued and unpaid distributions thereon to the date fixed for redemption. If fewer than all of the outstanding Series A Preferred Shares are to be redeemed, the number of shares to be redeemed will be determined by the Company and such shares may be redeemed pro rata from the holders of record of such shares in proportion to the number of such shares held by such holders (with adjustments to avoid redemption of fractional shares) or by lot in a manner determined by the Company. Unless full cumulative distributions on all Series A Preferred Shares shall have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for payment for all past distribution periods and the then current distribution period, no Series A Preferred Shares shall be redeemed or purchased by the Company except pursuant to a purchase or exchange offer made on the same terms to holders of all outstanding Series A Preferred Shares or Parity Shares. Notice of redemption will be mailed at least 30 days but not more than 90 days before the redemption date to each holder of record of Series A Preferred Shares at the address shown on the share transfer books of the Company. Each notice shall state: (i) the redemption date; (ii) the number of Series A Preferred Shares to be redeemed; (iii) the redemption price; (iv) the place or places where certificates for Series A Preferred Shares are to be surrendered for payment of the redemption price; and (v) that distributions on the Series A Preferred Shares will cease to accrue on such redemption date. If fewer than all Series A Preferred Shares are to be redeemed, the notice mailed to each such holder thereof shall also specify the number of Series A Preferred Shares to be redeemed from each such holder. If notice of redemption of any Series A Preferred Shares has been given and if the funds necessary for such redemption have been set aside by the Company in trust for the benefit of the holders of Series A Preferred Shares so called for redemption, then from and after the redemption date, distributions will cease to accrue on the Series A Preferred Shares, such Series A Preferred Shares shall no longer be deemed outstanding and all rights of the holders of such shares will terminate, except the right to receive the redemption price. The holders of Series A Preferred Shares at the close of business on a Dividend Record Date will be entitled to receive the distribution payable with respect to such Series A Preferred Shares on the corresponding Dividend Payment Date notwithstanding the redemption thereof between such Dividend Record Date and the corresponding Dividend Payment Date or the Company's default in the payment of the distribution due. Except as provided above, the Company will make no payment or allowance for unpaid distributions, whether or not in arrears, on Series A Preferred Shares which have been called for redemption. The Series A Preferred Shares have no stated maturity and will not be subject to any sinking fund or mandatory redemption. However, in order to preserve the Company's status as a REIT, as defined in the Code, the Series A Preferred Shares may be subject to redemption or exchange as described under "-Restrictions on Transfer." Liquidation Preference The holders of Series A Preferred Shares are entitled to receive in the event of any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, $20.00 per Series A Preferred Share plus an amount per Series A Preferred Share equal to all distributions (whether or not earned or declared) accrued and unpaid thereon to the date of final distribution to such holders, and no more. Until the holders of Series A Preferred Shares and Parity Shares have been paid their liquidation preference in full, no payment will be made to any holder of Junior Shares upon the liquidation, dissolution or winding up of the Company. If, upon any liquidation, dissolution or winding up of the Company, the assets of the Company, or proceeds thereof, distributable among the holders of the Series A Preferred Shares are insufficient to pay in full the liquidation preference with respect to the Series A Preferred Shares and any other Parity Shares, then such assets, or the proceeds thereof, will be distributed among the holders of Series A Preferred Shares and any such Parity Shares ratably in accordance with the respective amounts which would be payable on such Series A Preferred Shares and any such Parity Shares if all amounts payable thereon were paid in full. Neither a consolidation or merger of 9 the Company with another corporation, a statutory share exchange by the Company nor a sale or transfer of all or substantially all of the Company's assets will be considered a liquidation, dissolution or winding up, voluntary or involuntary, of the Company. Voting Rights Except as indicated below, or except as otherwise from time to time required by applicable law, the holders of Series A Preferred Shares have no voting rights. If six quarterly distributions (whether or not consecutive) payable on the Series A Preferred Shares or any Parity Shares are in arrears, whether or not earned or declared, the number of Trustees then constituting the Board of Trustees of the Company will be increased by two, and the holders of Series A Preferred Shares, voting together as a class with the holders of any other series of Parity Shares (any such other series, the "Voting Preferred Shares"), will have the right to elect two additional Trustees to serve on the Company's Board of Trustees at any annual meeting of shareholders or a properly called special meeting of the holders of Series A Preferred Shares and such Voting Preferred Shares and at each subsequent annual meeting of shareholders until all such distributions and distributions for the current quarterly period on the Series A Preferred Shares and such other Voting Preferred Shares have been paid or declared and paid or set aside for payment. Such voting right will terminate when all such accrued and unpaid dividends have been declared and paid or set aside for payment. The term of office of all Trustees so elected will terminate with the termination of such voting rights. The approval of two-thirds of the outstanding Series A Preferred Shares and all other series of Voting Preferred Shares similarly affected, voting as a single class, is required in order to (i) amend the Company's Declaration of Trust to affect materially and adversely the rights, preferences or voting power of the holders of the Series A Preferred Shares or the Voting Preferred Shares, (ii) enter into a share exchange that affects the Series A Preferred Shares, consolidate with or merge into another entity, or permit another entity to consolidate with or merge into the Company, unless in each such case each Series A Preferred Share remains outstanding without a material adverse change to its terms and rights or is converted into or exchanged for preferred stock of the surviving entity having preferences, rights, voting powers, restrictions, limitations as to distributions, qualifications and terms or conditions of redemption thereof identical to that of a Series A Preferred Share (except for changes that do not materially and adversely affect the holders of the Series A Preferred Shares) or (iii) authorize, reclassify, create, or increase the authorized amount of any class of capital shares having rights senior to the Series A Preferred Shares with respect to the payment of distributions or amounts upon liquidation, dissolution or winding up. However, the Company may create additional classes of Parity Shares and Junior Shares, increase the authorized number of Parity Shares and Junior Shares and issue additional series of Parity Shares and Junior Shares without the consent of any holder of Series A Preferred Shares. Except as provided above and as required by law, the holders of Series A Preferred Shares are not entitled to vote on any merger or consolidation involving the Company or a sale of all or substantially all of the assets of the Company. Conversion Rights The Series A Preferred Shares are convertible, in whole or in part, at any time, unless previously redeemed, at the option of the holders thereof, into authorized but previously unissued Common Shares at a conversion price of $20.00 per Common Share (equivalent to a conversion rate of one Common Share for each Series A Preferred Share), subject to adjustment as described below (the "Conversion Price"). See "-Conversion Price Adjustments." The right to convert Series A Preferred Shares called for redemption will terminate at the close of business on the fifth business day prior to the redemption date for such Series A Preferred Shares. For information as to notices of redemption, see "-Redemption" above. For a description of the Company's Common Shares, see "-Description of Common Shares." Conversion of Series A Preferred Shares, or a specified portion thereof, may be effected by delivering certificates evidencing such shares, together with written notice of conversion and a proper assignment of such 10 certificates to the Company or in blank, to the office or agency to be maintained by the Company for that purpose. Initially such office will be the office of the Transfer Agent. Each conversion will be deemed to have been effected immediately prior to the close of business on the date on which the certificates for Series A Preferred Shares shall have been surrendered and notice shall have been received by the Company as aforesaid (and if applicable, payment of an amount equal to the dividend payable on such shares shall have been received by the Company as described below) and the conversion shall be at the Conversion Price in effect at such time and on such date. Holders of Series A Preferred Shares at the close of business on a Dividend Record Date will be entitled to receive the dividend payable on such shares on the corresponding Dividend Payment Date notwithstanding the conversion of such shares following such Dividend Record Date and prior to such Dividend Payment Date. However, Series A Preferred Shares surrendered for conversion during the period between the close of business on any Dividend Record Date and the opening of business on the corresponding Dividend Payment Date (except shares converted after the issuance of a notice of redemption with respect to a redemption date during such period, which will be entitled to such dividend) must be accompanied by payment of an amount equal to the distribution payable on such shares on such Dividend Payment Date. A holder of Series A Preferred Shares on a Dividend Record Date who (or whose transferee) tenders any such shares for conversion into Common Shares on such Dividend Payment Date will receive the dividend payable by the Company on such Series A Preferred Shares on such date, and the converting holder need not include payment of the amount of such dividend upon surrender of Series A Preferred Shares for conversion. Except as provided above, the Company will make no payment or allowance for unpaid dividends, whether or not in arrears, on converted shares or for dividends on the Common Shares issued upon such conversion. The Company will not issue fractional Common Shares upon conversion but in lieu thereof will pay cash at the current market price of the Common Shares on the day prior to the conversion date. Conversion Price Adjustments The Conversion Price is subject to adjustment upon certain events, including without duplication (i) dividends (and other distributions) payable in Common Shares, (ii) the issuance to all holders of Common Shares of certain rights or warrants entitling them to subscribe for or purchase Common Shares at a price per share less than the fair market value per Common Share (which, as defined, includes an adjustment for underwriting commissions avoided in rights offerings to shareholders), (iii) subdivisions, combinations and reclassifications of Common Shares, and (iv) distributions to all holders of Common Shares of any capital shares of the Company (other than Common Shares), evidences of indebtedness of the Company or assets (including securities, but excluding those dividends, rights, warrants and distributions referred to above and excluding Permitted Common Share Cash Distributions, as herein defined). "Permitted Common Share Cash Distributions" are those cumulative cash dividends and distributions paid with respect to the Common Shares after December 31, 1995 which are not in excess of the following: the sum of (i) the Company's cumulative undistributed funds from operations at December 31, 1995; plus (ii) the cumulative amount of funds from operations, as determined by the Board of Trustees of the Company, after December 31, 1995, minus (iii) the cumulative amount of distributions accrued or paid on the Series A Preferred Shares or any other class of preferred shares after January 18, 1996. In addition to the foregoing adjustments, the Company will be permitted to make such reductions in the Conversion Price as it considers to be advisable in order that any event treated for federal income tax purposes as a dividend of stock or stock rights will not be taxable to the holders of the Common Shares. In the event that the Company shall be a party to any transaction (including without limitation a merger, consolidation, statutory share exchange, tender offer for all or substantially all of the Common Shares or sale of all or substantially all of the Company's assets), in each case as a result of which all or substantially all Common Shares are converted into the right to receive stock, securities or other property (including cash or any combination thereof), each Series A Preferred Share that is not redeemed or converted prior to such transaction, will thereafter be convertible into the kind and amount of shares of stock and other securities and property receivable (including cash or any combination thereof) upon the consummation of such transaction by a holder of that number of Common 11 Shares or fraction thereof into which one Series A Preferred Share was convertible immediately prior to such transaction (assuming such holder of Common Shares failed to exercise any rights of election and received per share the kind and amount received per share by a plurality of non-electing shares). The Company may not become a party to any such transaction unless the terms thereof are consistent with the foregoing. No adjustment of the Conversion Price will be required to be made in any case until cumulative adjustments amount to 1% or more of the Conversion Price. Any adjustments not so required to be made will be carried forward and taken into account in subsequent adjustments. Restrictions on Transfer For information regarding restrictions on ownership of the shares of beneficial interest of the Company, see "Description of Common Shares- Restrictions on Transfer." Transfer Agent and Registrar Harris Trust and Savings Bank has been appointed as transfer agent and registrar for the Series A Preferred Shares. CERTAIN PROVISIONS OF MARYLAND LAW AND OF THE COMPANY'S DECLARATION OF TRUST AND BYLAWS The following paragraphs summarize certain provisions of Maryland law and the Company's Declaration of Trust and Bylaws. The summary does not purport to be complete and reference is made to Maryland law as well as the Company's Declaration of Trust and Bylaws, which are filed as exhibits to the Registration Statement of which this Prospectus is part. Board of Trustees The Company's Declaration of Trust and Bylaws provide that the number of Trustees of the Company may be established by a majority of the Board of Trustees but may not be fewer than three nor more than fifteen. The Declaration of Trust provides that a majority of the Trustees must be persons who are not affiliated with Amli or its affiliates ("Disinterested Trustees"). Any vacancy on the Board of Trustees will be filled, at any regular meeting or at any special meeting called for that purpose, by a majority of the remaining Trustees (even if less than a quorum), except that a vacancy resulting from an increase in the number of Trustees will be filled by a majority of the entire Board of Trustees and, in the event that a majority of the Board of Trustees are not Disinterested Trustees by reason of the resignation or removal of one or more Disinterested Trustees or otherwise, the remaining Disinterested Trustees (or, if there are no Disinterested Trustees, the remaining members of the Board of Trustees) shall promptly appoint that number of Disinterested Trustees necessary to cause the Board of Trustees to include a majority of Disinterested Trustees. Pursuant to the terms of the Declaration of Trust, the Trustees are divided into three classes, holding office initially for one-year, two-year and three-year terms, respectively. As these initial terms expire, Trustees in each class are elected for terms of three years and until their successors are duly elected and qualified. The Company believes that classification of the Board of Trustees will help to assure the continuity and stability of the Company's business strategies and policies as determined by the Board of Trustees. The classified Trustee provision could have the effect of making the removal of incumbent Trustees more time-consuming and difficult, which could discourage a third party from making a tender offer or otherwise attempting to obtain control of the Company, even though such an attempt might be beneficial to the Company and its shareholders. At least two annual meetings of shareholders, instead of one, will generally be required to effect a change in a majority of the Board of Trustees. 12 Holders of Common Shares have no right to cumulative voting for the election of Trustees. Consequently, at each annual meeting of shareholders, the holders of a majority of Common Shares voting together as a single class will be able to elect all of the successors of the class of Trustees whose term expires at that meeting. Business Combinations Under the Maryland General Corporation Law, as amended from time to time (the "MGCL"), as applicable to Maryland real estate investment trusts, certain "business combinations" (including a merger, consolidation, share exchange, or, in certain circumstances, an asset transfer or issuance or reclassification of equity securities) between a Maryland real estate investment trust and any person who beneficially owns 10% or more of the voting power of the shares of the trust or an affiliate of the trust who, at any time within the two-year period prior to the date in question, was the beneficial owner of 10% or more of the voting power of the then- outstanding voting shares of beneficial interest of the trust (an "Interested Shareholder") or an affiliate thereof are prohibited for five years after the most recent date on which the Interested Shareholder became an Interested Shareholder. Thereafter, any such business combination must be (a) recommended by the Board of Trustees of such trust and (b) approved by the affirmative vote of at least (i) 80% of the votes entitled to be cast by holders of outstanding voting shares of the trust and (ii) two- thirds of the votes entitled to be cast by holders of outstanding voting shares (other than voting shares held by the Interested Shareholder with whom the business combination is to be effected or by an affiliate or associate thereof), voting together as a single group, unless, among other things, the company's common shareholders receive a minimum price (as defined in the statute) for their shares and the consideration is received in cash or in the same form as previously paid by the Interested Shareholder for his shares. These provisions of Maryland law do not apply, however, to business combinations with a particular Interested Shareholder or its existing or future affiliates that are approved or exempted by the board of trustees of the trust prior to the time that the Interested Shareholder becomes an Interested Shareholder or if the original declaration of trust includes a provision electing not to be governed, in whole or in part, as to business combinations generally, specifically or generally by types, as to identified or unidentified existing or future Interested Shareholders or their affiliates. The Company's Declaration of Trust, in accordance with Maryland law, exempts Mr. Mutz, Baldwin & Lyons and Amli and their respective affiliates and successors from the foregoing restrictions. As a result, such persons and entities may be able to enter into business combinations with the Company, which may not be in the best interests of the shareholders, without compliance by the Company with the super-majority voting requirements and the other provisions of the statute. Control Share Acquisitions The MGCL, as applicable to Maryland real estate investment trusts, imposes limitations on the voting rights of shares acquired in a "control share acquisition" relating to a Maryland real estate investment trust. The MGCL defines a "control share acquisition" as the acquisition of "control shares," which is defined as voting shares that would entitle the acquiror to exercise voting power in electing trustees in excess of the following levels of voting power: 20%, 33-1/3%, and 50%. The MGCL requires a two-thirds shareholder vote (excluding shares owned by the acquiring person and certain members of management) to accord voting rights to shares acquired in a control share acquisition. The MGCL also requires a Maryland real estate investment trust to hold a special meeting at the request of an actual or proposed control share acquiror generally within 50 days after a request is made with the submission of an "acquiring person statement," but only if the acquiring person (a) delivers a written undertaking to pay the expenses of such special meeting or, if required by the Board of Trustees, posts a bond for the cost of the meeting and (b) submits a definitive financing agreement to the extent that financing is not provided by the acquiring person. In addition, unless the charter or bylaws provide otherwise, the MGCL gives a Maryland real estate investment trust, within certain time limitations, various redemption rights if there is a shareholder vote on the issue and the grant of voting rights is not approved, or if an "acquiring person statement" is not delivered to the target company within 10 days following a control share acquisition. Moreover, unless the charter or bylaws provide otherwise, the MGCL provides that if, before a control share acquisition occurs, voting rights are accorded to the control shares which results in the acquiring person having a majority of voting power, then minority shareholders are entitled to appraisal rights. The fair value of the shares as determined for purposes of such appraisal rights may not be less than the highest price per share paid by the acquiror in the control share acquisition. The control share acquisition statute does not apply (a) to shares acquired in a merger, consolidation or share 13 exchange if the trust is a party to the transaction or (b) to acquisitions approved or exempted by the declaration of trust or bylaws of the trust. The Company's Declaration of Trust, in accordance with Maryland law, contains a provision exempting acquisitions of shares by Mr. Mutz, Baldwin & Lyons and Amli and their respective affiliates and successors from the foregoing provisions. Amendment to the Declaration of Trust The Company's Declaration of Trust may be amended only by the affirmative vote or written consent of the holders of not less than a majority of all of the shares of beneficial interest entitled to vote on the matter, except that the Trustees by a two-thirds vote may amend provisions of the Company's Declaration of Trust from time to time to qualify as a real estate investment trust under the Code and Maryland law. Termination of the Company The Company's Declaration of Trust permits the termination of the Company and the discontinuation of the operations of the Company by the affirmative vote or written consent of the holders of not less than a majority of the outstanding shares of beneficial interest. Advance Notice of Trustee Nominations and New Business The Bylaws of the Company provide that (a) with respect to an annual meeting of shareholders, nominations of persons for election to the Board of Trustees and the proposal of business to be considered by shareholders may be made only (i) pursuant to the Company's notice of the meeting, (ii) by the Board of Trustees, or (iii) by a shareholder who is entitled to vote at the meeting and has complied with the advance notice procedures set forth in the Bylaws, and (b) with respect to special meetings of shareholders, only the business specified in the Company's notice of meeting may be brought before the meeting of shareholders, and nominations of persons for election to the Board of Trustees may be made only on terms similar to those for annual meetings. Anti-Takeover Effect of Certain Provisions of Maryland Law and of the Declaration of Trust and Bylaws The business combination provisions and the control share acquisition provisions of the MGCL, the provisions of the Declaration of Trust on classification of the Board of Trustees and the advance notice provisions of the Bylaws could delay, defer or prevent a transaction or a change in control of the Company that might involve a premium price for holders of Common Shares or otherwise be in their best interest. FEDERAL INCOME TAX CONSIDERATIONS The following is a description of the material Federal income tax consequences to the Company and its shareholders of the treatment of the Company as a REIT. The discussion is general in nature and not exhaustive of all possible tax considerations, nor does the discussion give a detailed description of any state, local, or foreign tax considerations. The discussion does not discuss all aspects of Federal income tax law that may be relevant to a prospective shareholder in light of his particular circumstances or to certain types of shareholders (including insurance companies, financial institutions or broker-dealers, tax exempt organizations, foreign corporations and persons who are not citizens or residents of the United States) subject to special treatment under the federal income tax laws nor does the discussion address special considerations, if any, which may relate to the purchase of Preferred Shares or Securities Warrants. THIS DISCUSSION IS NOT INTENDED AS A SUBSTITUTE FOR CAREFUL TAX PLANNING, AND EACH PROSPECTIVE INVESTOR IS ADVISED TO CONSULT WITH ITS TAX ADVISOR REGARDING THE SPECIFIC TAX CONSEQUENCES TO IT OF THE PURCHASE, OWNERSHIP AND SALE OF THE OFFERED SECURITIES, INCLUDING THE FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES OF SUCH PURCHASE, OWNERSHIP AND SALE, AND OF POTENTIAL CHANGES IN APPLICABLE TAX LAWS. 14 If certain detailed conditions imposed by the REIT provisions of the Code are met, entities, such as the Company, that invest primarily in real estate and that otherwise would be treated for Federal income tax purposes as corporations, are generally not taxed at the corporate level on their "REIT taxable income" that is currently distributed to shareholders. This treatment substantially eliminates the "double taxation" (i.e., at both the corporate and shareholder levels) that generally results from the use of corporations. If the Company fails to qualify as a REIT in any year, however, it will be subject to Federal income taxation as if it were a domestic corporation, and its shareholders will be taxed in the same manner as shareholders of ordinary corporations. In this event, the Company could be subject to potentially significant tax liabilities, and therefore the amount of cash available for distribution to its shareholders would be reduced or eliminated. The Company has elected REIT status effective for the taxable year ended December 31, 1994, and the Board of Trustees of the Company believes that the Company has operated and expects that the Company will continue to operate in a manner that will permit the Company to elect REIT status in each taxable year thereafter. There can be no assurance, however, that this belief or expectation will be fulfilled, since qualification as a REIT depends on the Company continuing to satisfy numerous asset, income and distribution tests described below, which in turn will be dependent in part on the Company's operating results. TAXATION OF THE COMPANY GENERAL. In any year in which the Company qualifies as a REIT it will not, in general, be subject to Federal income tax on that portion of its REIT taxable income or capital gain which is distributed to shareholders. The Company may, however, be subject to tax at normal corporate rates upon any taxable income or capital gain not distributed. Notwithstanding its qualification as a REIT, the Company may also be subject to taxation in certain other circumstances. If the Company should fail to satisfy either the 75% or the 95% gross income test (as discussed below), and nonetheless maintains its qualification as a REIT because certain other requirements are met, it will be subject to a 100% tax on the greater of the amount by which the Company fails either the 75% or the 95% test, multiplied by a fraction intended to reflect the Company's profitability. The Company will also be subject to a tax of 100% on net income from any "prohibited transaction" as described below, and if the Company has (i) 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 (ii) other non-qualifying income from foreclosure property, it will be subject to tax on such income from foreclosure property at the highest corporate rate. In addition, if the Company should fail to distribute during each calendar year at least the sum of (i) 85% of its REIT ordinary income for such year, (ii) 95% of its REIT capital gain net income for such year, and (iii) any undistributed taxable income from prior years, the Company would be subject to a 4% excise tax on the excess of such required distribution over the amounts actually distributed. The Company may also be subject to the corporate alternative minimum tax, as well as tax in certain situations not presently contemplated. Each of the Management Company, Amrescon and AIA will be taxed on its income at regular corporate rates. The Company will use the calendar year both for Federal income tax purposes and for financial reporting purposes. In order to qualify as a REIT, the Company must meet, among others, the following requirements: SHARE OWNERSHIP TESTS. The Company's shares of beneficial interest must be held by a minimum of 100 persons for at least 335 days in each taxable year (or a proportional number of days in any short taxable year). In addition, at all times during the second half of each taxable year, no more than 50% in value of the outstanding shares of beneficial interest of the Company may be owned, directly or indirectly and by applying certain constructive ownership rules, by five or fewer individuals, which for this purpose includes certain tax-exempt entities. However, for purposes of this test, any shares of beneficial interest held by a qualified domestic pension or other retirement trust will be treated as held directly by its beneficiaries in proportion to their actuarial interest in such trust rather than by such trust. 15 In order to attempt to ensure compliance with the foregoing share ownership tests, the Company has placed certain restrictions on the transfer of its shares of beneficial interest to prevent additional concentration of share ownership. Moreover, to evidence compliance with these requirements, under Treasury regulations the Company must maintain records which disclose the actual ownership of its outstanding shares of beneficial interest. In fulfilling its obligations to maintain records, the Company must and will demand written statements each year from the record holders of designated percentages of its shares of beneficial interest disclosing the actual owners of such shares of beneficial interest (as prescribed by Treasury regulations). A list of those persons failing or refusing to comply with such demand must be maintained as a part of the Company's records. A shareholder failing or refusing to comply with the Company's written demand must submit with his tax return a similar statement disclosing the actual ownership of Company shares of beneficial interest and certain other information. In addition, the Company's Declaration of Trust provides restrictions regarding the transfer of its shares of beneficial interest that are intended to assist the Company in continuing to satisfy the share ownership requirements. See "Description of Common Shares - Restrictions on Transfer" and "Description of Preferred Shares - Restrictions on Transfer." ASSET TESTS. At the close of each quarter of the Company's taxable year, the Company must satisfy two tests relating to the nature of its assets (with "assets" being determined in accordance with generally accepted accounting principles). First, at least 75% of the value of the Company's total assets must be represented by interests in real property, interests in mortgages on real property, shares in other REITs, cash, cash items, government securities and qualified temporary investments. Second, although the remaining 25% of the Company's assets generally may be invested without restriction, securities in this class may not exceed (i) in the case of securities of any one non-government issuer, 5% of the value of the Company's total assets or (ii) 10% of the outstanding voting securities of any one such issuer. Where the Company invests in a partnership (such as the Operating Partnership), it will be deemed to own a proportionate share of the partnership's assets. See "-Tax Aspects of the Company's Investments in Partnerships-General." Accordingly, the Company's investment in the Communities and the Co-Investment Communities through its interest in the Operating Partnership is intended to constitute an investment in qualified assets for purposes of the 75% asset test. The Operating Partnership owns 100% of the non-voting preferred stock of each of the Management Company, Amrescon and AIA and 5% of the voting common stock of each of the Management Company, Amrescon and AIA. See "The Company." By virtue of its partnership interest in the Operating Partnership, the Company is deemed to own its pro rata share of the assets of the Operating Partnership, including the securities of the Management Company, Amrescon and AIA, as described above. Because the Operating Partnership owns only 5% of the voting securities of each of the Management Company, Amrescon and AIA and the preferred stock's approval right in the case of each of the Management Company, Amrescon and AIA is limited to certain fundamental corporate actions that could adversely affect the preferred stock as a class, the 10% limitation on holdings of voting securities of any one issuer should not be exceeded. Based upon its analysis of the total estimated value of the Management Company stock, Amrescon stock and AIA stock and the Subordinated Notes, respectively, owned by the Operating Partnership relative to the estimated value of the total assets owned by the Operating Partnership and the other assets of the Company, the Company believes that the Company's pro rata share of the non-voting preferred stock, voting common stock and Subordinated Note of the Management Company owned by the Operating Partnership does not exceed, on the date of this Prospectus, 5% of the value of the Company's total assets, that the Company's pro rata share of the non-voting preferred stock and voting common stock of Amrescon owned by the Operating Partnership does not exceed, on the date of this Prospectus, 5% of the value of the Company's total assets, and that the Company's pro rata share of the non-voting preferred stock, voting common stock and Subordinated Note of AIA owned by the Operating Partnership does not exceed, on the date of this Prospectus, 5% of the value of the Company's total assets. As to the securities of any Services Company, this 5% limitation must be satisfied not only as of the date that the Company (directly or through the Operating Partnership) acquired securities of the Management Company, Amrescon or AIA, but also at the end of any quarter in which the Company increases its interest in the Management Company, Amrescon or AIA or so acquires other property. In this respect, if the holder of a right to exchange Units for Common Shares exercises such rights, the Company will thereby increase its proportionate (indirect) ownership interest in the Management Company, Amrescon and AIA, thus requiring the Company to meet the 5% test in any quarter in which such conversion option is exercised. Although the Company plans to take steps to 16 ensure that it satisfies the 5% value test for any quarter with respect to which retesting is to occur, there can be no assurance that such steps will always be successful or will not require a reduction in the Operating Partnership's overall interest in the Management Company, Amrescon or AIA. GROSS INCOME TESTS. There are three separate percentage tests relating to the sources of the Company's gross income which must be satisfied for each taxable year. For purposes of these tests, where the Company invests in a partnership, the Company will be treated as receiving its share of the income and loss of the partnership, and the gross income of the partnership will retain the same character in the hands of the Company as it has in the hands of the partnership. See "-Tax Aspects of the Company's Investments in Partnerships-General" below. The three tests are as follows: THE 75% TEST. At least 75% of the Company's gross income for the taxable year must be "qualifying income." Qualifying income generally includes (i) rents from real property (except as modified below); (ii) interest on obligations secured by mortgages on, or interests in, real property; (iii) gains from the sale or other disposition of interests in real property and real estate mortgages, other than gain from property held primarily for sale to customers in the ordinary course of the Company's trade or business ("dealer property"); (iv) dividends or other distributions on shares in other REITs, as well as gain from the sale of such shares; (v) abatements and refunds of real property taxes; (vi) income from the operation, and gain from the sale, of property acquired at or in lieu of a foreclosure of the mortgage secured by such property ("foreclosure property"); (vii) commitment fees received for agreeing to make loans secured by mortgages on real property or to purchase or lease real property; and (viii) certain qualified temporary investment income attributable to the investment of new capital received by the Company in exchange for its shares during the one-year period following the receipt of such capital. Rents received from a tenant will not, however, qualify as rents from real property in satisfying the 75% test (or the 95% gross income test described below) if the Company, or an owner of 10% or more of the Company, directly or constructively owns 10% or more of such tenant. In addition, if rent attributable to personal property leased in connection with a lease of real property is greater than 15% of the total rent received under the lease, then the portion of rent attributable to such personal property will not qualify as rents from real property. Moreover, an amount received or accrued will not qualify as rents from real property (or as interest income) for purposes of the 75% and 95% gross income tests if it is based in whole or in part on the income or profits of any person, although an amount received or accrued generally will not be excluded from "rents from real property" solely by reason of being based on a fixed percentage or percentages of receipts or sales. Finally, for rents received to qualify as rents from real property for purposes of the 75% and 95% gross income tests, the Company generally must not operate or manage the property or furnish or render services to tenants, other than through an "independent contractor" from whom the Company derives no income, except that the "independent contractor" requirement does not apply to the extent that the services provided by the Company are "usually or customarily rendered" in connection with the rental of space for occupancy only, or are not otherwise considered "rendered to the occupant for his convenience." The Management Company (which does not satisfy the independent contractor standard) provides management and leasing services to each of the Communities and each of the Co-Investment Communities and may provide certain services on any newly acquired properties of the Operating Partnership. The Company believes for purposes of the 75% and 95% gross income tests, that the services provided by the Management Company on the Operating Partnership's properties and any other services and amenities provided by the Operating Partnership or its agents with respect to such properties are and will continue to be of the type usually or customarily rendered in connection with the rental of space for occupancy only. The Company intends to monitor the services and amenities provided by the Management Company as management agent as well as by others, if any, on the properties of the Operating Partnership. The Company intends that services that cannot be provided directly by the Operating Partnership, the Management Company or other agents will be performed by independent contractors. THE 95% TEST. In addition to deriving 75% of its gross income from the sources listed above, at least 95% of the Company's gross income for the taxable year must be derived from the above-described qualifying income, or from dividends, interest, or gains from the sale or other disposition of stock or other securities that are not dealer 17 property. Dividends and interest on any obligations not collateralized by an interest in real property are included for purposes of the 95% test, but not for purposes of the 75% test. For purposes of determining whether the Company complies with the 75% and the 95% gross income tests, gross income does not include income from prohibited transactions. A "prohibited transaction" is a sale of dealer property (excluding foreclosure property); however, it does not include a sale of property if such property is held by the Company for at least four years and certain other requirements (relating to the number of properties sold in a year, their tax bases, and the cost of improvements made thereto) are satisfied. See "-Taxation of the Company-General" and "-Tax Aspects of the Company's Investments in Partnerships-Sale of the Communities and Co- Investment Communities." The Company believes that, for purposes of both the 75% and the 95% gross income tests, its investment in the Communities and the Co-Investment Communities through the Operating Partnership will in major part give rise to qualifying income in the form of rents, and that gains on sales of the Communities and the Co-Investment Communities, or of the Company's interest in the Operating Partnership, generally will also constitute qualifying income. The Management Company receives and anticipates continuing to receive fee income in consideration of the performance of property management and other services with respect to properties not owned by the Company or the Operating Partnership, Amrescon receives and anticipates continuing to receive fee income in consideration of the performance of general contracting and construction management services, and AIA receives and anticipates continuing to receive fee income for providing investment advisory services; however, substantially all income derived by the Company from the Management Company, Amrescon and AIA will be in the form of dividends on the preferred stock and common stock of each of the Service Companies owned by the Operating Partnership and interest on the Subordinated Notes. Such dividends and interest income will satisfy the 95%, but not the 75%, gross income test (as discussed above). In addition, the Company's share of any income realized on interest rate swap or cap agreements, including income received at the time of entering into such agreements, generally will satisfy the 95%, but not the 75%, gross income test. The Company intends to closely monitor its non-qualifying income and anticipates that non-qualifying income on its other investments and activities, including such dividend income, interest income and interest rate swap or cap income (if any), will not result in the Company failing either the 75% or 95% gross income test. Even if the Company fails to satisfy one or both of the 75% or 95% gross income tests for any taxable year, it may still qualify as a REIT for such year if it is entitled to relief under certain provisions of the Code. These relief provisions will generally be available if: (i) the Company's failure to comply was due to reasonable cause and not to willful neglect; (ii) the Company reports the nature and amount of each item of its income included in the tests on a schedule attached to its tax return; and (iii) any incorrect information on this schedule is not due to fraud with intent to evade tax. If these relief provisions apply, however, the Company will nonetheless be subject to a 100% tax on the greater of the amount by which it fails either the 75% or 95% gross income test, multiplied by a fraction intended to reflect the Company's profitability. THE 30% TEST. The Company must derive less than 30% of its gross income for each taxable year from the sale or other disposition of (i) real property held for less than four years (other than foreclosure property and involuntary conversions); (ii) stock or securities (including an interest rate swap or cap agreement) held for less than one year; and (iii) property in a prohibited transaction. The Company does not anticipate that it will have difficulty in complying with this test. However, if extraordinary circumstances were to occur that give rise to dispositions of Communities or Co-Investment Communities held for less than four years (for example, on account of the inability to obtain refinancing), the 30% test could become an issue. ANNUAL DISTRIBUTION REQUIREMENTS. In order to qualify as a REIT, the Company is required to distribute dividends (other than capital gain dividends) to its shareholders each year in an amount at least equal to (A) the sum of (i) 95% of the Company's REIT taxable income (computed without regard to the dividends paid deduction and the Company's net capital gain) and (ii) 95% of the net income (after tax), if any, from foreclosure property, minus (B) the sum of certain items of non-cash income. Such distributions must be paid in the taxable year to which they 18 relate, or in the following taxable year if declared before the Company timely files its tax return for such year and if paid on or before the first regular dividend payment after such declaration. To the extent that the Company does not distribute all of its net capital gain or distributes at least 95%, but less than 100%, of its REIT taxable income, as adjusted, it will be subject to tax on the undistributed amount at regular capital gains or ordinary corporate tax rates, as the case may be. The Company intends to make timely distributions sufficient to satisfy the annual distribution requirements described in the first sentence of the preceding paragraph. In this regard, the Partnership Agreement authorizes the Company, as general partner, to take such steps as may be necessary to cause the Operating Partnership to distribute to its partners an amount sufficient to permit the Company to meet these distribution requirements. It is possible that the Company may not have sufficient cash or other liquid assets to meet the 95% distribution requirement, due to timing differences between the actual receipt of income and actual payment of expenses on the one hand, and the inclusion of such income and deduction of such expenses in computing the Company's REIT taxable income on the other hand; due to the Operating Partnership's inability to control cash distributions with respect to any properties as to which it does not have decision making control; or for other reasons. To avoid a problem with the 95% distribution requirement, the Company will closely monitor the relationship between its REIT taxable income and cash flow and, if necessary, intends to borrow funds (or cause the Operating Partnership or other affiliates to borrow funds) in order to satisfy the distribution requirement. However, there can be no assurance that such borrowing would be available at such time. If the Company fails to meet the 95% distribution requirement as a result of an adjustment to the Company's tax return by the Service, the Company may retroactively cure the failure by paying a "deficiency dividend" (plus applicable penalties and interest) within a specified period. FAILURE TO QUALIFY. If the Company fails to qualify for taxation as a REIT in any taxable year and the relief provisions do not apply, the Company will be subject to tax (including any applicable alternative minimum tax) on its taxable income at regular corporate rates. Distributions to shareholders in any year in which the Company fails to qualify as a REIT will not be deductible by the Company, nor generally will they be required to be made under the Code. In such event, to the extent of current and accumulated earnings and profits, all distributions to shareholders will be taxable as ordinary income, and, subject to certain limitations in the Code, corporate distributees may be eligible for the dividends received deduction. Unless entitled to relief under specific statutory provisions, the Company also will be disqualified from re-electing taxation as a REIT for the four taxable years following the year during which qualification was lost. TAX ASPECTS OF THE COMPANY'S INVESTMENTS IN PARTNERSHIPS GENERAL. The Company holds a partnership interest in the Operating Partnership. See "The Company." In general, a partnership is a "pass-through" entity which is not subject to Federal income tax. Rather, partners are allocated their proportionate shares of the items of income, gain, loss, deduction and credit of a partnership, and are potentially subject to tax thereon, without regard to whether the partners receive a distribution from the partnership. The Company will include its proportionate share of the foregoing partnership items for purposes of the various REIT gross income tests and in the computation of its REIT taxable income. See "-Taxation of the Company-General" and "-Gross Income Tests." Accordingly, any resultant increase in the Company's REIT taxable income from its interest in the Operating Partnership (whether or not a corresponding cash distribution is also received from the Operating Partnership) will increase its distribution requirements (see "-Taxation of the Company-Annual Distribution Requirements"), but will not be subject to Federal income tax in the hands of the Company provided that an amount equal to such income is distributed by the Company to its shareholders. Moreover, for purposes of the REIT asset tests (see "-Taxation of the Company-Asset Tests"), the Company will include its proportionate share of assets held by the Operating Partnership. ENTITY CLASSIFICATION. The Company's interest in the Operating Partnership involves special tax considerations, including the possibility of a challenge by the Service of the status of the Operating Partnership as 19 a partnership (as opposed to an association taxable as a corporation for Federal income tax purposes). If the Operating Partnership were to be treated as an association, it would be taxable as a corporation and therefore subject to an entity-level tax on its income. In such a situation, the character of the Company's assets and items of gross income would change, which would preclude the Company from satisfying the REIT asset tests and the REIT gross income tests (see "-Taxation of the Company- Asset Tests" and "-Gross Income Tests"), which in turn would prevent the Company from qualifying as a REIT. (See "-Taxation of the Company-Failure to Qualify" above, for a discussion of the effect of the Company's failure to meet such tests.) TAX ALLOCATIONS WITH RESPECT TO THE COMMUNITIES. Pursuant to Section 704(c) of the Code, income, gain, loss and deduction attributable to appreciated or depreciated property that is contributed to a partnership in exchange for an interest in the partnership (such as certain of the Communities), must be allocated in a manner such that the contributing partner is charged with, or benefits from, respectively, the unrealized gain or unrealized loss associated with the property at the time of the contribution. The amount of such unrealized gain or unrealized loss is generally equal to the difference between the fair market value of the contributed property at the time of contribution, and the adjusted tax basis of such property at the time of contribution (a "Book-Tax Difference"). Such allocations are solely for Federal income tax purposes and do not affect the book capital accounts or other economic arrangements among the partners. The formation of the Operating Partnership included contributions of appreciated property (including certain Communities or interests therein). Consequently, the Partnership Agreement requires certain allocations to be made in a manner consistent with Section 704(c) of the Code. In general, certain contributors of certain of the Communities or interests therein will be allocated lower amounts of depreciation deductions for tax purposes and increased taxable income and gain on sale by the Operating Partnership on the contributed assets (including certain of the Communities). This will tend to eliminate the Book-Tax Difference over the life of the Operating Partnership. However, the special allocation rules of Section 704(c) do not always entirely rectify the Book-Tax Difference on an annual basis or with respect to a specific taxable transaction such as a sale or a deemed sale, and accordingly variations from normal Section 704(c) principles may arise, which could result in the allocation of additional taxable income to the Company in excess of corresponding cash proceeds in certain circumstances. Treasury regulations issued under Section 704(c) of the Code provide partnerships with a choice of several methods of accounting for Book-Tax Differences, including retention of the method under current law. The Operating Partnership and the Company will use the remedial method for making allocations under Section 704(c) with respect to the existing Communities. With respect to any property purchased by the Operating Partnership subsequent to the admission of the Company to the Operating Partnership, in general, such property will initially have a tax basis equal to its fair market value and Section 704(c) of the Code will not apply. SALE OF THE COMMUNITIES AND CO-INVESTMENT COMMUNITIES. The Company's share of any gain realized by the Operating Partnership on the sale of any dealer property generally will be treated as income from a prohibited transaction that is subject to a 100% penalty tax. See "Taxation of the Company-General" and "Gross Income Tests-The 95% Test." Under existing law, whether property is dealer property is a question of fact that depends on all the facts and circumstances with respect to the particular transaction. The Operating Partnership intends to hold the Communities and Co-Investment Communities for investment with a view to long-term appreciation, to engage in the business of acquiring, owning, operating and developing the Communities, Co-Investment Communities and other multifamily residential properties, and to make such occasional sales of the Communities, Co-Investment Communities and other properties acquired subsequent to the date hereof as are consistent with the Company's investment objectives. Based upon the Company's investment objectives, the Company believes that overall the Communities and Co-Investment Communities should not be considered dealer property and that the amount of income from prohibited transactions, if any, will not be material. 20 TAXATION OF SHAREHOLDERS TAXATION OF TAXABLE DOMESTIC SHAREHOLDERS. As long as the Company qualifies as a REIT, distributions made to the Company's taxable domestic shareholders out of current or accumulated earnings and profits (and not designated as capital gain dividends) will be taken into account by them as ordinary income and will not be eligible for the dividends received deduction for corporations. Distributions that are designated as capital gain dividends will be taxed as long-term capital gains (to the extent they do not exceed the Company's actual net capital gain for the taxable year) without regard to the period for which the shareholder has held its shares of beneficial interest of the Company. However, corporate shareholders may be required to treat up to 20% of certain capital gain dividends as ordinary income. To the extent that the Company makes distributions in excess of current and accumulated earnings and profits, these distributions are treated first as a tax-free return of capital to the shareholder, reducing the tax basis of a shareholder's shares of beneficial interest by the amount of such excess distribution (but not below zero), with distributions in excess of the shareholder's tax basis being taxed as capital gains (if the shares of beneficial interest are held as a capital asset). In addition, any dividend declared by the Company in October, November or December of any year and payable to a shareholder of record on a specific date in any such month shall be treated as both paid by the Company and received by the shareholder on December 31 of such year, provided that the dividend is actually paid by the Company during January of the following calendar year. Shareholders may not include in their individual income tax returns any net operating losses or capital losses of the Company. Federal income tax rules may also require that certain minimum tax adjustments and preferences be apportioned to Company shareholders. In general, any loss upon a sale or exchange of shares of beneficial interest by a shareholder who has held such shares of beneficial interest for six months or less (after applying certain holding period rules) will be treated as a long-term capital loss, to the extent of distributions from the Company required to be treated by such shareholder as long-term capital gains. BACKUP WITHHOLDING. The Company will report to its domestic shareholders and to the Service the amount of dividends paid for each calendar year, and the amount of tax withheld, if any, with respect thereto. Under the backup withholding rules, a shareholder may be subject to backup withholding at the rate of 31% with respect to dividends paid unless such shareholder (i) is a corporation or comes within certain other exempt categories and, when required, demonstrates this fact or (ii) provides a taxpayer identification number, certifies as to no loss of exemption from backup withholding, and otherwise complies with applicable requirements of the backup withholding rules. A shareholder that does not provide the Company with its correct taxpayer identification number may also be subject to penalties imposed by the Service. Any amount paid as backup withholding is available as a credit against the shareholder's income tax liability. In addition, the Company may be required to withhold a portion of capital gain distributions made to any shareholders who fail to certify their non-foreign status to the Company. See "Certain United States Tax Considerations for Non-U.S. Shareholders-Distributions from the Company-Capital Gain Dividends" below. TAXATION OF TAX-EXEMPT SHAREHOLDERS. The Service has issued a revenue ruling in which it held that amounts distributed by a REIT to a tax-exempt employees' pension trust do not constitute unrelated business taxable income ("UBTI"). Subject to the discussion below regarding a "pension-held REIT," based upon such ruling and the statutory framework of the Code, distributions by the Company to a shareholder that is a tax-exempt entity should not constitute UBTI, provided that the tax-exempt entity has not financed the acquisition of its shares with "acquisition indebtedness" within the meaning of the Code, that the shares are not otherwise used in an unrelated trade or business of the tax-exempt entity, and that the Company, consistent with its present intent, does not hold a residual interest in a real estate mortgage investment conduit. However, if any pension or other retirement trust that qualifies under Section 401(a) of the Code ("qualified pension trust") holds more than 10% by value of the interests in a "pension-held REIT" at any time during a taxable year, a portion of the dividends paid to the qualified pension trust by such REIT may constitute UBTI. For these purposes, a "pension-held REIT" is defined as a REIT if (i) such REIT would not have qualified as a REIT but for the provisions of the Code which look through such a qualified pension trust in determining ownership of shares of the REIT and (ii) at least one qualified pension trust holds more than 25% by value of the interests of such REIT 21 or one or more qualified pension trusts (each owning more than a 10% interest by value in the REIT) hold in the aggregate more than 50% by value of the interests in such REIT. DIVIDEND REINVESTMENT PLAN. Shareholders participating in the dividend reinvestment and share purchase plan adopted by the Company will be deemed to have received the gross amount of any cash distributions which would have been paid by the Company to such shareholders had they not elected to participate. These deemed distributions will be treated as actual distributions from the Company to the participating shareholders and will retain the character and tax effects applicable to distributions from the Company generally. See "-Taxation of Shareholders-Taxation of Taxable Domestic Shareholders." Participants in the dividend reinvestment and share purchase plan are subject to Federal income tax on the amount of the deemed distributions to the extent that such distributions represent dividends or gains, even though they receive no cash. In addition, participants in the dividend reinvestment and share purchase plan are subject to Federal income tax on payment by the Company of brokerage commissions and bank fees on their behalf. Common Shares received under the plan will have a holding period beginning with the day after purchase, and a tax basis equal to their cost (which is the gross amount of the deemed distribution plus the amount of any brokerage commissions and bank fees paid on the holder's behalf). OTHER TAX CONSIDERATIONS THE MANAGEMENT COMPANY, AMRESCON AND AIA; OTHER CONSIDERATIONS. A portion of the cash to be used by the Operating Partnership to fund distributions to partners, including the Company, is expected to come from the Management Company, Amrescon and AIA through dividends on the common and preferred stock of the Management Company, Amrescon and AIA held by the Operating Partnership and from interest on the Subordinated Notes. In addition, the Management Company, Amrescon and AIA will each receive income from the Company, the Operating Partnership and unrelated third parties. Because the Company, the Operating Partnership, the Management Company, Amrescon and AIA are related through stock or partnership ownership, income of the Management Company, Amrescon or AIA from services performed for the Company and the Operating Partnership may be subject to certain rules under which additional income may be allocated to the Management Company, Amrescon or AIA. On account of such ownership relationships, the allocation of certain expenses and reimbursements thereof among the Company, the Management Company, the Operating Partnership, Amrescon and AIA could be subject to additional scrutiny by the Service. Each of the Management Company, Amrescon and AIA will pay Federal and state income taxes at the full applicable corporate rates on its income prior to payment of any dividends. Each of the Management Company, Amrescon and AIA will attempt to minimize the amount of such taxes, but there can be no assurance whether or the extent to which measures taken to minimize taxes will be successful. To the extent that the Management Company, Amrescon and AIA are required to pay Federal, state, or local taxes, the cash available for distribution by the Company to shareholders will be reduced accordingly. In addition, to the extent that tax exempt entities and foreign persons hold shares of beneficial interest of the Company, the interest expense deductions of the Management Company and AIA on the Subordinated Notes could be reduced. POSSIBLE LEGISLATIVE OR OTHER ACTIONS AFFECTING TAX CONSEQUENCES. Prospective shareholders should recognize that the present Federal income tax treatment of investment in the Company may be modified by legislative, judicial or administrative action at any time and that any such action may affect investments and commitments previously made. The rules dealing with Federal income taxation are constantly under review by persons involved in the legislative process and by the Service and the Treasury Department, resulting in revisions of regulations and revised interpretations of established concepts as well as statutory changes. No assurance can be given as to the form or content (including with respect to effective dates) of any tax legislation which may be enacted. Revisions in Federal tax laws and interpretations thereof could adversely affect the tax consequences of investment in the Company. STATE AND LOCAL TAXES. The Company and its shareholders may be subject to state or local taxation, and the Company and the Operating Partnership may be subject to state or local tax withholding requirements, in various 22 jurisdictions, including those in which it or they transact business or reside. The state and local tax treatment of the Company and its shareholders may not conform to the Federal income tax consequences discussed above. Consequently, prospective shareholders should consult their own tax advisors regarding the effect of state and local tax laws on an investment in shares of beneficial interest of the Company. CERTAIN UNITED STATES TAX CONSIDERATIONS FOR NON-U.S. SHAREHOLDERS The following is a discussion of certain anticipated U.S. Federal income and U.S. Federal estate tax consequences of the ownership and disposition of shares of beneficial interest applicable to Non-U.S. Shareholders of such shares. A "Non-U.S. Shareholder" is (i) any individual who is neither a citizen nor resident of the United States, (ii) any corporation or partnership other than a corporation or partnership created or organized in the United States or under the laws of the United States or any state thereof or under the laws of the District of Columbia or (iii) any estate or trust that is not "resident" in the United States. The discussion is based on current law and is for general information only. The discussion does not address other aspects of U.S. Federal taxation other than income and estate taxation or all aspects of U.S. Federal income and estate taxation. The discussion does not consider any specific facts or circumstances that may apply to a particular Non-U.S. Shareholder. PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR TAX ADVISORS REGARDING THE U.S. FEDERAL, STATE, LOCAL AND NON-U.S. INCOME, ESTATE AND OTHER TAX CONSEQUENCES OF HOLDING AND DISPOSING OF SHARES OF BENEFICIAL INTEREST. DISTRIBUTIONS FROM THE COMPANY ORDINARY DIVIDENDS. The portion of dividends received by Non-U.S. Shareholders payable out of the Company's earnings and profits that are not attributable to capital gains of the Company and that are not effectively connected with a U.S. trade or business of the Non-U.S. Shareholder will be subject to U.S. withholding tax at the rate of 30% (unless reduced by treaty or the Non-U.S. Shareholder files an Internal Revenue Service Form 4224 with the Company certifying that the investment to which the distribution relates is effectively connected to a United States trade or business of such Non-U.S. Shareholder). Under certain limited circumstances, the amount of tax withheld may be refundable, in whole or in part, because of the tax status of certain partners or beneficiaries of Non-U.S. Shareholders that are either foreign partnerships or foreign estates or trusts. In general, Non-U.S. Shareholders will not be considered engaged in a U.S. trade or business solely as a result of their ownership of shares of beneficial interest. In cases where the dividend income from a Non-U.S. Shareholder's investment in shares of beneficial interest is (or is treated as) effectively connected with the Non-U.S. Shareholder's conduct of a U.S. trade or business, the Non-U.S. Shareholder generally will be subject to U.S. tax at graduated rates, in the same manner as U.S. shareholders are taxed with respect to such dividends (and may also be subject to the 30% branch profits tax (unless reduced by treaty) in the case of a Non-U.S. Shareholder that is a foreign corporation). Under currently applicable Treasury regulations, withholding agents are required to determine the applicable withholding rate pursuant to the appropriate tax treaty, and withhold the appropriate amount. Treasury regulations proposed in 1996, which have not been adopted, and are, therefore, not currently effective, would, if and when they become effective, require Non-U.S. Shareholders to file a form W-8 to obtain the benefit of any applicable tax treaty providing for a lower rate of withholding tax on dividends paid after December 31, 1997. Such form would require a representation by the holder as to foreign status, the holder's name and permanent residence address, the basis for a reduced withholding rate (e.g., the relevant tax treaty) and other pertinent information, to be certified by such holder under penalties of perjury. Such information is subject to being reported to the Internal Revenue Service. A permanent resident address for this purpose generally is the address in the country where the person claims to be a resident for the purpose of the country's income tax. If the beneficial holder is a corporation, then the address is where the corporation maintains its principal office in its country of incorporation. CAPITAL GAIN DIVIDENDS. Under the Foreign Investment in Real Property Tax Act of 1980 ("FIRPTA"), any distribution made by the Company to a Non- U.S. Shareholder, to the extent attributable to gains from 23 dispositions of United States Real Property Interests ("USRPIs") by the Company ("USRPI Capital Gains"), will be considered effectively connected with a U.S. trade or business of the Non-U.S. Shareholder and subject to U.S. income tax at the rates applicable to U.S. individuals or corporations, without regard to whether such distribution is designated as a capital gain dividend. In addition, the Company will be required to withhold tax equal to 35% of the amount of such distribution to the extent it constitutes USRPI Capital Gains. Such distribution may also be subject to the 30% branch profits tax (unless reduced by treaty) in the case of a Non-U.S. Shareholder that is a foreign corporation. NON-DIVIDEND DISTRIBUTIONS. Any distributions by the Company that exceed both current and accumulated earnings and profits of the Company will not be taxed as either ordinary dividends or capital gain dividends. See "Federal Income Tax Considerations - Taxation of Shareholders - Taxation of Taxable Domestic Shareholders." However, if it cannot be determined at the time a distribution is made whether or not such distribution will be in excess of current and accumulated earnings and profits, the distribution will be subject to withholding. Should this occur, the Non-U.S. Shareholder may seek a refund of over withholding from the Service once it is subsequently determined that such distribution was, in fact, in excess of current and accumulated earnings and profits of the Company. DISPOSITIONS OF SHARES OF BENEFICIAL INTEREST Unless the shares of beneficial interest constitute USRPIs, a sale or exchange of shares of beneficial interest by a Non-U.S. Shareholder generally will not be subject to U.S. taxation under FIRPTA. The shares of beneficial interest will not constitute USRPIs if the Company is a "domestically controlled REIT." A domestically controlled REIT is a REIT in which, at all times during a specified testing period, less than 50% in value of its shares is held directly or indirectly by Non-U.S. Shareholders. It is currently anticipated that the Company will be a domestically controlled REIT and, therefore, that the sale of shares of beneficial interest will not be subject to taxation under FIRPTA. No assurance can be given that the Company will continue to be a domestically controlled REIT. If the Company does not constitute a domestically controlled REIT, a Non-U.S. Shareholder's sale or exchange of shares of beneficial interest generally will still not be subject to tax under FIRPTA as a sale of USRPIs provided that (i) the Company's shares of beneficial interest are "regularly traded" (as defined by applicable Treasury regulations) on an established securities market (e.g., the NYSE, on which the Common Shares are listed) and (ii) the selling Non-U.S. Shareholder held 5% or less of the Company's outstanding shares of beneficial interest at all times during a specified testing period. If gain on the sale or exchange of shares of beneficial interest were subject to taxation under FIRPTA, the Non-U.S. Shareholder would be subject to U.S. income tax at the rates applicable to U.S. individuals or corporations, and the purchaser of shares of beneficial interest could be required to withhold 10% of the purchase price and remit such amount to the Service. The branch profits tax would not apply to such sales or exchanges. Capital gains not subject to FIRPTA will nonetheless be taxable in the United States to a Non-U.S. Shareholder in two cases: (i) if the Non-U.S. Shareholder's investment in shares of beneficial interest is effectively connected with a U.S. trade or business conducted by such Non-U.S. Shareholder, the Non-U.S. Shareholder will be subject to the same treatment as U.S. shareholders with respect to such gain or (ii) if the Non-U.S. Shareholder is a nonresident alien individual who was present in the United States for 183 days or more during the taxable year and has a "tax home" in the United States, the nonresident alien individual will be subject to 30% tax on the individual's capital gain (unless reduced or eliminated by treaty). FEDERAL ESTATE TAX Shares of beneficial interest owned or treated as owned by an individual who is not a citizen or "resident" (as specifically defined for U.S. Federal estate tax purposes) of the United States at the time of death will be includable in the individual's gross estate for U.S. Federal estate tax purposes, unless an applicable estate tax treaty provides otherwise. Such individual's estate may be subject to U.S. Federal estate tax on the property includable in the estate for U.S. Federal estate tax purposes. 24 INFORMATION REPORTING AND BACKUP WITHHOLDING The Company must report annually to the Service and to each Non-U.S. Shareholder the amount of dividends (including any capital gain dividends) paid to, and the tax withheld with respect to, each Non-U.S. Shareholder. These reporting requirements apply regardless of whether withholding was reduced or eliminated by an applicable tax treaty. Copies of these returns may also be made available under the provisions of a specific treaty or agreement with the tax authorities in the country in which the Non-U.S. Shareholder resides. U.S. backup withholding (which generally is imposed at the rate of 31% on certain payments to persons that fail to furnish the information required under the U.S. information reporting requirements) and information reporting will generally not apply to dividends (including any capital gain dividends) paid on shares of beneficial interest to a Non-U.S. Shareholder at an address outside the United States. The proposed Treasury regulations referred to under "Distributions from the Company-Ordinary Dividends," in general, would similarly require a Non-U.S. Shareholder to provide the form W-8 for dividends paid after December 31, 1997 to be exempt from backup withholding and information reporting. The payment of the proceeds from the disposition of shares of beneficial interest to or through a U.S. office of a broker will be subject to information reporting and backup withholding unless the owner, under penalties of perjury, certifies, among other things, its status as a Non- U.S. Shareholder, or otherwise establishes an exemption. The payment of the proceeds from the disposition of shares of beneficial interest to or through a non-U.S. office of a non-U.S. broker generally will not be subject to backup withholding and information reporting, except as noted below. In the case of a payment of proceeds from the disposition of shares of beneficial interest to or through a non-U.S. office of a broker which is (i) a U.S. person, (ii) a "controlled foreign corporation" for U.S. Federal income tax purposes or (iii) a foreign person 50% or more of whose gross income for certain periods is derived from a U.S. trade or business, information reporting (but not backup withholding) will apply unless the broker has documentary evidence in its files that the holder is a Non-U.S. Shareholder (and the broker has no actual knowledge to the contrary) and certain other conditions are met, or the holder otherwise establishes an exemption. Under proposed Treasury regulations, a payment of the proceeds from the disposition of shares of beneficial interest to or through such broker will be subject to backup withholding if such broker has actual knowledge that the holder is a U.S. person. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules will be refunded or credited against the Non-U.S. Shareholder's U.S. Federal income tax liability, provided that required information is furnished to the Service. These backup withholding and information reporting rules are currently under review by the Treasury Department, and their application to shares of beneficial interest is subject to change. PLAN OF DISTRIBUTION The Selling Shareholder may from time to time offer and sell the Shares on the NYSE or otherwise at market prices then prevailing or at prices and upon terms then obtainable. Sales may be made in ordinary brokerage transactions, in block transactions, in privately negotiated transactions, pursuant to Rule 144 or otherwise. If the Shares are sold through brokers, the Selling Shareholder expects to pay customary brokerage commissions and charges. The Shares are being registered to permit public secondary trading of the Shares from time to time after the date of this Prospectus. The Company will bear all expenses (other than selling commissions, underwriting discounts and fees and expenses of counsel to the Selling Shareholder) to the Selling Shareholder in connection with the registration and sale of the Shares. The Company is registering the Shares as required by the agreements between the Company, the Operating Partnership and the Selling Shareholder, which agreements are filed as an exhibit to the Registration Statement of which this Prospectus is a part. The Selling Shareholder and any dealer, broker or other agent selling securities offered hereby for the Selling Shareholder or purchasing any such securities from the Selling Shareholder for purposes of resale may be 25 deemed to be an underwriter under the Securities Act and any compensation received by the Selling Shareholder, dealer, broker or other agent may be deemed underwriting compensation. The amount of such compensation cannot currently be estimated. The Company knows of no existing arrangements between the Selling Shareholder and any other dealer, broker or other agent. To comply with certain states' securities laws, if applicable, the Shares offered hereby may be sold in such states only through brokers or dealers. In addition, in certain states the Shares may not be sold unless they have been registered or qualified for sale in such state or an exemption from registration or qualification is available and is complied with. EXPERTS The consolidated financial statements and schedule of Amli Residential Properties Trust as of December 31, 1995 and 1994, and for each of the years in the three-year period ended December 31, 1995, have been incorporated by reference herein and in the Registration Statement in reliance upon the report of KPMG Peat Marwick LLP, independent certified public accountants, which report is incorporated by reference herein, and upon the authority of said firm as experts in accounting and auditing. To the extent that KPMG Peat Marwick LLP audits and reports on financial statements of Amli Residential Properties Trust issued at future dates, and consents to the use of their report thereon, such financial statements also will be incorporated by reference in the Registration Statement in reliance upon their report and said authority. LEGAL MATTERS Certain legal matters relating to the validity of the Offered Securities offered pursuant to this Prospectus will be passed upon for the Company by Mayer, Brown & Platt. Mayer, Brown & Platt has in the past represented and is currently representing the Company and certain of its affiliates. 26 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. The following table sets forth the estimated expenses in connection with the issuance and distribution of the securities registered hereby, all of which will be paid by the Registrant: SEC registration fee . . . . . . . . . $ 1,008 Printing and duplicating expenses. . . 1,000 Legal fees and expenses. . . . . . . . 20,000 Accounting fees and expenses . . . . . 1,500 Miscellaneous expenses . . . . . . . . 1,492 ------- Total. . . . . . . $25,000 ======= ITEM 15. INDEMNIFICATION OF TRUSTEES AND OFFICERS. The Registrant's officers and Trustees are and will be indemnified under the Declaration of Trust and Bylaws of the Registrant, and the Partnership Agreement of the Operating Partnership against certain liabilities. The Declaration of Trust requires the Registrant to indemnify its Trustees and officers, among others, against claims and liabilities and reasonable expenses actually incurred by them in connection with any claim or liability by reason of their services in those or other capacities unless it is established that the act or omission of the Trustee or officer was material to the matter giving rise to the proceeding and was committed in bad faith or was the result of active and deliberate dishonesty, or the Trustee or officer actually received an improper personal benefit, or, in the case of any criminal proceeding, the Trustee or officer had reasonable cause to believe that the act or omission was unlawful. As permitted by Maryland Law, the Declaration of Trust provides that a Trustee or officer of the Registrant shall not be liable for monetary damages to the Registrant or its shareholders for any act or omission in the performance of his duties, except to the extent that (1) the person actually received an improper benefit or (2) the person's action or failure to act was the result of active and deliberate dishonesty and was material to the cause of action adjudicated. The Partnership Agreement of the Operating Partnership also provides for indemnification of the Registrant and its officers and Trustees to the same extent indemnification is provided to officers and Trustees of the Registrant in its Declaration of Trust, and limits the liability of the Registrant to the Operating Partnership and its partners to the same extent the liability of the officers and Trustees of the Registrant to the Registrant and its shareholders is limited under the Registrant's Declaration of Trust. ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. See Exhibit Index included herewith which is incorporated herein by reference. II-1 ITEM 17. UNDERTAKINGS. The undersigned registrant hereby undertakes: (a) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement: (i) To include any Prospectus required by section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the Prospectus any facts or events arising after the effective date of the Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement; (iii) To include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement; PROVIDED, HOWEVER, that paragraphs (a)(i) and (a)(ii) do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed with or furnished to the Commission by the Registrant pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the Registration Statement. (b) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial BONA FIDE offering thereof. (c) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. The undersigned Registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference in the Registration Statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial BONA FIDE offering thereof. The undersigned Registrant hereby undertakes to supplement the applicable prospectus supplement, after the expiration of the subscription period, to set forth the results of the subscription offer, the transactions by the underwriters during the subscription period, the amount of unsubscribed securities to be purchased by the underwriters, and the terms of any subsequent reoffering thereof. If any public offering by the underwriters is to be made on terms differing from those set forth on the cover page of the applicable prospectus supplement, a post-effective amendment will be filed to set forth the terms of such offering. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to Trustees, officers and controlling persons of the Registrant pursuant to the provisions set forth or described in Item 15 of this Registration Statement, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a Trustee, officer or II-2 controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such Trustee, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue. POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each of Amli Residential Properties Trust, a Maryland real estate investment trust, and each of the undersigned Trustees and officers of Amli Residential Properties Trust, hereby constitutes and appoints Gregory T. Mutz, John E. Allen, Allan J. Sweet and Charles C. Kraft, its, his or her true and lawful attorneys-in- fact and agents, for it, him or her and in its, his or her name, place and stead, in any and all capacities, with full power to act alone, to sign any and all amendments to this Registration Statement, and to file each such amendment to this Registration Statement with all exhibits thereto, and any and all documents in connection therewith, with the Securities and Exchange Commission, hereby granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform any and all acts and things required and necessary to be done, as fully and to all intents and purposes as it, he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof. II-3 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Company certifies that it has reasonable grounds to believe that it meets all the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Chicago, State of Illinois on July 25, 1996. AMLI RESIDENTIAL PROPERTIES TRUST By: /s/ JOHN E. ALLEN John E. Allen Its: Vice Chairman Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities indicated on July 25, 1996. NAME TITLE /s/ GREGORY T. MUTZ Chairman of the Board of Trustee Gregory T. Mutz (Principal Executive Officer) /s/ JOHN E. ALLEN Vice-Chairman of the Board of Trustees John E. Allen (Principal Financial Officer) /s/ ALLAN J. SWEET Trustee and President Allan J. Sweet /s/ CHARLES C. KRAFT Treasurer Charles C. Kraft (Principal Accounting Officer) /s/ LAURA D. GATES Trustee Laura D. Gates /s/ MARC S. HEILWEIL Trustee Marc S. Heilweil /s/ STEPHEN G. McCONAHEY Trustee Stephen G. McConahey /s/ QUINTIN E. PRIMO III Trustee Quintin E. Primo III /s/ JOHN G. SCHREIBER Trustee John G. Schreiber /s/ PHILIP N. TAGUE Trustee Philip N. Tague II-4 INDEX TO EXHIBITS EXHIBIT NUMBER DOCUMENT DESCRIPTION 4.1 Amended and Restated Declaration of Trust of the Registrant (Incorporated by reference to exhibit 3.1 to Registration Statement No. 33- 71566). 4.2 Amended and Restated By-laws of the Registrant (Incorporated by reference to exhibit 3.2 to Registration Statement No. 33-71566). 4.3 Amended and Restated Agreement of Limited Partnership of Amli Residential Properties, L.P. (Incorporated by reference to exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1994). 4.3(a) First Amendment to the Amended and Restated Agreement of Limited Partnership of Amli Residential Properties, L.P. (Incorporated by reference to exhibit 10.1(a) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1995). 4.3(b) Second Amendment to the Amended and Restated Agreement of Limited Partnership of Amli Residential Properties, L.P. (Incorporated by reference to exhibit 10.1(b) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1995). 4.4 Form of Common Share Certificate (Incorporated by reference to exhibit 4.1 to Registration Statement No. 33-71566). 4.5 Articles Supplementary to the Amended and Restated Declaration of Trust of the Registrant Classifying Unissued Shares of Beneficial Interest in the Registrant as Series A Cumulative Convertible Preferred Shares of Beneficial Interest (Incorporated by reference to exhibit 4.9 to the Registrant's Current Report on Form 8-K dated January 30, 1996). 4.6 Form of Series A Preferred Share Certificate (Incorporated by reference to exhibit 4.5 to the Registrant's Current Report on Form 8-K dated January 18, 1996). 5.1 Opinion of Mayer, Brown & Platt. 8.1 Tax Opinion of Mayer, Brown & Platt. 23.1 Consent of KPMG Peat Marwick LLP. 23.2 Consent of Mayer, Brown & Platt (Included in the opinions filed as Exhibits 5.1 and 8.1 to this Registration Statement). 24.1 Power of Attorney (Included on page II-3). 99.1 (i) Side Agreement, dated as of May 3, 1996, between the Registrant, Amli Residential Properties, L.P. and Peachtree City Multifamily Partners, L.P., (ii) Two Letter Agreements, dated May 3, 1996, between the Registrant and Peachtree City Multifamily Partners, L.P. (iii) Letter Agreement, dated May 3, 1996, between Amli Residential Properties, L.P. and Peachtree City Multifamily Partners, L.P. II-5 EX-5.1 2 EXHIBIT 5.1 July 24, 1996 The Board of Trustees Amli Residential Properties Trust 125 South Wacker Drive Chicago, Illinois 60606 Ladies and Gentlemen: We have acted as counsel to Amli Residential Properties Trust, a Maryland real estate investment trust (the "Company"), in connection with the proceedings (the "Company Proceedings") taken and to be taken relating to the registration by the Company of an aggregate of 143,500 common shares of beneficial interest (the "Shares") of the Company, $.01 par value per share, with the Securities and Exchange Commission (the "SEC") for resale by a certain selling shareholder who may obtain the Shares upon exchange of limited partnership units in Amli Residential Properties, L.P. We have also participated in the preparation and filing with the SEC under the Securities Act of 1933, as amended, of a registration statement on Form S-3 (the "Registration Statement"), relating to such Shares. As special counsel to the Company, we have examined originals or copies certified to our satisfaction of the Company's Amended and Restated Declaration of Trust (the "Declaration of Trust") and Amended and Restated Bylaws, resolutions of the Board of Trustees, and such other Company records, instruments, certificates and documents and such questions of law as we considered necessary or appropriate to enable us to express this opinion. As to certain facts material to our opinion, we have relied, to the extent we deem such reliance proper, upon certificates of public officials and officers of the Company. In rendering this opinion, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals and the conformity to authentic original documents of photostatic copies. Based upon and subject to the foregoing and to the assumptions, limitations and conditions set forth herein, we are of the opinion that, upon completion of the Company Proceedings, the Shares will have been duly authorized for issuance, and when the Shares are issued and delivered in accordance with the Company The Board of Trustees Amli Residential Properties Trust June 24, 1996 Page 2 Proceedings and the resolutions authorizing their issuance, the Shares will be validly issued, fully paid and, except as described below, nonassessable. Our opinion relating to the nonassessability of the Shares does not pertain to the potential liability of shareholders of the Company for debts and liabilities of the Company. Section 5-350 of the Maryland Courts and Judicial Proceedings Code provides that "a shareholder . . . of a real estate investment trust . . . is not personally liable for the obligations of the real estate investment trust." The Declaration of Trust provides that no shareholder shall be personally liable in connection with the Company's property or the affairs of the Company. The Declaration of Trust further provides that the Company shall indemnify and hold harmless shareholders against all claims and liabilities and related reasonable expenses to which they become subject by virtue of their status as current or former shareholders. In addition, we have been advised that the Company, as a matter of practice, inserts a clause in its business, management and other contracts that provides that shareholders shall not be personally liable thereunder. Accordingly, no personal liability should attach to the Company's shareholders for contract claims under any contract containing such a clause where adequate notice is given. However, with respect to tort claims, contract claims where shareholder liability is not so negated, claims for taxes and certain statutory liability, the shareholders may, in some jurisdictions, be personally liable for such claims and liabilities. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to us under the caption "Legal Matters". Very truly yours, MAYER, BROWN & PLATT EX-8.1 3 EXHIBIT 8.1 July 25, 1996 The Board of Trustees Amli Residential Properties Trust 125 South Wacker Drive, Suite 3100 Chicago, Illinois 60606 Re: Partnership Classification; Status as a Real Estate Investment Trust ("REIT"); Information in the Registration Statement under "FEDERAL INCOME TAX CONSIDERATIONS" and "CERTAIN UNITED STATES TAX CONSIDERATIONS FOR NON-U.S. SHAREHOLDERS" -------------------------------------------------- Ladies and Gentlemen: We have acted as special counsel to Amli Residential Properties Trust, a Maryland real estate investment trust ("ARPT"), in connection with the registration of 143,500, common shares of beneficial interest of ARPT (the "Common Shares"), all of which Common Shares may be offered and sold by a certain selling shareholder from time to time as set forth in the prospectus (the "Prospectus") which forms a part of the Registration Statement on Form S-3 filed with the Securities and Exchange Commission on July 25, 1996, as amended through the date hereof (the "Registration Statement"). Unless otherwise specifically defined herein, all capitalized terms have the meanings assigned to them in the Registration Statement. In connection with the registration of the Common Shares, you have requested our opinions concerning (i) the treatment of Amli Residential Properties, L.P. (the "Operating Partnership") as a partnership for Federal income tax purposes, and not as an association taxable as a corporation; (ii) the qualification and taxation for Federal income tax purposes of the Company as a REIT; and (iii) the information in the Registration Statement under the headings "FEDERAL INCOME TAX CONSIDERATIONS" and "CERTAIN UNITED STATES TAX CONSIDERATIONS FOR NON-U.S. SHAREHOLDERS." In formulating our opinions, we have reviewed and relied upon the partnership agreement of the Operating Partnership, the Registration Statement, other documents and information provided by you, and such applicable provisions of law and other documents Amli Residential Properties Trust July 25, 1996 Page 2 as we have considered necessary or desirable for purposes of the opinions expressed herein. In addition, we have relied upon the Company's certificate (the "Officer's Certificate"), executed by a duly appointed officer of the Company, setting forth certain representations relating to the organization and actual and proposed operation of the Company, the Operating Partnership, the Management Company, AIA, Amrescon and each of the partnerships in which the Operating Partnership will directly or indirectly hold an interest and which actually owns an interest in real property (the "Property Partnerships"). For purposes of our opinions, we have not made an independent investigation of the facts set forth in such documents, the Officer's Certificate, the partnership agreements for the Operating Partnership or the Property Partnerships, or the Registration Statement. We have, consequently, relied upon your representations that the information presented in such documents or otherwise furnished to us accurately and completely describes all material facts. No facts have come to our attention, however, that would cause us to question the accuracy or completeness of such facts or documents in a material way. In rendering these opinions, we have assumed that the transactions contemplated by the foregoing documents will be consummated in accordance with the operative documents, and that such documents accurately reflect the material facts of such transactions. In addition, the opinions are based on the assumption that the Company, the Operating Partnership, the Management Company, AIA, Amrescon and the Property Partnerships have operated and will continue to each be operated in the manner described in the applicable partnership agreement or other organizational documents and in the Registration Statement, and all terms and provisions of such agreements and documents have been and will continue to be complied with by all parties thereto. Our opinions expressed herein are based on the applicable laws of the States of Maryland and Delaware, the Code, Treasury regulations promulgated thereunder, and interpretations of the Code and such regulations by the courts and the Internal Revenue Service, all as they are in effect and exist at the date of this letter. It should be noted that statutes, regulations, judicial decisions, and administrative interpretations are subject to change at any time and, in some circumstances, with retroactive effect. A material change that is made after the date hereof in any of the foregoing bases for our opinions could adversely affect our conclusions. Amli Residential Properties Trust July 25, 1996 Page 3 Based upon and subject to the foregoing, it is our opinion that: 1. The Operating Partnership will be treated, for Federal income tax purposes, as a partnership, and not as an association taxable as a corporation. 2. Beginning with the Company's taxable year ending December 31, 1994, the Company has been organized in conformity with the requirements for qualification as a REIT under the Code, and the Company's actual and proposed method of operation, as described in the Registration Statement and as represented in the Officer's Certificate, has enabled it and will continue to enable it to satisfy the requirements for qualification as a REIT. 3. The information in the Registration Statement under the headings "FEDERAL INCOME TAX CONSIDERATIONS" and "CERTAIN UNITED STATES TAX CONSIDERATIONS FOR NON-U.S. SHAREHOLDERS," to the extent that it constitutes matters of law or legal conclusions, has been reviewed by us and is correct in all material respects. Other than as expressly stated above, we express no opinion on any issue relating to the Company, the Operating Partnership, any Property Partnership or to any investment therein. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the use of the name of our firm therein and under the caption "FEDERAL INCOME TAX CONSIDERATIONS" in the Registration Statement. Very truly yours, MAYER, BROWN & PLATT EX-23.1 4 EXHIBIT 23.1 ACCOUNTANTS' CONSENT The Board of Trustees and Shareholders Amli Residential Properties Trust: We consent to the use of our report on the consolidated financial statements and schedule of Amli Residential Properties Trust as of December 31, 1995 and 1994, and for each of the years in the three-year period ended December 31, 1995, incorporated by reference herein and to the reference to our Firm under the heading "EXPERTS". KPMG PEAT MARWICK LLP KPMG Peat Marwick LLP Chicago, Illinois July 22, 1996 EX-99.1 5 EXHIBIT 99.1 SIDE AGREEMENT This Side Agreement is made by and between PEACHTREE CITY MULTIFAMILY PARTNERS, L.P., a Georgia limited partnership ("Peachtree"), AMLI RESIDENTIAL PROPERTIES, L.P., a Delaware limited partnership ("Amli"), and AMLI RESIDENTIAL PROPERTIES TRUST, a Maryland real estate investment trust ("Trust") as of May 3, 1996. For and in consideration of Ten and no/100 Dollars ($10.00) and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Peachtree, Amli, and the Trust agree as follows: Notwithstanding the agreements as contained in that certain Letter Agreement by and between Peachtree City Multifamily Partners, L.P., and Amli Residential Properties Trust, executed as of May 3, 1996, a copy of said letter being attached hereto as Exhibit "A" and incorporated herein by reference ("Letter Agreement"), in the event that the Securities and Exchange Commission has not declared effective the registration statement to be filed for the registration of 143,500 Shares of Trust stock (as that term is defined in the Letter Agreement), and such 143,500 shares of Trust stock do not become Registered Shares (as that term is defined in the Letter Agreement) within 90 days from the date hereof, Peachtree shall have the right to convert its Restricted Units (as that term is defined in the Letter Agreement) into Unregistered Shares (as that term is defined in the Letter Agreement) at any time from and after the expiration of said 90 days. IN WITNESS WHEREOF, the parties hereto have set their hands and seals on the date first above written. AMLI RESIDENTIAL PROPERTIES, L.P., PEACHTREE CITY MULTIFAMILY a Delaware limited partnership PARTNERS, L.P., a Georgia limited partnership By: Amli Residential Properties Trust, By: Peachtree City Multifamily a Maryland real estate investment Properties, L.L.C., a trust, General Partner Georgia limited partnership, sole general partner By: /s/ PHILIP N. TAGUE By: /s/ ERIC J. EDEE (Seal) Title: Executive Vice President Eric J. Edee, President and Managing Member (Trust Seal) AMLI RESIDENTIAL PROPERTIES TRUST, a Maryland real estate investment trust By: /s/ PHILIP N. TAGUE Title: Executive Vice President (Trust Seal) EXHIBIT A LETTER AGREEMENT This Letter Agreement made by and between PEACHTREE CITY MULTIFAMILY PARTNERS, L.P., a Georgia limited partnership ("Peachtree"), and AMLI RESIDENTIAL PROPERTIES TRUST, a Maryland real estate investment trust ("Trust"), this 3rd day of May, 1996. For and in consideration of Ten and no/100 Dollars ($10.00) and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Peachtree and the Trust hereby covenant and agree as follows: STATEMENT OF FACT: Peachtree on this date has been issued 143,500 limited partnership units ("Units") of Amli Residential Properties, L.P., a Delaware limited partnership ("Amli") in exchange for the contribution to Amli of twenty- five (25) acres, more or less, located in Land Lots 122 and 123 of the 7th District, Fayette County, Georgia. Peachtree has previously been advised that one-half of the total Units are unrestricted ("Unrestricted Units") and the remaining one-half of the Units (i.e., 71,750 Units) are restricted for One Hundred Eighty (180) days ("Restricted Units"), whereby such Restricted Units cannot be converted into shares of stock of the Trust ("Shares"). Peachtree has further been advised that in the event Peachtree requests the conversion of the Unrestricted Units to Shares, that the Unrestricted Units converted into Shares will be unregistered Shares, and that any subsequent registration statement filed with the Securities and Exchange Commission ("SEC") to register the Unrestricted Shares for Units in favor of Peachtree will cause substantial delay and will be burdensome on the Trust. Peachtree and the Trust each acknowledge that it is in the best interests of both Peachtree and the Trust for Peachtree to agree not to exercise its rights to convert the Unrestricted Units into unregistered Shares until such time as the Shares have become registered Shares pursuant to a registration statement filed with the SEC and declared effective by the SEC. The Trust is willing to undertake and use its reasonable efforts to prepare and file for registration of Shares of the Trust in order that such Shares become registered Shares ("Registered Shares"). AGREEMENT: The Trust has agreed, in favor of Peachtree, to prepare and file a registration statement with the SEC on or before July 2, 1996 for registration of 143,500 Shares of Trust stock, and to use its reasonable, diligent, and good faith efforts to cause the registration statement to be declared effective by the SEC as soon thereafter as is practicable. Peachtree agrees it has no right and will not exercise the right to convert the Unrestricted Units to Shares until the registration statement is completed and the registration statement has been declared effective by the SEC, whereby the Shares become Registered Shares. IN WITNESS WHEREOF, the parties hereto have set their hand and seal hereto on the date first above written. PEACHTREE: PEACHTREE CITY MULTIFAMILY PARTNERS, L.P., A Georgia limited partnership By: Peachtree City Multifamily Properties, L.L.C., a Georgia limited partnership, Sole General Partner By: /S/ ERIC J. EDEE (Seal) Eric J. Edee, President and Managing Member TRUST AMLI RESIDENTIAL PROPERTIES TRUST, a Maryland real estate investment trust By: /s/ PHILIP N. TAGUE Title: Executive Vice President (Trust Seal) LETTER AGREEMENT This Letter Agreement made by and between PEACHTREE CITY MULTIFAMILY PARTNERS, L.P., a Georgia limited partnership ("Peachtree"), and AMLI RESIDENTIAL PROPERTIES TRUST, a Maryland real estate investment trust ("Trust"), this 3rd day of May, 1996. For and in consideration of Ten and no/100 Dollars ($10.00) and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Peachtree and the Trust hereby covenant and agree as follows: STATEMENT OF FACT: Peachtree on this date has been issued 143,500 limited partnership units ("Units") of Amli Residential Properties, L.P., a Delaware limited partnership ("Amli") in exchange for the contribution to Amli of twenty- five (25) acres, more or less, located in Land Lots 122 and 123 of the 7th District, Fayette County, Georgia. Peachtree has previously been advised that one-half of the total Units are unrestricted ("Unrestricted Units") and the remaining one-half of the Units (i.e., 71,750 Units) are restricted for One Hundred Eighty (180) days ("Restricted Units"), whereby such Restricted Units cannot be converted into shares of stock of the Trust ("Shares"). Peachtree has further been advised that in the event Peachtree requests the conversion of the Unrestricted Units to Shares, that the Unrestricted Units converted into Shares will be unregistered Shares, and that any subsequent registration statement filed with the Securities and Exchange Commission ("SEC") to register the Unrestricted Shares for Units in favor of Peachtree will cause substantial delay and will be burdensome on the Trust. Peachtree and the Trust each acknowledge that it is in the best interests of both Peachtree and the Trust for Peachtree to agree not to exercise its rights to convert the Unrestricted Units into unregistered Shares until such time as the Shares have become registered Shares pursuant to a registration statement filed with the SEC and declared effective by the SEC. The Trust is willing to undertake and use its reasonable efforts to prepare and file for registration of Shares of the Trust in order that such Shares become registered Shares ("Registered Shares"). AGREEMENT: The Trust has agreed, in favor of Peachtree, to prepare and file a registration statement with the SEC on or before July 2, 1996 for registration of 143,500 Shares of Trust stock, and to use its reasonable, diligent, and good faith efforts to cause the registration statement to be declared effective by the SEC as soon thereafter as is practicable. Peachtree agrees it has no right and will not exercise the right to convert the Unrestricted Units to Shares until the registration statement is completed and the registration statement has been declared effective by the SEC, whereby the Shares become Registered Shares. IN WITNESS WHEREOF, the parties hereto have set their hand and seal hereto on the date first above written. PEACHTREE: PEACHTREE CITY MULTIFAMILY PARTNERS, L.P., A Georgia limited partnership By: Peachtree City Multifamily Properties, L.L.C., a Georgia limited partnership, Sole General Partner By: /s/ ERIC J. EDEE (Seal) Eric J. Edee, President and Managing Member TRUST AMLI RESIDENTIAL PROPERTIES TRUST, a Maryland real estate investment trust By: /s/ PHILIP N. TAGUE Title: Executive Vice President (Trust Seal) LETTER AGREEMENT This Letter Agreement entered into by and between PEACHTREE CITY MULTIFAMILY PARTNERS, L.P., a Georgia limited partnership ("Peachtree"), and AMLI RESIDENTIAL PROPERTIES TRUST, a Maryland real estate investment trust ("Trust"), this 3rd day of May, 1996. For and in consideration of Ten and no/100 Dollars ($10.00) and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: STATEMENT OF FACT: Peachtree is the owner and holder of 143,500 limited partnership units ("Units") of Amli Residential Properties, L.P., a Delaware partnership ("Amli") which is the sole general partner of the Trust. Peachtree has the right to convert the Units into shares of stock of the Trust ("Shares") in accordance with and pursuant to Article 4, Section 4.2(e) of the Amended and Restated Agreement of Limited Partnership of Amli Residential Properties, L.P., dated February 15, 1994. Peachtree acknowledges that one-half of the Units (i.e., 71,750 Units) are restricted whereby the Units cannot be converted into Shares for 180 days from the date hereof ("Restricted Units") and the remaining one-half of the Units (i.e., 71,750 Units) are unrestricted ("Unrestricted Units") and may be converted into Shares at any time. Peachtree agreed to contribute certain real property to Amli with the understanding that it could convert its Units into Registered Shares (as that term is hereinafter defined). The Shares of the Trust are unregistered Shares, and Peachtree has requested the Trust to undertake and to use its reasonable efforts to prepare and file a registration statement for the registration of 143,500 Shares of the Trust with no restrictions thereon, and upon such registration of 143,500 Shares ("Registered Shares"), such Registered Shares shall be reserved for Peachtree for the purpose of converting the Units into the Registered Shares. The Trust is willing to agree as follows. AGREEMENT: In consideration of Peachtree's contribution of certain real property to Amli, the Trust hereby agrees in favor of Peachtree to prepare and file a registration statement with the Securities and Exchange Commission ("SEC") on or before July 3, 1996, for the registering of 143,500 Shares of Trust stock, and to use its reasonable, diligent and good faith efforts to cause the registration statement to be declared effective by the SEC as soon thereafter as is practicable. Upon the completion of the registration and the 143,500 Shares becoming registered stock with no restrictions, such Registered Shares shall be reserved and held for Peachtree pursuant to the conversion rights of Units into Shares. IN WITNESS WHEREOF, the parties hereto have set their hand and seal hereto on the date first above written. PEACHTREE: PEACHTREE CITY MULTIFAMILY PARTNERS, L.P., A Georgia limited partnership By: Peachtree City Multifamily Properties, L.L.C., a Georgia limited partnership, Sole General Partner By: /s/ ERIC J. EDEE (Seal) Eric J. Edee, President and Managing Member TRUST AMLI RESIDENTIAL PROPERTIES TRUST, a Maryland real estate investment trust By: /s/ PHILIP N. TAGUE Title: Executive Vice President (Trust Seal) LETTER AGREEMENT This Letter Agreement made by PEACHTREE CITY MULTIFAMILY PARTNERS, L.P., a Georgia limited partnership ("Peachtree"), in favor of AMLI RESIDENTIAL PROPERTIES, L.P., a Delaware limited partnership ("Amli"), this 3rd day of May, 1996. For and in consideration of Ten and no/100 Dollars ($10.00) and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: STATEMENT OF FACT: Peachtree, on the date hereof, has contributed to Amli twenty-five (25) acres, more or less, located in Land Lots 122 and 123 of the 7th District, Fayette County, Georgia for the issuance of 143,500 limited partnership units of Amli ("Units"). Peachtree has been advised that one- half of the total Units are unrestricted ("Unrestricted Units") and the other one-half of the Units are restricted for One Hundred Eighty (180) days ("Restricted Units") whereby such one-half of the Units cannot be converted into shares of stock of Amli Residential Properties Trust, a Maryland real estate investment trust ("Shares"). Peachtree has been further advised that notwithstanding Peachtree's ownership of the Units as of the record date, May 9, 1996, for distribution purposes, Peachtree is not entitled to any distribution made to record unit owners as of May 9, 1996 for the fiscal quarter ending March 31, 1996, but Peachtree will be entitled to its prorata share of any distributions made in the future by Amli to unit owners. AGREEMENT: Peachtree hereby acknowledges and agrees that one-half of the Units are Unrestricted Units with respect to the right to convert such Unrestricted Units into Shares and that the other one-half of the Units are Restricted Units, which Restricted Units contain a restriction and prohibition for a period of 180 days from the date hereof prohibiting the conversion of the Restricted Units into Shares. Further, Peachtree acknowledges and agrees that it is not entitled to participate in the upcoming distribution to unit owners of Amli who are owners of Units as of the record date, May 9, 1996 for the fiscal quarter ending March 31, 1996, and Peachtree has no rights or claims in and to any of the distribution to be made to unit owners of Amli as of said record date; however, Peachtree will be entitled to its prorata share of any future distributions made by Amli to unit owners for the quarter ending June 30, 1996, and its full share of distributions for the quarters ending thereafter. IN WITNESS WHEREOF, the undersigned have set their hands and seals hereto on the date first above written. PEACHTREE: PEACHTREE CITY MULTIFAMILY PARTNERS, L.P., A Georgia limited partnership By: Peachtree City Multifamily Properties, L.L.C., a Georgia limited partnership, sole general partner By: /s/ ERIC J. EDEE (Seal) Eric J. Edee, President and Managing Member AMLI: AMLI RESIDENTIAL PROPERTIES, L.P., a Delaware limited partnership, having Amli Residential Properties Trust, a Maryland real estate investment trust, as its sole general partner By: Amli Residential Properties Trust, a Maryland real estate investment trust, general partner By: /s/ PHILIP N. TAGUE Title: Executive Vice President (Trust Seal) -----END PRIVACY-ENHANCED MESSAGE-----