Prospectus Supplement
(To Prospectus dated June 18, 2003)
2,400,000 Shares
[KIMCO REALTY CORP. LOGO]
Common Stock
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Kimco Realty Corporation is offering 2,400,000 shares of common stock.
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Our common stock is listed on the New York Stock Exchange under the symbol
"KIM." The last reported sale price of our common stock on the New York Stock
Exchange on September 8, 2003 was $42.05 per share.
To preserve our status as a REIT for federal income tax purposes, our
charter imposes certain restrictions on ownership of our common stock. See
"Description of Common Stock--Restrictions on Ownership" in the accompanying
prospectus.
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Investing in our common stock involves risks that are described in the "Risk
Factors" section beginning on page 4 of the accompanying prospectus.
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Per Share Total(1)
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Offering price ...................................... $41.20 $98,880,000
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Discounts and commissions to the underwriter ........ $ 0.37 $ 888,000
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Offering proceeds to Kimco Realty Corporation before
expenses (2)....................................... $40.83 $97,992,000
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(1) If the underwriter exercises its over-allotment option in full, the total
public offering price, underwriting discount and proceeds, before expenses, to
us would be $113,712,000, $1,021,200 and $112,690,800, respectively.
(2) The per share amount is a 2.90% discount to the last sale price of our
common stock as reported on the New York Stock Exchange of $42.05 on September
8, 2003.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus supplement or the accompanying prospectus is truthful or
complete. Any representation to the contrary is a criminal offense.
We have granted the underwriter the right to purchase up to 360,000
additional shares of common stock to cover any over-allotments. The
underwriter can exercise this right at any time within 30 days after the
offering. The underwriter expects to deliver the shares of our common stock to
investors on or about September 12, 2003.
Banc of America Securities LLC
September 9, 2003
You should rely only on the information contained or incorporated by
reference in this prospectus supplement and the accompanying prospectus. We
have not, and the underwriter has not, authorized any other person to provide
you with different or additional information. If anyone provides you with
different or additional information, you should not rely on it. We are not,
and the underwriter is not, making an offer to sell the shares in any
jurisdiction where the offer or sale is not permitted. You should assume that
the information appearing in this prospectus supplement and the accompanying
prospectus, including the documents incorporated therein by reference, is
accurate only as of their respective dates. Our business, financial condition,
results of operations and prospects may have changed since those dates.
When we refer to "we," "us," or "our" in this prospectus supplement, we mean
Kimco Realty Corporation and one or more of its subsidiaries or, as the
context may require, Kimco Realty Corporation only.
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TABLE OF CONTENTS
Page
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Prospectus Supplement
Forward-Looking Statements .............................................. ii
The Company ............................................................. S-1
The Offering ............................................................ S-3
Price Range of Common Stock and Dividend Policy ......................... S-4
Use of Proceeds ......................................................... S-5
Certain U.S. Federal Income Tax Consequences ............................ S-6
Underwriting ............................................................ S-11
Legal Matters ........................................................... S-13
Prospectus
About This Prospectus ................................................... 1
Where Can You Find More Information ..................................... 1
Incorporation of Certain Documents By Reference ......................... 1
Disclosure Regarding Forward-Looking Statements ......................... 2
The Company ............................................................. 3
Risk Factors ............................................................ 4
Use of Proceeds ......................................................... 8
Ratio of Earnings to Fixed Charges ...................................... 8
Description of Debt Securities .......................................... 9
Description of Common Stock ............................................. 22
Description of Common Stock Warrants .................................... 24
Description of Preferred Stock .......................................... 24
Description of Depositary Shares ........................................ 32
Material Federal Income Tax Considerations to us of Our REIT Election ... 35
Plan of Distribution .................................................... 44
Experts ................................................................. 45
Legal Matters ........................................................... 45
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(i)
FORWARD-LOOKING STATEMENTS
This prospectus supplement and the accompanying prospectus, including the
documents that we incorporate by reference, contain certain historical and
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of
1934, as amended. We intend such forward-looking statements to be covered by
the safe harbor provisions for forward-looking statements contained in the
Private Securities Litigation Reform Act of 1995 and include this statement
for purposes of complying with these safe harbor provisions. Forward-looking
statements, which are based on certain assumptions and describe our future
plans, strategies and expectations, are generally identifiable by use of the
words "believe," "expect," "intend," "anticipate," "estimate," "project" or
similar expressions.
Our ability to predict results or the actual effect of future plans or
strategies is inherently uncertain. Factors which may cause actual results to
differ materially from current expectations include, but are not limited to:
o changes in general economic and local real estate conditions;
o the inability of major tenants to continue paying their rent obligations
due to bankruptcy, insolvency or general downturn in their business;
o financing risks, such as the inability to obtain equity or debt financing
on favorable terms;
o changes in governmental laws and regulations (including changes to laws
governing the taxation of REITs);
o the level and volatility of interest rates;
o the availability of suitable acquisition opportunities; and
o increases in operating costs.
The forward-looking statements included or incorporated by reference in this
prospectus supplement or accompanying prospectus are made only as of their
respective dates and we undertake no obligation to publicly update these
forward-looking statements to reflect changes in underlying assumptions, new
information, future events or otherwise. In light of these risks,
uncertainties and assumptions, the forward-looking events might or might not
occur. Accordingly, there is no assurance that our expectations will be
realized.
(ii)
THE COMPANY
Kimco Realty Corporation, a Maryland corporation, began operations through a
predecessor in 1966, and today is one of the nation's largest publicly-traded
owners and operators of neighborhood and community shopping centers (measured
by gross leasable area, which we refer to as "GLA").
As of July 22, 2003, we owned interests in 635 properties, including:
o 563 neighborhood and community shopping centers;
o one regional mall;
o 39 retail store leases;
o 28 ground up development projects; and
o four parcels of undeveloped land.
These properties have a total of approximately 94.0 million square feet of
GLA and are located in 41 states, Canada and Mexico.
Our ownership interests in real estate consist of our consolidated
portfolio, portfolios in which we own an economic interest, such as Kimco
Income REIT and Kimco Retail Opportunity Portfolio, and other properties or
portfolios where we also retain management. We believe our portfolio of
neighborhood and community shopping center properties is the largest (measured
by GLA) currently held by any publicly-traded real estate investment trust.
We believe that we have operated, and we intend to continue to operate, in
such a manner to qualify as a real estate investment trust (a "REIT") under
the Internal Revenue Code of 1986, as amended (the "Code"). We are self-
administered and self-managed through present management, which has owned and
managed neighborhood and community shopping centers for more than 35 years. We
have not engaged, nor do we expect to retain, any external advisors in
connection with the operation of our properties. Our executive officers are
engaged in the day-to-day management and operation of our real estate
exclusively and we administer nearly all operating functions for our
properties, including leasing, legal, construction, data processing,
maintenance, finance and accounting. Our executive offices are located at 3333
New Hyde Park Road, New Hyde Park, New York 11042-0020 and our telephone
number is (516) 869-9000.
Business Strategy
Our investment objective has been to increase cash flow, current income and,
consequently, the value of our existing portfolio of properties, and to seek
continued growth through (1) the strategic re-tenanting, renovation and
expansion of our existing centers and (2) the selective acquisition of
established income-producing real estate properties and properties requiring
significant re-tenanting and redevelopment, primarily in neighborhood and
community shopping centers in geographic regions in which we presently
operate. We will consider investments in other real estate sectors and in
geographic markets where we do not presently operate should suitable
opportunities arise.
In connection with the Tax Relief Extension Act of 1999 which became
effective January 1, 2001, we are now permitted to participate in activities
which we were precluded from previously in order to maintain our qualification
as a REIT, so long as these activities are conducted in entities which elect
to be treated as taxable subsidiaries under the Code, subject to certain
limitations. As such, through our taxable REIT subsidiaries, we are engaged in
various retail real estate related opportunities, including (1) merchant
building through our wholly-owned taxable REIT subsidiary, Kimco Developers,
Inc., which is primarily engaged in the ground-up development of neighborhood
and community shopping centers and subsequent sale thereof upon completion,
(2) retail real estate advisory and disposition services which primarily focus
on leasing and disposition strategies for real estate property interests of
both healthy and distressed retailers and (3) acting as an agent or principal
in connection with tax deferred exchange transactions. We will consider other
investments through taxable REIT subsidiaries should suitable opportunities
arise.
S-1
Recent Developments
Note Offering
On August 5, 2003, we issued $100,000,000 in aggregate principal amount of
our Series C Medium-Term Fixed Rate Notes, which mature August 5, 2008 and
bear interest at a rate of 3.950%. Net proceeds from this offering along with
cash on hand were used to redeem all $100,000,000 of our Remarketed Reset
Notes due August 18, 2008.
Mid-Atlantic Realty Trust
On June 18, 2003, we entered into a definitive merger agreement (the "Merger
Agreement") with Mid-Atlantic Realty Trust ("Mid-Atlantic"). Under the terms
of the Merger Agreement, which was unanimously approved by the Board of both
companies, we will acquire all of the outstanding shares of Mid-Atlantic for
$21.00 per share in cash in a transaction in which Mid-Atlantic will merge
into a subsidiary of ours. Subject to certain conditions, limited partners in
Mid-Atlantic's operating partnership will be offered the same cash
consideration for each outstanding unit and will be offered the opportunity
(in lieu of cash) to exchange their interests for preferred units in the
operating partnership upon the closing of the transaction. The merger is
subject to approval by Mid-Atlantic's shareholders and to customary closing
conditions. Mid-Atlantic shareholders are scheduled to vote on the merger on
September 30, 2003.
The Merger Agreement may be terminated if, among other reasons, the Mid-
Atlantic Board withdraws or modifies its approval in order to accept an
Acquisition Proposal (as defined in the Merger Agreement), provided that Mid-
Atlantic pays us a termination fee and break-up expenses. In certain other
circumstances, the Merger Agreement may be terminated and result in payment of
a termination fee and/or break-up expenses. In addition, Mid-Atlantic has
signed a memorandum of understanding to settle litigation filed against it
over our merger. As part of the settlement, Mid-Atlantic will reduce the
termination fee payable to us from $15.5 million to $14.5 million.
Board of Directors
We increased the size of our Board to eight members and Richard B. Saltzman
joined our Board. Mr. Saltzman was recently named President of Colony Capital
LLC.
Acquisitions and Dispositions
Since the period ended June 30, 2003, we have acquired three wholly owned
operating properties, in separate transactions, for an aggregate purchase
price of approximately $50.2 million including the assumption of approximately
$19.9 million in mortgage debt encumbering two of the properties.
Additionally, we have disposed of our regional mall located in Leominster,
Massachusetts for approximately $64.5 million.
S-2
THE OFFERING
Common stock offered by us. . . . 2,400,000 shares, or 2,760,000 shares if
the underwriter exercises its over-
allotment option in full.
Common stock to be
outstanding after this
offering. . . . . . . . . . . . . 109,842,373 shares.
Use of proceeds . . . . . . . . . We expect to use the net proceeds received
from this offering for general corporate
purposes, including investments of equity
capital in our co-investment programs
and the acquisition of interests in real
estate properties as suitable opportunities
arise. Pending such uses, we may use the
net proceeds to repay a portion of the
outstanding balance on our revolving credit
facility and we may invest the net
proceeds in short-term income producing
investments. See "Use of Proceeds."
NYSE symbol . . . . . . . . . . . KIM
The number of shares of common stock to be outstanding after this offering
is based upon 107,442,373 shares outstanding as of September 8, 2003. This
number excludes shares of common stock reserved for issuance upon the exercise
of options.
Unless we specifically state otherwise, the information in this prospectus
supplement does not take into account the sale of up to 360,000 shares of
common stock that the underwriter has the option to purchase from us to cover
over-allotments.
S-3
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
The following sets forth the high and low sale prices for our common stock
for the periods indicated as reported by the NYSE and the dividends paid by us
with respect to each period shown below, adjusted to reflect our three-for-two
common stock split, which was completed on December 21, 2001.
Price Range of
Common Stock Dividends Paid
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High Low Per Share
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Fiscal year ended December 31, 2001:
First Quarter................................................. $30.08 $27.17 $0.48
Second Quarter................................................ 31.57 27.33 0.48
Third Quarter................................................. 33.30 29.50 0.48
Fourth Quarter................................................ 34.07 31.33 0.52
Fiscal year ended December 31, 2002:
First Quarter................................................. $33.50 $29.00 $0.52
Second Quarter................................................ 33.87 31.00 0.52
Third Quarter................................................. 33.20 25.96 0.52
Fourth Quarter................................................ 32.08 27.77 0.54
Fiscal year ended December 31, 2003:
First Quarter................................................. $36.00 $30.25 $0.54
Second Quarter................................................ 39.45 34.47 0.54
Third Quarter (through September 8, 2003)..................... 43.35 37.21 --(1)
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(1) Dividends for the third quarter of 2003 have not yet been declared.
On September 8, 2003, the last reported sale price of our common stock on
the NYSE was $42.05 per share. Dividends are expected to be paid on or about
the 15th day of each January, April, July and October to common stockholders
at the discretion of our Board of Directors and will depend on our earnings,
our financial condition, capital requirements, the annual distribution
requirements under the REIT provisions of the Code and such other factors as
our Board of Directors deems relevant. Our preferred stock and debt
instruments and agreements limit the payment of dividends to holders of our
common stock under certain circumstances. See "Description of Debt
Securities--Certain Covenants--Restrictions on Dividends and Other
Distributions" and "Description of Preferred Stock--Dividends" in the
accompanying prospectus.
We have implemented a dividend reinvestment program under which stockholders
may elect to automatically reinvest their dividends in shares of our common
stock. We may, from time to time, repurchase shares of our common stock in the
open market for purposes of fulfilling our obligations under this dividend
reinvestment program or may elect to issue additional shares of common stock.
Distributions by us to the extent of our current earnings and profits for
federal income tax purposes are generally taxable to stockholders as ordinary
dividend income. Distributions in excess of earnings and profits generally are
treated as a non-taxable return of capital to the extent of a stockholder's
basis in the common stock. A return of capital distribution has the effect of
deferring taxation until a stockholder's sale of the common stock. See
"Certain U.S. Federal Income Tax Consequences" in this prospectus supplement.
S-4
USE OF PROCEEDS
We expect to receive net proceeds from this offering of approximately
$98.0 million after deducting the underwriting discount and our estimated
expenses, or approximately $112.7 million if the underwriter's over-allotment
option is exercised in full. We expect to use the net proceeds received from
this offering for general corporate purposes, including investments of equity
capital in our co-investment programs and the acquisition of interests in real
estate properties as suitable opportunities arise. Pending such use, we may
use the net proceeds to repay a portion of the outstanding balance on our
revolving credit facility, which matures in June 2006, and we may invest the
net proceeds in short-term income producing investments such as commercial
paper, government securities or money market funds that invest in government
securities.
Bank of America, N.A., an affiliate of the underwriter, is a lender under
our revolving credit facility. To the extent that we use net proceeds of this
offering to reduce outstanding indebtedness under the revolving credit
facility, this lender will receive its proportionate share of any repayment.
See "Underwriting."
S-5
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain United States federal income tax
considerations relating to the purchase, ownership and disposition of our
common stock. This summary is based upon the provisions of the Internal
Revenue Code of 1986, as amended (the "Internal Revenue Code"), Treasury
Regulations promulgated under the Internal Revenue Code, administrative
rulings and judicial decisions as of the date hereof. These authorities may be
changed, perhaps retroactively, so as to result in United States federal
income tax consequences different from those set forth below. We have not
sought any ruling from the Internal Revenue Service with respect to the
statements made and the conclusions reached in the following summary, and
there can be no assurance that the Internal Revenue Service will agree with
such statements and conclusions.
This summary assumes that the common stock is held by holders as a capital
asset, within the meaning of section 1221 of the Internal Revenue Code. This
summary also does not address the tax considerations arising under the laws of
any foreign, state or local jurisdiction. In addition, this discussion does
not address all tax considerations that may be applicable to holders'
particular circumstances. This discussion also does not address the tax
consequences relevant to persons who receive special treatment under the
federal income tax law, except to the extent discussed under the heading
"Taxation of Tax-Exempt Shareholders" and "Taxation of Non-United States
Shareholders" or where specifically noted. Holders receiving special treatment
include, without limitation:
o a holder who is not a United States stockholder, as defined below;
o a broker-dealer, a dealer in securities or a financial institution;
o a S corporation;
o a bank;
o a thrift;
o an insurance company;
o a tax-exempt organization;
o a holder who is subject to the alternative minimum tax provisions of the
Internal Revenue Code;
o a holder who is holding the common stock as part of a hedge, straddle or
other risk reduction or constructive sale transaction;
o a person with a "functional currency" other than the United States
dollar; or
o a United States expatriate.
If a partnership holds our common stock, the tax treatment of a partner in
the partnership will generally depend upon the status of the partner and the
activities of the partnership. If you are a partner of a partnership holding
our common stock, you should consult your tax advisor regarding the tax
consequences of the ownership and disposition of the common stock.
When we use the term "United States stockholder," we mean a holder of shares
of our capital stock who is, for United States federal income tax purposes:
o a citizen or resident of the United States;
o a corporation, partnership, or other entity created or organized in or
under the laws of the United States or of any state or in the District of
Columbia, unless, in the case of a partnership, treasury regulations
provide otherwise;
o an estate which is required to pay United States federal income tax
regardless of the source of its income; or
S-6
o a trust whose administration is under the primary supervision of a United
States court and which has one or more United States persons who have the
authority to control all substantial decisions of the trust.
Notwithstanding the preceding sentence, to the extent provided in the
treasury regulations, some trusts in existence on August 20, 1996, and
treated as United States persons prior to this date that elect to
continue to be treated as United States persons, shall also be considered
United States stockholders.
This discussion does not address any aspects of United States federal income
taxation relating to us or our election to be taxed as a real estate
investment trust (a "REIT"). A summary of certain United States federal income
tax considerations is set forth in the accompanying prospectus under the
heading "Material Federal Income Tax Considerations To Us of Our REIT
Election." You are urged to consult your tax advisor regarding the tax
consequences to you of:
o the acquisition, ownership and sale of our common stock, including the
federal, state, local, foreign and other tax consequences;
o our election to be taxed as a REIT for United States federal income tax
purposes; and
o potential changes in the tax laws.
Taxation of Taxable United States Stockholders
Distributions Generally
Distributions out of our current or accumulated earnings and profits, other
than capital gain dividends discussed below, will constitute dividends that
generally will be taxable to our taxable United States stockholders as
ordinary income. As long as we qualify as a real estate investment trust,
these distributions will not be eligible for the dividends-received deduction
in the case of United States stockholders that are corporations. For purposes
of determining whether distributions to holders of common stock are out of
current or accumulated earnings and profits, our earnings and profits will be
allocated first to the outstanding preferred stock and then to the common
stock.
Under the recently enacted Jobs and Growth Tax Relief Reconciliation Act of
2003, individuals are generally subject to United States federal income tax at
a reduced rate of 15% or less on dividends received with respect to certain
common stock. In general, dividends payable by us on our common stock are not
eligible for this reduced rate, except to the extent such dividends were
attributable either to dividends we received from taxable corporations, to
income that was subject to tax at the corporate/REIT level (for example, if we
distribute taxable income that we retained and paid tax on in the prior
taxable year) or to "capital gains dividends" as discussed below.
To the extent that we make distributions in excess of our current and
accumulated earnings and profits, these distributions will be treated first as
a tax-free return of capital to each United States stockholder. This treatment
will reduce the adjusted tax basis which each United States stockholder has in
its shares of common stock by the amount of the distribution, but not below
zero. Distributions in excess of our current and accumulated earnings and
profits and in excess of a United States stockholder's adjusted tax basis in
its shares will be taxable as capital gain, provided that the shares have been
held as capital assets. Such gain will be taxable as long-term capital gain if
the shares have been held for more than one year.
Dividends we declare in October, November, or December of any year and
payable to a stockholder of record on a specified date in any of these months
will be treated as both paid by us and received by the stockholder on December
31 of that year, provided we actually pay the dividend on or before January 31
of the following year.
Stockholders may not include in their own income tax returns any of our net
operating losses or capital losses.
Capital Gain Distributions
Distributions that we properly designate as capital gain dividends will be
taxable to our taxable United States stockholders as gain from the sale or
disposition of a capital asset, to the extent that such gain does not
S-7
exceed our actual net capital gain for the taxable year. Depending on the
characteristics of the assets which produced these gains, and on specified
designations, if any, which we may make, these gains may be taxable to non-
corporate United States stockholders at a 15% (or 20% for certain amounts in
2003) or 25% rate. United States stockholders that are corporations may,
however, be required to treat up to 20% of some capital gain dividends as
ordinary income. If we properly designate any portion of a dividend as a
capital gain dividend, your share of such capital gain dividend would be an
amount which bears the same ratio to the total amount of dividends, as
determined for United States federal income tax purposes, paid to you for the
year as the aggregate amount designated as a capital gain dividend bears to
the aggregate amount of all dividends, as determined for United States federal
income tax purposes, paid on all classes of shares of our capital stock for
the year.
The currently applicable provisions of the United States federal income tax
laws relating to the 15% rate of capital gain taxation are currently scheduled
to "sunset" or revert back to provisions of prior law effective for taxable
years beginning after December 31, 2008. Upon the sunset of the current
provisions, the capital gains tax rate of 15% will be increased to 20%.
Passive Activity Losses and Investment Interest Limitations
Distributions we make and gain arising from the sale or exchange by a United
States stockholder of our shares will not be treated as passive activity
income. As a result, United States stockholders generally will not be able to
apply any "passive losses" against this income or gain. Distributions we make,
to the extent they do not constitute a return of capital, generally will be
treated as investment income for purposes of computing the investment interest
limitation. Gain arising from the sale or other disposition of our shares,
however, may not be treated as investment income depending upon your
particular situation.
Retention of Net Long-Term Capital Gains
We may elect to retain, rather than distribute as a capital gain dividend,
our net long-term capital gains. If we make this election, we would pay tax on
our retained net long-term capital gains. In addition, to the extent we
designate, a United States stockholder generally would:
o include its proportionate share of our undistributed long-term capital
gains in computing its long-term capital gains in its return for its
taxable year in which the last day of our taxable year falls, subject to
certain limitations as to the amount that is includable;
o be deemed to have paid the capital gains tax imposed on us on the
designated amounts included in the United States stockholder's long-term
capital gains;
o receive a credit or refund for the amount of tax deemed paid by it;
o increase the adjusted basis of its common stock by the difference between
the amount of includable gains and the tax deemed to have been paid by
it; and
o in the case of a United States stockholder that is a corporation,
appropriately adjust its earnings and profits for the retained capital
gains as required by treasury regulations to be prescribed by the
Internal Revenue Service.
Dispositions of Common Stock
If you are a United States stockholder and you sell or dispose of your
shares of common stock, you will recognize gain or loss for federal income tax
purposes in an amount equal to the difference between the amount of cash and
the fair market value of any property you receive on the sale or other
disposition and your adjusted basis in the shares for tax purposes. This gain
or loss will generally be capital if you have held the common stock as a
capital asset, and will generally be long-term capital gain or loss if you
have held the common stock for more than one year. United States stockholders
who are individuals generally will be subject to U.S. federal income taxes at
a maximum rate of 15% on long-term capital gains for taxable dispositions of
the common stock occurring after May 5, 2003 and before January 1, 2009. In
general, if you are a United States stockholder and you recognize loss upon
the sale or other disposition of common stock
S-8
that you have held for six months or less, the loss you recognize will be
treated as a long-term capital loss to the extent you received distributions
from us which were required to be treated as long-term capital gains.
Information Reporting and Backup Withholding
We report to our United States stockholders and the Internal Revenue Service
the amount of dividends paid during each calendar year and the amount of any
tax withheld. Under the backup withholding rules, a stockholder may be subject
to backup withholding with respect to dividends paid unless the holder is a
corporation or is otherwise exempt and, when required, demonstrates this fact
or provides a taxpayer identification number, certifies as to no loss of
exemption from backup withholding, and otherwise complies with the backup
withholding rules. A United States stockholder that does not provide us with
his correct taxpayer identification number may also be subject to penalties
imposed by the Internal Revenue Service. Backup withholding is not an
additional tax. Any amount paid as backup withholding will be creditable
against the stockholder's income tax liability. In addition, we may be
required to withhold a portion of capital gain distributions to any
stockholders who fail to certify their non-foreign status. See "-- Taxation of
Non-United States Stockholders."
Taxation of Tax-Exempt Stockholders
The Internal Revenue Service has ruled that amounts distributed as dividends
by a qualified REIT do not constitute unrelated business taxable income when
received by a tax-exempt entity. Based on that ruling, except as described
below, dividend income from us and gain arising upon your sale of shares
generally will not be unrelated business taxable income to a tax-exempt
stockholder. This income or gain will be unrelated business taxable income,
however, if the tax-exempt stockholder holds its shares as "debt financed
property" within the meaning of the Internal Revenue Code or if the shares are
used in a United States trade or business of the tax-exempt stockholder.
Generally, debt financed property is property the acquisition or holding of
which was financed through a borrowing by the tax-exempt stockholder.
For tax-exempt stockholders which are social clubs, voluntary employee
benefit associations, supplemental unemployment benefit trusts, and qualified
group legal services plans exempt from United States federal income taxation
under Sections 501(c)(7), (c)(9), (c)(17) and (c)(20) of the Internal Revenue
Code, respectively, income from an investment in our shares will constitute
unrelated business taxable income unless the organization is able to properly
claim a deduction for amounts set aside or placed in reserve for specific
purposes so as to offset the income generated by its investment in our shares.
These prospective investors should consult their tax advisors concerning these
"set aside" and reserve requirements.
Notwithstanding the above, however, a portion of the dividends paid by a
"pension held REIT" will be treated as unrelated business taxable income as to
some trusts that hold more than 10%, by value, of the interests of a real
estate investment trust. A REIT will not be a "pension held REIT" if it is
able to satisfy the "not closely held" requirement without relying on the
"look-through" exception with respect to certain trusts. As a result of
limitations on the transfer and ownership of stock contained in our charter,
we do not expect to be classified as a "pension-held REIT," and as a result,
the tax treatment described in this paragraph should be inapplicable to our
tax-exempt stockholders.
Taxation of Non-United States Stockholders
The preceding discussion does not address the rules governing United States
federal income taxation of the ownership and disposition of our common stock
by persons that are non-United States stockholders. When we use the term "non-
United States stockholder" we mean stockholders who are not United States
stockholders. In general, non-United States stockholders may be subject to
special tax withholding requirements on distributions from us and with respect
to their sale or other disposition of our common stock, except to the extent
reduced or eliminated by an income tax treaty between the United States and
the non-United States stockholder's country. A non-United States stockholder
who is a stockholder of record and is eligible for reduction or elimination of
withholding must file an appropriate form with us in order to claim such
treatment. Non-United States stockholders should consult their own tax
advisors concerning the federal
S-9
income tax consequences to them of an acquisition of shares of our common
stock, including the federal income tax treatment of dispositions of interests
in and the receipt of distributions from us.
Proposed Legislation
Recently legislation was introduced in the United States House of
Representatives and the Senate that would amend certain rules relating to
REITs. As of the date of this prospectus supplement, this legislation has not
been enacted into law. The proposed legislation would, among other things,
include the following changes:
o As discussed in the accompanying prospectus under the heading "Material
Federal Income Tax Considerations to Us of Our REIT Election--Taxation of
the Company as a REIT--Asset Tests," we may not own more than 10% by vote
or value of any one issuer's securities. If we fail to meet this test at
the end of any quarter and such failure is not cured within 30 days
thereafter, we would fail to qualify as a REIT. Under the proposal, after
the 30 day cure period, a REIT could dispose of sufficient assets to cure
such a violation that does not exceed the lesser of 1% of the REIT's
assets at the end of the relevant quarter or $10,000,000. For violations
due to reasonable cause that are larger than this amount, the legislation
would permit the REIT to avoid disqualification as a REIT, after the 30
day cure period, by taking steps including the disposition of sufficient
assets to meet the asset test and paying a tax equal to the greater of
$50,000 or the highest corporate tax rate multiplied by the net income
generated by the nonqualifying assets.
o The legislation would expand the straight debt safe harbor under which
certain types of securities are disregarded as securities when
calculating the 10% value limitation discussed above.
o The legislation also would change the formula for calculating the tax
imposed for certain violations of the 75% and 95% gross income tests
described in the accompanying prospectus under the heading "Material
Federal Income Tax Considerations to Us of Our REIT Election--Taxation of
the Company as a REIT--Income Tests" and would make certain changes to
the requirements for availability of the applicable relief provisions for
failure to meet such tests.
o The legislation would clarify a rule regarding our ability to enter into
leases with a taxable REIT subsidiary.
o The legislation would eliminate certain exclusions from the calculation
of "redetermined rents" subject to the 100% penalty tax.
The foregoing is a non-exhaustive list of changes that would be made by the
proposed legislation. The provisions contained in this legislation relating to
expansion of the straight debt safe harbor and our ability to enter into
leases with our taxable REIT subsidiary, generally would apply to taxable
years ending after December 31, 2000, and the remaining provisions generally
would apply to taxable years beginning after the date the legislation is
enacted. In any event, there can be no assurance regarding whether the
proposed legislation ultimately will be enacted or the form in which it might
be enacted.
S-10
UNDERWRITING
We are offering the shares of common stock described in this prospectus
through Banc of America Securities LLC. Subject to the terms and conditions of
an underwriting agreement dated the date of this prospectus supplement, we
have agreed to sell to the underwriter, and the underwriter has agreed to
purchase from us, all of the shares of common stock in this offering.
The underwriting agreement is subject to a number of terms and conditions
and provides that the underwriter must buy all of the shares if it buys any of
them. The underwriter will sell the shares to the public when and if the
underwriter buys the shares from us.
The underwriter initially will offer the shares to the public at the price
specified on the cover page of this prospectus supplement. If all of the
shares are not sold at the public offering price, the underwriter may change
the public offering price and the other selling terms. The common stock is
offered subject to a number of conditions, including:
o receipt and acceptance of the common stock by the underwriter; and
o the underwriter's right to reject orders in whole or in part.
Over-Allotment Option. We have granted the underwriter an option to buy up
to 360,000 additional shares of common stock at the same price per share as it
is paying for the shares listed on the cover of this prospectus supplement.
These additional shares would cover sales of shares by the underwriter which
exceed the number of shares specified on the cover of this prospectus
supplement. The underwriter may exercise this option at any time within 30
days after the date of this prospectus supplement. If purchased, the
additional shares will be sold by the underwriter on the same terms as those
on which the other shares are sold.
Discounts and Commissions. The following table shows the per share and total
underwriting discounts and commissions to be paid to the underwriter by us.
These amounts are shown assuming no exercise and full exercise of the
underwriter's option to purchase additional shares.
Paid by
Kimco Realty Corporation
---------------------------
No exercise Full exercise
----------- -------------
Per Share ............................... $ 0.37 $ 0.37
-------- ----------
Total ................................... $888,000 $1,021,200
======== ==========
We estimate that the total expenses of the offering to be paid by us, not
including underwriting discounts and commissions, will be approximately
$150,000. The underwriter has agreed to reimburse us for certain of our
expenses up to $138,000.
Stock Market Listing. Our common stock is listed on the New York Stock
Exchange under the symbol "KIM."
Stabilization. In connection with this offering, the underwriter may engage
in activities that stabilize, maintain or otherwise affect the price of our
common stock, including:
o stabilizing transactions;
o short sales; and
o purchases to cover positions created by short sales.
Stabilizing transactions consist of bids or purchases made for the purpose
of preventing or retarding a decline in the market price of our common stock
while this offering is in progress. Stabilizing transactions may include
making short sales of our common stock, which involves the sale by the
underwriter of a greater number of shares of common stock than it is required
to purchase in this offering, and purchasing shares of common stock from us or
on the open market to cover positions created by short sales. Short sales may
be
S-11
"covered" shorts, which are short positions in an amount not greater than the
underwriter's over-allotment option referred to above, or may be "naked"
shorts, which are short positions in excess of that amount.
The underwriter may close out any covered short position by either
exercising its over-allotment option, in whole or in part, or by purchasing
shares in the open market. In making this determination, the underwriter will
consider, among other things, the price of shares available for purchase in
the open market as compared to the price at which it may purchase shares
through the over-allotment option.
A naked short position is more likely to be created if the underwriter is
concerned that there may be downward pressure on the price of the common stock
in the open market that could adversely affect investors who purchased in this
offering. To the extent that the underwriter creates a naked short position,
it will purchase shares in the open market to cover the position.
These activities by the underwriter may have the effect of raising or
maintaining the market price of our common stock or preventing or retarding a
decline in the market price of our common stock. As a result of these
activities, the price of our common stock may be higher than the price that
otherwise might exist in the open market. If the underwriter commences these
activities, it may discontinue them at any time. The underwriter may carry out
these transactions on the New York Stock Exchange, in the over-the-counter-
market or otherwise.
Lock-up Agreement. We have agreed with Banc of America Securities LLC not to
offer, sell, contract to sell, hedge or otherwise dispose of, directly or
indirectly, any of our shares of common stock or securities convertible into
or exchangeable for shares of common stock during the period from the date of
this prospectus supplement continuing through the date 30 days after the date
of this prospectus supplement, without the prior written consent of Banc of
America Securities LLC. This consent may be given at any time without public
notice.
Indemnification. We will indemnify the underwriter against some liabilities,
including liabilities under the Securities Act of 1933. If we are unable to
provide this indemnification, we will contribute to payments the underwriter
may be required to make in respect of those liabilities.
Conflicts/Affiliates. The underwriter and its affiliates have provided, and
may in the future provide, various investment banking, commercial banking and
other financial services for us for which services they have received, and may
in the future receive, customary fees. In addition, Bank of America, N.A., an
affiliate of the underwriter, is a lender under our revolving credit facility.
To the extent that we use net proceeds of this offering to reduce outstanding
indebtedness under the revolving credit facility, such lender will receive its
proportionate share of the repayment. See "Use of Proceeds."
S-12
LEGAL MATTERS
Latham & Watkins LLP, New York, New York, will pass upon certain matters
relating to this offering for us. Goodwin Procter LLP, Boston, Massachusetts,
will act as counsel to the underwriter. Venable LLP, Baltimore, Maryland, will
pass upon certain matters of Maryland law. Certain members of Latham & Watkins
LLP and their families own beneficial interests in less than 1% of our common
stock. Goodwin Procter LLP represents us in the acquisition of Mid-Atlantic
Realty Trust and related transactions.
S-13
[KIMCO REALTY CORP. LOGO]
KIMCO REALTY CORPORATION
$1,000,000,000
Debt Securities, Preferred Stock,
Depositary Shares, Common Stock and Common Stock Warrants
We may from time to time offer up to $1,000,000,000 in aggregate initial
offering price of the following securities on terms to be determined at the
time of the offering:
o Unsecured Senior Debt Securities;
o Shares or Fractional Shares of Preferred Stock, par value $1.00 per
share;
o Depositary Shares representing Shares of Preferred Stock;
o Shares of Common Stock, par value $.01 per share
o Warrants to Purchase Common Stock;
Our common stock is traded on the New York Stock Exchange under the symbol
"KIM." We will make applications to list any shares of common stock sold
pursuant to a supplement to this prospectus on the NYSE. We have not
determined whether we will list any other securities we may offer on any
exchange or over-the-counter market. If we decide to seek listing of any
securities, the supplement to this prospectus will disclose the exchange or
market.
Our debt securities, preferred stock, depositary shares representing shares
of preferred stock, common stock and common stock warrants may be offered
separately, together or as units, in separate classes or series, in amounts,
at prices and on terms to be set forth in a supplement to this prospectus.
When we offer securities, we will provide specific terms of such securities in
supplements to this prospectus.
In addition, the specific terms may include limitations on direct or
beneficial ownership and restrictions on transfer of the securities offered by
this prospectus, in each case as may be appropriate to preserve our status as
a real estate investment trust, or REIT, for federal income tax purposes.
The securities offered by this prospectus may be offered directly, through
agents designated from time to time by us, or to or through underwriters or
dealers. If any agents or underwriters are involved in the sale of any of the
securities offered by this prospectus, their names, and any applicable
purchase price, fee, commission or discount arrangement between or among them,
will be set forth, or will be calculable from the information set forth, in
the applicable prospectus supplement. None of the securities offered by this
prospectus may be sold without delivery of the applicable prospectus
supplement describing the method and terms of the offering of those
securities.
Each prospectus supplement will also contain information, where applicable,
about United States federal income tax considerations and any legend or
statement required by state law or the Securities and Exchange Commission.
Investing in our securities involves risks. See "Risk Factors" beginning on
page 4.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF
THIS PROSPECTUS IS TRUTHFUL OR COMPLETE AND ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The date of this Prospectus is June 18, 2003.
We have not authorized any dealer, salesman or other person to give any
information or to make any representation other than those contained or
incorporated by reference in this prospectus and the accompanying supplement
to this prospectus. You must not rely upon any information or representation
not contained or incorporated by reference in this prospectus or the
accompanying prospectus supplement. This prospectus and the accompanying
supplement to this prospectus do not constitute an offer to sell or the
solicitation of an offer to buy any securities other than the registered
securities to which they relate, nor do this prospectus and the accompanying
supplement to this prospectus constitute an offer to sell or the solicitation
of an offer to buy securities in any jurisdiction to any person to whom it is
unlawful to make such offer or solicitation in such jurisdiction. The
information contained in this prospectus and the supplement to this prospectus
is accurate as of the dates on their covers. When we deliver this prospectus
or a supplement or make a sale pursuant to this prospectus or a supplement, we
are not implying that the information is current as of the date of the
delivery or sale.
TABLE OF CONTENTS
Page
----
ABOUT THIS PROSPECTUS .................................................. 1
WHERE CAN YOU FIND MORE INFORMATION .................................... 1
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE ........................ 1
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS ........................ 2
THE COMPANY ............................................................ 3
RISK FACTORS. .......................................................... 4
USE OF PROCEEDS ........................................................ 8
RATIOS OF EARNINGS TO FIXED CHARGES .................................... 8
DESCRIPTION OF DEBT SECURITIES. ........................................ 9
DESCRIPTION OF COMMON STOCK. ........................................... 22
DESCRIPTION OF COMMON STOCK WARRANTS ................................... 24
DESCRIPTION OF PREFERRED STOCK ......................................... 24
DESCRIPTION OF DEPOSITARY SHARES ....................................... 32
MATERIAL FEDERAL INCOME TAX CONSIDERATIONS TO US OF OUR REIT ELECTION. . 35
PLAN OF DISTRIBUTION ................................................... 44
EXPERTS. ............................................................... 45
LEGAL MATTERS. ......................................................... 45
When used in this prospectus, "the Company," "we," "us," or "our" refers to
Kimco Realty Corporation and its direct and indirect subsidiaries on a
consolidated basis.
ABOUT THIS PROSPECTUS
This prospectus constitutes part of a registration statement on Form S-3
filed by us under the Securities Act of 1933, as amended, with the U.S.
Securities and Exchange Commission, or the "SEC," utilizing a "shelf"
registration process. Under this shelf registration process, we may sell any
combination of the securities described in this prospectus in one or more
offerings up to a total dollar amount of $1,000,000,000. This prospectus
provides you with a general description of the securities we may offer. As
allowed by SEC rules, this prospectus does not contain all the information you
can find in the registration statement or the exhibits to the registration
statement. Each time we sell securities, we will provide a prospectus
supplement that will contain specific information about the terms of that
offering. A prospectus supplement may also add, update or change information
contained in this prospectus. You should read both this prospectus and any
prospectus supplement together with additional information described under the
next heading "Where You Can Find More Information" before considering an
investment in the securities offered by that prospectus supplement.
WHERE CAN YOU FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission. Our SEC filings are
available to the public over the Internet at the SEC's web site at http://
www.sec.gov. You may also read and copy any document we file with the SEC at
the SEC's public reference room at 450 Fifth Street, N.W., Washington, D.C.
20549.
You may also obtain copies of our SEC filings at prescribed rates by writing
to the Public Reference Section of the SEC at 450 Fifth Street, N.W., Room
1024, Washington, D.C. 20549. Please call 1-800-SEC-0330 for further
information on the operations at the public reference room. Our SEC filings
are also available at the offices of the New York Stock Exchange, 20 Broad
Street, New York, New York 10005.
Statements contained in this prospectus as to the contents of any contract
or other document are not necessarily complete, and in each instance reference
is made to the copy of that contract or other document filed as an exhibit to
the registration statement, each such statement being qualified in all
respects by that reference and the exhibits and schedules thereto. For further
information about us and the securities offered by this prospectus, you should
refer to the registration statement and such exhibits and schedules which may
be obtained from the SEC at its principal office in Washington, D.C. upon
payment of any fees prescribed by the SEC.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The documents listed below have been filed by us under the Securities
Exchange Act of 1934, as amended (the "Securities Exchange Act"), with the SEC
and are incorporated by reference in this prospectus:
o Annual Report on Form 10-K for the year ended December 31, 2002;
o Quarterly Report on Form 10-Q for the three months ended March 31, 2003;
o Current Reports on Form 8-K filed on February 14, 2003, March 27, 2003,
April 16, 2003, April 29, 2003, May 2, 2003, May 6, 2003, May 8, 2003,
May 9, 2003 and June 9, 2003; and
o Definitive proxy statement filed on April 7, 2003.
We are also incorporating by reference into this prospectus all documents
that we have filed or will file with the SEC as prescribed by Sections 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act since the date of this
prospectus and prior to the termination of the sale of the securities offered
by this prospectus and the accompanying prospectus supplement.
This means that important information about us appears or will appear in
these documents and will be regarded as appearing in this prospectus. To the
extent that information appearing in a document filed later is
inconsistent with prior information, the later statement will control and the
prior information, except as modified or superseded, will no longer be a part
of this prospectus.
Copies of all documents which are incorporated by reference in this
prospectus and the applicable prospectus supplement (not including the
exhibits to such information, unless such exhibits are specifically
incorporated by reference) will be provided without charge to each person,
including any beneficial owner of the securities offered by this prospectus,
to whom this prospectus or the applicable prospectus supplement is delivered,
upon written or oral request. Requests should be directed to our secretary,
3333 New Hyde Park Road, New Hyde Park, New York 11042-0020 (telephone number:
(516) 869-9000). You may also obtain copies of these filings, at no cost, by
accessing our website at http://www.kimcorealty.com; however, the information
found on our website is not considered part of this prospectus or any
accompanying prospectus supplement.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus, including the documents that we incorporate by reference,
contains certain historical and forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of
the Securities Exchange Act. We intend such forward-looking statements to be
covered by the safe harbor provisions for forward-looking statements contained
in the Private Securities Litigation Reform Act of 1995 and include this
statement for purposes of complying with these safe harbor provisions.
Forward-looking statements, which are based on certain assumptions and
describe our future plans, strategies and expectations, are generally
identifiable by use of the words "believe," "expect," "intend," "anticipate,"
"estimate," "project" or similar expressions. Our ability to predict results
or the actual effect of future plans or strategies is inherently uncertain.
Factors which may cause actual results to differ materially from current
expectations include, but are not limited to, (i) changes in general economic
and local real estate conditions, (ii) the inability of major tenants to
continue paying their rent obligations due to bankruptcy, insolvency or
general downturn in their business, (iii) financing risks, such as the
inability to obtain equity or debt financing on favorable terms, (iv) changes
in governmental laws and regulations (including changes to laws governing the
taxation of REITs), (v) the level and volatility of interest rates, (vi) the
availability of suitable acquisition opportunities and (vii) increases in
operating costs. The forward-looking statements included in this prospectus
are made only as of the date of this prospectus and we undertake no obligation
to publicly update these forward-looking statements to reflect new
information, future events or otherwise. In light of these risks,
uncertainties and assumptions, the forward-looking events might or might not
occur. Accordingly, there is no assurance that our expectations will be
realized.
2
THE COMPANY
Overview
We began operations through a predecessor in 1966, and today are one of the
nation's largest publicly-traded owners and operators of neighborhood and
community shopping centers (measured by gross leasable area, which we refer to
as "GLA").
As of April 21, 2003, we owned interests in 630 properties, including:
o 558 neighborhood and community shopping centers;
o one regional mall;
o 41 retail store leases;
o 25 ground up development projects; and
o five parcels of undeveloped land.
These properties have a total of approximately 91.0 million square feet of
GLA and are located in 41 states, Canada and Mexico.
Our ownership interests in real estate consist of our consolidated portfolio
and in portfolios in which we own an economic interest, such as; Kimco Income
REIT, the RioCan Venture, Kimco Retail Opportunity Portfolio and other
properties or portfolios where we also retain management. We believe our
portfolio of neighborhood and community shopping center properties is the
largest (measured by GLA) currently held by any publicly-traded REIT.
We believe that we have operated, and we intend to continue to operate, in
such a manner to qualify as a REIT under the Internal Revenue Code of 1986, as
amended (the "Code"). We are self-administered and self-managed through
present management, which has owned and managed neighborhood and community
shopping centers for more than 35 years. We have not engaged, nor do we expect
to retain, any external advisors in connection with the operation of our
properties. Our executive officers are engaged in the day-to-day management
and operation of our real estate exclusively, and we administer nearly all
operating functions for our properties, including leasing, legal,
construction, data processing, maintenance, finance and accounting. Our
executive offices are located at 3333 New Hyde Park Road, New Hyde Park, New
York 11042-0020 and our telephone number is (516) 869-9000.
In order to maintain our qualification as a REIT for federal income tax
purposes, we are required to distribute at least 90% of our net taxable
income, excluding capital gains, each year. Dividends on any preferred stock
issued by us are included as distributions for this purpose. Historically, our
distributions have exceeded, and we expect that our distributions will
continue to exceed, our net taxable income each year. A portion of such
distributions may constitute a return of capital. As a result of the
foregoing, our consolidated net worth may decline. We however, do not believe
that consolidated stockholders' equity is a meaningful reflection of net real
estate values.
3
RISK FACTORS
You should carefully consider the following risks and all of the information
set forth in this prospectus and any accompanying prospectus supplement before
investing in our securities.
Loss of our tax status as a real estate investment trust would have
significant adverse consequences to us and the value of our securities.
We elected to be taxed as a REIT for federal income tax purposes under the
Code commencing with our taxable year beginning January 1, 1992. We currently
intend to operate so as to qualify as a REIT and believe that our current
organization and method of operation comply with the rules and regulations
promulgated under the Code to enable us to qualify as a REIT.
Qualification as a REIT involves the application of highly technical and
complex Code provisions for which there are only limited judicial and
administrative interpretations. The determination of various factual matters
and circumstances not entirely within our control may affect our ability to
qualify as a REIT. For example, in order to qualify as a REIT, at least 95% of
our gross income in any year must be derived from qualifying sources, and we
must satisfy a number of requirements regarding the composition of our assets.
Also, we must make distributions to stockholders aggregating annually at least
90% of our net taxable income, excluding capital gains. In addition, new
legislation, regulations, administrative interpretations or court decisions
could significantly change the tax laws with respect to qualification as a
REIT, the federal income tax consequences of such qualification or the
desirability of an investment in a REIT relative to other investments.
Although we believe that we are organized and have operated in such a manner,
we can give no assurance that we have qualified or will continue to qualify as
a REIT for tax purposes.
If we lose our REIT status, we will face serious tax consequences that will
substantially reduce the funds available to make payment of principal and
interest on the debt securities we issue and to pay dividends to our
stockholders. If we fail to qualify as a REIT:
o we would not be allowed a deduction for distributions to stockholders in
computing our taxable income and would be subject to federal income tax
at regular corporate rates;
o we also could be subject to the federal alternative minimum tax and
possibly increased state and local taxes; and
o unless we are entitled to relief under statutory provisions, we could not
elect to be subject to tax as a REIT for four taxable years following the
year during which we were disqualified.
In addition, if we fail to qualify as a REIT, we would not be required to make
distributions to stockholders.
As a result of all these factors, our failure to qualify as a REIT also
could impair our ability to expand our business and raise capital, and would
adversely affect the value of our securities.
U.S. Federal income tax law developments could affect the desirability of
investing in our common stock because of our REIT status.
In May 2003, legislation was enacted that reduces the maximum tax rate of
non-corporate taxpayers for capital gains generally from 20% to 15% (from May
6, 2003 through 2008) and for dividends payable to non-corporate taxpayers
generally from 38.6% to 15% (from January 1, 2003 through 2008). In general,
dividends payable by REITs are not eligible for such treatment except in
limited circumstances which we do not contemplate. However, the recent
legislation reduces the maximum tax rate of non-corporate taxpayers on
ordinary income from 38.6% to 35%.
Although this legislation does not adversely affect the taxation of REITs or
dividends paid by REITs, the more favorable treatment of regular corporate
dividends could cause investors who are individuals to consider stocks of
other corporations that pay dividends as more attractive relative to stocks of
REITs. It is not possible to predict whether this change in perceived relative
value will occur, or what the effect will be on the market price of our stock.
4
Adverse market conditions and competition may impede our ability to generate
sufficient income to pay expenses and maintain properties.
The economic performance and value of our properties are subject to all of
the risks associated with owning and operating real estate including:
o changes in the national, regional and local economic climate;
o local conditions, including an oversupply of space in properties like
those that we own, or a reduction in demand for properties like those
that we own;
o the attractiveness of our properties to tenants;
o the ability of tenants to pay rent;
o competition from other available properties;
o changes in market rental rates;
o the need to periodically pay for costs to repair, renovate and re-let
space;
o changes in operating costs, including costs for maintenance, insurance
and real estate taxes;
o the fact that the expenses of owning and operating properties
are not necessarily reduced when circumstances such as market factors and
competition cause a reduction in income from the properties; and
o changes in laws and governmental regulations, including those governing
usage, zoning, the environment and taxes.
Downturns in the retailing industry likely will have a direct impact on our
performance.
Our properties consist primarily of community and neighborhood shopping
centers and other retail properties. Our performance therefore is linked to
economic conditions in the market for retail space generally. The market for
retail space has been or could be adversely affected by weakness in the
national, regional and local economies, the adverse financial condition of
some large retailing companies, the ongoing consolidation in the retail
sector, the excess amount of retail space in a number of markets, and
increasing consumer purchases through catalogues and the internet. To the
extent that any of these conditions occur, they are likely to impact market
rents for retail space.
Failure by any anchor tenant with leases in multiple locations to make rental
payments to us, because of a deterioration of its financial condition or
otherwise, could impact our performance.
Our performance depends on our ability to collect rent from tenants. At any
time, our tenants may experience a downturn in their business that may
significantly weaken their financial condition. As a result, our tenants may
delay a number of lease commencements, decline to extend or renew leases upon
expiration, fail to make rental payments when due, close stores or declare
bankruptcy. Any of these actions could result in the termination of the
tenant's leases and the loss of rental income attributable to the terminated
leases. In addition, lease terminations by an anchor tenant or a failure by
that anchor tenant to occupy the premises could result in lease terminations
or reductions in rent by other tenants in the same shopping centers under the
terms of some leases. In that event, we may be unable to re-lease the vacated
space at attractive rents or at all. The occurrence of any of the situations
described above, particularly if it involves a substantial tenant with leases
in multiple locations, could impact our performance.
We may be unable to collect balances due from any tenants in bankruptcy.
We cannot assure you that any tenant that files for bankruptcy protection
will continue to pay us rent. A bankruptcy filing by or relating to one of our
tenants or a lease guarantor would bar all efforts by us to collect pre-
bankruptcy debts from the tenant or the lease guarantor, or their property,
unless we receive an order permitting us to do so from the bankruptcy court. A
tenant or lease guarantor bankruptcy could delay our efforts to collect past
due balances under the relevant leases, and could ultimately preclude
collection of
5
these sums. If a lease is assumed by the tenant in bankruptcy, all pre-
bankruptcy balances due under the lease must be paid to us in full. However,
if a lease is rejected by a tenant in bankruptcy, we would have only a general
unsecured claim for damages. Any unsecured claim we hold may be paid only to
the extent that funds are available and only in the same percentage as is paid
to all other holders of unsecured claims, and there are restrictions under
bankruptcy laws which limit the amount of the claim we can make if a lease is
rejected. As a result, it is likely that we will recover substantially less
than the full value of any unsecured claims we hold.
Real estate property investments are illiquid, and therefore we may not be
able to dispose of properties when appropriate or on favorable terms.
Real estate property investments generally cannot be disposed of quickly. In
addition, the federal tax code imposes restrictions on a REIT's ability to
dispose of properties that are not applicable to other types of real estate
companies. Therefore, we may not be able to vary our portfolio in response to
economic or other conditions promptly or on favorable terms.
We do not have exclusive control over our joint venture investments, so we are
unable to ensure that our objectives will be pursued.
We have invested in some cases as a co-venturer or partner in properties,
instead of owning directly. These investments involve risks not present in a
wholly owned ownership structure. In these investments, we do not have
exclusive control over the development, financing, leasing, management and
other aspects of these investments. As a result, the co-venturer or partner
might have interests or goals that are inconsistent with our interests or
goals, take action contrary to our interests or otherwise impede our
objectives. The co-venturer or partner also might become insolvent or
bankrupt.
Our financial covenants may restrict our operating and acquisition activities.
Our revolving credit facility and the indenture under which our senior
unsecured debt is issued contain certain financial and operating covenants,
including, among other things, certain coverage ratios, as well as limitations
on our ability to incur secured and unsecured debt, make dividend payments,
sell all or substantially all of our assets and engage in mergers and
consolidations and certain acquisitions. These covenants may restrict our
ability to pursue certain business initiatives or certain acquisition
transactions. In addition, failure to meet any of the financial covenants
could cause an event of default under and/or accelerate some or all of our
indebtedness, which would have a material adverse effect on us.
We may be subject to environmental regulations.
Under various federal, state, and local laws, ordinances and regulations, we
may be considered an owner or operator of real property and may be responsible
for paying for the disposal or treatment of hazardous or toxic substances
released on or in our property or disposed of by us, as well as certain other
potential costs which could relate to hazardous or toxic substances (including
governmental fines and injuries to persons and property). This liability may
be imposed whether or not we knew about, or were responsible for, the presence
of hazardous or toxic substances.
Our ability to lease or develop properties is subject to competitive
pressures.
We face competition in the acquisition, development, operation and sale of
real property from individuals and businesses who own real estate, fiduciary
accounts and plans and other entities engaged in real estate investment. Some
of these competitors have greater financial resources than we do. This results
in competition for the acquisition of properties, for tenants who lease or
consider leasing space in our existing and subsequently acquired properties
and for other real estate investment opportunities.
6
Changes in market conditions could adversely affect the market price of our
publicly traded securities.
As with other publicly traded securities, the market price of our publicly
traded securities depends on various market conditions, which may change from
time to time. Among the market conditions that may affect the market price of
our publicly traded securities are the following:
o the extent of institutional investor interest in the company;
o the reputation of REITs generally and the reputation of REITs with
portfolios similar to ours;
o the attractiveness of the securities of REITs in comparison to securities
issued by other entities (including securities issued by other real
estate companies);
o our financial condition and performance;
o the market's perception of our growth potential and potential future cash
dividends;
o an increase in market interest rates, which may lead prospective
investors to demand a higher distribution rate in relation to the price
paid for our shares; and
o general economic and financial market conditions.
7
USE OF PROCEEDS
Unless otherwise described in the applicable prospectus supplement, we
intend to use the net proceeds from the sale of the securities offered by this
prospectus for general corporate purposes, which may include the acquisition
of neighborhood and community shopping centers as suitable opportunities
arise, the expansion and improvement of certain properties in our portfolio,
and the repayment or refinancing of indebtedness outstanding at that time. The
factors which we will consider in any refinancing will include the amount and
characteristics of any debt securities issued and may include, among others,
the impact of such refinancing on our interest coverage, debt-to-capital
ratio, liquidity and earnings per share. If we identify any specific use for
the net proceeds from the sale of securities, we will describe such use in the
accompanying prospectus supplement.
RATIOS OF EARNINGS TO FIXED CHARGES
All periods presented below have been adjusted to reflect the impact of
operating properties sold and classified as discontinued operations during the
three months ended March 31, 2003 and for the year ended December 31, 2002 and
for properties classified as held for sale as of December 31, 2002, in
accordance with SFAS No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets.
Our ratio of earnings to fixed charges for the three months ended March 31,
2003 and the years ended December 31, 2002, 2001, 2000, 1999 and 1998 was 3.3,
3.4, 3.3, 2.9, 2.7 and 2.6, respectively. Our ratio of earnings to combined
fixed charges and preferred stock dividend requirements for the three months
ended March 31, 2003 and the years ended December 31, 2002, 2001, 2000, 1999
and 1998 was 2.8, 2.9, 2.7, 2.3, 2.1 and 2.0, respectively.
For purposes of computing these ratios, earnings have been calculated by
adding fixed charges (excluding capitalized interest), amortization of
capitalized interest and distributed income of equity investees to pre-tax
income from continuing operations before adjustment for minority interests in
consolidated subsidiaries or income/loss from unconsolidated partnerships.
Fixed charges consist of interest costs, whether expensed or capitalized, the
interest component of rental expense, and amortization of debt discounts and
issue costs, whether expensed or capitalized.
8
DESCRIPTION OF DEBT SECURITIES
Our unsecured senior debt securities are to be issued under an indenture,
dated as of September 1, 1993, as amended by the first supplemental indenture,
dated as of August 4, 1994, the second supplemental indenture, dated as of
April 7, 1995, and as further amended or supplemented from time to time,
between us and The Bank of New York (successor by merger to IBJ Schroder Bank
& Trust Company), as trustee. The indenture has been filed as an exhibit to
the registration statement of which this prospectus is a part and is available
for inspection at the corporate trust office of the trustee at 101 Barclay
Street, 8th Floor, New York, New York 10286 or as described above under "Where
You Can Find More Information." The indenture is subject to, and governed by,
the Trust Indenture Act of 1939, as amended. The statements made hereunder
relating to the indenture and the debt securities to be issued thereunder are
summaries of some of the provisions thereof and do not purport to be complete
and are subject to, and are qualified in their entirety by reference to, all
provisions of the indenture and the debt securities. All section references
appearing herein are to sections of the indenture.
General
The debt securities will be our direct, unsecured obligations and will rank
equally with all of our other unsecured and unsubordinated indebtedness. The
indenture provides that the debt securities may be issued without limit as to
aggregate principal amount, in one or more series, in each case as established
from time to time in or pursuant to authority granted by a resolution of our
board of directors or as established in one or more indentures supplemental to
the indenture. All debt securities of one series need not be issued at the
same time and, unless otherwise provided, a series may be reopened, without
the consent of the holders of the debt securities of such series, for
issuances of additional debt securities of that series (Section 301).
The indenture provides that there may be more than one trustee thereunder,
each with respect to one or more series of debt securities. Any trustee under
the indenture may resign or be removed with respect to one or more series of
debt securities, and a successor trustee may be appointed to act with respect
to that series (Section 608). In the event that two or more persons are acting
as trustee with respect to different series of debt securities, each trustee
shall be a trustee of a trust under the indenture separate and apart from the
trust administered by any other trustee (Section 609), and, except as
otherwise indicated herein, any action described herein to be taken by the
trustee may be taken by each trustee with respect to, and only with respect
to, the one or more series of debt securities for which it is trustee under
the indenture.
For a detailed description of a specific series of debt securities, you
should consult the prospectus supplement for that series. The prospectus
supplement may contain any of the following information, where applicable:
(1) the title and series designation of those debt securities;
(2) the aggregate principal amount of those debt securities and any
limit on the aggregate principal amount;
(3) if other than the principal amount thereof, the portion of the
principal amount thereof payable upon declaration of acceleration of
the maturity thereof, or (if applicable) the portion of the
principal amount of those debt securities which is convertible into
our common stock or our preferred stock, or the method by which any
portion shall be determined;
(4) if convertible, any applicable limitations on the ownership or
transferability of our common stock or our preferred stock into
which those debt securities are convertible which exist to preserve
our status as a REIT;
(5) the date or dates, or the method for determining the date or dates,
on which the principal of those debt securities will be payable;
(6) the rate or rates (which may be fixed or variable), or the method by
which the rate or rates shall be determined, at which those debt
securities will bear interest, if any;
9
(7) the date or dates, or the method for determining the date or dates,
from which any interest will accrue, the interest payment dates on
which that interest will be payable, the regular record dates for
the interest payment dates, or the method by which that date shall
be determined, the person to whom that interest shall be payable,
and the basis upon which interest shall be calculated if other than
that of a 360-day year of twelve 30-day months;
(8) the place or places where (a) the principal of (and premium, if any)
and interest, if any, on those debt securities will be payable, (b)
those debt securities may be surrendered for conversion or
registration of transfer or exchange and (c) notices or demands to
or upon us in respect of those debt securities and the indenture may
be served;
(9) the period or periods within which, the price or prices at which,
and the terms and conditions upon which those debt securities may be
redeemed, as a whole or in part, at our option, if we are to have
that option;
(10) our obligation, if any, to redeem, repay or purchase those debt
securities pursuant to any sinking fund or analogous provision or at
the option of a holder of those debt securities and the period or
periods within which, the price or prices at which and the terms and
conditions upon which those debt securities will be redeemed, repaid
or purchased, as a whole or in part, pursuant to that obligation;
(11) if other than U.S. dollars, the currency or currencies in which
those debt securities are denominated and payable, which may be
units of two or more foreign currencies or a composite currency or
currencies, and the terms and conditions relating thereto;
(12) whether the amount of payments of principal of (and premium, if any)
or interest, if any, on those debt securities may be determined with
reference to an index, formula or other method (which index, formula
or method may, but need not be, based on a currency, currencies,
currency unit or units or composite currency or currencies) and the
manner in which those amounts shall be determined;
(13) any additions to, modifications of or deletions from the terms of
those debt securities with respect to the events of default or
covenants set forth in the indenture;
(14) whether those debt securities will be issued in certificated or
book-entry form or both;
(15) whether those debt securities will be in registered or bearer form
and, if in registered form, their denominations if other than $1,000
and any integral multiple of $1,000 and, if in bearer form, their
denominations and the terms and conditions relating thereto;
(16) the applicability, if any, of the defeasance and covenant defeasance
provisions of article fourteen of the indenture;
(17) if those debt securities are to be issued upon the exercise of debt
warrants, the time, manner and place for those debt securities to be
authenticated and delivered;
(18) the terms, if any, upon which those debt securities may be
convertible into our common stock or our preferred stock and the
terms and conditions upon which that conversion will be effected,
including, without limitation, the initial conversion price or rate
and the conversion period;
(19) whether and under what circumstances we will pay additional amounts
as contemplated in the indenture on those debt securities in respect
of any tax, assessment or governmental charge and, if so, whether we
will have the option to redeem those debt securities in lieu of
making such payment; and
(20) any other terms of those debt securities not inconsistent with the
provisions of the indenture (Section 301).
The debt securities may provide for less than the entire principal amount
thereof to be payable upon declaration of acceleration of their maturity. We
refer to this type of debt securities as original issue discount
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securities. Any material or applicable special U.S. federal income tax,
accounting and other considerations applicable to original issue discount
securities will be described in the applicable prospectus supplement.
Except as described under "Certain Covenants--Limitations on Incurrence of
Debt" and under "Merger, Consolidation or Sale," the indenture does not
contain any other provisions that would limit our ability to incur
indebtedness or to substantially reduce or eliminate our assets, which may
have an adverse effect on our ability to service our indebtedness (including
the debt securities) or that would afford holders of the debt securities
protection in the event of:
(1) a highly leveraged or similar transaction involving us, our
management, or any affiliate of any of those parties,
(2) a change of control, or
(3) a reorganization, restructuring, merger or similar transaction
involving us that may adversely affect the holders of our debt
securities.
Furthermore, subject to the limitations set forth under "Merger,
Consolidation or Sale," we may, in the future, enter into certain
transactions, such as the sale of all or substantially all of our assets or a
merger or consolidation involving us, that would increase the amount of our
indebtedness or substantially reduce or eliminate our assets, which may have
an adverse effect on our ability to service our indebtedness, including the
debt securities. In addition, restrictions on ownership and transfers of our
common stock and our preferred stock are designed to preserve our status as a
REIT and, therefore, may act to prevent or hinder a change of control. You
should refer to the applicable prospectus supplement for information with
respect to any deletions from, modifications of or additions to the events of
default or our covenants that are described below, including any addition of a
covenant or other provision providing event risk or similar protection.
A significant number of our properties are owned through our subsidiaries.
Therefore, our rights and those of our creditors, including holders of debt
securities, to participate in the assets of those subsidiaries upon the
liquidation or recapitalization of those subsidiaries or otherwise will be
subject to the prior claims of those subsidiaries' respective creditors
(except to the extent that our claims as a creditor may be recognized).
Denominations, Interest, Registration and Transfer
Unless otherwise described in the applicable prospectus supplement, the debt
securities of any series will be issuable in denominations of $1,000 and
integral multiples of $1,000 (Section 302).
Unless otherwise specified in the applicable prospectus supplement, the
principal of (and premium, if any) and interest on any series of debt
securities will be payable at the corporate trust office of the trustee,
initially located at 101 Barclay Street, 8th Floor, New York, New York 10286,
provided that, at our option, payment of interest may be made by check mailed
to the address of the person entitled thereto as it appears in the security
register or by wire transfer of funds to that person at an account maintained
within the United States (Sections 301, 305, 306, 307 and 1002).
Any interest not punctually paid or duly provided for on any interest
payment date with respect to a debt security will forthwith cease to be
payable to the holder of that debt security on the applicable regular record
date and may either be paid to the person in whose name that debt security is
registered at the close of business on a special record date for the payment
of the interest not punctually paid or duly provided for to be fixed by the
trustee, notice whereof shall be given to the holder of that debt security not
less than 10 days prior to the special record date, or may be paid at any time
in any other lawful manner, all as more completely described in the indenture.
Subject to certain limitations imposed upon debt securities issued in book-
entry form, the debt securities of any series will be exchangeable for other
debt securities of the same series and of a like aggregate principal amount
and tenor of different authorized denominations upon surrender of those debt
securities at the corporate trust office of the trustee. In addition, subject
to certain limitations imposed upon debt securities issued in book-entry form,
the debt securities of any series may be surrendered for conversion or
registration of transfer or exchange thereof at the corporate trust office of
the trustee. Every debt security surrendered for conversion, registration of
transfer or exchange shall be duly endorsed or accompanied by a written
11
instrument of transfer. No service charge will be imposed for any registration
of transfer or exchange of any debt securities, but we may require payment of
a sum sufficient to cover any tax or other governmental charge payable in
connection with the registration of transfer or exchange of debt securities
(Section 305). If the applicable prospectus supplement refers to any transfer
agent (in addition to the trustee) initially designated by us with respect to
any series of debt securities, we may at any time rescind the designation of
that transfer agent or approve a change in the location through which that
transfer agent acts, except that we will be required to maintain a transfer
agent in each place of payment for that series. We may at any time designate
additional transfer agents with respect to any series of debt securities
(Section 1002).
Neither we nor any trustee shall be required to:
(1) issue, register the transfer of or exchange debt securities of any
series during a period beginning at the opening of business 15 days
before any selection of debt securities of that series to be
redeemed and ending at the close of business on the day of mailing
of the relevant notice of redemption;
(2) register the transfer of or exchange any debt security, or portion
thereof, called for redemption, except the unredeemed portion of any
debt security being redeemed in part; or
(3) issue, register the transfer of or exchange any debt security which
has been surrendered for repayment at the option of the holder of
that debt security, except the portion, if any, of that debt
security not to be so repaid (Section 305).
Merger, Consolidation or Sale
We may consolidate with, or sell, lease or convey all or substantially all
of our assets to, or merge with or into, any other corporation, provided that:
(1) either we shall be the continuing corporation, or the successor
corporation (if other than us) formed by or resulting from that
consolidation or merger or which shall have received the transfer of
our assets, shall expressly assume payment of the principal of (and
premium, if any) and interest on all of the debt securities and the
due and punctual performance and observance of all of the covenants
and conditions contained in the indenture;
(2) immediately after giving effect to that transaction and treating any
indebtedness which becomes an obligation of ours or of any of our
subsidiaries as a result thereof as having been incurred by us or
that subsidiary at the time of that transaction, no event of default
under the indenture, and no event which, after notice or the lapse
of time, or both, would become an event of default, shall have
occurred and be continuing; and
(3) an officer's certificate and legal opinion covering the above
conditions shall be delivered to the trustee (Sections 801 and 803).
Certain Covenants
Limitations on Incurrence of Debt. We will not, and will not permit any of
our subsidiaries to, incur any Debt (as defined below) if, immediately after
giving effect to the incurrence of that additional Debt, the aggregate
principal amount of all outstanding Debt of ours and of our subsidiaries on a
consolidated basis determined in accordance with generally accepted accounting
principles is greater than 65% of the sum of:
(1) our Undepreciated Real Estate Assets (as defined below) as of the
end of the calendar quarter covered in our annual report on Form 10-
K or quarterly report on Form 10-Q, as the case may be, most
recently filed with the SEC (or, if that filing is not permitted
under the Securities Exchange Act, with the trustee) prior to the
incurrence of that additional Debt; and
(2) the purchase price of any real estate assets acquired by us or any
of our subsidiaries since the end of that calendar quarter,
including those obtained in connection with the incurrence of that
additional Debt (Section 1004).
In addition to the foregoing limitation on the incurrence of Debt, we will
not, and will not permit any of our subsidiaries to, incur any Debt secured by
any mortgage, lien, charge, pledge, encumbrance or security
12
interest of any kind upon any of our property or the property of any of our
subsidiaries if, immediately after giving effect to the incurrence of that
additional Debt, the aggregate principal amount of all of our outstanding Debt
and the outstanding Debt of our subsidiaries on a consolidated basis which is
secured by any mortgage, lien, charge, pledge, encumbrance or security
interest on our property or the property of any of our subsidiaries is greater
than 40% of the sum of:
(1) our Undepreciated Real Estate Assets as of the end of the calendar
quarter covered in our annual report on Form 10-K or quarterly
report on Form 10-Q, as the case may be, most recently filed with
the SEC (or, if such filing is not permitted under the Securities
Exchange Act, with the trustee) prior to the incurrence of that
additional Debt; and
(2) the purchase price of any real estate assets acquired by us or any
of our subsidiaries since the end of that calendar quarter,
including those obtained in connection with the incurrence of that
additional Debt (Section 1004).
In addition to the foregoing limitations on the incurrence of Debt, we will
not, and will not permit any of our subsidiaries to, incur any Debt if
Consolidated Income Available for Debt Service (as defined below) for any 12
consecutive calendar months within the 15 calendar months immediately
preceding the date on which that additional Debt is to be incurred shall have
been less than 1.5 times the Maximum Annual Service Charge (as defined below)
on our Debt and the Debt of all of our subsidiaries to be outstanding
immediately after the incurring of that additional Debt (Section 1004).
Restrictions on Dividends and Other Distributions. We will not, in respect
of any shares of any class of our stock:
(1) declare or pay any dividends (other than dividends payable in the
form of our stock) on our stock;
(2) apply any of our property or assets to the purchase, redemption or
other acquisition or retirement of our stock;
(3) set apart any sum for the purchase, redemption or other acquisition
or retirement of our stock; or
(4) make any other distribution, by reduction of capital or otherwise
if, immediately after that declaration or other action referred to
above, the aggregate of all those declarations and other actions
since the date on which the indenture was originally executed shall
exceed the sum of:
(a) Funds from Operations (as defined below) from June 30, 1993
until the end of the calendar quarter covered in our annual
report on Form 10-K or quarterly report on Form 10-Q, as the
case may be, most recently filed with the SEC (or, if that
filing is not permitted under the Securities Exchange Act, with
the trustee) prior to that declaration or other action; and
(b) $26,000,000; provided, however, that the foregoing limitation
shall not apply to any declaration or other action referred to
above which is necessary to maintain our status as a REIT under
the Code if the aggregate principal amount of all our
outstanding Debt and the outstanding Debt of our subsidiaries
at that time is less than 65% of our Undepreciated Real Estate
Assets as of the end of the calendar quarter covered in our
annual report on Form 10-K or quarterly report on Form 10-Q, as
the case may be, most recently filed with the SEC (or, if that
filing is not permitted under the Securities Exchange Act, with
the trustee) prior to that declaration or other action (Section
1005).
Notwithstanding the foregoing, we will not be prohibited from making the
payment of any dividend within 30 days of the declaration of that dividend if
at the date of declaration that payment would have complied with the
provisions of the immediately preceding paragraph (Section 1005).
Existence. Except as permitted under "Merger, Consolidation or Sale," we
will do or cause to be done all things necessary to preserve and keep in full
force and effect our corporate existence, rights (charter and statutory) and
franchises; provided, however, that we will not be required to preserve any
right or franchise if we determine that the preservation of that right or
franchise is no longer desirable in the conduct of our business and that the
loss of that right or franchise is not disadvantageous in any material respect
to the holders of the debt securities (Section 1006).
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Maintenance of Properties. We will cause all of our properties used or
useful in the conduct of our business or the business of any of our
subsidiaries to be maintained and kept in good condition, repair and working
order and supplied with all necessary equipment and will cause to be made all
necessary repairs, renewals, replacements, betterments and improvements to
those properties, all as in our judgment may be necessary so that the business
carried on in connection with those properties may be properly and
advantageously conducted at all times; provided, however, that we and our
subsidiaries will not be prevented from selling or otherwise disposing for
value our respective properties in the ordinary course of business (Section
1007).
Insurance. We will, and will cause each of our subsidiaries to, keep all of
our insurable properties insured against loss or damage at least in an amount
equal to their then full insurable value with insurers of recognized
responsibility and having a rating of at least A:VIII in Best's Key Rating
Guide (Section 1008).
Payment of Taxes and Other Claims. We will pay or discharge or cause to be
paid or discharged, before the same shall become delinquent,
(1) all taxes, assessments and governmental charges levied or imposed
upon us or any of our subsidiaries or upon our income, profits or
property or the income, profits or property of any of our
subsidiaries, and
(2) all lawful claims for labor, materials and supplies which, if
unpaid, might by law become a lien upon our property or the property
of any of our subsidiaries; provided, however, that we will not be
required to pay or discharge or cause to be paid or discharged any
tax, assessment, charge or claim whose amount, applicability or
validity is being contested in good faith by appropriate proceedings
(Section 1009).
Provision of Financial Information. Whether or not we are subject to
Section 13 or 15(d) of the Securities Exchange Act, we will, to the extent
permitted under the Securities Exchange Act, file with the SEC the annual
reports, quarterly reports and other documents which we would have been
required to file with the SEC pursuant to Section 13 or 15(d) of the
Securities Exchange Act if we were so subject, those documents to be filed
with the SEC on or prior to the respective dates by which we would have been
required so to file those documents if we were so subject. We will also in any
event:
(1) within 15 days of each date by which we would have been required to
file those documents with the SEC pursuant to Section 13 or 15(d) of
the Securities Exchange Act:
(a) transmit by mail to all holders of debt securities, as their
names and addresses appear in the security register, without
cost to the holders of debt securities, copies of the annual
reports and quarterly reports which we would have been required
to file with the SEC pursuant to Section 13 or 15(d) of the
Securities Exchange Act if we were subject to those Sections,
and
(b) file with the trustee copies of the annual reports, quarterly
reports and other documents which we would have been required
to file with the SEC pursuant to Section 13 or 15(d) of the
Securities Exchange Act if we were subject to those Sections,
and
(2) if filing those documents by us with the SEC is not permitted under
the Securities Exchange Act, promptly upon written request and
payment of the reasonable cost of duplication and delivery, supply
copies of those documents to any prospective holder of debt
securities (Section 1010).
Maintenance of Unencumbered Total Asset Value. We will at all times
maintain an Unencumbered Total Asset Value in an amount of not less than one
hundred percent (100%) of the aggregate principal amount of all our
outstanding Debt and the outstanding Debt of our subsidiaries that is
unsecured (Section 1014).
Definitions Used for the Debt Securities
As used in the Indenture and the descriptions thereof herein,
14
"Consolidated Income Available for Debt Service" for any period means our
Consolidated Net Income (as defined below) and the Consolidated Net Income of
our subsidiaries plus amounts which have been deducted for:
(1) interest on our Debt and interest on the Debt of our subsidiaries,
(2) provision for our taxes and the taxes of our subsidiaries based on
income,
(3) amortization of debt discount,
(4) property depreciation and amortization, and
(5) the effect of any noncash charge resulting from a change in
accounting principles in determining Consolidated Net Income for
that period.
"Consolidated Net Income" for any period means the amount of our
consolidated net income (or loss) and the consolidated net income (or loss) of
our subsidiaries for that period determined on a consolidated basis in
accordance with generally accepted accounting principles.
"Debt" of ours or any of our subsidiaries means any indebtedness of ours or
any of our subsidiaries, whether or not contingent, in respect of:
(1) borrowed money or evidenced by bonds, notes, debentures or similar
instruments,
(2) indebtedness secured by any mortgage, pledge, lien, charge,
encumbrance or any security interest existing on property owned by
us or any of our subsidiaries,
(3) letters of credit or amounts representing the balance deferred and
unpaid of the purchase price of any property except any balance that
constitutes an accrued expense or trade payable, or
(4) any lease of property by us or any of our subsidiaries as lessee
which is reflected on our consolidated balance sheet as a
capitalized lease in accordance with generally accepted accounting
principles,
in the case of items of indebtedness under (1) through (3) above to the extent
that those items (other than letters of credit) would appear as a liability on
our consolidated balance sheet in accordance with generally accepted
accounting principles, and also includes, to the extent not otherwise
included, any obligation by us or any of our subsidiaries to be liable for, or
to pay, as obligor, guarantor or otherwise (other than for purposes of
collection in the ordinary course of business), indebtedness of another person
(other than us or any of our subsidiaries) (it being understood that Debt
shall be deemed to be incurred by us or any of our subsidiaries whenever we or
that subsidiary shall create, assume, guarantee or otherwise become liable in
respect thereof).
"Funds from Operations" for any period means our Consolidated Net Income and
the Consolidated Net Income of our subsidiaries for that period without giving
effect to depreciation and amortization, gains or losses from extraordinary
items, gains or losses on sales of real estate, gains or losses on investments
in marketable securities and any provision/benefit for income taxes for that
period, plus funds from operations of unconsolidated joint ventures, all
determined on a consistent basis for that period.
"Maximum Annual Service Charge" as of any date means the maximum amount
which may become payable in any period of 12 consecutive calendar months from
that date for interest on, and required amortization of, Debt. The amount
payable for amortization shall include the amount of any sinking fund or other
analogous fund for the retirement of Debt and the amount payable on account of
principal on any Debt which matures serially other than at the final maturity
date of that Debt.
"Total Assets" as of any date means the sum of (1) our Undepreciated Real
Estate Assets and (2) all our other assets determined in accordance with
generally accepted accounting principles (but excluding goodwill and amortized
debt costs).
"Undepreciated Real Estate Assets" as of any date means the amount of our
real estate assets and the real estate assets of our subsidiaries on that
date, before depreciation and amortization determined on a consolidated basis
in accordance with generally accepted accounting principles.
15
"Unencumbered Total Asset Value" as of any date means the sum of our Total
Assets which are unencumbered by any mortgage, lien, charge, pledge or
security interest that secures the payment of any obligations under any Debt.
Events of Default, Notice and Waiver
The indenture provides that the following events are events of default with
respect to any series of debt securities issued thereunder:
(1) default for 30 days in the payment of any installment of interest on
any debt security of that series;
(2) default in the payment of the principal of (or premium, if any, on)
any debt security of that series at its maturity;
(3) default in making any sinking fund payment as required for any debt
security of that series;
(4) default in the performance of any of our other covenants contained
in the indenture (other than a covenant added to the indenture
solely for the benefit of a series of debt securities issued
thereunder other than that series), continued for 60 days after
written notice as provided in the indenture;
(5) default in the payment of an aggregate principal amount exceeding
$10,000,000 of any evidence of our indebtedness or any mortgage,
indenture or other instrument under which indebtedness is issued or
by which that indebtedness is secured, that default having occurred
after the expiration of any applicable grace period and having
resulted in the acceleration of the maturity of that indebtedness,
but only if that indebtedness is not discharged or that acceleration
is not rescinded or annulled;
(6) certain events of bankruptcy, insolvency or reorganization, or court
appointment of a receiver, liquidator or trustee of ours or any of
our significant subsidiaries (as defined in Regulation S-X
promulgated under the Securities Act) or either of our properties;
and
(7) any other event of default provided with respect to a particular
series of debt securities (Section 501).
If an event of default under the indenture with respect to debt securities
of any series at the time outstanding occurs and is continuing, then in all of
those cases the trustee or the holders of not less than 25% in principal
amount of the outstanding debt securities of that series may declare the
principal amount (or, if the debt securities of that series are original issue
discount securities or indexed securities, that portion of the principal
amount as may be specified in the terms thereof) of all of the debt securities
of that series to be due and payable immediately by written notice thereof to
us (and to the trustee if given by the holders of debt securities). However,
at any time after a declaration of acceleration with respect to debt
securities of that series (or of all debt securities then outstanding under
the indenture, as the case may be) has been made, but before a judgment or
decree for payment of the money due has been obtained by the trustee, the
holders of not less than a majority in principal amount of outstanding debt
securities of that series (or of all debt securities then outstanding under
the indenture, as the case may be) may rescind and annul that declaration and
its consequences if:
(1) we shall have deposited with the trustee all required payments of
the principal of (and premium, if any) and interest on the debt
securities of that series (or of all debt securities then
outstanding under the indenture, as the case may be), plus certain
fees, expenses, disbursements and advances of the trustee, and
(2) all events of default, other than the non-payment of accelerated
principal (or specified portion thereof), with respect to debt
securities of that series (or of all debt securities then
outstanding under the indenture, as the case may be) have been cured
or waived as provided in the indenture (Section 502). The indenture
also provides that the holders of not less than a majority in
principal amount of the outstanding debt securities of any series
(or of all debt securities then outstanding under the indenture, as
the case may be) may waive any past default with respect to that
series and its consequences, except a default:
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(a) in the payment of the principal of (or premium, if any) or
interest on any debt security of that series, or
(b) in respect of a covenant or provision contained in the
indenture that cannot be modified or amended without the
consent of the holder of each outstanding debt security
affected thereby (Section 513).
The trustee is required to give notice to the holders of debt securities
within 90 days of a default under the indenture; provided, however, that the
trustee may withhold notice to the holders of any series of debt securities of
any default with respect to that series (except a default in the payment of
the principal of (or premium, if any) or interest on any debt security of that
series or in the payment of any sinking fund installment in respect of any
debt security of that series) if the responsible officers of the trustee
consider that withholding to be in the interest of those holders of debt
securities (Section 601).
The indenture provides that no holders of debt securities of any series may
institute any proceedings, judicial or otherwise, with respect to the
indenture or for any remedy thereunder, except in the case of failure of the
trustee, for 60 days, to act after it has received a written request to
institute proceedings in respect of an event of default from the holders of
not less than 25% in principal amount of the outstanding debt securities of
that series, as well as an offer of indemnity reasonably satisfactory to it
(Section 507). This provision will not prevent, however, any holder of debt
securities from instituting suit for the enforcement of payment of the
principal of (and premium, if any) and interest on those debt securities at
the respective due dates thereof (Section 508).
Subject to provisions in the indenture relating to its duties in case of
default, the trustee is under no obligation to exercise any of its rights or
powers under the indenture at the request or direction of any holders of any
series of debt securities then outstanding under the indenture, unless those
holders shall have offered to the trustee reasonable security or indemnity
(Section 602). The holders of not less than a majority in principal amount of
the outstanding debt securities of any series (or of all debt securities then
outstanding under the indenture, as the case may be) shall have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the trustee, or of exercising any trust or power conferred upon
the trustee. However, the trustee may refuse to follow any direction which is
in conflict with any law or the indenture, which may involve the trustee in
personal liability or which may be unduly prejudicial to the holders of debt
securities of those series not joining therein (Section 512).
Within 120 days after the close of each fiscal year, we must deliver to the
trustee a certificate, signed by one of several specified officers, stating
whether or not that officer has knowledge of any default under the indenture
and, if so, specifying each of those defaults and the nature and status
thereof (Section 1011).
Modification
Modifications and amendments of the indenture and debt securities may be
made only with the consent of the holders of not less than a majority in
principal amount of all outstanding debt securities which are affected by such
modification or amendment; provided, however, that no modification or
amendment may, without the consent of the holder of each of the debt
securities affected thereby,
(1) change the stated maturity of the principal of, or any installment
of interest (or premium, if any) on, any debt security;
(2) reduce the principal amount of, or the rate or amount of interest
on, or any premium payable on redemption of, any debt security, or
reduce the amount of principal of an original issue discount
security that would be due and payable upon declaration of
acceleration of the maturity thereof or would be provable in
bankruptcy, or adversely affect any right of repayment of the holder
of any debt security;
(3) change the place of payment, or the coin or currency, for payment of
principal of (or premium, if any) or interest on any debt security;
(4) impair the right to institute suit for the enforcement of any
payment on or with respect to any debt security;
17
(5) reduce the above-stated percentage of outstanding debt securities of
any series necessary to modify or amend the indenture, to waive
compliance with certain provisions thereof or certain defaults and
consequences thereunder or to reduce the quorum or voting
requirements set forth in the indenture; or
(6) modify any of the foregoing provisions or any of the provisions
relating to the waiver of certain past defaults or certain
covenants, except to increase the required percentage to effect that
action or to provide that certain other provisions may not be
modified or waived without the consent of the holder of that debt
security (Section 902).
The holders of not less than a majority in principal amount of outstanding
debt securities have the right to waive compliance by us with some of the
covenants in the indenture (Section 1013).
Modifications and amendments of the indenture may be made by us and the
trustee without the consent of any holder of debt securities for any of the
following purposes:
(1) to evidence the succession of another person to us as obligor under
the indenture;
(2) to add to our covenants for the benefit of the holders of all or any
series of debt securities or to surrender any right or power
conferred upon us in the indenture;
(3) to add events of default for the benefit of the holders of all or
any series of debt securities;
(4) to add or change any provisions of the indenture to facilitate the
issuance of, or to liberalize some of the terms of, debt securities
in bearer form, or to permit or facilitate the issuance of debt
securities in uncertificated form, provided that such action shall
not adversely affect the interests of the holders of the debt
securities of any series in any material respect;
(5) to change or eliminate any provisions of the indenture, provided
that any of those changes or elimination shall become effective only
when there are no debt securities outstanding of any series created
prior thereto which are entitled to the benefit of that provision;
(6) to secure the debt securities;
(7) to establish the form or terms of debt securities of any series,
including the provisions and procedures, if applicable, for the
conversion of those debt securities into our common stock or our
preferred stock;
(8) to provide for the acceptance of appointment by a successor trustee
or facilitate the administration of the trusts under the indenture
by more than one trustee;
(9) to cure any ambiguity, defect or inconsistency in the indenture,
provided that such action shall not adversely affect the interests
of the holders of debt securities of any series in any material
respect; or
(10) to supplement any of the provisions of the indenture to the extent
necessary to permit or facilitate defeasance and discharge of any
series of those debt securities, provided that such action shall not
adversely affect the interests of the holders of the debt securities
of any series in any material respect (Section 901).
The indenture provides that in determining whether the holders of the
requisite principal amount of outstanding debt securities of a series have
given any request, demand, authorization, direction, notice, consent or waiver
thereunder or whether a quorum is present at a meeting of holders of debt
securities,
(1) the principal amount of an original issue discount security that
shall be deemed to be outstanding shall be the amount of the
principal thereof that would be due and payable as of the date of
that determination upon declaration of acceleration of the maturity
thereof,
(2) the principal amount of a debt security denominated in a foreign
currency that shall be deemed outstanding shall be the U.S. Dollar
equivalent, determined on the issue date for that debt security, of
the principal amount (or, in the case of an original issue discount
security, the U.S. Dollar
18
equivalent on the issue date of that debt security of the amount
determined as provided in (1) above),
(3) the principal amount of an indexed security that shall be deemed
outstanding shall be the principal face amount of that indexed
security at original issuance, unless otherwise provided with
respect to that indexed security pursuant to Section 301 of the
indenture, and
(4) debt securities owned by us or any other obligor upon the debt
securities or any of our affiliates or of that other obligor shall
be disregarded (Section 101).
The indenture contains provisions for convening meetings of the holders of
debt securities of a series (Section 1501). A meeting may be called at any
time by the trustee, and also, upon request, by us or the holders of at least
10% in principal amount of the outstanding debt securities of that series, in
any of those cases upon notice given as provided in the indenture (Section
1502). Except for any consent that must be given by the holder of each debt
security affected by certain modifications and amendments of the indenture,
any resolution presented at a meeting or adjourned meeting duly reconvened at
which a quorum is present may be adopted by the affirmative vote of the
holders of a majority in principal amount of the outstanding debt securities
of that series; provided, however, that, except as referred to above, any
resolution with respect to any request, demand, authorization, direction,
notice, consent, waiver or other action that may be made, given or taken by
the holders of a specified percentage, which is less than a majority, in
principal amount of the outstanding debt securities of a series may be adopted
at a meeting or adjourned meeting duly reconvened at which a quorum is present
by the affirmative vote of the holders of that specified percentage in
principal amount of the outstanding debt securities of that series. Any
resolution passed or decision taken at any meeting of holders of debt
securities of any series duly held in accordance with the indenture will be
binding on all holders of debt securities of that series. The quorum at any
meeting called to adopt a resolution, and at any reconvened meeting, will be
persons holding or representing a majority in principal amount of the
outstanding debt securities of a series; provided, however, that if any action
is to be taken at that meeting with respect to a consent or waiver which may
be given by the holders of not less than a specified percentage in principal
amount of the outstanding debt securities of a series, the persons holding or
representing that specified percentage in principal amount of the outstanding
debt securities of that series will constitute a quorum (Section 1504).
Notwithstanding the foregoing provisions, if any action is to be taken at a
meeting of holders of debt securities of any series with respect to any
request, demand, authorization, direction, notice, consent, waiver or other
action that the indenture expressly provides may be made, given or taken by
the holders of a specified percentage in principal amount of all outstanding
debt securities affected thereby, or of the holders of that series and one or
more additional series:
(1) there shall be no minimum quorum requirement for that meeting, and
(2) the principal amount of the outstanding debt securities of that
series that vote in favor of that request, demand, authorization,
direction, notice, consent, waiver or other action shall be taken
into account in determining whether that request, demand,
authorization, direction, notice, consent, waiver or other action
has been made, given or taken under the indenture (Section 1504).
Discharge, Defeasance and Covenant Defeasance
We may discharge certain obligations to holders of any series of debt
securities that have not already been delivered to the trustee for
cancellation and that either have become due and payable or will become due
and payable within one year (or scheduled for redemption within one year) by
irrevocably depositing with the trustee, in trust, funds in the currency or
currencies, currency unit or units or composite currency or currencies in
which those debt securities are payable in an amount sufficient to pay the
entire indebtedness on those debt securities in respect of principal (and
premium, if any) and interest to the date of that deposit (if those debt
securities have become due and payable) or to the stated maturity or
redemption date, as the case may be (Section 401).
The indenture provides that, if the provisions of article fourteen of the
indenture are made applicable to the debt securities of or within any series
pursuant to Section 301 of the indenture, we may elect either:
19
(1) to defease and be discharged from any and all obligations with
respect to those debt securities (except for the obligation to pay
additional amounts, if any, upon the occurrence of certain events of
tax, assessment or governmental charge with respect to payments on
those debt securities and the obligations to register the transfer
or exchange of those debt securities, to replace temporary or
mutilated, destroyed, lost or stolen debt securities, to maintain an
office or agency in respect of those debt securities and to hold
moneys for payment in trust) ("defeasance") (Section 1402); or
(2) to be released from its obligations with respect to those debt
securities under Sections 1004 to 1010, inclusive, and Section 1014
of the indenture (being the restrictions described under "Certain
Covenants") or, if provided pursuant to Section 301 of the
indenture, its obligations with respect to any other covenant, and
any omission to comply with those obligations shall not constitute a
default or an event of default with respect to those debt securities
("covenant defeasance") (Section 1403),
in either case upon the irrevocable deposit by us with the trustee, in trust,
of an amount, in the currency or currencies, currency unit or units or
composite currency or currencies in which those debt securities are payable at
stated maturity, or Government Obligations (as defined below), or both,
applicable to those debt securities which through the scheduled payment of
principal and interest in accordance with their terms will provide money in an
amount sufficient to pay the principal of (and premium, if any) and interest
on those debt securities, and any mandatory sinking fund or analogous payments
thereon, on the scheduled due dates therefor.
That type of trust may only be established if, among other things, we have
delivered to the trustee an opinion of counsel to the effect that the holders
of those debt securities will not recognize income, gain or loss for U.S.
federal income tax purposes as a result of that defeasance or covenant
defeasance and will be subject to U.S. federal income tax on the same amounts,
in the same manner and at the same times as would have been the case if that
defeasance or covenant defeasance had not occurred, and that opinion of
counsel, in the case of defeasance, must refer to and be based upon a ruling
of the Internal Revenue Service or a change in applicable U.S. federal income
tax law occurring after the date of the indenture (Section 1404).
"Government Obligations" means securities which are:
(1) direct obligations of the United States of America or the government
which issued the foreign currency in which the debt securities of a
particular series are payable, for the payment of which its full
faith and credit is pledged, or
(2) obligations of a person controlled or supervised by and acting as an
agency or instrumentality of the United States of America or that
government which issued the foreign currency in which the debt
securities of that series are payable, the payment of which is
unconditionally guaranteed as a full faith and credit obligation by
the United States of America or that other government,
which, in either case, are not callable or redeemable at the option of the
issuer thereof, and shall also include a depository receipt issued by a bank
or trust company as custodian with respect to that Government Obligation or a
specific payment of interest on or principal of that Government Obligation
held by the custodian for the account of the holder of a depository receipt,
provided that (except as required by law) the custodian is not authorized to
make any deduction from the amount payable to the holder of the depository
receipt from any amount received by the custodian in respect of the Government
Obligation or the specific payment of interest on or principal of the
Government Obligation evidenced by the depository receipt (Section 101).
Unless otherwise provided in the applicable prospectus supplement, if after
we have deposited funds or Government Obligations or both to effect defeasance
or covenant defeasance with respect to debt securities of any series,
(1) the holder of a debt security of that series is entitled to, and
does, elect pursuant to Section 301 of the indenture or the terms of
that debt security to receive payment in a currency, currency unit
or composite currency other than that in which the deposit has been
made in respect of that debt security, or
20
(2) a Conversion Event (as defined below) occurs in respect of the
currency, currency unit or composite currency in which the deposit
has been made,
then, the indebtedness represented by that debt security shall be deemed to
have been, and will be, fully discharged and satisfied through the payment of
the principal of (and premium, if any) and interest on that debt security as
they become due out of the proceeds yielded by converting the amount so
deposited in respect of that debt security into the currency, currency unit or
composite currency in which that debt security becomes payable as a result of
that election or cessation of usage based on the applicable market exchange
rate (Section 1405). "Conversion Event" means the cessation of use of:
(1) a currency, currency unit or composite currency both by the
government of the country which issued that currency and for the
settlement of transactions by a central bank or other public
institutions of or within the international banking community,
(2) the European Currency Unit, or ECU, both within the European
Monetary System and for the settlement of transactions by public
institutions of or within the European Communities, or
(3) any currency unit or composite currency other than the ECU for the
purposes for which it was established.
Unless otherwise provided in the applicable prospectus supplement, all
payments of principal of (and premium, if any) and interest on any debt
security that is payable in a foreign currency that ceases to be used by its
government of issuance shall be made in U.S. Dollars (Section 101).
In the event we effect covenant defeasance with respect to any debt
securities and those debt securities are declared due and payable because of
the occurrence of any event of default other than the event of default
described in clause (4) under "Events of Default, Notice and Waiver" with
respect to Sections 1004 to 1010, inclusive, and Section 1014 of the indenture
(which Sections would no longer be applicable to those debt securities) or
described in clause (7) under "Events of Default, Notice and Waiver" with
respect to any other covenant as to which there has been covenant defeasance,
the amount in such currency, currency unit or composite currency in which
those debt securities are payable, and Government Obligations on deposit with
the trustee, will be sufficient to pay amounts due on those debt securities at
the time of their stated maturity but may not be sufficient to pay amounts due
on those debt securities at the time of the acceleration resulting from that
event of default. However, we would remain liable to make payment of those
amounts due at the time of acceleration.
The applicable prospectus supplement may further describe the provisions, if
any, permitting that defeasance or covenant defeasance, including any
modifications to the provisions described above, with respect to the debt
securities of or within a particular series.
Conversion Rights
The terms and conditions, if any, upon which the debt securities are
convertible into other debt securities, our common stock or our preferred
stock will be set forth in the applicable prospectus supplement relating
thereto. Those terms will include whether those debt securities are
convertible into other debt securities, our common stock or our preferred
stock, the conversion price (or manner of calculation thereof), the conversion
period, provisions as to whether conversion will be at our option or the
option of the holders of debt securities, the events requiring an adjustment
of the conversion price and provisions affecting conversion in the event of
the redemption of those debt securities.
Global Securities
The debt securities of a series may be issued in whole or in part in the
form of one or more global securities that will be deposited with, or on
behalf of, a depositary identified in the applicable prospectus supplement
relating to that series. Global securities may be issued in either registered
or bearer form and in either temporary or permanent form. The specific terms
of the depositary arrangement with respect to a series of debt securities will
be described in the applicable prospectus supplement relating to that series.
21
DESCRIPTION OF COMMON STOCK
We have the authority to issue 200,000,000 shares of common stock, par value
$.01 per share, and 102,000,000 shares of excess stock, par value $.01 per
share. At June 9, 2003, we had outstanding 105,141,310 shares of common stock
and no shares of excess stock. Prior to August 4, 1994, we were incorporated
as a Delaware corporation. On August 4, 1994, we reincorporated as a Maryland
corporation pursuant to an Agreement and Plan of Merger approved by our
stockholders.
The following description of our common stock sets forth certain general
terms and provisions of the common stock to which any prospectus supplement
may relate, including a prospectus supplement providing that common stock will
be issuable upon conversion of our debt securities or our preferred stock or
upon the exercise of common stock warrants issued by us. The statements below
describing the common stock are in all respects subject to and qualified in
their entirety by reference to the applicable provisions of our charter and
bylaws.
Holders of our common stock will be entitled to receive dividends when, as
and if authorized by our board of directors and declared by us, out of assets
legally available therefor. Payment and declaration of dividends on the common
stock and purchases of shares thereof by us will be subject to certain
restrictions if we fail to pay dividends on our preferred stock. Upon our
liquidation, dissolution or winding up, holders of common stock will be
entitled to share equally and ratably in any assets available for distribution
to them, after payment or provision for payment of our debts and other
liabilities and the preferential amounts owing with respect to any of our
outstanding preferred stock. The common stock will possess ordinary voting
rights for the election of directors and in respect of other corporate
matters, with each share entitling the holder thereof to one vote. Holders of
common stock will not have cumulative voting rights in the election of
directors, which means that holders of more than 50% of all of the shares of
our common stock voting for the election of directors will be able to elect
all of the directors if they choose to do so and, accordingly, the holders of
the remaining shares will be unable to elect any directors. Holders of shares
of common stock will not have preemptive rights, which means they have no
right to acquire any additional shares of common stock that may be issued by
us at a subsequent date. The common stock will, when issued, be fully paid and
nonassessable and will not be subject to preemptive or similar rights.
Under Maryland law and our charter, a distribution (whether by dividend,
redemption or other acquisition of shares) to holders of shares of common
stock may be made only if, after giving effect to the distribution, we are
able to pay our indebtedness as it becomes due in the usual course of business
and our total assets are greater than our total liabilities plus the amount
necessary to satisfy the preferential rights upon dissolution of stockholders
whose preferential rights on dissolution are superior to the holders of common
stock and we can pay our debts as they become due. We have complied with these
requirements in all of our prior distributions to holders of common stock.
Restrictions on Ownership
For us to qualify as a REIT under the Code, not more than 50% in value of
our outstanding stock may be owned, actually or constructively, by five or
fewer individuals (as defined in the Code to include certain entities) during
the last half of a taxable year. Our stock also must be beneficially owned by
100 or more persons during at least 335 days of a taxable year of 12 months or
during a proportionate part of a shorter taxable year. In addition, rent from
related party tenants (generally, a tenant of a REIT owned, actually or
constructively, 10% or more by the REIT, or a 10% owner of the REIT) is not
qualifying income for purposes of the income tests under the Code.
Subject to the exceptions specified in our charter, no holder may own, or be
deemed to own by virtue of the constructive ownership provisions of the Code,
more than 2% in value of the outstanding shares of our common stock. The
constructive ownership rules are complex and may cause common stock owned
actually or constructively by a group of related individuals or entities or
both to be deemed constructively owned by one individual or entity. As a
result, the acquisition of less than 2% in value of the common stock (or the
acquisition of an interest in an entity which owns common stock) by an
individual or entity could cause that
22
individual or entity (or another individual or entity) to own constructively
in excess of 2% in value of the common stock, and thus subject such common
stock to the ownership limit.
Existing stockholders who exceeded the ownership limit immediately after the
completion of our initial public offering of our common stock in November 1991
may continue to do so and may acquire additional shares through the stock
option plan, or from other existing stockholders who exceed the ownership
limit, but may not acquire additional shares from such sources such that the
five largest beneficial owners of common stock could own, actually or
constructively, more than 49.6% of the outstanding common stock, and in any
event may not acquire additional shares from any other sources. In addition,
because rent from related party tenants is not qualifying rent for purposes of
the gross income tests under the Code, our charter provides that no individual
or entity may own, or be deemed to own by virtue of the attribution provisions
of the Code (which differ from the attribution provisions applied to the
ownership limit), in excess of 9.8% in value of our outstanding common stock.
We refer to this ownership limitation as the related party limit. Our board of
directors may waive the ownership limit and the related party limit with
respect to a particular stockholder (such related party limit has been waived
with respect to the existing stockholders who exceeded the related party limit
immediately after the initial public offering of our common stock) if evidence
satisfactory to our board of directors and our tax counsel is presented that
such ownership will not then or in the future jeopardize our status as a REIT.
As a condition of that waiver, our board of directors may require opinions of
counsel satisfactory to it or an undertaking or both from the applicant with
respect to preserving our REIT status. The foregoing restrictions on
transferability and ownership will not apply if our board of directors
determines that it is no longer in our best interests to attempt to qualify,
or to continue to qualify, as a REIT. If shares of common stock in excess of
the ownership limit or the related party limit, or shares which would
otherwise cause the REIT to be beneficially owned by less than 100 persons or
which would otherwise cause us to be "closely held" within the meaning of the
Code or would otherwise result in our failure to qualify as a REIT, are issued
or transferred to any person, that issuance or transfer shall be null and void
to the intended transferee, and the intended transferee would acquire no
rights to the stock. Shares transferred in excess of the ownership limit or
the related party limit, or shares which would otherwise cause us to be
"closely held" within the meaning of the Code or would otherwise result in our
failure to qualify as a REIT, will automatically be exchanged for shares of a
separate class of stock, which we refer to as excess stock, that will be
transferred by operation of law to us as trustee for the exclusive benefit of
the person or persons to whom the shares are ultimately transferred, until
that time as the intended transferee retransfers the shares. While these
shares are held in trust, they will not be entitled to vote or to share in any
dividends or other distributions (except upon liquidation). The shares may be
retransferred by the intended transferee to any person who may hold those
shares at a price not to exceed either:
(1) the price paid by the intended transferee, or
(2) if the intended transferee did not give value for such shares, a
price per share equal to the market value of the shares on the date
of the purported transfer to the intended transferee,
at which point the shares will automatically be exchanged for ordinary common
stock. In addition, such shares of excess stock held in trust are purchasable
by us for a 90-day period at a price equal to the lesser of the price paid for
the stock by the intended transferee and the market price for the stock on the
date we determine to purchase the stock. This period commences on the date of
the violative transfer if the intended transferee gives us notice of the
transfer, or the date our board of directors determines that a violative
transfer has occurred if no notice is provided.
All certificates representing shares of common stock will bear a legend
referring to the restrictions described above.
All persons who own, directly or by virtue of the attribution provisions of
the Code, more than a specified percentage of the outstanding shares of common
stock must file an affidavit with us containing the information specified in
our charter within 30 days after January 1 of each year. In addition, each
common stockholder shall upon demand be required to disclose to us in writing
such information with respect to the actual and constructive ownership of
shares as our board of directors deems necessary to comply with the provisions
of the Code applicable to a REIT or to comply with the requirements of any
taxing authority or governmental agency.
23
The registrar and transfer agent for our common stock is The Bank of New
York.
DESCRIPTION OF COMMON STOCK WARRANTS
We may issue common stock warrants for the purchase of our common stock.
Common stock warrants may be issued independently or together with any of the
other securities offered by this prospectus that are offered by any prospectus
supplement and may be attached to or separate from the securities offered by
this prospectus. Each series of common stock warrants will be issued under a
separate warrant agreement to be entered into between us and a warrant agent
specified in the applicable prospectus supplement. The warrant agent will act
solely as our agent in connection with the common stock warrants of such
series and will not assume any obligation or relationship of agency or trust
for or with any holders or beneficial owners of common stock warrants.
The applicable prospectus supplement will describe the terms of the common
stock warrants in respect of which this prospectus is being delivered,
including, where applicable, the following:
(1) the title of those common stock warrants;
(2) the aggregate number of those common stock warrants;
(3) the price or prices at which those common stock warrants will be
issued;
(4) the designation, number and terms of the shares of common stock
purchasable upon exercise of those common stock warrants;
(5) the designation and terms of the other securities offered by this
prospectus with which the common stock warrants are issued and the
number of those common stock warrants issued with each security
offered by this prospectus;
(6) the date, if any, on and after which those common stock warrants and
the related common stock will be separately transferable;
(7) the price at which each share of common stock purchasable upon
exercise of those common stock warrants may be purchased;
(8) the date on which the right to exercise those common stock warrants
shall commence and the date on which that right shall expire;
(9) the minimum or maximum amount of those common stock warrants which
may be exercised at any one time;
(10) information with respect to book-entry procedures, if any;
(11) a discussion of federal income tax considerations; and
(12) any other material terms of those common stock warrants, including
terms, procedures and limitations relating to the exchange and
exercise of those common stock warrants.
DESCRIPTION OF PREFERRED STOCK
We are authorized to issue 3,600,000 shares of preferred stock, par value
$1.00 per share, 345,000 shares of 7 3/4% Class A Cumulative Redeemable
Preferred Stock, $1.00 par value per share, 230,000 shares of 8 1/2% Class B
Cumulative Redeemable Preferred Stock, $1.00 par value per share, 460,000
shares of 8 3/8% Class C Cumulative Redeemable Preferred Stock, $1.00 par
value per share, 700,000 shares of 7 1/2% Class D Cumulative Convertible
Preferred Stock, $1.00 par value per share, 65,000 shares of Class E Floating
Rate Cumulative Redeemable Preferred Stock, $1.00 par value per share, and
700,000 shares of 6.65% Class F Cumulative Redeemable Preferred Stock, $1.00
par value per share. We are also authorized to issue 345,000 shares of Class A
Excess Preferred Stock, $1.00 par value per share, 230,000 shares of Class B
Excess Preferred Stock, $1.00 par value per share, 460,000 shares of Class C
Excess Preferred Stock, $1.00 par value
24
per share, 700,000 shares of Class D Excess Preferred Stock, $1.00 par value
per share, 65,000 shares of Class E Excess Preferred Stock, $1.00 par value
per share, and 700,000 shares of Class F Excess Preferred Stock, $1.00 par
value per share, which are reserved for issuance upon conversion of certain
outstanding Class A preferred stock, Class B preferred stock, Class C
preferred stock, Class D preferred stock, Class E preferred stock or Class F
preferred stock, as the case may be, as necessary to preserve our status as a
REIT. At June 9, 2003, 700,000 shares of Class F preferred stock, represented
by 7,000,000 depositary shares, were outstanding.
Under our charter, our board of directors may from time to time establish
and issue one or more classes or series of preferred stock and fix the
designations, powers, preferences and rights of the shares of such classes or
series and the qualifications, limitations or restrictions thereon, including,
but not limited to, the fixing of the dividend rights, dividend rate or rates,
conversion rights, voting rights, rights and terms of redemption (including
sinking fund provisions) and the liquidation preferences.
The following description of our preferred stock sets forth certain general
terms and provisions of our preferred stock to which any prospectus supplement
may relate. The statements below describing the preferred stock are in all
respects subject to and qualified in their entirety by reference to the
applicable provisions of our charter (including the applicable articles
supplementary) and bylaws.
General
Subject to limitations prescribed by Maryland law and our charter, our board
of directors is authorized to fix the number of shares constituting each class
or series of preferred stock and the designations and powers, preferences and
relative, participating, optional or other special rights and qualifications,
limitations or restrictions thereof, including those provisions as may be
desired concerning voting, redemption, dividends, dissolution or the
distribution of assets, conversion or exchange, and those other subjects or
matters as may be fixed by resolution of our board of directors or duly
authorized committee thereof. The preferred stock will, when issued, be fully
paid and nonassessable and will not have, or be subject to, any preemptive or
similar rights.
You should refer to the prospectus supplement relating to the class or
series of preferred stock offered thereby for specific terms, including:
(1) The class or series, title and stated value of that preferred stock;
(2) The number of shares of that preferred stock offered, the
liquidation preference per share and the offering price of that
preferred stock;
(3) The dividend rate(s), period(s) and/or payment date(s) or method(s)
of calculation thereof applicable to that preferred stock;
(4) Whether dividends on that preferred stock shall be cumulative or not
and, if cumulative, the date from which dividends on that preferred
stock shall accumulate;
(5) The procedures for any auction and remarketing, if any, for that
preferred stock;
(6) Provisions for a sinking fund, if any, for that preferred stock;
(7) Provisions for redemption, if applicable, of that preferred stock;
(8) Any listing of that preferred stock on any securities exchange;
(9) The terms and conditions, if applicable, upon which that preferred
stock will be convertible into our common stock, including the
conversion price (or manner of calculation thereof);
(10) Whether interests in that preferred stock will be represented by our
depositary shares;
(11) The relative ranking and preference of the preferred stock as to
distribution rights and rights upon our liquidation, dissolution or
winding up if other than as described in this prospectus;
25
(12) Any limitations on issuance of any other series of preferred stock
ranking senior to or on a parity with the preferred stock as to
distribution rights and rights upon our liquidation, dissolution or
winding up;
(13) A discussion of certain federal income tax considerations applicable
to that preferred stock;
(14) Any limitations on actual, beneficial or constructive ownership and
restrictions on transfer of that preferred stock and, if
convertible, the related common stock, in each case as may be
appropriate to preserve our status as a REIT; and
(15) Any other material terms, preferences, rights, limitations or
restrictions of that preferred stock.
Rank
Unless otherwise specified in the applicable prospectus supplement, the
preferred stock will, with respect to rights to the payment of dividends and
distribution of our assets and rights upon our liquidation, dissolution or
winding up, rank:
(1) senior to all classes or series of our common stock and excess stock
and to all of our equity securities the terms of which provide that
those equity securities are junior to the preferred stock;
(2) on a parity with all of our equity securities other than those
referred to in clauses (1) and (3); and
(3) junior to all of our equity securities the terms of which provide
that those equity securities will rank senior to it.
For these purposes, the term "equity securities" does not include
convertible debt securities.
Dividends
Holders of shares of our preferred stock of each class or series shall be
entitled to receive, when, as and if authorized by our board of directors and
declared by us, out of our assets legally available for payment, cash
dividends at rates and on dates as will be set forth in the applicable
prospectus supplement. Each dividend shall be payable to holders of record as
they appear on our stock transfer books on the record dates as shall be fixed
by our board of directors.
Dividends on any class or series of our preferred stock may be cumulative or
non-cumulative, as provided in the applicable prospectus supplement.
Dividends, if cumulative, will accumulate from and after the date set forth in
the applicable prospectus supplement. If our board of directors fails to
authorize a dividend payable on a dividend payment date on any class or series
of our preferred stock for which dividends are noncumulative, then the holders
of that class or series of our preferred stock will have no right to receive a
dividend in respect of the dividend period ending on that dividend payment
date, and we will have no obligation to pay the dividend accrued for that
period, whether or not dividends on that class or series are declared payable
on any future dividend payment date.
If any shares of our preferred stock of any class or series are outstanding,
no full dividends shall be authorized or paid or set apart for payment on our
preferred stock of any other class or series ranking, as to dividends, on a
parity with or junior to the preferred stock of that class or series for any
period unless:
(1) if that class or series of preferred stock has a cumulative
dividend, full cumulative dividends have been or contemporaneously
are authorized and paid or authorized and a sum sufficient for the
payment thereof set part for that payment on the preferred stock of
that class or series for all past dividend periods and the then
current dividend period, or
(2) if that class or series of preferred stock does not have a
cumulative dividend, full dividends for the then current dividend
period have been or contemporaneously are authorized and paid or
authorized and a sum sufficient for the payment thereof set apart
for that payment on the preferred stock of that class or series.
When dividends are not paid in full (or a sum sufficient for their full
payment is not so set apart) upon the shares of preferred stock of any class
or series and the shares of any other class or series of preferred
26
stock ranking on a parity as to dividends with the preferred stock of that
class or series, all dividends declared upon shares of preferred stock of that
class or series and any other class or series of preferred stock ranking on a
parity as to dividends with that preferred stock shall be authorized pro rata
so that the amount of dividends authorized per share on the preferred stock of
that class or series and that other class or series of preferred stock shall
in all cases bear to each other the same ratio that accrued and unpaid
dividends per share on the shares of preferred stock of that class or series
(which shall not include any accumulation in respect of unpaid dividends for
prior dividend periods if that preferred stock does not have a cumulative
dividend) and that other class or series of preferred stock bear to each
other. No interest, or sum of money in lieu of interest, shall be payable in
respect of any dividend payment or payments on preferred stock of that series
that may be in arrears.
Except as provided in the immediately preceding paragraph, unless: (1) if
that class or series of preferred stock has a cumulative dividend, full
cumulative dividends on the preferred stock of that class or series have been
or contemporaneously are authorized and paid or authorized and a sum
sufficient for the payment thereof set apart for payment for all past dividend
periods and the then current dividend period; and (2) if that class or series
of preferred stock does not have a cumulative dividend, full dividends on the
preferred stock of that class or series have been or contemporaneously are
authorized and paid or authorized and a sum sufficient for the payment thereof
set aside for payment for the then current dividend period, then no dividends
(other than in our common stock or other stock ranking junior to the preferred
stock of that class or series as to dividends and upon our liquidation,
dissolution or winding up) shall be authorized or paid or set aside for
payment or other distribution shall be authorized or made upon our common
stock, excess stock or any of our other stock ranking junior to or on a parity
with the preferred stock of that class or series as to dividends or upon
liquidation, nor shall any common stock, excess stock or any of our other
stock ranking junior to or on a parity with the preferred stock of such class
or series as to dividends or upon our liquidation, dissolution or winding up
be redeemed, purchased or otherwise acquired for any consideration (or any
moneys be paid to or made available for a sinking fund for the redemption of
any shares of that stock) by us (except by conversion into or exchange for
other of our stock ranking junior to the preferred stock of that class or
series as to dividends and upon our liquidation, dissolution or winding up).
Any dividend payment made on shares of a class or series of preferred stock
shall first be credited against the earliest accrued but unpaid dividend due
with respect to shares of that class or series which remains payable.
Redemption
If the applicable prospectus supplement so states, the shares of preferred
stock will be subject to mandatory redemption or redemption at our option, in
whole or in part, in each case on the terms, at the times and at the
redemption prices set forth in that prospectus supplement.
The prospectus supplement relating to a class or series of preferred stock
that is subject to mandatory redemption will specify the number of shares of
that preferred stock that shall be redeemed by us in each year commencing
after a date to be specified, at a redemption price per share to be specified,
together with an amount equal to all accrued and unpaid dividends thereon
(which shall not, if that preferred stock does not have a cumulative dividend,
include any accumulation in respect of unpaid dividends for prior dividend
periods) to the date of redemption. The redemption price may be payable in
cash or other property, as specified in the applicable prospectus supplement.
If the redemption price for preferred stock of any series is payable only from
the net proceeds of the issuance of our stock, the terms of that preferred
stock may provide that, if no such stock shall have been issued or to the
extent the net proceeds from any issuance are insufficient to pay in full the
aggregate redemption price then due, that preferred stock shall automatically
and mandatorily be converted into shares of our applicable stock pursuant to
conversion provisions specified in the applicable prospectus supplement.
Notwithstanding the foregoing, unless:
(1) if that class or series of preferred stock has a cumulative
dividend, full cumulative dividends on all shares of any class or
series of preferred stock shall have been or contemporaneously are
authorized and paid or authorized and a sum sufficient for the
payment thereof set apart for payment for all past dividend periods
and the then current dividend period; and
27
(2) if that class or series of preferred stock does not have a
cumulative dividend, full dividends on the preferred stock of any
class or series have been or contemporaneously are authorized and
paid or authorized and a sum sufficient for the payment thereof set
apart for payment for the then current dividend period.
No shares of any class or series of preferred stock shall be redeemed unless
all outstanding shares of preferred stock of that class or series are
simultaneously redeemed; provided, however, that the foregoing shall not
prevent the purchase or acquisition of shares of preferred stock of that class
or series pursuant to a purchase or exchange offer made on the same terms to
holders of all outstanding shares of preferred stock of that class or series.
In addition, unless:
(1) if that class or series of preferred stock has a cumulative
dividend, full cumulative dividends on all outstanding shares of any
class or series of preferred stock have been or contemporaneously
are authorized and paid or authorized and a sum sufficient for the
payment thereof set apart for payment for all past dividend periods
and the then current dividend period; and
(2) if that class or series of preferred stock does not have a
cumulative dividend, full dividends on the preferred stock of any
class or series have been or contemporaneously are authorized and
paid or authorized and a sum sufficient for the payment thereof set
apart for payment for the then current dividend period, we shall not
purchase or otherwise acquire directly or indirectly any shares of
preferred stock of that class or series (except by conversion into
or exchange for our stock ranking junior to the preferred stock of
that class or series as to dividends and upon our liquidation,
dissolution or winding up).
If fewer than all of the outstanding shares of preferred stock of any class
or series are to be redeemed, the number of shares to be redeemed will be
determined by us and those shares may be redeemed pro rata from the holders of
record of those shares in proportion to the number of those shares held by
those holders (with adjustments to avoid redemption of fractional shares) or
any other equitable method determined by us that will not result in the
issuance of any excess preferred stock.
Notice of redemption will be mailed at least 30 days but not more than 60
days before the redemption date to each holder of record of a share of
preferred stock of any class or series to be redeemed at the address shown on
our stock transfer books. Each notice shall state:
(1) the redemption date;
(2) the number of shares and class or series of the preferred stock to
be redeemed;
(3) the redemption price;
(4) the place or places where certificates for that preferred stock are
to be surrendered for payment of the redemption price;
(5) that dividends on the shares to be redeemed will cease to accrue on
that redemption date; and
(6) the date upon which the holder's conversion rights, if any, as to
those shares shall terminate.
If fewer than all the shares of preferred stock of any class or series are
to be redeemed, the notice mailed to each holder thereof shall also specify
the number of shares of preferred stock to be redeemed from each holder. If
notice of redemption of any shares of preferred stock has been given and if
the funds necessary for that redemption have been set apart by us in trust for
the benefit of the holders of any shares of preferred stock so called for
redemption, then from and after the redemption date dividends will cease to
accrue on those shares of preferred stock, those shares of preferred stock
shall no longer be deemed outstanding and all rights of the holders of those
shares will terminate, except the right to receive the redemption price.
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Liquidation Preference
Upon our voluntary or involuntary liquidation, dissolution or winding up,
then, before any distribution or payment shall be made to the holders of any
common stock, excess stock or any other class or series of our stock ranking
junior to that class or series of preferred stock in the distribution of
assets upon our liquidation, dissolution or winding up, the holders of each
class or series of preferred stock shall be entitled to receive out of our
assets legally available for distribution to stockholders liquidating
distributions in the amount of the liquidation preference per share (set forth
in the applicable prospectus supplement), plus an amount equal to all
dividends accrued and unpaid thereon (which shall not include any accumulation
in respect of unpaid dividends for prior dividend periods if that class or
series of preferred stock does not have a cumulative dividend). After payment
of the full amount of the liquidating distributions to which they are
entitled, the holders of that class or series of preferred stock will have no
right or claim to any of our remaining assets. If, upon our voluntary or
involuntary liquidation, dissolution or winding up, our legally available
assets are insufficient to pay the amount of the liquidating distributions on
all outstanding shares of that class or series of preferred stock and the
corresponding amounts payable on all shares of other classes or series of our
stock ranking on a parity with that class or series of preferred stock in the
distribution of assets upon our liquidation, dissolution or winding up, then
the holders of that class or series of preferred stock and all other classes
or series of stock shall share ratably in that distribution of assets in
proportion to the full liquidating distributions to which they would otherwise
be respectively entitled.
If liquidating distributions shall have been made in full to all holders of
shares of that class or series of preferred stock, our remaining assets shall
be distributed among the holders of any other classes or series of stock
ranking junior to that class or series of preferred stock upon our
liquidation, dissolution or winding up, according to their respective rights
and preferences and in each case according to their respective number of
shares. For those purposes, neither our consolidation or merger with or into
any other corporation, trust or other entity nor the sale, lease, transfer or
conveyance of all or substantially all of our property or business shall be
deemed to constitute our liquidation, dissolution or winding up.
Voting Rights
Except as set forth below or as otherwise from time to time required by law
or as indicated in the applicable prospectus supplement, holders of preferred
stock will not have any voting rights.
Whenever dividends on any shares of that class or series of preferred stock
shall be in arrears for six or more quarterly periods, regardless of whether
those quarterly periods are consecutive, the holders of those shares of that
class or series of preferred stock (voting separately as a class with all
other classes or series of preferred stock upon which like voting rights have
been conferred and are exercisable) will be entitled to vote for the election
of two additional directors to our board of directors (and our entire board of
directors will be increased by two directors) at a special meeting called by
one of our officers at the request of a holder of that class or series of
preferred stock or, if that special meeting is not called by that officer
within 30 days, at a special meeting called by a holder of that class or
series of preferred stock designated by the holders of record of at least 10%
of the shares of any of those classes or series of preferred stock (unless
that request is received less than 90 days before the date fixed for the next
annual or special meeting of the stockholders), or at the next annual meeting
of stockholders, and at each subsequent annual meeting until:
(1) if that class or series of preferred stock has a cumulative
dividend, then all dividends accumulated on those shares of
preferred stock for the past dividend periods and the then current
dividend period shall have been fully paid or declared and a sum
sufficient for the payment thereof set apart for payment, or
(2) if that class or series of preferred stock does not have a
cumulative dividend, then four consecutive quarterly dividends shall
have been fully paid or declared and a sum sufficient for the
payment thereof set apart for payment.
Unless provided otherwise for any series of preferred stock, so long as any
shares of preferred stock remain outstanding, we shall not, without the
affirmative vote or consent of the holders of at least two-thirds
29
of the shares of each class or series of preferred stock outstanding at the
time, given in person or by proxy, either in writing or at a meeting (that
class or series voting separately as a class),
(1) authorize or create, or increase the authorized or issued amount of,
any class or series of stock ranking senior to that class or series
of preferred stock with respect to payment of dividends or the
distribution of assets upon our liquidation, dissolution or winding
up or reclassify any of our authorized stock into those shares, or
create, authorize or issue any obligation or security convertible
into or evidencing the right to purchase those shares; or
(2) amend, alter or repeal the provisions of the charter in respect of
that class or series of preferred stock, whether by merger,
consolidation or otherwise, so as to materially and adversely affect
any right, preference, privilege or voting power of that class or
series of preferred stock; provided, however, that any increase in
the amount of the authorized preferred stock or the creation or
issuance of any other class or series of preferred stock, or any
increase in the number of authorized shares of that class or series,
in each case ranking on a parity with or junior to the preferred
stock of that class or series with respect to payment of dividends
and the distribution of assets upon liquidation, dissolution or
winding up, shall not be deemed to materially and adversely affect
those rights, preferences, privileges or voting powers.
The foregoing voting provisions will not apply if, at or prior to the time
when the act with respect to which that vote would otherwise be required shall
be effected, all outstanding shares of that class or series of preferred stock
shall have been redeemed or called for redemption upon proper notice and
sufficient funds shall have been irrevocably deposited in trust to effect that
redemption.
Conversion Rights
The terms and conditions, if any, upon which shares of any class or series
of preferred stock are convertible into common stock, debt securities or
another series of preferred stock will be set forth in the applicable
prospectus supplement relating thereto. Such terms will include the number of
shares of common stock or those other series of preferred stock or the
principal amount of debt securities into which the preferred stock is
convertible, the conversion price (or manner of calculation thereof), the
conversion period, provisions as to whether conversion will be at our option
or at the option of the holders of that class or series of preferred stock,
the events requiring an adjustment of the conversion price and provisions
affecting conversion in the event of the redemption of that class or series of
preferred stock.
Restrictions on Ownership
As discussed above under "Description of Common Stock--Restrictions on
Ownership," for us to qualify as a REIT under the Code, not more than 50% in
value of our outstanding stock may be owned, actually or constructively, by
five or fewer individuals (as defined in the Code to include certain entities)
during the last half of a taxable year. Our stock also must be beneficially
owned by 100 or more persons during at least 335 days of a taxable year of 12
months (or during a proportionate part of a shorter taxable year). In
addition, rent from related party tenants (generally, a tenant of a REIT
owned, actually or constructively 10% or more by the REIT, or a 10% owner of
the REIT) is not qualifying income for purposes of the gross income tests
under the Code. Therefore, the applicable articles supplementary for each
class or series of preferred stock will contain certain provisions restricting
the ownership and transfer of that class or series of preferred stock. Except
as otherwise described in the applicable prospectus supplement relating
thereto, the provisions of each applicable articles supplementary relating to
the ownership limit for any class or series of preferred stock will provide as
follows:
Our preferred stock ownership limit provision will provide that, subject to
some exceptions, no holder of that class or series of preferred stock may own,
or be deemed to own by virtue of the constructive ownership provisions of the
Code, preferred stock in excess of the preferred stock ownership limit, which
will be equal to 9.8% of the outstanding preferred stock of any class or
series. The constructive ownership rules are complex and may cause preferred
stock owned actually or constructively by a group of related individuals and/
or entities to be deemed to be constructively owned by one individual or
entity. As a result, the acquisition of less than 9.8% of any class or series
of preferred stock (or the acquisition of an interest in an
30
entity which owns preferred stock) by an individual or entity could cause that
individual or entity (or another individual or entity) to own constructively
in excess of 9.8% of that class or series of preferred stock, and thus subject
that preferred stock to the preferred stock ownership limit.
Our board of directors will be entitled to waive the preferred stock
ownership limit with respect to a particular stockholder if evidence
satisfactory to our board of directors, with advice of our tax counsel, is
presented that the ownership will not then or in the future jeopardize our
status as a REIT. As a condition of that waiver, our board of directors may
require opinions of counsel satisfactory to it or an undertaking or both from
the applicant with respect to preserving our REIT status.
Such articles supplementary will provide that a transfer of shares of the
class or series of preferred stock that results in a person actually or
constructively owning shares of preferred stock in excess of the preferred
stock ownership limit, or which would cause us to be "closely held" within the
meaning of the Code or would otherwise result in our failure to qualify as a
REIT, will be null and void as to the intended transferee, and the intended
transferee will acquire no rights or economic interest in those shares. In
addition, shares actually or constructively owned by a person in excess of the
preferred stock ownership limit, or which would otherwise cause us to be
"closely held" within the meaning of the Code or would otherwise result in our
failure to qualify as a REIT, will be automatically exchanged for excess
preferred stock, a separate class of preferred stock that will be transferred,
by operation of law to us as trustee of a trust for the exclusive benefit of
the transferee or transferees to whom the shares are ultimately transferred
(without violating the preferred stock ownership limit). While held in trust,
a class of excess preferred stock will not be entitled to vote, it will not be
considered for purposes of any stockholder vote or the determination of a
quorum for that vote, and it will not be entitled to participate in any
distributions made by us (except upon liquidation). The intended transferee or
owner may, at any time a class of excess preferred stock is held by us in
trust, transfer the class of excess preferred stock to any person whose
ownership of that class or series of excess preferred stock would be permitted
under the preferred stock ownership limit, at a price not to exceed either:
(1) the price paid by the intended transferee or owner in the purported
transfer which resulted in the issuance of that class of excess
preferred stock; or
(2) if the intended transferee did not give full value for that class of
excess preferred stock, a price equal to the market price on the
date of the purported transfer or the other event that resulted in
the issuance of that class of excess preferred stock, at which time
that class of excess preferred stock would automatically be
exchanged for the corresponding class or series of preferred stock.
In addition, we have the right, for a period of 90 days during the time a
class of excess preferred stock is held by us in trust, to purchase all or any
portion of that class of excess preferred stock from the intended transferee
or owner at a price equal to the lesser of:
(1) the price paid for the stock by the intended transferee or owner
(or, if the intended transferee did not give full value for that
class of excess preferred stock, a price equal to the market price
on the date of the purported transfer or other event that resulted
in the issuance of that class of excess preferred stock), and
(2) the closing market price for the corresponding class of preferred
stock on the date we exercise our option to purchase the stock.
This period commences on the date of the violative transfer of ownership if
the intended transferee or owner gives notice of the transfer to us, or the
date our board of directors determines that a violative transfer or ownership
has occurred if no notice is provided.
All certificates representing shares of a class or series of preferred stock
will bear a legend referring to the restrictions described above.
The preferred stock ownership limit provision is set as a percentage of the
number of outstanding shares of any class or series of preferred stock. As a
result, if the number of shares of any class or series of preferred stock is
reduced on a non-pro rata basis among all holders of that class or series,
excess preferred stock may be created as a result of that reduction. In the
event that our action causes that reduction of shares, we have agreed to
exercise our option to repurchase those shares of that class or series of
excess preferred
31
stock if the intended owner notifies us that it is unable to sell its rights
to that class or series of excess preferred stock.
All persons who own a specified percentage (or more) of our outstanding
stock must file an affidavit with us containing information regarding their
ownership of stock as set forth in the Treasury Regulations. Under current
Treasury Regulations, the percentage is set between one-half of one percent
and five percent, depending on the number of record holders of our stock. In
addition, each stockholder shall upon demand be required to disclose to us in
writing that information with respect to the actual and constructive ownership
of shares of our stock as our board of directors deems necessary to comply
with the provisions of the Code applicable to a REIT or to comply with the
requirements of any taxing authority or governmental agency.
DESCRIPTION OF DEPOSITARY SHARES
General
We may issue depositary shares, each of which will represent a fractional
interest of a share of a particular class or series of our preferred stock, as
specified in the applicable prospectus supplement. Shares of a class or series
of preferred stock represented by depositary shares will be deposited under a
separate deposit agreement among us, the depositary named therein and the
holders from time to time of the depositary receipts issued by the preferred
stock depositary which will evidence the depositary shares. Subject to the
terms of the deposit agreement, each owner of a depositary receipt will be
entitled, in proportion to the fractional interest of a share of a particular
class or series of preferred stock represented by the depositary shares
evidenced by that depositary receipt, to all the rights and preferences of the
class or series of preferred stock represented by those depositary shares
(including dividend, voting, conversion, redemption and liquidation rights).
The depositary shares will be evidenced by depositary receipts issued
pursuant to the applicable deposit agreement. Immediately following the
issuance and delivery of a class or series of preferred stock by us to the
preferred stock depositary, we will cause the preferred stock depositary to
issue, on our behalf, the depositary receipts. Copies of the applicable form
of deposit agreement and depositary receipt may be obtained from us upon
request, and the statements made hereunder relating to the deposit agreement
and the depositary receipts to be issued thereunder are summaries of certain
provisions thereof and do not purport to be complete and are subject to, and
qualified in their entirety by reference to, all of the provisions of the
applicable deposit agreement and related depositary receipts.
Dividends and Other Distributions
The preferred stock depositary will distribute all cash dividends or other
cash distributions received in respect of a class or series of preferred stock
to the record holders of depositary receipts evidencing the related depositary
shares in proportion to the number of those depositary receipts owned by those
holders, subject to certain obligations of holders to file proofs,
certificates and other information and to pay certain charges and expenses to
the preferred stock depositary.
In the event of a distribution other than in cash, the preferred stock
depositary will distribute property received by it to the record holders of
depositary receipts entitled thereto, subject to certain obligations of
holders to file proofs, certificates and other information and to pay certain
charges and expenses to the preferred stock depositary, unless the preferred
stock depositary determines that it is not feasible to make that distribution,
in which case the preferred stock depositary may, with our approval, sell that
property and distribute the net proceeds from that sale to those holders.
No distribution will be made in respect of any depositary share to the
extent that it represents any class or series of preferred stock converted
into excess preferred stock or otherwise converted or exchanged.
Withdrawal of preferred stock
Upon surrender of the depositary receipts at the corporate trust office of
the preferred stock depositary (unless the related depositary shares have
previously been called for redemption or converted into excess
32
preferred stock or otherwise), the holders thereof will be entitled to
delivery at that office, to or upon that holder's order, of the number of
whole or fractional shares of the class or series of preferred stock and any
money or other property represented by the depositary shares evidenced by
those depositary receipts. Holders of depositary receipts will be entitled to
receive whole or fractional shares of the related class or series of preferred
stock on the basis of the proportion of preferred stock represented by each
depositary share as specified in the applicable prospectus supplement, but
holders of those shares of preferred stock will not thereafter be entitled to
receive depositary shares therefor. If the depositary receipts delivered by
the holder evidence a number of depositary shares in excess of the number of
depositary shares representing the number of shares of preferred stock to be
withdrawn, the preferred stock depositary will deliver to that holder at the
same time a new depositary receipt evidencing the excess number of depositary
shares.
Redemption
Whenever we redeem shares of a class or series of preferred stock held by
the preferred stock depositary, the preferred stock depositary will redeem as
of the same redemption date the number of depositary shares representing
shares of the class or series of preferred stock so redeemed, provided we
shall have paid in full to the preferred stock depositary the redemption price
of the preferred stock to be redeemed plus an amount equal to any accrued and
unpaid dividends thereon to the date fixed for redemption. The redemption
price per depositary share will be equal to the corresponding proportion of
the redemption price and any other amounts per share payable with respect to
that class or series of preferred stock. If fewer than all the depositary
shares are to be redeemed, the depositary shares to be redeemed will be
selected pro rata (as nearly as may be practicable without creating fractional
depositary shares) or by any other equitable method determined by us that will
not result in the issuance of any excess preferred stock.
From and after the date fixed for redemption, all dividends in respect of
the shares of a class or series of preferred stock so called for redemption
will cease to accrue, the depositary shares so called for redemption will no
longer be deemed to be outstanding and all rights of the holders of the
depositary receipts evidencing the depositary shares so called for redemption
will cease, except the right to receive any moneys payable upon their
redemption and any money or other property to which the holders of those
depositary receipts were entitled upon their redemption and surrender thereof
to the preferred stock depositary.
Voting
Upon receipt of notice of any meeting at which the holders of a class or
series of preferred stock deposited with the preferred stock depositary are
entitled to vote, the preferred stock depositary will mail the information
contained in that notice of meeting to the record holders of the depositary
receipts evidencing the depositary shares which represent that class or series
of preferred stock. Each record holder of depositary receipts evidencing
depositary shares on the record date (which will be the same date as the
record date for that class or series of preferred stock) will be entitled to
instruct the preferred stock depositary as to the exercise of the voting
rights pertaining to the amount of preferred stock represented by that
holder's depositary shares. The preferred stock depositary will vote the
amount of that class or series of preferred stock represented by those
depositary shares in accordance with those instructions, and we will agree to
take all reasonable action which may be deemed necessary by the preferred
stock depositary in order to enable the preferred stock depositary to do so.
The preferred stock depositary will abstain from voting the amount of that
class or series of preferred stock represented by those depositary shares to
the extent it does not receive specific instructions from the holders of
depositary receipts evidencing those depositary shares. The preferred stock
depositary shall not be responsible for any failure to carry out any
instruction to vote, or for the manner or effect of any vote made, as long as
that action or non-action is in good faith and does not result from negligence
or willful misconduct of the preferred stock depositary.
Liquidation Preference
In the event of our liquidation, dissolution or winding up, whether
voluntary or involuntary, the holders of each depositary receipt will be
entitled to the fraction of the liquidation preference accorded each share of
preferred stock represented by the depositary shares evidenced by that
depositary receipt, as set forth in the applicable prospectus supplement.
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Conversion
The depositary shares, as such, are not convertible into our common stock
(except as set forth in the proviso below) or any of our other securities or
property, except in connection with certain conversions in connection with the
preservation of our status as a REIT; provided that the depositary shares
representing our Class D preferred stock are convertible into our common
stock. Nevertheless, if so specified in the applicable prospectus supplement
relating to an offering of depositary shares, the depositary receipts may be
surrendered by holders thereof to the preferred stock depositary with written
instructions to the preferred stock depositary to instruct us to cause
conversion of a class or series of preferred stock represented by the
depositary shares evidenced by those depositary receipts into whole shares of
our common stock, other shares of a class or series of preferred stock
(including excess preferred stock) or other shares of stock, and we have
agreed that upon receipt of those instructions and any amounts payable in
respect thereof, we will cause the conversion thereof utilizing the same
procedures as those provided for delivery of preferred stock to effect that
conversion. If the depositary shares evidenced by a depositary receipt are to
be converted in part only, a new depositary receipt or receipts will be issued
for any depositary shares not to be converted. No fractional shares of common
stock will be issued upon conversion, and if that conversion would result in a
fractional share being issued, an amount will be paid in cash by us equal to
the value of the fractional interest based upon the closing price of the
common stock on the last business day prior to the conversion.
Amendment and Termination of the Deposit Agreement
The form of depositary receipt evidencing the depositary shares which
represent the preferred stock and any provision of the deposit agreement may
at any time be amended by agreement between us and the preferred stock
depositary. However, any amendment that materially and adversely alters the
rights of the holders of depositary receipts or that would be materially and
adversely inconsistent with the rights granted to the holders of the related
class or series of preferred stock will not be effective unless that amendment
has been approved by the existing holders of at least two thirds of the
depositary shares evidenced by the depositary receipts then outstanding. No
amendment shall impair the right, subject to certain exceptions in the deposit
agreement, of any holder of depositary receipts to surrender any depositary
receipt with instructions to deliver to the holder the related class or series
of preferred stock and all money and other property, if any, represented
thereby, except in order to comply with law. Every holder of an outstanding
depositary receipt at the time any of those types of amendments becomes
effective shall be deemed, by continuing to hold that depositary receipt, to
consent and agree to that amendment and to be bound by the deposit agreement
as amended thereby.
We may terminate the deposit agreement upon not less than 30 days' prior
written notice to the preferred stock depositary if:
(1) such termination is necessary to preserve our status as a REIT, or
(2) a majority of each class or series of preferred stock subject to
that deposit agreement consents to that termination, whereupon the
preferred stock depositary shall deliver or make available to each
holder of depositary receipts, upon surrender of the depositary
receipts held by that holder, that number of whole or fractional
shares of each class or series of preferred stock as are represented
by the depositary shares evidenced by those depositary receipts
together with any other property held by the preferred stock
depositary with respect to those depositary receipts.
We have agreed that if the deposit agreement is terminated to preserve our
status as a REIT, then we will use our best efforts to list each class or
series of preferred stock issued upon surrender of the related depositary
shares on a national securities exchange. In addition, the deposit agreement
will automatically terminate if:
(1) all outstanding depositary shares issued thereunder shall have been
redeemed,
(2) there shall have been a final distribution in respect of each class
or series of preferred stock subject to that deposit agreement in
connection with our liquidation, dissolution or winding up and that
distribution shall have been distributed to the holders of
depositary receipts evidencing the depositary shares representing
that class or series of preferred stock, or
34
(3) each share of preferred stock subject to that deposit agreement
shall have been converted into our stock not so represented by
depositary shares.
Charges of Preferred Stock Depositary
We will pay all transfer and other taxes and governmental charges arising
solely from the existence of the deposit agreement. In addition, we will pay
the fees and expenses of the preferred stock depositary in connection with the
performance of its duties under the deposit agreement. However, holders of
depositary receipts will pay the fees and expenses of the preferred stock
depositary for any duties requested by those holders to be performed which are
outside of those expressly provided for in the deposit agreement.
Resignation and Removal of Preferred Stock Depositary
The preferred stock depositary may resign at any time by delivering notice
to us of its election to do so, and we may at any time remove the preferred
stock depositary, that resignation or removal to take effect upon the
appointment of a successor preferred stock depositary. A successor preferred
stock depositary must be appointed within 60 days after delivery of the notice
of resignation or removal and must be a bank or trust company having its
principal office in the United States and having a combined capital and
surplus of at least $50,000,000.
Miscellaneous
The preferred stock depositary will forward to holders of depositary
receipts any reports and communications from us which are received by it with
respect to the related preferred stock.
Neither we nor the preferred stock depositary will be liable if it is
prevented from or delayed in, by law or any circumstances beyond its control,
performing its obligations under the deposit agreement. Our obligations and
those of the preferred stock depositary under the deposit agreement will be
limited to performing our respective duties thereunder in good faith and
without negligence (in the case of any action or inaction in the voting of a
class or series of preferred stock represented by the depositary shares),
gross negligence or willful misconduct, and neither we nor the preferred stock
depositary will be obligated to prosecute or defend any legal proceeding in
respect of any depositary receipts, depositary shares or shares of a class or
series of preferred stock represented thereby unless satisfactory indemnity is
furnished. We and the preferred stock depositary may rely on written advice of
counsel or accountants, or information provided by persons presenting shares
of a class or series of preferred stock represented thereby for deposit,
holders of depositary receipts or other persons believed in good faith to be
competent to give that information, and on documents believed in good faith to
be genuine and signed by a proper party.
In the event the preferred stock depositary shall receive conflicting
claims, requests or instructions from any holders of depositary receipts, on
the one hand, and us, on the other hand, the preferred stock depositary shall
be entitled to act on those claims, requests or instructions received from us.
MATERIAL FEDERAL INCOME TAX CONSIDERATIONS
TO US OF OUR REIT ELECTION
The following is a summary of the federal income tax considerations to us
which are anticipated to be material to purchasers of the securities offered
by this prospectus. This summary is based on current law, is for general
information only and is not tax advice. Your tax treatment will vary depending
upon the terms of the specific securities that you acquire, as well as your
particular situation. This discussion does not attempt to address any aspects
of federal income taxation relevant to your ownership of the securities
offered by this prospectus. Instead, the material federal income tax
considerations relevant to your ownership of the securities offered by this
prospectus may be provided in the applicable prospectus supplement relating
thereto.
The information in this section is based on:
o the Internal Revenue Code;
35
o current, temporary and proposed Treasury regulations promulgated under
the Internal Revenue Code;
o the legislative history of the Internal Revenue Code;
o current administrative interpretations and practices of the Internal
Revenue Service; and
o court decisions,
in each case, as of the date of this prospectus. In addition, the
administrative interpretations and practices of the Internal Revenue Service
include its practices and policies as expressed in private letter rulings
which are not binding on the Internal Revenue Service, except with respect to
the particular taxpayers who requested and received these rulings. Future
legislation, Treasury regulations, administrative interpretations and
practices and/or court decisions may adversely affect the tax considerations
contained in this discussion or the desirability of an investment in a REIT
relative to other investments. Any change could apply retroactively to
transactions preceding the date of the change. Except as described below, we
have not requested, and do not plan to request, any rulings from the Internal
Revenue Service concerning our tax treatment, and the statements in this
prospectus are not binding on the Internal Revenue Service or any court. Thus,
we can provide no assurance that the tax considerations contained in this
discussion will not be challenged by the Internal Revenue Service or if
challenged, will not be sustained by a court.
You are advised to consult the applicable prospectus supplement, as well as
your own tax advisor, regarding the tax consequences to you of the
acquisition, ownership and sale of the securities offered by this prospectus,
including the federal, state, local, foreign and other tax consequences; our
election to be taxed as a REIT for federal income purposes; and potential
changes in the tax laws.
Taxation of the Company as a REIT
General. We elected to be taxed as a REIT under Sections 856 through 860 of
the Code, commencing with our taxable year beginning January 1, 1992. We
believe we have been organized and have operated in a manner which allows us
to qualify for taxation as a REIT under the Internal Revenue Code commencing
with our taxable year beginning January 1, 1992. We intend to continue to
operate in this manner, but there is no assurance that we have operated or
will continue to operate in a manner so as to qualify or remain qualified as a
REIT.
The sections of the Internal Revenue Code and the corresponding Treasury
regulations that relate to the qualification and operation of a REIT are
highly technical and complex. This summary is qualified in its entirety by the
applicable Internal Revenue Code provisions, rules and regulations promulgated
thereunder, and administrative and judicial interpretations thereof.
As a condition to the closing of each offering of the securities offered by
this prospectus, other than offerings of medium term notes and as otherwise
specified in the applicable prospectus supplement, our tax counsel will render
an opinion to the underwriters of that offering to the effect that, commencing
with our taxable year which began January 1, 1992, we have been organized in
conformity with the requirements for qualification as a REIT, and our proposed
method of operation will enable us to continue to meet the requirements for
qualification and taxation as a REIT under the Internal Revenue Code. It must
be emphasized that this opinion will be based on various assumptions and
representations to be made by us as to factual matters, including
representations to be made in a factual certificate to be provided by one of
our officers. Our tax counsel will have no obligation to update its opinion
subsequent to its date. In addition, this opinion will be based upon our
factual representations set forth in this prospectus and set forth in the
applicable prospectus supplement. Moreover, our qualification and taxation as
a REIT depends upon our ability to meet the various qualification tests
imposed under the Internal Revenue Code discussed below, including through
actual annual operating results, asset diversification, distribution levels
and diversity of stock ownership, the results of which have not been and will
not be reviewed by our tax counsel. Accordingly, no assurance can be given
that our actual results of operation of any particular taxable year will
satisfy those requirements. Further, the anticipated income tax treatment
described in this prospectus may be changed, perhaps retroactively, by
legislative, administrative or judicial action at any time.
36
If we qualify for taxation as a REIT, we generally will not be required to
pay federal corporate income taxes on our net income that is currently
distributed to stockholders. We will be required to pay federal income tax,
however, as follows:
o We will be required to pay tax at regular corporate rates on any
undistributed real estate investment trust taxable income, including
undistributed net capital gains.
o We may be required to pay the "alternative minimum tax" on our items of
tax preference.
o If we have (1) net income from the sale or other disposition of
oreclosure property which is held primarily for sale to customers in the
ordinary course of business or (2) other non-qualifying income from
foreclosure property, we will be required to pay tax at the highest
corporate rates on this income. Foreclosure property is generally defined
as property acquired by foreclosure or after a default on a loan secured
by the property or a lease of the property.
o We will be required to pay a 100% tax on any net income from prohibited
transactions. Prohibited transactions are, in general, sales or other
dispositions of property, other than foreclosure property, held primarily
for sale to customers in the ordinary course of business.
o If we fail to satisfy the 75% gross income test or the 95% gross income
test, as described below, but have otherwise maintained our qualification
as a REIT, we will be required to pay a 100% tax on an amount equal to
(1) the gross income attributable to the greater of (a) the amount by
which 75% of our gross income exceeds the amount qualifying under the 75%
gross income test described below and (b) the amount by which 90% of our
gross income exceeds the amount qualifying under the 95% gross income
test described below, multiplied by (2) a fraction intended to reflect
our profitability.
o If we fail to distribute during each calendar year at least the sum of
(1) 85% of our real estate investment trust ordinary income for such
taxable year, (2) 95% of our real estate investment trust capital gain
net income for such year, and (3) any undistributed taxable income from
prior periods, we will be required to pay a 4% excise tax on the excess
of that required distribution over the amounts actually distributed.
o If we acquire any asset from a corporation which is or has been a C
corporation in a transaction in which the basis of the asset in our hands
is determined by reference to the basis of the asset in the hands of the
C corporation, and we subsequently recognize gain on the disposition of
the asset during the ten-year period beginning on the date we acquired
the asset, then we will be required to pay tax at the highest regular
corporate tax rate on this gain to the extent of the excess of (a) the
fair market value of the asset over (b) our adjusted basis in the asset,
in each case determined as of the date we acquired the asset. A C
corporation is generally defined as a corporation required to pay full
corporate level tax. In addition, if we recognize gain on the disposition
of any asset during the 10-year period beginning on the first day of the
first taxable year for which we qualified as a REIT and we held the asset
on the first day of this period, then we will be required to pay tax at
the highest regular corporate tax rate on this gain to the extent of the
excess of (a) the fair market value of the asset over (b) our adjusted
basis in the asset, in each case determined as of the first day of the
first taxable year for which we qualified as a REIT. The results
described in this paragraph with respect to the recognition of gain
assume that we have made and will make or refrained from making and will
refrain from making a timely election under the relevant Treasury
regulations to obtain the results described in this paragraph with
respect to the recognition of gain.
o We will be subject to a 100% penalty tax on any redetermined rents,
redetermined deductions or excess interest. In general, redetermined
rents are rents from real property that are overstated as a result of
services furnished by a taxable REIT subsidiary of ours to any of our
tenants. See "--Taxable REIT Subsidiaries." Redetermined deductions and
excess interest represent amounts that are deducted by a taxable REIT
subsidiary of ours for amounts paid to us that are in excess of the
amounts that would have been deducted based on arm's length negotiations.
Requirements for Qualification. The Internal Revenue Code defines a REIT as
a corporation, trust or association:
37
(1) that is managed by one or more trustees or directors,
(2) that issues transferable shares or transferable certificates to
evidence beneficial ownership,
(3) that would be taxable as a domestic corporation, but for Sections
856 through 860 of the Internal Revenue Code,
(4) that is not a financial institution or an insurance company within
the meaning of the Internal Revenue Code,
(5) that is beneficially owned by 100 or more persons,
(6) not more than 50% in value of the outstanding stock of which is
owned, directly or constructively, by five or fewer individuals,
including specified entities, during the last half of each taxable
year, and
(7) that meets other tests, described below, regarding the nature of its
income, assets and the amount of its distribution.
The Internal Revenue Code provides that conditions (1) to (4) must be met
during the entire taxable year and that condition (5) must be met during at
least 335 days of a taxable year of 12 months, or during a proportionate part
of a taxable year of less than 12 months. Conditions (5) and (6) do not apply
until after the first taxable year for which an election is made to be taxed
as a real estate investment trust. For purposes of condition (6), pension
funds and other specified tax-exempt entities are generally treated as
individuals, except that a "look-through" exception applies to pension funds.
We have satisfied condition (5) and believe that we have issued sufficient
shares to allow us to satisfy condition (6). In addition, our charter
provides, and the articles supplementary for any series of preferred stock
will provide, for restrictions regarding ownership and transfer of our stock,
which restrictions are intended to assist us in continuing to satisfy the
share ownership requirements described in (5) and (6) above. The ownership and
transfer restrictions pertaining generally to our common stock and preferred
stock are described in "Description of Common Stock--Restrictions on Ownership
and Transfer" and "Description of Preferred Stock--Restrictions on Ownership
and Transfer" or, to the extent those restrictions differ from those described
in this prospectus, those restrictions will be described in the applicable
prospectus supplement. There can be no assurance, however, that those transfer
restrictions will in all cases prevent a violation of the stock ownership
provisions described in (5) and (6) above. If we fail to satisfy these share
ownership requirements, except as provided in the next sentence, our status as
a REIT will terminate. If, however, we comply with the rules contained in the
applicable Treasury regulations requiring us to attempt to ascertain the
actual ownership of our shares, and we do not know, and would not have known
through the exercise of reasonable diligence, that we failed to meet the
requirement set forth in condition (6) above, we will be treated as having met
this requirement.
In addition, a corporation may not elect to become a REIT unless its taxable
year is the calendar year. We have a calendar year.
Ownership of Qualified REIT Subsidiaries and Interests in Partnership. We
own and operate a number of properties through subsidiaries. Internal Revenue
Code Section 856(i) provides that a corporation which is a "qualified REIT
subsidiary" shall not be treated as a separate corporation, and all assets,
liabilities, and items of income, deduction, and credit of a "qualified REIT
subsidiary" shall be treated as assets, liabilities and items of the REIT.
Thus, in applying the requirements described herein, our "qualified REIT
subsidiaries" will be ignored, and all assets, liabilities and items of
income, deduction, and credit of those subsidiaries will be treated as our
assets, liabilities and items. We have received a ruling from the IRS to the
effect that all of the subsidiaries that were held by us prior to January 1,
1992, the effective date of our election to be taxed as a REIT, will be
"qualified REIT subsidiaries" upon the effective date of our REIT election.
Moreover, with respect to each subsidiary of ours formed subsequent to January
1, 1992 and prior to January 1, 1998, we have owned 100% of the stock of that
subsidiary at all times during the period that subsidiary has been in
existence. For tax years beginning on or after January 1, 1998, any
corporation, other than a taxable REIT subsidiary, wholly owned by a REIT is
permitted to be treated as a "qualified REIT subsidiary" regardless of whether
that subsidiary has always been owned by the REIT.
38
Treasury Regulations provide that if we are a partner in a partnership, we
will be deemed to own our proportionate share of the assets of the
partnership. Also, we will be deemed to be entitled to the income of the
partnership attributable to our proportionate share of the income of the
partnership. The character of the assets and gross income of the partnership
will retain the same character in our hands for purposes of Section 856 of the
Internal Revenue Code, including satisfying the gross income tests and the
asset tests described below. The treatment described above also applies with
respect to the ownership of interests in limited liability companies that are
treated as partnerships. Thus, our proportionate share of the assets,
liabilities and items of income of the partnerships and limited liability
companies that are treated as partnerships in which we are a partner or a
member, respectively, will be treated as our assets, liabilities and items of
income for purposes of applying the requirements described in this prospectus.
Taxable REIT Subsidiary. A REIT may own more than 10% of the voting
securities of an issuer or 10% or more of the value of the securities of an
issuer if the issuer is a taxable REIT subsidiary of the REIT. A corporation
qualifies as a taxable REIT subsidiary of a REIT if the corporation jointly
elects with the REIT to be treated as a taxable REIT subsidiary of the REIT. A
taxable REIT subsidiary also includes any corporation in which a taxable REIT
subsidiary owns more than 35% of the total vote or value. Dividends from a
taxable REIT subsidiary will be nonqualifying income for purposes of the 75%,
but not the 95% gross income test. Other than certain activities relating to
lodging and health care facilities, a taxable REIT subsidiary may generally
engage in any business, including, the provision of customary or noncustomary
services to tenants of its parent REIT.
A taxable REIT subsidiary is subject to federal income tax, and state and
local income tax where applicable, as a regular C corporation.
Sections of the Internal Revenue Code which apply to tax years beginning
after December 31, 2000 generally intended to insure that transactions between
a REIT and its taxable REIT subsidiary occur at arm's length and on
commercially reasonable terms, include a provision that prevents a taxable
REIT subsidiary from deducting interest on direct or indirect indebtedness to
its parent REIT if, under specified series of tests, the taxable REIT
subsidiary is considered to have an excessive interest expense level and debt
to equity ratio. In some case, these sections of the Internal Revenue Code
impose a 100% tax on a REIT if its rental, service and/or other agreements
with its taxable REIT subsidiaries are not on arm's length terms.
As a result of the modifications to the sections of the Internal Revenue
Code which are described above and which are effective for taxable years
beginning after December 31, 2000, we modified our ownership of the Service
Company. Effective January 1, 2001, we made a joint election with the Service
Company to treat the Service Company as a taxable REIT subsidiary. In
addition, effective January 1, 2001, we contributed the note that was issued
to us from the Service Company to the capital of the Service Company and
acquired 100% of the voting stock of the Service Company. Thus, we currently
own 100% of the stock of the Service Company and there is no debt outstanding
between the Service Company and us.
Income Tests. We must satisfy two gross income requirements annually to
maintain our qualification as a REIT:
o First, each taxable year we must derive directly or indirectly at least
75% of our gross income, excluding gross income from prohibited
transactions, from (a) investments relating to real property or mortgages
on real property, including rents from real property and, in some
circumstances, interest or (b) some type of temporary investments.
o Second, each taxable year we must derive at least 95% of our gross
income, excluding gross income from prohibited transactions, from (a) the
real property investments described above, (b) dividends, interest and
gain from the sale or isposition of stock or securities or (c) from any
combination of the foregoing.
For these purposes, the term "interest" generally does not include any
amount received or accrued, directly or indirectly, if the determination of
that amount depends in whole or in part on the income or profits of any
person. However, an amount received or accrued generally will not be excluded
from the term "interest" solely by reason of being based on a fixed percentage
or percentages of receipts or sales.
39
Rents we receive will qualify as "rents from real property" in satisfying
the gross income requirements for a REIT described above only if the following
conditions are met:
o First, the amount of rent must not be based in whole or in part on the
income or profits of any person. However, an amount received or accrued
generally will not be excluded from the term "rents from real property"
solely by reason of being based on a fixed percentage or percentages of
receipts or sales.
o Second, we, or an actual or constructive owner of 10% or more of our
stock, do not actually or constructively own 10% or more of the interests
in the tenant. Rents received from such tenant that is a taxable REIT
subsidiary, however, will not be excluded from the definition of "rents
from real property" if at least 90% of the space at the property to which
the rents relate is leased to third parties, and the rents paid by the
taxable REIT subsidiary are comparable to rents paid by our ther tenants
for comparable space.
o Third, rent attributable to personal property, leased in connection with
a lease of real property, is not greater than 5% of the total rent
received under the lease. If this condition is not met, then the portion
of the rent attributable to personal property will not qualify as "rents
from real property."
o Finally, we generally must not operate or manage our property or furnish
or render services to our tenants, subject to a 1% de minimis exception,
other than through an independent contractor from whom we derive no
revenue. We may, however, directly perform services that are "usually or
customarily rendered" in connection with the rental of space for
occupancy only and are not otherwise considered "rendered to the
occupant" of the property. In addition, we may employ a taxable REIT
subsidiary which may be wholly or partially owned by us to provide both
customary and noncustomary services to our tenants without causing the
rent we receive from those tenants to fail to qualify as "rents from real
property." Any amounts we receive from a taxable REIT subsidiary with
respect to the taxable REIT subsidiary's provision of noncustomary
services will, however, be nonqualified income under the 75% gross income
test and, except to the extent received through the payment of dividends,
the 95% gross income test.
We have received a ruling from the Internal Revenue Service providing that
the performance of the types of services provided by us will not cause the
rents received with respect to those leases to fail to qualify as "rents from
real property." In addition, we generally do not intend to receive rent which
fails to satisfy any of the above conditions. Notwithstanding the foregoing,
we may have taken and may continue to take some of the actions set forth above
to the extent those actions will not, based on the advice of our tax counsel,
jeopardize our status as a REIT.
If we fail to satisfy one or both of the 75% or 95% gross income tests for
any taxable year, we may nevertheless qualify as a REIT if we are entitled to
relief under the Internal Revenue Code. Generally, we may avail ourselves of
the relief provisions if:
o our failure to meet these tests was due to reasonable
cause and not due to willful neglect,
o we attach a schedule of the sources of our income to our Federal income
tax return, and
o any incorrect information on the schedule was not due to fraud with
intent to evade tax.
It is not possible, however, to state whether in all circumstances we would be
entitled to the benefit of these relief provisions. As discussed above under
"--General," even if these relief provisions apply, a tax would be imposed
with respect to our non-qualifying income.
Prohibited Transaction Income. Any gain that we realize on the sale of any
property held as inventory or other property held primarily for sale to
customers in the ordinary course of business will be treated as income from a
prohibited transaction that is subject to a 100% penalty tax. That prohibited
transaction income may also have an adverse effect upon our ability to satisfy
the income tests for qualification as a REIT. Under existing law, whether
property is held as inventory or primarily for sale to customers in the
ordinary course of business is a question of fact that depends on all the
facts and circumstances with respect
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to the particular transaction. We hold our properties for investment with a
view to long-term appreciation, we are engaged in the business of acquiring,
developing, owning and operating our properties and we make such occasional
sales of the properties as are consistent with our investment objectives.
There can be no assurance, however, that the Internal Revenue Service might
not contend that one or more of those sales is subject to the 100% penalty
tax.
Penalty Tax. Any redetermined rents, redetermined deductions or excess
interest we generate will be subject to a 100% penalty tax. In general,
redetermined rents are rents from real property that are overstated as a
result of services furnished by a taxable REIT subsidiary to any of our
tenants, and redetermined deductions and excess interest represent amounts
that are deducted by a taxable REIT subsidiary for amounts paid to us that are
in excess of the amounts that would have been deducted based on arm's length
negotiations. Rents we receive will not constitute redetermined rents if they
qualify for the safe harbor provisions contained in the Internal Revenue Code.
Safe harbor provisions are provided where:
o Amounts are received by a REIT for services customarily furnished or
rendered in connection with the rental of real property;
o Amounts are excluded from the definition of impermissible tenant service
income as a result of satisfying a 1% de minimis exception;
o The taxable REIT subsidiary renders a significant amount of similar
services to unrelated parties and the charges for such services are
substantially comparable;
o Rents paid to the REIT by tenants who are not receiving servicesfrom the
taxable REIT subsidiary are substantially comparable to the rents paid by
the real estate investment trust's tenants leasing comparable space who
are receiving such services from the taxable REIT subsidiary and the
charge for the services is separately stated; and
o The taxable REIT subsidiary's gross income from the service is not less
than 150% of the subsidiary's direct cost in furnishing the service.
Asset Tests. At the close of each quarter of our taxable year, we also must
satisfy the following tests relating to the nature and diversification of our
assets.
o First, at least 75% of the value of our total assets must be represented
by real estate assets, cash, cash items and government securities. For
purposes of this test, real estate assets include stock or debt
instruments that are purchased with the proceeds of a stock offering or a
long-term public debt offering with a term of at least five years, but
only for the one-year period beginning on the date we receive these
proceeds.
o Second, not more than 25% of our total assets may be represented by
securities other than those includible in the 75% asset test.
o Third, for taxable years ending on or prior to December 31, 2000, of the
investments included in the 25% asset class, the value of any one
issuer's securities owned by us may not exceed 5% of the value of our
total assets and we may not own more than 10% of any one issuer's
outstanding voting securities.
o Finally, for taxable years beginning after December 31, 2000, (a) not
more than 20% of the value of our total assets may be represented by
securities of one or more taxable REIT subsidiaries and (b) except for
the securities of a taxable REIT subsidiary and securities included in
the 75% asset test, not more than 5% of the value of our assets may be
represented by securities of any one issuer and we may not own more than
10% of the total vote or value of the outstanding securities of any one
issuer, except, in the case of the 10% value test, certain "straight
debt" securities.
We currently have numerous direct and indirect wholly-owned subsidiaries. As
set forth above, the ownership of more than 10% of the voting securities of
any one issuer by a REIT is prohibited unless such subsidiary is a taxable
REIT subsidiary. However, if our subsidiaries are "qualified REIT
subsidiaries" as defined in the Internal Revenue Code, those subsidiaries will
not be treated as separate corporations for
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federal income tax purposes. Thus, our ownership of stock of a "qualified REIT
subsidiary" will not cause us to fail the asset tests.
Prior to January 1, 2001, we owned 100% of the nonvoting preferred stock of
Kimco Realty Services, Inc. and did not own any of the voting securities of
Kimco Realty Services, Inc. We refer to Kimco Realty Services, Inc. as the
Service Company. Effective January 1, 2001, we made a joint election with the
Service Company to treat the Service Company as a taxable REIT subsidiary. In
addition, effective January 1, 2001, we acquired 100% of the voting stock of
the Service Company and currently own 100% of the stock of the Service
Company. We believe, and will represent to our counsel for purposes of its
opinion, that (i) the value of the securities of the Service Company held by
us did not exceed at the close of any quarter during a taxable year that ended
on or prior to December 31, 2000 5% of the total value of our assets and (ii)
the value of the securities of all our taxable REIT subsidiaries does not and
will not exceed more than 20% of the value of our total assets at the close of
each quarter during a taxable year that begins after December 31, 2000. Our
tax counsel, in rendering its opinion as to our qualification as a REIT, will
be relying on our representations to that effect with respect to the value of
those securities and assets. No independent appraisals will be obtained to
support this conclusion. There can be no assurance that the Internal Revenue
Service will not contend that the value of the securities of the Service
Company held by us exceeds the applicable value limitation.
After initially meeting the asset tests at the close of any quarter, we will
not lose our status as a REIT for failure to satisfy the asset tests at the
end of a later quarter solely by reason of changes in asset values. If the
failure to satisfy the asset tests results from an acquisition of securities
or other property during a quarter, the failure can be cured by the
disposition of sufficient nonqualifying assets within 30 days after the close
of the quarter. We intend to maintain adequate records of the value of our
assets to ensure compliance with the asset tests and to take such other
actions within 30 days after the close of any quarter as may be required to
cure any noncompliance. If we fail to cure noncompliance with the asset tests
within that time period, we would cease to qualify as a REIT.
Annual Distribution Requirements. To maintain our qualification as a REIT,
we are required to distribute dividends, other than capital gain dividends, to
our stockholders in an amount at least equal to the sum of:
o 90% of our REIT taxable income, and
o 90% of our after tax net income, if any, from foreclosure property; minus
o the excess of the sum of specified items of non-cash income items over 5%
of our REIT taxable income.
Our REIT taxable income is computed without regard to the dividends paid
deduction and our net capital gain. In addition, for purposes of this test,
non-cash income items includes income attributable to leveled stepped rents,
original issue discount or purchase money discount debt, or a like-kind
exchange that is later determined to be taxable.
We must pay these distributions in the taxable year to which they relate, or
in the following taxable year if declared before we timely file our tax return
for that year and if paid on or before the first regular dividend payment
after that declaration. The amount distributed must not be preferential-i.e.,
each holder of shares of common stock and each holder of shares of each class
of preferred stock must receive the same distribution per share. To the extent
that we do not distribute all of our net capital gain or distribute at least
90%, but less than 100%, of our REIT taxable income, as adjusted, we will be
subject to tax thereon at regular ordinary and capital gain corporate tax
rates. We believe we have made, and intend to continue to make, timely
distributions sufficient to satisfy these annual distribution requirements.
We expect that our REIT taxable income will be less than our cash flow
because of depreciation and other non-cash charges included in computing our
REIT taxable income. Accordingly, we anticipate that we will generally have
sufficient cash or liquid assets to enable us to satisfy our distribution
requirement. However, it is possible that, from time to time, we may not have
sufficient cash or other liquid assets to meet the distribution requirement
due to timing differences between the actual receipt of income and actual
42
payment of deductible expenses and the inclusion of that income and deduction
of those expenses in arriving at our taxable income. In the event that those
timing differences occur, in order to meet the distribution requirement, we
may find it necessary to arrange for short-term, or possibly long-term,
borrowings or to pay dividends in the form of taxable stock dividends.
Under some circumstances, we may be able to rectify a failure to meet the
distribution requirement for a year by paying "deficiency dividends" to
stockholders in a later year, which may be included in our deduction for
dividends paid for the earlier year. Thus, we may be able to avoid being taxed
on amounts distributed as deficiency dividends. We will be required, however,
to pay interest based upon the amount of any deduction claimed for deficiency
dividends and would be subject to any applicable penalty provisions.
In addition, we will be required to pay a 4% excise tax on the excess of the
required distribution over the amounts actually distributed if we fail to
distribute during each calendar year, or in the case of distributions with
declaration and record dates falling in the last three months of the calendar
year, by the end of January immediately following that year, at least the sum
of 85% of our REIT ordinary income for that year, 95% of our REIT capital gain
income for the year, plus, in each case, any undistributed taxable income from
prior periods. Any REIT taxable income or net gain income on which this excise
tax is imposed for any year is treated as an amount distributed that year for
purposes of calculating the tax.
Failure to Qualify
If we fail to qualify for taxation as a REIT in any taxable year, and the
relief provisions do not apply, we will be subject to tax, including any
applicable alternative minimum tax, on our taxable income at regular corporate
rates. That failure to qualify for taxation as a REIT could have an adverse
effect on the market value and marketability of the securities offered by this
prospectus. Distributions to stockholders in any year in which we fail to
qualify will not be deductible by us nor will they be required to be made. As
a result, our failure to qualify as a REIT would substantially reduce the cash
available for distribution by us to our stockholders. In that event, to the
extent of current and accumulated earnings and profits, all distributions to
stockholders will be taxable as ordinary income and, subject to specified
limitations in the Internal Revenue Code, corporate distributees may be
eligible for the dividends received deduction. Unless entitled to relief under
specific statutory provisions, we will also be disqualified from taxation as a
REIT for the four taxable years following the year during which qualification
was lost. It is not possible to state whether in all circumstances we would be
entitled to that statutory relief.
Other Tax Matters
Some of our investments are through partnerships which may involve special
tax risks. These risks include possible challenge by the IRS of (a)
allocations of income and expense items, which could affect the computation of
our income, and (b) the status of the partnerships as partnerships, as opposed
to associations taxable as corporations, for income tax purposes. Treasury
Regulations that are effective as of January 1, 1997 provide that a domestic
partnership is generally taxed as a partnership unless it elects to be taxed
as an association taxable as a corporation. None of the partnerships in which
we are a partner has made or intends to make that election. These Treasury
Regulations provide that a partnership's claimed classification will be
respected for periods prior to January 1, 1997 if the entity had a reasonable
basis for its claimed classification, and that partnership had not been
notified in writing on or before May 8, 1996 that the classification of that
entity was under examination. If any of the partnerships were treated as an
association for a prior period, and (i) if our ownership in any of those
partnerships exceeded 10% of the partnership's voting interest or (ii) the
value of that interest exceeded 5% of the value of our assets, we would cease
to qualify as a REIT for that period and possibly future periods. Moreover,
the deemed change in classification of that partnership from an association to
a partnership effective as of January 1, 1997 would be a taxable event. We
believe that each of the partnerships has been properly treated for tax
purposes as a partnership, and not as an association taxable as a corporation.
However, no assurance can be given that the Internal Revenue Service may not
successfully challenge the status of any of the partnerships.
We may be subject to state or local taxation in various state or local
jurisdictions, including those in which we transact business. Our state or
local tax treatment may not conform to the federal income tax
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consequences described above. Consequently, prospective investors should
consult their own tax advisors regarding the effect of state and local tax
laws on an investment in us.
PLAN OF DISTRIBUTION
We may sell the securities offered by this prospectus to one or more
underwriters for public offering and sale by them or may sell the securities
offered by this prospectus to investors directly or through agents. Any
underwriter or agent involved in the offer and sale of the securities offered
by this prospectus will be named in the applicable prospectus supplement. We
have reserved the right to sell or exchange securities directly to investors
on our or their own behalf in those jurisdictions where we are authorized to
do so.
We may distribute the securities from time to time in one or more
transactions:
o at a fixed price or prices, which may be changed;
o at market prices prevailing at the time of sale;
o at prices related to such prevailing market prices; or
o at negotiated prices.
Underwriters may offer and sell the securities offered by this prospectus at
a fixed price or prices, which may be changed, at prices related to the
prevailing market prices at the time of sale or at negotiated prices. We also
may, from time to time, authorize underwriters acting as our agents to offer
and sell the securities offered by this prospectus upon the terms and
conditions as are set forth in the applicable prospectus supplement. In
connection with the sale of securities offered by this prospectus,
underwriters may be deemed to have received compensation from us in the form
of underwriting discounts or commissions and may also receive commissions from
purchasers of securities offered by this prospectus for whom they may act as
agent. Underwriters may sell the securities offered by this prospectus to or
through dealers, and those dealers may receive compensation in the form of
discounts, concessions or commissions from the underwriters and/or commissions
from the purchasers for whom they may act as agent.
Any underwriting compensation paid by us to underwriters or agents in
connection with the offering of the securities offered by this prospectus, and
any discounts, concessions or commissions allowed by underwriters to
participating dealers, will be set forth in the applicable prospectus
supplement. Underwriters, dealers and agents participating in the distribution
of the securities offered by this prospectus may be deemed to be underwriters,
and any discounts and commissions received by them and any profit realized by
them on resale of the securities offered by this prospectus may be deemed to
be underwriting discounts and commissions, under the Securities Act.
Underwriters, dealers and agents may be entitled, under agreements entered
into with us, to indemnification against and contribution toward certain civil
liabilities, including liabilities under the Securities Act.
If so indicated in the applicable prospectus supplement, we will authorize
dealers acting as our agents to solicit offers by certain institutions to
purchase the securities offered by this prospectus from us at the public
offering price set forth in that prospectus supplement pursuant to delayed
delivery contracts providing for payment and delivery on the date or dates
stated in that prospectus supplement.
Each delayed delivery contract will be for an amount not less than, and the
aggregate principal amount of the securities offered by this prospectus sold
pursuant to delayed delivery contracts shall be not less nor more than, the
respective amounts stated in the applicable prospectus supplement.
Institutions with whom delayed delivery contracts, when authorized, may be
made include commercial and savings banks, insurance companies, pension funds,
investment companies, educational and charitable institutions, and other
institutions but will in all cases be subject to our approval. Delayed
delivery contracts will not be subject to any conditions except:
(1) the purchase by an institution of the securities offered by this
prospectus covered by its delayed delivery contracts shall not at
the time of delivery be prohibited under the laws of any
jurisdiction in the United States to which that institution is
subject, and
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(2) if the securities offered by this prospectus are being sold to
underwriters, we shall have sold to those underwriters the total
principal amount of the securities offered by this prospectus less
the principal amount thereof covered by delayed delivery contracts.
To facilitate the offering of securities, certain persons participating in
the offering may engage in transactions that stabilize, maintain, or otherwise
affect the price of the securities. This may include over-allotments or short
sales of the securities, which involve the sale by persons participating in
the offering of more securities than we sold to them. In these circumstances,
these persons would cover such over-allotments or short positions by making
purchases in the open market or by exercising their over-allotment option, if
any. In addition, these persons may stabilize or maintain the price of the
securities by bidding for or purchasing securities in the open market or by
imposing penalty bids, whereby selling concessions allowed to dealers
participating in the offering may be reclaimed if securities sold by them are
repurchased in connection with stabilization transactions. The effect of these
transactions may be to stabilize or maintain the market price of the
securities at a level above that which might otherwise prevail in the open
market. These transactions may be discontinued at any time.
Certain of the underwriters and their affiliates may be customers of, engage
in transactions with, and perform services for us and our subsidiaries in the
ordinary course of business.
EXPERTS
The financial statements incorporated in this prospectus by reference to
Kimco Realty Corporation and Subsidiaries' Current Report on Form 8-K dated
June 9, 2003 and Annual Report on Form 10-K for the year ended December 31,
2002, have been so incorporated in reliance on the reports of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
LEGAL MATTERS
The validity of the securities offered by this prospectus will be passed
upon for us by Latham & Watkins LLP, New York, New York. Any underwriters will
be advised about the other issues relating to any offering by their own legal
counsel. Latham & Watkins LLP and any counsel for any underwriters, dealers or
agents will rely on Venable, Baetjer and Howard, LLP, Baltimore, Maryland, as
to certain matters of Maryland law. Certain members of Latham & Watkins LLP
and their families own beneficial interests in less than 1% of our common
stock.
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2,400,000 Shares
[KIMCO REALTY CORP. LOGO]
Common Stock
Prospectus Supplement
September 9, 2003
Banc of America Securities LLC
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