As filed with the Securities and Exchange Commission on May 17, 2001
Registration Statement No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
RECKSON ASSOCIATES REALTY CORP.
(Exact name of each registrant as specified in its charter)
Maryland 11-3233650
--------------------------------- ---------------------------------------
(State or other jurisdiction (I.R.S. employer identification number)
of incorporation or organization)
225 Broadhollow Road
Melville, New York 11747
(631) 694-6900
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive office)
Scott H. Rechler
President and Co-Chief Executive Officer
Reckson Associates Realty Corp.
225 Broadhollow Road
Melville, New York 11747
(631) 694-6900
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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Copy to:
Edward F. Petrosky, Esq.
J. Gerard Cummins, Esq.
Sidley Austin Brown & Wood LLP
One World Trade Center, 58th Floor
New York, N.Y. 10048
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Approximate date of commencement of proposed sale to public:
From time to time after this Registration Statement becomes effective.
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If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. /_/
If any of the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, as amended (the "Securities Act"), other than securities offered only
in connection with dividend or interest reinvestment plans, please check the
following box. /_/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. /_/
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. /_/
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. /_/
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CALCULATION OF REGISTRATION FEE
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Proposed Maximum Proposed Maximum
Title of Class of Amount to be Aggregate Price Aggregate Amount of Registration
Securities to be Registered Registered per Share (1) Offering Price Fee(2)
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Class A Common Stock, 3,453,881 $21.70 $74,949,218 $18,737
par value $.01 per share
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(1) Estimated solely for purposes of calculating the registration fee.
(2) Pursuant to Rule 457(c) of the rules and regulations under the Securities
Act of 1933, as amended, the registration fee is calculated based on the
average of the high and low sale prices of the Company's Class A common
stock on the New York Stock Exchange for May 14, 2001.
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The Registrant hereby amends this registration statement on the date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
registration statement shall thereafter become effective with Section 8(a) of
the Securities Act of 1933 or until this registration statement shall become
effective on the date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
The information contained in this prospectus is not complete and may be
changed. We may not sell these securities until the registration statement
filed with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities and it is not soliciting
an offer to buy these securities in any state where the offer or sale is not
permitted.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED MAY 17, 2001
PROSPECTUS
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3,453,881 Shares
RECKSON ASSOCIATES REALTY CORP.
Class A Common Stock
(Par Value $0.01 Per Share)
-----------------------
This prospectus relates to the offer and sale from time to time by the
selling stockholder referred to in this prospectus of up to 3,453,881 shares
of our Class A common stock, $.01 par value per share, which may be offered in
transactions on any national securities exchange or quotation service on which
the Class A common stock may be listed at the time of sale, in negotiated
transactions or otherwise, at fixed prices, at market prices prevailing at the
time of sale, at prices related to prevailing market prices, at negotiated
prices, without consideration, or by any other legally available means. The
registration of the Class A common stock does not necessarily mean that any of
the Class A common stock will be offered or sold by the selling stockholder.
The selling stockholder will receive all of the net proceeds from the
sale of the Class A common stock and will pay all underwriting discounts and
selling commissions, if any, applicable to any such sale. We will not receive
any of the proceeds from the sale of the shares of Class A common stock by the
selling stockholder. We are paying the costs of preparing and filing the
registration statement of which this prospectus is a part.
Our Class A common stock is listed on the New York Stock Exchange under
the symbol "RA." On May 16, 2001, the last reported sale price of the Class A
common stock was $21.14 per share.
The Class A common stock may be sold by the selling stockholder from time
to time directly to purchasers or through agents, underwriters or dealers. See
"Plan of Distribution" and "Selling Stockholder." The selling stockholder and
any dealers, agents or underwriters which participate in the distribution of
the Class A common stock may be deemed to be "underwriters" within the meaning
of the Securities Act of 1933 and any commission received by them and any
profit on the resale of the Class A common stock purchased by them may be
deemed to be underwriting commissions or discounts under the Securities Act.
See "Plan of Distribution" for a description of indemnification arrangements.
See "Risk Factors" beginning on page 3 of this prospectus for a
description of risks that should be considered by purchasers of the Class A
common stock.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
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The date of this prospectus is ___________, 2001.
AVAILABLE INFORMATION
We are subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith, we file reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). These reports, proxy
statements and other information may be inspected and copied at the Public
Reference Room maintained by the Commission at Room 1024, 450 Fifth Street,
N.W., Washington, D.C. 20549, as well as the regional offices of the
Commission at 7 World Trade Center (13th Floor), New York, New York 10048, and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. Copies of such information can be obtained by mail from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, at prescribed rates. The public may obtain information on the
operation of the Public Reference Room by calling the Commission at
1-800-SEC-0330. The Commission maintains a web site that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the Commission. You may access the Commission's
web site at http://www.sec.gov. These materials can also be inspected at the
office of the New York Stock Exchange, 20 Broad Street, New York, New York,
the exchange on which our common stock is listed.
We have filed with the Commission a Registration Statement on Form S-3
(herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), of which this prospectus constitutes a part. This
prospectus does not contain all of the information set forth in the
Registration Statement, certain parts of which have been omitted in accordance
with the rules and regulations of the Commission. For further information,
reference is made to the Registration Statement.
In this prospectus "we", "us" or "ours" and the "Company" each refers to
Reckson Associates Realty Corp.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents that we previously filed with the Commission
pursuant to the Exchange Act are incorporated by reference in this prospectus
(other than information in such documents that is deemed not to be filed):
SEC Filings (File No. 1-13762) Period
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Annual Report on Form 10-K Year ended December 31, 2000
Quarterly Report on Form 10-Q Quarter ended March 31, 2001
Registration Statement Filed on Form 8-A Filed May 9, 1995 (as amended)
We also incorporate by reference each of the following documents that we
will file with the Commission after the date of this prospectus until the
particular offering is completed or after the date of the initial registration
statement and prior to effectiveness of the registration statement:
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o Reports filed under Section 13(a) and (c) of the Exchange Act;
o Definitive proxy or information statements filed under Section 14 of
the Exchange Act in connection with any subsequent stockholders'
meeting; and
o Any reports filed under Section 15(d) of the Exchange Act.
Any statement contained herein or in a document all or any portion of
which is incorporated or deemed to be incorporated by reference herein will be
deemed to be modified or superceded for purposes of this prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supercedes such earlier statement. Any statement so modified or
superseded will not be deemed, except as so modified or superceded, to
constitute a part of this prospectus.
We will provide a copy of any or all of these documents (exclusive of
exhibits unless the exhibits are specifically incorporated by reference
therein), without charge, to each person to whom this prospectus is delivered,
upon written or oral request to Reckson Associates Realty Corp., 225
Broadhollow Road, Melville, New York 11747, Attn: Susan McGuire, Investor
Relations, telephone number (631) 694-6900.
CAUTIONARY STATEMENTS CONCERNING
FORWARD-LOOKING INFORMATION
Certain information both included and incorporated by reference in this
prospectus may contain forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act, and as
such may involve known and unknown risks, uncertainties and other factors
which may cause the actual results, performance or achievements of our company
to be materially different from future results, performance or achievements
expressed or implied by such forward-looking statements. 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 "may," "will," "should," "expect," "anticipate," "estimate," "believe,"
"intend" or "project" or the negative thereof or other variations thereon or
comparable terminology. Factors which could have a material adverse effect on
the operations and future prospects of our company are described below under
"Risk Factors." These risks and uncertainties should be considered in
evaluating any forward-looking statements contained or incorporated by
reference herein. Our actual results may differ significantly from the results
discussed in the forward-looking statements.
RISK FACTORS
An investment in our Class A common stock involves various risks.
Prospective investors should carefully consider the following information in
conjunction with the other information contained in this prospectus before
purchasing the securities offered hereby.
3
o We are dependent on the New York Tri-State area market due to limited
geographic diversification and our financial results may suffer as a result of
a decline in economic conditions in such area
A decline in the economic conditions in the New York tri-state area (the
"Tri-State Area") and for commercial real estate could adversely affect our
business, financial condition and results of operations. All of our
properties, except one office property located in Orlando, Florida, are
located in the Tri-State Area, although our organizational documents do not
restrict us from owning properties outside this area. Each of our five markets
are located in New York City and the suburbs of New York City and may be
similarly affected by economic changes in this area. A significant downturn in
the financial services industry and related industries would likely have a
negative effect on these markets and on the performance of our properties.
The following is a breakdown of our office and industrial properties for
each of our five markets at March 31, 2001:
Number of
Properties(1) Square Footage Annual Base Rent(2)
------------- -------------- -------------------
Long Island
Office 27 4,372,848 $87,632,452
Industrial 95 5,894,445 $35,719,809
Westchester
Office 24 3,291,373 $65,740,732
Industrial 3 163,000 $1,820,496
New Jersey
Office 18 2,141,068 $42,983,756
Industrial 5 324,254 $2,308,461
Connecticut
Office 8 1,123,188 $22,991,991
Industrial 1 452,414 $2,876,568
New York City
Office 5 3,516,361 $100,970,183
(1) We also own one 357,000 square foot office building located in Orlando,
FL and two 10,000 square foot retail properties on Long Island.
(2) Represents base rents from leases in place as of March 31, 2001, for the
period April 1, 2001 through March 31, 2002, excluding the reimbursement
by tenants of electrical costs.
o Debt servicing and refinancing, increases in interest rates and financial
covenants could adversely affect our economic performance
Dependence upon debt financing; risk of inability to service or refinance
debt. In order to qualify as a real estate investment trust, or REIT, for
federal income tax purposes, we are required to distribute at least 90% of our
taxable income. As a result, we are more reliant on debt or equity financings
than many other non-REIT companies that are able to retain more of their
income.
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We are subject to the risks associated with debt financing. Our cash flow
could be insufficient to meet required payments of principal and interest. We
may not be able to refinance existing indebtedness, which in virtually all
cases requires substantial principal payments at maturity, or the terms of
such refinancing might not be as favorable as the terms of the existing
indebtedness. As of March 31, 2001, the weighted average maturity of our
existing indebtedness was approximately 6.3 years and our total existing
indebtedness was approximately $1.5 billion. We also may not be able to
refinance any indebtedness we incur in the future. Finally, we may not be able
to obtain funds by selling assets or raising equity to make required payments
on maturing indebtedness.
Rising interest rates could adversely affect cash flow. We conduct all of
our operations through, and serve as the sole general partner of, Reckson
Operating Partnership, L.P. (the "Operating Partnership"). Increases in
interest rates could increase the Operating Partnership's interest expense,
which could adversely affect the ability to service its indebtedness or to pay
dividends to our stockholders. As of March 31, 2001, approximately 39% of
our debt was variable rate debt and our total debt was approximately $1.5
billion. Outstanding advances under the credit facility of the Operating
Partnership bear interest at variable rates. In addition, we may incur
indebtedness in the future that also bears interest at a variable rate.
Requirements of credit facility could adversely affect our financial
condition and our ability to make distributions. The ability of the Operating
Partnership to borrow under our credit facility is subject to certain
financial covenants, including covenants relating to limitations on unsecured
and secured borrowings, minimum interest and fixed charge coverage ratios, a
minimum equity value and a maximum dividend payout ratio. The Operating
Partnership relies on borrowings under its credit facility to finance
acquisition and development activities and for working capital purposes and,
if the Operating Partnership is unable to borrow under its credit facility, it
could adversely affect our financial condition. The Operating Partnership has
obtained a three-year unsecured credit facility from The Chase Manhattan Bank,
as Administrative Agent, which provides for a maximum borrowing amount of up
to $575 million. The credit facility also contains a financial covenant
limiting the amount of distributions that we may pay to holders of our common
stock during any fiscal quarter if they exceed, when added to all
distributions paid during the three immediately preceding quarters, the
greater of:
o 90% of our funds from operations; and
o the amounts required in order for us to continue to qualify as a
REIT.
Although the Operating Partnership presently is in compliance with the
covenants under the credit facility, there is no assurance that the Operating
Partnership will continue to be in compliance or that we will be able to
service our indebtedness or pay dividends to our stockholders.
No limitation on debt. Currently, we have a policy of incurring debt only
if our Debt Ratio is 50% or less. As of March 31, 2001, our Debt Ratio was
44.3%. For these purposes, Debt Ratio is defined as the total debt of the
Operating Partnership as a percentage of the market value of outstanding
shares of common stock, including the conversion of outstanding partnership
units in the Operating Partnership, the liquidation preference of our
preferred stock, the
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contributed value of Metropolitan Partners LLC's ("Metropolitan's") preferred
interest and the liquidation preference of the preferred units of the
Operating Partnership, excluding all units of general partnership owned by us,
plus total debt (including our share of joint venture debt and net of minority
partners' share of joint venture debt). Under this policy, we could incur
additional debt if our stock price increases, even if we may not have a
corresponding increase in our ability to repay the debt. In addition, as of
March 31, 2001, our debt-to-equity ratio was 1:1.26. We calculated our
debt-to-equity ratio by comparing the total debt of the Operating Partnership
to the value of our outstanding common stock and the common units of limited
partnership interest of the Operating Partnership (including its share of
joint venture debt and net of minority partners' share of joint venture debt),
each based upon the market value of the common stock, and the liquidation
preference of our preferred stock, the contributed value of Metropolitan's
preferred interest and the preferred units of limited partnership interest in
the Operating Partnership, excluding all units of general partnership interest
owned by us. As described above, our credit facility contains financial
covenants which limit the ability of the Operating Partnership to incur
additional indebtedness. However, our organizational documents do not contain
any limitation on the amount of indebtedness we may incur. Accordingly, the
Board of Directors could alter or eliminate this policy and would do so, for
example, if it were necessary in order for us to continue to qualify as a
REIT. If this policy were changed, we could become more highly leveraged,
resulting in higher interest payments that could adversely affect our ability
to pay dividends to our stockholders and could increase the risk of default on
the Operating Partnership's existing indebtedness.
o We may have conflicts of interest with FrontLine Capital Group; we have
credit risk as a result of loans we have made to FrontLine
Conflicts as a result of overlapping management. Certain members of our
executive management, including our president and treasurer, serve in similar
capacities for FrontLine Capital Group ("FrontLine") (formerly known as
Reckson Service Industries, Inc.), an entity that we spun-off to our
stockholders in 1998. In addition, three members of our Board of Directors
(including our president) also serve as directors of FrontLine. Although the
individuals referred to above are committed to our success, they are also
committed to the success of FrontLine. As of March 31, 2001, our senior
management and directors beneficially owned approximately 14.85% of our
outstanding common stock and approximately 15.10% of the outstanding common
stock of FrontLine. In calculating the ownership of our common stock, we have
included our Class A common stock and our Class B exchangeable common stock;
and we have assumed the exchange of all limited partnership units in the
Operating Partnership for shares of Class A common stock and the exercise of
all vested stock options. There is a risk that the common membership of
management, members of the Boards of Directors and ownership of common stock
will lead to conflicts of interest in the fiduciary duties owed to
stockholders by common directors and officers in connection with transactions
between the two companies, as well as a conflict in allocating management
time.
Conflicts in our loans to FrontLine. In June 1998, the Operating
Partnership established a credit facility with FrontLine (the "FrontLine
Facility") in the amount of $100 million for our service sector operations and
other general corporate purposes. In addition, in June 1998, the Operating
Partnership authorized the investment of $100 million with respect to the
funding of the investment of Reckson Strategic Venture Partners, LLC (the
"Reckson Strategic Venture
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Partners Commitment"). Amounts available under the Reckson Strategic Venture
Partners Commitment are funded through investments by the Operating
Partnership into REIT qualified joint ventures with Reckson Strategic Venture
Partners or through loans directly to FrontLine under a credit agreement with
terms substantially identical to those under the FrontLine Facility. In March
2001, we increased the Reckson Strategic Venture Partners Commitment to $110
million and, as of March 31, 2001, approximately $109.1 million had been
funded through the Reckson Strategic Venture Partners Commitment. The amount
available under the credit facility relating to the Reckson Strategic Venture
Partners Commitment is reduced by the amount of any REIT qualified joint
venture investments between the Operating Partnership and Reckson Strategic
Venture Partners. Loans under the Reckson Strategic Venture Partners
Commitment in excess of $25 million in any single investment are subject to
approval by our Board of Directors, while advances under the FrontLine
Facility in excess of $10 million in respect of any single investment are
subject to approval by our Board of Directors, or a committee thereof. The
FrontLine Facility and the credit agreement relating to the Reckson Strategic
Ventures Partners Commitment are due in June 2003 and advances thereunder are
recourse obligations of ours. Interest accrues on these facilities at a rate
equal to the greater of (1) the prime rate plus 2% and (2) 12% per annum, with
the rate on amounts that are outstanding for more than one year increasing
annually at a rate of 4% of the prior year's rate. Interest is not payable
under these facilities prior to maturity and principal is prepayable without
penalty.
Subject to the amendments described below, as long as there are
outstanding advances under the FrontLine Facility or borrowings by FrontLine
under the credit agreement with respect to the Reckson Strategic Venture
Partners Commitment, FrontLine is prohibited from paying dividends on any
shares of FrontLine's capital stock or incurring additional debt. The
FrontLine Facility and the credit agreement with respect to the Reckson
Strategic Venture Partners Commitment are subject to certain other covenants
and prohibit advances thereunder to the extent the advances could, in our
determination, endanger our status as a REIT. The terms of the FrontLine
Facility and the credit agreement with respect to the Reckson Strategic
Venture Partners Commitment were not negotiated at arms' length and thus may
not reflect terms that could have been obtained from independent third
parties. Additional indebtedness may be incurred by our subsidiaries. As of
March 31, 2001, borrowings under the FrontLine Facility aggregated
approximately $93.4 million and, pursuant to the Reckson Strategic Venture
Partners Commitment, the Operating Partnership had made approximately $67.7
million in REIT qualified joint venture investments with Reckson Strategic
Venture Partners and had advanced approximately $41.4 million under the credit
agreement.
In November 1999, the credit facilities were amended to allow FrontLine
to incur up to $135 million in debt secured by FrontLine's assets and to pay
interest thereon and to allow the payment of dividends on up to $200 million
of preferred stock which may be issued by FrontLine. As consideration for the
amendments, which were approved by FrontLine's Board of Directors and that of
ours, FrontLine paid a fee to the Operating Partnership of approximately $3.6
million in the form of approximately 176,000 shares of FrontLine's common
stock. As of March 31, 2001, FrontLine had obtained a $25 million revolving
line of credit from a commercial lender and it had issued $51 million of
preferred stock and redeemable convertible preferred stock.
7
In March 2001, the credit facilities were amended to provide that (i)
interest is payable only at maturity and (ii) we may transfer all or any
portion of any rights or obligations under the credit facilities to our
affiliates. We requested these changes as a result of changes in REIT tax
laws.
Conflicts in transactions with FrontLine under the intercompany
agreement. The Operating Partnership and FrontLine have entered into an
intercompany agreement to formalize their relationship at the outset and to
limit conflicts of interest. The intercompany agreement was not negotiated at
arms' length as it was negotiated while 95% of the common stock of FrontLine
was owned by the Operating Partnership. Under the intercompany agreement,
FrontLine granted the Operating Partnership a right of first opportunity to
make any REIT-qualified investment that becomes available to FrontLine. In
addition, if a REIT-qualified investment opportunity becomes available to an
affiliate of FrontLine, including Reckson Strategic Venture Partners, 100% of
the common ownership interest of which is indirectly owned by FrontLine, the
intercompany agreement requires FrontLine's affiliate to allow the Operating
Partnership to participate in the opportunity to the extent of FrontLine's
interest in the affiliate.
Under the intercompany agreement, the Operating Partnership granted
FrontLine a right of first opportunity to provide to the Operating Partnership
and our tenants any type of non-customary commercial services for occupants of
office, industrial and other property types, which we may not be permitted to
provide because they may generate REIT non-qualifying income under federal tax
laws. FrontLine will provide services to the Operating Partnership at rates
and on terms as attractive as either the best available for comparable
services in the market or those offered by FrontLine to third parties. In
addition, the Operating Partnership will give FrontLine access to its tenants
with respect to commercial services that may be provided to tenants.
Under the intercompany agreement, subject to certain conditions, the
Operating Partnership granted FrontLine a right of first refusal to become the
lessee of any real property acquired by the Operating Partnership if the
Operating Partnership determines that, because the operation of the property
may involve the performance of non-customary services that under the Code a
REIT may not generally provide, it is required to enter into a "master" lease
arrangement. Pursuant to a "master" lease arrangement, the Operating
Partnership would own the property, but lease it entirely to a single lessee
that would operate the property.
With respect to services that FrontLine will provide to the Operating
Partnership, management will have a conflict of interest in determining the
market rates to charge the Operating Partnership for these services. In
addition, management will have a conflict of interest in determining whether
the Operating Partnership or FrontLine would pursue a REIT-qualified
investment opportunity outside our core business strategy of investing in
office and industrial properties in the Tri-State Area. Furthermore, the
Operating Partnership and FrontLine may structure investments so that Reckson
Strategic Venture Partners - Reckson Operating Partnership joint ventures may
pursue the portion of investments generating REIT-qualified income and Reckson
Strategic Venture Partners will pursue directly the other portion of these
investments. Accordingly, Reckson Strategic Venture Partners and Reckson
Strategic Venture Partners-Reckson Operating Partnership joint ventures may
have conflicts of interest in the structuring, valuation, management and
disposition of these investments.
8
Policies with respect to conflicts of interest may not be successful. We
have adopted policies designed to eliminate or minimize conflicts of interest.
These policies include the approval of all transactions in which our directors
or officers have a conflicting interest by a majority of the directors who are
neither officers nor affiliated with us. These policies do not prohibit sales
of assets to or from affiliates, but would require the sales to be approved by
our independent directors. However, there is no assurance that these policies
will be successful and, if they are not successful, decisions could be made
that might fail to reflect fully the interests of all of our stockholders.
o Our acquisition, development and construction activities could result in
losses
We intend to acquire existing office and industrial properties to the
extent that suitable acquisitions can be made on advantageous terms.
Acquisitions of commercial properties entail risks, such as the risks that we
may not be in a position or have the opportunity in the future to make
suitable property acquisitions on advantageous terms and that our investments
will fail to perform as expected. Some of the properties that we acquire may
require significant additional investment and upgrades and are subject to the
risk that estimates of the cost of improvements to bring such properties up to
standards established for the intended market position may prove inaccurate.
Since our IPO in June 1995, we have acquired 71 office properties (excluding
the office property located in Orlando, Florida and other properties located
outside New York that were acquired and subsequently disposed of in our
acquisition of Tower Realty Trust, Inc.) with aggregate square footage of
approximately 12.6 million and 41 industrial properties (excluding properties
which we acquired and subsequently disposed of) with aggregate square footage
of approximately 3.4 million. In addition, we have developed one office
building encompassing approximately 277,000 square feet and four industrial
buildings encompassing approximately 483,000 square feet.
We also intend to continue the selective development and construction of
office and industrial properties in accordance with our development and
underwriting policies as opportunities arise. We are currently developing one
property comprising approximately 315,000 square feet. Our development and
construction activities include the risks that:
o we may abandon development opportunities after expending resources to
pursue development
o construction costs of a project may exceed our original estimates
o occupancy rates and rents at a newly completed property may not
be sufficient to make the property profitable
o financing may not be available to us on favorable terms for
development of a property
o we may not complete construction and lease-up on schedule, resulting
in increased carrying costs to complete construction, construction
costs and, in some instances, penalties owed to tenants with executed
leases
Our development activities are also subject to risks relating to the
inability to obtain, or delays in obtaining, all necessary zoning, land-use,
building, occupancy and other required governmental permits and
authorizations. If any of the above events occur, our ability to pay dividends
to our stockholders and service the Operating Partnership's indebtedness could
be
9
adversely affected. In addition, new development activities, regardless of
whether or not they are ultimately successful, typically require a substantial
portion of management's time and attention.
In June 1999 we acquired a first mortgage note for approximately $277.5
million on a 1.4 million square foot, 47-story Class A office tower located at
919 Third Avenue, New York, New York, that was in default. In July 2000, we
consented to the filing of a consensual, pre-packaged bankruptcy plan with the
current fee owner and we obtained title to this property in November 2000. We
have also obtained a three-year $250 million first mortgage commitment on the
property. At closing, $200 million was funded under the commitment at an
interest rate of LIBOR plus 120 basis points. In addition, we have commenced a
significant capital improvement project with respect to this property that we
anticipate will bring our total investment in this property to approximately
$365 million. As of March 31, 2001 the property is 98% leased. It is
anticipated that the renovation program will be substantially completed by the
first quarter of 2002. There can be no assurance that the cost incurred to
complete the renovation program will not exceed our estimates or that the
program will be completed in the anticipated timeframe.
o Adverse real estate market conditions, increases in operating expenses or
capital expenditures, tenant defaults and uninsured losses could adversely
affect our financial results
Our properties' revenues and value may be adversely affected by a number
of factors, including:
o the national, state and local economic climate and real estate
conditions, such as oversupply of or reduced demand for space and
changes in market rental rates
o the need to periodically renovate, repair and relet our space
o increasing operating costs, including real estate taxes and
utilities, which may not be passed through to tenants
o defaults by our tenants or their failure to pay rent on a timely
basis
o uninsured losses
A significant portion of our expenses of real estate investments, such as
mortgage payments, real estate taxes, insurance and maintenance costs, are
generally not reduced when circumstances cause a decrease in income from our
properties. In addition, our real estate values and income from properties are
also affected by our compliance with laws, including tax laws, interest rate
levels and the availability of financing.
Because real estate investments are illiquid, we may not be able to sell
properties when appropriate. Real estate investments generally cannot be sold
quickly. We may not be able to vary our portfolio promptly in response to
economic or other conditions. In addition, provisions of the Internal Revenue
Code of 1986, as amended (the "Code") limit a REIT's ability to sell
properties in some situations when it may be economically advantageous to do
so, thereby adversely affecting returns to our stockholders.
Competition in our markets is significant. The competition for tenants in
the office and industrial markets in the Tri-State Area is significant and
includes properties owned by other
10
REITs, local privately-held companies, institutional investors and other
owners. There is also significant competition for acquisitions in our markets
from the same types of competitors. In addition, many users of industrial
space in our markets own the buildings that they occupy.
Increasing operating costs could adversely affect cash flow. Our
properties are subject to operating risks common to commercial real estate,
any and all of which may adversely affect occupancy or rental rates. Our
properties are subject to increases in our operating expenses such as
cleaning, electricity, heating, ventilation and air conditioning; elevator
repair and maintenance; insurance and administrative costs; and other costs
associated with security, landscaping, repairs and maintenance of our
properties. While our tenants generally are currently obligated to pay a
portion of these costs, there is no assurance that tenants will agree to pay
these costs upon renewal or that new tenants will agree to pay these costs
initially. If operating expenses increase, the local rental market may limit
the extent to which rents may be increased to meet increased expenses without
at the same time decreasing occupancy rates. While we have cost saving
measures at each of our properties, if any of the above occurs, our ability to
pay dividends to our stockholders and service our indebtedness could be
adversely affected.
Some potential losses are not covered by insurance. We carry
comprehensive liability, fire, extended coverage and rental loss insurance on
all of our properties. However, losses arising from acts of war or relating to
pollution are not generally insured because they are either uninsurable or not
economically insurable. If an uninsured loss or a loss in excess of insured
limits should occur, we could lose our capital invested in a property, as well
as any future revenue from the property. We would remain obligated on any
mortgage indebtedness or other obligations related to the property.
Investments in mortgage debt could lead to losses. We may invest in
mortgages secured by office or industrial properties. We may acquire the
mortgaged properties through foreclosure proceedings or negotiated
settlements. In addition to the risks associated with investments in
commercial properties, investments in mortgage indebtedness present additional
risks, including the risk that the fee owners of such properties may not make
payments of interest on a current basis and we may not realize our anticipated
return or sustain losses relating to the investments. Although we currently
have no intention to originate mortgage loans as a significant part of our
business, we may make loans to a seller in connection with our purchase of
real estate. The underwriting criteria we would use for these loans would be
based upon the credit and value of the underlying real estate.
o Property ownership through partnerships and joint ventures could limit our
control of those investments
Partnership or joint venture investments may involve risks not otherwise
present for investments made solely by us, including the possibility that our
partners or co-venturer might become bankrupt, that our partners or
co-venturer might at any time have different interests or goals than we do,
and that our partners or co-venturer may take action contrary to our
instructions, requests, policies or objectives, including our policy with
respect to maintaining our qualification as a REIT. Other risks of joint
venture investments include impasse on decisions, such as a sale, because
neither our partner or co-venturer nor us would have full control over the
11
partnership or joint venture. There is no limitation under our organizational
documents as to the amount of funds that may be invested in partnerships or
joint ventures.
The following is a description of the significant joint ventures in which
we are involved:
Our investment in the Omni includes the risks that we cannot refinance or
dispose of the property in our sole discretion and we could have our general
partnership interest converted into a limited partnership interest. The
Operating Partnership owns a 60% general partner interest in Omni Partners,
L.P. (the "Omni Partnership"), the partnership that owns the Omni, a 575,000
square foot office building located in our Nassau West Corporate Center office
park. Odyssey Partners, L.P. ("Odyssey") and an affiliate of Odyssey own the
remaining 40% interest. Through our partnership interest, we act as managing
partner and have the sole authority to conduct the business and affairs of the
Omni Partnership subject to the limitations set forth in the amended and
restated agreement of limited partnership of Omni Partners, L.P. (the "Omni
Partnership Agreement"). These limitations include Odyssey's right to
negotiate under certain circumstances a refinancing of the mortgage debt
encumbering the Omni and the right to approve any sale of the Omni made on or
before March 13, 2007 (the "Acquisition Date"). The Operating Partnership will
continue to act as the sole managing partner of the Omni Partnership unless
certain conditions specified in the Omni Partnership Agreement shall occur.
Upon the occurrence of any of these conditions, the Operating Partnership's
general partnership interest shall convert to a limited partnership interest
and an affiliate of Odyssey shall be the sole managing partner, or, at the
option of Odyssey, the Operating Partnership shall be a co-managing partner
with an affiliate of Odyssey. In addition, on the Acquisition Date, the
Operating Partnership will have the right to purchase Odyssey's interest in
the Omni Partnership at a price (the "Option Price") based on 90% of its fair
market value. If the Operating Partnership fails to exercise this option,
Odyssey has the right to require the Operating Partnership to purchase
Odyssey's interest in the Omni Partnership on the Acquisition Date at the
Option Price. The Operating Partnership has the right to extend the
Acquisition Date until March 13, 2012. The Option Price shall apply to the
payment of all sums due under a loan made by the Operating Partnership in
March 1997 to Odyssey in the amount of approximately $17 million. The Odyssey
loan matures on the Acquisition Date, subject to the Operating Partnership's
right to extend the Acquisition Date as set forth above, and is secured by a
pledge of Odyssey's interest in the Omni Partnership.
Our joint venture in an office building in Tarrytown, New York includes
the risks that we cannot enter into large leases or refinance or dispose of
the building in our discretion. The Operating Partnership owns a 60% managing
member interest in a limited liability company that owns 520 White Plains
Road, a 171,761 square foot office building located in Tarrytown, New York.
The remaining 40% member interest is held by Tarrytown Corporate Center III,
L.P. ("TCC"), a partnership affiliated with the Halpern organization, the
organization from which we acquired eight Class A office properties for
approximately $86 million in February 1996. The member agreement governing the
joint venture arrangement requires us to obtain the consent of TCC prior to
engaging in activities such as entering into or modifying a lease for more
than 25,000 rentable square feet, financing or refinancing indebtedness
encumbering the property and selling or otherwise transferring the property.
Our joint ventures in privatization of government office buildings and
correctional facilities are dependent upon continued outsourcing by
governments and competitive bidding.
12
From time to time, the Operating Partnership may make REIT qualified joint
venture investments in real estate assets with Reckson Strategic Venture
Partners. FrontLine owns 100% of the common ownership interests of Reckson
Strategic Venture Partners and, accordingly, controls Reckson Strategic
Venture Partners. The strategy of Reckson Strategic Venture Partners is to
acquire interests in established entrepreneurial enterprises with experienced
management teams in market sectors which are in the early stages of their
growth cycle or offer circumstances for attractive investments as well as
opportunities for future growth. REIT qualified joint venture investments with
Reckson Strategic Venture Partners may involve various types of real estate
assets and involve different risks than those in our office and industrial
sectors, as to which we have no prior experience or expertise. No assurance
can be given as to the success of these investments. As of March 31, 2001, the
Operating Partnership had made REIT qualified joint venture investments with
Reckson Strategic Venture Partners of approximately $67.7 million.
Our joint venture in suburban office properties includes the risk that we
will be unable to transfer our interest therein at our discretion. In
September 2000, we formed a joint venture (the "Tri-State JV") with Teachers
Insurance and Annuity Association ("TIAA") and contributed eight Class A
suburban office properties aggregating approximately 1.5 million square feet
to the Tri-State JV in exchange for approximately $136 million and a 51%
majority ownership interest in the Tri-State JV. The operating member of the
Tri-State JV is our subsidiary. The agreement governing the joint venture
provides that if the operating member transfers its interest in Tri-State JV,
or a change in control occurs with respect to the operating member or certain
of our affiliates, under certain limited circumstances, TIAA may elect to
cause the operating member to purchase TIAA's interest in the Tri-State JV.
o Environmental problems are possible
Federal, state and local laws and regulations relating to the protection
of the environment may require a current or previous owner or operator of real
estate to investigate and clean up hazardous or toxic substances or petroleum
product releases at a property. An owner of real estate is liable for the
costs of removal or remediation of certain hazardous or toxic substances on or
in the property. These laws often impose such liability without regard to
whether the owner knew of, or caused, the presence of the contaminants.
Clean-up costs and the owner's liability generally are not limited under the
enactments and could exceed the value of the property and/or the aggregate
assets of the owner. The presence of, or the failure to properly remediate,
the substances may adversely affect the owner's ability to sell or rent the
property or to borrow using the property as collateral. Persons who arrange
for the disposal or treatment of hazardous or toxic substances may also be
liable for the clean-up costs of the substances at a disposal or treatment
facility, whether or not such facility is owned or operated by the person.
Even if more than one person was responsible for the contamination, each
person covered by the environmental laws may be held responsible for the
clean-up costs incurred. In addition, third parties may sue the owner or
operator of a site for damages and costs resulting from environmental
contamination emanating from that site.
Environmental laws also govern the presence, maintenance and removal of
asbestos-containing materials ("ACMs"). These laws impose liability for
release of ACMs into the air and third parties may seek recovery from owners
or operators of real properties for personal injury associated with ACMs. In
connection with the ownership (direct or indirect), operation,
13
management and development of real properties, we may be considered an owner
or operator of properties containing ACMs. Having arranged for the disposal or
treatment of contaminants we may be potentially liable for removal,
remediation and other costs, including governmental fines and injuries to
persons and property.
All of our office properties and all of our industrial properties have
been subjected to a Phase I or similar environmental site assessment after
April 1, 1994 that were completed by independent environmental consultant
companies, except for the property located at 35 Pinelawn Road which was
originally developed by us and subjected to a Phase I in April 1992. These
Phase I or similar environmental site assessments involved general inspections
without soil sampling, ground water analysis or radon testing and, for our
properties constructed in 1978 or earlier, survey inspections to ascertain the
existence of ACMs. These environmental site assessments have not revealed any
environmental liability that we believe would have a material adverse effect
on our business.
o Failure to qualify as a REIT would be costly
We have operated (and intend to operate) so as to qualify as a REIT under
the Code beginning with our taxable year ended December 31, 1995. Although our
management believes that we are organized and operated in a manner to so
qualify, no assurance can be given that we will qualify or remain qualified as
a REIT.
If we fail to qualify as a REIT in any taxable year, we will be subject
to federal income tax (including any applicable alternative minimum tax) on
our taxable income at regular corporate rates. Moreover, unless entitled to
relief under certain statutory provisions, we also will be disqualified from
treatment as a REIT for the four taxable years following the year during which
qualification was lost. This treatment would significantly reduce net earnings
available to service indebtedness, make investments or pay dividends to
stockholders because of the additional tax liability to us for the years
involved. Also, we would not then be required to pay dividends to our
stockholders.
o Tax consequences upon a sale or refinancing of properties may result in
conflicts of interest for our directors and officers
Holders of units of limited partnership interest of the Operating
Partnership or co-owners of properties not owned entirely by us may suffer
different and more adverse tax consequences than we will upon the sale or
refinancing of our properties. We may have different objectives from these
co-owners and holders of limited partnership units regarding the appropriate
pricing and timing of any sale or refinancing of these properties. While we,
as the sole general partner of the Operating Partnership, have the exclusive
authority as to whether and on what terms to sell or refinance each property
owned solely by the Operating Partnership, our directors and officers who hold
limited partnership units may seek to influence us not to sell or refinance
the properties, even though such a sale might otherwise be financially
advantageous to us, or may seek to influence us to refinance a property with a
higher level of debt.
o Limits on ownership and changes in control may deter changes in management
and third party acquisition proposals
14
Ownership limit. To maintain our qualification as a REIT, five or fewer
individuals (as defined in the Code, to include certain entities) may not own,
directly or indirectly, more than 50% in value of our outstanding capital
stock during the last half of a taxable year (other than the first year). In
order to protect against the risk of losing REIT status, our charter limits
ownership of our issued and outstanding Class A common stock by any single
stockholder to 9% of the lesser of the number or value of the outstanding
shares of common stock. It also limits ownership of our Class B exchangeable
common stock by any single stockholder to 9% in value of the outstanding
shares of all of our common stock and limits ownership of our issued and
outstanding 7-5/8% Series A Convertible Cumulative Preferred Stock and Series
B Convertible Cumulative Preferred Stock to 9% in value of the outstanding
shares of all of our capital stock. In addition, a stockholder may not acquire
shares of our Series A preferred stock that would result in the stockholder's
owning in excess of 20% of the lesser of the number or value of outstanding
shares of the Series A preferred stock. See "Description of Preferred
Stock--Restrictions on Ownership." These provisions may delay, defer or
prevent a change of control in the Company or other transaction by a third
party without the consent of the Board of Directors even if a change in
control were in the best interests of our stockholders.
Staggered board. Our Board of Directors is divided into three classes.
The terms of the Class I, Class II and Class III directors expire in 2002,
2003, and 2004, respectively. Directors are chosen for a three-year term.
These provisions may deter changes in control because of the increased time
period necessary for a third party to acquire control of management through
positions on the Board of Directors.
Supermajority Vote for Removal of Directors. In our charter, we have
opted into a provision of the Maryland General Corporation law (the "MGCL")
requiring a vote of two-thirds of the common stock to remove one or more
directors.
Majority of Votes Required to Call Special Meetings of Stockholders. Our
bylaws provide that a special meeting of stockholders need only be called if
requested by holders of the majority of votes eligible to be cast at such
meeting.
Future issuances of common stock. Our charter authorizes the Board of
Directors to issue additional shares of common stock without stockholder
approval. We also may issue shares of Class A common stock in exchange for
limited partnership units pursuant to the Operating Partnership's partnership
agreement. We issued approximately 11.7 million shares of Class B exchangeable
common stock in connection with the Tower transaction. These shares are
exchangeable at the option of the holder on a one-for-one basis for shares of
our Class A common stock and are entitled currently to an annual dividend of
$2.40 per share, subject to adjustment annually. On or after November 23,
2003, we can redeem the Class B exchangeable common stock on a one-for-one
basis for shares of our Class A common stock. Issuance of Class A common stock
or Class B exchangeable common stock could have the effect of diluting
existing common stockholders' interests.
Our charter permits the issuance of preferred stock which could delay,
defer or prevent a change in control. Our charter authorizes the Board of
Directors to issue up to 25 million shares of preferred stock, of which
9,192,000 shares of Series A Preferred Stock and 2,000,000 shares of Series B
preferred stock are issued and outstanding, to reclassify unissued shares of
15
capital stock, and to establish the preferences, conversion and other rights,
voting powers, restrictions, limitations and restrictions on ownership,
limitations as to dividends or other distributions, qualifications, and terms
and conditions of redemption for each class or series of any capital stock
issued.
In October 2000, the Board of Directors adopted a Stockholder Rights Plan
(the "Rights Plan") designed to protect stockholders from various abusive
takeover tactics, including attempts to acquire control at an inadequate
price, depriving stockholders of the full value of their investment. The
Rights Plan is designed to allow the Board of Directors to secure the best
available transaction for all of our stockholders. The Rights Plan was not
adopted in response to any known effort to acquire control of the Company.
Under the Rights Plan, each stockholder received a dividend of one Right
for each share of our outstanding Class A common stock owned. The Rights are
exercisable only if a person or group acquires, or announces their intent to
acquire, 15% or more of our Class A common stock, or announces a tender offer
the consummation of which would result in beneficial ownership by a person or
group of 15% or more of the Class A common stock. Each Right entitles the
holder to purchase one one-thousandth of a share of a new series of junior
participating preferred stock of ours at an initial exercise price of $84.44.
If any person acquires beneficial ownership of 15% or more of the
outstanding shares of Class A common stock, then all Rights holders except the
acquiring person are entitled to purchase our Class A common stock at a price
discounted from the then market price. If we are acquired in a merger after
such an acquisition, all Rights holders except the acquiring person are also
entitled to purchase stock in the buyer at a discount in accordance with the
Rights Plan.
Limitations on acquisition of and changes in control pursuant to Maryland
law. The MGCL contains provisions, referred to as the "control share
acquisition statute," which eliminate the voting rights of shares acquired in
a Maryland corporation in quantities so as to constitute "control shares," as
defined under the MGCL. The MGCL also contains provisions, referred to as the
"business combination statute," which generally limit business combinations
between a Maryland corporation and any 10% owners of the company's stock or
any affiliate thereof. These provisions may have the effect of inhibiting a
third party from making an acquisition proposal for the Company or of
delaying, deferring or preventing a change in control of the Company under
circumstances that otherwise could provide the holders of shares of common
stock with the opportunity to realize a premium over the then-prevailing
market price. As permitted by the MGCL, our bylaws contain a provision
exempting any and all acquisitions by any person of shares of our capital
stock from the control share acquisition statute. The Board of Directors,
however, has approved the Company's opting into the "business combination
statute."
o The market value of securities could decrease based on our performance and
market perception and conditions
Effect of earnings and cash dividends. The market value of the equity
securities of a REIT may be based primarily upon the market's perception of
the REIT's growth potential and its current and future cash dividends, and may
be secondarily based upon the real estate market
16
value of the underlying assets. For the year ended December 31, 2000, we
distributed approximately 91% of our cash available for distribution to our
common stockholders.
Adverse impact of rising interest rates. One factor which influences the
price of securities is the dividend or interest rate on the securities
relative to market interest rates. Rising interest rates may lead potential
buyers of our equity securities to expect a higher dividend rate, which would
adversely affect the market price of the securities. In addition, rising
interest rates would result in increased expense, thereby adversely affecting
cash flow and the ability of the Operating Partnership to service its
indebtedness.
THE COMPANY
We were incorporated in September 1994 and commenced operations effective
with the completion of our initial public offering (the "IPO") on June 2,
1995.
We were formed for the purpose of continuing the commercial real estate
business of our predecessors, affiliated partnerships and other entities. For
more than 40 years, we have been engaged in the business of owning,
developing, acquiring, constructing, managing and leasing office and
industrial properties in the Tri-State Area. Based on industry surveys, we
believe that we are one of the largest owners and operators of Class A
suburban and commercial business district ("CBD") office properties and
industrial properties in the Tri-State Area. When we refer to Class A office
buildings in this prospectus, we mean well maintained, high quality buildings
that achieve rental rates that are at the higher end of the range of rental
rates for office properties in the particular market. We operate as a
fully-integrated, self-administered and self-managed REIT. As of March 31,
2001, we owned 188 properties (the "Properties") (including 10 joint venture
properties) in the Tri-State Area encompassing approximately 21.3 million
rentable square feet, all of which we manage. The Properties consist of 65
Class A suburban office properties encompassing approximately 9.1 million
rentable square feet, 17 Class A CBD office properties encompassing
approximately 5.3 million rentable square feet, 104 industrial properties
encompassing approximately 6.8 million rentable square feet and two 10,000
square foot retail properties. We also own a 357,000 square foot office
building located in Orlando, Florida. In addition, as of March 31, 2001, we
had approximately $2.9 million invested in certain mortgage indebtedness
encumbering approximately 97 acres of land, approximately $17 million in a
note receivable secured by a partnership interest in Omni Partners, L. P.,
owner of the Omni, a 575,000 square foot Class A office property located in
Uniondale, New York and $36.5 million under three notes which are secured by a
minority partner's preferred unit interest in the Operating Partnership (the
"Note Receivable Investments"). As of March 31, 2001, we are in the process of
developing a 315,000 square foot office building and also owned approximately
290 acres of land in 13 separate parcels on which we can develop approximately
1.4 million square feet of office space and approximately 224,000 square feet
of industrial space.
The office properties are Class A office buildings that are well-located,
well-maintained and professionally managed. In addition, these properties are
modern or have been modernized to compete with newer buildings in their
markets. We believe that these properties achieve among the highest rent and
occupancy rates within their markets. Forty-two of the 65 suburban office
properties are located in ten planned office parks and are tenanted by, among
others, national service firms, such as telecommunications firms, "big five"
accounting firms, securities
17
brokerage houses, insurance companies and health care providers. The
industrial properties are utilized for distribution, warehousing, research and
development, and light manufacturing/assembly activities and are located
primarily in three planned industrial parks.
Our executive offices are located at 225 Broadhollow Road, Melville, New
York 11747 and our telephone number at that location is (631) 694-6900. At
March 31, 2001, we had approximately 330 employees.
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of the shares of
Class A common stock by the selling stockholder.
DESCRIPTION OF COMMON STOCK
General
Our charter (the "Charter") provides that we may issue up to 100 million
shares of common stock, $.01 par value per share. In addition, units of
limited partnership interest in the Operating Partnership may be redeemed for
cash or, at our option, exchanged for our Class A common stock on a
one-for-one basis. On May 16, 2001, there were 46,167,242 shares of Class A
common stock outstanding and 10,283,513 shares of Class B exchangeable common
stock outstanding.
We issued Class B exchangeable common stock in connection with the
acquisition of Tower Realty Trust, Inc. The shares of Class B common stock
currently are entitled to receive an annual dividend of $2.40 per share,
subject to adjustment annually by a percentage equal to 70% of the cumulative
percentage change in our FFO per share above the FFO per share during the year
prior to issuance. The shares of Class B common stock are convertible at any
time, at the option of the holder, into an equal number of shares of our Class
A common stock, subject to customary antidilution adjustments as well as
certain other adjustments. We, at our option, may redeem any or all of the
Class B common stock in exchange for an equal number of shares of our Class A
common stock (subject to customary antidilution adjustments as well as certain
other adjustments) at any time following November 23, 2003. The Class B common
stock ranks pari passu with the Class A common stock.
All shares of Class A common stock have been duly authorized and will be
fully paid and nonassessable. Subject to the preferential rights of any other
shares or series of stock and to the provisions of the Charter regarding
Excess Stock (as defined under "Restrictions on Ownership of Capital Stock"),
holders of shares of Class A common stock offered hereby will be entitled to
receive distributions on the stock if, as and when authorized and declared by
the Board of Directors out of assets legally available therefor and to share
ratably in our assets legally available for distribution to our common
stockholders in the event of our liquidation, dissolution or winding up after
payment of or adequate provision for all known debts and liabilities.
Subject to the provisions of the Charter regarding Excess Stock, each
outstanding share of our Class A common stock and Class B common stock
entitles the holder to one vote on all matters submitted to a vote of
stockholders, including the election of directors, and, except as
18
provided with respect to any other class or series of stock, the holders of
these shares will possess the exclusive voting power. There is no cumulative
voting in the election of directors, which means that the holders of a
majority of the outstanding shares of our Class A common stock and Class B
common stock can elect all of the directors then standing for election and the
holders of the remaining shares will not be able to elect any directors.
Holders of shares of Class A common stock have no preference, conversion,
exchange, sinking fund, redemption or appraisal rights and have no preemptive
rights to subscribe for any other securities. Subject to the provisions of the
Charter regarding Excess Stock, shares of common stock will have equal
dividend, liquidation and other rights.
Certain Provisions of the Charter
Under the MGCL, a Maryland corporation generally cannot dissolve, amend
its charter, merge, sell all or substantially all of its assets, engage in a
share exchange or engage in similar transactions outside the ordinary course
of business unless approved by the affirmative vote of stockholders holding at
least two-thirds of the shares entitled to vote on the matter unless a lesser
percentage (but not less than a majority of all of the votes entitled to be
cast on the matter) is set forth in the corporation's charter. The Charter
does not provide for a lesser percentage in these situations.
The Charter authorizes the Board of Directors to reclassify any unissued
shares of common stock into other classes or series of classes of capital
stock and to establish the number of shares in each class or series and to set
the preferences, conversion and other rights, voting powers, restrictions,
limitations and restrictions on ownership, limitations as to dividends or
other distributions, qualifications and terms or conditions of redemption for
each class or series.
Prospective investors should review the section captioned "Risk
Factors--Limits on Ownership and Changes in Control May Delay Changes in
Management and Third Party Acquisition Proposals."
Restrictions on Ownership
In order to qualify as a REIT under the Code, not more than 50% in value
of our outstanding capital stock may be owned, directly or indirectly, by five
or fewer individuals (as defined in the Code) during the last half of a
taxable year and the stock 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). To satisfy the above ownership
requirements and certain other requirements for qualification as a REIT, the
Board of Directors has adopted, and the stockholders prior to the IPO
approved, a provision in the Charter restricting the ownership or acquisition
of shares of common stock and preferred stock.
Transfer Agent and Registrar
The transfer agent and registrar for the common stock is American Stock
Transfer & Trust Company.
19
SELLING STOCKHOLDER
The selling stockholder (which term includes its pledgees, transferees or
other successors in interest) will receive the shares of Class A common stock
offered hereby in an offering exempt from the registration requirements of the
Securities Act. The selling stockholder may from time to time offer and sell
any or all of the shares of the Class A common stock offered under this
prospectus.
The following table sets forth certain information with respect to shares
of Class A common stock covered by this prospectus and any other shares of
common stock owned by the selling stockholder. Because the selling stockholder
may offer all, some or none of the shares of Class A common stock that are
covered by this prospectus, no estimate can be made of the number of shares of
Class A common stock that will be offered under this prospectus or the number
of shares of common stock that will be owned by the selling stockholder upon
completion of the offering to which this prospectus relates.
Shares of Class A
Common Stock Shares of Class A
Name of Owned Before Common Stock Covered
Selling Stockholder the Offering by this Prospectus(2)
------------------- ------------ ---------------------
Crescent Real Estate
Equities Limited
Partnership (1) 0 3,453,881
---------------
(1) The selling stockholder is the holder of the class A preferred membership
interest in Metropolitan, and, pursuant to the terms of the operating
agreement of Metropolitan, will receive the shares of Class A common
stock offered hereby upon the exchange of its membership interest.
The selling stockholder acquired its interest in Metropolitan in
connection with our acquisition of Tower Realty Trust, Inc.
(2) The selling stockholder is under no obligation known to us to sell any of
the shares of Class A common stock registered hereunder. However, assuming
the sale of all shares of Class A common stock registered hereunder, the
selling stockholder will have sold all of the shares of Class A common
stock currently held by it.
PLAN OF DISTRIBUTION
We have been advised that the selling stockholder (a term that includes
its pledgees, transferees and other successors in interest, as described
above) may offer shares of Class A common stock from time to time depending on
market conditions and other factors, in one or more transactions on the
national securities exchanges or over-the-counter markets on which the shares
are traded, in negotiated transactions or otherwise, at fixed prices, at
market prices prevailing at the time of sale, at prices related to prevailing
market prices, at negotiated prices, without consideration, or by any other
legally available means.
Sales of shares of Class A common stock by the selling stockholder may
involve (i) block transactions in which the broker or dealer so engaged will
attempt to sell the shares as agent but may position and resell a portion of
the block as principal to facilitate the transaction, (ii) purchases by a
broker-dealer as principal and resale by such broker-dealer for its own
20
account pursuant to this prospectus, (iii) ordinary brokerage transactions and
transactions in which a broker solicits purchasers and (iv) privately
negotiated transactions. To the extent required, this prospectus may be
amended and supplemented from time to time to describe a specific plan of
distribution. In connection with the distribution of the shares of Class A
common stock or otherwise, the selling stockholder may enter into hedging
transactions with broker-dealers. In connection with such transactions,
broker-dealers may engage in short sales of the Class A common stock in the
course of hedging the position they assume with the selling stockholder. The
selling stockholder may also sell the Class A common stock short and redeliver
the shares to close out such short positions.
The selling stockholder may also enter into option transactions
(including call or put option transactions) or other transactions with
broker-dealers which require delivery to such broker-dealer of shares offered
hereby, which shares such broker-dealer may resell pursuant to this prospectus
(as supplemented or amended to reflect such transaction, if necessary). The
selling stockholder may also pledge shares to a broker-dealer and, upon a
default, such broker-dealer may effect sales of the pledged shares pursuant to
this prospectus (as supplemented or amended to reflect such transaction, if
necessary). The selling stockholder may also sell the Class A common stock
through one or more underwriters on a firm commitment or best-efforts basis
(with a supplement or amendment to this prospectus, if necessary). In
addition, any shares that qualify for sale pursuant to Rule 144 may be sold
under Rule 144 rather than pursuant to this prospectus.
Brokers and dealers may receive compensation in the form of concessions
or commissions from the selling stockholder and/or purchasers of shares for
whom they may act as agent and/or to whom they may sell as principal (which
compensation may be in excess of customary commissions). The selling
stockholder and any broker or dealer that participates in the distribution of
shares may be deemed to be underwriters and any commissions received by them
and any profit on the resale of shares positioned by a broker or dealer may be
deemed to be underwriting discounts and commissions under the Securities Act.
We have agreed to indemnify the selling stockholder, each underwriter who
participates in an offering of the shares of Class A common stock, each
person, if any, who controls any of such parties within the meaning of the
Securities Act and the Exchange Act, and each of their respective directors,
officers, employees and agents against certain liabilities, including
liabilities arising under the Securities Act. The selling stockholder may
agree to indemnify any agent or broker-dealer that participates in
transactions involving sales of the shares of Class A common stock against
certain liabilities, including liabilities arising under the Securities Act.
We have advised the selling stockholder that Regulation M under the
Exchange Act may apply to sales of shares and to the activities of the selling
stockholder or broker-dealers in connection therewith. Regulation M and other
rules and regulations under the Exchange Act, including anti-fraud provisions,
may limit when the selling stockholder or broker-dealers may sell or purchase
the shares of Class A common stock. We will bear all costs, expenses and fees
in connection with the registration of the shares of Class A common stock
covered by this prospectus. The selling stockholder will bear any brokerage
commissions and similar selling expenses, if any, attributable to the sale of
the shares.
21
RESTRICTIONS ON OWNERSHIP OF CAPITAL STOCK
Excess Stock
The Charter provides that we may issue up to 75 million shares of Excess
Stock, par value $.01 per share. For a description of our Excess Stock, see
"--Restrictions on Ownership" below.
Restrictions on Ownership
In order for us to qualify as a REIT under the Code, among other things,
not more than 50% in value of our outstanding capital stock may be owned,
directly or indirectly, by five or fewer individuals (defined in the Code to
include certain entities) during the last half of a taxable year (other than
the first year) (the "Five or Fewer Requirement"), and the shares of capital
stock must be beneficially owned by 100 or more persons during at least 335
days of a taxable year of 12 months (other than the first year) or during a
proportionate part of a shorter taxable year. Pursuant to the Code, stock held
by certain types of entities, such as pension trusts qualifying under Section
401(a) of the Code, United States investment companies registered under the
Investment Company Act of 1940, partnerships, trusts and corporations, will be
attributed to the beneficial owners of the entities for purposes of the Five
or Fewer Requirement (i.e., the beneficial owners of the entities will be
counted as our stockholders).
In order to protect us against the risk of losing our status as a REIT
due to a concentration of ownership among stockholders, our Charter, subject
to certain exceptions, provides that no stockholder may own, or be deemed to
own by virtue of certain attribution provisions of the Code, more than 9.0%
(the "Ownership Limit") of the aggregate number or value of the outstanding
shares of Class A common stock. The Charter also imposes limitations on the
ownership of Class B common stock and preferred stock. Any transfer of shares
of stock that would result in a violation of the Ownership Limit or that would
result in disqualification as a REIT, including any transfer that results in
shares of capital stock being owned by fewer than 100 persons or results in
the Company being "closely held" within the meaning of Section 856(h) of the
Code, shall be null and void, and the intended transferee will acquire no
rights to the shares of capital stock. The foregoing restrictions on
transferability and ownership will not apply if the 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. The Board of Directors may, in its sole
discretion, waive the Ownership Limit if evidence satisfactory to the Board of
Directors and tax counsel is presented that the changes in ownership will not
then or in the future jeopardize REIT status and the Board of Directors
otherwise decides that waiving the Ownership Limit is in our best interests.
Shares of capital stock owned, or deemed to be owned, or transferred to a
stockholder in excess of the Ownership Limit will automatically be converted
into shares of "Excess Stock" that will be transferred, by operation of law,
to the trustee of a trust for the exclusive benefit of one or more charitable
organizations described in Section 170(b)(1)(A) and 170(c) of the Code (the
"Charitable Beneficiary"). The trustee of the trust will be deemed to own the
Excess Stock for the benefit of the Charitable Beneficiary on the date of the
violative transfer to the original transferee-stockholder. Any dividend or
distribution paid to the original transferee-stockholder of
22
Excess Stock prior to our discovery that capital stock has been transferred in
violation of the provisions of the Charter shall be repaid to the trustee upon
demand. Any dividend or distribution authorized and declared but unpaid shall
be rescinded as void ab initio with respect to the original
transferee-stockholder and shall instead be paid to the trustee of the trust
for the benefit of the Charitable Beneficiary. Any vote cast by an original
transferee-stockholder of shares of capital stock constituting Excess Stock
prior to the discovery by us that shares of capital stock have been
transferred in violation of the provisions of the Charter shall be rescinded
as void ab initio. While the Excess Stock is held in trust, the original
transferee-stockholder will be deemed to have given an irrevocable proxy to
the trustee to vote the capital stock for the benefit of the Charitable
Beneficiary. The trustee of the trust may transfer the interest in the trust
representing the Excess Stock to any person whose ownership of the shares of
capital stock converted into Excess Stock would be permitted under the
Ownership Limit. If the transfer is made, the interest of the Charitable
Beneficiary shall terminate and the proceeds of the sale shall be payable to
the original transferee-stockholder and to the Charitable Beneficiary as
described herein. The original transferee-stockholder shall receive the lesser
of (1) the price paid by the original transferee-stockholder for the shares of
capital stock that were converted into Excess Stock or, if the original
transferee-stockholder did not give value for the shares (e.g., the stock was
received through a gift, devise or other transaction), the average closing
price for the class of shares from which the shares of capital stock were
converted for the ten trading days immediately preceding the sale or gift, and
(2) the price received by the trustee from the sale or other disposition of
the Excess Stock held in trust. The trustee may reduce the amount payable to
the original transferee-stockholder by the amount of dividends and
distributions relating to the shares of Excess Stock which have been paid to
the original transferee-stockholder and are owed by the original
transferee-stockholder to the trustee. Any proceeds in excess of the amount
payable to the original transferee-stockholder shall be paid by the trustee to
the Charitable Beneficiary. Any liquidation distributions relating to Excess
Stock shall be distributed in the same manner as proceeds of a sale of Excess
Stock. If the foregoing transfer restrictions are determined to be void or
invalid by virtue of any legal decision, statute, rule or regulations, then
the original transferee-stockholder of any shares of Excess Stock may be
deemed, at our option, to have acted as our agent in acquiring the shares of
Excess Stock and to hold the shares of Excess Stock for us.
In addition, we will have the right, for a period of 90 days during the
time any shares of Excess Stock are held in trust, to purchase all or any
portion of the shares of Excess Stock at the lesser of (i) the price initially
paid for the shares by the original transferee-stockholder, or if the original
transferee-stockholder did not give value for the shares (e.g., the shares
were received through a gift, devise or other transaction), the average
closing price for the class of stock from which the shares of Excess Stock
were converted for the ten trading days immediately preceding the sale or
gift, and (ii) the average closing price for the class of stock from which the
shares of Excess Stock were converted for the ten trading days immediately
preceding the date we elect to purchase the shares. We may reduce the amount
payable to the original transferee-stockholder by the amount of dividends and
distributions relating to the shares of Excess Stock which have been paid to
the original transferee-stockholder and are owed by the original
transferee-stockholder to the trustee. We may pay the amount of the reductions
to the trustee for the benefit of the Charitable Beneficiary. The 90-day
period begins on the later date of which notice is received of the violative
transfer if the original transferee-stockholder gives notice to us of the
transfer or, if
23
no notice is given, the date the Board of Directors determines that a
violative transfer has been made.
These restrictions will not preclude settlement of transactions through
the New York Stock Exchange.
All certificates representing shares of stock will bear a legend
referring to the restrictions described above.
Each stockholder shall upon demand be required to disclose to us in
writing any information with respect to the direct, indirect and constructive
ownership of our capital stock as the Board of Directors deems necessary to
comply with the provisions of the Code applicable to REITs, to comply with the
requirements of any taxing authority or governmental agency or to determine
any compliance.
The Ownership Limit may have the effect of delaying, deferring or
preventing a change in control of the Company unless the Board of Directors
determines that maintenance of REIT status is no longer in our best interests.
FEDERAL INCOME TAX CONSIDERATIONS
Based on various assumptions and factual representations made by us
regarding our operations, in the opinion of Sidley Austin Brown & Wood LLP,
our counsel, commencing with our taxable year ended December 31, 1995, we have
been organized in conformity with the requirements for qualification as a REIT
under the Code, and our proposed method of operating will enable us to meet
the requirements for qualification and taxation as a REIT. Our qualification
depends upon our ability to meet the various requirements imposed under the
Code through actual operations, as discussed below. Sidley Austin Brown & Wood
LLP will not review our operations and no assurance can be given that actual
operations will meet these requirements. The opinion of Sidley Austin Brown &
Wood LLP is not binding on the IRS or any court. The opinion of Sidley Austin
Brown & Wood LLP is based upon existing law, Internal Revenue Service (the
"IRS") regulations and currently published administrative positions of the IRS
and judicial decisions, which are subject to change either prospectively or
retroactively.
The provisions of the Code pertaining to REITs are highly technical and
complex. The following is a brief and general summary of certain provisions
that currently govern us and our stockholders' federal income tax treatment.
For the particular provisions that govern us and our stockholders' federal
income tax treatment, reference is made to Sections 856 through 860 of the
Code and the regulations thereunder. The following summary is qualified in its
entirety by reference.
Under the Code, if certain requirements are met in a taxable year, a REIT
generally will not be subject to federal income tax with respect to income
that it distributes to its stockholders. If we fail to qualify during any
taxable year as a REIT, unless certain relief provisions are available, it
will be subject to tax (including any applicable alternative minimum tax) on
its taxable income at regular corporate rates, which could have a material
adverse effect upon its stockholders. See "Risk Factors-Risks of Failure to
Qualify as a REIT."
24
In any year in which we qualify to be taxed as a REIT, distributions made
to our stockholders out of current or accumulated earnings and profits will be
taxed to stockholders as ordinary income except that distributions of net
capital gains designated by us as capital gain dividends will be taxed as
long-term capital gain income to the stockholders. To the extent that
distributions exceed current and accumulated earnings and profits, they will
constitute a return of capital, rather than dividend or capital gain income,
and will reduce the basis for the stockholder's common stock or preferred
stock with respect to which the distribution is paid. To the extent that
distributions exceed the stockholder's basis, the excess will be taxed in the
same manner as gain from the sale of that common stock or preferred stock. For
purposes of determining whether a distribution on common stock or preferred
stock is out of current or accumulated earnings and profits, our earnings and
profits will be allocated first to preferred stock and then to common stock.
Beginning in 1998, we may elect to retain long-term capital gains and pay
corporate-level income tax on them and treat the retained gains as if they had
been distributed to stockholders. In this case, each stockholder would include
in income, as long-term capital gain, its proportionate share of the
undistributed gains and would be deemed to have paid its proportionate share
of the tax paid by us with respect thereto. In addition, the basis for a
stockholder's common stock or preferred stock would be increased by the amount
of the undistributed long-term capital gain included in its income, less the
amount of the tax it is deemed to have paid with respect thereto.
Legislation enacted in 1999 contains several tax provisions regarding
REITs, including a reduction of the annual distribution requirement for REIT
taxable income from 95% to 90%. The legislation also changed the 10% voting
securities test under current law to a 10% vote or value test. Thus, subject
to certain exceptions, a REIT will not be allowed to own more than 10% of the
vote or value of the outstanding securities of any issuer (other than a
qualified REIT subsidiary or another REIT). The new 10% value test will not
apply to certain straight-debt securities. An exception to both the 10% vote
and 10% value tests, which will also be an exception to the 5% asset test,
will allow a REIT to own any or all of the securities of a "taxable REIT
subsidiary." A taxable REIT subsidiary will be able to perform non-customary
services for tenants of a REIT without disqualifying rents received from such
tenants for purposes of the REIT's gross income tests and will also be able to
undertake third-party management and development activities as well as
non-real-estate-related activities. A taxable REIT subsidiary will be taxed as
a regular C corporation but will be subject to "earnings stripping"
limitations on the deductibility of interest paid to its REIT. In addition, a
REIT will be subject to a 100% excise tax on certain excess amounts to ensure
an arm's-length relationship between the REIT and its taxable REIT
subsidiaries. No more than 20% of a REIT's total assets will be allowed to
consist of securities of taxable REIT subsidiaries.
The foregoing provisions became applicable to us as of January 1, 2001,
subject to grandfather rules with respect to the 10% value test as well as a
transition period for the tax-free conversion of existing corporate
subsidiaries into taxable REIT subsidiaries.
Investors are urged to consult their own tax advisors with respect to the
appropriateness of an investment in the securities offered hereby and with
respect to the tax consequences arising under federal law and the laws of any
state, municipality or other taxing jurisdiction, including tax consequences
resulting from the investor's own tax characteristics. In particular, foreign
investors should consult their own tax advisors concerning the tax
consequences of an
25
investment in us, including the possibility of United States income tax
withholding on our distributions.
LEGAL MATTERS
The validity of the issuance of the Class A common stock covered by this
prospectus (and certain legal matters described under "Federal Income Tax
Considerations") will be passed upon for us by Sidley Austin Brown & Wood LLP,
New York, New York.
EXPERTS
The consolidated financial statements and schedule of the Company
appearing in our Annual Report (Form 10-K) for the year ended December 31,
2000, have been audited by Ernst & Young LLP, independent auditors, as set
forth in their report thereon included therein and incorporated herein by
reference. Such consolidated financial statements and schedule are
incorporated herein by reference in reliance upon such report given on the
authority of such firm as experts in accounting and auditing.
26
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following sets forth the estimated expenses in connection with the
issuance and distribution of the Registrant's securities being registered
hereby, other than underwriting discounts and commissions, all of which will
be borne by us:
Securities and Exchange Commission registration fee...... $ 18,737
Printing and engraving expenses.......................... 5,000
Legal fees and expenses.................................. 25,000
Accounting fees and expenses............................. 12,000
Miscellaneous............................................ 5,000
--------
Total.................................................... $ 65,737
Item 15. Indemnification of Directors and Officers
The MGCL, permits a Maryland corporation to include in its Charter a
provision limiting the liability of its directors and officers to the company
and its stockholders for money damages except for liability resulting from (a)
actual receipt of an improper benefit or profit in money, property or services
or (b) active and deliberate dishonesty established by a final judgment as
being material to the cause of action. Our Charter contains such a provision
which eliminates such liability to the maximum extent permitted by Maryland
law.
Our Charter authorizes us, to the maximum extent permitted by Maryland
law, to obligate ourselves to indemnify and to pay or reimburse reasonable
expenses in advance of final disposition of a proceeding to (a) any present or
former director or officer or (b) any individual who, while a director and at
our request, serves or has served another company, real estate investment
trust, partnership, joint venture, trust, employee benefit plan or any other
enterprise as a director, officer, partner or trustee of such company, real
estate investment trust, partnership, joint venture, trust, employee benefit
plan or other enterprise and who is made a party to the proceeding by reason
of his or her service in that capacity. Our Bylaws obligate us, to the maximum
extent permitted by Maryland law, to indemnify and to pay or reimburse
reasonable expenses in advance of final disposition of a proceeding to (a) any
present or former director or officer who is made a party to the proceeding by
reason of his service in that capacity or (b) any individual who, while a
director and at our request, serves or has served another company, real estate
investment trust, partnership, joint venture, trust, employee benefit plan or
any other enterprise as a director, officer, partner or trustee of such
company, real estate investment trust, partnership, joint venture, trust,
employee benefit plan or other enterprise and who is made a party to the
proceeding by reason of his service in that capacity. Our Charter and Bylaws
also permit us to indemnify and advance expenses to any person who served our
predecessor in any of the capacities described above and to any employee or
agent of us or our predecessor.
The MGCL requires a company (unless its charter provides otherwise, which
our Charter does not) to indemnify a director or officer who has been
successful, on the merits or otherwise,
27
in the defense of any proceeding to which he is made a party by reason of his
service in that capacity. The MGCL permits a company to indemnify its present
and former directors and officers, among others, against judgments, penalties,
fines, settlements and reasonable expenses actually incurred by them in
connection with any proceeding to which they may be made a party by reason of
their service in those or other capacities unless it is established that (a)
the act or omission of the director or officer was material to the matter
giving rise to the proceeding and (i) was committed in bad faith or (ii) was
the result of active and deliberate dishonesty, (b) the director or officer
actually received an improper personal benefit in money, property or services
or (c) in the case of any criminal proceeding, the director or officer had
reasonable cause to believe that the act or omission was unlawful. However,
under the MGCL, a Maryland corporation may not indemnify for an adverse
judgment in a suit by or in the right of the company or for a judgment of
liability on the basis that personal benefit was improperly received, unless
in either case a court orders indemnification and then only for expenses. In
addition, the MGCL permits a company to advance reasonable expenses, upon the
company's receipt of (a) a written affirmation by the director or officer of
his good faith belief that he has met the standard of conduct necessary for
indemnification by us and (b) a written statement by or on his behalf to repay
the amount paid or reimbursed by us if it shall ultimately be determined that
the standard of conduct was not met.
We have entered into indemnification agreements with each of our
executive officers and directors. The indemnification agreements require,
among other matters, that we indemnify our executive officers and directors to
the fullest extent permitted by law and advance to the executive officers and
directors all related expenses, subject to reimbursement if it is subsequently
determined that indemnification is not permitted. Under these agreements, we
must also indemnify and advance all expenses incurred by executive officers
and directors seeking to enforce their rights under the indemnification
agreements and may cover executive officers and directors under our directors'
and officers' liability insurance. Although indemnification agreements offer
substantially the same scope of coverage afforded the Bylaws, they provide
greater assurance to directors and executive officers that indemnification
will be available, because, as contracts, they cannot be modified unilaterally
in the future by the Board of Directors or the stockholders to eliminate the
rights they provide.
The Partnership Agreement of the Operating Partnership contains
provisions indemnifying its partners and their officers and directors to the
fullest extent permitted by the Delaware Limited Partnership Act.
Item 16. Exhibits
4.1 -- Amended and Restated Articles of Incorporation(1)
4.2 -- Amended and Restated By-laws of Registrant(2)
4.3 -- Articles Supplementary of the Registrant Establishing and Fixing the
Rights and Preferences of a Series of Shares of Preferred Stock
filed with the Maryland State Department of Assessments and Taxation
on April 9, 1998(3)
28
4.4 -- Articles Supplementary of the Registrant Establishing and Fixing the
Rights and Preferences of a Class of Shares of Common Stock filed
with the Maryland State Department of Assessments and Taxation on
May 24, 1999(4)
4.5 -- Articles Supplementary of the Registrant Establishing and Fixing the
Rights and Preferences of a Series of Shares of Preferred Stock
filed with the Maryland State Department of Assessments and Taxation
on May 28, 1999(5)
4.6 -- Articles of Amendment of the Registrant filed with the Maryland
State Department of Assessments and Taxation on January 4, 2000(4)
4.7 -- Articles Supplementary of the Registrant filed with the Maryland
State Department of Assessments and Taxation on January 11, 2000(4)
4.8 -- Form of Class A common stock certificate(6)
5 -- Opinion of Sidley Austin Brown & Wood LLP as to the legality of the
Class A common stock
8 -- Opinion of Sidley Austin Brown & Wood LLP as to tax matters*
23.1 -- Consent of Sidley Austin Brown & Wood LLP (included in Exhibit 5)
23.2 -- Consent of Ernst & Young LLP
24 -- Power of attorney (included on the signature page of this
Registration Statement)
---------------
* To be filed by amendment.
(1) Previously filed as an exhibit to the Company's Registration Statement on
Form S-11 (No. 333-1280) and incorporated herein by reference.
(2) Previously filed as an exhibit to the Company's Form 10-K filed with the
SEC on March 21, 2001 and incorporated herein by reference.
(3) Previously filed as an exhibit to the Company's Form 8-K report filed
with the SEC on March 1, 1999 and incorporated herein by reference.
(4) Previously filed as an exhibit to the Company's Form 10-K filed with
the SEC on March 17, 2000.
(5) Previously filed as an exhibit to the Company's Form 8-K report filed with
the SEC on June 7, 1999 and incorporated herein by reference.
(6) Previously filed as an exhibit to the Company's Registration Statement on
Form S-11 (No. 33-84324) and incorporated herein by reference.
Item 17. Undertakings
(a) The Registrant hereby undertakes:
29
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to the Registration Statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the Registration Statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than
a 20% change in the maximum aggregate offering price set forth
in the "Calculation of Registration Fee" table in the effective
registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement.
Provided, however, that paragraphs (1)(i) and (1)(ii) do not
apply if the information required to be included in a post-
effective amendment by those paragraphs is contained in periodic
reports filed by the Registrant pursuant to Section 13 or 15(d)
of the Exchange Act that are incorporated by reference in the
Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof; and
(3) (a) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) The Registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act, each filing of the Registrant's annual
report pursuant to Section 13(a) or 15(d) of the Exchange Act (and, where
applicable, each filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Exchange Act) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers, partners and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed
30
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer, partner or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer, partner or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
31
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Reckson
Associates Realty Corp. certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form S-3 and has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the Township of Huntington, State
of New York, on May 17, 2001.
RECKSON ASSOCIATES REALTY CORP.
By: /s/ Scott H. Rechler
-----------------------------------
Scott H. Rechler
President
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Scott H. Rechler, Mitchell D. Rechler
and Michael Maturo or any one of them, his or her attorneys-in-fact and
agents, each with full power of substitution and resubstitution for him or her
in any and all capacities, to sign any or all amendments or post-effective
amendments to this registration statement or a registration statement prepared
in accordance with Rule 462 of the Securities Act of 1933, as amended, and to
file the same, with exhibits thereto and other documents in connection
herewith or in connection with the registration of the offered securities
under the Securities Exchange Act of 1934, as amended, with the Securities and
Exchange Commission, granting unto each of such attorneys-in-fact and agents
full power to do and perform each and every act and thing requisite and
necessary in connection with such matters and hereby ratifying and confirming
all that each of such attorneys-in-fact and agents or his or her substitutes
may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Donald J. Rechler Chairman of the Board, Co-Chief Executive Officer May 17, 2001
------------------------------- and Director (Principal Executive Officer)
Donald J. Rechler
/s/ Scott H. Rechler President, Co-Chief Executive Officer and Director May 17, 2001
-------------------------------
Scott H. Rechler
/s/ Michael Maturo Executive Vice President, Treasurer and Chief May 17, 2001
------------------------------- Financial Officer (Principal Financial Officer and
Michael Maturo Principal Accounting Officer)
/s/ Roger M. Rechler Vice-Chairman of the Board and Director May 17, 2001
-------------------------------
Roger M. Rechler
/s/ Mitchell D. Rechler Co-Chief Operating Officer and Director May 17, 2001
-------------------------------
Mitchell D. Rechler
/s/ Harvey R. Blau Director May 17, 2001
-------------------------------
Harvey R. Blau
/s/ Leonard Feinstein Director May 17, 2001
-------------------------------
Leonard Feinstein
/s/ Herve A. Kevenides Director May 17, 2001
-------------------------------
Herve A. Kevenides
/s/ John V.N. Klein Director May 17, 2001
-------------------------------
John V.N. Klein
/s/ Lewis S. Ranieri Director May 17, 2001
-------------------------------
Lewis S. Ranieri
/s/ Conrad D. Stephenson Director May 17, 2001
-------------------------------
Conrad D. Stephenson
32
Exhibit Index
Exhibits Description Page
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5 -- Opinion of Sidley Austin Brown & Wood LLP as to the legality of the Class A common stock
23.1 -- Consent of Sidley Austin Brown & Wood LLP (included in Exhibit 5)
23.2 -- Consent of Ernst & Young LLP
24 -- Power of attorney (included on the signature page of this Registration Statement)
33