As filed with the Securities and Exchange Commission on September 22, 2003
Registration 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
BRANDYWINE REALTY TRUST
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(Exact name of registrant as specified in its charter)
Maryland 23-2413352
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(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
401 Plymouth Road
Plymouth Meeting, Pennsylvania 19462
(610) 325-5600
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(Address, including zip code, and telephone number, including area
code, of Registrant's principal executive offices)
Gerard H. Sweeney
President and Chief Executive Officer
401 Plymouth Road
Plymouth Meeting, Pennsylvania 19462
(610) 325-5600
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(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copy to:
Michael H. Friedman, Esquire
Pepper Hamilton LLP
3000 Two Logan Square
Philadelphia, Pennsylvania 19103-2799
(215) 981-4000
_______________
Approximate date of commencement of proposed sale to the public: As
soon as possible after the effective date of this Registration Statement and
from time to time as determined by market conditions.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. |_|
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, please check the following box. |X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. |_|
If delivery of the Prospectus is expected to be made pursuant to Rule
434, please check the following box. |_|
CALCULATION OF REGISTRATION FEE
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Title of Shares to be Registered Amount to be Proposed Maximum Proposed Maximum Amount of
Registered Price Per Share (1) Aggregate Offering Registration Fee
Price (1)
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Common Shares of Beneficial 8,554,245 $ 25.425 $ 217,491,679 $ 17,595.08
Interest, par value $.01 per share
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(1) Determined in accordance with Rule 457(c) under the Securities Act of
1933 based on the average of the high and low reported sales prices per
share on the New York Stock Exchange on September 18, 2003.
This Registration Statement includes two Prospectuses: one Prospectus
for the resale of up to 4,875,000 Common Shares of Beneficial Interest issuable
upon conversion of 8.75% Series B Senior Convertible Preferred Shares of
Beneficial Interest and upon exercise of Warrants by the holder of the Series B
Senior Convertible Preferred Shares, and another Prospectus for the resale of up
to 3,679,245 Common Shares of Beneficial Interest that may be issued upon
redemption of units of limited partnership interest of Brandywine Operating
Partnership, L.P. by the holder of the units.
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The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the SEC, acting pursuant to said Section 8(a), may
determine.
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The information in this Prospectus is not complete and may be changed. The
selling shareholder 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.
Preliminary Prospectus dated September 22, 2003
Subject to Completion
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BRANDYWINE REALTY TRUST
4,875,000 Common Shares of Beneficial Interest
================================================================================
The person identified in this Prospectus, whom we refer to as the
"Selling Shareholder," may use this Prospectus to offer and sell up to 4,875,000
of our Common Shares of beneficial interest from time to time. We are
registering these Common Shares for offer and sale as required under the terms
of a registration rights agreement between the Selling Shareholder and us. Our
registration of the offered Common Shares does not mean that the Selling
Shareholder will offer or sell any of the Common Shares. We will receive no
proceeds of any sales of the offered Common Shares by the Selling Shareholder,
but we will incur expenses in connection with the offering.
The Selling Shareholder may sell the offered Common Shares in public or
private transactions, on or off the New York Stock Exchange, at prevailing
market prices or at privately negotiated prices. The Selling Shareholder may
sell the offered Common Shares directly or through agents or broker-dealers
acting as principal or agent, or in a distribution by underwriters.
Our Common Shares are listed on the New York Stock Exchange under the
trading symbol "BDN."
To assist us in qualifying as a real estate investment trust for
federal income tax purposes, our Declaration of Trust provides that, without an
exemption, no shareholder or group of affiliated shareholders may own more than
9.8% in value of our outstanding Common Shares.
Investing in the offered Common Shares involves risks. You should
carefully read the risk factors described in this Prospectus and in our Annual
Report on Form 10-K filed on March 27, 2003, which is incorporated by reference
in this Prospectus.
_________________
You should read this Prospectus, the documents that are incorporated by
reference in this Prospectus and any Prospectus supplement carefully before you
decide to invest. You should not assume that the information in this Prospectus
is accurate as of any date other than the date on the front of this document.
________________
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
accuracy or adequacy of this Prospectus. Any representation to the contrary is a
criminal offense.
The date of this Prospectus is [ ], 2003.
TABLE OF CONTENTS
Page
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ABOUT THIS PROSPECTUS.............................................................................................1
WHERE YOU CAN FIND MORE INFORMATION...............................................................................1
FORWARD-LOOKING STATEMENTS........................................................................................3
RISK FACTORS......................................................................................................3
INFORMATION ABOUT US AND THE SELLING SHAREHOLDER..................................................................3
USE OF PROCEEDS...................................................................................................4
DESCRIPTION OF SHARES OF BENEFICIAL INTEREST......................................................................5
PROVISIONS OF MARYLAND LAW AND OF OUR DECLARATION OF TRUST AND BYLAWS.............................................9
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES...................................................................12
SELLING SHAREHOLDER..............................................................................................13
PLAN OF DISTRIBUTION.............................................................................................13
EXPERTS..........................................................................................................15
LEGAL MATTERS....................................................................................................15
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ABOUT THIS PROSPECTUS
This Prospectus is part of a registration statement on Form S-3 that we
filed with the Securities and Exchange Commission under the Securities Act of
1933. This Prospectus and any accompanying Prospectus supplement do not contain
all of the information included in the registration statement. For further
information, we refer you to the registration statement, including its exhibits,
filed with the SEC. Statements contained in this Prospectus and any accompanying
Prospectus supplement about the contents of any document are not necessarily
complete. If SEC rules require that a document be filed as an exhibit to the
registration statement, please see such document for a complete description of
these matters. You should not assume that the information in this Prospectus or
any Prospectus supplement is accurate as of any date other than the date on the
front of each document.
This Prospectus provides you with a general description of the offered
Common Shares. Each time the Selling Shareholder sells any of the offered Common
Shares to you, the Selling Shareholder will provide you with this Prospectus and
a Prospectus supplement, if applicable, that will contain specific information
about the terms of the offering. The Prospectus supplement also may add, update
or change any information contained in this Prospectus. You should read both
this Prospectus and any Prospectus supplement together with additional
information described under the heading "Where You Can Find More Information"
below.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports and other information
with the SEC. You may read and copy materials that we have filed with the SEC,
including the registration statement, at the following locations:
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 233 Broadway Citicorp Center
Room 1024 New York, NY 10279 500 West Madison Street
Washington, D.C. 20549 Suite 1400
Chicago, IL 60661-2511
You may obtain information on the operation of the SEC's Public
Reference Rooms by calling the SEC at 1-800-SEC-0330.
The SEC also maintains an Internet web site that contains reports,
proxy statements and other information regarding issuers, including Brandywine
Realty Trust, that file electronically with the SEC. The address of that site is
http://www.sec.gov. Further, you may inspect reports, proxy statements and other
information concerning Brandywine Realty Trust at the offices of the New York
Stock Exchange, which are located at 20 Broad Street, New York, New York 10005.
The SEC allows us to "incorporate by reference" the information we file
with it, which means that we can disclose important information to you by
referring you to another document filed separately with the SEC. The information
incorporated by reference is considered to be part of this Prospectus, and
information we file later with the SEC will be deemed to automatically update
and supersede this information. We incorporate by reference the documents listed
below, which we have previously filed with the SEC and which are considered part
of this Prospectus, and any future filings made with the SEC prior to the
termination of this offering under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934. We also incorporate by reference any filings
made under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of
1934 after the date of the initial registration statement and prior to
effectiveness of the registration statement. These filings contain important
information about us.
Report Filed Date of Filing
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File No. 1-9106:
Annual Report on Form 10-K for the year Filed on March 27, 2003
ended December 31, 2002
Quarterly Report on Form 10-Q for the quarter Filed on May 14, 2003
ended March 31, 2003
Quarterly Report on Form 10-Q for the quarter Filed on August 13, 2003
ended June 30, 2003
Current Report on Form 8-K Filed on February 28, 2003
Current Report on Form 8-K Filed on April 25, 2003
Current Report on Form 8-K Filed on June 12, 2003
Current Report on Form 8-K Filed on June 13, 2003
Current Report on Form 8-K Filed on June 25, 2003
Current Report on Form 8-K Filed on July 25, 2003
Current Report on Form 8-K Filed on September 18, 2003
Form 8-A Filed October 14, 1997
You can obtain copies of any of the documents incorporated by reference
in this document from us or through the SEC or the SEC's web site described
above. Documents incorporated by reference are available from us, without
charge, excluding all exhibits unless specifically incorporated by reference as
an exhibit to this Prospectus. You may obtain documents incorporated by
reference in this document by writing us at the following address or calling us
at the telephone number listed below:
BRANDYWINE REALTY TRUST
401 Plymouth Road
Suite 500
Plymouth Meeting, PA 19462
Attention: General Counsel
Telephone: (610) 325-5600
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FORWARD-LOOKING STATEMENTS
Some of the information included or incorporated by reference in this
Prospectus contains forward-looking statements, including statements that are
not historical or factual. We intend these forward-looking statements to be
covered by the safe harbor provisions for forward-looking statements contained
in the Private Securities Litigation Reform Act of 1995 and we are including
this paragraph for purposes of complying with these safe harbor provisions. The
forward-looking statements include statements regarding our intent, belief or
expectations. You can identify these statements by the use of terminology such
as "may," "will," "expect," "believe," "intend," "plan," "estimate," "should"
and other comparable terms. In addition, we, through our senior management, from
time to time make forward-looking oral and written public statements concerning
our expected future operations and other developments.
Although forward-looking statements reflect our good faith beliefs and
best judgment based upon current information, they are not guarantees of future
performance and are subject to known and unknown risks and uncertainties. Actual
results may differ materially from the expectations contained in the
forward-looking statements as a result of various factors. Such factors include,
but are not limited to, the risks identified under the caption "Risk Factors" in
our Annual Report on Form 10-K for the year ended December 31, 2002.
RISK FACTORS
You should carefully consider the "Risk Factors" in our Annual Report
on Form 10-K for the fiscal year ended December 31, 2002 before deciding to
invest in our Common Shares.
INFORMATION ABOUT US AND THE SELLING SHAREHOLDER
General
We, Brandywine Realty Trust, were formed in 1986 as a Maryland real
estate investment trust, or REIT. We are self-administered and self-managed and
engage in acquiring, developing, redeveloping, leasing and managing office and
industrial properties located predominantly in the Mid-Atlantic region. We
operate in a manner intended to qualify as a REIT under the Internal Revenue
Code.
At June 30, 2003, we owned a portfolio of 209 office properties, 27
industrial facilities and one mixed-use property that contained an aggregate of
approximately 16.2 million net rentable square feet. At June 30, 2003, we also
owned approximately 425 acres of undeveloped land. In addition, at June 30,
2003, we held economic interests in 10 real estate ventures formed with third
parties to develop commercial properties. We own all of our assets through our
interest in Brandywine Operating Partnership, L.P.
Our executive offices are located at 401 Plymouth Road, Plymouth
Meeting, Pennsylvania 19462 and our telephone number is (610) 325-5600. We have
an internet web address at http://www.brandywinerealty.com. Information included
or referred to on our website is not a part of this prospectus.
Selling Shareholder
In 1999, we sold to Five Arrows Realty Securities III L.L.C. ("Five
Arrows" or the "Selling Shareholder") 4,375,000 Series B Preferred Shares. As
part of that transaction, we also issued Five Arrows warrants exercisable on or
before April 19, 2006 for up to 500,000 Common Shares at an exercise price of
$24.00 per share (the "Warrants"). Each Series B Preferred Share is subject to
conversion into one Common Share. Under certain circumstances, the exercise
price of the Warrants and the conversion ratio of the Series B Preferred Shares
may be adjusted.
We issued the Series B Preferred Shares and Warrants in reliance upon
the exemption from the registration requirements of the Securities Act set forth
in Section 4(2) of such statute. In the transaction, we agreed to file a
registration statement with the SEC covering the resale of the Common Shares
issuable to the Selling Shareholder upon the conversion of the Series B
Preferred Shares or its exercise of the Warrants, and to indemnify the Selling
Shareholder against claims made against it arising out of, among other things,
statements made in the registration statement. Accordingly, we are registering,
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and this Prospectus relates to, the offer and sale by the Selling Shareholder of
the Common Shares to be received by the Selling Shareholder upon the conversion,
in whole or in part, of the Series B Preferred Shares and exercise, in whole or
in part, of the Warrants. The registration of these securities does not
necessarily mean that any of these securities will be offered or sold by the
Selling Shareholder. We have agreed to pay all expenses of this registration.
USE OF PROCEEDS
We will not receive any proceeds from the sale of the Common Shares
covered by this Prospectus. All of the net proceeds from the sale of the Common
Shares will go to the Selling Shareholder.
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DESCRIPTION OF SHARES OF BENEFICIAL INTEREST
The following paragraphs summarize provisions of our shares of
beneficial interest. This is a summary, and does not completely describe our
shares of beneficial interest. For a complete description, we refer you to our
Declaration of Trust and Bylaws.
General
Our Declaration of Trust provides that we are authorized to issue up to
110,000,000 shares of beneficial interest, referred to in this Prospectus as
Shares, consisting of 100,000,000 Common Shares and 10,000,000 Preferred Shares,
par value $.01 per share. Of the Preferred Shares, 750,000 have been designated
as 7.25% Series A Cumulative Convertible Preferred Shares and are referred to in
this Prospectus as the Series A Preferred Shares. An additional 4,375,000
Preferred Shares have been designated as 8.75% Series B Senior Cumulative
Convertible Preferred Shares and are referred to in this Prospectus as the
Series B Preferred Shares. Our Declaration of Trust may generally be amended by
our Board of Trustees, without shareholder approval, to increase or decrease the
aggregate number of authorized Shares of any class except for the Series A
Preferred Shares and Series B Preferred Shares. The authorized Common Shares and
undesignated Preferred Shares are generally available for future issuance
without further action by our shareholders, unless such action is required by
applicable law, the rules of any stock exchange or automated quotation system on
which our securities may be listed or traded or pursuant to the preferential
rights of the Series A Preferred Shares or Series B Preferred Shares. Holders of
Series A Preferred Shares and Series B Preferred Shares have the right to
approve certain additional issuances of Preferred Shares, such as shares that
would rank senior to the Series A or Series B Preferred Shares as to dividends
or liquidation preference.
Both Maryland statutory law governing real estate investment trusts
organized under Maryland law (the "Maryland REIT Law") and our Declaration of
Trust provide that none of our shareholders will be personally liable, by reason
of status as a shareholder, for any of our obligations. Our Bylaws further
provide that we will indemnify any shareholder or former shareholder against any
claim or liability to which such shareholder may become subject by reason of
being or having been a shareholder, and that we shall reimburse each shareholder
who has been successful, on the merits or otherwise, in the defense of a
proceeding to which he has been made a party by reason of status as such for all
reasonable expenses incurred by him in connection with any such claim or
liability.
Our Declaration of Trust provides that, subject to the provisions of
any class or series of Preferred Shares then outstanding and to the mandatory
provisions of applicable law, our shareholders are entitled to vote only on the
following matters: (i) election or removal of trustees; (ii) amendment of the
Declaration of Trust (other than an amendment to increase or decrease the
aggregate number of authorized Shares of any class); (iii) a determination by
the Trust to invest in commodities contracts (other than interest rate futures
intended to hedge us against interest rate risk), engage in securities trading
(as compared to investment) activities or hold properties primarily for sale to
customers in the ordinary course of business; and (iv) our merger with another
entity. Except with respect to these matters, no action taken by our
shareholders at any meeting shall in any way bind our Board of Trustees.
Transfer Agent and Registrar
The transfer agent and registrar for the Common Shares is currently
EquiServe.
Shares
Common Shares of Beneficial Interest
Each outstanding Common Share entitles the holder to one vote on all
matters submitted to a vote of shareholders, including the election of trustees.
There is no cumulative voting in the election of trustees. Subject to (i) the
preferential rights of the Series A Preferred Shares and Series B Preferred
Shares and (ii) such preferential rights as may be granted by our Board of
Trustees in future issuances of additional series of Preferred Shares, holders
of Common Shares are entitled to such distributions as may be authorized and
declared from time to time by our Board of Trustees out of funds legally
available therefor.
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Holders of Common Shares have no conversion, exchange or redemption
rights or preemptive rights to subscribe to any of our securities. All
outstanding Common Shares are fully paid and nonassessable. In the event of any
liquidation, dissolution or winding-up of our affairs, subject to (i) the
preferential rights of the Series A Preferred Shares and Series B Preferred
Shares and (ii) such preferential rights as may be granted by our Board of
Trustees in connection with the future issuances of additional series of
Preferred Shares, holders of Common Shares will be entitled to share ratably in
any of our assets remaining after provision for payment of liabilities to
creditors. All Common Shares have equal dividend, distribution, liquidation and
other rights.
Preferred Shares of Beneficial Interest
The Preferred Shares authorized by our Declaration of Trust may be
issued from time to time in one or more series. Prior to the issuance of
Preferred Shares of each such series, our Board of Trustees is required by the
Maryland REIT Law and our Declaration of Trust to set for each series the terms,
preferences, conversion or other rights, voting powers, restrictions,
limitations as to distributions, qualifications and terms or conditions of
redemption, as are permitted by the Maryland REIT Law. These rights, powers,
restrictions and limitations could include the right to receive specified
distributions and payments on liquidation prior to any such payments being made
to the holders of Common Shares. Under certain circumstances, the issuance of
Preferred Shares could have the effect of delaying, deferring or preventing a
change of control of the Company and may adversely affect the voting and other
rights of the holders of Common Shares. See "Provisions of Maryland Law and of
our Declaration of Trust and Bylaws - Control Share Acquisitions."
Classification or Reclassification of Preferred Shares
Our Declaration of Trust authorizes the trustees to classify or
reclassify, in one or more series, any unissued Preferred Shares by setting or
changing the number of Preferred Shares constituting such series and the
designation, preferences, conversion or other rights, voting powers,
restrictions, limitations as to distributions, qualifications or terms or
conditions of redemption of such Preferred Shares.
Series A Preferred Shares. We currently have 750,000 Series A Preferred
Shares issued and outstanding. Each Series A Preferred Share has a stated value
(the "Stated Value") of $50.00 and is convertible into Common Shares at the
option of the holder at a conversion price (the "Conversion Price") of $28.00.
The Conversion Price will be reduced to $26.50 if the average closing price of
the Common Shares during the 60-trading day period ending on December 31, 2003
is $23.00 or lower. At any time that the average market price of the Common
Shares is equal to or greater than 120% of the Conversion Price for 60
consecutive trading days, we have the right to redeem all or any part of the
outstanding Series A Preferred Shares for an amount in cash equal to the
aggregate Stated Value of the Series A Preferred Shares to be redeemed (plus
accrued and unpaid distributions) or for a number of Common Shares equal to the
aggregate Stated Value of the Series A Preferred Shares to be redeemed divided
by the Conversion Price (plus accrued and unpaid distributions). In addition, at
any time on or after January 2, 2004, we have the right to redeem all or any
part of the outstanding Series A Preferred Shares for an amount in cash equal to
the aggregate Stated Value of the Series A Preferred Shares to be redeemed (plus
accrued and unpaid distributions) or, in the event that the average closing
price of the Common Shares is equal to or greater than 110% of the Conversion
Price for 60 consecutive trading days, for a number of Common Shares equal to
the aggregate Stated Value of the Series A Preferred Shares to be redeemed
divided by the Conversion Price (plus accrued and unpaid distributions). Each
Series A Preferred Share accrues distributions, payable in cash and prior to the
payment of any distribution on the Common Shares, in an amount equal to the
greater of (i) $0.9063 per quarter (equivalent to $3.625 per annum) or (ii) the
cash distributions paid or payable for the most recent quarter on the number of
Common Shares into which a Series A Preferred Share is convertible. The holders
of Series A Preferred Shares have no voting rights except (i) with respect to
actions which would have a material and adverse effect on the rights of such
holders and (ii) in the event quarterly distributions on the Series A Preferred
Shares are in arrears for six or more quarters. In the event the quarterly
distributions are so in arrears, the holders of the Series A Preferred Shares
have the right, voting together as a single class with any other class of our
Preferred Shares ranking on a parity with the Series A Preferred Shares, to
elect two additional members to our Board of Trustees. In the event of any
liquidation, dissolution or winding-up of our affairs, the holders of the Series
A Preferred Shares are entitled to receive from our assets remaining after
provision for payment of liabilities to creditors an amount equal to the
aggregate Stated Value of the Series A Preferred Shares then outstanding
together with any accrued and unpaid distributions thereon prior to the
distribution of any such assets to the holders of the Common Shares.
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Series B Preferred Shares. We currently have 4,375,000 Series B
Preferred Shares issued and outstanding. Distributions on the Series B Preferred
Shares are cumulative from the date of issuance and are payable quarterly at the
greater of (i) $0.525 per share and (ii) the amount of the quarterly
distribution payable on the number of Common Shares into which a Series B
Preferred Share is convertible. The Series B Preferred Shares rank pari passu as
to distributions with the Series A Preferred Shares. We may not pay
distributions on the Common Shares, or other shares that rank junior to the
Series B Preferred Shares as to distributions, until we have paid distributions
on the Series B Preferred Shares. A holder of a Series B Preferred Share may
convert the share into one Common Share at a conversion price of $24.00 per
Common Share. The liquidation value of each Series B Preferred Share equals
$24.00 plus accrued and unpaid distributions. The Series B Preferred Shares rank
pari passu upon liquidation with the Series A Preferred Shares. At any time on
or after April 19, 2004, we may require the conversion of the Series B Preferred
Shares into Common Shares if the Common Shares have traded, during any
consecutive 90-day period following such date, at a price in excess of 130% of
the conversion price and the Common Shares to be issued are freely transferable
and listed on the New York Stock Exchange. We may redeem all of the outstanding
Series B Preferred Shares at any time on or after April 19, 2007 for $24 per
share plus accrued and unpaid distributions. If we experience a change of
control, become closely-held or a pension-held REIT, or fail to qualify as a
REIT, other than through action of Five Arrows Realty Securities III L.L.C.,
Five Arrows may require us to purchase the outstanding Series B Preferred Shares
for $24.48 per share plus accrued and unpaid distributions. Under certain
circumstances, we may, in lieu of making such payment, revise the conversion
ratio so that, based on the then-current market price of the Common Shares, each
Series B Preferred Share will thereafter be convertible into that number of
Common Shares having an aggregate market value equal to at least $28.80. In
certain transactions involving a merger or consolidation as to which holders of
Series B Preferred Shares have a separate voting right, holders who do not vote
in favor of the transaction may require us to redeem their shares for $24.96 per
share plus accrued and unpaid distributions. Five Arrows has the right to vote
on all matters as a single class with holders of Common Shares, and as a
separate class on certain matters affecting the rights of the Series B Preferred
Shares. So long as Five Arrows beneficially owns at least 50% of the outstanding
Series B Preferred Shares, Five Arrows may appoint one trustee to our Board of
Trustees. If we (i) fail to pay distributions on Common Shares equal to at least
$0.32 for two consecutive quarters, (ii) reduce the annual distribution on our
Common Shares to below $1.28 per share, (iii) fail to pay timely distributions
on the Series B Preferred Shares, (iv) are in material default of our credit
facility or (v) fail to maintain a debt service coverage ratio of at least 1.25
or a debt to market capitalization ratio no higher .70, then Five Arrows will
have the right to appoint a second trustee to our Board.
Restrictions on Transfer
For us to qualify as a REIT under the Internal Revenue Code, not more
than 50% in value of our outstanding Shares may be owned, directly or
indirectly, by five or fewer individuals (defined in the Internal Revenue Code
to include certain entities such as qualified pension plans) during the last
half of a taxable year and Shares must be beneficially owned by 100 or more
persons during at least 335 days of a taxable year of twelve months (or during a
proportionate part of a shorter taxable year).
Because our Board of Trustees believes it is at present important for
us to continue to qualify as a REIT, our Declaration of Trust, subject to
certain exceptions, contains provisions that restrict the number of Shares that
a person may own and that are designed to safeguard us against an inadvertent
loss of REIT status. In order to prevent any shareholder from owning Shares in
an amount that would cause more than 50% in value of the outstanding Shares to
be held by five or fewer individuals, our Board of Trustees, pursuant to
authority granted in our Declaration of Trust, has passed a resolution that,
subject to certain exceptions, provides that no person may own, or be deemed to
own by virtue of the attribution provisions of the Internal Revenue Code, more
than 9.8% in value of the outstanding Shares. This limitation is referred to in
this Prospectus as the Ownership Limit. Our Board of Trustees, subject to
limitations, retains the authority to effect additional increases to, or
establish exemptions from, the Ownership Limit. Our Board of Trustees, pursuant
to authority granted in our Declaration of Trust, has passed resolutions that
exempt the initial holders of the Series A Preferred Shares and Series B
Preferred Shares and Cohen & Steers Capital Management, Inc. and related persons
from the Ownership Limit, on the condition that, and for so long as, such
holders comply with certain representations, warranties and agreements intended
to ensure that no direct or indirect owner of any of such holders owns more than
9.8% in value of the outstanding Shares.
In addition, pursuant to our Declaration of Trust, no purported
transfer of Shares may be given effect if it would result in ownership of all of
the outstanding Shares by fewer than 100 persons (determined without any
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reference to the rules of attribution) or result in our being "closely held"
within the meaning of Section 856(h) of the Internal Revenue Code. These
restrictions are referred to in this Prospectus as the Ownership Restrictions.
In the event of a purported transfer or other event that would, if effective,
result in the ownership of Shares in violation of the Ownership Limit or the
Ownership Restrictions, such transfer would be deemed void and such Shares
automatically would be exchanged for "Excess Shares" authorized by our
Declaration of Trust, according to rules set forth in our Declaration of Trust,
to the extent necessary to ensure that the purported transfer or other event
does not result in the ownership of Shares in violation of the Ownership Limit
or the Ownership Restrictions.
Holders of Excess Shares are not entitled to voting rights (except to
the extent required by law), dividends or distributions. If, after the purported
transfer or other event resulting in an exchange of Shares for Excess Shares and
prior to the discovery by us of such exchange, dividends or distributions are
paid with respect to Shares that were exchanged for Excess Shares, then such
dividends or distributions would be repayable to us upon demand. While
outstanding, Excess Shares would be held in trust by us for the benefit of the
ultimate transferee of an interest in such trust, as described below. While
Excess Shares are held in trust, an interest in that trust may be transferred by
the purported transferee or other purported holder with respect to such Excess
Shares only to a person whose ownership of the Shares would not violate the
Ownership Limit or the Ownership Restrictions, at which time the Excess Shares
would be exchanged automatically for Shares of the same type and class as the
Shares for which the Excess Shares were originally exchanged. Our Declaration of
Trust contains provisions that are designed to ensure that the purported
transferee or other purported holder of the Excess Shares may not receive in
return for such a transfer an amount that reflects any appreciation in the
Shares for which such Excess Shares were exchanged during the period that such
Excess Shares were outstanding. Any amount received by a purported transferee or
other purported holder in excess of the amount permitted to be received would be
required to be turned over to us.
Our Declaration of Trust also provides that Excess Shares shall be
deemed to have been offered for sale to us, or our designee, which shall have
the right to accept such offer for a period of 90 days after the later of: (i)
the date of the purported transfer or event which resulted in an exchange of
Shares for such Excess Shares; and (ii) the date our Board of Trustees
determines that a purported transfer or other event resulting in an exchange of
Shares for such Excess Shares has occurred if we do not receive notice of any
such transfer. The price at which we may purchase such Excess Shares would be
equal to the lesser of: (i) in the case of Excess Shares resulting from a
purported transfer for value, the price per share in the purported transfer that
caused the automatic exchange for such Excess Shares or, in the case of Excess
Shares resulting from some other event, the market price of such Shares on the
date of the automatic exchange for Excess Shares; or (ii) the market price of
such Shares on the date that we accept the Excess Shares. Any dividend or
distribution paid to a proposed transferee on Excess Shares prior to the
discovery by us that such Shares have been transferred in violation of the
provisions of our Declaration of Trust shall be repaid to us upon our demand. If
the foregoing restrictions are determined to be void or invalid by virtue of any
legal decision, statute, rule or regulation, then the intended transferee or
holder of any Excess Shares may be deemed, at our option, to have acted as our
agent and on our behalf in acquiring or holding such Excess Shares and to hold
such Excess Shares on our behalf.
Our trustees may waive the Ownership Restrictions if evidence
satisfactory to the trustees and our tax counsel or tax accountants is presented
showing that such waiver will not jeopardize our status as a REIT under the
Internal Revenue Code. As a condition of such waiver, our trustees may require
that an intended transferee give written notice to us, furnish such
undertakings, agreements and information as may be required by our trustees
and/or an undertaking from the applicant with respect to preserving our status.
Any transfer of Shares, or any security convertible into Shares that would
create a direct or indirect ownership of Shares in excess of the Ownership Limit
or result in the violation of the Ownership Restrictions, will be void with
respect to the intended transferee and will result in Excess Shares as described
above.
Neither the Ownership Restrictions nor the Ownership Limit will be
removed automatically even if the REIT provisions of the Internal Revenue Code
are changed so as no longer to contain any ownership concentration limitation or
if the ownership concentration limitation is increased. Except as described
above, any change in the Ownership Restrictions would require an amendment to
our Declaration of the Trust. Amendments to our Declaration of Trust generally
require the affirmative vote of holders owning not less than a majority of the
outstanding Shares entitled to vote thereon. In addition to preserving our
status as a REIT, the Ownership Restrictions and the Ownership Limit may have
the effect of precluding an acquisition of control of us without the approval of
our Board of Trustees.
-8-
All persons who own, directly or by virtue of the applicable
attribution provisions of the Internal Revenue Code, more than 4.0% of the value
of any class of outstanding Shares, must file an affidavit with us containing
the information specified in our Declaration of Trust by January 31 of each
year. In addition, each shareholder shall upon demand be required to disclose to
us in writing such information with respect to the direct, indirect and
constructive ownership of Shares as our trustees deem necessary to comply with
the provisions of the Internal Revenue Code applicable to REITs, to comply with
the requirements of any taxing authority or governmental agency or to determine
any such compliance.
The Ownership Limit could have the effect of delaying, deferring or
preventing a transaction or a change in our control that might involve a premium
price for the Common Shares or otherwise be in the best interest of our
shareholders.
All certificates representing Shares that are hereafter issued will
bear a legend referring to the restrictions and limitations described above.
PROVISIONS OF MARYLAND LAW AND OF
OUR DECLARATION OF TRUST AND BYLAWS
The following paragraphs summarize provisions of Maryland law, our
Declaration of Trust and our Bylaws. These paragraphs are a summary, and do not
completely describe Maryland law, our Declaration of Trust or our Bylaws. For a
complete description, we refer you to the Maryland statutes applicable to REITs,
our Declaration of Trust and our Bylaws.
Duration
Under our Declaration of Trust, we have a perpetual term of existence
and will continue perpetually subject to the authority of our Board of Trustees
to terminate our existence and liquidate our assets and subject to termination
pursuant to the Maryland REIT Law.
Board of Trustees
Our Declaration of Trust provides that the number of our trustees shall
not be less than three nor more than 15. Any vacancy, including a vacancy
created by an increase in the number of trustees, may be filled by a majority of
our trustees.
Our trustees generally will each serve for a one-year term. We have
granted to the initial purchaser of Series A Preferred Shares a right to
designate an individual for election to the Board. We have also granted to the
holders of Series B Preferred Shares a right to elect a trustee as well as the
right to elect an additional trustee if we fail to comply with certain
agreements. See "Description of Shares of Beneficial Interest - Preferred Shares
of Beneficial Interest - Series B Preferred Shares."
Our Declaration of Trust generally provides that a trustee may be
removed from office only at a meeting of shareholders. However, a trustee
elected solely by holders of a series of Preferred Shares may be removed only by
the affirmative vote of a majority of the Preferred Shares of that series voting
as a single class.
Business Combinations
Under Maryland law, as applicable to Maryland real estate investment
trusts, certain "business combinations" (including certain mergers,
consolidations, share exchanges, or, in certain circumstances, asset transfers
or issuances or reclassifications of equity securities) between a Maryland real
estate investment trust and an "interested shareholder" or an affiliate of the
interested shareholder are prohibited for five years after the most recent date
on which the interested shareholder becomes an interested shareholder. An
interested shareholder includes a person who beneficially owns, and an affiliate
or associate (as defined under Maryland law) of the trust who, at any time
during the two-year period prior to the date in question, was the beneficial
owner of 10% or more of the voting power of the trust's then outstanding voting
shares. Thereafter, any such business combination must be recommended by the
trustees of such trust and approved by the affirmative vote of at least:
-9-
o 80% of the votes entitled to be cast by holders of
outstanding voting shares of beneficial interest of the
trust voting together as a single voting group; and
o two-thirds of the votes entitled to be cast by holders of
outstanding voting shares of beneficial interest other than
shares held by the interested shareholder with whom or with
whose affiliate the business combination is to be effected
or by the interested shareholder's affiliates or
associates, voting together as a single voting group.
These super-majority voting requirements do not apply if the trust's
common shareholders receive a minimum price (as defined under Maryland law) for
their shares and the consideration is received in cash or in the same form as
previously paid by the interested shareholder for its shares. These provisions
also do not apply to business combinations that are approved or exempted by the
Board of Trustees of the trust prior to the time that the interested shareholder
becomes an interested shareholder. An amendment to a Maryland REIT's declaration
of trust electing not to be subject to the foregoing requirements must be
approved by the affirmative vote of at least 80% of the votes entitled to be
cast by holders of outstanding voting shares of beneficial interest of the
trust, voting together as a single voting group, and two-thirds of the votes
entitled to be cast by holders of outstanding voting shares of beneficial
interest other than shares of beneficial interest held by interested
shareholders. Any such amendment shall not be effective until 18 months after
the vote of shareholders and does not apply to any business combination of the
trust with an interested shareholder that has such status on the date of the
shareholder vote. Our Board of Trustees has previously exempted any business
combinations involving Safeguard Scientifics, Inc., Pennsylvania State
Employees' Retirement System, LF Strategic Realty Investors L.P., Morgan Stanley
Asset Management Inc., Five Arrows Realty Securities III L.L.C. and Gerard H.
Sweeney and their respective affiliates and associates from the business
combination provisions summarized above and, consequently, the five-year
prohibition and the super-majority vote requirements will not apply to business
combinations between us and any of them.
The business combination statute could have the effect of delaying,
deferring or preventing offers to acquire us and of increasing the difficulty of
consummating any such transaction.
Control Share Acquisitions
Under Maryland law, as applicable to Maryland real estate investment
trusts, "control shares" of a Maryland real estate investment trust acquired in
a "control share acquisition" have no voting rights except to the extent
approved by a vote of two-thirds of the votes entitled to be cast on the matter
by shareholders, excluding shares owned by the acquiror, by officers or by
trustees who are employees of the trust in question. "Control shares" are voting
shares of beneficial interest which, if aggregated with all other shares
previously acquired by such acquiror or in respect of which the acquiror is able
to exercise or direct the exercise of voting power (except solely by virtue of a
revocable proxy), would entitle the acquiror to exercise the voting power in the
election of trustees within one of the following ranges of voting power:
o one-tenth or more but less than one-third,
o one-third or more but less than a majority, or
o a majority or more of all voting power.
Control shares do not include shares the acquiring person is then
entitled to vote as a result of having previously obtained shareholder approval.
A "control share acquisition" means the acquisition of control shares, subject
to certain exceptions.
A person who has made or proposes to make a control share acquisition,
upon satisfaction of certain conditions (including an undertaking to pay
expenses), may compel the trust's board of trustees to call a special meeting of
shareholders to be held within 50 days of demand to consider the voting rights
of the shares. If no request for a meeting is made, the trust may itself present
the question at any shareholders meeting.
-10-
If voting rights are not approved at the meeting or if the acquiring
person does not deliver an acquiring person statement as required by the
statute, then, subject to certain conditions and limitations, the trust may
redeem any or all of the control shares, except those for which voting rights
have previously been approved, for fair value determined, without regard to the
absence of voting rights for the control shares, as of the date of the last
control share acquisition by the acquiror or of any meeting of shareholders at
which the voting rights of such shares are considered and not approved. If
voting rights for control shares are approved at a shareholders meeting and the
acquiror becomes entitled to vote a majority of the shares entitled to vote, all
other shareholders may exercise appraisal rights. The fair value of the shares
as determined for purposes of such appraisal rights may not be less than the
highest price per share paid by the acquiror in the control share acquisition,
and certain limitations and restrictions otherwise applicable to the exercise of
dissenters' rights do not apply in the context of a control share acquisition.
The control share acquisition statute does not apply to shares acquired
in a merger, consolidation or share exchange if the trust is a party to the
transaction, or to acquisitions approved or exempted by the declaration of trust
or bylaws of the trust. Pursuant to the statute, we have exempted any and all
acquisitions of Shares by Safeguard Scientifics, Inc., Pennsylvania State
Employees' Retirement System and Morgan Stanley Asset Management Inc., and any
of their respective current or future affiliates or associates from these
control share provisions. As a result, they will be able to possess voting power
not generally available to other persons.
The control share acquisition statute could have the effect of
delaying, deferring or preventing offers to acquire us and of increasing the
difficulty of consummating any such transaction.
Amendment to the Declaration of Trust
Our Declaration of Trust may be amended only by the affirmative vote of
the holders of not less than a majority of the Shares then outstanding and
entitled to vote thereon, except for the provisions of our Declaration of Trust
relating to (i) increases or decreases in the aggregate number of Shares of any
class (other than the Series A Preferred Shares and Series B Preferred Shares),
which may generally be made by our Board of Trustees without shareholder
approval and (ii) the Maryland General Corporation Law provisions on business
combinations, amendment of which requires the affirmative vote of the holders of
not less than 80% of the Shares then outstanding and entitled to vote. In
addition, if our Board of Trustees determines, with the advice of counsel, that
any one or more of the provisions of our Declaration of Trust conflict with the
Maryland REIT Law, the Internal Revenue Code or other applicable Federal or
state law(s), the conflicting provisions of our Declaration of Trust shall be
deemed never to have constituted a part of our Declaration of Trust, even
without any amendment thereof.
Termination of the Company and REIT Status
Subject to the rights of any outstanding Preferred Shares and to the
provisions of the Maryland REIT Law, our Declaration of Trust permits our Board
of Trustees to terminate our existence and to discontinue our election to be
taxed as a REIT.
Transactions Between the Company and its Trustee or Officers
Our Declaration of Trust provides that any contract or transaction
between us and one or more of our trustees, officers, employees or agents must
be approved by a majority of our trustees who have no interest in the contract
or transaction.
Limitation of Liability and Indemnification
The Maryland REIT Law permits a Maryland real estate investment trust
to include in its Declaration of Trust a provision limiting the liability of its
trustees and officers to the trust and its shareholders for money damages.
However, a Maryland real estate investment trust may not eliminate liability
resulting from actual receipt of an improper benefit or profit in money,
property or services. Also, liability resulting from active and deliberate
dishonesty may not be eliminated if a final judgment establishes that the
-11-
dishonesty is material to the cause of action. Our Declaration of Trust contains
such a provision which eliminates such liability to the maximum extent permitted
by the Maryland REIT Law.
Our Bylaws require us to indemnify, without requiring a preliminary
determination of the ultimate entitlement to indemnification, (a) any present or
former trustee, officer or shareholder who has been successful, on the merits or
otherwise, in the defense of a proceeding to which he was made a party by reason
of such status, against reasonable expenses incurred by him in connection with
the proceeding; (b) any present or former trustee or officer against any claim
or liability to which he may become subject by reason of such status unless it
is established that (i) his act or omission was committed in bad faith or was
the result of active and deliberate dishonesty, (ii) he actually received an
improper personal benefit in money, property or services or (iii) in the case of
a criminal proceeding, he had reasonable cause to believe that his act or
omission was unlawful; and (c) each shareholder or former shareholder against
any claim or liability to which he may be subject by reason of such status as a
shareholder or former shareholder. However, under Maryland law, a Maryland
corporation may not indemnify for an adverse judgment in a suit by or in the
right of the corporation or for a judgment of liability on the basis that the
act or omission was material to the matter and was committed in bad faith, the
result of active and deliberate dishonesty or a personal benefit was improperly
received, or, if in a criminal proceeding, there was reasonable cause to believe
the act or omission was unlawful. In addition, our Bylaws require us to pay or
reimburse, in advance of final disposition of a proceeding, reasonable expenses
incurred by a present or former trustee, officer or shareholder made a party to
a proceeding by reason of his status as a trustee, officer or shareholder
provided that, in the case of a trustee or officer, we shall have received (i) a
written affirmation by the trustee or officer of his good faith belief that he
has met the applicable standard of conduct necessary for our indemnification as
authorized by the Bylaws and (ii) a written undertaking by him or on his behalf
to repay the amount paid or reimbursed by us if it shall ultimately be
determined that the applicable standard of conduct was not met. Our Bylaws also
(i) permit us, with the approval of our trustees, to provide indemnification and
payment or reimbursement of expenses to a present or former trustee, officer or
shareholder who served our predecessor in such capacity, and to any of our
employees or agents or our predecessors, (ii) provide that any indemnification
or payment or reimbursement of the expenses permitted by our Bylaws shall be
furnished in accordance with the procedures provided for indemnification and
payment or reimbursement of expenses under Section 2-418 of the Maryland General
Corporation Law for directors of Maryland corporations and (iii) permit us to
provide such other and further indemnification or payment or reimbursement of
expenses as may be permitted by the Maryland General Corporation Law for
directors of Maryland corporations.
The limited partnership agreement of the Operating Partnership also
provides for indemnification by the Operating Partnership of us, as general
partner, and our trustees and officers for any costs, expenses or liabilities
incurred by us or them by reason of any act performed by us or them for or on
behalf of the Operating Partnership or us; provided that such person's actions
were taken in good faith and in the belief that such conduct was in the best
interests of the Operating Partnership and that such person was not guilty of
fraud, willful misconduct or gross negligence.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to our trustees and officers pursuant to the foregoing
provisions or otherwise, we have been advised that, although the validity and
scope of the governing statute has not been tested in court, in the opinion of
the Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
addition, indemnification may be limited by state securities laws.
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Our Declaration of Trust and Bylaws contain provisions to indemnify our
trustees and officers against liability incurred by them as a result of their
services as trustees and officers. We have been informed that in the opinion of
the Securities and Exchange Commission, our indemnification of our trustees,
officers or controlling persons for liabilities arising under the Securities Act
of 1933, as amended, is against public policy as expressed in the Securities
Act, and therefore is unenforceable.
-12-
SELLING SHAREHOLDER
Common Shares
We are registering 4,875,000 Common Shares for resale by the Selling
Shareholder if and to the extent the Selling Shareholder elects to convert all
or a portion of its Series B Preferred Shares into Common Shares or to exercise
all or a portion of its Warrants to acquire Common Shares. Following any
issuance upon such conversion or exercise, the Selling Shareholder may resell
the Common Shares covered by this Prospectus as provided under the section
entitled "Plan of Distribution" and in any applicable Prospectus supplement.
The following table provides the name of, and the number of Common
Shares beneficially owned by, the Selling Shareholder as of September 1, 2003.
Since the Selling Shareholder may sell all, some or none of its Common Shares,
no estimate can be made of the aggregate number of Common Shares that are to be
offered and sold hereunder or that will be owned by the Selling Shareholder upon
completion of the offering to which this Prospectus relates.
Number of Percentage of
Number of Common Number of Common Shares Common Shares
Shares Common Shares Beneficially Beneficially
Beneficially Owned Offered Owned After Owned After
Name Prior to Offering Hereby the Offering the Offering
---- ------------------ ------------- ------------- -------------
Five Arrows Realty Securities III L.L.C.(1) 4,875,000(2) 4,875,000 0 0%
____________________
(1) The address of Five Arrows Realty Securities III L.L.C. is 1251 Avenue of
the Americas, 44th Floor, New York, New York 10020.
(2) Assumes that all of the Series B Preferred Shares are converted into Common
Shares, and includes 500,000 Common Shares issuable upon exercise of
Warrants.
PLAN OF DISTRIBUTION
This Prospectus relates to the offer and sale from time to time of up
to 4,375,000 Common Shares that may be issued to the Selling Shareholder upon
conversion of Series B Preferred Shares, and up to 500,000 Common Shares that
may be issued to the Selling Shareholder upon exercise of Warrants. We are
registering the offer and sale of the Common Shares by the Selling Shareholder,
but the registration of these Common Shares does not necessarily mean that any
or all of such Common Shares will be offered or sold by the Selling Shareholder.
We will not receive any proceeds from the sale of the Common Shares by
the Selling Shareholder. "Selling Shareholder" includes affiliates, donees,
transferees, distributees and pledgees selling Common Shares received from the
named Selling Shareholder after the date of this Prospectus.
The securities covered by this Prospectus may be offered and sold at
various times by the Selling Shareholder. The Selling Shareholder will act
independently of us in making decisions with respect to the securities covered
by this Prospectus and may offer these securities in one or more of the
following transactions:
o on any national securities exchange or quotation service on which
the securities may be listed or quoted at the time of sale;
o in the over-the-counter market;
o in transactions other than on such exchange or in the
over-the-counter market;
-13-
o in brokerage transactions;
o in block trades;
o through put or call options;
o in privately negotiated transactions;
o in connection with short sales;
o through underwriters, brokers or dealers (who may act as agent or
principal);
o by pledge to secure debts and other obligations;
o in open market sales in reliance upon Rule 144 under the Securities
Act of 1933;
o in connection with the writing of non-traded and exchange-traded
call options, in hedge transactions and in settlement of other
transactions in standardized or over-the-counter options; or
o in a combination of any of the above transactions.
The Selling Shareholder may sell securities covered by this Prospectus
at market prices prevailing at the time of sale, at prices related to such
prevailing market prices, at negotiated prices or at fixed prices. The Selling
Shareholder reserves the sole right to accept and, together with any agent of
the Selling Shareholder, to reject in whole or in part any proposed purchase of
its securities covered by this Prospectus.
Securities covered by this Prospectus may be sold from time to time to
purchasers directly by the Selling Shareholder or to or through underwriters,
dealers or agents, who may receive compensation in the form of discounts,
concessions or commissions from the Selling Shareholder and/or the purchasers of
securities for whom they may act as an agent (which compensation as to a
particular broker-dealer might be in excess of customary commissions). These
broker-dealers may act either as agent of the Selling Shareholder or as a
principal for the broker-dealer's own account. These transactions may include
transactions in which the same broker-dealer acts as an agent on both sides of
the trade. The Selling Shareholder and any dealers or agents that participate in
the distribution of securities covered by this Prospectus may be deemed to be
"underwriters" within the meaning of Section 2(11) of the Securities Act of
1933, and any profit on the sale of securities covered by this Prospectus and
any commissions received by any dealers or agents might be deemed to be
underwriting commissions under the Securities Act of 1933.
Because the Selling Shareholder may be deemed to be an "underwriter"
within the meaning of Section 2(11) of the Securities Act of 1933, the Selling
Shareholder will be subject to the prospectus delivery requirements of the
Securities Act of 1933. We have informed the Selling Shareholder that the
anti-manipulation provisions of Regulation M promulgated under the Securities
Exchange Act of 1934 may apply to its sales in the market. However, the
registration of the securities registered by this Prospectus shall not be deemed
an admission by the Selling Shareholder that it is or that anyone acting on its
behalf is an "underwriter."
At a time any particular offer of securities covered by this Prospectus
is made by the Selling Shareholder, a supplement to this Prospectus, if
required, will be distributed setting forth its name and the names of any
dealers or agents and any commissions and other terms constituting compensation
from the Selling Shareholder and any other required information.
Under an agreement with the Selling Shareholder, we will pay
substantially all of the expenses incident to the registration of the resale of
the securities covered by this Prospectus. Under an agreement entered into with
the Selling Shareholder, the Selling Shareholder and any underwriter the Selling
Shareholder may utilize will be indemnified by us against certain civil
liabilities, including liabilities under the Securities Act of 1933.
-14-
EXPERTS
The consolidated financial statements and schedules of Brandywine
Realty Trust as of December 31, 2002 and 2001, and for each of the years in the
three-year period ended December 31, 2002, have been incorporated by reference
herein and in the Registration Statement in reliance upon the report of KPMG
LLP, independent accountants, incorporated by reference herein, and upon the
authority of said firm as experts in accounting and auditing.
KPMG's report dated February 26, 2003, except as to Notes 9, 12, 13 and
21 which are dated as of June 30, 2003, refers to the fact that effective
January 1, 2002, the Company adopted Statement of Financial Accounting Standards
No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." Also,
KPMG's report refers to the fact that effective January 1, 2003, the Company
adopted Statement of Financial Accounting Standards No. 145, "Rescission of No.
4, 44, and 64, Amendment of FASB No. 13, and Technical Corrections."
LEGAL MATTERS
The validity of the securities offered has been passed upon for us by
Pepper Hamilton LLP, Philadelphia, Pennsylvania.
-15-
================================================================================
PROSPECTUS
______________________
BRANDYWINE REALTY TRUST
4,875,000 Common Shares
[ ], 2003
================================================================================
No dealer, salesperson or other individual has been authorized to give
any information or to make any representations not contained in this Prospectus
in connection with the offering covered by this Prospectus. If given or made,
such information or representations must not be relied upon as having been
authorized by us or the Selling Shareholder. This Prospectus does not constitute
an offer to sell, or a solicitation of an offer to buy, the Common Shares, in
any jurisdiction where, or to any person to whom, it is unlawful to make any
such offer or solicitation. Neither the delivery of this Prospectus nor any
offer or sale made hereunder shall, under any circumstances, create an
implication that there has not been any change in the facts set forth in this
Prospectus or in our affairs since the date hereof.
================================================================================
The information in this Prospectus is not complete and may be changed. The
selling shareholder 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.
Preliminary Prospectus dated September 22, 2003
Subject to Completion
================================================================================
BRANDYWINE REALTY TRUST
3,679,245 Common Shares of Beneficial Interest
================================================================================
The person identified in this Prospectus, whom we refer to as the
"Selling Shareholder," may use this Prospectus to offer and sell up to 3,679,245
of our Common Shares of beneficial interest from time to time. We are
registering these Common Shares for offer and sale as required under the terms
of a registration rights agreement between the Selling Shareholder and us. Our
registration of the offered Common Shares does not mean that the Selling
Shareholder will offer or sell any of the Common Shares. We will receive no
proceeds of any sales of the offered Common Shares by the Selling Shareholder,
but we will incur expenses in connection with the offering.
The Selling Shareholder may sell the offered Common Shares in public or
private transactions, on or off the New York Stock Exchange, at prevailing
market prices or at privately negotiated prices. The Selling Shareholder may
sell the offered Common Shares directly or through agents or broker-dealers
acting as principal or agent, or in a distribution by underwriters.
Our Common Shares are listed on the New York Stock Exchange under the
trading symbol "BDN."
To assist us in qualifying as a real estate investment trust for
federal income tax purposes, our Declaration of Trust provides that, without an
exemption, no shareholder or group of affiliated shareholders may own more than
9.8% in value of our outstanding Common Shares.
Investing in the offered Common Shares involves risks. You should
carefully read the risk factors described in this Prospectus and in our Annual
Report on Form 10-K filed on March 28, 2003, which is incorporated by reference
in this Prospectus.
_________________
You should read this Prospectus, the documents that are incorporated by
reference in this Prospectus and any Prospectus supplement carefully before you
decide to invest. You should not assume that the information in this Prospectus
is accurate as of any date other than the date on the front of this document.
________________
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these securities or
passed upon the accuracy or adequacy of this Prospectus. Any representation
to the contrary is a criminal offense.
The date of this Prospectus is [ ], 2003.
TABLE OF CONTENTS
Page
ABOUT THIS PROSPECTUS........................................................1
WHERE YOU CAN FIND MORE INFORMATION..........................................1
FORWARD-LOOKING STATEMENTS...................................................3
RISK FACTORS.................................................................3
INFORMATION ABOUT US AND THE SELLING SHAREHOLDER.............................3
USE OF PROCEEDS..............................................................4
DESCRIPTION OF SHARES OF BENEFICIAL INTEREST.................................5
PROVISIONS OF MARYLAND LAW AND OF OUR DECLARATION OF TRUST AND BYLAWS........9
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES..............................12
SELLING SHAREHOLDER.........................................................13
PLAN OF DISTRIBUTION........................................................13
EXPERTS.....................................................................15
LEGAL MATTERS...............................................................15
-i-
ABOUT THIS PROSPECTUS
This Prospectus is part of a registration statement on Form S-3 that we
filed with the Securities and Exchange Commission under the Securities Act of
1933. This Prospectus and any accompanying Prospectus supplement do not contain
all of the information included in the registration statement. For further
information, we refer you to the registration statement, including its exhibits,
filed with the SEC. Statements contained in this Prospectus and any accompanying
Prospectus supplement about the contents of any document are not necessarily
complete. If SEC rules require that a document be filed as an exhibit to the
registration statement, please see such document for a complete description of
these matters. You should not assume that the information in this Prospectus or
any Prospectus supplement is accurate as of any date other than the date on the
front of each document.
This Prospectus provides you with a general description of the offered
Common Shares. Each time the Selling Shareholder sells any of the offered Common
Shares to you, the Selling Shareholder will provide you with this Prospectus and
a Prospectus supplement, if applicable, that will contain specific information
about the terms of the offering. The Prospectus supplement also may add, update
or change any information contained in this Prospectus. You should read both
this Prospectus and any Prospectus supplement together with additional
information described under the heading "Where You Can Find More Information"
below.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports and other information
with the SEC. You may read and copy materials that we have filed with the SEC,
including the registration statement, at the following locations:
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 233 Broadway Citicorp Center
Room 1024 New York, NY 10279 500 West Madison Street
Washington, D.C. 20549 Suite 1400
Chicago, IL 60661-2511
You may obtain information on the operation of the SEC's Public
Reference Rooms by calling the SEC at 1-800-SEC-0330.
The SEC also maintains an Internet web site that contains reports,
proxy statements and other information regarding issuers, including Brandywine
Realty Trust, that file electronically with the SEC. The address of that site is
http://www.sec.gov. Further, you may inspect reports, proxy statements and other
information concerning Brandywine Realty Trust at the offices of the New York
Stock Exchange, which are located at 20 Broad Street, New York, New York 10005.
The SEC allows us to "incorporate by reference" the information we file
with it, which means that we can disclose important information to you by
referring you to another document filed separately with the SEC. The information
incorporated by reference is considered to be part of this Prospectus, and
information we file later with the SEC will be deemed to automatically update
and supersede this information. We incorporate by reference the documents listed
below, which we have previously filed with the SEC and which are considered part
of this Prospectus, and any future filings made with the SEC prior to the
termination of this offering under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934. We also incorporate by reference any filings
made under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of
1934 after the date of the initial registration statement and prior to
effectiveness of the registration statement. These filings contain important
information about us.
Report Filed Date of Filing
File No. 1-9106:
Annual Report on Form 10-K for the year Filed on March 27, 2003
ended December 31, 2002
Quarterly Report on Form 10-Q for the quarter Filed on May 14, 2003
ended March 31, 2003
Quarterly Report on Form 10-Q for the quarter Filed on August 13, 2003
ended June 30, 2003
Current Report on Form 8-K Filed on February 28, 2003
Current Report on Form 8-K Filed on April 25, 2003
Current Report on Form 8-K Filed on June 12, 2003
Current Report on Form 8-K Filed on June 13, 2003
Current Report on Form 8-K Filed on June 25, 2003
Current Report on Form 8-K Filed on July 25, 2003
Current Report on Form 8-K Filed on September 18, 2003
Form 8-A Filed October 14, 1997
You can obtain copies of any of the documents incorporated by reference
in this document from us or through the SEC or the SEC's web site described
above. Documents incorporated by reference are available from us, without
charge, excluding all exhibits unless specifically incorporated by reference as
an exhibit to this Prospectus. You may obtain documents incorporated by
reference in this document by writing us at the following address or calling us
at the telephone number listed below:
BRANDYWINE REALTY TRUST
401 Plymouth Road
Suite 500
Plymouth Meeting, PA 19462
Attention: General Counsel
Telephone: (610) 325-5600
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FORWARD-LOOKING STATEMENTS
Some of the information included or incorporated by reference in this
Prospectus contains forward-looking statements, including statements that are
not historical or factual. We intend these forward-looking statements to be
covered by the safe harbor provisions for forward-looking statements contained
in the Private Securities Litigation Reform Act of 1995 and we are including
this paragraph for purposes of complying with these safe harbor provisions. The
forward-looking statements include statements regarding our intent, belief or
expectations. You can identify these statements by the use of terminology such
as "may," "will," "expect," "believe," "intend," "plan," "estimate," "should"
and other comparable terms. In addition, we, through our senior management, from
time to time make forward-looking oral and written public statements concerning
our expected future operations and other developments.
Although forward-looking statements reflect our good faith beliefs and
best judgment based upon current information, they are not guarantees of future
performance and are subject to known and unknown risks and uncertainties. Actual
results may differ materially from the expectations contained in the
forward-looking statements as a result of various factors. Such factors include,
but are not limited to, the risks identified under the caption "Risk Factors" in
our Annual Report on Form 10-K for the year ended December 31, 2002.
RISK FACTORS
You should carefully consider the "Risk Factors" in our Annual Report
on Form 10-K for the fiscal year ended December 31, 2002 before deciding to
invest in our Common Shares.
INFORMATION ABOUT US AND THE SELLING SHAREHOLDER
General
We, Brandywine Realty Trust, were formed in 1986 as a Maryland real
estate investment trust, or REIT. We are self-administered and self-managed and
engage in acquiring, developing, redeveloping, leasing and managing office and
industrial properties located predominantly in the Mid-Atlantic region. We
operate in a manner intended to qualify as a REIT under the Internal Revenue
Code.
At June 30, 2003, we owned a portfolio of 209 office properties, 27
industrial facilities and one mixed-use property that contained an aggregate of
approximately 16.2 million net rentable square feet. At June 30, 2003, we also
owned approximately 425 acres of undeveloped land. In addition, at June 30,
2003, we held economic interests in 10 real estate ventures formed with third
parties to develop commercial properties. We own all of our assets through our
interest in Brandywine Operating Partnership, L.P. (the "Operating
Partnership").
Our executive offices are located at 401 Plymouth Road, Plymouth
Meeting, Pennsylvania 19462 and our telephone number is (610) 325-5600. We have
an internet web address at http://www.brandywinerealty.com. Information included
or referred to on our website is not a part of this prospectus.
Selling Shareholder
In 1998 and 1999, the Operating Partnership issued 1,950,000 of its
Series B Preferred Units of limited partnership interest to Commonwealth
Atlantic Operating Properties Inc. (the "Selling Shareholder") and certain of
its affiliates in exchange for interests in real estate and real estate-related
assets. As of the date of this Prospectus, the Selling Shareholder owns all of
the Series B Preferred Units. Each Series B Preferred Unit has a stated value of
$50.00 and is convertible into Class A Units at a conversion price of $28.00;
provided that if the average market price of our Common Shares during the
60-trading day period ending on December 31, 2003 is $23.00 or lower, the
conversion price declines to $26.50. Each Class A Unit may be tendered by the
holder to the Operating Partnership for cash equal to the fair market value of a
Common Share at the time of redemption. At our option, we may purchase the Class
A Units for cash equal to the value of an equivalent number of Common Shares or
we may redeem the Class A Units for an equivalent number of Common Shares and
become the owner of the redeemed Class A Units.
-3-
We issued the Series B Units in reliance upon the exemption from the
registration requirements of the Securities Act set forth in Section 4(2) of
such statute. In the transaction, we agreed to file a registration statement
with the SEC covering the resale of the Common Shares issuable to the Selling
Shareholder upon the conversion of the Class A Units received upon conversion of
the Series B Preferred Units, and to indemnify the Selling Shareholder against
claims made against it arising out of, among other things, statements made in
the registration statement. Accordingly, we are registering, and this Prospectus
relates to, the offer and sale by the Selling Shareholder of the Common Shares
to be received by the Selling Shareholder upon the conversion, in whole or in
part, of the Series B Preferred Units into Class A Units and the conversion of
the Class A Units into Common Shares. The registration of these securities does
not necessarily mean that any of these securities will be offered or sold by the
Selling Shareholder. We have agreed to pay all expenses of this registration.
USE OF PROCEEDS
We will not receive any proceeds from the sale of the Common Shares
covered by this Prospectus. All of the net proceeds from the sale of the Common
Shares will go to the Selling Shareholder.
-4-
DESCRIPTION OF SHARES OF BENEFICIAL INTEREST
The following paragraphs summarize provisions of our shares of
beneficial interest. This is a summary, and does not completely describe our
shares of beneficial interest. For a complete description, we refer you to our
Declaration of Trust and Bylaws.
General
Our Declaration of Trust provides that we are authorized to issue up to
110,000,000 shares of beneficial interest, referred to in this Prospectus as
Shares, consisting of 100,000,000 Common Shares and 10,000,000 Preferred Shares,
par value $.01 per share. Of the Preferred Shares, 750,000 have been designated
as 7.25% Series A Cumulative Convertible Preferred Shares and are referred to in
this Prospectus as the Series A Preferred Shares. An additional 4,375,000
Preferred Shares have been designated as 8.75% Series B Senior Cumulative
Convertible Preferred Shares and are referred to in this Prospectus as the
Series B Preferred Shares. Our Declaration of Trust may generally be amended by
our Board of Trustees, without shareholder approval, to increase or decrease the
aggregate number of authorized Shares of any class except for the Series A
Preferred Shares and Series B Preferred Shares. The authorized Common Shares and
undesignated Preferred Shares are generally available for future issuance
without further action by our shareholders, unless such action is required by
applicable law, the rules of any stock exchange or automated quotation system on
which our securities may be listed or traded or pursuant to the preferential
rights of the Series A Preferred Shares or Series B Preferred Shares. Holders of
Series A Preferred Shares and Series B Preferred Shares have the right to
approve certain additional issuances of Preferred Shares, such as shares that
would rank senior to the Series A or Series B Preferred Shares as to dividends
or liquidation preference.
Both Maryland statutory law governing real estate investment trusts
organized under Maryland law (the "Maryland REIT Law") and our Declaration of
Trust provide that none of our shareholders will be personally liable, by reason
of status as a shareholder, for any of our obligations. Our Bylaws further
provide that we will indemnify any shareholder or former shareholder against any
claim or liability to which such shareholder may become subject by reason of
being or having been a shareholder, and that we shall reimburse each shareholder
who has been successful, on the merits or otherwise, in the defense of a
proceeding to which he has been made a party by reason of status as such for all
reasonable expenses incurred by him in connection with any such claim or
liability.
Our Declaration of Trust provides that, subject to the provisions of
any class or series of Preferred Shares then outstanding and to the mandatory
provisions of applicable law, our shareholders are entitled to vote only on the
following matters: (i) election or removal of trustees; (ii) amendment of the
Declaration of Trust (other than an amendment to increase or decrease the
aggregate number of authorized Shares of any class); (iii) a determination by
the Trust to invest in commodities contracts (other than interest rate futures
intended to hedge us against interest rate risk), engage in securities trading
(as compared to investment) activities or hold properties primarily for sale to
customers in the ordinary course of business; and (iv) our merger with another
entity. Except with respect to these matters, no action taken by our
shareholders at any meeting shall in any way bind our Board of Trustees.
Transfer Agent and Registrar
The transfer agent and registrar for the Common Shares is currently
EquiServe.
Shares
Common Shares of Beneficial Interest
Each outstanding Common Share entitles the holder to one vote on all
matters submitted to a vote of shareholders, including the election of trustees.
There is no cumulative voting in the election of trustees. Subject to (i) the
preferential rights of the Series A Preferred Shares and Series B Preferred
Shares and (ii) such preferential rights as may be granted by our Board of
Trustees in future issuances of additional series of Preferred Shares, holders
of Common Shares are entitled to such distributions as may be authorized and
declared from time to time by our Board of Trustees out of funds legally
available therefor.
-5-
Holders of Common Shares have no conversion, exchange or redemption
rights or preemptive rights to subscribe to any of our securities. All
outstanding Common Shares are fully paid and nonassessable. In the event of any
liquidation, dissolution or winding-up of our affairs, subject to (i) the
preferential rights of the Series A Preferred Shares and Series B Preferred
Shares and (ii) such preferential rights as may be granted by our Board of
Trustees in connection with the future issuances of additional series of
Preferred Shares, holders of Common Shares will be entitled to share ratably in
any of our assets remaining after provision for payment of liabilities to
creditors. All Common Shares have equal dividend, distribution, liquidation and
other rights.
Preferred Shares of Beneficial Interest
The Preferred Shares authorized by our Declaration of Trust may be
issued from time to time in one or more series. Prior to the issuance of
Preferred Shares of each such series, our Board of Trustees is required by the
Maryland REIT Law and our Declaration of Trust to set for each series the terms,
preferences, conversion or other rights, voting powers, restrictions,
limitations as to distributions, qualifications and terms or conditions of
redemption, as are permitted by the Maryland REIT Law. These rights, powers,
restrictions and limitations could include the right to receive specified
distributions and payments on liquidation prior to any such payments being made
to the holders of Common Shares. Under certain circumstances, the issuance of
Preferred Shares could have the effect of delaying, deferring or preventing a
change of control of the Company and may adversely affect the voting and other
rights of the holders of Common Shares. See "Provisions of Maryland Law and of
our Declaration of Trust and Bylaws - Control Share Acquisitions."
Classification or Reclassification of Preferred Shares
Our Declaration of Trust authorizes the trustees to classify or
reclassify, in one or more series, any unissued Preferred Shares by setting or
changing the number of Preferred Shares constituting such series and the
designation, preferences, conversion or other rights, voting powers,
restrictions, limitations as to distributions, qualifications or terms or
conditions of redemption of such Preferred Shares.
Series A Preferred Shares. We currently have 750,000 Series A Preferred
Shares issued and outstanding. Each Series A Preferred Share has a stated value
(the "Stated Value") of $50.00 and is convertible into Common Shares at the
option of the holder at a conversion price (the "Conversion Price") of $28.00.
The Conversion Price will be reduced to $26.50 if the average closing price of
the Common Shares during the 60-trading day period ending on December 31, 2003
is $23.00 or lower. At any time that the average market price of the Common
Shares is equal to or greater than 120% of the Conversion Price for 60
consecutive trading days, we have the right to redeem all or any part of the
outstanding Series A Preferred Shares for an amount in cash equal to the
aggregate Stated Value of the Series A Preferred Shares to be redeemed (plus
accrued and unpaid distributions) or for a number of Common Shares equal to the
aggregate Stated Value of the Series A Preferred Shares to be redeemed divided
by the Conversion Price (plus accrued and unpaid distributions). In addition, at
any time on or after January 2, 2004, we have the right to redeem all or any
part of the outstanding Series A Preferred Shares for an amount in cash equal to
the aggregate Stated Value of the Series A Preferred Shares to be redeemed (plus
accrued and unpaid distributions) or, in the event that the average closing
price of the Common Shares is equal to or greater than 110% of the Conversion
Price for 60 consecutive trading days, for a number of Common Shares equal to
the aggregate Stated Value of the Series A Preferred Shares to be redeemed
divided by the Conversion Price (plus accrued and unpaid distributions). Each
Series A Preferred Share accrues distributions, payable in cash and prior to the
payment of any distribution on the Common Shares, in an amount equal to the
greater of (i) $0.9063 per quarter (equivalent to $3.625 per annum) or (ii) the
cash distributions paid or payable for the most recent quarter on the number of
Common Shares into which a Series A Preferred Share is convertible. The holders
of Series A Preferred Shares have no voting rights except (i) with respect to
actions which would have a material and adverse effect on the rights of such
holders and (ii) in the event quarterly distributions on the Series A Preferred
Shares are in arrears for six or more quarters. In the event the quarterly
distributions are so in arrears, the holders of the Series A Preferred Shares
have the right, voting together as a single class with any other class of our
Preferred Shares ranking on a parity with the Series A Preferred Shares, to
elect two additional members to our Board of Trustees. In the event of any
liquidation, dissolution or winding-up of our affairs, the holders of the Series
A Preferred Shares are entitled to receive from our assets remaining after
provision for payment of liabilities to creditors an amount equal to the
aggregate Stated Value of the Series A Preferred Shares then outstanding
together with any accrued and unpaid distributions thereon prior to the
distribution of any such assets to the holders of the Common Shares.
-6-
Series B Preferred Shares. We currently have 4,375,000 Series B
Preferred Shares issued and outstanding. Distributions on the Series B Preferred
Shares are cumulative from the date of issuance and are payable quarterly at the
greater of (i) $0.525 per share and (ii) the amount of the quarterly
distribution payable on the number of Common Shares into which a Series B
Preferred Share is convertible. The Series B Preferred Shares rank pari passu as
to distributions with the Series A Preferred Shares. We may not pay
distributions on the Common Shares, or other shares that rank junior to the
Series B Preferred Shares as to distributions, until we have paid distributions
on the Series B Preferred Shares. A holder of a Series B Preferred Share may
convert the share into one Common Share at a conversion price of $24.00 per
Common Share. The liquidation value of each Series B Preferred Share equals
$24.00 plus accrued and unpaid distributions. The Series B Preferred Shares rank
pari passu upon liquidation with the Series A Preferred Shares. At any time on
or after April 19, 2004, we may require the conversion of the Series B Preferred
Shares into Common Shares if the Common Shares have traded, during any
consecutive 90-day period following such date, at a price in excess of 130% of
the conversion price and the Common Shares to be issued are freely transferable
and listed on the New York Stock Exchange. We may redeem all of the outstanding
Series B Preferred Shares at any time on or after April 19, 2007 for $24 per
share plus accrued and unpaid distributions. If we experience a change of
control, become closely-held or a pension-held REIT, or fail to qualify as a
REIT, other than through action of Five Arrows Realty Securities III L.L.C.,
Five Arrows may require us to purchase the outstanding Series B Preferred Shares
for $24.48 per share plus accrued and unpaid distributions. Under certain
circumstances, we may, in lieu of making such payment, revise the conversion
ratio so that, based on the then-current market price of the Common Shares, each
Series B Preferred Share will thereafter be convertible into that number of
Common Shares having an aggregate market value equal to at least $28.80. In
certain transactions involving a merger or consolidation as to which holders of
Series B Preferred Shares have a separate voting right, holders who do not vote
in favor of the transaction may require us to redeem their shares for $24.96 per
share plus accrued and unpaid distributions. Five Arrows has the right to vote
on all matters as a single class with holders of Common Shares, and as a
separate class on certain matters affecting the rights of the Series B Preferred
Shares. So long as Five Arrows beneficially owns at least 50% of the outstanding
Series B Preferred Shares, Five Arrows may appoint one trustee to our Board of
Trustees. If we (i) fail to pay distributions on Common Shares equal to at least
$0.32 for two consecutive quarters, (ii) reduce the annual distribution on our
Common Shares to below $1.28 per share, (iii) fail to pay timely distributions
on the Series B Preferred Shares, (iv) are in material default of our credit
facility or (v) fail to maintain a debt service coverage ratio of at least 1.25
or a debt to market capitalization ratio no higher .70, then Five Arrows will
have the right to appoint a second trustee to our Board.
Restrictions on Transfer
For us to qualify as a REIT under the Internal Revenue Code, not more
than 50% in value of our outstanding Shares may be owned, directly or
indirectly, by five or fewer individuals (defined in the Internal Revenue Code
to include certain entities such as qualified pension plans) during the last
half of a taxable year and Shares must be beneficially owned by 100 or more
persons during at least 335 days of a taxable year of twelve months (or during a
proportionate part of a shorter taxable year).
Because our Board of Trustees believes it is at present important for
us to continue to qualify as a REIT, our Declaration of Trust, subject to
certain exceptions, contains provisions that restrict the number of Shares that
a person may own and that are designed to safeguard us against an inadvertent
loss of REIT status. In order to prevent any shareholder from owning Shares in
an amount that would cause more than 50% in value of the outstanding Shares to
be held by five or fewer individuals, our Board of Trustees, pursuant to
authority granted in our Declaration of Trust, has passed a resolution that,
subject to certain exceptions, provides that no person may own, or be deemed to
own by virtue of the attribution provisions of the Internal Revenue Code, more
than 9.8% in value of the outstanding Shares. This limitation is referred to in
this Prospectus as the Ownership Limit. Our Board of Trustees, subject to
limitations, retains the authority to effect additional increases to, or
establish exemptions from, the Ownership Limit. Our Board of Trustees, pursuant
to authority granted in our Declaration of Trust, has passed resolutions that
exempt the initial holders of the Series A Preferred Shares and Series B
Preferred Shares and Cohen & Steers Capital Management, Inc. and related persons
from the Ownership Limit, on the condition that, and for so long as, such
holders comply with certain representations, warranties and agreements intended
to ensure that no direct or indirect owner of any of such holders owns more than
9.8% in value of the outstanding Shares.
-7-
In addition, pursuant to our Declaration of Trust, no purported
transfer of Shares may be given effect if it would result in ownership of all of
the outstanding Shares by fewer than 100 persons (determined without any
reference to the rules of attribution) or result in our being "closely held"
within the meaning of Section 856(h) of the Internal Revenue Code. These
restrictions are referred to in this Prospectus as the Ownership Restrictions.
In the event of a purported transfer or other event that would, if effective,
result in the ownership of Shares in violation of the Ownership Limit or the
Ownership Restrictions, such transfer would be deemed void and such Shares
automatically would be exchanged for "Excess Shares" authorized by our
Declaration of Trust, according to rules set forth in our Declaration of Trust,
to the extent necessary to ensure that the purported transfer or other event
does not result in the ownership of Shares in violation of the Ownership Limit
or the Ownership Restrictions.
Holders of Excess Shares are not entitled to voting rights (except to
the extent required by law), dividends or distributions. If, after the purported
transfer or other event resulting in an exchange of Shares for Excess Shares and
prior to the discovery by us of such exchange, dividends or distributions are
paid with respect to Shares that were exchanged for Excess Shares, then such
dividends or distributions would be repayable to us upon demand. While
outstanding, Excess Shares would be held in trust by us for the benefit of the
ultimate transferee of an interest in such trust, as described below. While
Excess Shares are held in trust, an interest in that trust may be transferred by
the purported transferee or other purported holder with respect to such Excess
Shares only to a person whose ownership of the Shares would not violate the
Ownership Limit or the Ownership Restrictions, at which time the Excess Shares
would be exchanged automatically for Shares of the same type and class as the
Shares for which the Excess Shares were originally exchanged. Our Declaration of
Trust contains provisions that are designed to ensure that the purported
transferee or other purported holder of the Excess Shares may not receive in
return for such a transfer an amount that reflects any appreciation in the
Shares for which such Excess Shares were exchanged during the period that such
Excess Shares were outstanding. Any amount received by a purported transferee or
other purported holder in excess of the amount permitted to be received would be
required to be turned over to us.
Our Declaration of Trust also provides that Excess Shares shall be
deemed to have been offered for sale to us, or our designee, which shall have
the right to accept such offer for a period of 90 days after the later of: (i)
the date of the purported transfer or event which resulted in an exchange of
Shares for such Excess Shares; and (ii) the date our Board of Trustees
determines that a purported transfer or other event resulting in an exchange of
Shares for such Excess Shares has occurred if we do not receive notice of any
such transfer. The price at which we may purchase such Excess Shares would be
equal to the lesser of: (i) in the case of Excess Shares resulting from a
purported transfer for value, the price per share in the purported transfer that
caused the automatic exchange for such Excess Shares or, in the case of Excess
Shares resulting from some other event, the market price of such Shares on the
date of the automatic exchange for Excess Shares; or (ii) the market price of
such Shares on the date that we accept the Excess Shares. Any dividend or
distribution paid to a proposed transferee on Excess Shares prior to the
discovery by us that such Shares have been transferred in violation of the
provisions of our Declaration of Trust shall be repaid to us upon our demand. If
the foregoing restrictions are determined to be void or invalid by virtue of any
legal decision, statute, rule or regulation, then the intended transferee or
holder of any Excess Shares may be deemed, at our option, to have acted as our
agent and on our behalf in acquiring or holding such Excess Shares and to hold
such Excess Shares on our behalf.
Our trustees may waive the Ownership Restrictions if evidence
satisfactory to the trustees and our tax counsel or tax accountants is presented
showing that such waiver will not jeopardize our status as a REIT under the
Internal Revenue Code. As a condition of such waiver, our trustees may require
that an intended transferee give written notice to us, furnish such
undertakings, agreements and information as may be required by our trustees
and/or an undertaking from the applicant with respect to preserving our status.
Any transfer of Shares, or any security convertible into Shares that would
create a direct or indirect ownership of Shares in excess of the Ownership Limit
or result in the violation of the Ownership Restrictions, will be void with
respect to the intended transferee and will result in Excess Shares as described
above.
Neither the Ownership Restrictions nor the Ownership Limit will be
removed automatically even if the REIT provisions of the Internal Revenue Code
are changed so as no longer to contain any ownership concentration limitation or
if the ownership concentration limitation is increased. Except as described
above, any change in the Ownership Restrictions would require an amendment to
our Declaration of the Trust. Amendments to our Declaration of Trust generally
require the affirmative vote of holders owning not less than a majority of the
outstanding Shares entitled to vote thereon. In addition to preserving our
status as a REIT, the Ownership Restrictions and the Ownership Limit may have
the effect of precluding an acquisition of control of us without the approval of
our Board of Trustees.
-8-
All persons who own, directly or by virtue of the applicable
attribution provisions of the Internal Revenue Code, more than 4.0% of the value
of any class of outstanding Shares, must file an affidavit with us containing
the information specified in our Declaration of Trust by January 31 of each
year. In addition, each shareholder shall upon demand be required to disclose to
us in writing such information with respect to the direct, indirect and
constructive ownership of Shares as our trustees deem necessary to comply with
the provisions of the Internal Revenue Code applicable to REITs, to comply with
the requirements of any taxing authority or governmental agency or to determine
any such compliance.
The Ownership Limit could have the effect of delaying, deferring or
preventing a transaction or a change in our control that might involve a premium
price for the Common Shares or otherwise be in the best interest of our
shareholders.
All certificates representing Shares that are hereafter issued will
bear a legend referring to the restrictions and limitations described above.
PROVISIONS OF MARYLAND LAW AND OF
OUR DECLARATION OF TRUST AND BYLAWS
The following paragraphs summarize provisions of Maryland law, our
Declaration of Trust and our Bylaws. These paragraphs are a summary, and do not
completely describe Maryland law, our Declaration of Trust or our Bylaws. For a
complete description, we refer you to the Maryland statutes applicable to REITs,
our Declaration of Trust and our Bylaws.
Duration
Under our Declaration of Trust, we have a perpetual term of existence
and will continue perpetually subject to the authority of our Board of Trustees
to terminate our existence and liquidate our assets and subject to termination
pursuant to the Maryland REIT Law.
Board of Trustees
Our Declaration of Trust provides that the number of our trustees shall
not be less than three nor more than 15. Any vacancy, including a vacancy
created by an increase in the number of trustees, may be filled by a majority of
our trustees.
Our trustees generally will each serve for a one-year term. In
connection with a transaction that included issuance of the Series B Preferred
Units, we granted to an affiliate of the Selling Shareholder the right to
designate an individual for election to the Board. We have also granted to the
holders of Series B Preferred Shares a right to elect a trustee as well as the
right to elect an additional trustee if we fail to comply with certain
agreements. See "Description of Shares of Beneficial Interest - Preferred Shares
of Beneficial Interest - Series B Preferred Shares."
Our Declaration of Trust generally provides that a trustee may be
removed from office only at a meeting of shareholders. However, a trustee
elected solely by holders of a series of Preferred Shares may be removed only by
the affirmative vote of a majority of the Preferred Shares of that series voting
as a single class.
Business Combinations
Under Maryland law, as applicable to Maryland real estate investment
trusts, certain "business combinations" (including certain mergers,
consolidations, share exchanges, or, in certain circumstances, asset transfers
or issuances or reclassifications of equity securities) between a Maryland real
estate investment trust and an "interested shareholder" or an affiliate of the
interested shareholder are prohibited for five years after the most recent date
on which the interested shareholder becomes an interested shareholder. An
interested shareholder includes a person who beneficially owns, and an affiliate
or associate (as defined under Maryland law) of the trust who, at any time
during the two-year period prior to the date in question, was the beneficial
owner of 10% or more of the voting power of the trust's then outstanding voting
shares. Thereafter, any such business combination must be recommended by the
trustees of such trust and approved by the affirmative vote of at least:
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o 80% of the votes entitled to be cast by holders of
outstanding voting shares of beneficial interest of the
trust, voting together as a single voting group; and
o two-thirds of the votes entitled to be cast by holders of
outstanding voting shares of beneficial interest other than
shares held by the interested shareholder with whom or with
whose affiliate the business combination is to be effected
or by the interested shareholder's affiliates or associates,
voting together as a single voting group.
These super-majority voting requirements do not apply if the trust's
common shareholders receive a minimum price (as defined under Maryland law) for
their shares and the consideration is received in cash or in the same form as
previously paid by the interested shareholder for its shares. These provisions
also do not apply to business combinations that are approved or exempted by the
Board of Trustees of the trust prior to the time that the interested shareholder
becomes an interested shareholder. An amendment to a Maryland REIT's declaration
of trust electing not to be subject to the foregoing requirements must be
approved by the affirmative vote of at least 80% of the votes entitled to be
cast by holders of outstanding voting shares of beneficial interest of the
trust, voting together as a single voting group, and two-thirds of the votes
entitled to be cast by holders of outstanding voting shares of beneficial
interest other than shares of beneficial interest held by interested
shareholders. Any such amendment shall not be effective until 18 months after
the vote of shareholders and does not apply to any business combination of the
trust with an interested shareholder that has such status on the date of the
shareholder vote. Our Board of Trustees has previously exempted any business
combinations involving Safeguard Scientifics, Inc., Pennsylvania State
Employees' Retirement System, LF Strategic Realty Investors L.P., Morgan Stanley
Asset Management Inc., Five Arrows Realty Securities III L.L.C. and Gerard H.
Sweeney and their respective affiliates and associates from the business
combination provisions summarized above and, consequently, the five-year
prohibition and the super-majority vote requirements will not apply to business
combinations between us and any of them.
The business combination statute could have the effect of delaying,
deferring or preventing offers to acquire us and of increasing the difficulty of
consummating any such transaction.
Control Share Acquisitions
Under Maryland law, as applicable to Maryland real estate investment
trusts, "control shares" of a Maryland real estate investment trust acquired in
a "control share acquisition" have no voting rights except to the extent
approved by a vote of two-thirds of the votes entitled to be cast on the matter
by shareholders, excluding shares owned by the acquiror, by officers or by
trustees who are employees of the trust in question. "Control shares" are voting
shares of beneficial interest which, if aggregated with all other shares
previously acquired by such acquiror or in respect of which the acquiror is able
to exercise or direct the exercise of voting power (except solely by virtue of a
revocable proxy), would entitle the acquiror to exercise the voting power in the
election of trustees within one of the following ranges of voting power:
o one-tenth or more but less than one-third,
o one-third or more but less than a majority, or
o a majority or more of all voting power.
Control shares do not include shares the acquiring person is then
entitled to vote as a result of having previously obtained shareholder approval.
A "control share acquisition" means the acquisition of control shares, subject
to certain exceptions.
A person who has made or proposes to make a control share acquisition,
upon satisfaction of certain conditions (including an undertaking to pay
expenses), may compel the trust's board of trustees to call a special meeting of
shareholders to be held within 50 days of demand to consider the voting rights
of the shares. If no request for a meeting is made, the trust may itself present
the question at any shareholders meeting.
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If voting rights are not approved at the meeting or if the acquiring
person does not deliver an acquiring person statement as required by the
statute, then, subject to certain conditions and limitations, the trust may
redeem any or all of the control shares, except those for which voting rights
have previously been approved, for fair value determined, without regard to the
absence of voting rights for the control shares, as of the date of the last
control share acquisition by the acquiror or of any meeting of shareholders at
which the voting rights of such shares are considered and not approved. If
voting rights for control shares are approved at a shareholders meeting and the
acquiror becomes entitled to vote a majority of the shares entitled to vote, all
other shareholders may exercise appraisal rights. The fair value of the shares
as determined for purposes of such appraisal rights may not be less than the
highest price per share paid by the acquiror in the control share acquisition,
and certain limitations and restrictions otherwise applicable to the exercise of
dissenters' rights do not apply in the context of a control share acquisition.
The control share acquisition statute does not apply to shares acquired
in a merger, consolidation or share exchange if the trust is a party to the
transaction, or to acquisitions approved or exempted by the declaration of trust
or bylaws of the trust. Pursuant to the statute, we have exempted any and all
acquisitions of Shares by Safeguard Scientifics, Inc., Pennsylvania State
Employees' Retirement System and Morgan Stanley Asset Management Inc., and any
of their respective current or future affiliates or associates from these
control share provisions. As a result, they will be able to possess voting power
not generally available to other persons.
The control share acquisition statute could have the effect of
delaying, deferring or preventing offers to acquire us and of increasing the
difficulty of consummating any such transaction.
Amendment to the Declaration of Trust
Our Declaration of Trust may be amended only by the affirmative vote of
the holders of not less than a majority of the Shares then outstanding and
entitled to vote thereon, except for the provisions of our Declaration of Trust
relating to (i) increases or decreases in the aggregate number of Shares of any
class (other than the Series A Preferred Shares and Series B Preferred Shares),
which may generally be made by our Board of Trustees without shareholder
approval and (ii) the Maryland General Corporation Law provisions on business
combinations, amendment of which requires the affirmative vote of the holders of
not less than 80% of the Shares then outstanding and entitled to vote. In
addition, if our Board of Trustees determines, with the advice of counsel, that
any one or more of the provisions of our Declaration of Trust conflict with the
Maryland REIT Law, the Internal Revenue Code or other applicable Federal or
state law(s), the conflicting provisions of our Declaration of Trust shall be
deemed never to have constituted a part of our Declaration of Trust, even
without any amendment thereof.
Termination of the Company and REIT Status
Subject to the rights of any outstanding Preferred Shares and to the
provisions of the Maryland REIT Law, our Declaration of Trust permits our Board
of Trustees to terminate our existence and to discontinue our election to be
taxed as a REIT.
Transactions Between the Company and its Trustee or Officers
Our Declaration of Trust provides that any contract or transaction
between us and one or more of our trustees, officers, employees or agents must
be approved by a majority of our trustees who have no interest in the contract
or transaction.
Limitation of Liability and Indemnification
The Maryland REIT Law permits a Maryland real estate investment trust
to include in its Declaration of Trust a provision limiting the liability of its
trustees and officers to the trust and its shareholders for money damages.
However, a Maryland real estate investment trust may not eliminate liability
resulting from actual receipt of an improper benefit or profit in money,
property or services. Also, liability resulting from active and deliberate
dishonesty may not be eliminated if a final judgment establishes that the
dishonesty is material to the cause of action. Our Declaration of Trust contains
such a provision which eliminates such liability to the maximum extent permitted
by the Maryland REIT Law.
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Our Bylaws require us to indemnify, without requiring a preliminary
determination of the ultimate entitlement to indemnification, (a) any present or
former trustee, officer or shareholder who has been successful, on the merits or
otherwise, in the defense of a proceeding to which he was made a party by reason
of such status, against reasonable expenses incurred by him in connection with
the proceeding; (b) any present or former trustee or officer against any claim
or liability to which he may become subject by reason of such status unless it
is established that (i) his act or omission was committed in bad faith or was
the result of active and deliberate dishonesty, (ii) he actually received an
improper personal benefit in money, property or services or (iii) in the case of
a criminal proceeding, he had reasonable cause to believe that his act or
omission was unlawful; and (c) each shareholder or former shareholder against
any claim or liability to which he may be subject by reason of such status as a
shareholder or former shareholder. However, under Maryland law, a Maryland
corporation may not indemnify for an adverse judgment in a suit by or in the
right of the corporation or for a judgment of liability on the basis that the
act or omission was material to the matter and was committed in bad faith, the
result of active and deliberate dishonesty or a personal benefit was improperly
received, or, if in a criminal proceeding, there was reasonable cause to believe
the act or omission was unlawful. In addition, our Bylaws require us to pay or
reimburse, in advance of final disposition of a proceeding, reasonable expenses
incurred by a present or former trustee, officer or shareholder made a party to
a proceeding by reason of his status as a trustee, officer or shareholder
provided that, in the case of a trustee or officer, we shall have received (i) a
written affirmation by the trustee or officer of his good faith belief that he
has met the applicable standard of conduct necessary for our indemnification as
authorized by the Bylaws and (ii) a written undertaking by him or on his behalf
to repay the amount paid or reimbursed by us if it shall ultimately be
determined that the applicable standard of conduct was not met. Our Bylaws also
(i) permit us, with the approval of our trustees, to provide indemnification and
payment or reimbursement of expenses to a present or former trustee, officer or
shareholder who served our predecessor in such capacity, and to any of our
employees or agents or our predecessors, (ii) provide that any indemnification
or payment or reimbursement of the expenses permitted by our Bylaws shall be
furnished in accordance with the procedures provided for indemnification and
payment or reimbursement of expenses under Section 2-418 of the Maryland General
Corporation Law for directors of Maryland corporations and (iii) permit us to
provide such other and further indemnification or payment or reimbursement of
expenses as may be permitted by the Maryland General Corporation Law for
directors of Maryland corporations.
The limited partnership agreement of the Operating Partnership also
provides for indemnification by the Operating Partnership of us, as general
partner, and our trustees and officers for any costs, expenses or liabilities
incurred by us or them by reason of any act performed by us or them for or on
behalf of the Operating Partnership or us; provided that such person's actions
were taken in good faith and in the belief that such conduct was in the best
interests of the Operating Partnership and that such person was not guilty of
fraud, willful misconduct or gross negligence.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to our trustees and officers pursuant to the foregoing
provisions or otherwise, we have been advised that, although the validity and
scope of the governing statute has not been tested in court, in the opinion of
the Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
addition, indemnification may be limited by state securities laws.
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Our Declaration of Trust and Bylaws contain provisions to indemnify our
trustees and officers against liability incurred by them as a result of their
services as trustees and officers. We have been informed that in the opinion of
the Securities and Exchange Commission, our indemnification of our trustees,
officers or controlling persons for liabilities arising under the Securities Act
of 1933, as amended, is against public policy as expressed in the Securities
Act, and therefore is unenforceable.
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SELLING SHAREHOLDER
Common Shares
Pursuant to the terms of a Registration Rights Agreement (a copy of
which is attached as Exhibit 10.4 to our Quarterly Report on Form 10-Q filed
with the SEC on August 13, 1998) we are registering 3,679,245 Common Shares for
resale by the Selling Shareholder if and to the extent the Selling Shareholder
elects to convert all or a portion of its Series B Preferred Units into Class A
Units and such Class A Units are subsequently redeemed for Common Shares.
Following an issuance of Common Shares upon redemption of Class A Units, the
Selling Shareholder may resell the Common Shares as provided under the section
of this Prospectus entitled "Plan of Distribution" and in any applicable
Prospectus supplement.
The following table provides the name of, and the number of Common
Shares beneficially owned by, the Selling Shareholder as of September 1, 2003.
Since the Selling Shareholder may sell all, some or none of its Common Shares,
no estimate can be made of the aggregate number of Common Shares that are to be
offered and sold hereunder or that will be owned by the Selling Shareholder upon
completion of the offering to which this Prospectus relates.
Number of Percentage of
Number of Common Common Shares Common Shares
Shares Number of Beneficially Beneficially
Beneficially Common Shares Owned After Owned After
Owned Prior to Offered the Offering the Offering
Name Offering Hereby
Commonwealth Atlantic Operating 3,679,245(2) 3,679,245 0 0%
Properties Inc. (1)
--------------------------------------------------------------------------------
(1) Commonwealth Atlantic Properties Inc. owns, directly and indirectly, all
of the common shares of Commonwealth Atlantic Operating Properties Inc. LF
Strategic Realty Investors L.P. and Commonwealth Atlantic Properties
Investors Trust together own all of the common shares of Commonwealth
Atlantic Properties Inc. LF Strategic Realty Investors L.P. owns all of
the common shares of Commonwealth Atlantic Properties Investors Trust.
Lazard Freres Real Estate Investors L.L.C. is the general partner of LF
Strategic Realty Investors L.P. The address of each of these entities is
30 Rockefeller Plaza, 50th Floor, New York, NY 10020.
(2) Assumes that all of the Series B Preferred Units are converted into Class
A Units at a conversion price per share of $26.50, and that all of the
Class A Units are redeemed for Common Shares.
PLAN OF DISTRIBUTION
This Prospectus relates to the offer and sale from time to time of up
to 3,679,245 Common Shares that may be issued to the Selling Shareholder upon
conversion of Series B Preferred Units into Class A Units, and upon redemption
of the Class A Units for Common Shares. We are registering the offer and sale of
the Common Shares by the Selling Shareholder, but the registration of these
Common Shares does not necessarily mean that any or all of such Common Shares
will be offered or sold by the Selling Shareholder.
We will not receive any proceeds from the sale of the Common Shares by
the Selling Shareholder. "Selling Shareholder" includes affiliates, donees,
transferees, distributees, and pledgees selling Common Shares received from the
named Selling Shareholder after the date of this Prospectus.
The securities covered by this Prospectus may be offered and sold at
various times by the Selling Shareholder. The Selling Shareholder will act
independently of us in making decisions with respect to the securities covered
by this Prospectus and may offer these securities in one or more of the
following transactions:
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o on any national securities exchange or quotation service on which
the securities may be listed or quoted at the time of sale;
o in the over-the-counter market;
o in transactions other than on such exchange or in the
over-the-counter market;
o in brokerage transactions;
o in block trades;
o through put or call options;
o in privately negotiated transactions;
o in connection with short sales;
o through underwriters, brokers or dealers (who may act as agent or
principal);
o by pledge to secure debts and other obligations;
o in open market sales in reliance upon Rule 144 under the
Securities Act of 1933;
o in connection with the writing of non-traded and exchange-traded
call options, in hedge transactions and in settlement of other
transactions in standardized or over-the-counter options; or
o in a combination of any of the above transactions.
The Selling Shareholder may sell securities covered by this Prospectus
at market prices prevailing at the time of sale, at prices related to such
prevailing market prices, at negotiated prices or at fixed prices. The Selling
Shareholder reserves the sole right to accept and, together with any agent of
the Selling Shareholder, to reject in whole or in part any proposed purchase of
its securities covered by this Prospectus.
Securities covered by this Prospectus may be sold from time to time to
purchasers directly by the Selling Shareholder or to or through underwriters,
dealers or agents, who may receive compensation in the form of discounts,
concessions or commissions from the Selling Shareholder and/or the purchasers of
securities for whom they may act as an agent (which compensation as to a
particular broker-dealer might be in excess of customary commissions). These
broker-dealers may act either as agent of the Selling Shareholder or as a
principal for the broker-dealer's own account. These transactions may include
transactions in which the same broker-dealer acts as an agent on both sides of
the trade. The Selling Shareholder and any dealers or agents that participate in
the distribution of securities covered by this Prospectus may be deemed to be
"underwriters" within the meaning of Section 2(11) of the Securities Act of
1933, and any profit on the sale of securities covered by this Prospectus and
any commissions received by any dealers or agents might be deemed to be
underwriting commissions under the Securities Act of 1933.
Because the Selling Shareholder may be deemed to be an "underwriter"
within the meaning of Section 2(11) of the Securities Act of 1933, the Selling
Shareholder will be subject to the prospectus delivery requirements of the
Securities Act of 1933. We have informed the Selling Shareholder that the
anti-manipulation provisions of Regulation M promulgated under the Securities
Exchange Act of 1934 may apply to its sales in the market. However, the
registration of the securities registered by this Prospectus shall not be deemed
an admission by the Selling Shareholder that it is or that anyone acting on its
behalf is an "underwriter."
At a time any particular offer of securities covered by this Prospectus
is made by the Selling Shareholder, a supplement to this Prospectus, if
required, will be distributed setting forth its name and the names of any
dealers or agents and any commissions and other terms constituting compensation
from the Selling Shareholder and any other required information.
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Under an agreement with the Selling Shareholder, we will pay
substantially all of the expenses incident to the registration of the resale of
the securities covered by this Prospectus. Under an agreement entered into with
the Selling Shareholder, the Selling Shareholder and any underwriter the Selling
Shareholder may utilize will be indemnified by us against certain civil
liabilities, including liabilities under the Securities Act of 1933.
EXPERTS
The consolidated financial statements and schedules of Brandywine
Realty Trust as of December 31, 2002 and 2001, and for each of the years in the
three-year period ended December 31, 2002, have been incorporated by reference
herein and in the Registration Statement in reliance upon the report of KPMG
LLP, independent accountants, incorporated by reference herein, and upon the
authority of said firm as experts in accounting and auditing.
KPMG's report dated February 26, 2003, except as to Notes 9, 12, 13 and
21 which are dated as of June 30, 2003, refers to the fact that effective
January 1, 2002, the Company adopted Statement of Financial Accounting Standards
No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." Also,
KPMG's report refers to the fact that effective January 1, 2003, the Company
adopted Statement of Financial Accounting Standards No. 145, "Rescission of No.
4, 44, and 64, Amendment of FASB No. 13, and Technical Corrections."
LEGAL MATTERS
The validity of the securities offered has been passed upon for us by
Pepper Hamilton LLP, Philadelphia, Pennsylvania.
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================================================================================
PROSPECTUS
____________________
BRANDYWINE REALTY TRUST
3,679,245 Common Shares
[ ], 2003
================================================================================
No dealer, salesperson or other individual has been authorized to give
any information or to make any representations not contained in this Prospectus
in connection with the offering covered by this Prospectus. If given or made,
such information or representations must not be relied upon as having been
authorized by us or the Selling Shareholder. This Prospectus does not constitute
an offer to sell, or a solicitation of an offer to buy, the Common Shares, in
any jurisdiction where, or to any person to whom, it is unlawful to make any
such offer or solicitation. Neither the delivery of this Prospectus nor any
offer or sale made hereunder shall, under any circumstances, create an
implication that there has not been any change in the facts set forth in this
Prospectus or in our affairs since the date hereof.
================================================================================
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses for the
distribution of the securities being registered. Such costs and expenses do not
include amounts that may be incurred upon the issuance of certain types of
securities registered hereunder.
SEC Registration Fee....................................... $ 17,595
Printing and Duplicating Expenses.......................... 5,000
Legal Fees and Expenses (other than Blue Sky fees)......... 25,000
Accounting Fees and Expenses............................... 15,000
Miscellaneous.............................................. 10,000
--------
Total...................................................... $ 72,595
========
Item 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Maryland REIT Law permits a Maryland real estate investment trust
to include in its Declaration of Trust a provision limiting the liability of its
trustees and officers to the trust and its shareholders 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
Declaration of Trust contains a provision which eliminates such liability to the
maximum extent permitted by the Maryland REIT Law.
Our Bylaws require us to indemnify, without a preliminary determination
of the ultimate entitlement to indemnification, (a) any present or former
trustee, officer or shareholder who has been successful, on the merits or
otherwise, in the defense of a proceeding to which he was made a party by reason
of such status, against reasonable expenses incurred by him in connection with
the proceeding; (b) any present or former trustee or officer against any claim
or liability to which he may become subject by reason of such status unless it
is established that (i) his act or omission was committed in bad faith or was
the result of active and deliberate dishonesty, (ii) he actually received an
improper personal benefit in money, property or services or (iii) in the case of
a criminal proceeding, he had reasonable cause to believe that his act or
omission was unlawful; and (c) each shareholder or former shareholder against
any claim or liability to which he may be subject by reason of such status as a
shareholder or former shareholder. However, under Maryland law, a Maryland
corporation may not indemnify for an adverse judgment in a suit by or in the
right of the corporation or for a judgment of liability on the basis that the
act or omission was material to the matter and was committed in bad faith, the
result of active and deliberate dishonesty or a personal benefit was improperly
received, or, if in a criminal proceeding, there was reasonable cause to believe
the act or omission was unlawful. In addition, our Bylaws require us to pay or
reimburse, in advance of final disposition of a proceeding, reasonable expenses
incurred by a present or former trustee, officer or shareholder made a party to
a proceeding by reason of his status as a trustee, officer or shareholder
provided that, in the case of a trustee or officer, we shall have received (i) a
written affirmation by the trustee or officer of his good faith belief that he
has met the applicable standard of conduct necessary for indemnification by us
as authorized by the Bylaws and (ii) a written undertaking by him or on his
behalf to repay the amount paid or reimbursed by us if it shall ultimately be
determined that the applicable standard of conduct was not met. Our Bylaws also
(i) permit us, with the approval of our trustees, to provide indemnification and
payment or reimbursement of expenses to a present or former trustee, officer or
shareholder who served our predecessor in such capacity, and to any of our
employees or agents of our predecessor, (ii) provide that any indemnification or
payment or reimbursement of the expenses permitted by our Bylaws shall be
furnished in accordance with the procedures provided for indemnification and
payment or reimbursement of expenses under Section 2-418 of the Maryland General
Corporation Law for directors of Maryland corporations and (iii) permit us to
provide such other and further indemnification or payment or reimbursement of
expenses as may be permitted by the Maryland General Corporation Law for
directors of Maryland corporations.
II-1
The limited partnership agreement of Brandywine Operating Partnership,
L.P., referred to in this Prospectus as the Operating Partnership, also provides
for indemnification by the Operating Partnership of us and our trustees and
officers for any costs, expenses or liabilities incurred by them by reason of
any act performed by them for or on behalf of the Operating Partnership or us;
provided that such person's conduct was taken in good faith and in the belief
that such conduct was in the best interests of the Operating Partnership and
that such person was not guilty of fraud, willful misconduct or gross
negligence.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to trustees and officers of the Trust pursuant to
the foregoing provisions or otherwise, we have been advised that, although the
validity and scope of the governing statute has not been tested in court, in the
opinion of the SEC, such indemnification is against public policy as expressed
in Securities Act and is, therefore, unenforceable. In addition, indemnification
may be limited by state securities laws.
Item 16. EXHIBITS
3.1 - Amended and Restated Declaration of Trust of the Company
(Incorporated by reference to Exhibit 3.1 to the Company's
Current Report on Form 8-K dated June 9, 1997)
3.2 - Articles of Amendment to Declaration of Trust of the Company
(Incorporated by reference to Exhibit 3.1 to the Company's
Current Report on Form 8-K dated September 10, 1997)
3.3 - Articles of Amendment to Declaration of Trust of the Company
(No. 2) (Incorporated by reference to Exhibit 3.1 to the
Company's Current Report on Form 8-K dated June 3, 1998)
3.4 - Articles Supplementary (Incorporated by reference to Exhibit
3.1 to the Company's Current Report on Form 8-K dated October
13, 1998)
3.5 - Articles of Amendment to Declaration of Trust of the Company
(Incorporated by reference to Exhibit 3.1.5 to the Company's
Annual Report on Form 10-K for the year ended December 31,
1998)
3.6 - Articles Supplementary (Incorporated by reference to Exhibit
3.1 to the Company's Current Report on Form 8-K dated April
26, 1999)
3.7 - Amended and Restated Bylaws of the Company (Incorporated by
reference to Exhibit 3.2 to the Company's Annual Report on
Form 10-K for the year ended December 31, 2001)
5.1 - Opinion of Pepper Hamilton LLP regarding the validity of
securities being registered
8.1 - Opinion of Pepper Hamilton LLP regarding tax matters
10.1 - Operating Agreement between the Company and Five Arrows
Realty Securities III L.L.C. (Incorporated by reference to
Exhibit 10.3 to the Company's Current Report on Form 8-K dated
April 26, 1999)
10.2 - Registration Rights Agreement among the Company, the
Operating Partnership and others (Incorporated by reference to
Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q
filed August 13, 1998)
23.1 - Consent of KPMG LLP
II-2
23.2 - Consent of Pepper Hamilton LLP (contained in Exhibit 5.1)
23.3 - Consent of Pepper Hamilton LLP regarding opinion as to tax
matters (contained in Exhibit 8.1)
24 - Power of Attorney (included on signature page to this
Registration Statement)
__________
Item 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the Prospectus any facts or events
arising after the effective date of this 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 this 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 SEC pursuant to Rule 424(b)
if, in the aggregate, the changes in volume and price
represent no more than a 20 percent 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
this registration statement or any material change to
such information in this registration statement;
provided, however, that subparagraphs (i) and (ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the SEC
by the Registrant pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in this registration
statement.
(2) That for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) 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 undersigned Registrant hereby further undertakes that, for the purposes
of determining any liability under the Securities Act of 1933, each filing of
the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in this
registration statement shall be deemed to be a new registration statement
relating to the Securities offered herein, and the offering of such Securities
at that time shall be deemed to be the initial bona fide offering thereof.
II-3
(c) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to trustees, officers and controlling persons of the
Registrant pursuant to the provisions described under Item 15 of this
registration statement, or otherwise (other than insurance), the Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in such 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 trustee, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the Securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by them is against public
policy as expressed in such Act and will be governed by the final adjudication
of such issue.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
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 City of Philadelphia, Commonwealth of Pennsylvania, on
September 22, 2003.
BRANDYWINE REALTY TRUST
By: /s/ Gerard H. Sweeney
-----------------------------------------
Gerard H. Sweeney
President and Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below
hereby constitutes and appoints Gerard H. Sweeney his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments (including post-effective amendments) to this registration
statement, and to file the same, with exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agent full power and authority to do and perform each
and every act and thing requisite and necessary to be done, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent or his substitute or
substitutes, may lawfully 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 below by the following persons on September 22, 2003,
in the capacities indicated.
Signature Title
--------- -----
/s/ Anthony A. Nichols, Sr. Chairman of the Board of Trustees
----------------------------------------
Anthony A. Nichols, Sr.
/s/ Gerard H. Sweeney President, Chief Executive Officer and
---------------------------------------- trustee (Principal Executive Officer)
Gerard H. Sweeney
/s/ Christopher P. Marr Sr. Vice President and Chief Financial
---------------------------------------- Officer (Principal Financial Officer)
Christopher P. Marr
/s/ Bradley W. Harris Vice President and Chief Accounting
---------------------------------------- Officer (Principal Accounting Officer)
Bradley W. Harris
/s/ D. Pike Aloian Trustee
----------------------------------------
D. Pike Aloian
/s/ Donald E. Axinn Trustee
----------------------------------------
Donald E. Axinn
/s/ Walter D'Alessio Trustee
----------------------------------------
Walter D'Alessio
/s/ Robert C. Larson Trustee
----------------------------------------
Robert C. Larson
/s/ Charles P. Pizzi Trustee
----------------------------------------
Charles P. Pizzi
II-5
EXHIBIT INDEX
Exhibit Exhibit
Number Description
------ -----------
5.1 Opinion of Pepper Hamilton LLP
8.1 Opinion of Pepper Hamilton LLP
23.1 Consent of KPMG LLP