As filed with the Securities and Exchange Commission on July 23, 2003
REGISTRATION NO. 333-_______
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
HEALTH CARE REIT, INC.
------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 34-1096634
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(State or Other Jurisdiction of (I.R.S. Employer Identification
Incorporation or Organization Number
One SeaGate
Suite 1500
Toledo, Ohio 43604
(419) 247-2800
--------------------------------------------------------------------------------
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
GEORGE L. CHAPMAN
Chairman of the Board and Chief Executive Officer
Health Care REIT, Inc.
One SeaGate, Suite 1500
Toledo, Ohio 43604
Telephone: (419) 247-2800
--------------------------------------------------------------------------------
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
Copy to:
Mary Ellen Pisanelli, Esquire
Shumaker, Loop & Kendrick, LLP
North Courthouse Square
1000 Jackson
Toledo, Ohio 43624
(419) 241-9000
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If only the securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box: [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [ ]
CALCULATION OF REGISTRATION FEE
TITLE OF EACH PROPOSED MAXIMUM
CLASS OF PROPOSED MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO AMOUNT TO BE OFFERING PRICE OFFERING PRICE REGISTRATION
BE REGISTERED REGISTERED (1)(2) PER UNIT (1)(3) (1)(2)(4) FEE (5)
------------------------ ----------------- ---------------- ---------------- ------------
Debt Securities (6)
Preferred Stock,
$1.00 par value
Depositary Shares repre-
senting Preferred Stock (7)
Common Stock,
$1.00 par value (8)
Warrants
Units(9)
Total $937,557,819 $937,557,819 $75,848.43
------------ ------------ ----------
(1) Pursuant to General Instruction II.D. of Form S-3 under the Securities Act,
the fee table does not specify by each class of securities to be registered
information as to the amount to be registered, proposed maximum offering price
per unit, and proposed maximum aggregate offering price.
(2) The amount to be registered consists of up to $937,557,819 (in U.S. dollars
or the equivalent thereof at the time of sale for any debt security denominated
in one or more foreign currencies or composite currencies) of an indeterminate
amount of Debt Securities, an indeterminate number of shares of Preferred Stock,
an indeterminate number of Depositary Shares, an indeterminate number of shares
of Common Stock, an indeterminate number of Warrants, and an indeterminate
number of Units as may be sold, from time to time, by the Registrant. There are
also being registered hereunder an indeterminate principal amount of each class
of securities registered hereunder (the "underlying securities") as may be
issuable, without separate consideration, (i) upon conversion, exercise or
exchange of any other class of securities registered hereunder, to the extent
such securities are by their terms convertible into or exercisable or
exchangeable for the underlying securities, or (ii) pursuant to antidilution
provisions of any other class of securities registered hereunder. There is also
being registered hereunder an indeterminate amount of Debt Securities, an
indeterminate number of shares of Preferred Stock, an indeterminate number of
Depositary Shares, an indeterminate number of shares of Common Stock, and an
indeterminate number of Units as may from time to time be issuable upon
conversion of any Debt Securities, Preferred Stock, Depositary Shares or Units
issued in private transactions.
(3) The proposed maximum offering price per unit will be determined from time to
time by the Registrant in connection with the issuance by the Registrant of the
securities registered hereunder.
(4) Estimated solely for purposes of calculating the registration fee. No
separate consideration will be received for securities as may from time to time
be issued upon conversion or exchange of the securities registered hereunder.
The maximum aggregate offering price of all securities offered pursuant to this
Registration Statement will not exceed $937,557,819.
(5) Calculated pursuant to Rule 457(o) under the Securities Act. Pursuant to
Rule 457(p) under the Securities Act, the filing fee of $75,848.43 is being
offset by (a) $12,655.32, the amount previously paid as the registration fee
associated with $137,557,819 of securities registered on a previously filed
Registration Statement on Form S-3 (File No. 333-73936), filed by Health Care
REIT, Inc. on November 21, 2001, and (b) $63,193.11, a portion of a credit
available with the SEC.
(6) If any such Debt Securities are issued at an original issue discount, then
the offering price shall be in such greater principal amount as shall result in
an aggregate initial offering price of up to $937,557,819.
(7) Includes such indeterminate number of Depositary Shares as may be evidenced
by Depositary Receipts issued pursuant to one or more Deposit Agreements. In the
event the Registrant elects to offer to the public fractional interests in
shares of the Preferred Stock registered hereunder, Depositary Receipts will be
distributed to those persons acquiring such fractional interest and the shares
of Preferred Stock will be issued to a Depositary under a Deposit Agreement.
(8) This Registration Statement also covers Preferred Stock Purchase Rights
under the Registrant's Preferred Stock Purchase Rights Agreement, which are
attached to and tradeable only with the shares of Common Stock registered
hereby. No registration fees are required for such shares and such rights
because they will be issued for no additional consideration.
(9) Units consisting of any combination of one or more Debt Securities or other
securities, including Preferred Stock, Depositary Shares, Common Stock, Warrants
or any combination thereof.
Pursuant to Rule 429 under the Securities Act of 1933, the prospectus
included herein is a combined prospectus and relates to $137,557,819 principal
amount of Debt Securities, Preferred Stock, Common Stock and Warrants registered
under the Registration Statement on Form S-3 (File No. 333-73936), filed by
Health Care REIT, Inc. on November 21, 2001, which have not been sold. In the
event any of such previously registered Debt Securities, Preferred Stock, Common
Stock and Warrants are offered prior to the effective date of this Registration
Statement, they will not be included in any prospectus hereunder. The amount of
Debt Securities, Preferred Stock, Depositary Shares, Common Stock, Warrants and
Units being registered hereunder represents the maximum amount of Debt
Securities, Preferred Stock, Depositary Shares, Common Stock, Warrants and Units
that are expected to be offered for sale.
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 COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
$937,557,819
HEALTH CARE REIT, INC.
DEBT SECURITIES
PREFERRED STOCK
DEPOSITARY SHARES
COMMON STOCK
WARRANTS
UNITS
We may periodically offer and sell, in one or more offerings:
- debt securities
- shares or fractional shares of preferred stock
- depositary shares
- shares of common stock
- warrants to purchase debt securities, preferred stock,
depositary shares, common stock or units
- units consisting of one or more debt securities or other
securities
We will offer these securities at an aggregate initial public offering
price of up to $937,557,819, on terms we will determine at the time of offering.
We will provide the specific terms of the securities being offered in
supplements to this prospectus prepared in connection with each offering. You
should read this prospectus and the supplement for the specific security being
offered before you invest.
We may offer these securities directly, through agents we designate
periodically, or to or through underwriters or dealers. If designated agents or
underwriters are involved in the sale of any of the securities, we will disclose
in the prospectus supplement their names, any applicable purchase price, fee,
compensation arrangement between or among them, and our net proceeds from such
sale. See "Plan of Distribution." No securities may be sold without the delivery
of the applicable prospectus supplement describing the securities and the method
and terms of their offering.
Our shares of common stock are listed on the New York Stock Exchange
under the symbol "HCN." Our executive offices are located at One SeaGate, Suite
1500, Toledo, Ohio 43604, telephone number: 419-247-2800, facsimile:
419-247-2826, and Web site: www.hcreit.com. Unless specifically noted otherwise
in this prospectus, all references to "we," "us," "our," or the "Company" refer
to Health Care REIT, Inc. and its subsidiaries.
The information in this prospectus is not complete and may be changed.
We may not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES, OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS JULY 22, 2003.
TABLE OF CONTENTS
ABOUT THIS PROSPECTUS.............................................................................. 4
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS AND RISK FACTORS........................ 4
WHERE YOU CAN FIND ADDITIONAL INFORMATION.......................................................... 5
DOCUMENTS INCORPORATED BY REFERENCE................................................................ 5
THE COMPANY........................................................................................ 6
THE PORTFOLIO................................................................................. 7
HOW WE INTEND TO USE THE PROCEEDS.................................................................. 8
RATIOS OF EARNINGS TO FIXED CHARGES AND EARNINGS TO
COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS.......................................... 8
GENERAL DESCRIPTION OF THE OFFERED SECURITIES...................................................... 9
DESCRIPTION OF DEBT SECURITIES..................................................................... 9
GENERAL....................................................................................... 10
DENOMINATIONS, INTEREST, REGISTRATION AND TRANSFER............................................ 11
MERGER, CONSOLIDATION OR SALE OF ASSETS....................................................... 12
CERTAIN COVENANTS............................................................................. 12
EVENTS OF DEFAULT AND RELATED MATTERS......................................................... 12
MODIFICATION OF AN INDENTURE.................................................................. 13
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE................................................. 14
SUBORDINATION................................................................................. 15
GUARANTEES.................................................................................... 15
GLOBAL SECURITIES............................................................................. 15
DESCRIPTION OF OUR COMMON STOCK.................................................................... 16
GENERAL....................................................................................... 16
SHARE PURCHASE RIGHTS......................................................................... 16
DESCRIPTION OF OUR PREFERRED STOCK................................................................. 17
GENERAL....................................................................................... 17
RANK.......................................................................................... 18
DISTRIBUTIONS................................................................................. 18
REDEMPTION.................................................................................... 19
LIQUIDATION PREFERENCE........................................................................ 19
VOTING RIGHTS................................................................................. 20
CONVERSION RIGHTS............................................................................. 20
OUR EXCHANGE RIGHTS........................................................................... 20
DESCRIPTION OF DEPOSITARY SHARES................................................................... 21
GENERAL....................................................................................... 21
DISTRIBUTIONS................................................................................. 21
WITHDRAWAL OF SHARES OF PREFERRED STOCK....................................................... 21
REDEMPTION OF DEPOSITARY SHARES............................................................... 21
VOTING OF THE UNDERLYING SHARES OF PREFERRED STOCK............................................ 22
LIQUIDATION PREFERENCE........................................................................ 22
CONVERSION OR EXCHANGE OF SHARES OF PREFERRED STOCK........................................... 22
AMENDMENT AND TERMINATION OF A DEPOSIT AGREEMENT.............................................. 22
CHARGES OF A DEPOSITARY....................................................................... 23
RESIGNATION AND REMOVAL OF A DEPOSITARY....................................................... 23
MISCELLANEOUS................................................................................. 23
DESCRIPTION OF WARRANTS............................................................................ 23
DESCRIPTION OF UNITS............................................................................... 24
RESTRICTIONS ON TRANSFER OF SECURITIES............................................................. 24
DESCRIPTION OF CERTAIN PROVISIONS OF OUR CERTIFICATE OF INCORPORATION AND BY-LAWS.................. 25
ANTI-TAKEOVER PROVISIONS...................................................................... 25
LIMITATIONS ON TRANSACTIONS INVOLVING US AND OUR STOCKHOLDERS................................. 26
U.S. FEDERAL INCOME TAX CONSIDERATIONS............................................................. 27
U.S. INCOME TAXATION OF THE COMPANY AS A REIT................................................. 27
GENERAL................................................................................... 27
2
QUALIFICATION AS A REIT................................................................... 28
FAILURE TO QUALIFY AS A REIT.................................................................. 31
U.S. FEDERAL INCOME TAXATION OF HOLDERS OF OUR STOCK.......................................... 31
TREATMENT OF TAXABLE U.S. STOCKHOLDERS.................................................... 31
TREATMENT OF TAX-EXEMPT U.S. STOCKHOLDERS................................................. 33
BACKUP WITHHOLDING AND INFORMATION REPORTING.............................................. 33
TAXATION OF FOREIGN STOCKHOLDERS.......................................................... 34
U.S. FEDERAL INCOME TAXATION OF HOLDERS OF DEPOSITARY SHARES.................................. 35
CONVERSION OR EXCHANGE OF SHARES FOR PREFERRED STOCK...................................... 35
U.S. FEDERAL INCOME AND ESTATE TAXATION OF HOLDERS OF OUR DEBT SECURITIES..................... 35
U.S. HOLDERS.............................................................................. 35
NON-U.S. HOLDERS.......................................................................... 36
U.S. FEDERAL INCOME AND ESTATE TAXATION OF HOLDERS OF OUR WARRANTS............................ 38
EXERCISE OF WARRANTS...................................................................... 38
EXPIRATION OF WARRANTS.................................................................... 38
SALE OR EXCHANGE OF WARRANTS.............................................................. 38
POTENTIAL LEGISLATION OR OTHER ACTIONS AFFECTING TAX CONSEQUENCES............................. 38
PLAN OF DISTRIBUTION............................................................................... 39
LEGAL OPINIONS..................................................................................... 40
EXPERTS............................................................................................ 40
3
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement we filed with the
SEC using a "shelf" registration process. Under this shelf process, we may sell
any combination of the securities described in this prospectus from time to time
in one or more offerings up to a total amount of proceeds of $937,557,819. This
prospectus provides you only with a general description of the securities we may
offer. Each time we sell securities, we will provide a prospectus supplement
containing specific information about the terms of that offering. The prospectus
supplement may also add to, update or change information contained in this
prospectus. You should read both this prospectus and any prospectus supplement
together with additional information described under the heading "Where You Can
Find Additional Information" and "Documents Incorporated By Reference."
You should rely only on the information contained and incorporated by
reference in this prospectus. Neither we nor the underwriters have authorized
any other person to provide you with different or inconsistent information from
that contained in this prospectus and the applicable prospectus supplement. If
anyone provides you with different or inconsistent information, you should not
rely on it. You should assume that the information in this prospectus and the
applicable prospectus supplement, as well as information we previously filed
with the SEC and incorporated by reference, is accurate only as of the date on
the front cover of this prospectus and the applicable prospectus supplement. Our
business, financial condition, results of operations and prospects may have
changed since those dates.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
AND RISK FACTORS
We have made and incorporated by reference statements in this prospectus
supplement that constitute "forward-looking statements" as that term is defined
in the federal securities laws. These forward-looking statements concern:
- the possible expansion of our portfolio;
- the performance of our operators and properties;
- our ability to enter into agreements with new viable tenants for
properties which we take back from financially troubled tenants, if any;
- our ability to make distributions;
- our policies and plans regarding investments, financings and other
matters;
- our tax status as a real estate investment trust;
- our ability to appropriately balance the use of debt and equity; and
- our ability to access capital markets or other sources of funds.
When we use words such as "believe," "expect," "anticipate," "estimate" or
similar expressions, we are making forward-looking statements. Forward-looking
statements are not guarantees of future performance and involve risks and
uncertainties. Our expected results may not be achieved, and actual results may
differ materially from our expectations. This may be a result of various
factors, including, but not limited to:
- the status of the economy;
- the status of capital markets, including prevailing interest rates;
- compliance with and changes to regulations and payment policies within
the health care industry;
- changes in financing terms;
- competition within the health care and senior housing industries; and
4
- changes in federal, state and local legislation.
On May 28, 2003, the President signed into law legislation that, for
individual taxpayers, will generally reduce the tax rate on corporate dividends
to a maximum of 15% for tax years from 2003 to 2008. The dividends of a real
estate investment trust ("REIT") generally will not qualify for this reduced tax
rate because a REIT's income generally is not subject to corporate level tax.
This new law could cause stock in non-REIT corporations to be a more attractive
investment to individual investors than stock in REITs and could have an adverse
effect on the market price of our equity securities.
Our business is subject to certain risks, which are discussed in our
most recent Annual Report on Form 10-K, under the headings "Business" and
"Management's Discussion And Analysis Of Financial Condition And Results Of
Operations." Updated information relating to such risks, as well as additional
risks specific to the securities to be offered hereby, will be set forth in the
prospectus supplement relating to such offered securities. We assume no
obligation to update or revise any forward-looking statements or to update the
reasons why actual results could differ from those projected in any
forward-looking statements.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
This prospectus is part of a registration statement on Form S-3 we have
filed with the SEC covering the securities that may be offered under this
prospectus. The registration statement, including the attached exhibits and
schedules, contains additional relevant information about the securities.
Additionally, we file annual, quarterly and current reports, proxy
statements and other information with the SEC, all of which are made available,
free of charge, on our Internet Web site at www.hcreit.com under the heading
"Investor Relations" and the "SEC Filings" tab, as soon as reasonably
practicable after they are filed with, or furnished to, the SEC. You can review
our SEC filings and the registration statement by accessing the SEC's Internet
site at http://www.sec.gov. You also may read and copy the registration
statement and any reports, statements or other information on file at the SEC's
public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549. You can
request copies of those documents upon payment of a duplicating fee to the SEC.
You also may review a copy of the registration statement at the SEC's regional
offices in Chicago, Illinois and New York, New York. Please call the SEC at
1-800-SEC-0330 for further information on the operation of the public reference
rooms.
You also can inspect our reports, proxy statements and other
information about us at the offices of the New York Stock Exchange, 20 Broad
Street, New York, New York 10005.
This prospectus does not contain all the information set forth in the
registration statement. We have omitted certain parts consistent with SEC rules.
For further information, please see the registration statement.
DOCUMENTS INCORPORATED BY REFERENCE
The SEC allows us to "incorporate by reference" the information we file
with the SEC, which means:
- we consider incorporated documents to be part of the prospectus;
- we may disclose important information to you by referring you to those
documents; and
- information we subsequently file with the SEC will automatically update
and supersede the information in this prospectus.
This prospectus incorporates by reference the following documents:
- Annual Report on Form 10-K for the year ended December 31, 2002.
- Quarterly Report on Form 10-Q for the quarterly period ended March 31,
2003, and
- Quarterly Report on Form 10-Q for the quarterly period ended June 30,
2003.
- The description of our common stock as set forth in our registration
statement filed under the Exchange Act on Form 8-A on June 17, 1985,
including any amendment or report for the purpose of updating such
description.
5
- The description of the rights to purchase our Series A junior
participating preferred stock, par value $1.00 per share, associated
with our common stock, is set forth in our registration statement filed
under the Exchange Act on Form 8-A on August 3, 1994, including any
amendment or report for the purpose of updating such description.
- The description of our 7 7/8% Series D Cumulative Redeemable Preferred
Stock as set forth in our registration statement filed under the
Exchange Act on Form 8-A/A on July 8, 2003, including any amendment or
report for the purpose of updating such description.
- All subsequent documents filed by us under Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act of 1934 after the date of this prospectus and
before the termination of the offering.
This prospectus summarizes material provisions of contracts and other
documents to which we refer. Since this prospectus may not contain all the
information that you may find important, you should review the full text of
those documents. Upon request, we will provide each person receiving this
prospectus a free copy, without exhibits, of any or all documents incorporated
by reference into this prospectus. You may direct such requests to:
Erin C. Ibele, Vice President and Corporate Secretary
Health Care REIT, Inc.
One SeaGate, Suite 1500
Toledo, Ohio 43604
(419) 247-2800
www.hcreit.com
THE COMPANY
Health Care REIT, Inc., a Delaware corporation, is a self-administered,
equity real estate investment trust that invests in health care facilities,
primarily skilled nursing and assisted living facilities. We also invest in
specialty care facilities. As of June 30, 2003, long-term care facilities, which
include skilled nursing and assisted living facilities, comprised approximately
92% of our investment portfolio. Founded in 1970, we were the first real estate
investment trust to invest exclusively in health care facilities.
As of June 30, 2003, we had approximately $1.7 billion in net real estate
investments, inclusive of credit enhancements, in 270 facilities located in 33
states and managed by 47 different operators. At that date, the portfolio
included 166 assisted living facilities, 96 skilled nursing facilities and eight
specialty care facilities.
We seek to increase funds from operations and enhance stockholder value
through relationship investing with public and private regionally focused health
care operators. The primary components of this strategy are set forth below.
Relationship Investing. We establish relationships with, and provide
financing to, operators throughout their growth cycles. We target companies with
experienced management teams, regionally focused operations, substantial inside
ownership interests or venture capital backing and significant growth potential.
By maintaining close ties to health care operators, we are able to provide
value added services and monitor our investments on an ongoing basis.
Investments are designed to support the operator's business plan. Features
typically include a master operating lease for the acquisition and development
of facilities in a geographic region. Economic terms typically include annual
rate increases and fair market value-based purchase options.
Portfolio Management. Portfolio strength is derived from diversity by
operator, health care sector and geographic location. We emphasize long-term
investment structures that result in a predictable asset base with attendant
recurring income and funds from operations. Generally, master leases have a 10
to 15 year term and mortgage loans provide five to seven years of prepayment
protection. We also regularly monitor the portfolio with our proprietary
database system.
Depth of Management. Our management team is comprised of seven individuals
with 117 years of experience in health care and real estate finance. George L.
Chapman has been a member of senior management for more than 13 years and in
1996 became our Chairman and Chief Executive Officer. Mr. Chapman and the
management team have successfully implemented our investment strategy of
emphasizing relationship financings with strong, emerging operators.
6
THE PORTFOLIO
The following table reflects our portfolio as of June 30, 2003:
Type of Investments Percentage Number of Number of Investment per Number of Number of
Facility (1) of Portfolio Facilities Beds/Units Bed/Unit (2) Operators (3) States (3)
--------------- -------------- ------------ ---------- ---------- -------------- ------------- ----------
(In thousands)
Assisted Living
Facilities $ 914,724 54% 166 11,043 $ 84,561 30 32
Skilled Nursing
Facilities 634,505 38% 96 13,617 46,597 18 20
Specialty Care
Facilities 138,557 8% 8 1,304 112,748 6 5
-------------- --- --- ------
Totals $ 1,687,786 100% 270 25,964
============== === === ======
(1) Investments include gross real estate investments and credit enhancements
which amounted to $1,679,941,000 and $7,845,000, respectively.
(2) Investment per Bed/Unit was computed by using the total investment amount
of $1,715,335,000 which includes gross real estate investments, credit
enhancements and unfunded commitments for which initial funding has
commenced which amounted to $1,679,941,000, $7,845,000 and $27,549,000,
respectively.
(3) We have investments in properties located in 33 states and managed by 47
different operators.
In determining whether to invest in a facility, we focus on the following:
(a) the experience of the management team; (b) the historical and projected
financial and operational performance of the facility; (c) the credit of the
tenant or borrower; (d) the security for the lease or loan; and (e) the capital
committed to the facility by the tenant or borrower. We conduct market research
and analysis for all potential investments. In addition, we review the value of
all facilities, the interest rates and debt service coverage requirements of any
debt to be assumed and the anticipated sources of repayment of any debt.
We monitor our investments through a variety of methods determined by the
type of health care facility and operator. Our monitoring process includes
review of monthly financial statements for each facility, quarterly review of
operator credit, annual facility inspections and review of covenant compliance
relating to licensure, real estate taxes, letters of credit and other
collateral. In monitoring our portfolio, our personnel use a proprietary
database to collect and analyze facility-specific data. Additionally, we conduct
extensive research to ascertain industry trends and risks.
Our investments are primarily operating leases and mortgage loans.
Construction financing is provided, but only as part of a long-term operating
lease or mortgage loan. Substantially all of our investments are designed with
escalating rate structures. Depending upon market conditions, we believe that
appropriate new investments will be available in the future with substantially
the same spreads over our cost of capital. Operating leases and mortgage loans
are normally credit enhanced by guaranties and/or letters of credit. In
addition, operating leases are typically structured as master leases and
mortgage loans are generally cross-defaulted and cross-collateralized with other
mortgage loans, operating leases or agreements between us and the operator and
its affiliates.
7
HOW WE INTEND TO USE THE PROCEEDS
Unless otherwise described in a prospectus supplement, we intend to use
the net proceeds from the sale of any securities under this prospectus for
general business purposes, which may include acquisition of and investment in
additional properties and the repayment of borrowings under our credit
facilities or other debt. Until the proceeds from a sale of securities by us are
applied to their intended purposes, they will be invested in short-term
investments, including repurchase agreements, some or all of which may not be
investment grade.
RATIOS OF EARNINGS TO FIXED CHARGES AND
EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
The following table sets forth our ratios of earnings to fixed charges
and earnings to combined fixed charges and preferred stock dividends for the
periods indicated. The ratio of earnings to fixed charges was computed by
dividing earnings by our fixed charges. The ratio of earnings to combined fixed
charges and preferred stock dividends was computed by dividing earnings by our
combined fixed charges and preferred stock dividends. For purposes of
calculating these ratios, "earnings" includes income from continuing operations
before extraordinary items, excluding the equity earnings in a less than 50%
owned subsidiary, plus fixed charges and reduced by capitalized interest. "Fixed
charges" consists of interest on all indebtedness and the amortization of loan
expenses.
SIX MONTHS
ENDED
YEAR ENDED DECEMBER 31 JUNE 30
---------------------------------------- ----------
1998 1999 2000 2001 2002 2003
---- ---- ---- ---- ---- ----
Consolidated ratio of earnings to
fixed charges (unaudited) 2.99 2.75 2.56 2.68 2.50 2.39
Consolidated ratio of earnings to
combined fixed charges and
preferred stock dividends (unaudited) 2.59 2.03 1.90 1.93 1.95 2.01
We issued 3,000,000 shares of 8 7/8% Series B Cumulative Redeemable
Preferred Stock in May 1998 and all of those shares were redeemed on July 15,
2003. We issued 3,000,000 shares of Series C Cumulative Convertible Preferred
Stock in January 1999 and during the year ended December 31, 2002, the holder of
our Series C Cumulative Convertible Preferred Stock converted 900,000 shares
into 878,000 shares of our common stock, leaving 2,100,000 shares of Series C
Cumulative Convertible Preferred Stock outstanding at December 31, 2002. As of
July 18, 2003, 1,154,000 additional shares of our Series C Cumulative
Convertible Preferred Stock were converted into 1,125,854 shares of our common
stock, leaving 946,000 shares of our Series C
8
Cumulative Convertible Preferred Stock outstanding at July 18, 2003. We issued
4,000,000 shares of 7 7/8% Series D Cumulative Redeemable Preferred Stock on
July 9, 2003 and all of those shares are outstanding.
GENERAL DESCRIPTION OF THE OFFERED SECURITIES
We may offer under this prospectus one or more of the following
categories of our securities:
- debt securities, in one or more series;
- shares of our preferred stock, par value $1.00 per share, in one or
more series;
- depositary shares, representing interests in our preferred stock, in
one or more series;
- shares of our common stock, par value $1.00 per share;
- warrants to purchase any of the foregoing securities; and
- units consisting of any combination of the foregoing securities.
The terms of any specific offering of securities, including the terms
of any units offered, will be set forth in a prospectus supplement relating to
such offering.
Our amended certificate of incorporation authorizes us to issue
125,000,000 shares of common stock and 25,000,000 shares of preferred stock. Of
our preferred stock:
- 13,000 shares have been designated as Junior Participating Preferred
Stock, Series A,
- 3,000,000 shares have been designated as Series C Cumulative
Convertible Preferred Stock, and
- 4,000,000 shares have been designated as 7 7/8% Series D Cumulative
Redeemable Preferred Stock.
As of July 18, 2003, we had issued and outstanding 42,356,855 shares
of common stock, 946,000 shares of Series C Cumulative Convertible Preferred
Stock and 4,000,000 shares of 7 7/8% Series D Cumulative Redeemable Preferred
Stock
Our common stock is listed on the New York Stock Exchange under the
symbol "HCN." We intend to apply to list any additional shares of common stock
that are issued and sold hereunder. Our 7 7/8% Series D Cumulative Redeemable
Preferred Stock is listed on the New York Stock Exchange under the symbol "HCN
PrD." We may apply to list shares of any series of preferred stock or any
depositary shares which are offered and sold hereunder, as described in the
prospectus supplement relating to such preferred stock or depositary shares.
DESCRIPTION OF DEBT SECURITIES
The debt securities sold under this prospectus will be our direct
obligations, which may be secured or unsecured, and which may be senior or
subordinated indebtedness. The debt securities may be guaranteed on a secured or
unsecured, senior or subordinated basis, by one or more of our subsidiaries. The
debt securities will be issued under one or more indentures between us and a
specified trustee. Any indenture will be subject to and governed by the Trust
Indenture Act of 1939, as amended. The statements made in this prospectus
relating to any indentures and the debt securities to be issued under the
indentures are summaries of certain anticipated provisions of the indentures and
are not complete.
The following is a summary of the material terms of our debt
securities. Because it is a summary, it does not contain all of the information
that may be important to you. If you want more information, you should read the
indenture for senior debt securities between us and Fifth Third Bank, as
trustee, dated September 6, 2002, and the forms of indentures for senior
subordinated and junior subordinated debt securities which we have filed as
exhibits to the registration statement of which this prospectus is a part. We
will file any final indentures for senior subordinated and junior subordinated
debt securities and supplemental indentures if we issue debt securities of this
type. See "Where You Can Find Additional Information." This summary is also
subject to and qualified by reference to the descriptions of the particular
terms of the securities described in the applicable prospectus supplement.
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GENERAL
We may issue debt securities that rank "senior," "senior subordinated"
or "junior subordinated." The debt securities that we refer to as "senior" will
be our direct obligations and will rank equally and ratably in right of payment
with our other indebtedness not subordinated. We may issue debt securities that
will be subordinated in right of payment to the prior payment in full of senior
debt, as defined in the applicable prospectus supplement, and may rank equally
and ratably with the other senior subordinated indebtedness. We refer to these
as "senior subordinated" securities. We may also issue debt securities that may
be subordinated in right of payment to the senior subordinated securities. These
would be "junior subordinated" securities. We have filed with the registration
statement, of which this prospectus is a part, an indenture for senior debt
securities between us and Fifth Third Bank, as trustee, dated September 6, 2002,
and two separate forms of indenture, one for the senior subordinated securities
and one for the junior subordinated securities. We refer to senior subordinated
and junior subordinated securities as "subordinated."
We may issue the debt securities without limit as to aggregate
principal amount, in one or more series, in each case as we establish in one or
more supplemental indentures. We need not issue all debt securities of one
series at the same time. Unless we otherwise provide, we may reopen a series,
without the consent of the holders of the series, for issuances of additional
securities of that series.
We anticipate that any indenture will provide that we may, but need
not, designate more than one trustee under an indenture, each with respect to
one or more series of debt securities. Any trustee under any indenture may
resign or be removed with respect to one or more series of debt securities, and
we may appoint a successor trustee to act with respect to that series. The
applicable prospectus supplement will describe the specific terms relating to
the series of debt securities we will offer, including, where applicable, the
following:
- the title and series designation and whether they are senior
securities, senior subordinated securities or subordinated securities;
- the aggregate principal amount of the securities;
- the percentage of the principal amount at which we will issue the debt
securities and, if other than the principal amount of the debt
securities, the portion of the principal amount of the debt securities
payable upon maturity of the debt securities;
- if convertible, the securities into which they are convertible, the
initial conversion price, the conversion period and any other terms
governing such conversion;
- the stated maturity date;
- any fixed or variable interest rate or rates per annum;
- the place where principal, premium, if any, and interest will be
payable and where the debt securities can be surrendered for transfer,
exchange or conversion;
- the date from which interest may accrue and any interest payment dates;
- any sinking fund requirements;
- any provisions for redemption, including the redemption price and any
remarketing arrangements;
- whether the securities are denominated or payable in United States
dollars or a foreign currency or units of two or more foreign
currencies;
- the events of default and covenants of such securities, to the extent
different from or in addition to those described in this prospectus;
- whether we will issue the debt securities in certificated or book-entry
form;
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- whether the debt securities will be in registered or bearer form and,
if in registered form, the denominations if other than in even
multiples of $1,000 and, if in bearer form, the denominations and terms
and conditions relating thereto;
- whether we will issue any of the debt securities in permanent global
form and, if so, the terms and conditions, if any, upon which interests
in the global security may be exchanged, in whole or in part, for the
individual debt securities represented by the global security;
- the applicability, if any, of the defeasance and covenant defeasance
provisions described in this prospectus or any prospectus supplement;
- whether we will pay additional amounts on the securities in respect of
any tax, assessment or governmental charge and, if so, whether we will
have the option to redeem the debt securities instead of making this
payment;
- the subordination provisions, if any, relating to the debt securities;
- if the debt securities are to be issued upon the exercise of debt
warrants, the time, manner and place for them to be authenticated and
delivered;
- whether any of our subsidiaries will be bound by the terms of the
indenture, in particular any restrictive covenants;
- the provisions relating to any security provided for the debt
securities; and
- the provisions relating to any guarantee of the debt securities.
We may issue debt securities at less than the principal amount payable
at maturity. We refer to these securities as "original issue discount"
securities. If material or applicable, we will describe in the applicable
prospectus supplement special U.S. federal income tax, accounting and other
considerations applicable to original issue discount securities.
Except as may be described in any prospectus supplement, an indenture
will not contain any other provisions that would limit our ability to incur
indebtedness or that would afford holders of the debt securities protection in
the event of a highly leveraged or similar transaction involving us or in the
event of a change of control. You should review carefully the applicable
prospectus supplement for information with respect to events of default and
covenants applicable to the securities being offered.
DENOMINATIONS, INTEREST, REGISTRATION AND TRANSFER
Unless otherwise described in the applicable prospectus supplement, we
will issue the debt securities of any series that are registered securities in
denominations that are even multiples of $1,000, other than global securities,
which may be of any denomination.
Unless otherwise specified in the applicable prospectus supplement, we
will pay the interest, principal and any premium at the corporate trust office
of the trustee. At our option, however, we may make payment of interest by check
mailed to the address of the person entitled to the payment as it appears in the
applicable register or by wire transfer of funds to that person at an account
maintained within the United States.
If we do not punctually pay or otherwise provide for interest on any
interest payment date, the defaulted interest will be paid either:
- to the person in whose name the debt security is registered at the
close of business on a special record date the trustee will fix; or
- in any other lawful manner, all as the applicable indenture describes.
You may have your debt securities divided into more debt securities of
smaller denominations or combined into fewer debt securities of larger
denominations, as long as the total principal amount is not changed. We call
this an "exchange." You may exchange or transfer debt securities at the office
of the applicable trustee. The trustee acts as our agent for registering debt
securities in the names of holders and transferring debt securities. We may
change this appointment to another entity or perform it ourselves.
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The entity performing the role of maintaining the list of registered
holders is called the "registrar." It will also perform transfers. You will not
be required to pay a service charge to transfer or exchange debt securities, but
you may be required to pay for any tax or other governmental charge associated
with the exchange or transfer. The security registrar will make the transfer or
exchange only if it is satisfied with your proof of ownership.
MERGER, CONSOLIDATION OR SALE OF ASSETS
Under any indenture, we are generally permitted to consolidate or merge
with another company. We are also permitted to sell substantially all of our
assets to another company, or to buy substantially all of the assets of another
company. However, we may not take any of these actions unless the following
conditions are met:
- if we merge out of existence or sell our assets, the other company must
be an entity organized under the laws of one of the states of the
United States or the District of Columbia or under United States
federal law and must agree to be legally responsible for our debt
securities; and
- immediately after the merger, sale of assets or other transaction, we
may not be in default on the debt securities. A default for this
purpose would include any event that would be an event of default if
the requirements for giving us default notice or our default having to
exist for a specific period of time were disregarded.
CERTAIN COVENANTS
Existence. Except as permitted as described above under "-- Merger,
Consolidation or Sale of Assets," we will agree to do all things necessary to
preserve and keep our existence, rights and franchises, provided that it is in
our best interests for the conduct of business.
Provisions Of Financial Information. Whether or not we remain required
to do so under the Exchange Act, to the extent permitted by law, we will agree
to file all annual, quarterly and other reports and financial statements with
the SEC and an indenture trustee on or before the applicable SEC filing dates as
if we were required to do so.
Additional Covenants. Any additional or different covenants or
modifications to the foregoing covenants with respect to any series of debt
securities will be described in the applicable prospectus supplement.
EVENTS OF DEFAULT AND RELATED MATTERS
Events Of Default. The term "event of default" for any series of debt
securities means any of the following:
- We do not pay the principal or any premium on a debt security of that
series within 30 days after its maturity date.
- We do not pay interest on a debt security of that series within 30 days
after its due date.
- We do not deposit any sinking fund payment for that series within 30
days after its due date.
- We remain in breach of any other term of the applicable indenture
(other than a term added to the indenture solely for the benefit of
another series) for 60 days after we receive a notice of default
stating we are in breach. Either the trustee or holders of more than
50% in principal amount of debt securities of the affected series may
send the notice.
- We default under any of our other indebtedness in specified amounts
after the expiration of any applicable grace period, which default
results in the acceleration of the maturity of such indebtedness. Such
default is not an event of default if the other indebtedness is
discharged, or the acceleration is rescinded or annulled, within a
period of 10 days after we receive notice specifying the default and
requiring that we discharge the other indebtedness or cause the
acceleration to be rescinded or annulled. Either the trustee or the
holders of more than 50% in principal amount of debt securities of the
affected series may send the notice.
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- We or one of our "significant subsidiaries," if any, files for
bankruptcy or certain other events in bankruptcy, insolvency or
reorganization occur. The term "significant subsidiary" means each of
our significant subsidiaries, if any, as defined in Regulation S-X
under the Securities Act.
- Any other event of default described in the applicable prospectus
supplement occurs.
Remedies If An Event Of Default Occurs. If an event of default has
occurred and has not been cured, the trustee or the holders of at least a
majority in principal amount of the debt securities of the affected series may
declare the entire principal amount of all the debt securities of that series to
be due and immediately payable. If an event of default occurs because of certain
events in bankruptcy, insolvency or reorganization, the principal amount of all
the debt securities of that series will be automatically accelerated, without
any action by the trustee or any holder. At any time after the trustee or the
holders have accelerated any series of debt securities, but before a judgment or
decree for payment of the money due has been obtained, the holders of at least a
majority in principal amount of the debt securities of the affected series may,
under certain circumstances, rescind and annul such acceleration.
The trustee will be required to give notice to the holders of debt
securities within 90 days after a default under the applicable indenture unless
the default has been cured or waived. The trustee may withhold notice to the
holders of any series of debt securities of any default with respect to that
series, except a default in the payment of the principal of or interest on any
debt security of that series, if specified responsible officers of the trustee
in good faith determine that withholding the notice is in the interest of the
holders.
Except in cases of default, where the trustee has some special duties,
the trustee is not required to take any action under the applicable indenture at
the request of any holders unless the holders offer the trustee reasonable
protection from expenses and liability. We refer to this as an "indemnity." If
reasonable indemnity is provided, the holders of a majority in principal amount
of the outstanding securities of the relevant series may direct the time, method
and place of conducting any lawsuit or other formal legal action seeking any
remedy available to the trustee. These majority holders may also direct the
trustee in performing any other action under the applicable indenture, subject
to certain limitations.
Before you bypass the trustee and bring your own lawsuit or other
formal legal action or take other steps to enforce your rights or protect your
interests relating to the debt securities, the following must occur:
- you must give the trustee written notice that an event of default has
occurred and remains uncured;
- the holders of at least a majority in principal amount of all
outstanding securities of the relevant series must make a written
request that the trustee take action because of the default, and must
offer reasonable indemnity to the trustee against the cost and other
liabilities of taking that action; and
- the trustee must have not taken action for 60 days after receipt of the
notice and offer of indemnity.
However, you are entitled at any time to bring a lawsuit for the
payment of money due on your security after its due date.
Every year we will furnish to the trustee a written statement by
certain of our officers certifying that to their knowledge we are in compliance
with the applicable indenture and the debt securities, or else specifying any
default.
MODIFICATION OF AN INDENTURE
There are three types of changes we can make to the indentures and the
debt securities:
Changes Requiring Your Approval. First, there are changes we cannot
make to your debt securities without your specific approval. The following is a
list of those types of changes:
- change the stated maturity of the principal or interest on a debt
security;
- reduce any amounts due on a debt security;
- reduce the amount of principal payable upon acceleration of the
maturity of a debt security following a default;
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- change the currency of payment on a debt security;
- impair your right to sue for payment;
- modify the subordination provisions, if any, in a manner that is
adverse to you;
- reduce the percentage of holders of debt securities whose consent is
needed to modify or amend an indenture or to waive compliance with
certain provisions of an indenture;
- reduce the percentage of holders of debt securities whose consent is
needed to waive past defaults or change certain provisions of the
indenture relating to waivers of default;
- waive a default or event of default in the payment of principal of or
premium, if any, or interest on the debt securities; or
- modify any of the foregoing provisions.
Changes Requiring A Majority Vote. The second type of change to an
indenture and the debt securities is the kind that requires a vote in favor by
holders of debt securities owning a majority of the principal amount of the
particular series affected. Most changes fall into this category, except for
clarifying changes and certain other changes that would not materially adversely
affect holders of the debt securities. We require the same vote to obtain a
waiver of a past default. However, we cannot obtain a waiver of a payment
default or any other aspect of an indenture or the debt securities listed in the
first category described above under "--Changes Requiring Your Approval" unless
we obtain your individual consent to the waiver.
Changes Not Requiring Approval. The third type of change does not
require any vote by holders of debt securities. This type is limited to
clarifications and certain other changes that would not materially adversely
affect holders of the debt securities.
Further Details Concerning Voting. Debt securities are not considered
outstanding, and therefore the holders thereof are not eligible to vote if we
have deposited or set aside in trust for you money for their payment or
redemption or if we or one of our affiliates own them. The holders of debt
securities are also not eligible to vote if they have been fully defeased as
described immediately below under "--Discharge, Defeasance and Covenant
Defeasance--Full Defeasance." For original issue discount securities, we will
use the principal amount that would be due and payable on the voting date if the
maturity of the debt securities were accelerated to that date because of a
default.
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
Discharge. We may discharge some obligations to holders of any series
of debt securities that either have become due and payable or will become due
and payable within one year, or scheduled for redemption within one year, by
irrevocably depositing with the trustee, in trust, funds in the applicable
currency in an amount sufficient to pay the debt securities, including any
premium and interest.
Full Defeasance. We can, under particular circumstances, effect a full
defeasance of your series of debt securities. By this we mean we can legally
release ourselves from any payment or other obligations on the debt securities
if, among other things, we put in place the arrangements described below to
repay you and deliver certain certificates and opinions to the trustee:
- we must deposit in trust for your benefit and the benefit of all other
direct holders of the debt securities a combination of money or U.S.
government or U.S. government agency notes or bonds or, in some
circumstances, depositary receipts representing these notes or bonds,
that will generate enough cash to make interest, principal and any
other payments on the debt securities on their various due dates;
- the current federal tax law must be changed or an IRS ruling must be
issued permitting the above deposit without causing you to be taxed on
the debt securities any differently than if we did not make the deposit
and just repaid the debt securities ourselves. Under current federal
income tax law, the deposit and our legal release from the debt
securities would be treated as though we took back your debt securities
and gave you your share of the cash and notes or bonds deposited in
trust. In that event, you could recognize gain or loss on the debt
securities you give back to us; and
- we must deliver to the trustee a legal opinion confirming the tax law
change described above.
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If we did accomplish full defeasance, you would have to rely solely on
the trust deposit for repayment on the debt securities. You could not look to us
for repayment in the unlikely event of any shortfall. Conversely, the trust
deposit would most likely be protected from claims of our lenders and other
creditors if we ever became bankrupt or insolvent. You would also be released
from any subordination provisions.
Covenant defeasance. Under current federal income tax law, we can make
the same type of deposit described above and be released from some of the
restrictive covenants in the debt securities. This is called "covenant
defeasance." In that event, you would lose the protection of those restrictive
covenants but would gain the protection of having money and securities set aside
in trust to repay the securities and you would be released from any
subordination provisions.
If we accomplish covenant defeasance, the following provisions of an
indenture and the debt securities would no longer apply:
- any covenants applicable to the series of debt securities and described
in the applicable prospectus supplement;
- any subordination provisions; and
- certain events of default relating to breach of covenants and
acceleration of the maturity of other debt set forth in any prospectus
supplement.
If we accomplish covenant defeasance, you can still look to us for
repayment of the debt securities if a shortfall in the trust deposit occurred.
If one of the remaining events of default occurs, for example, our bankruptcy,
and the debt securities become immediately due and payable, there may be a
shortfall. Depending on the event causing the default, you may not be able to
obtain payment of the shortfall.
SUBORDINATION
We will describe in the applicable prospectus supplement the terms and
conditions, if any, upon which any series of senior subordinated securities or
subordinated securities is subordinated to debt securities of another series or
to our other indebtedness. The terms will include a description of:
- the indebtedness ranking senior to the debt securities being offered;
- the restrictions, if any, on payments to the holders of the debt
securities being offered while a default with respect to the senior
indebtedness is continuing;
- the restrictions, if any, on payments to the holders of the debt
securities being offered following an event of default; and
- provisions requiring holders of the debt securities being offered to
remit some payments to holders of senior indebtedness.
GUARANTEES
Our payment obligations under any series of our debt securities may be
guaranteed by some or all of our subsidiaries. The guarantees may be secured or
unsecured and may be senior or subordinated obligations. The guarantors will be
identified and the terms of the guarantees will be described in the applicable
prospectus supplement.
GLOBAL SECURITIES
If so set forth in the applicable prospectus supplement, we may issue
the debt securities of a series in whole or in part in the form of one or more
global securities that will be deposited with a depositary identified in the
prospectus supplement. We may issue global securities in either registered or
bearer form and in either temporary or permanent form. The specific terms of the
depositary arrangement with respect to any series of debt securities will be
described in the prospectus supplement.
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DESCRIPTION OF OUR COMMON STOCK
The following is a summary of certain provisions of our amended
certificate of incorporation and by-laws, which documents set forth certain
terms of our common stock. Because this summary is not complete, you should
refer to such documents for complete information. Copies of our certificate of
incorporation and by-laws, as amended, are incorporated by reference as exhibits
to the registration statement of which this prospectus is a part.
GENERAL
Common stock holders are entitled to receive dividends when declared by
the board of directors and after payment of, or provision for, full cumulative
dividends on and any required redemptions of shares of preferred stock then
outstanding. Common stock holders have one vote per share, and there are no
cumulative voting rights. If we are voluntarily or involuntarily liquidated or
dissolved, common stock holders are to share ratably in our distributable assets
remaining after the satisfaction of all of our debts and liabilities and the
preferred stock holders' prior preferential rights. Common stock holders do not
have preemptive rights. The common stock will be, when issued, fully paid and
nonassessable. The common stock is subject to restrictions on transfer under
certain circumstances described under "Restrictions on Transfer of Securities"
below. The transfer agent for our common stock is Mellon Investor Services LLC.
Each outstanding share of our common stock is accompanied by a right to
purchase one one-thousandth of a share of our junior participation preferred
stock, Series A, at the price of $48, subject to certain anti-dilution
adjustments. We have designated and reserved 13,000 shares of our preferred
stock as such Class A preferred stock for issuance upon exercise of the rights.
The existence of such rights could have the effect of delaying, deterring or
preventing a change in our control. The purchase rights and the Class A
preferred stock are more fully discussed below under the caption "Share Purchase
Rights." For a description of other provisions of our amended certificate of
incorporation and by-laws that could have the effect of delaying, deterring or
preventing a change in our control, please see "Description of Certain
Provisions of Our Certificate of Incorporation and By-Laws" below.
The rights, preferences and privileges of holders of our common stock
are subject to, and may be adversely affected by, the rights of the holders of
shares of any series of our preferred stock which are outstanding or which we
may designate and issue in the future. See "Description of Our Preferred Stock"
below.
SHARE PURCHASE RIGHTS
On July 19, 1994, our board of directors adopted a shareholder rights
plan, commonly referred to as a "poison pill," which authorized the issuance of
one preferred share purchase right for each outstanding share of common stock.
Under certain conditions, each right may be exercised to purchase one
one-thousandth of a share of our Junior Participating Preferred Stock, Series A,
for $48, subject to certain anti-dilution adjustments. The number of rights
outstanding and Series A preferred stock issuable upon exercise, as well as the
Series A preferred stock purchase price, are subject to customary antidilution
adjustments.
The rights are evidenced by the certificates for shares of common
stock, and in general are not transferable apart from the common stock or
exercisable until after a party has acquired beneficial ownership of, or made a
tender offer for 15% or more of our outstanding common stock, or the occurrence
of other events as specified in a rights agreement between us and Mellon
Investor Services LLC, as rights agent. Under certain conditions as specified in
the rights agreement, including but not limited to, the acquisition by a party
of 15% or more of our outstanding common stock, or the acquisition of us in a
merger or other business combination, each holder of a right (other than an
acquiring person, whose rights will be void) will receive upon its exercise and
payment of the exercise price that number of shares of our common stock, or the
common stock of the other party, as applicable, having a market value of two
times the exercise price of the right.
The rights expire on August 5, 2004, and until they are exercised,
their holder will have no rights as a stockholder. At our option, the rights may
be redeemed in whole at a price of $.01 per right any time prior to becoming
exercisable. In general, we may also exchange the rights at a ratio of one share
of common stock per right after becoming exercisable but prior to any party
acquiring 50% or more of the outstanding shares of common stock.
Series A preferred stock issuable upon exercise of the rights will not
be redeemable. Each share of Series A preferred stock will have 1,000 votes and
will be entitled to:
- a minimum preferential quarterly dividend payment equal to the greater
of $25.00 per share or 1,000 times the amount of the dividends per
share paid on the common stock;
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- a liquidation preference in an amount equal to the greater of $100 or
1,000 times the amount per share paid on the common stock; and
- a payment in connection with a business combination in which shares of
common stock are exchanged equal to 1,000 times the amount per share
paid on the common stock.
The purchase rights have an anti-takeover effect that is intended to
discourage coercive or unfair takeover tactics and to encourage any potential
acquirer to negotiate a fair price for all of our shareholders. The purchase
rights may cause substantial dilution to any party that may attempt to acquire
us on terms not approved by our board of directors. However, the purchase rights
are structured in a way so as not to interfere with any negotiated merger or
other business combination.
DESCRIPTION OF OUR PREFERRED STOCK
The following is a summary description of the material terms of our
shares of preferred stock. Because it is a summary, it does not contain all of
the information that may be important to you. If you want more information, you
should read our amended certificate of incorporation and by-laws, copies of
which have been filed with the SEC. See "Where You Can Find Additional
Information." This summary is also subject to and qualified by reference to the
description of the particular terms of your securities described in the
applicable prospectus supplement.
GENERAL
Our board of directors or a duly authorized committee thereof, will
determine the designations, preferences, limitations and relative rights of our
authorized and unissued preferred shares. These may include:
- the distinctive designation of each series and the number of shares
that will constitute the series;
- the voting rights, if any, of shares of the series;
- the distribution rate on the shares of the series, any restriction,
limitation or condition upon the payment of the distribution, whether
distributions will be cumulative, and the dates on which distributions
are payable;
- the prices at which, and the terms and conditions on which, the shares
of the series may be redeemed, if the shares are redeemable;
- the purchase or sinking fund provisions, if any, for the purchase or
redemption of shares of the series;
- any preferential amount payable upon shares of the series upon our
liquidation or the distribution of our assets;
- if the shares are convertible, the price or rates of conversion at
which, and the terms and conditions on which, the shares of the series
may be converted into other securities; and
- whether the series can be exchanged, at our option, into debt
securities, and the terms and conditions of any permitted exchange.
The issuance of preferred shares, or the issuance of rights to purchase
preferred shares, could discourage an unsolicited acquisition proposal. In
addition, the rights of holders of common shares will be subject to, and may be
adversely affected by, the rights of holders of any preferred shares that we may
issue in the future.
The following describes some general terms and provisions of the
preferred shares to which a prospectus supplement may relate. The statements
below describing the preferred shares are in all respects subject to and
qualified in their entirety by reference to the applicable provisions of our
amended certificate of incorporation, including any applicable certificate of
designation, and our by-laws.
The prospectus supplement will describe the specific terms as to each
issuance of preferred shares, including:
- the description of the preferred shares;
- the number of the preferred shares offered;
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- the voting rights, if any, of the holders of the preferred shares;
- the offering price of the preferred shares;
- the distribution rate, when distributions will be paid, or the method
of determining the distribution rate if it is based on a formula or not
otherwise fixed;
- the date from which distributions on the preferred shares shall
accumulate;
- the provisions for any auctioning or remarketing, if any, of the
preferred shares;
- the provision, if any, for redemption or a sinking fund;
- the liquidation preference per share;
- any listing of the preferred shares on a securities exchange;
- whether the preferred shares will be convertible and, if so, the
security into which they are convertible and the terms and conditions
of conversion, including the conversion price or the manner of
determining it;
- whether interests in the shares of preferred stock will be represented
by depositary shares as more fully described below under "Description
of Depositary Shares;"
- a discussion of federal income tax considerations;
- the relative ranking and preferences of the preferred shares as to
distribution and liquidation rights;
- any limitations on issuance of any preferred shares ranking senior to
or on a parity with the series of preferred shares being offered as to
distribution and liquidation rights;
- any limitations on direct or beneficial ownership and restrictions on
transfer, in each case as may be appropriate to preserve our status as
a real estate investment trust; and
- any other specific terms, preferences, rights, limitations or
restrictions of the preferred shares.
As described under "Description of Depositary Shares," we may, at our
option, elect to offer depositary shares evidenced by depositary receipts. If we
elect to do this, each depositary receipt will represent a fractional interest
in a share of the particular series of preferred stock issued and deposited with
a depositary. The applicable prospectus supplement will specify that fractional
interest.
RANK
Unless our board of directors otherwise determines and we so specify in
the applicable prospectus supplement, we expect that the preferred shares will,
with respect to distribution rights and rights upon liquidation or dissolution,
rank senior to all our common shares.
DISTRIBUTIONS
Holders of preferred shares of each series will be entitled to receive
cash and/or share distributions at the rates and on the dates shown in the
applicable prospectus supplement. Even though the preferred shares may specify a
fixed rate of distribution, our board of directors must authorize and declare
those distributions and they may be paid only out of assets legally available
for payment. We will pay each distribution to holders of record as they appear
on our share transfer books on the record dates fixed by our board of directors.
In the case of shares of preferred stock represented by depositary receipts, the
records of the depositary referred to under "Description of Depositary Shares"
will determine the persons to whom dividends are payable.
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Distributions on any series of preferred shares may be cumulative or
noncumulative, as provided in the applicable prospectus supplement. We refer to
each particular series, for ease of reference, as the applicable series.
Cumulative distributions will be cumulative from and after the date shown in the
applicable prospectus supplement. If our board of directors fails to authorize a
distribution on any applicable series that is noncumulative, the holders will
have no right to receive, and we will have no obligation to pay, a distribution
in respect of the applicable distribution period, whether or not distributions
on that series are declared payable in the future. If the applicable series is
entitled to a cumulative distribution, we may not declare, or pay or set aside
for payment, any full distributions on any other series of preferred shares
ranking, as to distributions, on a parity with or junior to the applicable
series, unless we declare, and either pay or set aside for payment, full
cumulative distributions on the applicable series for all past distribution
periods and the then current distribution period. If the applicable series does
not have a cumulative distribution, we must declare, and pay or set aside for
payment, full distributions for the then current distribution period only. When
distributions are not paid, or set aside for payment, in full upon any
applicable series and the shares of any other series ranking on a parity as to
distributions with the applicable series, we must declare, and pay or set aside
for payment, all distributions upon the applicable series and any other parity
series proportionately, in accordance with accrued and unpaid distributions of
the several series. For these purposes, accrued and unpaid distributions do not
include unpaid distribution periods on noncumulative preferred shares. No
interest will be payable in respect of any distribution payment that may be in
arrears.
Except as provided in the immediately preceding paragraph, unless we
declare, and pay or set aside for payment, full cumulative distributions,
including for the then current period, on any cumulative applicable series, we
may not declare, or pay or set aside for payment, any distributions upon common
shares or any other equity securities ranking junior to or on a parity with the
applicable series as to distributions or upon liquidation. The foregoing
restriction does not apply to distributions paid in common shares or other
equity securities ranking junior to the applicable series as to distributions
and upon liquidation. If the applicable series is noncumulative, we need only
declare, and pay or set aside for payment, the distribution for the then current
period, before declaring distributions on common shares or junior or parity
securities. In addition, under the circumstances that we could not declare a
distribution, we may not redeem, purchase or otherwise acquire for any
consideration any common shares or other parity or junior equity securities,
except upon conversion into or exchange for common shares or other junior equity
securities. We may, however, make purchases and redemptions otherwise prohibited
pursuant to certain redemptions or pro rata offers to purchase the outstanding
shares of the applicable series and any other parity series of preferred shares.
We will credit any distribution payment made on an applicable series
first against the earliest accrued but unpaid distribution due with respect to
the series.
REDEMPTION
We may have the right or may be required to redeem one or more series
of preferred shares, as a whole or in part, in each case upon the terms, if any,
and at the times and at the redemption prices shown in the applicable prospectus
supplement.
If a series of preferred shares is subject to mandatory redemption, we
will specify in the applicable prospectus supplement the number of shares we are
required to redeem, when those redemptions start, the redemption price, and any
other terms and conditions affecting the redemption. The redemption price will
include all accrued and unpaid distributions, except in the case of
noncumulative preferred shares. The redemption price may be payable in cash or
other property, as specified in the applicable prospectus supplement. If the
redemption price for preferred shares of any series is payable only from the net
proceeds of our issuance of shares of capital stock, the terms of the preferred
shares may provide that, if no shares of such capital stock shall have been
issued or to the extent the net proceeds from any issuance are insufficient to
pay in full the aggregate redemption price then due, the preferred shares will
automatically and mandatorily be converted into shares of the applicable capital
stock pursuant to conversion provisions specified in the applicable prospectus
supplement.
LIQUIDATION PREFERENCE
The applicable prospectus supplement will show the liquidation
preference of the applicable series. Upon our voluntary or involuntary
liquidation, before any distribution may be made to the holders of our common
shares or any other shares of beneficial interest ranking junior in the
distribution of assets upon any liquidation to the applicable series, the
holders of that series will be entitled to receive, out of our assets legally
available for distribution to stockholders, liquidating distributions in the
amount of the liquidation preference, plus an amount equal to all distributions
accrued and unpaid. In the case of a noncumulative applicable series, accrued
and unpaid distributions include only the then current distribution period.
After payment of the full amount of the liquidating distributions to which they
are entitled, the holders of preferred shares will have no right or claim to any
of our remaining assets. If liquidating distributions shall have been made in
full to all holders of preferred shares, our remaining assets will be
distributed among
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the holders of any other shares of beneficial interest ranking junior to the
preferred shares upon liquidation, according to their rights and preferences and
in each case according to their number of shares.
If, upon any voluntary or involuntary liquidation, our available assets
are insufficient to pay the amount of the liquidating distributions on all
outstanding shares of that series and the corresponding amounts payable on all
shares of beneficial interest ranking on a parity in the distribution of assets
with that series, then the holders of that series and all other equally ranking
shares of beneficial interest shall share ratably in the distribution in
proportion to the full liquidating distributions to which they would otherwise
be entitled. For these purposes, our consolidation or merger with or into any
other corporation or other entity, or the sale, lease or conveyance of all or
substantially all of our property or business, will not be a liquidation.
VOTING RIGHTS
Holders of the preferred shares will not have any voting rights, except
as described below or as otherwise from time to time required by law or as
specified in the applicable prospectus supplement. As more fully described under
"Description of Depositary Shares" below, if we elect to issue depositary
shares, each representing a fraction of a share of a series of preferred stock,
each depositary will in effect be entitled to a fraction of a vote per
depositary share.
Unless otherwise provided for in an applicable series, so long as any
preferred shares are outstanding, we may not, without the affirmative vote or
consent of at least a majority of the shares of each series of preferred shares
outstanding at that time:
- authorize, create or increase the authorized or issued amount of any
class or series of shares of beneficial interest ranking senior to that
series of preferred shares with respect to distribution and liquidation
rights;
- reclassify any authorized shares of beneficial interest into a series
of shares of beneficial interest ranking senior to that series of
preferred shares with respect to distribution and liquidation rights;
- create, authorize or issue any security or obligation convertible into
or evidencing the right to purchase any shares of beneficial interest
ranking senior to that series of preferred shares with respect to
distribution and liquidation rights; and
- amend, alter or repeal the provisions of our certificate of
incorporation relating to that series of preferred shares that
materially and adversely affects the series of preferred shares.
The authorization, creation or increase of the authorized or issued
amount of any class or series of shares of capital stock ranking on parity or
junior to a series of preferred shares with respect to distribution and
liquidation rights will not be deemed to materially and adversely affect that
series.
CONVERSION RIGHTS
We will describe in the applicable prospectus supplement the terms and
conditions, if any, upon which you may, or we may require you to, convert shares
of any series of preferred shares into common shares or any other class or
series of shares of capital stock. The terms will include the number of common
shares or other capital stock into which the preferred shares are convertible,
the conversion price or manner of determining it, the conversion period,
provisions as to whether conversion will be at the option of the holders of the
series or at our option, the events requiring an adjustment of the conversion
price, and provisions affecting conversion upon the redemption of shares of the
series.
OUR EXCHANGE RIGHTS
We will describe in the applicable prospectus supplement the terms and
conditions, if any, upon which we can require you to exchange shares of any
series of preferred shares for debt securities. If an exchange is required, you
will receive debt securities with a principal amount equal to the liquidation
preference of the applicable series of preferred shares. The other terms and
provisions of the debt securities will not be materially less favorable to you
than those of the series of preferred shares being exchanged.
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DESCRIPTION OF DEPOSITARY SHARES
This section describes the general germs and provisions of shares of
preferred stock represented by depositary shares. The applicable prospectus
supplement will describe the specific terms of the depositary shares offered
through that prospectus supplement and any general terms outlined in this
section that will not apply to those depositary shares.
We have summarized in this section certain terms and provisions of the
deposit agreement, the depositary shares and the receipts representing
depositary shares. The summary is not complete. You should read the forms of
deposit agreement and depositary receipt that we will file with the SEC at or
before the time of the offering of the depositary shares for additional
information before you buy any depositary shares.
GENERAL
We may, at our option, elect to offer fractional interests in shares of
preferred stock, rather than shares of preferred stock. If we exercise this
option, we will appoint a depositary to issue depositary receipts representing
those fractional interests. Shares of preferred stock of each series represented
by depositary shares will be deposited under a separate deposit agreement
between us and the depositary. The prospectus supplement relating to a series of
depositary shares will provide the name and address of the depositary. Subject
to the terms of the applicable deposit agreement, each owner of depositary
shares will be entitled to all of the dividend, voting, conversion, redemption,
liquidation and other rights and preferences of the shares of preferred stock
represented by those depositary shares.
Depositary receipts issued pursuant to the applicable deposit agreement
will evidence ownership of depositary shares. Upon surrender of depositary
receipts at the office of the depositary, and upon payment of the charges
provided in and subject to the terms of the deposit agreement, a holder of
depositary shares will be entitled to receive the shares of preferred stock
underlying the surrendered depositary receipts.
DISTRIBUTIONS
A depositary will be required to distribute all dividends or other cash
distributions received in respect of the applicable shares of preferred stock to
the record holders of depositary receipts evidencing the related depositary
shares in proportion to the number of depositary receipts owned by the holders.
Fractions will be rounded down to the nearest whole cent.
If the distribution is other than in cash, a depositary will be
required to distribute property received by it to the record holders of
depositary receipts entitled thereto, unless the depositary determines that it
is not feasible to make the distribution. In that case, the depositary may, with
our approval, sell the property and distribute the net proceeds from the sale to
the holders of depositary shares.
Depositary shares that represent shares of preferred stock converted or
exchanged will not be entitled to distributions. The deposit agreement also will
contain provisions relating to the manner in which any subscription or similar
rights we offer to holders of shares of preferred stock will be made available
to holders of depositary shares. All distributions will be subject to
obligations of holders to file proofs, certificates and other information and to
pay certain charges and expenses to the depositary.
WITHDRAWAL OF SHARES OF PREFERRED STOCK
You may receive the number of whole shares of your series of preferred
stock and any money or other property represented by your depositary receipts
after surrendering your depositary receipts at the corporate trust office of the
depositary. Partial shares of preferred stock will not be issued. If the
depositary shares that you surrender exceed the number of depositary shares that
represent the number of whole shares of preferred stock you wish to withdraw,
then the depositary will deliver to you at the same time a new depositary
receipt evidencing the excess number of depositary shares. Once you have
withdrawn your shares of preferred stock, you will not be entitled to re-deposit
those shares of preferred stock under the deposit agreement in order to receive
depositary shares. We do not expect that there will be any public trading market
for withdrawn shares of preferred stock.
REDEMPTION OF DEPOSITARY SHARES
If we redeem a series of the preferred stock underlying the depositary
shares, the depositary will redeem those shares from the proceeds it receives.
The redemption price per depositary share will be equal to the applicable
fraction of the redemption price per share payable with respect to the series of
the preferred stock. The redemption date for depositary shares will be the same
as that of the preferred stock. If we are redeeming less than all of the
depositary shares, the depositary will select the depositary shares we are
redeeming by lot or pro rata as the depositary may determine.
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After the date fixed for redemption, the depositary shares called for
redemption will no longer be deemed outstanding. All rights of the holders of
the depositary shares and the related depositary receipts will cease at that
time, except the right to receive the money or other property to which the
holders of depositary shares were entitled upon redemption. Receipt of the money
or other property is subject to surrender to the depositary of the depositary
receipts evidencing the redeemed depositary shares.
VOTING OF THE UNDERLYING SHARES OF PREFERRED STOCK
Upon receipt of notice of any meeting at which the holders of the
preferred stock are entitled to vote, a depositary will be required to mail the
information contained in the notice of meeting to the record holders of the
depositary shares representing such preferred stock. Each record holder of
depositary receipts on the record date will be entitled to instruct the
depositary as to how the holder's depositary shares will be voted. The record
date for the depositary shares will be the same as the record date for the
preferred stock. The depositary will vote the shares as you instruct. We will
agree to take all reasonable action that the depositary deems necessary in order
to enable it to vote the preferred stock in that manner. If you do not instruct
the depositary how to vote your shares, the depositary will abstain from voting
those shares. The depositary will not be responsible for any failure to carry
out any voting instruction, or for the manner or effect of any vote, as long as
its action or inaction is in good faith and does not result from its negligence
or willful misconduct.
LIQUIDATION PREFERENCE
Upon our liquidation, whether voluntary or involuntary, each holder of
depositary shares will be entitled to the fraction of the liquidation preference
accorded each share of preferred stock represented by the depositary shares, as
described in the applicable prospectus supplement.
CONVERSION OR EXCHANGE OF SHARES OF PREFERRED STOCK
The depositary shares will not themselves be convertible into or
exchangeable for shares of common stock or preferred stock or any of our other
securities or property. Nevertheless, if so specified in the applicable
prospectus supplement, the depositary receipts may be surrendered by holders to
the applicable depositary with written instructions to it to instruct us to
cause the conversion of the preferred stock represented by the depositary
shares. Similarly, if so specified in the applicable prospectus supplement, we
may require you to surrender all of your depositary receipts to the applicable
depositary upon our requiring the conversion or exchange of the preferred stock
represented by the depositary shares into our debt securities. We will agree
that, upon receipt of the instruction and any amounts payable in connection with
the conversion or exchange, we will cause the conversion or exchange using the
same procedures as those provided for delivery of shares of preferred stock to
effect the conversion or exchange. If you are converting only a part of the
depositary shares, the depositary will issue you a new depositary receipt for
any unconverted depositary shares.
AMENDMENT AND TERMINATION OF A DEPOSIT AGREEMENT
We and the applicable depositary are permitted to amend the provisions
of the depositary receipts and the deposit agreement. However, the holders of at
least a majority of the applicable depositary shares then outstanding must
approve any amendment that adds or increases fees or charges or prejudices an
important right of holders. Every holder of an outstanding depositary receipt at
the time any amendment becomes effective, by continuing to hold the receipt,
will be bound by the applicable deposit agreement, as amended.
Any deposit agreement may be terminated by us upon not less than 30
days' prior written notice to the applicable depositary if (1) the termination
is necessary to preserve our status as a REIT or (2) a majority of each series
of preferred stock affected by the termination consents to the termination. When
either event occurs, the depositary will be required to deliver or make
available to each holder of depositary receipts, upon surrender of the
depositary receipts held by the holder, the number of whole or fractional shares
of preferred stock as are represented by the depositary shares evidenced by the
depositary receipts, together with any other property held by the depositary
with respect to the depositary receipts. In addition, a deposit agreement will
automatically terminate if:
- all depositary shares have been redeemed;
- there shall have been a final distribution in respect of the related
preferred stock in connection with our liquidation and the distribution
has been made to the holders of depositary receipts evidencing the
depositary shares underlying the preferred stock; or
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- each related share of preferred stock shall have been converted or
exchanged into securities not represented by depositary shares.
CHARGES OF A DEPOSITARY
We will pay all transfer and other taxes and governmental charges
arising solely from the existence of a deposit agreement. In addition, we will
pay the fees and expenses of a depositary in connection with the initial deposit
of the preferred stock and any redemption of preferred stock. However, holders
of depositary receipts will pay any transfer or other governmental charges and
the fees and expenses of a depositary for any duties the holders request to be
performed that are outside of those expressly provided for in the applicable
deposit agreement.
RESIGNATION AND REMOVAL OF A DEPOSITARY
A depositary may resign at any time by delivering to us notice of its
election to do so. In addition, we may at any time remove a depositary. Any
resignation or removal will take effect when we appoint a successor depositary
and it accepts the appointment. We must appoint a successor depositary within 60
days after delivery of the notice of resignation or removal. A depositary must
be a bank or trust company having its principal office in the United States that
has a combined capital and surplus of at least $50 million.
MISCELLANEOUS
A depositary will be required to forward to holders of depositary
receipts any reports and communications from us that it receives with respect to
the related shares of preferred stock. Holders of depository receipts will be
able to inspect the transfer books of the depository and the list of holders of
receipts upon reasonable notice. Neither a depositary nor our company will be
liable if it is prevented from or delayed in performing its obligations under a
deposit agreement by law or any circumstances beyond its control. Our
obligations and those of the depositary under a deposit agreement will be
limited to performing duties in good faith and without gross negligence or
willful misconduct.
Neither we nor any depositary will be obligated to prosecute or defend
any legal proceeding in respect of any depositary receipts, depositary shares or
related shares of preferred stock unless satisfactory indemnity is furnished. We
and each depositary will be permitted to rely on written advice of counsel or
accountants, on information provided by persons presenting shares of preferred
stock for deposit, by holders of depositary receipts, or by other persons
believed in good faith to be competent to give the information, and on documents
believed in good faith to be genuine and signed by a proper party.
If a depositary receives conflicting claims, requests or instructions
from any holder of depositary receipts, on the one hand, and us, on the other
hand, the depositary shall be entitled to act on the claims, requests or
instructions received from us.
DESCRIPTION OF WARRANTS
This section describes the general terms and provisions of the
warrants. The applicable prospectus supplement will describe the specific terms
of the warrants offered through that prospectus supplement and any general terms
outlined in this section that will not apply to those warrants.
We have summarized in this section certain terms and provisions of the
warrant agreement and the warrants. The summary is not complete. You should read
the forms of warrant and warrant agreement that we will file with the SEC at or
before the time of the offering of the applicable series of warrants for
additional information before you buy any warrants.
We may issue, together with any other securities being offered or
separately, warrants entitling the holder to purchase from or sell to us, or to
receive from us the cash value of the right to purchase or sell, debt
securities, preferred stock, depositary shares or common stock. We and a warrant
agent will enter a warrant agreement pursuant to which the warrants will be
issued. The warrant agent will act solely as our agent in connection with the
warrants and will not assume any obligation or relationship of agency or trust
for or with any holders or beneficial owners of warrants.
In the case of each series of warrants, the applicable prospectus
supplement will describe the terms of the warrants being offered thereby. These
include the following, if applicable:
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- the offering price;
- the number of warrants offered;
- the securities underlying the warrants;
- the exercise price, the procedures for exercise of the warrants and
the circumstances, if any, that will cause the warrants to be
automatically exercised;
- the date on which the warrants will expire;
- federal income tax consequences;
- the rights, if any, we have to redeem the warrants;
- the name of the warrant agent; and
- the other terms of the warrants.
Warrants may be exercised at the appropriate office of the warrant
agent or any other office indicated in the applicable prospectus supplement.
Before the exercise of warrants, holders will not have any of the rights of
holders of the securities underlying the warrants and will not be entitled to
payments made to holders of those securities.
The warrant agreements may be amended or supplemented without the
consent of the holders of the warrants to which the amendment or supplement
applies to effect changes that are not inconsistent with the provisions of the
warrants and that do not adversely affect the interests of the holders of the
warrants. However, any amendment that materially and adversely alters the rights
of the holders of warrants will not be effective unless the holders of at least
a majority of the applicable warrants then outstanding approve the amendment.
Every holder of an outstanding warrant at the time any amendment becomes
effective, by continuing to hold the warrant, will be bound by the applicable
warrant agreement, as amended thereby. The prospectus supplement applicable to a
particular series of warrants may provide that certain provisions of the
warrants, including the securities for which they may be exercisable, the
exercise price, and the expiration date may not be altered without the consent
of the holder of each warrant.
DESCRIPTION OF UNITS
We may, from time to time, issue units comprised of one or more of the
other securities that may be offered under this prospectus, in any combination.
Each unit will be issued so that the holder of the unit is also the holder of
each security included in the unit. Thus, the holder of a unit will have the
rights and obligations of a holder of each included security. The unit agreement
under which a unit is issued may provide that the securities included in the
unit may not be held or transferred separately at any time, or at any time
before a specified date.
Any applicable prospectus supplement will describe:
- the material terms of the units and of the securities comprising
the units, including whether and under what circumstances those
securities may be held or transferred separately;
- any material provisions relating to the issuance, payment,
settlement, transfer or exchange of the units or of the securities
comprising the units;
- any special United States federal income tax considerations
applicable to the units; and
- any material provisions of the governing unit agreement that
differ from those described above.
RESTRICTIONS ON TRANSFER OF SECURITIES
For us to qualify as a real estate investment trust, not more than 50%
in value of our outstanding capital stock may be owned, directly or indirectly,
by five or fewer individuals at any time during the last half of our taxable
year. In order to ensure that this
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requirement is satisfied, our by-laws (with respect to our common stock), and
our certificates of designation (for our preferred stock) provide that no person
may acquire securities that would result in the direct or indirect beneficial
ownership of more than 9.8% in value of our outstanding capital stock. If any
securities in excess of this limit are issued or transferred to any person, such
issuance or transfer shall be valid only with respect to such amount of
securities as does not exceed this limit, and such issuance or transfer will be
void with respect to the excess.
If these provisions of our by-laws and certificates of designation are
determined to be invalid by virtue of any legal decision, statute, rule or
regulation, then the transferee of the shares or other securities will be deemed
to have acted as our agent in acquiring the shares or other securities that are
in excess of the limit, and will be deemed to hold such excess shares or
securities on our behalf. As the equivalent of treasury securities for such
purposes, the excess securities will not be entitled to any voting rights, will
not be considered to be outstanding for quorum or voting purposes, and will not
be entitled to receive dividends, interest or any other distribution with
respect to such securities. Any person who receives dividends, interest or any
other distribution in respect of the excess securities will hold the same as our
agent and for the transferee of the excess securities following a permitted
transfer.
In addition, under our by-laws and certificates of designation, we may
refuse to transfer any shares, passing either by voluntary transfer, by
operation of law, or under the last will and testament of any stockholder, if
such transfer would or might, in the opinion of our board of directors or
counsel, disqualify us as a real estate investment trust.
DESCRIPTION OF CERTAIN PROVISIONS OF OUR CERTIFICATE OF
INCORPORATION AND BY-LAWS
ANTI-TAKEOVER PROVISIONS
Our amended certificate of incorporation and by-laws contain provisions
that may have the effect of discouraging persons from acquiring large blocks of
our stock or delaying or preventing a change in our control. The material
provisions that may have such an effect are:
- Classification of our board of directors into three classes with the
term of only one class expiring each year.
- A provision permitting our board of directors to make, amend or repeal
our by-laws.
- Authorization for our board of directors to issue preferred stock in
series and to fix the rights and preferences of the series, including,
among other things, whether and to what extent the shares of any series
will have voting rights and the extent of the preferences of the shares
of any series with respect to dividends and other matters (see
"Description of Our Preferred Stock" above).
- A prohibition on shareholders taking action by written consent in lieu
of a meeting.
- Advance notice procedures with respect to nominations of directors by
stockholders.
- The grant only to our board of directors of the right to call special
meetings of stockholders.
- Limitations on the number of shares of our capital stock that may be
beneficially owned, directly or indirectly, by any one stockholder (see
"Restrictions on Transfer of Securities" above).
- Limitations on transactions that involve us and any stockholder who
beneficially owns 5% or more of our common stock (see "Limitations on
Transactions Involving Us and Our Shareholders" below).
- A provision permitting amendment of certain of the provisions listed
above only by an affirmative vote of the holders of at least
three-quarters of all of the outstanding shares of our voting stock,
voting together as a single class.
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LIMITATIONS ON TRANSACTIONS INVOLVING US AND OUR STOCKHOLDERS
Under our by-laws, in addition to any vote otherwise required by law, our
certificate of incorporation or our by-laws, the following transactions will
require the affirmative vote of the holders of at least seventy-five percent of
the voting power of our then outstanding shares of capital stock entitled to
vote generally in the election of directors, voting together as a single class:
- Our merger or consolidation with or into
- any stockholder that owns 5% or more of our voting stock; or
- any other corporation or entity which is, or after such merger or
consolidation would be, an affiliate of a stockholder that owns 5%
or more of our voting stock.
- Any sale, lease, exchange, mortgage, pledge, transfer or other
disposition of substantially all of our assets, in one transaction or a
series of transactions, to or with any stockholder that owns 5% or more
of our voting stock or an affiliate of any such stockholder.
- Any reclassification of our securities, including any reverse stock
split, or recapitalization or any other transaction that has the
effect, directly or indirectly, of increasing the proportionate share
of the outstanding shares of any class of our equity securities that is
directly or indirectly owned by any stockholder that owns 5% or more of
our voting stock or any affiliate of such a stockholder, whether or not
the transaction involves a such a stockholder.
- The adoption of any plan or proposal for our liquidation or dissolution
proposed by or on behalf of a stockholder that owns 5% or more of our
voting stock or any affiliate of such a stockholder.
These provisions will not apply to any of the transactions described above
if:
- we are at the time of the consummation of the transaction, and at all
times throughout the preceding twelve months have been, directly or
indirectly, the beneficial owner of a majority of each class of the
outstanding equity securities of the 5% stockholder that is a party to
the transaction; or
- the transaction has been approved by a majority of the members of our
board of directors who, at the time such approval is given, were not
affiliates or nominees of the 5% stockholder and were either members of
our board of directors prior to the time that the 5% stockholder became
a 5% stockholder, or were successors of such directors on the
recommendation of a majority of such directors then on the board of
directors; or
- both of the following conditions have been met:
- the aggregate amount of the cash and the fair market value, as
determined in good faith by our board of directors, of the
consideration other than cash to be received per share by holders
of our voting stock in such transaction shall be at least equal to
the highest per share price paid by the 5% stockholder for any
shares of voting stock acquired by it:
- within the two-year period immediately prior to the first
public announcement of the proposal of the transaction, or
- in the transaction in which it became a 5% stockholder,
whichever is higher; and
- the consideration to be received by holders of a particular class of
outstanding voting stock shall be in cash or in the same form as the 5%
stockholder previously paid for shares of such voting stock. If the 5%
stockholder paid for shares of any class of voting stock with varying
forms of consideration, the form of consideration to be paid by the 5%
stockholder for such class of voting stock shall be either cash or the
form used to acquire the largest number of shares of such class of
voting stock previously acquired by the stockholder.
The foregoing summary of certain provisions of our amended certificate of
incorporation and by-laws does not purport to be complete or to give effect to
provisions of statutory or common law. The foregoing summary is subject to, and
qualified in its entirety by reference to, the provisions of applicable law and
our amended certificate of incorporation and by-laws, copies of which are
incorporated by reference as exhibits to the registration statement of which
this prospectus is a part.
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U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following summary of the taxation of the Company and the material
federal tax consequences to you as a holder of our common stock and debt
securities offered under this prospectus is for general information only and is
not tax advice. The applicable prospectus supplement delivered with this
prospectus will provide any necessary information about additional federal
income tax considerations, if any, related to the particular securities being
offered. The tax treatment of our securities will depend on the holder's
particular situation, and this summary only applies to you to the extent that
you hold our securities as capital assets. This discussion does not deal with
special tax situations such as insurance companies, financial institutions or
broker-dealers.
This summary does not discuss all of the aspects of U.S. federal income
taxation that may be relevant to you in light of your particular investment or
other circumstances. In addition, this summary does not discuss any state or
local income taxation or foreign income taxation or other tax consequences. This
summary is based on current U.S. federal income tax law. Subsequent developments
in U.S. federal income tax law, including changes in law or differing
interpretations, which may be applied retroactively, could have a material
effect on the U.S. federal income tax consequences of purchasing, owning and
disposing of our securities as set forth in this summary. Before you purchase
our securities, you should consult your own tax advisor regarding the particular
U.S. federal, state, local, foreign and other tax consequences of acquiring,
owning, and selling of our securities.
U.S. FEDERAL INCOME TAXATION OF THE COMPANY AS A REIT
GENERAL
We elected to be taxed as a real estate investment trust (or REIT)
commencing with our first taxable year. We intend to continue to operate in such
a manner as to qualify as a REIT, but there is no guarantee that we will qualify
or remain qualified as a REIT for subsequent years. Qualification and taxation
as a REIT depends upon our ability to meet a variety of qualification tests
imposed under federal income tax law with respect to our income, assets,
distribution level and diversity of share ownership as discussed below under
"-Qualification as a REIT." However, there can be no assurance that we will be
owned and organized and will operate in a manner so as to qualify or remain
qualified.
In any year in which we qualify as a REIT, in general, we will not be
subject to federal income tax on that portion of our REIT taxable income or
capital gain that is distributed to stockholders. We may, however, be subject to
tax at normal corporate rates on any taxable income or capital gain not
distributed. If we elect to retain and pay income tax on our net long-term
capital gain, stockholders are required to include their proportionate share of
our undistributed long-term capital gain in income, but they will receive a
refundable credit for their share of any taxes paid by us on such gain.
Despite the REIT election, we may be subject to federal income and
excise tax as follows:
- To the extent that we do not distribute all of our net capital gain or
distribute at least 90%, but less than 100%, of our "REIT taxable
income," as adjusted, we will be subject to tax on the undistributed
amount at regular corporate tax rates;
- We may be subject to the "alternative minimum tax" on certain items of
tax preference to the extent that this tax exceeds our regular tax;
- If we have net income from the sale or other disposition of
"foreclosure property" that is held primarily for sale to customers in
the ordinary course of business or other non-qualifying income from
foreclosure property, we will be subject to tax at the highest
corporate rate on this income;
- Any net income from prohibited transactions (which are, in general,
sales or other dispositions of property held primarily for sale to
customers in the ordinary course of business, other than dispositions
of foreclosure property and dispositions of property due to an
involuntary conversion) will be subject to a 100% tax;
- If we fail to satisfy either the 75% or 95% gross income tests (as
discussed below), but nonetheless maintain our qualification as a REIT
because certain other requirements are met, we will be subject to a
100% tax on an amount equal to (1) the gross income attributable to the
greater of the amounts by which we failed the 75% or 95% test,
multiplied by (2) a fraction intended to reflect our profitability;
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- If we fail to distribute during each year at least the sum of (1) 85%
of our REIT ordinary income for the year, (2) 95% of our REIT capital
gain net income for the year (other than capital gain that we elect
to retain and pay tax on) and (3) any undistributed taxable income
from preceding periods, we will be subject to a 4% excise tax on the
excess of the required distribution over amounts actually
distributed; and
- We will also be subject to a tax of 100% on the amount of any rents
from real property, deductions or excess interest paid to us by any
of our "taxable REIT subsidiaries" that would be reduced through
reapportionment under certain federal income tax principles in order
to more clearly reflect income of the taxable REIT subsidiary. See
"-Other Tax Considerations-Investments in Taxable REIT Subsidiaries."
If we acquire any assets from a corporation which is or has been a "C"
corporation in a carryover basis transaction, we could be liable for specified
liabilities that are inherited from the "C" corporation. A "C" corporation is
generally defined as a corporation that is required to pay full corporate level
federal income tax. If we recognize gain on the disposition of the assets during
the 10-year period beginning on the date on which the assets were acquired by
us, then to the extent of the assets' "built-in gain" (i.e., the excess of the
fair market value of the asset over the adjusted tax basis in the asset, in each
case determined as of the beginning of the 10-year period), we will be subject
to tax on the gain at the highest regular corporate rate applicable. The results
described in this paragraph with respect to the recognition of built-in gain
assume that the built-in gain assets, at the time the built-in gain assets were
subject to a conversion transaction (either where a "C" corporation elected
REIT status or a REIT acquired the assets from a "C" corporation), were not
treated as sold to an unrelated party and gain recognized.
QUALIFICATION AS A REIT
A REIT is defined as a corporation, trust or association:
(1) which is managed by one or more trustees or directors;
(2) the beneficial ownership of which is evidenced by transferable shares
or by transferable certificates of beneficial interest;
(3) which would be taxable as a domestic corporation but for the federal
income tax law relating to REITs;
(4) which is neither a financial institution nor an insurance company;
(5) the beneficial ownership of which is held by 100 or more persons in
each taxable year of the REIT except for its first taxable year;
(6) not more than 50% in value of the outstanding stock of which is owned
during the last half of each taxable year, excluding its first taxable
year, directly or indirectly, by or for five or fewer individuals
(which includes certain entities) (the " Five or Fewer Requirement");
and
(7) which meets certain income and asset tests described below.
Conditions (1) to (4), inclusive, must be met during the entire taxable
year and condition (5) must be met during at least 335 days of a taxable year of
12 months or during a proportionate part of a taxable year of less than 12
months. For purposes of conditions (5) and (6), pension funds and certain other
tax-exempt entities are treated as individuals, subject to a "look-through"
exception in the case of condition (6).
Based on publicly available information, we believe we have satisfied
the share ownership requirements set forth in (5) and (6) above. In addition,
Article VI of our Amended and Restated By-Laws provides for restrictions
regarding ownership and transfer of shares. These restrictions are intended to
assist us in continuing to satisfy the share ownership requirements described in
(5) and (6) above. These restrictions, however, may not ensure that we will, in
all cases, be able to satisfy the share ownership requirements described in (5)
and (6) above.
We have complied with, and will continue to comply with, regulatory
rules to send annual letters to certain of our stockholders requesting
information regarding the actual ownership of our stock. If despite sending the
annual letters, we do not know, or after exercising reasonable diligence would
not have known, whether we failed to meet the Five or Fewer Requirement, we
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will be treated as having met the Five or Fewer Requirement. If we fail to
comply with these regulatory rules, we will be subject to a monetary penalty. If
our failure to comply was due to intentional disregard of the requirement, the
penalty would be increased. However, if our failure to comply was due to
reasonable cause and not willful neglect, no penalty would be imposed.
We may own a number of properties through wholly owned subsidiaries. A
corporation will qualify as a "qualified REIT subsidiary" if 100% of its stock
is owned by a REIT and the REIT does not elect to treat the subsidiary as a
taxable REIT subsidiary. A "qualified REIT subsidiary" will not be treated as a
separate corporation, and all assets, liabilities and items of income,
deductions and credits of a "qualified REIT subsidiary" will be treated as
assets, liabilities and items (as the case may be) of the REIT. A "qualified
REIT subsidiary" is not subject to federal income tax, and our ownership of the
voting stock of a qualified REIT subsidiary will not violate the restrictions
against ownership of securities of any one issuer which constitute more than 10%
of the value or total voting power of the issuer or more than 5% of the value of
our total assets, as described below under "-Asset Tests."
If we invest in a partnership, a limited liability company or a trust
taxed as a partnership or as a disregarded entity, we will be deemed to own a
proportionate share of the partnership's, limited liability company's or trust's
assets. Likewise, we will be treated as receiving our share of the income and
loss of the partnership, limited liability company or trust, and the gross
income will retain the same character in our hands as it has in the hands of the
partnership, limited liability company or trust. These "look-through" rules
apply for purposes of the income tests and assets tests described below.
Income Tests. There are two separate percentage tests relating to our
sources of gross income that we must satisfy for each taxable year.
- At least 75% of our gross income (excluding gross income from certain sales
of property held primarily for sale) must be directly or indirectly derived
each taxable year from "rents from real property," other income from
investments relating to real property or mortgages on real property or
certain income from qualified temporary investments.
- At least 95% of our gross income (excluding gross income from certain sales
of property held primarily for sale) must be directly or indirectly derived
each taxable year from any of the sources qualifying for the 75% test and
from dividends (including dividends from taxable REIT subsidiaries),
interest, gain from the sale or disposition of stock securities and
payments to us under an interest rate swap, cap agreement, option, futures
contract, forward rate agreement or any similar financial instrument
entered into by us to hedge indebtedness incurred or to be incurred.
Rents received by us will qualify as "rents from real property" for
purposes of satisfying the gross income tests for a REIT only if several
conditions are met:
- The amount of rent must not be based in whole or in part on the income or
profits of any person, although rents generally will not be excluded merely
because they are based on a fixed percentage or percentages of receipts or
sales.
- Rents received from a tenant will not qualify as rents from real property
if the REIT, or an owner of 10% or more of the REIT, also directly or
constructively owns 10% or more of the tenant, unless the tenant is our
taxable REIT subsidiary and certain other requirements are met with respect
to the real property being rented.
- If rent attributable to personal property leased in connection with a lease
of real property is greater than 15% of the total rent received under the
lease, then the portion of rent attributable to the personal property will
not qualify as "rents from real property."
- For rents to qualify as rents from real property, we generally must not
furnish or render services to tenants, other than through a taxable REIT
subsidiary or an "independent contractor" from whom we derive no income,
except that we may directly provide services that are "usually or
customarily rendered" in the geographic area in which the property is
located in connection with the rental of real property for occupancy only,
or are not otherwise considered "rendered to the occupant for his
convenience."
For taxable years beginning after August 5, 1997, a REIT has been
permitted to render a de minimis amount of impermissible services to tenants and
still treat amounts received with respect to that property as rent from real
property. The amount received or accrued by the REIT during the taxable year for
the impermissible services with respect to a property may not exceed 1% of all
amounts received or accrued by the REIT directly or indirectly from the
property. The amount received for any service or management operation for this
purpose shall be deemed to be not less than 150% of the direct cost of the REIT
in furnishing or rendering the service or providing the management or operation.
Furthermore, impermissible services may be furnished to tenants by
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a taxable REIT subsidiary subject to certain conditions, and we may still treat
rents received with respect to the property as rent from real property.
The term "interest" generally does not include any amount if the
determination of the amount depends in whole or in part on the income or profits
of any person, although an amount generally will not be excluded from the term
"interest" solely by reason of being based on a fixed percentage of receipts or
sales.
If we fail to satisfy one or both of the 75% or 95% gross income tests
for any taxable year, we may nevertheless qualify as a REIT for the year if we
are eligible for relief. These relief provisions will be generally available if:
- Our failure to meet the tests was due to reasonable cause and not due to
willful neglect,
- We attach a schedule of the sources of our income to our return; and
- Any incorrect information on the schedule was not due to fraud with intent
to evade tax.
It is not now possible to determine the circumstances under which we
may be entitled to the benefit of these relief provisions. If these relief
provisions apply, a 100% tax is imposed on an amount equal to (a) the gross
income attributable to the greater of the amount by which we failed the 75% or
95% test, multiplied by (b) a fraction intended to reflect our profitability.
Asset Tests. At the close of each quarter of our taxable year, we must
also satisfy several tests relating to the nature and diversification of our
assets determined in accordance with generally accepted accounting principles.
At least 75% of the value of our total assets must be represented by real estate
assets, cash, cash items (including receivables arising in the ordinary course
of our operation), government securities and qualified temporary investments.
Although the remaining 25% of our assets generally may be invested without
restriction, we are prohibited from owning securities representing more than 10%
of either the vote or value of the outstanding securities of any issuer other
than a qualified REIT subsidiary, another REIT or a taxable REIT subsidiary (the
"10% vote and value test"). Further, no more than 20% of the total assets may be
represented by securities of one or more taxable REIT subsidiaries and no more
than 5% of the value of our total assets may be represented by securities of any
non-governmental issuer other than a qualified REIT subsidiary, another REIT or
a taxable REIT subsidiary. Each of the 10% vote and value test and the 20% and
5% asset tests must be satisfied at the end of any quarter. There are special
rules which provide relief if the value related tests are not satisfied due to
changes in the value of the assets of a REIT.
Investments in Taxable REIT Subsidiaries. For taxable years beginning
after December 31, 2000, REITs may own more than 10% of the voting power and
value of securities in taxable REIT subsidiaries. We and any taxable corporate
entity in which we own an interest are allowed to jointly elect to treat the
entity as a "taxable REIT subsidiary."
One of our subsidiaries has elected to be treated as a taxable REIT
subsidiary. Taxable REIT subsidiaries are subject to full corporate level
federal taxation on their earnings but are permitted to engage in certain types
of activities which cannot be performed directly by REITs without jeopardizing
their REIT status. Our taxable REIT subsidiary will attempt to minimize the
amount of these taxes, but there can be no assurance whether or the extent to
which measures taken to minimize taxes will be successful. To the extent our
taxable REIT subsidiary is required to pay federal, state or local taxes, the
cash available for distribution as dividends to us from our taxable REIT
subsidiary will be reduced.
The amount of interest on related-party debt that a taxable REIT
subsidiary may deduct is limited. Further, a 100% tax applies to any interest
payments by a taxable REIT subsidiary to its affiliated REIT to the extent the
interest rate is not commercially reasonable. A taxable REIT subsidiary is
permitted to deduct interest payments to unrelated parties without any of these
restrictions.
The Internal Revenue Service may reallocate costs between a REIT and
its taxable REIT subsidiary where there is a lack of arms'-length dealing
between the parties. Any deductible expenses allocated away from a taxable REIT
subsidiary would increase its tax liability. Further, any amount by which a REIT
understates its deductions and overstates those of its taxable REIT subsidiary
will, subject to certain exceptions, be subject to a 100% tax. Additional
taxable REIT subsidiary elections may be made in the future for additional
entities in which we own an interest.
Annual Distribution Requirements. In order to avoid being taxed as a
regular corporation, we are required to make distributions (other than capital
gain distributions) to our stockholders which qualify for the dividends paid
deduction in an amount at least equal to (A) the sum of (i) 90% of our "REIT
taxable income" (computed without regard to the dividends paid deduction and our
30
net capital gain) and (ii) 90% of the after-tax net income, if any, from
foreclosure property, minus (B) a portion of certain items of non-cash income.
These distributions must be paid in the taxable year to which they relate, or in
the following taxable year if declared before we timely file our tax return for
that year and if paid on or before the first regular distribution payment after
the declaration. The amount distributed must not be preferential. This means
that every stockholder of the class of stock to which a distribution is made
must be treated the same as every other stockholder of that class, and no class
of stock may be treated otherwise than in accordance with its dividend rights as
a class. To the extent that we do not distribute all of our net capital gain or
distribute at least 90%, but less than 100%, of our "REIT taxable income," as
adjusted, we will be subject to tax on the undistributed amount at regular
corporate tax rates. Finally, as discussed above, we may be subject to an excise
tax if we fail to meet certain other distribution requirements. We intend to
make timely distributions sufficient to satisfy these annual distribution
requirements.
It is possible that, from time to time, we may not have sufficient cash
or other liquid assets to meet the 90% distribution requirement, or to
distribute the greater amount as may be necessary to avoid income and excise
taxation, due to, among other things, (a) timing differences between (i) the
actual receipt of income and actual payment of deductible expenses and (ii) the
inclusion of income and deduction of expenses in arriving at our taxable income,
or (b) the payment of severance benefits that may not be deductible to us. In
the event that timing differences occur, we may find it necessary to arrange for
borrowings or, if possible, pay dividends in the form of taxable stock dividends
in order to meet the distribution requirement.
Under certain circumstances, in the event of a deficiency determined by
the Internal Revenue Service, we may be able to rectify a resulting failure to
meet the distribution requirement for a year by paying "deficiency dividends" to
stockholders in a later year, which may be included in our deduction for
distributions paid for the earlier year. Thus, we may be able to avoid being
taxed on amounts distributed as deficiency distributions; however, we will be
required to pay applicable penalties and interest based upon the amount of any
deduction taken for deficiency distributions.
FAILURE TO QUALIFY AS A REIT
If we fail to qualify for taxation as a REIT in any taxable year, we
will be subject to federal income tax, including any applicable alternative
minimum tax, on our taxable income at regular corporate rates. Distributions to
stockholders in any year in which we fail to qualify as a REIT will not be
deductible nor will any particular amount of distributions be required to be
made in any year. All distributions to stockholders will be taxable as ordinary
income to the extent of current and accumulated earnings and profits allocable
to these distributions and, subject to certain limitations, will be eligible for
the dividends received deduction for corporate stockholders. Unless entitled to
relief under specific statutory provisions, we also will be disqualified from
taxation as a REIT for the four taxable years following the year during which
qualification was lost. It is not possible to state whether in all circumstances
we would be entitled to statutory relief. Failure to qualify for even one year
could result in our need to incur indebtedness or liquidate investments in order
to pay potentially significant resulting tax liabilities.
U.S. FEDERAL INCOME TAXATION OF HOLDERS OF OUR STOCK
TREATMENT OF TAXABLE U.S. STOCKHOLDERS
The following summary applies to you only if you are a "U.S. stockholder." A
"U.S. stockholder" is a stockholder of shares of stock who, for United States
federal income tax purposes, is:
- a citizen or resident of the United States;
- a corporation, partnership or other entity created or organized in or under
the laws of the United States or of any state or in the District of
Columbia, unless, in the case of a partnership, Treasury Regulations
provide otherwise;
- an estate the income of which is subject to United States federal income
taxation regardless of its source; or
- a trust whose administration is subject to the primary supervision of a
United States court and which has one or more United States persons who
have the authority to control all substantial decisions of the trust.
So long as we qualify for taxation as a REIT, distributions on shares
of our stock made out of the current or accumulated earnings and profits
allocable to these distributions (and not designated as capital gain dividends)
will be includable as ordinary income for federal income tax purposes. None of
these distributions will be eligible for the dividends received deduction for
U.S. corporate stockholders.
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On May 28, 2003, the President signed into law the Jobs and Growth Tax
Relief Reconciliation Act of 2003. The Jobs and Growth Tax Relief Reconciliation
Act of 2003 will reduce the maximum marginal rate of tax payable by individuals
on dividends received from corporations that are subject to a corporate level of
tax. Except in limited circumstances, this reduced tax rate will not apply to
dividends paid to you by us on our shares, because generally we are not subject
to federal income tax on the portion of our REIT taxable income or capital gains
distributed to our stockholders. The reduced maximum federal income tax rate
will apply to that portion, if any, of dividends received by you with respect to
our shares that are attributable to either (1) dividends received by us from
non-REIT corporations or other taxable REIT subsidiaries, or (2) income from the
prior year with respect to which we were required to pay federal corporate
income tax during the prior year (if, for example, we did not distribute 100% of
our REIT taxable income for the prior year).
Distributions that are designated as capital gain dividends will be
taxed as long-term capital gains (to the extent they do not exceed our actual
net capital gain for the taxable year), without regard to the period for which
you held our stock. However, if you are a corporation, you may be required to
treat a portion of some capital gain dividends as ordinary income.
If we elect to retain and pay income tax on any net long-term capital
gain, you would include in income, as long-term capital gain, your proportionate
share of this net long-term capital gain. You would also receive a refundable
tax credit for your proportionate share of the tax paid by us on these retained
capital gains and you would have an increase in the basis of your shares of our
stock in an amount equal to your includable capital gains less your share of the
tax deemed paid.
You may not include in your federal income tax return any of our net
operating losses or capital losses. Federal income tax rules may also require
that certain minimum tax adjustments and preferences be apportioned to you. In
addition, any distribution declared by us in October, November or December of
any year on a specified date in any such month shall be treated as both paid by
us and received by you on December 31 of that year, provided that the
distribution is actually paid by us no later than January 31 of the following
year.
We will be treated as having sufficient earnings and profits to treat
as a dividend any distribution up to the amount required to be distributed in
order to avoid imposition of the 4% excise tax discussed under "-General" and
"-Qualification as a REIT--Annual Distribution Requirements" above. As a result,
you may be required to treat as taxable dividends certain distributions that
would otherwise result in a tax-free return of capital. Moreover, any
"deficiency dividend" will be treated as a dividend (an ordinary dividend or a
capital gain dividend, as the case may be), regardless of our earnings and
profits. Any other distributions in excess of current or accumulated earnings
and profits will not be taxable to you to the extent these distributions do not
exceed the adjusted tax basis of your shares of our stock. You will be required
to reduce the tax basis of your shares of our stock by the amount of these
distributions until the basis has been reduced to zero, after which these
distributions will be taxable as capital gain, if the shares of our stock are
held as a capital asset. The tax basis as so reduced will be used in computing
the capital gain or loss, if any, realized upon sale of the shares of our stock.
Any loss upon a sale or exchange of shares of our stock which were held for six
months or less (after application of certain holding period rules) will
generally be treated as a long-term capital loss to the extent you previously
received capital gain distributions with respect to these shares of our stock.
Upon the sale or exchange of any shares of our stock to or with a
person other than us or a sale or exchange of all shares of our stock (whether
actually or constructively owned) with us, you will generally recognize capital
gain or loss equal to the difference between the amount realized on the sale or
exchange and your adjusted tax basis in these shares of our stock. This gain
will be capital gain if you held these shares of our stock as a capital asset.
If we redeem any of your shares in us, the treatment can only be
determined on the basis of particular facts at the time of redemption. In
general, you will recognize gain or loss (as opposed to dividend income) equal
to the difference between the amount received by you in the redemption and your
adjusted tax basis in your shares redeemed if such redemption results in a
"complete termination" of your interest in all classes of our equity securities,
is a "substantially disproportionate redemption" or is "not essentially
equivalent to a dividend" with respect to you. In applying these tests, there
must be taken into account your ownership of all classes of our equity
securities (e.g., common stock, preferred stock, depositary shares and
warrants). You also must take into account any equity securities that are
considered to be constructively owned by you.
If, as a result of a redemption by us of your shares, you no longer own
(either actually or constructively) any of our equity securities or only own
(actually and constructively) an insubstantial percentage of our equity
securities, then it is probable that the redemption of your shares would be
considered "not essentially equivalent to a dividend" and, thus, would result in
gain or loss to you. However, whether a distribution is "not essentially
equivalent to a dividend" depends on all of the facts and circumstances, and if
you
32
rely on any of these tests at the time of redemption, you should consult your
tax advisor to determine their application to the particular situation.
Generally, if the redemption does not meet the tests described above,
then the proceeds received by you from the redemption of your shares will be
treated as a distribution taxable as a dividend to the extent of the allocable
portion of current or accumulated earnings and profits. If the redemption is
taxed as a dividend, your adjusted tax basis in the redeemed shares will be
transferred to any other shareholdings in us that you own. If you own no other
shareholdings in us, under certain circumstances, such basis may be transferred
to a related person, or it may be lost entirely.
Gain from the sale or exchange of our shares held for more than one
year is taxed at a maximum long-term capital gain rate, which is currently 15%
(prior to the effective date of the Jobs and Growth Tax Relief Reconciliation
Act of 2003, described above, the maximum long-term capital gain rate was 20%).
Pursuant to Internal Revenue Service guidance, we may classify portions of our
capital gain dividends as gains eligible for the long-term capital gains rate or
as gain taxable to individual stockholders at a maximum rate of 25%.
TREATMENT OF TAX-EXEMPT U.S. STOCKHOLDERS
Tax-exempt entities, including qualified employee pension and profit
sharing trusts and individual retirement accounts ("Exempt Organizations"),
generally are exempt from federal income taxation. However, they are subject to
taxation on their unrelated business taxable income ("UBTI"). The Internal
Revenue Service has issued a published revenue ruling that dividend
distributions from a REIT to an exempt employee pension trust do not constitute
UBTI, provided that the shares of the REIT are not otherwise used in an
unrelated trade or business of the exempt employee pension trust. Based on this
ruling, amounts distributed by us to Exempt Organizations generally should not
constitute UBTI. However, if an Exempt Organization finances its acquisition of
the shares of our stock with debt, a portion of its income from us will
constitute UBTI pursuant to the "debt financed property" rules. Likewise, a
portion of the Exempt Organization's income from us would constitute UBTI if we
held a residual interest in a real estate mortgage investment conduit.
In addition, in certain circumstances, a pension trust that owns more
than 10% of our stock is required to treat a percentage of our dividends as
UBTI. This rule applies to a pension trust holding more than 10% of our stock
only if (i) the percentage of our income that is UBTI (determined as if we were
a pension trust) is at least 5%, (ii) we qualify as a REIT by reason of the
modification of the Five or Fewer Requirement that allows beneficiaries of the
pension trust to be treated as holding shares in proportion to their actuarial
interests in the pension trust, and (iii) either (a) one pension trust owns more
than 25% of the value of our stock or (b) a group of pension trusts individually
holding more than 10% of the value of our stock collectively own more than 50%
of the value of our stock.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Under certain circumstances, you may be subject to backup withholding
at applicable rates on payments made with respect to, or cash proceeds of a sale
or exchange of, shares of our stock. Backup withholding will apply only if you:
- fail to furnish your taxpayer identification number ("TIN") to the person
required to withhold;
- furnish an incorrect TIN;
- are notified by the Internal Revenue Service that you have failed to
properly report payments of interest and dividends; or
- under certain circumstances, fail to certify, under penalty of perjury,
that you have furnished a correct TIN and have not been notified by the
Internal Revenue Service that you are subject to backup withholding for
failure to report interest and dividend payments.
Backup withholding will not apply with respect to payments made to
certain exempt recipients, such as corporations and tax-exempt organizations.
You should consult with a tax advisor regarding qualification for exemption from
backup withholding, and the procedure for obtaining an exemption. Backup
withholding is not an additional tax. Rather, the amount of any backup
withholding with respect to payment to a stockholder will be allowed as a credit
against the stockholder's United States federal income tax liability and may
entitle the stockholder to a refund, provided that the required information is
provided to the Internal Revenue Service. In
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addition, withholding a portion of capital gain distributions made to
stockholders may be required for stockholders who fail to certify their
non-foreign status.
TAXATION OF FOREIGN STOCKHOLDERS
The following summary applies to you only if you are a foreign person.
The federal taxation of foreign persons is a highly complex matter that may be
affected by many considerations.
Distributions to you of cash generated by our real estate operations,
but not by the sale or exchange of our capital assets, generally will be subject
to U.S. withholding tax at a rate of 30%, unless an applicable tax treaty
reduces that tax and you file with us the required form evidencing the lower
rate.
In general, you will be subject to United States federal income tax on
a graduated rate basis rather than withholding with respect to your investment
in our stock if the investment is "effectively connected" with your conduct of a
trade or business in the United States. A corporate foreign stockholder that
receives income that is, or is treated as, effectively connected with a United
States trade or business may also be subject to the branch profits tax, which is
payable in addition to regular United States corporate income tax. The following
discussion will apply to foreign stockholders whose investment in us is not so
effectively connected. We expect to withhold United States income tax, as
described below, on the gross amount of any distributions paid to you unless (i)
you file an Internal Revenue Service Form W-8ECI with us claiming that the
distribution is "effectively connected" or (ii) certain other exceptions apply.
Distributions by us that are attributable to gain from the sale or
exchange of a United States real property interest will be taxed to you under
the Foreign Investment in Real Property Tax Act of 1980 ("FIRPTA") as if these
distributions were gains "effectively connected" with a United States trade or
business. Accordingly, you will be taxed at the normal capital gain rates
applicable to a U.S. stockholder on these amounts, subject to any applicable
alternative minimum tax and a special alternative minimum tax in the case of
nonresident alien individuals. Distributions subject to FIRPTA may also be
subject to a branch profits tax in the hands of a corporate foreign stockholder
that is not entitled to treaty exemption.
We will be required to withhold from distributions subject to FIRPTA,
and remit to the Internal Revenue Service, 35% of designated capital gain
dividends, or, if greater, 35% of the amount of any distributions that could be
designated as capital gain dividends. In addition, if we designate prior
distributions as capital gain dividends, subsequent distributions, up to the
amount of the prior distributions not withheld against, will be treated as
capital gain dividends for purposes of withholding.
Unless our shares constitute a "United States real property interest"
within the meaning of FIRPTA or are effectively connected with a U.S. trade or
business, a sale of our shares by you generally will not be subject to United
States taxation. Our shares will not constitute a United States real property
interest if we qualify as a "domestically controlled REIT. " We do, and expect
to continue to, qualify as a domestically controlled REIT. A domestically
controlled REIT is a REIT in which at all times during a specified testing
period less than 50% in value of its shares is held directly or indirectly by
foreign stockholders. However, if you are a nonresident alien individual who is
present in the United States for 183 days or more during the taxable year and
certain other conditions apply, you will be subject to a 30% tax on capital
gains. In any event, a purchaser of our shares from you will not be required
under FIRPTA to withhold on the purchase price if the purchased shares are
"regularly traded" on an established securities market or if we are a
domestically controlled REIT. Otherwise, under FIRPTA, the purchaser may be
required to withhold 10% of the purchase price and remit that amount to the
Internal Revenue Service.
Backup withholding tax and information reporting will generally not
apply to distributions paid to you outside the United States that are treated as
(i) dividends to which the 30% or lower treaty rate withholding tax discussed
above applies; (ii) capital gains dividends; or (iii) distributions attributable
to gain from the sale or exchange by us of United States real property
interests. Payment of the proceeds of a sale of stock within the United States
or conducted through certain U.S. related financial intermediaries is subject to
both backup withholding and information reporting unless the beneficial owner
certifies under penalty of perjury that he or she is not a U.S. person (and the
payor does not have actual knowledge that the beneficial owner is a U.S. person)
or otherwise established an exemption. You may obtain a refund of any amounts
withheld under the backup withholding rules by filing the appropriate claim for
refund with the Internal Revenue Service.
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U.S. FEDERAL INCOME TAXATION OF HOLDERS OF DEPOSITARY SHARES
Owners of our depositary shares will be treated as if you were owners
of the series of preferred stock represented by the depositary shares. Thus, you
will be required to take into account the income and deductions to which you
would be entitled if you were a holder of the underlying series of preferred
stock.
CONVERSION OR EXCHANGE OF SHARES FOR PREFERRED STOCK
No gain or loss will be recognized upon the withdrawal of preferred
stock in exchange for depositary shares and the tax basis of each share of
preferred stock will, upon exchange, be the same as the aggregate tax basis of
the depositary shares exchanged. If you held your depositary shares as a capital
asset at the time of the exchange for shares of preferred stock, the holding
period for your shares of preferred stock will include the period during which
you owned the depositary shares.
U.S. FEDERAL INCOME AND ESTATE TAXATION OF HOLDERS OF OUR DEBT SECURITIES
The following is a general summary of the United States federal income
tax consequences and, in the case that you are a holder that is a non-U.S.
holder, as defined below, the United States federal estate tax consequences, of
purchasing, owning and disposing of debt securities periodically offered under
one or more indentures, the forms of which have been filed as exhibits to this
registration statement (the "notes"). This summary assumes that you hold the
notes as capital assets. This summary applies to you only if you are the initial
holder of the notes and you acquire the notes for a price equal to the issue
price of the notes. The issue price of the notes is the first price at which a
substantial amount of the notes is sold other than to bond houses, brokers or
similar persons or organizations acting in the capacity of underwriters,
placement agents or wholesalers. In addition, this summary does not consider any
foreign, state, local or other tax laws that may be applicable to us or a
purchaser of the notes.
U.S. HOLDERS
The following summary applies to you only if you are a U.S. holder, as defined
below.
Definition of a U.S. Holder. A "U.S. holder" is a beneficial owner of a
note or notes that is for United States federal income tax purposes:
- an individual citizen or resident alien of the United States;
- a corporation or partnership, or other entity classified as a corporation
or partnership for these purposes, created or organized in or under the
laws of the United States or of any political subdivision of the United
States, including any state;
- an estate, the income of which is subject to United States federal income
taxation regardless of the source of that income; or
- a trust, if, in general, a U.S. court is able to exercise primary
supervision over the trust's administration and one or more U.S. persons,
within the meaning of the Internal Revenue Code, has the authority to
control all of the trust's substantial decisions.
Payments of Interest. Stated interest on the notes generally will be
taxed as ordinary interest income from domestic sources at the time it is paid
or accrues in accordance with your method of accounting for tax purposes.
Sale, Exchange or Other Disposition of Notes. The adjusted tax basis in
your note acquired at a premium will generally be your cost. You generally will
recognize taxable gain or loss when you sell or otherwise dispose of your notes
equal to the difference, if any, between:
- the amount realized on the sale or other disposition, less any amount
attributable to any accrued interest, which will be taxable in the manner
described under "-Payments of Interest" above; and
- your adjusted tax basis in the notes.
Your gain or loss generally will be capital gain or loss. This capital
gain or loss will be long-term capital gain or loss if at the time of the sale
or other disposition you have held the notes for more than one year. Subject to
limited exceptions, your capital losses cannot be used to offset your ordinary
income.
Backup Withholding and Information Reporting. In general, "backup
withholding" may apply:
35
- to any payments made to you of principal and interest on your note, and
- to payment of the proceeds of a sale or other disposition of your note
before maturity,
- if you are a non-corporate U.S. holder and (1) fail to provide a correct
taxpayer identification number, which if you are an individual, is
ordinarily your social security number; (2) furnish an incorrect taxpayer
identification number; (3) are notified by the Internal Revenue Service
that you have failed to properly report payments of interest or dividends;
or (4) fail to certify, under penalties of perjury, that you have furnished
a correct taxpayer identification number and that the Internal Revenue
Service has not notified you that you are subject to backup withholding.
The amount of any reportable payments, including interest, made to you
(unless you are an exempt recipient) and the amount of tax withheld, if any,
with respect to such payments will be reported to you and to the Internal
Revenue Service for each calendar year. You should consult your tax advisor
regarding your qualification for an exemption from backup withholding and the
procedures for obtaining such an exemption, if applicable. The backup
withholding tax is not an additional tax and will be credited against your U.S.
federal income tax liability, provided that correct information is provided to
the Internal Revenue Service.
NON-U.S. HOLDERS
The following summary applies to you if you are a beneficial owner of a
note and are not a U.S. holder, as defined above (a "non-U.S. holder").
Special rules may apply to certain non-U.S. holders such as "controlled
foreign corporations," "passive foreign investment companies" and "foreign
personal holding companies." Such entities are encouraged to consult their tax
advisors to determine the United States federal, state, local and other tax
consequences that may be relevant to them.
U.S. Federal Withholding Tax. Subject to the discussion below, U.S.
federal withholding tax will not apply to payments by us or our paying agent, in
its capacity as such, of principal and interest on your notes under the
"portfolio interest" exception of the Internal Revenue Code, provided that:
- you do not, directly or indirectly, actually or constructively, own ten
percent or more of the total combined voting power of all classes of our
stock entitled to vote;
- you are not (1) a controlled foreign corporation for U.S. federal income
tax purposes that is related, directly or indirectly, to us through
sufficient stock ownership, as provided in the Internal Revenue Code, or
(2) a bank receiving interest described in Section 881(c)(3)(A) of the
Internal Revenue Code;
- such interest is not effectively connected with your conduct of a U.S.
trade or business; and
- you provide a signed written statement, under penalties of perjury, which
can reliably be related to you, certifying that you are not a U.S. person
within the meaning of the Internal Revenue Code and providing your name and
address to:
- us or our paying agent; or
- a securities clearing organization, bank or other financial institution
that holds customers' securities in the ordinary course of its trade or
business and holds your notes on your behalf and that certifies to us or
our paying agent under penalties of perjury that it, or the bank or
financial institution between it and you, has received from you your
signed, written statement and provides us or our paying agent with a copy
of such statement.
Treasury regulations provide that:
- if you are a foreign partnership, the certification requirement will
generally apply to your partners, and you will be required to provide
certain information;
36
- if you are a foreign trust, the certification requirement will generally be
applied to you or your beneficial owners depending on whether you are a
"foreign complex trust," "foreign simple trust," or "foreign grantor
trust" as defined in the Treasury regulations; and
- look-through rules will apply for tiered partnerships, foreign simple
trusts and foreign grantor trusts.
If you are a foreign partnership or a foreign trust, you should consult
your own tax advisor regarding your status under these Treasury regulations and
the certification requirements applicable to you.
If you cannot satisfy the portfolio interest requirements described
above, payments of interest will be subject to the 30% United States withholding
tax, unless you provide us with a properly executed (1) Internal Revenue Service
Form W-8BEN claiming an exemption from or reduction in withholding under the
benefit of an applicable treaty or (2) Internal Revenue Service Form W-8ECI
stating that interest paid on the note is not subject to withholding tax because
it is effectively connected with your conduct of a trade or business in the
United States. Alternative documentation may be applicable in certain
circumstances.
If you are engaged in a trade or business in the United States and
interest on a note is effectively connected with the conduct of that trade or
business, you will be required to pay United States federal income tax on that
interest on a net income basis (although you will be exempt from the 30%
withholding tax provided the certification requirement described above is met)
in the same manner as if you were a U.S. person, except as otherwise provided by
an applicable tax treaty. If you are a foreign corporation, you may be required
to pay a branch profits tax on the earnings and profits that are effectively
connected to the conduct of your trade or business in the United States.
Sale, Exchange or other Disposition of Notes. You generally will not
have to pay U.S. federal income tax on any gain or income realized from the
sale, redemption, retirement at maturity or other disposition of your notes,
unless:
- in the case of gain, you are an individual who is present in the United
States for 183 days or more during the taxable year of the sale or other
disposition of your notes, and specific other conditions are met;
- you are subject to tax provisions applicable to certain United States
expatriates; or
- the gain is effectively connected with your conduct of a U.S. trade or
business.
If you are engaged in a trade or business in the United States and gain
with respect to your notes is effectively connected with the conduct of that
trade or business, you generally will be subject to U.S. income tax on a net
basis on the gain. In addition, if you are a foreign corporation, you may be
subject to a branch profits tax on your effectively connected earnings and
profits for the taxable year, as adjusted for certain items.
U.S. Federal Estate Tax. If you are an individual and are not a U.S.
citizen or a resident of the United States, as specially defined for U.S.
federal estate tax purposes, at the time of your death, your notes will
generally not be subject to the U.S. federal estate tax, unless, at the time of
your death (1) you owned actually or constructively ten percent or more of the
total combined voting power of all our classes of stock entitled to vote or (2)
interest on the notes is effectively connected with your conduct of a U.S. trade
or business.
Backup Withholding and Information Reporting. Backup withholding will
not apply to payments of principal or interest made by us or our paying agent,
in its capacity as such, to you if you have provided the required certification
that you are a non-U.S. holder as described in "-U.S. Federal Withholding Tax"
above, and provided that neither we nor our paying agent have actual knowledge
that you are a U.S. holder, as described in "-U.S. Holders" above. We or our
paying agent may, however, report payments of interest on the notes.
The gross proceeds from the disposition of your notes may be subject to
information reporting and backup withholding tax. If you sell your notes outside
the United States through a non-U.S. office of a non-U.S. broker and the sales
proceeds are paid to you outside the United States, then the U.S. backup
withholding and information reporting requirements generally will not apply to
that payment. However, U.S. information reporting, but not backup withholding,
will apply to a payment of sales proceeds, even if that payment is made outside
the United States, if you sell your notes though a non-U.S. office of a broker
that:
- is a U.S. person, as defined in the Internal Revenue Code,
37
- derives 50% or more of its gross income in specific periods from the
conduct of a trade or business in the United States,
- is a "controlled foreign corporation" for U.S. federal income tax purposes,
or
- is a foreign partnership, if at any time during its tax year,
- one or more of its partners are U.S. persons who in the aggregate hold more
than 50% of the income or capital interests in the partnership, or
- the foreign partnership is engaged in a U.S. trade or business,
unless the broker has documentary evidence in its files that you
are a non-U.S. person and certain other conditions are met or you
otherwise establish an exemption. If you receive payments of the
proceeds of a sale of your notes to or through a U.S. office of a
broker, the payment is subject to both U.S. backup withholding and
information reporting unless you provide a Form W-8BEN certifying
that you are a non-U.S. person or you otherwise establish an
exemption.
You should consult your own tax advisor regarding application of backup
withholding in your particular circumstance and the availability of and
procedure for obtaining an exemption from backup withholding. Any amounts
withheld under the backup withholding rules from a payment to you will be
allowed as a refund or credit against your U.S. federal income tax liability,
provided the required information is furnished to the Internal Revenue Service.
U.S. FEDERAL INCOME AND ESTATE TAXATION OF HOLDERS OF OUR WARRANTS
EXERCISE OF WARRANTS
You will not generally recognize gain or loss upon the exercise of a
warrant. Your basis in the debt securities, preferred stock, depositary shares
or common stock, as the case may be, received upon the exercise of the warrant
will be equal to the sum of your adjusted tax basis in the warrant and the
exercise price paid. Your holding period in the debt securities, preferred
stock, depositary shares or common stock, as the case may be, received upon the
exercise of the warrant will not include the period during which the warrant was
held by you.
EXPIRATION OF WARRANTS
Upon the expiration of a warrant, you will recognize a capital loss in
an amount equal to your adjusted tax basis in the warrant.
SALE OR EXCHANGE OF WARRANTS
Upon the sale or exchange of a warrant to a person other than us, you
will recognize gain or loss in an amount equal to the difference between the
amount realized on the sale or exchange and your adjusted tax basis in the
warrant. Such gain or loss will be capital gain or loss and will be long-term
capital gain or loss if the warrant was held for more than one year. Upon the
sale of the warrant to us, the Internal Revenue Service may argue that you
should recognize ordinary income on the sale. You are advised to consult your
own tax advisors as to the consequences of a sale of a warrant to us.
POTENTIAL LEGISLATION OR OTHER ACTIONS AFFECTING TAX CONSEQUENCES
Current and prospective securities holders should recognize that the
present federal income tax treatment of an investment in us may be modified by
legislative, judicial or administrative action at any time and that any action
may affect investments and commitments previously made. The rules dealing with
federal income taxation are constantly under review by persons involved in the
legislative process and by the Internal Revenue Service and the Treasury
Department, resulting in revisions of regulations and revised interpretations of
established concepts as well as statutory changes. Revisions in federal tax laws
and interpretations of these laws could adversely affect the tax consequences of
an investment in us.
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PLAN OF DISTRIBUTION
We may sell the securities:
- through underwriters or dealers;
- through agents;
- directly to purchasers; or
- through a combination of any of these methods of sale.
Any underwriter or agent involved in the offer and sale of the
securities will be named in the applicable prospectus supplement. Direct sales
to investors or our stockholders may be accomplished through subscription
offerings or through stockholder purchase rights distributed to stockholders. In
connection with subscription offerings or the distribution of stockholder
purchase rights to stockholders, if all of the underlying securities are not
subscribed for, we may sell any unsubscribed securities to third parties
directly or through underwriters or agents. In addition, whether or not all of
the underlying securities are subscribed for, we may concurrently offer
additional securities to third parties directly or through underwriters or
agents. If securities are to be sold through stockholder purchase rights, the
stockholder purchase rights will be distributed as a dividend to the
stockholders for which they will pay no separate consideration. The prospectus
supplement with respect to the offer of securities under stockholder purchase
rights will set forth the relevant terms of the stockholder purchase rights,
including:
- whether common stock, preferred stock or equity stock, or warrants
for those securities will be offered under the stockholder purchase
rights;
- the number of those securities or warrants that will be offered under
the stockholder purchase rights;
- the period during which and the price at which the stockholder
purchase rights will be exercisable;
- the number of stockholder purchase rights then outstanding;
- any provisions for changes to or adjustments in the exercise price of
the stockholder purchase rights, and
- any other material terms of the stockholder purchase rights.
Underwriters may offer and sell the securities at:
- fixed prices, which may be changed;
- prices related to the prevailing market prices at the time of sale; or
- negotiated prices.
We also may, from time to time, authorize underwriters acting as our
agents to offer and sell the securities upon the terms and conditions as are set
forth in the applicable prospectus supplement. In connection with the sale of
securities, underwriters may be deemed to have received compensation from us in
the form of underwriting discounts or commissions and may also receive
commissions from purchasers of securities for whom they may act as agent.
Underwriters may sell securities to or through dealers, and these dealers may
receive compensation in the form of discounts, concessions or commissions from
the underwriters or commissions from the purchasers for whom they may act as
agent, or both. The applicable prospectus supplement will disclose:
- any underwriting compensation we pay to underwriters or agents in
connection with the offering of securities, and
- any discounts, concessions or commissions allowed by underwriters to
participating dealers.
39
Under the Securities Act, underwriters, dealers and agents
participating in the distribution of the securities may be deemed to be
underwriters and any discounts and commissions received by them and any profit
realized by them on resale of the securities may be deemed to be underwriting
discounts and commissions. We may agree to indemnify underwriters, dealers and
agents against civil liabilities, including liabilities under the Securities Act
and to make contribution to them in connection with those liabilities.
If indicated in the applicable prospectus supplement, we may also offer
and sell securities through a firm that will remarket the securities. These
firms may act as principals for their own account or as our agents. These firms
may be deemed to be underwriters in connection with the securities being
remarketed. We may agree to indemnify these firms against liabilities, including
liabilities under the Securities Act.
If indicated in the applicable prospectus supplement, we will authorize
dealers acting as our agents to solicit offers by institutions to purchase
securities at the offering price set forth in that prospectus supplement under
delayed delivery contracts providing for payment and delivery on the dates
stated in the prospectus supplement. Each contract will be for an amount not
less than, and the aggregate principal amount of securities sold under contracts
will be not less nor more than, the respective amounts stated in the applicable
prospectus supplement. Institutions with whom contracts, when authorized, may be
made include commercial and savings banks, insurance companies, pension funds,
investment companies, educational and charitable institutions, and other
institutions but will in all cases be subject to our approval. Contracts will
not be subject to any conditions except:
- the purchase by an institution of the securities covered by its
contracts will not at the time of delivery be prohibited under the laws
of any jurisdiction in the United States to which the institution is
subject, and
- if the securities are being sold to underwriters, we will have sold to
them the total principal amount of the securities less the principal
amount of the securities covered by contracts.
Agents and underwriters will have no responsibility in respect of the
delivery or performance of contracts.
Some of the underwriters and their affiliates may engage in
transactions with or perform services for us in the ordinary course of business.
LEGAL OPINIONS
The validity of the securities offered will be passed upon by Shumaker,
Loop & Kendrick, LLP, Toledo, Ohio. Certain tax matters will be passed upon for
us by Arnold & Porter, Washington, D.C.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements and schedules included in our Annual Report on Form 10-K
for the year ended December 31, 2002, as set forth in their report, which is
incorporated by reference in this prospectus and elsewhere in the registration
statement. Our financial statements and schedules are incorporated by reference
in reliance on Ernst & Young LLP's report, given on their authority as experts
in accounting and auditing.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Expenses payable in connection with the issuance and distribution of
the securities to be registered, other than underwriting discounts and
commissions, are estimated as follows:
Securities and Exchange Commission filing fees $ 0 (after offsets)
Legal fees and expenses 50,000
Accounting fees and expenses 10,000
Miscellaneous 2,000
--------
TOTAL $ 62,000 (after offsets)
========
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Section 7 of our Second Restated Certificate of Incorporation, as
amended, provides that our directors will not be personally liable to us or our
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to us
or our stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the General Corporation Law of Delaware (the "GCL"), or (iv) for
any transaction from which the director derived any improper personal benefit.
Section 7 also provides that if the GCL is amended to further eliminate or limit
the personal liability of directors, then the liability of our directors will be
eliminated or limited to the extent permitted by the GCL, as so amended. The
Second Restated Certificate of Incorporation also states that any repeal or
modification of the foregoing paragraph by our stockholders will not adversely
affect any right or protection of our directors existing at the time of such
repeal or modification.
Our By-Laws provide that we will indemnify, to the extent permitted by
the GCL, any person who was or is a party or is threatened to be made a party to
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he or she
is or was one of our directors or officers, or is or was serving at our request
as a director, officer, employee, trustee, partner or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees), judgments, fines, and amounts paid in
settlement, actually and reasonably incurred by him or her in connection with
such action, suit or proceeding.
We have entered into indemnification agreements to assure our directors
and officers that they will be indemnified to the extent permitted by the Second
Restated Certificate of Incorporation, By-Laws and Delaware law. The
indemnification agreements cover any and all expenses, judgments, fines,
penalties, and amounts paid in settlement, provide for the prompt advancement of
all expenses incurred in connection with any proceeding and obligate the
director or officer to reimburse us for all amounts so advanced if it is
subsequently determined, as provided in the indemnification agreements, that the
director or officer is not entitled to indemnification.
Delaware law requires indemnification in cases where a director or
officer has been successful in defending any claim or proceeding and permits
indemnification, even if a director or officer has not been successful, in cases
where the director or officer acted in good faith and in a manner that he or she
reasonably believed was in, or not opposed to, the best interests of the
corporation. To be indemnified with respect to criminal proceedings, the
director or officer must also have had no reasonable cause to believe that his
or her conduct was unlawful. In the case of a claim by a third party (i.e., a
party other than the corporation), Delaware law permits indemnification for
judgments, fines, and amounts paid in settlement, as well as expenses. In the
case of a claim by, or in the right of, the corporation (including stockholder
derivative suits), indemnification under the GCL is limited to expenses, but
does not cover judgments or amounts paid in settlement, and no indemnification
of expenses is permitted if the director or officer is adjudged liable to the
corporation, unless a court determines that, despite such adjudication but in
view of all of the circumstances, such indemnification is nonetheless proper.
Delaware law also permits the advancement of expenses to directors and officers
upon receipt of an undertaking
to repay all amounts so advanced if it is ultimately determined that the
director or officer has not met the applicable standard of conduct and is,
therefore, not entitled to be indemnified.
We maintain indemnification insurance that provides for reimbursement
of indemnification payments properly and lawfully made to our directors and
officers and coverage for directors and officers in situations where we cannot
or do not indemnify them.
ITEM 16. EXHIBITS
1 Underwriting Agreement*
3.1 Second Restated Certificate of Incorporation of the Company (filed with
the Commission as Exhibit 3.1 to the Company's Form 10-K filed March
20, 2000, and incorporated herein by reference thereto).
3.2 Certificate of Designation, Preferences and Rights of Junior
Participating Preferred Stock, Series A, of Health Care REIT, Inc.
(filed with the Commission as Exhibit 3.1 to the Company's Form 10-K
filed March 20, 2000, and incorporated herein by reference thereto).
3.3 Certificate of Designation of 8 7/8% Series B Cumulative Redeemable
Preferred Stock of Health Care REIT, Inc. (filed with the Commission as
Exhibit 3.1 to the Company's Form 10-K filed March 20, 2000, and
incorporated herein by reference thereto).
3.4 Certificate of Designations, Preferences and Rights of Series C
Cumulative Convertible Preferred Stock of Health Care REIT, Inc. (filed
with the Commission as Exhibit 3.1 to the Company's Form 10-K filed
March 20, 2000, and incorporated herein by reference thereto).
3.5 Certificate of Amendment of Second Restated Certificate of
Incorporation of the Company (filed with the Commission as Exhibit 3.1
to the Company's Form 10-K filed March 20, 2000, and incorporated
herein by reference thereto).
3.6 Certificate of Amendment of Second Restated Certificate of
Incorporation of the Company (filed with the Commission as Exhibit 3.1
to the Company's Form 8-K filed June 13, 2003, and incorporated herein
by reference thereto).
3.7 Certificate of Designation of 7 7/8% Series D Cumulative Redeemable
Preferred Stock of Health Care REIT, Inc. (filed with the Commission as
Exhibit 2.5 to the Company's Form 8-A/A filed July 8, 2003, and
incorporated herein by reference thereto).
3.8 Amended and Restated By-Laws of the Registrant (filed with the
Commission as Exhibit 3.1 to the Company's Form 8-K filed October 24,
1997, and incorporated herein by reference thereto).
4.1 The Company, by signing this Report, agrees to furnish the Securities
and Exchange Commission upon its request a copy of any instrument which
defines the rights of holders of long-term debt of Company authorizes a
total amount of securities not in excess of 10% of the total assets of
the Company.
4.2 Series A Junior Participating Preferred Share Purchase Rights
Agreement, dated as of July 19, 1994 (filed with the Commission as
Exhibit 2 to the Company's Form 8-A filed August 3, 1994 (File No.
1-8923), and incorporated herein by reference thereto).
4.3 Indenture dated as of April 17, 1997 by and between Health Care REIT,
Inc. and Fifth Third Bank (filed with the Commission as Exhibit 4.1 to
the Company's Form 8-K filed April 21, 1997, and incorporated herein by
reference thereto).
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4.4 First Supplemental Indenture dated as of April 17, 1997 by and between
Health Care REIT, Inc. and Fifth Third Bank (filed with the Commission
as Exhibit 4.2 to the Company's Form 8-K filed April 21, 1997, and
incorporated herein by reference thereto).
4.5 Second Supplemental Indenture dated as of March 13, 1998 between Health
Care REIT, Inc. and Fifth Third Bank (filed with the Commission as
Exhibit 4.2 to the Company's Form 8-K filed March 11, 1998, and
incorporated herein by reference thereto).
4.6 Third Supplemental Indenture dated as of March 18, 1999 between Health
Care REIT, Inc. and Fifth Third Bank (filed with the Commission as
Exhibit 4.2 to the Company's Form 8-K filed March 17, 1999, and
incorporated herein by reference thereto).
4.7 Fourth Supplemental Indenture dated as of August 10, 2001 between
Health Care REIT, Inc. and Fifth Third Bank (filed with the Commission
as Exhibit 4.2 of the Company's Form 8-K filed August 9, 2001, and
incorporated herein by reference thereto).
4.8 Indenture for Senior Debt Securities, dated as of September 6, 2002, by
and between Health Care REIT, Inc. and Fifth Third Bank (filed with the
Commission as Exhibit 4.1 of the Company's Form 8-K filed September 9,
2002, and incorporated herein by reference thereto).
4.9 Supplemental Indenture No. 1, dated as of September 6, 2002, to
Indenture for Senior Debt Securities, dated as of September 6, 2002, by
and between Health Care REIT, Inc. and Fifth Third Bank (filed with the
Commission as Exhibit 4.2 of the Company's Form 8-K filed September 9,
2002, and incorporated herein by reference thereto).
4.10 Amendment No. 1 to Supplemental Indenture No. 1, dated as of March 12,
2003, to Indenture for Senior Debt Securities, dated as of September 6,
2002, by and between Health Care REIT, Inc. and Fifth Third Bank (filed
with the Commission as Exhibit 4.1 of the Company's Form 8-K filed
March 14, 2003, and incorporated herein by reference thereto).
4.11 Form of Indenture for Senior Subordinated Debt Securities (filed with
the Commission as Exhibit 4.9 of the Company's Form S-3 (File No.
333-73936) filed November 21, 2001, and incorporated herein by
reference thereto).
4.12 Form of Indenture for Junior Subordinated Debt Securities (filed with
the Commission as Exhibit 4.10 of the Company's Form S-3 (File No.
333-73936) filed November 21, 2001, and incorporated herein by
reference thereto).
4.13 Form of Warrant Agreement.*
4.14 Form of Deposit Agreement, including form of Health Care REIT, Inc.
Depositary Receipt for Health Care REIT, Inc. Depositary Shares.*
5 Opinion of Shumaker, Loop & Kendrick, LLP.*
8 Tax Opinion of Arnold & Porter.
12 Statements re Computation of Ratios.
23.1 Consent of Ernst & Young LLP, independent auditors.
23.2 Consent of Shumaker, Loop & Kendrick, LLP to the use of their opinion
as an exhibit to this Registration Statement is included in their
opinion filed herewith as Exhibit 5.*
24 Powers of Attorney.
25 Statement of Eligibility of Trustee (filed with the Commission as
Exhibit 25.1 of the Company's Form 8-K filed March 12, 2003, and
incorporated by reference thereto).
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* TO BE FILED BY AMENDMENT
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 the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the commission pursuant to Rule 424(b) if, in the aggregate, the
charges in volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
provided, however, that paragraphs (A)(1)(i) and (A)(1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the Registrant pursuant to section 13 or section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
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 therein, 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 undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(C) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions or otherwise, the Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer 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 it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(D) The undersigned Registrant hereby undertakes that:
(i) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
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(ii) For purposes of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(E) The undersigned Registrant hereby undertakes to file an application for the
purpose of determining the eligibility of the Trustee to act under subsection
(a) of Section 310 of the Trust Indenture Act in accordance with the rules and
regulations prescribed by the Commission under section 305(b)(2) of the Act.
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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 Toledo, State of Ohio, on July 22, 2003.
HEALTH CARE REIT, INC.
By: /S/ George L. Chapman
George L. Chapman
Chairman of the Board and Chief
Executive Officer
(Principal Executive Officer)
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints George L. Chapman his or her
attorney-in-fact with power of substitution for him in any and all capacities,
to sign any amendments, supplements, subsequent registration statements relating
to the offering to which this registration statement relates, or other
instruments he or she deems necessary or appropriate, and to file the same, with
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorney-in-fact or his substitute may do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ William C. Ballard, Jr.* Director April 8, 2003
------------------------------------
William C. Ballard, Jr.
/s/ Pier C. Borra* Director April 8, 2003
------------------------------------
Pier C. Borra
/s/ Jeffrey H. Donahue* Director April 8, 2003
------------------------------------
Jeffrey H. Donahue
/s/ Peter J. Grua* Director April 9, 2003
------------------------------------
Peter J. Grua
/s/ Sharon M. Oster* Director April 7, 2003
------------------------------------
Sharon M. Oster
/s/ Bruce G. Thompson* Director April 8, 2003
------------------------------------
Bruce G. Thompson
/s/ R. Scott Trumbull* Director April 14, 2003
------------------------------------
R. Scott Trumbull
/s/ Richard A. Unverferth* Director April 8, 2003
------------------------------------
Richard A. Unverferth
/s/ George L. Chapman* Chairman, Chief Executive Officer, April 10, 2003
------------------------------------ and Director (Principal Executive Officer)
George L. Chapman
/s/ Raymond W. Braun* President and Chief Financial Officer April 8, 2003
------------------------------------ (Principal Financial Officer)
Raymond W. Braun
/s/ Michael A. Crabtree* Treasurer April 9, 2003
------------------------------------ (Principal Accounting Officer)
Michael A. Crabtree
* /s/ George L. Chapman
-----------------------
George L. Chapman
Attorney-in-Fact Dated: July 22, 2003
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