PROSPECTUS SUPPLEMENT
To Prospectus dated April 24, 2003
[GRAPHIC OMITED]
3,200,000 SHARES
WEINGARTEN REALTY INVESTORS
COMMON SHARES OF BENEFICIAL INTEREST
We are offering 3,200,000 common shares of beneficial interest.
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Our common shares of beneficial interest are listed on the New York Stock
Exchange under the symbol "WRI." The last reported sale price of our common
shares on the New York Stock Exchange on August 18, 2004 was $33.00 per share.
To preserve our status as a real estate investment trust for federal income
tax purposes, we impose certain restrictions on ownership of our common and
preferred shares. See "Description of Capital Shares-Restrictions on Ownership"
in the accompanying prospectus.
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PER SHARE TOTAL
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Offering price $ 32.00 $102,400,000
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Underwriting discount and commissions $ 0.155 $ 496,000
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Offering proceeds to us, before expenses $ 31.845 $101,904,000
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed on the
adequacy or accuracy of this prospectus supplement or the accompanying
prospectus. Any representation to the contrary is a criminal offense.
We have granted Banc of America Securities LLC the right to purchase up to
480,000 additional common shares of beneficial interest to cover any
over-allotments. Banc of America Securities LLC can exercise this right at any
time within 30 days after the date hereof. Banc of America Securities LLC
expects to deliver the common shares to investors on or about August 24, 2004.
BANC OF AMERICA SECURITIES LLC
August 18, 2004
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
PAGE
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About this Prospectus Supplement . . . . . . . . . . . . . . . . . . . . S-1
The Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-1
Recent Events. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-1
Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-2
Federal Income Tax Consequences. . . . . . . . . . . . . . . . . . . . . S-2
Underwriting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-6
Legal Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-7
PROSPECTUS
Cautionary Statement Concerning
Forward-Looking Statements . . . . . . . . . . . . . . . . . . . . . . 1
About this Prospectus. . . . . . . . . . . . . . . . . . . . . . . . . . 2
The Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Ratios of Earnings to Combined Fixed Charges
and Preferred Share Dividends. . . . . . . . . . . . . . . . . . . . . 2
Description of Debt Securities . . . . . . . . . . . . . . . . . . . . . 3
Description of Capital Shares. . . . . . . . . . . . . . . . . . . . . . 15
Description of Warrants. . . . . . . . . . . . . . . . . . . . . . . . . 25
Description of Other Classes of Outstanding Shares . . . . . . . . . . . 27
Federal Income Tax Consequences. . . . . . . . . . . . . . . . . . . . . 29
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Legal Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Experts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Where You Can Find More Information. . . . . . . . . . . . . . . . . . . 40
Incorporation of Documents by Reference. . . . . . . . . . . . . . . . . 40
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You should rely only on the information contained or incorporated by
reference in this prospectus supplement and the accompanying prospectus. We
have not, and the underwriter has not, authorized any other person to provide
you with different or additional information. If anyone provides you with
different or additional information, you should not rely on it. We are not, and
the underwriter is not, making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted. You should assume that
the information appearing in this prospectus supplement, the accompanying
prospectus and documents incorporated by reference is accurate only as of their
respective dates. Our business, financial condition, results of operations and
prospects may have changed since those dates.
ABOUT THIS PROSPECTUS SUPPLEMENT
In this prospectus supplement, references to "Weingarten," "we," "us" and
"our" are to Weingarten Realty Investors, a Texas real estate investment trust
and its subsidiaries.
This prospectus supplement contains the terms of this offering. A
description of our common shares is contained in the accompanying prospectus
under the caption "Description of Capital Shares-Common Shares." This prospectus
supplement, or the information incorporated herein by reference, may add, update
or change information in the accompanying prospectus. If information in this
prospectus supplement, or the information incorporated herein by reference, is
inconsistent with the accompanying prospectus, this prospectus supplement, or
the information incorporated herein by reference, will apply and will supersede
that information in the accompanying prospectus.
It is important for you to read and consider all information contained in
this prospectus supplement, the accompanying prospectus and the information
incorporated by reference in making your investment decision. You should also
read and consider the information in the documents we have referred you to in
"Where You Can Find More Information" and "Incorporation of Documents by
Reference" in the accompanying prospectus.
THE COMPANY
We are a real estate investment trust based in Houston, Texas. We develop,
acquire and own neighborhood and community shopping centers. To a lesser
degree, we develop, acquire and own industrial real estate. We have engaged in
these activities since 1948.
As of June 30, 2004, we owned or had an equity interest in operating
properties consisting of approximately 45.6 million square feet of building
area. These properties consist of 278 shopping centers generally in the 100,000
to 400,000 square foot range and 62 industrial projects. Our properties are
located in 20 states that span the southern half of the United States from coast
to coast. Our shopping centers are anchored primarily by supermarkets,
drugstores and other retailers that sell basic necessity-type items. As of June
30, 2004, we leased to approximately 5,000 different tenants under 6,800
separate leases. The weighted average occupancy rate of all of our improved
properties as of June 30, 2004 was 94.2%.
Our executive offices are located at 2600 Citadel Plaza Drive, Suite 300,
Houston, Texas 77008, and our telephone number is (713) 866-6000. Our website
address is www.weingarten.com. The information contained on our website is not
part of this prospectus supplement or the accompanying prospectus.
RECENT EVENTS
PORTFOLIO DEVELOPMENTS
Since June 30, 2004, we have acquired one shopping center and have
contracted to purchase two additional shopping centers, which total 453,600
square feet and represent an investment of $59.1 million, bringing total 2004
acquisitions to 3.1 million square feet and $449.1 million. Two of the shopping
centers are located in Laredo, Texas and are each 97% leased, and one is located
in Lubbock, Texas, which is 100% leased. We currently have ten shopping centers
in various stages of development comprising approximately 0.8 million square
feet. These developments are located in Arizona, Louisiana, Nevada, Texas and
Utah. We currently expect that the majority of these developments will be
completed during 2004 and into 2005, and we estimate that our aggregate
investment in these ten shopping centers will be approximately $116 million.
Currently, these shopping centers are 86.7% leased.
DIVIDENDS
On July 23, 2004 our board of trust managers declared a regular quarterly
cash dividend of $0.415 per common share, payable on September 15, 2004 to
shareholders of record on September 3, 2004. Purchasers of shares in this
offering who hold such shares on September 3, 2004 will be entitled to receive
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this dividend. This dividend is up from $0.39 per common share in 2003. On an
annualized basis, this represents a dividend of $1.66 per share as compared to
$1.56 per share for the prior year, a 6.4% increase.
FINANCING ACTIVITIES
On July 8, 2004 we issued 2,900,000 depositary shares, each representing a
1/100 interest in a share of 6.95% Series E Cumulative Redeemable Preferred
Shares, for net proceeds of approximately $70.2 million, which were used
primarily to pay down amounts outstanding under our Amended and Restated Credit
Agreement.
USE OF PROCEEDS
We estimate that the net proceeds from the sale of the common shares
offered by this prospectus supplement will be approximately $102 million after
deducting the underwriting discount and other estimated offering expenses,
assuming no exercise of the over-allotment option.
We intend to use the net proceeds from this offering to reduce amounts
outstanding under our $400 million Amended and Restated Credit Agreement, which
is one of the primary sources of financing for our on-going acquisition program.
As of August 18, 2004, borrowings under our Amended and Restated Credit
Agreement bore interest at the rate of 1.9% per annum and $94 million principal
amount was outstanding thereunder.
Pending such use of net proceeds, we intend, generally, to invest any
excess proceeds in short-term, interest-bearing securities.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion describes material U.S. federal income tax
consequences relating to the ownership and disposition of common shares. This
discussion supercedes the discussion contained under the heading "Federal Income
Tax Consequences-Taxation of Taxable U.S. Shareholders" in the accompanying
prospectus.
Because the following discussion is a summary that, in conjunction with the
discussion contained under the heading "Federal Income Tax Consequences" in the
accompanying prospectus, is intended to address only material federal income tax
consequences relating to the ownership and disposition of common shares that
will apply to all holders, it may not contain all the information that may be
important to you. As you review this discussion, you should keep in mind that:
- the tax consequences to you may vary depending on your particular tax
situation;
- special rules that are not discussed below may apply to you if, for
example, you are a tax-exempt organization, a broker-dealer, a
non-U.S. person, a trust, an estate, a regulated investment company, a
financial institution, an insurance company, or otherwise subject to
special tax treatment under the Internal Revenue Code;
- this summary does not address state, local or non-U.S. tax
considerations;
- this summary deals only with our common shareholders that hold common
shares as "capital assets," within the meaning of Section 1221 of the
Internal Revenue Code; and
- this discussion is not intended to be, and should not be construed as,
tax advice.
You are urged both to review the following discussion and to consult with
your own tax advisor to determine the effect of ownership and disposition of
common shares on your tax situation, including any state, local or non-U.S. tax
consequences.
The information in this section is based on the current Internal Revenue
Code, current, temporary and proposed Treasury regulations, the legislative
history of the Internal Revenue Code, current administrative interpretations and
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practices of the Internal Revenue Service, including its practices and policies
as endorsed in private letter rulings, which are not binding on the Internal
Revenue Service, and existing court decisions. Future legislation, regulations,
administrative interpretations and court decisions could change current law or
adversely affect existing interpretations of current law. Any change could
apply retroactively. We have not requested and do not plan to request any
rulings from the Internal Revenue Service concerning the tax treatment of us.
It is possible that the Internal Revenue Service could challenge the statements
in this discussion, which do not bind the Internal Revenue Service or the
courts, and that a court could agree with the Internal Revenue Service.
TAXATION OF U.S. SHAREHOLDERS
As used in the remainder of this discussion, the term "U.S. shareholder"
means a beneficial owner of common shares that is, for United States federal
income tax purposes:
(1) a citizen or resident, as defined in Section 7701(b) of the Internal
Revenue Code;
(2) a corporation or partnership, or other entity treated as a corporation
or partnership for federal income tax purposes, created or organized
under the laws of the United States, any state or the District of
Columbia;
(3) an estate the income of which is subject to federal income taxation
regardless of its source; or
(4) in general, a trust subject to the primary supervision of a United
States court and the control of one or more United States persons, and
a qualifying trust that elects to be treated as a United States trust
under applicable Treasury Regulations.
Generally, in the case of a partnership that holds common shares, any
partner that would be a U.S. shareholder if it held common shares directly is
also a U.S. shareholder. A "non-U.S. shareholder" is a holder, including any
partner in a partnership that holds common shares, that is not a U.S.
shareholder.
DISTRIBUTIONS - GENERAL. So long as we qualify as a REIT, distributions to
our U.S. shareholders out of our current or accumulated earnings and profits
that are not designated as capital gain dividends or "qualified dividend income"
will be taxable as ordinary income and will not be eligible for the dividends
received deduction generally available for corporations. Distributions in excess
of our current and accumulated earnings and profits will not be taxable to a
U.S. shareholder to the extent that the distributions do not exceed the adjusted
tax basis of the shareholder's shares. Rather, such distributions will reduce
the adjusted basis of such shares. Distributions in excess of our current and
accumulated earnings and profits that exceed the U.S. shareholder's adjusted
basis in its shares will be taxable as capital gains in the amount of such
excess if the shares are held as a capital asset. If we declare a dividend in
October, November or December of any year with a record date in one of these
months and pay the dividend on or before January 31 of the following year, we
will be treated as having paid the dividend, and the shareholder will be treated
as having received the dividend, on December 31 of the year in which the
dividend was declared.
CAPITAL GAIN DISTRIBUTIONS. We may elect to designate distributions of our
net capital gain as "capital gain dividends." Capital gain dividends are taxed
to shareholders as gain from the sale or exchange of a capital asset held for
more than one year, without regard to how long the U.S. shareholder has held its
shares. Designations made by us only will be effective to the extent that they
comply with Revenue Ruling 89-81, which requires that distributions made to
different classes of shares be composed proportionately of dividends of a
particular type. If we designate any portion of a dividend as a capital gain
dividend, a U.S. shareholder will receive an Internal Revenue Service Form
1099-DIV indicating the amount that will be taxable to the shareholder as
capital gain. Corporate shareholders, however, may be required to treat up to
20% of capital gain dividends as ordinary income.
Instead of paying capital gain dividends, we may designate all or part of
our net capital gain as "undistributed capital gain." We will be subject to tax
at regular corporate rates on our undistributed capital gain.
A U.S. shareholder:
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(1) will include in its income as long-term capital gains its
proportionate share of our undistributed capital gains; and
(2) will be deemed to have paid its proportionate share of the tax paid by
us on such undistributed capital gains and receive a credit or a
refund to the extent that its proportionate share of the tax paid by
us exceeds the U.S. shareholder's tax liability on the undistributed
capital gain.
A U.S. shareholder will increase the basis in its common shares by the
difference between the amount of capital gain included in its income and the
amount of tax it is deemed to have paid. Our earnings and profits will be
adjusted appropriately.
With respect to shareholders who are taxed at the rates applicable to
individuals, we will classify portions of any designated capital gain dividend
or undistributed capital gain as either:
(1) a 15% rate gain distribution, which would be taxable to non-corporate
U.S. shareholders at a maximum rate of 15%; or
(2) an "unrecaptured Section 1250 gain" distribution, which would be
taxable to non-corporate U.S. shareholders at a maximum rate of 25%,
depending upon the source of the capital gain.
We must determine the maximum amounts that we may designate as 15% and 25%
rate capital gain dividends by performing the computation required by the
Internal Revenue Code as if the REIT were an individual whose ordinary income
were subject to a marginal tax rate of at least 28%.
Recipients of capital gains dividends from us that are taxed at corporate
income tax rates will be taxed at the normal corporate income tax rates on those
dividends.
QUALIFIED DIVIDEND INCOME. We may elect to designate a portion of our
distributions paid to shareholders as "qualified dividend income." A portion of
a distribution that is properly designated as qualified dividend income is
taxable to non-corporate U.S. shareholders at capital gain rates, provided that
the shareholder has held the common shares with respect to which the
distribution is made for more than 60 days during the 120-day period (or 121-day
period under proposed technical corrections) beginning on the date that is 60
days before the date on which such common shares become ex-dividend with respect
to the relevant distribution. The maximum amount of our distributions eligible
to be designated as qualified dividend income for a taxable year is equal to the
sum of:
(1) the qualified dividend income received by us during such taxable year
from non-REIT corporations (including taxable REIT subsidiaries);
(2) the excess of any "undistributed" REIT taxable income recognized
during the immediately preceding year over the federal income tax paid
by us with respect to such undistributed REIT taxable income; and
(3) the excess of any income recognized during the immediately preceding
year attributable to the sale of a built-in-gain asset that was
acquired in a carry-over basis transaction from a "C" corporation over
the federal income tax paid by us with respect to such built-in gain.
Generally, dividends that we receive will be treated as qualified dividend
income for purposes of (1) above if the dividends are received from a domestic
corporation (other than a REIT or a regulated investment company) or a
"qualifying foreign corporation" and specified holding period requirements and
other requirements are met. A foreign corporation (other than a "foreign
personal holding company," a "foreign investment company," or "passive foreign
investment company") will be a qualifying foreign corporation if it is
incorporated in a possession of the United States, the corporation is eligible
for benefits of an income tax treaty with the United States that the Secretary
of Treasury determines is satisfactory, or the stock of the foreign corporation
on which the dividend is paid is readily tradable on an established securities
market in the United States. We generally expect that an insignificant portion,
if any, of our distributions will consist of qualified dividend income.
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SUNSET OF REDUCED TAX RATE PROVISIONS. The currently applicable provisions
of the federal income tax laws relating to the 15% rate of capital gain taxation
and the applicability of capital gain rates for designated qualified dividend
income of REITs are currently scheduled to "sunset" or revert back to provisions
of prior law effective for taxable years beginning after December 31, 2008. Upon
the sunset of the current provisions, all dividend income of REITs and non-REIT
corporations would be taxable at ordinary income rates and capital gain tax
rates would be increased (from 15% to 20%). The impact of this reversion is not
discussed herein. Consequently, shareholders should consult their own tax
advisors regarding the effect of sunset provisions on an investment in common
shares.
OTHER TAX CONSIDERATIONS. Distributions made by us and gain arising from
the sale or exchange by a U.S. shareholder of shares will not be treated as
passive activity income and, as a result, U.S. shareholders generally will not
be able to apply any "passive losses" against this income or gain. In addition,
regular taxable dividends from us generally will be treated as investment income
for purposes of the investment interest limitations. In addition, a U.S.
shareholder may elect to treat capital gain dividends, capital gains from the
disposition of shares and income designated as qualified dividend income as
investment income for purposes of the investment interest limitation, in which
case the applicable capital gains will be taxed at ordinary income rates. We
will notify shareholders regarding the portions of distributions for each year
that constitute ordinary income, return of capital, capital gain, and qualified
dividend income. U.S. shareholders may not include in their individual income
tax returns any of our net operating losses or capital losses. Our operating or
capital losses would be carried over by us for potential offset against future
income, subject to applicable limitations.
SALES OF SHARES. Upon any taxable sale or other disposition of common
shares, a U.S. shareholder will recognize gain or loss for federal income tax
purposes in an amount equal to the difference between:
(1) the amount of cash and the fair market value of any property received
on the sale or other disposition; and
(2) the holder's adjusted basis in the shares for tax purposes.
This gain or loss will be a capital gain or loss if the shares have been
held by the U.S. shareholder as a capital asset. The applicable tax rate will
depend on the shareholder's holding period in the asset (generally, if an asset
has been held for more than one year it will produce long-term capital gain) and
the shareholder's tax bracket. The Internal Revenue Service has the authority
to prescribe, but has not yet prescribed, regulations that would apply a capital
gain tax rate of 25% (which is generally higher than the long-term capital gain
tax rates for noncorporate shareholders) to a portion of capital gain realized
by a noncorporate shareholder on the sale of REIT shares that would correspond
to the REIT's "unrecaptured Section 1250 gain." Shareholders are urged to
consult with their own tax advisors with respect to their capital gain tax
liability. A corporate U.S. shareholder will be subject to tax at a maximum
rate of 35% on capital gain from the sale of our shares held for more than one
year. In general, any loss recognized by a U.S. shareholder upon the sale or
other disposition of shares that have been held for six months or less, after
applying the holding period rules, will be treated as a long-term capital loss,
to the extent of distributions received by the U.S. shareholder from us that
were required to be treated as long-term capital gains.
BACKUP WITHHOLDING RATE. As a result of recent legislation, the backup
withholding rate for 2004 has been reduced to 28%.
PROPOSED LEGISLATION
H.R. 1890, introduced in April 2003, and an identical bill, S. 1568,
introduced in August 2003, would modify certain provisions of the Internal
Revenue Code relating to REITs. The legislation would, among other things,
revise the REIT asset test by expanding the straight-debt safe harbor, modify
the treatment of certain REIT distributions that are attributable to gain from
sales or exchanges of United States real property interests and expand the REIT
provisions dealing with a failure to satisfy the income or asset tests. Whether
any or all of these proposals will ultimately be enacted cannot be determined at
this time.
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UNDERWRITING
We are offering the common shares described in this prospectus supplement.
Banc of America Securities LLC ("Banc of America") has entered into a firm
commitment underwriting agreement with us. Subject to the terms and conditions
of the underwriting agreement, we have agreed to sell to Banc of America, and
Banc of America has agreed to purchase, the number of common shares listed next
to its name in the following table:
UNDERWRITER NUMBER OF SHARES
Banc of America Securities LLC. . . . . . . . . . . . . . . . . . . . 3,200,000
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Total . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . 3,200,000
=========
The underwriting agreement is subject to a number of terms and conditions
and provides that Banc of America must buy all of the common shares if it buys
any of them. Banc of America will sell the common shares to the public when and
if it buys the shares from us.
Banc of America initially will offer the shares to the public at the price
specified on the cover page of this prospectus supplement. If all the common
shares are not sold at the public offering price, Banc of America may change the
public offering price and the other selling terms. The common shares are offered
subject to a number of conditions, including:
- receipt and acceptance of the common shares by Banc of America; and
- Banc of America's right to reject orders in whole or in part.
Over-Allotment Option. We have granted Banc of America an over-allotment
option to buy up to 480,000 additional common shares at the same price per share
as it is paying for the shares shown in the table above. These additional
shares would cover sales of common shares by Banc of America which exceed the
total number of common shares shown in the table above. Banc of America may
exercise this option at any time within 30 days after the date of this
prospectus supplement. If purchased, the additional shares will be sold by Banc
of America on the same terms as those on which the other common shares are sold.
Discounts and Commissions. The following table shows the per share and
total underwriting discounts and commissions to be paid to Banc of America by
us. These amounts are shown assuming no exercise and full exercise of Banc of
America's option to purchase additional shares.
PAID BY US
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NO EXERCISE FULL EXERCISE
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Per Common Share. . . . . . . . . . . . $ 0.155 $ 0.155
Total . . . . . . . . . . . . . . . . . $ 496,000 $ 570,000
We estimate that the expenses of the offering to be paid by us, not
including underwriting discounts and commissions, will be approximately $40,000.
Listing. Our common shares are listed on the New York Stock Exchange under
the symbol "WRI."
Stabilization. In connection with this offering, Banc of America may engage
in activities that stabilize, maintain or otherwise affect the price of our
common shares, including:
- stabilizing transactions;
- short sales;
- syndicate covering transactions; and
- purchases to cover positions created by short sales.
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Stabilizing transactions consist of bids or purchases made for the purpose
of preventing or retarding a decline in the market price of our common shares
while this offering is in progress. Stabilizing transactions may include making
short sales of our common shares, which involves the sale by Banc of America of
a greater number of common shares than it is required to purchase in this
offering, and purchasing common shares from us or on the open market to cover
positions created by short sales. Short sales may be "covered" shorts, which
are short positions in an amount not greater than Banc of America's
over-allotment option referred to above, or may be "naked" shorts, which are
short positions in excess of that amount.
Banc of America may close out any covered short position either by
exercising their over-allotment option, in whole or in part, or by purchasing
shares in the open market. In making this determination, Banc of America will
consider, among other things, the price of shares available for purchase in the
open market compared to the price at which it may purchase shares through the
over-allotment option.
A naked short position is more likely to be created if Banc of America is
concerned that there may be downward pressure on the price of the common shares
in the open market that could adversely affect investors who purchased in this
offering. To the extent that Banc of America creates a naked short position, it
will purchase shares in the open market to cover the position.
These activities may have the effect of raising or maintaining the market
price of our common shares or preventing or retarding a decline in the market
price of our common shares. As a result of these activities, the price of our
common shares may be higher than the price that otherwise might exist in the
open market. If Banc of America commences these activities, it may discontinue
them at any time. Banc of America may carry out these transactions on the New
York Stock Exchange, in the over-the-counter market or otherwise.
Lock-up Agreements. We and our executive officers have entered into lock-up
agreements with Banc of America. Under these agreements, subject to exceptions,
we may not issue any new common shares, and those holders of common shares may
not, directly or indirectly, offer, sell, contract to sell, pledge or otherwise
dispose of or hedge any common shares or securities convertible into or
exchangeable for common shares, or publicly announce the intention to do any of
the foregoing, without the prior consent of Banc of America for a period of 45
days from the date of this prospectus supplement. This consent may be given at
any time without public notice.
Indemnification. We will indemnify Banc of America against some
liabilities, including liabilities under the Securities Act. If we are unable to
provide this indemnification, we will contribute to payments Banc of America may
be required to make in respect of those liabilities.
Online Offering. A prospectus supplement with the accompanying prospectus
in electronic format may be made available on the web site maintained by Banc of
America. Other than the prospectus supplement with the accompanying prospectus
in electronic format, the information on any such web site, or accessible
through any such web site, is not part of the prospectus supplement or
accompanying prospectus. In addition, shares may be sold by Banc of America to
securities dealers who resell shares to online brokerage account holders.
Conflicts/Affiliates. Banc of America and its affiliates have provided, and
may in the future provide, various investment banking, commercial banking and
other financial services for us for which services they have received, and may
in the future receive, customary fees.
LEGAL MATTERS
Certain legal matters relating to the common shares will be passed upon for
us by Locke Liddell & Sapp LLP, Dallas, Texas, and for the underwriter by Sidley
Austin Brown & Wood LLP, New York, New York, who will rely on the opinion of
Locke Liddell & Sapp LLP as to matters of Texas law.
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PROSPECTUS
WEINGARTEN REALTY INVESTORS
$1,000,000,000
COMMON SHARES, PREFERRED SHARES, DEPOSITARY SHARES,
DEBT SECURITIES AND WARRANTS
__________
Weingarten Realty Investors, a real estate investment trust formed under
the Texas Real Estate Investment Trust Act, may offer, from time to time, in one
or more series or classes and in amounts, at prices and on terms that it will
determine at the time of offering, with an aggregate public offering price of up
to $1,000,000,000:
- unsecured debt securities that may be either senior debt securities
or subordinated debt securities;
- whole or fractional preferred shares of beneficial interest;
- preferred shares of beneficial interest represented by depositary
shares;
- common shares of beneficial interest; or
- warrants to purchase preferred shares of beneficial interest or
common shares of beneficial interest.
We will provide the specific terms of these securities in supplements to
this prospectus. You should read this prospectus and the supplements carefully
before you invest in any of these securities.
We may offer the securities directly, through agents designated from
time to time, or to or through underwriters or dealers. If any agents or
underwriters are involved in the sale of any of the securities, their names, and
any applicable purchase price, fee, commission or discount arrangement between
or among them, will be set forth, or will be calculable from the information set
forth, in the applicable prospectus supplement. For more information on this
topic, please see "Plan of Distribution" on page 39. No securities may be sold
without the delivery of the applicable prospectus supplement describing the
method and terms of the offering of such securities.
Our common shares of beneficial interest trade on the New York Stock
Exchange under the symbol "WRI."
____________
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the securities discussed in the
prospectus, nor have they determined whether this prospectus is accurate or
adequate. Any representation to the contrary is a criminal offense.
The date of this prospectus is April 24, 2003.
WE HAVE NOT AUTHORIZED ANY DEALER, SALESMAN OR OTHER PERSON TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS OR ANY APPLICABLE SUPPLEMENT TO
THIS PROSPECTUS. YOU MUST NOT RELY UPON ANY INFORMATION OR REPRESENTATION NOT
CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS OR ANY APPLICABLE
SUPPLEMENT TO THIS PROSPECTUS AS IF WE HAD AUTHORIZED IT. THIS PROSPECTUS AND
ANY APPLICABLE PROSPECTUS SUPPLEMENT DO NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE REGISTERED
SECURITIES TO WHICH THEY RELATE, NOR DOES THIS PROSPECTUS AND ANY ACCOMPANYING
PROSPECTUS SUPPLEMENT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY SECURITIES IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. YOU SHOULD NOT ASSUME
THAT THE INFORMATION CONTAINED IN THIS PROSPECTUS OR ANY APPLICABLE PROSPECTUS
SUPPLEMENT IS CORRECT ON ANY DATE AFTER THEIR RESPECTIVE DATES, EVEN THOUGH THIS
PROSPECTUS IS DELIVERED OR SECURITIES ARE SOLD ON A LATER DATE.
TABLE OF CONTENTS
Cautionary Statement Concerning Forward-Looking Statements . . . . . . . . . . . 1
About This Prospectus. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
The Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Ratios of Earnings to Combined Fixed Charges and Preferred Share Dividends . . . 2
Description of Debt Securities . . . . . . . . . . . . . . . . . . . . . . . . . 3
Description of Capital Shares. . . . . . . . . . . . . . . . . . . . . . . . . . 15
Description of Warrants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Description of Other Classes of Outstanding Shares . . . . . . . . . . . . . . . 27
Federal Income Tax Consequences. . . . . . . . . . . . . . . . . . . . . . . . . 29
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Legal Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Experts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Where You Can Find More Information. . . . . . . . . . . . . . . . . . . . . . . 40
Incorporation of Documents by Reference. . . . . . . . . . . . . . . . . . . . . 40
i
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This prospectus and the applicable prospectus supplement include and
incorporate by reference forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act. We
intend those forward-looking statements to be covered by the safe harbor
provisions for forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995. Forward-looking statements are generally
identifiable by use of the words "believe," "expect," "intend," "anticipate,"
"plan," "estimate," "project" or similar expressions.
Forward-looking statements are subject to known and unknown risks,
uncertainties and other facts that may cause our actual results or performance
to differ materially from those contemplated by the forward-looking statements.
Many of those factors are noted in conjunction with the forward-looking
statements in the text. Other important factors that could cause actual results
to differ include:
- Our inability to identify properties to acquire, effect acquisitions
or successfully integrate acquired properties and operations. This
inability could result in decreased market penetration, adverse effects on
results of operations and other adverse results. This same result could
occur if the results of our efforts to implement our property development
strategy fail or we experience public opposition to our development plans,
construction delays or cost overruns or if we are unable to obtain
necessary permits.
- The effect of economic conditions. If an economic downturn occurs,
the demand and rents for neighborhood and community shopping centers could
fall and adversely affect our financial condition and results of
operations. Our financial condition and results of operations could also be
adversely affected if our tenants are unable to make lease payments or
elect not to renew their leases.
- Failure to qualify as a REIT. We elected to be taxed as a REIT for
federal income tax purposes for our taxable year ended December 31, 2002,
and expect to continue to elect REIT status. Although we believe that we
were organized and have been operating in conformity with the requirements
for qualification as a REIT under the Internal Revenue Code, we cannot
assure you that we will continue to qualify as a REIT. Qualification as a
REIT involves the application of highly technical and complex Internal
Revenue Code provisions for which there are only limited judicial or
administrative interpretations. If in any taxable year we fail to qualify
as a REIT, we would not be allowed a deduction for distributions to
shareholders for computing taxable income and would be subject to federal
taxation at regular corporate rates. Unless entitled to statutory relief,
we would also be disqualified from treatment as a REIT for the four taxable
years following the year during which we failed to so qualify. As a result,
our ability to make distributions to our shareholders would be adversely
affected. See "Federal Income Tax Consequences - REIT Qualification" on
page 30.
- The cost of capital. Our cost depends on many factors, some of which
are beyond our control, including interest rates, credit ratings, prospects
and outlook.
- Actions of our competitors. We seek to remain competitive in the
neighborhood and community shopping center real estate markets that we
currently serve. We do, however, compete with a number of other real estate
oriented companies, some of which have greater resources than we do.
- Changes in government regulations, tax rates and similar matters.
For example, changes in real estate and zoning laws could adversely affect
our financial condition and results of operations.
- Other risks are detailed in our SEC reports or filings.
We undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
PAGE 1
ABOUT THIS PROSPECTUS
This prospectus is part of a "shelf" registration statement that we filed
with the SEC. By using a shelf-registration statement, we may sell, from time to
time, in one or more offerings, any combination of the securities described in
this prospectus. The total dollar amount of the securities we sell through these
offerings will not exceed $1,000,000,000. This prospectus only provides you with
a general description of the securities we may offer. Each time we sell
securities, we will provide you with a prospectus supplement that contains
specific information about the terms of the securities being offered. The
prospectus supplement may also add, update or change information contained in
this prospectus. You should read both this prospectus and any prospectus
supplement together with the additional information described under the heading
"Where You Can Find More Information" on page 40.
THE COMPANY
We are a real estate investment trust based in Houston, Texas. We develop,
acquire and own anchored neighborhood community shopping centers. To a lesser
degree, we develop, acquire and own industrial real estate. We have engaged in
these activities since 1948.
As of February 28, 2003, we owned or had an equity interest in operating
properties consisting of approximately 39.0 million square feet of building
area. These properties consist of 247 shopping centers generally in the 100,000
to 400,000 square foot range, 58 industrial projects and one office building.
Our properties are located in the southern half of the United States. Our
shopping centers are anchored primarily by supermarkets, drugstores and other
retailers that sell basic necessity-type items. As of December 31, 2002, we
leased to approximately 4,300 different tenants under 5,700 separate leases.
The weighted average occupancy rate of all of our improved properties as of
December 31, 2002 was 91.7%.
Our executive offices are located at 2600 Citadel Plaza Drive, Suite 300,
Houston, Texas 77008, and our telephone number is (713) 866-6000. Our website
address is www.weingarten.com. The information contained on our website is not
------------------
part of this prospectus.
USE OF PROCEEDS
Unless otherwise described in the applicable prospectus supplement, we
intend to use the net proceeds from the sale of the securities for:
- repayment or refinancing of debt;
- acquisition of additional properties or real estate-related
securities;
- development of new properties;
- redevelopment of existing properties; and
- working capital and general purposes.
Pending the use thereof, we intend, generally, to invest any net proceeds in
short-term, interest-bearing securities.
RATIOS OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED SHARE DIVIDENDS
The following table sets forth the ratio of earnings to combined fixed
charges and preferred share dividends and of funds from operations before
interest expense to combined fixed charges and preferred share dividends for the
periods shown:
PAGE 2
YEARS ENDED DECEMBER 31,
---------------------------------
1998 1999 2000 2001 2002
----- ----- ----- ----- -----
Ratio of earnings to combined fixed charges
and preferred share dividends. . . . . . . . 2.27x 2.29x 1.80x 1.92x 2.05x
Ratio of funds from operations before
interest expense to combined fixed charges
and preferred share dividends. . . . . . . . 3.28x 2.79x 2.60x 2.59x 2.65x
The ratios of earnings to combined fixed charges and preferred share
dividends were computed by dividing earnings by the sum of fixed charges and
preferred share dividends. The ratios of funds from operations before interest
expense to combined fixed charges and preferred share dividends were computed by
dividing funds from operations before interest expense by the sum of fixed
charges and preferred share dividends.
For these purposes, earnings consist of income before extraordinary items
plus fixed charges (excluding interest costs capitalized) and preferred share
dividends. Funds from operations before interest expense consists of net income
plus depreciation and amortization of real estate assets, interest on
indebtedness and extraordinary charges, less gains and losses on sales of
properties and securities.
DESCRIPTION OF DEBT SECURITIES
We will prepare and distribute a prospectus supplement that describes the
specific terms of the debt securities. In this section of the prospectus, we
describe the general terms we expect all debt securities will have. We also
identify some of the specific terms that will be described in a prospectus
supplement. Although we expect that any debt securities we offer with this
prospectus will have the general terms we describe in this section, our debt
securities may have terms that are different from or inconsistent with the
general terms we describe here. Therefore, you should read the prospectus
supplement carefully.
The senior debt securities will be issued under a senior indenture dated as
of May 1, 1995 between us and JPMorgan Chase Bank (formerly known as The Chase
Manhattan Bank, successor by merger to Chase Bank of Texas, National
Association), as trustee, and the subordinated debt securities will be issued
under a subordinated indenture dated as of May 1, 1995 between us and JPMorgan
Chase Bank, as trustee. The term "trustee" as used in this prospectus refers to
any bank that we may appoint as trustee under the terms of the applicable
indenture, in its capacity as trustee for the senior securities or the
subordinated securities.
We have summarized specific terms and provisions of the indentures.
The summary is not complete. The indentures have been incorporated by reference
as exhibits to the registration statement of which this prospectus is a part.
We urge you to read the indentures because they, and not this description, fully
define the rights of holders of debt securities. The indentures are subject to
the Trust Indenture Act of 1939, as amended. To obtain copies of the indentures,
see "Where You Can Find More Information" on page 40.
GENERAL
Unless otherwise provided in the prospectus supplement, the debt securities
(whether senior or subordinated) will be our direct, unsecured general
obligations. The senior debt securities will rank equally with all of our other
unsecured and unsubordinated indebtedness. The subordinated debt securities will
be subordinated and junior in right of payment to the prior payment in full of
our present and future senior debt securities. See "--Subordinated Debt
Securities" on page 7.
The indentures do not limit the amount of debt securities that we can
offer. Each indenture allows us to issue debt securities up to the principal
amount that may be authorized by us. We may issue additional debt securities
without your consent. We may issue debt securities in one or more series. All
PAGE 3
debt securities of one series need not be issued at the same time and, unless
otherwise provided, a series may be reopened, without the consent of the holders
of the debt securities of such series, for issuances of additional debt
securities of such series.
Without your consent, we may engage in a highly leveraged transaction, a
restructuring, a transaction involving a change in control, or a merger or
similar transaction that may adversely affect holders of debt securities. We
will not list the debt securities on any securities exchange.
ADDITIONAL TERMS OF DEBT SECURITIES
A prospectus supplement and any supplemental indentures relating to any
series of debt securities being offered will include specific terms relating to
the offering. These terms will include some or all of the following:
- the type and title of debt securities offered;
- any limit upon the total principal amount of the series of debt
securities;
- the total principal amount and priority of the debt securities;
- the percentage of the principal amount at which the debt securities
will be issued and any payments due if the maturity of the debt
securities is accelerated;
- the dates on which the principal of and premium, if any, on the debt
securities will be payable or the method of determining such date;
- the interest rates (which may be fixed or variable) that the debt
securities will bear, or the method for determining such rates;
- the dates from which the interest on the debt securities will accrue
and be payable, or the method of determining those dates;
- the date or dates on which interest will be payable and the record
date or dates to determine the persons who will receive payment;
- the place where principal of, premium, if any, and interest, on the
debt securities will be payable or at which the debt securities may be
surrendered for registration of transfer or exchange;
- the period or periods within which, the price or prices at which,
the currency (if other than U.S. dollars) in which, and the other
terms and conditions upon which, the debt securities may be redeemed,
in whole or in part, at our option, if we have that option;
- the obligation, if any, we have to redeem or repurchase the debt
securities pursuant to any sinking fund or similar provisions or upon
the happening of a specified event or at the option of a holder; and
the period or periods within which, the price at which, and the other
terms and conditions upon which, such debt securities shall be
redeemed or purchased, in whole or in part;
- the denominations in which the debt securities are authorized to
be issued;
- if the amount of principal of, or premium, if any, or interest on,
the debt securities may be determined with reference to an index or
pursuant to a formula or other method, the method in which such
amounts will be determined;
- the amount or percentage payable if we accelerate the maturity of
the debt securities, if other than the principal amount;
PAGE 4
- any changes to or additional events of default or covenants set forth
in the indentures;
- the terms of subordination, if any;
- any special tax implications of the debt securities, including
provisions for original issue discount securities;
- provisions, if any, granting special rights to the holders of the
debt securities if certain specified events occur; the circumstances,
if any, under which we will pay additional amounts on the debt
securities held by non-U.S. persons for taxes, assessments or similar
charges;
- whether the debt securities will be issued in registered or bearer
form or both;
- the date as of which any debt securities in bearer form and any
temporary global security representing outstanding securities are
dated, if other than the original issuance date of the debt
securities;
- the forms of the securities and interest coupons, if any, of the
series;
- if other than the trustee under the applicable indenture, the
identity of the registrar and any paying agent for the debt
securities;
- any means of defeasance or covenant defeasance that may be specified
in the debt securities;
- whether the debt securities are to be issued in whole or in part in
the form of one or more temporary or permanent global securities and,
if so, the identity of the depositary or its nominee, if any, for the
global security or securities and the circumstances under which
beneficial owners of interest in the global security may exchange
those interests for certificated debt securities to be registered in
the name of, or to be held by, the beneficial owners or their
nominees;
- if the debt securities may be issued or delivered, or any installation
of principal or interest may be paid, only upon receipt of certain
certificates or other documents or satisfaction of other conditions in
addition to those specified in the applicable indenture, the form of
those certificates, documents or conditions;
- any definitions for the debt securities for that series that are
different from or in addition to the definitions included in the
applicable indentures;
- in the case of the subordinated indenture, the relative degree to
which the debt securities shall be senior to or junior to other
securities, whether currently outstanding or to be offered in the
future, and to other debt, in right of payment;
- whether the debt securities are to be guaranteed and, if so, by
identity of the guarantors and the terms of the guarantees;
- the terms, if any, upon which the debt securities may be converted
or exchanged into or for our common shares, preferred shares or other
securities or property;
- any restrictions on the registration, transfer or exchange of the
debt securities; and
- any other terms consistent with the indenture.
PAGE 5
DENOMINATIONS, INTEREST, REGISTRATION AND TRANSFER
Unless the prospectus supplement states differently, the debt securities of
any series issued in registered form will be issuable in denominations of $1,000
and integral multiples of $1,000. Unless the prospectus supplement states
otherwise, the debt securities of any series issued in bearer form will be
issuable in denominations of $5,000.
Unless otherwise provided in the applicable prospectus supplement, the
trustee will pay the principal of and any premium and interest on the debt
securities and will register the transfer of any debt securities at its offices.
However, at our option, we may distribute interest payments by mailing a check
to the address of each holder of debt securities that appears on the register
for the debt securities.
Any interest on a debt security not punctually paid or duly provided for on
any interest payment date will cease to be payable to the holder on the
applicable regular record date. This defaulted interest may be paid to the
person in whose name the debt security is registered at the close of business on
a special record date for the payment of the defaulted interest. We will set
the special record date and give the holder of the debt security at least 10
days' prior notice. In the alternative, this defaulted interest may be paid at
any time in any other lawful manner, all as fully described in the applicable
indenture.
Subject to any limitations imposed upon debt securities issued in
book-entry form, the debt securities of any series will be exchangeable for
other debt securities of the same series and of a like aggregate principal
amount and tenor of different authorized denominations upon surrender to the
applicable trustee of the debt securities. In addition, subject to any
limitations imposed upon debt securities issued in book-entry form, a holder may
surrender the debt securities to the trustee for conversion or registration of
transfer. Every debt security surrendered for conversion, registration of
transfer or exchange will be duly endorsed or accompanied by a written
instrument of transfer from the holder. A holder will not have to pay a service
charge for any registration of transfer or exchange of any debt securities, but
we may require payment of a sum sufficient to cover any applicable tax or other
governmental charge.
If the prospectus supplement refers to any transfer agent, in addition to
the applicable trustee that we initially designated with respect to any series
of debt securities, we may at any time rescind the designation of the transfer
agent or approve a change in the location through which the transfer agent acts,
except that we will be required to maintain a transfer agent in each place of
payment for the series. We may at any time designate additional transfer agents
with respect to any series of debt securities.
Neither we nor the trustee will be required to:
- issue, register the transfer of or exchange debt securities of any
series during a period beginning at the opening of business 15 days
before any selection of debt securities of that series to be redeemed
and ending at the close of business on the day of mailing of the
relevant notice of redemption;
- register the transfer of or exchange any debt security, or portion
thereof, called for redemption, except the unredeemed portion of any
debt security being redeemed in part; or
- issue, register the transfer of or exchange any debt security that
has been surrendered for repayment at the holder's option, except the
portion, if any, of the debt security not to be repaid.
SENIOR DEBT SECURITIES
Any additional senior debt securities we issue will rank equally in right
of payment with the senior debt securities offered by this prospectus and the
applicable prospectus supplement. Further, the senior indenture does not
prohibit us from issuing additional debt securities that may rank equally in
right of payment to the senior debt securities. Any senior debt securities
offered pursuant to the senior indenture will be senior in right of payment to
all subordinated debt securities issued under the subordinated indenture.
PAGE 6
SUBORDINATED DEBT SECURITIES
The subordinated debt securities will have a junior position to all of our
senior debt. Under the subordinated indenture, payment of the principal,
interest and any premium on the subordinated debt securities will generally be
subordinated and junior in right of payment to the prior payment in full of all
senior debt. The subordinated indenture provides that no payment of principal,
interest and any premium on the subordinated debt securities may be made in the
event:
- of any insolvency, bankruptcy or similar proceeding involving us or
our properties; or
- we fail to pay the principal, interest, any premium or any other
amounts on any senior debt when due.
The subordinated indenture will not limit the amount of senior debt that we
may incur. All series of subordinated debt securities as well as other
subordinated debt issued under the subordinated indenture will rank equally with
each other in right of payment.
The subordinated indenture prohibits us from making a payment of principal,
premium, interest or sinking fund payments for the subordinated debt securities
during the continuance of any default on senior debt or any default under any
agreement pursuant to which the senior debt was issued beyond the grace period,
unless and until the default on the senior debt is cured or waived.
Upon any distribution of our assets in connection with any dissolution,
winding up, liquidation, reorganization, bankruptcy or other similar proceeding,
the holders of all senior debt securities will first be entitled to receive
payment in full of the principal, any premium and interest due on the senior
debt before the holders of the subordinated debt securities are entitled to
receive any payment. Because of this subordination, if we become insolvent, our
creditors who are not holders of senior debt or of the subordinated debt
securities may recover less, ratably, than holders of senior debt but may
recover more, ratably, than holders of the subordinated debt securities.
GLOBAL CERTIFICATES
Unless the prospectus supplement otherwise provides, we will issue debt
securities as one or more global certificates that will be deposited with The
Depository Trust Company. Unless otherwise specified in the applicable
prospectus supplement, debt securities issued in the form of a global
certificate to be deposited with DTC will be represented by a global certificate
registered in the name of DTC or its nominee. This means that we will not issue
certificates to each holder. Generally, we will issue global securities in the
total principal amount of the debt securities in a series. Debt securities in
the form of a global certificate may not be transferred except as a whole among
DTC, its nominee or a successor to DTC and any nominee of that successor.
We may determine not to use global certificates for any series. In that
event, we will issue debt securities in certificated form.
The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of securities in certificated form. Those laws
and some conditions on transfer of global securities may impair the ability to
transfer interests in global securities.
OWNERSHIP OF GLOBAL SECURITIES
So long as DTC or its nominee is the registered owner of a global security,
that entity will be the sole holder of the debt securities represented by that
instrument. Both we and the trustee are only required to treat DTC or its
nominee as the legal owner of those securities for all purposes under the
indentures.
Unless otherwise specified in this prospectus or the prospectus supplement,
no actual purchaser of debt securities represented by a global security will be
entitled to receive physical delivery of certificated securities or will be
considered the holder of those securities for any purpose under the indentures.
In addition, no actual purchaser will be able to transfer or exchange global
securities unless otherwise specified in this prospectus or the prospectus
PAGE 7
supplement. As a result, each actual purchaser must rely on the procedures of
DTC to exercise any rights of a holder under the applicable indenture. Also, if
an actual purchaser is not a DTC participant, the actual purchaser must rely on
the procedures of the participant through which it owns its interest in a global
security.
THE DEPOSITORY TRUST COMPANY
The following is based on information furnished by DTC and applies to the
extent that it is the depositary, unless otherwise provided in the prospectus
supplement.
Registered Owner. The debt securities will be issued as fully registered
securities in the name of Cede & Co. (which is DTC's nominee). The trustee will
deposit the global security with the depositary. The deposit with the depositary
and its registration in the name of Cede & Co. will not change the nature of the
actual purchaser's ownership interest in the debt securities.
DTC's Organization. DTC is a limited purpose trust company organized under
the New York Banking Law, a "banking organization" within the meaning of that
law, a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and a "clearing agency"
registered under the provisions of Section 17A of the Exchange Act.
DTC is owned by a number of its direct participants, the New York Stock
Exchange, Inc. and NasdaqAmex. Direct participants include securities brokers
and dealers, banks, trust companies, clearing corporations and certain other
organizations who directly participate in DTC. Other entities may access DTC's
system by clearing transactions through or maintaining a custodial relationship
with direct participants. The rules applicable to DTC and its participants are
on file with the SEC.
DTC's Activities. DTC holds securities that its participants deposit with
it. DTC also facilitates the settlement among participants of securities
transactions, such as transfers and pledges, in deposited securities through
electronic computerized book-entry changes in participants' accounts. Doing so
eliminates the need for physical movement of securities certificates.
Participants' Records. Except as otherwise provided in this prospectus or a
prospectus supplement, purchases of debt securities must be made by or through a
direct participant, which will receive a credit for the securities on DTC's
records. The purchaser's interest is in turn to be recorded on the participants'
records. Actual purchasers will not receive written confirmations from DTC of
their purchase, but they generally receive confirmations along with periodic
statements of their holdings from the participants through which they entered
into the transaction.
Transfers of interests in the global securities will be made on the books
of the participants on behalf of the actual purchasers. Certificates
representing the interest of the actual purchasers in the securities will not be
issued unless the use of global securities is suspended. DTC has no knowledge of
the actual purchasers of global securities. DTC's records only reflect the
identity of the direct participants who are responsible for keeping account of
their holdings on behalf of their customers.
Notices Among the Depositary, Participants and Actual Owners. Notices and
other communications by DTC, its participants and the actual purchasers will be
governed by arrangements among them, subject to any legal requirements in
effect.
Voting Procedures. Neither DTC nor Cede & Co. will give consents for or
vote the global securities. DTC generally mails an omnibus proxy to us just
after the applicable record date. That proxy assigns Cede & Co.'s voting rights
to the direct participants to whose accounts the securities are credited at that
time.
Payments. Principal and interest payments made by us will be delivered to
DTC. DTC's practice is to credit direct participants' accounts on the applicable
payment date unless it has reason to believe that it will not receive payment on
that date. Payments by participants to actual purchasers will be governed by
standing instructions and customary practices, as is the case with securities
PAGE 8
held for customers in bearer form or registered in "street name." Those
payments will be the responsibility of that participant, not DTC, the trustee or
us, subject to any legal requirements in effect at that time.
We are responsible for payment of principal, interest and premium, if any,
to the trustee, who is responsible to pay it to DTC. DTC is responsible for
disbursing those payments to direct participants. The participants are
responsible for disbursing payment to the actual purchasers.
TRANSFER OR EXCHANGE OF DEBT SECURITIES
You may transfer or exchange debt securities (other than global securities)
without a service charge at the corporate trust office of the trustee. You may
also surrender debt securities (other than global securities) for conversion or
registration of transfer without a service charge at the corporate trust office
of the trustee. You must execute a proper form of transfer and pay any taxes or
other governmental charges resulting from that action.
TRANSFER AGENT
If we designate a transfer agent (in addition to the trustee) in a
prospectus supplement, we may at any time rescind this designation or approve a
change in the location through which any such transfer agent acts. We will,
however, be required to maintain a transfer agent in each place of payment for a
series of debt securities. We may at any time designate additional transfer
agents for a series of debt securities.
CERTAIN COVENANTS
Under the indentures, we are required to:
- pay the principal, interest and any premium on the debt securities
when due;
- maintain a place of payment;
- deliver a report to the trustee at the end of each fiscal year
certifying our compliance with all of our obligations under the
indentures;
- deposit sufficient funds with any paying agent on or before the due
date for any principal, interest or any premium;
- maintain an unencumbered total asset value (as defined in the
indentures) in an amount of not less than 100% of the aggregate
principal amount of all our outstanding debt;
- except as described under " - Merger, Consolidation and Sale of
Assets," do or cause to be done all things necessary to preserve and
keep in full force and effect our existence, rights (declaration of
trust and statutory) and franchises, unless the board of trust
managers determines that the preservation thereof is no longer
desirable in the conduct of our business;
- cause all of our material properties used or useful for the conduct
of our business to be maintained and kept in good condition, repair
and working order and we will cause to be made all necessary repairs,
renewals, replacements, betterments and improvements of our material
properties to be made, all as in our judgment may be necessary so that
the business carried on in connection therewith may be properly and
advantageously conducted at all times;
- keep all of our insurable properties insured against loss or damage at
least equal to their then full insurable value with insurers of
recognized responsibility and, if such insurer has publicly rated
debt, the rating for such debt must be at least investment grade with
the nationally recognized rating agencies; pay or discharge or cause
to be paid or discharged, before they shall become delinquent, (1) all
taxes, assessments and governmental charges levied or
PAGE 9
imposed upon us or upon our income, profits or property, and (2) all
lawful claims for labor, materials and supplies which, if unpaid,
might by law become a lien upon our property; provided, however, we
are not required to pay or discharge any such tax, assessment, charge
or claim whose amount, applicability or validity is being contested in
good faith; and
- transmit by mail to all holders of debt securities, without cost to
such holders, and file with the trustee copies of the annual reports,
quarterly reports and other documents which we file with the SEC
pursuant to Sections 13 and 15(d) of the Exchange Act.
Under the indentures, we may not:
- incur or permit a subsidiary to incur any debt (as defined in the
indentures) which causes the aggregate principal amount of all our
outstanding debt to become greater than 60% of the sum of (1) our
total assets (as defined in the indentures) at the end of the calendar
quarter covered in our then most recent 10-K or 10-Q and (2) the
purchase price of any real estate assets or mortgages receivable
acquired and any securities offering proceeds received since the end
of such calendar quarter to the extent such proceeds were not used by
us to acquire real estate assets or mortgages receivable or used to
reduce debt;
- incur or permit a subsidiary to incur any debt if our ratio of
consolidated income available for debt service (as defined in the
indentures) to the annual service charge (as defined in the
indentures) shall have been less than 2.5 for the four quarters then
most recently ended; and
- incur any debt or permit a subsidiary to incur any debt secured by
any mortgage lien, charge, pledge, encumbrance or security interest in
which the aggregate principal amount of all our outstanding secured
debt in greater than 40% of our total assets.
EVENTS OF DEFAULT, NOTICE AND WAIVER
Events of default under the indentures for any series of debt securities
include:
- failure for 30 days to pay interest on any debt securities of that
series;
- failure to pay principal of, or premium, if any, on any debt
securities of that series;
- failure to pay any sinking fund payment when due;
- failure to perform or breach of any covenant or warranty contained
in the indentures (other than a covenant added to the indentures
solely for the benefit of a particular series of debt securities),
which continues for 60 days after written notice as provided in the
indenture;
- default under any of our other debt instruments with an aggregate
principal amount outstanding of at least $10,000,000; or
- events of bankruptcy, insolvency or reorganization, or court
appointment of a receiver, liquidator or trustee.
An event of default for a particular series of debt securities does not
necessarily constitute an event of default for any other series of debt
securities issued under an indenture. The trustee may withhold notice to the
holders of debt securities of any default (except in the payment of principal or
interest) if it considers such withholding of notice to be in the best interests
of the holders.
If an event of default for any series of debt securities occurs and
continues, the trustee or the holders of at least 25% of the total principal
PAGE 10
amount of the debt securities of the series may declare the entire principal of
that series due and payable immediately. If an event of default occurs due to
bankruptcy, insolvency or reorganization or court appointment of a receiver,
liquidator or trustee, no advance notice of acceleration is required;
acceleration is automatic.
Each indenture provides that, if an event of default has occurred, the
trustee is to use the degree of care a prudent person would use in the conduct
of his own affairs. Subject to those provisions, the trustee is under no
obligation to exercise any of its rights or powers under an indenture at the
request of any of the holders of the debt securities of a series unless they
have furnished to the trustee reasonable security or indemnity.
Each indenture provides that, after a declaration of acceleration, but
before a judgment or decree for payment of the money due has been obtained by
the trustee, the holders of a majority in aggregate principal amount of the debt
securities of that series, by written notice to us and the trustee, may rescind
and annul such declaration if:
- we have paid, or deposited with the trustee a sum sufficient to pay:
- all overdue interest on all debt securities of the applicable
series;
- the principal of and premium, if any, on any debt securities
of the applicable series which have become due other than by such
declaration of acceleration, plus interest thereon at the rate
borne by the debt securities;
- to the extent that payment of such interest is lawful, interest
upon overdue interest at the rate borne by the debt securities;
and
- all sums paid or advanced by the trustee under the indenture and
the reasonable compensation, expenses, disbursements and advances
of the trustee, its agents and counsel; and
- all events of default, other than the non-payment of principal of the
debt securities which have become due solely by such declaration of
acceleration, have been cured or waived.
The trustee is required to give notice to the holders of debt securities
within 90 days of a default under the applicable indenture unless such default
shall have been cured or waived; provided, however, that the trustee may
withhold notice to the holders of any series of debt securities of any default
with respect to such series (except a default in the payment of the principal
of, and premium, if any, or interest on any debt security of such series or in
the payment of any sinking fund installment in respect of any debt security of
such series) if the trustee considers such withholding to be in the interest of
the holders.
LIMITATION ON SUITS
The indentures limit the right of holders of debt securities to institute
legal proceedings. No holder of any debt securities will have the right to bring
a claim under an indenture unless:
- the holder has given written notice to the trustee of default under
the terms of that series of debt;
- the holders of not less than 25% of the aggregate principal amount of
debt securities of that series shall have made a written request to
the trustee to bring the claim and furnished the trustee reasonable
indemnification as it may require;
- the trustee has not commenced an action within 60 days of receipt of
the notice, request and offer of indemnity; and
- no direction inconsistent with a request has been given to the trustee
by the holders of not less than a majority of the aggregate principal
amount of the debt securities.
PAGE 11
The holders of a majority in aggregate principal amount of any series of
debt securities may direct the time, method and place of conducting any
proceeding for any remedy available to the trustee or exercising any power
conferred on the trustee with respect to the securities of any series; provided,
however, that
- the direction does not conflict with any rule of law or an indenture,
- the trustee may take any action it deems proper and which is
consistent with the direction of the holders; and
- the trustee is not required to take any action that would unduly
prejudice the holders of the debt securities not taking part in the
action or would impose personal liability on the trustee.
MODIFICATION OF THE INDENTURES
In order to change or modify an indenture, we must obtain the consent of
holders of at least a majority in principal amount of all outstanding debt
securities affected by that change. The consent of holders of at least a
majority in principal amount of each series of outstanding debt securities is
required to waive compliance by us with specific covenants in an indenture. We
must obtain the consent of each holder affected by a change:
- to extend the maturity, or to reduce the principal, redemption premium
or interest rate;
- change the place of payment, or the coin or currency, for payment;
- limit the right to sue for payment; or
- reduce the level of consents needed to approve a change to an
indenture; or modify any of the foregoing provisions or any of the
provisions relating to the waiver of certain past defaults or certain
covenants, except to increase the required level of consents needed to
approve a change to an indenture.
DEFEASANCE
Unless stated otherwise in a prospectus supplement, we will be able to
discharge our obligations under debt securities at any time by taking the
actions described below. The discharge of all obligations using this process is
known as "defeasance." If we defease debt securities, all obligations under the
series of debt securities that is defeased will be deemed to have been
discharged, except for:
- the rights of holders of outstanding debt securities to receive,
solely from funds deposited for this purpose, payments in respect of
the principal of, premium, if any, and interest on those debt
securities when the payments are due;
- the obligations with respect to the debt securities concerning issuing
temporary debt securities, registration of debt securities, mutilated,
destroyed, lost or stolen debt securities, and the maintenance of an
office or agency for payment and money for security payments held in
trust;
- the rights, powers, trusts, duties and immunities of the trustee; and
- the defeasance provisions of the indenture.
We will also be able to free ourselves from certain covenants that are
described in the indentures by taking the actions described below. The
discharge of obligations using this process is known as "covenant defeasance."
If we defease covenants under debt securities, then certain events (not
including non-payment, enforceability of any guarantee, bankruptcy and
insolvency events) described under " -- Events of Default, Notice and Waiver"
will no longer constitute an event of default with respect to the debt
securities.
PAGE 12
Unless stated otherwise in a prospectus supplement, in order to exercise
either defeasance or covenant defeasance as to the outstanding debt securities
of a series:
- we must irrevocably deposit with the trustee, in trust, for the
benefit of the holders of the debt securities of the applicable
series, an amount in (1) currency in which those debt securities are
then specified as payable at maturity, (2) government securities (as
defined in the applicable indenture) or (3) any combination thereof,
as will be sufficient, in the opinion of a nationally recognized firm
of independent public accountants expressed in a written certification
thereof delivered to the trustee, to pay and discharge the principal
of, premium, if any, and interest on the debt securities of the
applicable series on the stated maturity of such principal or
installment of principal or interest and any mandatory sinking fund
payments;
- in the case of defeasance, we will deliver to the trustee an opinion
of counsel confirming that either:
- we have received from, or there has been published by, the Internal
Revenue Service a ruling, or
- since the date we issued the applicable debt securities, there has
been a change in the applicable federal income tax law,
the effect of either being that the holders of the outstanding debt
securities of the applicable series will not recognize income, gain or loss
for federal income tax purposes as a result of such defeasance and will be
subject to federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such defeasance had not
occurred;
- in the case of covenant defeasance, we will deliver to the trustee an
opinion of counsel to the effect that the holders of the debt securities of the
applicable series will not recognize income, gain or loss for federal income tax
purposes as a result of such covenant defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such covenant defeasance had not occurred;
- no default or event of default shall have occurred and be continuing on
the date of such deposit or insofar as Sections 501(6) and 501(7) of the
indentures are concerned, at any time during the period ending on the 91st day
after the date of deposit;
- the defeasance or covenant defeasance shall not result in a breach or
violation of, or constitute a default under, the indenture or any other material
agreement or instrument to which we are a party or by which we are bound;
- we will deliver to the trustee an officers' certificate and an opinion of
counsel, each stating that all conditions precedent provided for that relate to
either the defeasance or the covenant defeasance, as the case may be, have been
met; and
- we will deliver to the trustee an opinion of counsel to the effect that
either (1) as a result of the deposit pursuant to the first bullet in this
paragraph and the election to defease, registration is not required under the
Investment Company Act of 1940, as amended, with respect to the trust funds
representing the deposit, or (2) all necessary registrations under the
Investment Company Act have been effected.
CONVERSION
Debt securities may be convertible into or exchangeable for common shares
or preferred shares. The prospectus supplement will describe the terms of any
conversion rights. To protect our status as a REIT, debt securities are not
PAGE 13
convertible if, as a result of that conversion, any person would then be deemed
to own, directly or indirectly, more than 9.8% of our capital shares. See
"Description of Capital Shares--Restrictions on Ownership" on page 23.
MERGER, CONSOLIDATION AND SALE OF ASSETS
Each indenture generally permits us to consolidate or merge with another
entity. The indentures also permit us to sell all or substantially all of our
property and assets. If this happens, the remaining or acquiring entity must
assume all of our responsibilities and liabilities under the indentures
including the payment of all amounts due on the debt securities and performance
of the covenants in the indentures. However, we will only consolidate or merge
with or into any other entity or sell all or substantially all of our assets
according to the terms and conditions of the indentures. The remaining or
acquiring entity will be substituted for us in the indentures with the same
effect as if it had been an original party to the indentures. Thereafter, the
successor entity may exercise our rights and powers under any indenture, in our
name or in its own name. Any act or proceeding required or permitted to be done
by our board of trust managers or any of our officers may be done by the board
or officers of the successor entity.
MODIFICATIONS AND AMENDMENTS
Unless stated otherwise in a prospectus supplement, we and the trustee may
modify and amend either indenture with the consent of the holders of a majority
in aggregate principal amount of the outstanding debt securities of all series
affected by the modification or amendment; provided, however, that no
modification or amendment may, without the consent of the holder of each
outstanding debt security of all series affected by the modification or
amendment:
- change the stated maturity of the principal of, or any
installment of interest on, any debt security;
- reduce the principal amount thereof or the rate of interest
thereon or any premium payable upon the redemption thereof;
- change the currency in which the principal or premium, if any,
of any debt security or the interest thereon is payable;
- reduce the percentage in principal amount of outstanding debt
securities of any series for which the consent of the holders is
required for any such supplemental indenture, or for any waiver
of compliance with certain provisions of the indenture or certain
defaults; or
- modify any of the provisions that relate to supplemental
indentures and that require the consent of holders, that relate
to the waiver of past defaults, that relate to the waiver of
certain covenants, except to increase the percentage in principal
amount of outstanding debt securities required to take such
actions or to provide that certain other provisions of the
indenture cannot be modified or waived without the consent of the
holder of each debt security affected thereby.
Unless we say otherwise in a prospectus supplement, we and the trustee may
modify and amend either indenture without the consent of the holders if the
modification or amendment does only the following:
- evidences the succession of another person to us and the
assumption by any such successor of any covenants under the
indenture and in the debt securities of any series;
- adds to our covenants for the benefit of the holders of all or
any series of debt securities or surrenders any of our rights or
powers;
- adds any additional event of default for the benefit of the
holders of all or any series of debt securities;
- adds or changes any provisions to the extent necessary to provide
that bearer securities may be registrable as to principal, to
change or eliminate any
PAGE 14
restrictions on the payment of principal of or any premium or
interest on bearer securities, to permit bearer securities to be
issued in exchange for registered securities or bearer of
securities of other authorized denominations, or to permit or
facilitate the issuance of securities in uncertificated form;
- changes or eliminates any provision affecting only debt
securities not yet issued;
- secures the debt securities of any series;
- establishes the form or terms of debt securities of any series
not yet issued;
- evidences and provides for successor trustees or adds or
changes any provisions of the indenture to the extent necessary
to permit or facilitate the appointment of a separate trustee or
trustees for specific series of debt securities;
- cures any ambiguity, corrects or supplements any provisions
which may be defective or inconsistent with any other provision,
or makes any other provisions with respect to matters or
questions arising under the indenture which shall not be
inconsistent with the provisions of the indenture; provided,
however, that no such modification or amendment may adversely
affect the interest of holders of debt securities of any series
then outstanding in any material respect; or
- supplements any provision of the indenture to such extent as
shall be necessary to permit the facilitation of defeasance and
discharge of any series of debt securities; provided, however,
that any such action may not adversely affect the interest of
holders of debt securities of any series then outstanding in any
material respect.
ORIGINAL ISSUE DISCOUNT
We may issue debt securities under either indenture for less than their
stated principal amount. Such securities may be treated as "original issue
discount securities," and they may be subject to special tax consequences. In
addition, some debt securities that are offered and sold at their stated
principal amount may, under certain circumstances, be treated as issued at an
original issue discount for federal income tax purposes. We will describe the
federal income tax consequences and other special consequences applicable to
securities treated as original issue discount securities in the prospectus
supplement relating to such securities. "Original issue discount security"
generally means any debt security that:
- does not provide for the payment of interest prior to maturity;
or
- is issued at a price lower than its face value and provides that
upon redemption or acceleration of its stated maturity an amount
less than its principal amount shall become due and payable.
GOVERNING LAW
Unless stated otherwise in a prospectus supplement, each indenture and the
debt securities will be governed by the laws of the State of New York.
DESCRIPTION OF CAPITAL SHARES
We are a Texas real estate investment trust. Your rights as a shareholder
are governed by the Texas Real Estate Investment Trust Act, our declaration of
trust and our bylaws. The following summary of terms, rights and preferences of
the shares of beneficial interest is not complete. You should read our
declaration of trust and bylaws for more complete information.
PAGE 15
AUTHORIZED SHARES
Our declaration of trust provides that we may issue up to 160,000,000
shares of beneficial interest, consisting of 150,000,000 common shares, par
value $0.03 per share, and 10,000,000 preferred shares, par value $.03 per
share. At February 28, 2003, 52,091,994 common shares, 3,000,000 7.44% Series A
Cumulative Redeemable Preferred Shares, 3,518,192 7.125% Series B Cumulative
Redeemable Preferred Shares and 2,252,582 7.0% Series C Cumulative Redeemable
Preferred Shares were issued and outstanding. In addition, we have 753,340
common shares available for issuance upon the exercise of options granted under
our employee and trust manager share option plans. Mellon Investor Services,
LLC is the transfer agent and registrar of our common shares and preferred
shares.
SHAREHOLDER LIABILITY
Under Texas law, you will not be personally liable for any obligation of
ours solely because you are a shareholder. Under our declaration of trust, our
shareholders are not personally liable for our debts or obligations and will not
be subject to any personal liability in tort, contract or otherwise, to any
person in connection with our property or affairs by reason of being a
shareholder.
Notwithstanding these limitations, common law theories of "piercing the
corporate veil" may be used to impose liability on shareholders in certain
instances. Also, to the extent that we conduct operations in another
jurisdiction where the law of that jurisdiction (1) does not recognize the
limitations of liability afforded by contract, Texas law or our declaration of
trust, and (2) does not provide similar limitations of liability applicable to
real estate investment trusts or other trusts, a third party could attempt,
under limited circumstances, to assert a claim against our shareholders based
upon our obligations.
COMMON SHARES
All common shares offered and sold through this prospectus will be duly
authorized, fully paid and nonassessable. As a shareholder, you will be
entitled to receive distributions, or dividends, on the shares you own if the
board of trust managers authorizes a dividend to the holders of our common
shares out of our legally available assets. However, your right to receive
those dividends may be affected by the preferential rights of any other class or
series of shares of beneficial interest and the provisions of our declaration of
trust regarding restrictions on the transfer of shares of beneficial interest.
You will also be entitled to receive dividends based on our assets available for
distribution to common shareholders if we liquidate, dissolve or wind up our
operations. The amount you, as a shareholder, would receive in the distribution
would be determined by the amount of your beneficial ownership of us in
comparison with other beneficial owners. Assets will be available for
distribution to shareholders only after we have paid all of our known debts and
liabilities and paid the holders of our Series A Preferred Shares, Series B
Preferred Shares and Series C Preferred Shares and any other preferred shares we
may issue which are outstanding at that time.
Voting Rights. Each outstanding common share owned by a shareholder
entitles that holder to one vote on all matters submitted to a vote of
shareholders, including the election of trust managers. The right to vote is
subject to the provisions of our declaration of trust regarding the restriction
on the transfer of shares of beneficial interest, which we describe under " -
Restrictions on Ownership and Transfer," below. There is no cumulative voting
in the election of trust managers.
As a holder of a common share, you will not have any right to:
- convert your shares into any other security;
- have any funds set aside for future payments;
- require us to repurchase your shares; or
PAGE 16
- purchase any of our securities, if other securities are offered
for sale, other than as a member of the general public. Subject
to the terms of our declaration of trust regarding the
restrictions on transfer of shares of beneficial interest, each
common share has the same dividend, distribution, liquidation and
other rights as each other common share.
According to the terms of our declaration of trust and bylaws and Texas
law, all matters submitted to the shareholders for approval, except for those
matters listed below, are approved if a majority of all the votes cast at a
meeting of shareholders duly called and at which a quorum is present are voted
in favor of approval. The following matters require approval other than by a
majority of all votes cast:
- the election of trust managers (which provides that trust
managers remain on the board unless and until a nominee for that
board seat receives the affirmative vote of the holders of
66 2/3% of our common shares);
- the amendment of our declaration of trust by shareholders (which
requires the affirmative vote of 66 2/3% of all votes entitled to
be cast on the matter);
- our termination, winding up of affairs and liquidation (which
requires the affirmative vote of 66 2/3% of all the votes
entitled to be cast on the matter); and
- our merger or consolidation with another entity or sale of all or
substantially all of our property (which requires the approval
of the board of trust managers and an affirmative vote of
two-thirds of all the votes entitled to be cast on the matter).
Stock Exchange Listing. Our common shares are traded on the New York Stock
Exchange under the trading symbol "WRI."
PREFERRED SHARES
General. Under our declaration of trust, our board of trust managers is
authorized to determine for each series of preferred shares, and the prospectus
supplement shall set forth with respect to each series that may be issued and
sold pursuant hereto:
- the designation of such shares and the number of shares that
constitute such series;
- the dividend rate (or the method of calculation thereof), if any, on
the shares of such series and the priority as to the payment of
dividends with respect to other classes or series of our capital
shares;
- the dividend periods (or the method of calculation thereof);
- the voting rights, if any, of the shares;
- the terms and amount of a sinking fund, if any;
- the liquidation preference and the priority as to payment of such
liquidation preference with respect to other classes or series of our
capital shares and any other rights of the shares of such series upon
our liquidation or winding-up;
- whether or not and on what terms the shares of such series will be
subject to redemption or repurchase at our option;
- whether and on what terms the shares of such series will be
convertible into or exchangeable for our other debt or equity
securities;
PAGE 17
- whether the shares of such series of preferred shares will be listed
on a securities exchange;
- any limitations on direct or beneficial ownership and restrictions on
transfer in addition to those described in " - Restrictions on
Ownership and Transfer," in each case as may be appropriate to
preserve our status as a real estate investment trust;
- any special United States federal income tax considerations applicable
to such series; and
- the other rights and privileges and any qualifications, limitations
or restrictions of such rights or privileges of such series not
inconsistent with our declaration of trust, our bylaws and the Texas
Real Estate Investment Trust Act.
The terms of any preferred shares we issue will be set forth in resolutions
adopted by our board of trust managers. We will file such resolutions as an
exhibit to the registration statement that includes this prospectus, or as an
exhibit to a filing with the SEC that is incorporated by reference into this
prospectus. The description of preferred shares in any prospectus supplement
will not describe all of the terms of the preferred shares in detail. You
should read the applicable resolutions for a complete description of all of the
terms.
Convertibility. No series of preferred shares that may be issued and sold
pursuant hereto will be convertible into or exchangeable for other securities or
property, except as set forth in the applicable prospectus supplement which will
set forth the terms and conditions upon which such conversion or exchange may be
effected, including the initial conversion or exchange rate and any adjustments
thereto, the conversion or exchange period and any other conversion or exchange
provisions.
Dividends. Holders of preferred shares shall be entitled to receive, when
and as declared by our board of trust managers, out of funds legally available
therefor, an annual cash dividend payable at such dates and such rates, if any,
per share per annum as set forth in the applicable prospectus supplement.
Unless otherwise set forth in the applicable prospectus supplement, each
series of preferred shares that may be issued and sold pursuant hereto, will
rank junior as to dividends to any preferred shares that may be issued in the
future that is expressly senior as to dividends to the preferred shares. If at
any time we fail to pay accrued dividends on any such senior shares at the time
such dividends are payable, we may not pay any dividend on the preferred shares
or redeem or otherwise repurchase preferred shares until such accumulated but
unpaid dividends on such senior shares have been paid or set aside for payment
in full by us.
Unless otherwise set forth herein or in the applicable prospectus
supplement relating to any class or series of preferred shares that may be
issued and sold pursuant hereto, no dividends shall be declared or set aside for
payment nor shall any other distribution be declared or made upon the common
shares, or any of our other capital shares ranking junior to or on a parity with
the preferred shares with such series as to dividends, nor shall any common
shares or any of our capital shares ranking junior to or on a parity with the
preferred shares with such series as to dividends or upon liquidation be
redeemed, purchased or otherwise acquired for any consideration (or any monies
be paid to or made available for a sinking fund for the redemption of any shares
by us (except by conversion into or exchange for our other capital shares
ranking junior to the preferred shares of such series as to dividends and upon
liquidation)) unless
- if such series of preferred shares has a cumulative dividend, full
cumulative dividends on the preferred shares of such series have been
or contemporaneously are declared and paid or declared and a sum
sufficient for the payment thereof set apart for all past dividend
periods and the then current dividend period; and
- if such series of preferred shares does not have a cumulative
dividend, full dividends on the preferred shares of such series have
been or contemporaneously are declared and paid or declared and a sum
PAGE 18
sufficient for the payment thereof set apart for payment for the then
current dividend period;
provided, however, that any monies theretofore deposited in any sinking fund
with respect to any preferred shares in compliance with the provisions of such
sinking fund may thereafter be applied to the purchase or redemption of such
preferred shares in accordance with the terms of such sinking fund, regardless
of whether at the time of such application full cumulative dividends upon
preferred shares outstanding on the last dividend payment date shall have been
paid or declared and set apart for payment; and provided, further, that any such
junior or parity preferred shares or common shares may be converted into or
exchanged for our shares ranking junior to the preferred shares as to dividends.
The amount of dividends payable for the initial dividend period or any
period shorter than a full dividend period shall be computed on the basis of a
360-day year or twelve 30-day months. Accrued but unpaid dividends will not
bear interest.
Redemption and Sinking Fund. No series of preferred shares that may be
issued and sold pursuant hereto will be redeemable or be entitled to receive the
benefit of a sinking fund, except as set forth in the applicable prospectus
supplement, which will set forth the terms and conditions thereof, including the
dates and redemption price of any such redemption, any conditions thereto, and
any other redemption or sinking fund provisions.
Liquidation Rights. In the event of our voluntary liquidation, dissolution
or winding-up, the holders of any series of any class of preferred shares shall
be entitled to receive in full out of our assets, including our capital, before
any amount shall be paid or distributed among the holders of the common shares
or any other shares ranking junior to such series, the amounts fixed by our
board of trust managers with respect to such series and set forth in the
applicable prospectus supplement. In addition, each holder will receive an
amount equal to all dividends accrued and unpaid on that series of preferred
shares to the date of payment of the amount due pursuant to our liquidation,
dissolution or winding-up. However, holders of noncumulative preferred shares
will only receive dividends for the current dividend period. After holders of
the preferred shares are paid the full preferential amounts to which they are
entitled, they will have no right or claim to any of our remaining assets. If
liquidating distributions are made in full to all holders of preferred shares,
our remaining assets will be distributed among the holders of any other classes
or series of capital shares ranking junior to the preferred shares upon
liquidation, dissolution or winding-up. The distributions will be made according
to the holders' respective rights and preferences and, in each case, according
to their respective numbers of shares. Our merger or consolidation into or with
any other corporation, or the sale, lease or conveyance of all or substantially
all of our assets, shall not constitute a dissolution, liquidation or winding-
up.
Voting Rights. Holders of preferred shares will not have any voting
rights, except as follows and as from time to time required by law. If and when
we are in default in the payment of (or, with respect to noncumulative shares,
have not paid or declared and set aside a sum sufficient for the payment of)
dividends on any series of any class of outstanding preferred shares, for
consecutive dividend payment periods which in the aggregate contain at least 540
days, all holders of shares of such class, voting separately as a class,
together and combined with all other preferred shares upon which like voting
rights have been conferred and are exercisable, will be entitled to elect a
number of trust managers set forth in the applicable prospectus supplement. This
voting right shall be vested and any additional trust managers shall serve until
all accrued and unpaid dividends (except, with respect to noncumulative shares,
only dividends for the then current dividend period) on such outstanding
preferred shares have been paid or declared and a sufficient sum set aside for
payment thereof.
The affirmative vote of the holders of at least 66 2/3% of a class of
outstanding preferred shares, voting separately as a class, shall be necessary
to effect either of the following:
- the authorization, creation or increase in the authorized number of
any shares, or any security convertible into shares, senior to such
class of preferred shares; or
- any amendment, alteration or repeal, whether by merger, consolidation
or otherwise, of any of the provisions of our declaration of trust
which adversely and materially affects the preferences or voting or
other rights of the holders of such class of preferred shares which
are set forth in our declaration of trust. However, the amendment of
the declaration of trust to authorize, create or change the authorized
PAGE 19
or outstanding number of a class of preferred shares or of any shares
ranking on a parity with or junior to such class of preferred shares
does not adversely and materially affect preferences or voting or
other rights of the holders of such class of preferred shares. In
addition, amending the declaration of trust to change the number or
classification of our trust managers does not adversely or materially
affect preferences or voting rights or other rights. Voting shall be
done in person at a meeting called for one of the above purposes or in
writing by proxy.
Without limiting the provisions described above, under the Texas REIT Act,
unless such authority is otherwise granted to the trust managers under our
declaration of trust, holders of each class of preferred shares will be entitled
to vote as a class on any amendment to the declaration of trust, whether or not
they are entitled to vote thereon by the declaration of trust, if the amendment
would
(1) increase or decrease the aggregate number of authorized shares of such
class or series;
(2) increase or decrease the par value of the shares of such class,
including changing shares having a par value into shares without par value, or
shares without par value into shares with par value;
(3) effect an exchange, reclassification, or cancellation of all or part of
the shares of such class or series;
(4) effect an exchange or create a right of exchange of all or any part of
the shares of another class into the shares of such class or series;
(5) change the designations, preferences, limitations, or relative rights
of the shares of such class or series;
(6) change the shares of such class or series, whether with or without par
value, into the same or a different number of shares, either with or without par
value, of the same class or series or another class or series;
(7) create a new class or series of shares having rights and preferences
equal, prior, or superior to the shares of the class or series, or increase the
rights and preferences of any class or series having rights and preferences
equal, prior, or superior to the shares of the class or series, or increase the
rights and preferences of any class or series having rights or preferences later
or inferior to the shares of the class or series in such a manner as to become
equal, prior, or superior to the shares of the class or series;
(8) divide the shares of the class into series and fix and determine the
designation of the series and the variations in the relative rights and
preferences between the shares of the series;
(9) limit or deny the existing preemptive rights of the shares of the class
or series, if the rights have previously been granted pursuant to the Texas REIT
Act; or
(10) cancel or otherwise affect dividends on the shares of the class or
series that had accrued but had not been declared.
Stock Exchange Listing. Our Series A Cumulative Redeemable Preferred
Shares and our Series C Cumulative Redeemable Preferred Shares are listed for
trading on the New York Stock Exchange.
DEPOSITARY SHARES
General. We may issue receipts for depositary shares, each of which will
represent a fractional interest of a particular series of a class of preferred
shares, as specified in the applicable prospectus supplement. The preferred
shares of each series represented by depositary shares will be deposited under a
separate deposit agreement among us, the depositary named in the deposit
agreement and the holders of the depositary receipts. Immediately following our
issuance and delivery of the preferred shares to the depositary, we will cause
the depositary to issue, on our behalf, the depositary receipts. Subject to the
terms of the applicable depositary agreement, each owner of a depositary receipt
will be entitled, in proportion to the fractional interest of a share of a
particular series of a preferred shares represented by the depositary shares
PAGE 20
evidenced by the depositary receipts, to all the rights and preferences of the
preferred shares represented by the depositary shares (including dividend,
voting, conversion, redemption and liquidation rights ) as designated by our
board of trust managers.
The summary of our depositary shares set forth below is not complete. You
should refer to the applicable prospectus supplement, provisions of the deposit
agreement and the depositary receipts that will be filed with the SEC as part of
the offering of any depositary shares. To obtain copies of these documents, see
"Where You Can Find More Information" on page 40.
Dividends and Other Distributions. The depositary will distribute all cash
dividends or other cash distributions received on behalf of the preferred shares
proportionately to the record holders of the related depositary receipts owned
by such holder. Such distributions are subject to certain obligations of holders
to file proofs, certificates and other information and to pay certain charges
and expenses to the depositary.
In the event of a non-cash distribution, the depositary will distribute
property it receives to the record holders of depositary receipts entitled to
the property unless the depositary determines that it is not feasible to make
such distribution, in which case the depositary may, with our approval, sell
such property and distribute the net proceeds of such sale to holders. Such
distributions by the depositary are subject to certain obligations of holders to
file proofs, certificates and other information and to pay certain changes and
expenses to the depositary.
Withdrawal of Shares. Unless the related depositary shares have previously
been called for redemption, upon surrender of the depositary receipts at the
corporate trust office of the depositary, the holders thereof will be entitled
to delivery at such office, to or upon such holder's order, of the number of
whole or fractional preferred shares and any money or other property represented
by the depositary shares evidenced by such depositary receipts. Holders of
depositary receipts will be entitled to receive whole or fractional shares of
the related preferred shares on the basis of the proportion of preferred shares
represented by each depositary share as specified in the applicable prospectus
supplement, but holders of such preferred shares will not thereafter be entitled
to receive depositary shares therefor. If the depositary receipts delivered by
the holder evidence a number of depositary shares in excess of the number of
depositary shares representing the preferred shares to be withdrawn, the
depositary will deliver to such holder at the same time a new depositary receipt
evidencing such excess number of depositary shares.
Redemption. Whenever we redeem preferred shares held by the depositary,
the depositary will redeem as of the same redemption date the number of
depositary shares representing the preferred shares so redeemed, provided we
have paid in full to the depositary the redemption price of the preferred shares
to be redeemed plus an amount equal to any accrued and unpaid dividends thereon
to the date fixed for redemption. With respect to noncumulative preferred
shares, dividends will be paid for the current dividend period only. The
redemption price per depositary share will be equal to the redemption price and
any other amounts per share payable with respect to the preferred shares. If
less than all the depositary shares are to be redeemed, the depositary shares to
be redeemed will be selected by the depositary by lot.
After the date fixed for redemption, the depositary shares called for
redemption will no longer be deemed to be outstanding and all rights of the
holders of the depositary receipts evidencing the depositary shares called for
redemption will cease. However, the holders will have the right to receive any
moneys payable upon redemption and any money or other property that the holders
of such depositary receipts were entitled to at the time of redemption when they
surrender their depositary receipts to the depositary.
Voting Rights. Upon receipt of notice of any meeting at which the holders
of the preferred shares are entitled to vote, the depositary will mail the
information contained in such notice to the record holders of the depositary
receipts related to such preferred shares. Each record holder of depositary
receipts on the record date will be entitled to instruct the depositary as to
the exercise of the voting rights of the preferred shares related to such
holder's depositary receipts. The record date for depositary receipts will be
the same date as the record date for preferred shares. The depositary will vote
the preferred shares related to such depositary receipts in accordance with such
instructions, and we will agree to take all reasonable action that the
depositary deems necessary to enable it to vote the preferred shares. The
depositary will abstain from voting preferred shares represented by such
depositary shares to the extent it does not receive specific instructions from
the holders of depositary receipts.
Liquidation Preference. In the event of our liquidation, dissolution or
winding-up, whether voluntary or involuntary, each holder of a depositary
receipt will be entitled to the fraction of the liquidation preference accorded
each preferred share represented by the depositary share evidenced by such
depositary receipt, as set forth in the applicable prospectus supplement.
PAGE 21
Conversion of Preferred Shares. The depositary shares, as such, are not
convertible into common shares or any of our other securities or property.
Nevertheless, if so specified in the applicable prospectus supplement relating
to an offering of depositary shares, the depositary receipts may be surrendered
by holders thereof to the depositary with written instructions to the depositary
to instruct us to cause conversion of the preferred shares represented by the
depositary shares into whole common shares, other preferred shares or other
shares of capital shares. We have agreed that upon receipt of such instructions
and any amounts payable in respect thereof, we will cause the conversion thereof
utilizing the same procedures as those provided for delivery of preferred shares
to effect such conversion. If the depositary shares evidenced by a depositary
receipt are to be converted in part only, one or more new depositary receipts
will be issued for any depositary shares not to be converted. No fractional
common shares will be issued upon conversion. If conversion will result in a
fractional share being issued, we will pay in cash an amount equal to the value
of the fractional interest based upon the closing price of the common shares on
the last business day prior to the conversion.
Amendment and Termination of the Deposit Agreement. The form of depositary
receipt evidencing the depositary shares which represent the preferred shares
and any provision of the deposit agreement may at any time be amended by
agreement between the depositary and us. However, any amendment that materially
and adversely alters the rights of the holders of depositary receipts will not
be effective unless it has been approved by the existing holders of at least a
majority of the depositary shares evidenced by outstanding depositary receipts.
We may terminate the deposit agreement upon not less than 30 days' prior
written notice to the depositary if (1) such termination is to preserve our
status as a REIT or (2) a majority of each class of preferred shares affected by
such termination consents to such termination. Upon termination of the deposit
agreement, the depositary shall deliver or make available to each holder of
depositary receipts, upon surrender of the depositary receipts held by such
holder, such number of whole or fractional preferred shares as are represented
by the depositary shares evidenced by such depositary receipts. In addition, the
deposit agreement will automatically terminate if:
- all outstanding depositary shares have been redeemed;
- there has been a final distribution in respect of the related
preferred shares in connection with any liquidation, dissolution or
winding-up and such distribution has been distributed to the holders
of depositary receipts evidencing the depositary shares representing
such preferred shares; or
- each related preferred share shall have been converted into capital
shares that are not represented by depositary shares.
Fees of Depositary. We will pay all transfer and other taxes and
governmental charges arising solely from the existence of the deposit agreement.
In addition, we will pay the fees and expenses of the depositary in connection
with the performance of its duties under the deposit agreement. However, holders
of depositary receipts will pay the depositary's fees and expenses for any
duties that holders request to be performed which are outside those expressly
provided for in the deposit agreement.
Resignation and Removal of Depositary. The depositary may resign at any
time by delivering to us notice of its resignation, and we may remove the
depositary at any time. Any such resignation or removal will take effect upon
the appointment of a successor depositary. A successor depositary must be
appointed within 60 days after delivery of the notice of resignation or removal.
A successor depositary must be a bank or trust company having its principal
office in the United States and having a combined capital and surplus of at
least $50,000,000.
Miscellaneous. The depositary will forward to holders of depositary
receipts any reports and communications from us which it receives with respect
to the related preferred shares. Neither us nor the depositary will be liable
if it is prevented from or delayed in, by law or any circumstances beyond its
control, performing its obligations under the deposit agreement. The obligations
of us and the depositary under the deposit agreement will be limited to
performing their duties thereunder in good faith and without negligence, gross
negligence or willful misconduct. We and the depositary will not be obligated to
prosecute or defend any legal proceeding in respect of any depositary receipts,
depositary shares or preferred shares represented thereby unless satisfactory
indemnity is furnished. We and the depositary may rely on written advice of
PAGE 22
counsel or accountants, or information provided by persons presenting preferred
shares represented thereby for deposit, holders of depositary receipts or other
persons believed to be competent to give such information, and on documents
believed to be genuine and signed by a proper party.
If the depositary shall receive conflicting claims, requests or
instructions from any holders of depositary receipts, on the one hand, and us,
on the other hand, the depositary shall be entitled to act on such claims,
requests or instructions received from us.
RESTRICTIONS ON OWNERSHIP
In order for us to qualify as a REIT under the Internal Revenue Code, not
more than 50% in value of our outstanding capital shares may be owned, directly
or indirectly, by five or fewer individuals during the last half of a taxable
year. In addition, our capital shares must be beneficially owned by 100 or more
persons during at least 335 days of a taxable year of 12 months, or during a
proportionate part of a shorter taxable year. For purposes of restrictions on
ownership, "capital shares" means our common shares and any securities
convertible into common shares.
Because the board believes it is essential for us to continue to qualify as
a REIT, our declaration of trust generally provides that no holder may own, or
be deemed to own by virtue of the attribution provisions of the Internal Revenue
Code, more than 9.8% of our total outstanding capital shares. Any transfer of
shares will not be valid if it would:
- create a direct or indirect ownership of shares in excess of 9.8%
of our total outstanding capital shares;
- result in shares being owned by fewer than 100 persons;
- result in our being "closely held" within the meaning of Section
856(h) of the Internal Revenue Code; or
- result in our disqualification as a REIT.
Shares held by a person in excess of 9.8% of our total outstanding capital
shares will automatically be deemed to be transferred to us as trustee of a
trust for the exclusive benefit of the transferees to whom those shares may
ultimately be transferred without violating the 9.8% ownership limit. Such
excess shares shall be treated as treasury shares. While in trust, these shares
will not be entitled to vote (except as required by law), and will not be
entitled to participate in dividends or other distributions. All certificates
representing capital shares will bear a legend referring to the restrictions
described above.
These restrictions on ownership may have the effect of precluding the
acquisition of control unless our board of trust managers and shareholders
determine that maintenance of REIT status is no longer in our best interests.
BUSINESS COMBINATIONS
Our declaration of trust requires that except in certain circumstances, a
business combination between us and a related person must be approved by the
affirmative vote of the holders of not less than 80% of our outstanding common
shares, including the affirmative vote of the holders of not less than 50% of
the outstanding common shares not owned by the related person. However, the 50%
voting requirement is not applicable if the business combination is approved by
the affirmative vote of the holders of not less than 90% of our outstanding
common shares. Our declaration of trust provides that a "business combination"
is:
(1) any merger or consolidation, if and to the extent permitted by law, of
us or our subsidiary, with or into a related person;
PAGE 23
(2) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition of more than 35% of the book value of the total assets of us and our
subsidiaries (taken as a whole) as of the end of the fiscal year ending prior to
the time the determination is being made, to or with a related person;
(3) the issuance or transfer by us or our subsidiary (other than by way of
a pro rata distribution to all shareholders) of any securities by us or our
subsidiary to a related person;
(4) any reclassification of securities (including any reverse share split)
or recapitalization by us, the effect of which would be to increase the voting
power of the related person;
(5) the adoption of any plan or proposal for the liquidation or dissolution
of us proposed by or on behalf of a related person which involves any transfer
of assets, or any other transaction, in which the related person has any direct
or indirect interest (except proportionally as a shareholder);
(6) any series or combination of transactions having, directly or
indirectly, the same or substantially the same effect as any of the foregoing;
and
(7) any agreement, contract or other arrangement providing, directly
or indirectly, for any of the foregoing.
A "related person" generally is defined in the declaration of trust to
include any individual, corporation, partnership or other person and the
affiliates and associates of any such individual, corporation, partnership or
other person which individually or together is the beneficial owner in the
aggregate of more than 50% of our outstanding common shares.
The 80% and 50% voting requirements outlined above will not apply, however,
if:
(1) the trust managers by a vote of not less than 80% of the trust managers
then holding office (a) have expressly approved in advance the acquisition of
our common shares that caused the related person to become a related person or
(b) have expressly approved the business combination prior to the date on which
the related person involved in the business combination shall have become a
related person; or
(2) the business combination is solely between us and another corporation,
100% of the voting stock of which is owned directly or indirectly by us; or
(3) the business combination is proposed to be consummated within one year
of the consummation of a fair tender offer (as defined in the declaration of
trust) by the related person in which the business combination, the cash or fair
market value of the property, securities or other consideration to be received
per share by all remaining holders of our common shares in the business
combination is not less than the price offered in the fair tender offer;
(4) all of the following conditions shall have been met:
(a) the business combination is a merger or consolidation, the
consummation of which is proposed to take place within one year of the date
of the transaction pursuant to which such person became a related person
and the cash or fair market value of the property, securities or other
consideration to be received per share by all remaining holders of common
shares in the business combination is not less than the highest per-share
price, with appropriate adjustments for recapitalizations and for share
splits and share dividends, paid by the related person in acquiring any of
its holdings of our common shares, which shall constitute a "fair price;"
(b) the consideration to be received by such holders is either cash
or, if the related person shall have acquired the majority of its holdings
of our common shares for a form of consideration other than cash, in the
same form of consideration with which the related person acquired such
majority;
PAGE 24
(c) after such person has become a related person and prior to
consummation of such business combination:
- there shall have been no reduction in the annual rate of
dividends, if any, paid per share on our common shares (adjusted
as appropriate for recapitalizations and for share splits,
reverse share splits and share dividends), except any reduction
in such rate that is made proportionately with any decline in our
net income for the period for which such dividends are declared
and except as approved by a majority of the trust managers
continuing in office; and
- such related person shall not have received the benefit,
directly or indirectly (except proportionately as a shareholder),
of any loans, advances, guarantees, pledges or other financial
assistance or any tax credits or other tax advantages provided by
us prior to the consummation of such business combination (other
than in connection with financing a fair tender offer); and
(d) proxy statement that conforms in all respects with the provisions
of the Exchange Act and the rules and regulations thereunder shall be
mailed to holders of our common shares at least 30 days prior to the
consummation of the business combination for the purpose of soliciting
shareholder approval of the business combination; or
(5) the "rights" (as defined below) shall have become exercisable.
If a person has become a related person and within one year after the date
of the transaction pursuant to which the related person became a related person,
which shall be considered as the "acquisition date,"
(1) a business combination meeting all of the requirements of paragraphs
(4)(a)(b)(c) and (d) above regarding the applicability of the 80% voting
requirement shall not have been consummated;
(2) a fair tender offer shall not have been consummated; and
(3) we have not been dissolved and liquidated,
then, in such event the beneficial owner of each common share (not including
shares beneficially owned by the related person) shall have the right (each a
"right" and collectively the "rights") which may be exercised subject to certain
conditions, commencing at the opening of business on the one-year anniversary
date of the acquisition date and continuing for a period of 90 days thereafter,
subject to certain extensions, to sell to us on the terms set forth herein one
share upon exercise of such right. At 5:00 P.M., Houston, Texas time, on the
last day of the exercise period, each right not exercised shall become void, all
rights in respect thereof shall cease as of such time and the certificates shall
no longer represent rights.
DESCRIPTION OF WARRANTS
We may issue warrants for the purchase of preferred shares or common
shares. We may issue warrants independently or together with debt securities,
preferred shares or common shares or attached to or separate from the offered
securities. We will issue each series of warrants under a separate warrant
agreement between us and a bank or trust company as warrant agent, as specified
in the applicable prospectus supplement.
The warrant agent will act solely as our agent in connection with the
warrants and will not act for or on behalf of warrant holders. The following
sets forth certain general terms and provisions of the warrants that may be
offered under this registration statement. Further terms of the warrants and
the applicable warrant agreements will be set forth in the applicable prospectus
supplement.
The applicable prospectus supplement will describe the terms of the
warrants in respect of which this prospectus is being delivered, including,
where applicable, the following:
PAGE 25
- the title of such warrants;
- the aggregate number of such warrants;
- the price or prices at which such warrants will be issued;
- the type and number of securities purchasable upon exercise of such
warrants;
- the designation and terms of the other offered securities, if any,
with which such warrants are issued and the number of such warrants
issued with each such offered security;
- the date, if any, on and after which such warrants and the related
securities will be separately transferable;
- the price at which each security purchasable upon exercise of such
warrants may be purchased;
- the date on which the right to exercise such warrants shall commence
and the date on which such right shall expire;
- the minimum or maximum amount of such warrants that may be exercised
at any one time;
- information with respect to book-entry procedures, if any;
- any anti-dilution protection;
- a discussion of certain federal income tax considerations; and
- any other terms of such warrants, including terms, procedures and
limitations relating to the transferability, exercise and exchange of
such warrants.
Warrant certificates will be exchangeable for new warrant certificates of
different denominations and warrants may be exercised at the corporate trust
office of the warrant agent or any other office indicated in the applicable
prospectus supplement. Prior to the exercise of their warrants, holders of
warrants will not have any of the rights of holders of the securities
purchasable upon such exercise or to any dividend payments or voting rights as
to which holders of the preferred shares or common shares purchasable upon such
exercise may be entitled.
Each warrant will entitle the holder to purchase for cash such number of
preferred shares or common shares, at such exercise price as shall, in each
case, be set forth in, or be determinable as set forth in, the applicable
prospectus supplement relating to the warrants offered thereby. Unless
otherwise specified in the applicable prospectus supplement, warrants may be
exercised at any time up to 5:00 p.m. New York City time on the expiration date
set forth in applicable prospectus supplement. After 5:00 p.m. time on the
expiration date, unexercised warrants will become void.
Warrants may be exercised as set forth in the applicable prospectus
supplement relating to the warrants. Upon receipt of payment and the warrant
certificate properly completed and duly executed at the corporate trust office
of the warrant agent or any other office indicated in the applicable prospectus
supplement, we will, as soon as practicable, forward the securities purchasable
upon such exercise. If less than all of the warrants are presented by such
warrant certificate of exercise, a new warrant certificate will be issued for
the remaining amount of warrants.
PAGE 26
DESCRIPTION OF OTHER CLASSES OF OUTSTANDING SHARES
7.44% SERIES A CUMULATIVE REDEEMABLE PREFERRED SHARES
On February 19, 1998, we issued 3,000,000 shares of 7.44% Series A
Cumulative Redeemable Preferred Shares for $75.0 million. The Series A
Preferred has a liquidation preference of $25.00 pre share and the holders are
entitled to cumulative dividends from the date of original issuance of $1.86 per
share per year. We may not redeem the shares before March 31, 2003 and
thereafter, the shares may be redeemed solely from the proceeds of an offering
of our capital shares. The redemption price per share is $25.00, plus any
accrued and unpaid dividends through the date of such redemption. The shares
have no maturity date and will remain outstanding indefinitely unless redeemed.
The shares are not convertible into any of our other securities. The Series A
Preferred shareholders generally have no voting rights, except if we fail to pay
dividends for six quarters. In that event, the holders of the Series A
Preferred, Series B Preferred and Series C Preferred, voting together as a
single class, have the right to elect two trust managers who shall serve until
all dividend arrearages have been paid. On May 5, 2003, we will redeem all
outstanding shares of Series A Preferred.
The Series A Preferred is listed for trading on the New York Stock
Exchange.
7.125% SERIES B CUMULATIVE REDEEMABLE PREFERRED SHARES
On October 20, 1998, we issued 3,600,000 of 7.125% Series B Cumulative
Redeemable Preferred Shares for $90.0 million. Except with respect to the
description of the dividend rate and the redemption rights upon the death of a
holder of Series B Preferred, the terms of the Series B Preferred are
substantially identical to the terms of the Series A Preferred. The Series B
Preferred ranks on parity with the Series A Preferred with respect to the
payment of dividends and payments upon liquidation. The holders of the Series B
Preferred are entitled to cumulative dividends from the date of original
issuance of $1.78 per share per year. We may not redeem the shares before
October 20, 2003.
Commencing December 15, 1998, on March 15, June 15, September 15 and
December 15 of each year, we will, upon the death of any registered holder of
the Series B Preferred, redeem such shares held by the registered owner upon
presentation of appropriate documentation by such registered owner's personal
representative or surviving joint tenant. Our obligation to redeem the shares
is subject to the following limitations:
- We will only redeem 1,000 shares per owner per year.
- During the first 10 years, in any one year, we will only redeem
up to 108,000 shares.
- During years 11 through 20, in any one year, we will only redeem
up to 72,000 shares.
- After year 20, we will only redeem up to 36,000 shares each year.
- The yearly redemption limitations listed above are cumulative.
The difference, if any, between that year's redemption limitation and
the amount actually redeemed in such year will be available for
redemption in later years, subject to an overall redemption limitation
of 108,000 shares per year.
- We will redeem shares only four times each year subject to the
following cumulative limitations:
March 15 - up to 27,000 shares;
June 15 - up to 54,000 shares;
September 15 - up to 81,000 shares; and
December 15 - up to 108,000 shares.
The Series B Preferred is not listed for trading on any exchange.
PAGE 27
7.00% SERIES C CUMULATIVE REDEEMABLE PREFERRED SHARES
On January 14, 1999, we issued 2,300,000 shares of 7.00% Series C
Cumulative Redeemable Preferred Shares for $115.0 million. Except with respect
to the description of the liquidation preference, dividend rate and the
redemption date of the Series C Preferred, the terms of the Series C Preferred
are substantially identical to the terms of the Series A Preferred and Series B
Preferred. The Series C Preferred ranks on parity with the Series A Preferred
and Series B Preferred with respect to the payment of dividends and payments
upon liquidation. The Series C Preferred has a liquidation preference of $50.00
per share and the holders are entitled to cumulative dividends from the date of
original issuance of $3.50 per share per year. We may not redeem the shares
before March 15, 2004. The redemption price per share is $50.00, plus any
accrued and unpaid dividends through the date of such redemption. Commencing
March 15, 1999, upon the death of any registered owner of this Series C
Preferred, we will redeem such shares held by such registered owner upon
presentation of appropriate documentation by the registered owner's personal
representative or surviving joint tenant. Our obligation to redeem the shares
is subject to the following limitations:
- We will only redeem 500 shares per owner per year.
- During the first 10 years, in any one year, we will only redeem
upon to 69,000 shares.
- During years 11 through 20, in any one year, we will only redeem
up to 46,000 shares.
- After year 20, we will only redeem up to 23,000 shares per
year.
- The above yearly redemption limitations are cumulative. The
difference, if any, between that year's redemption limitation and the
amount actually redeemed in such year will be available for redemption
in later years, subject to an overall redemption limitation of 69,000
shares per year.
- We will redeem shares only four times each year subject to the
following cumulative limitations:
March 15 - up to 17,500 shares;
June 15 - up to 34,500 shares;
September 15 - up to 51,750 shares; and
December 15 - up 69,000 shares.
The Series C Preferred is listed for trading on the New York Stock
Exchange.
6.75% SERIES D CUMULATIVE REDEEMABLE PREFERRED SHARES AND DEPOSITARY SHARES
On April 30, 2003, we intend to issue 100,000 shares of 6.75% Series D
Cumulative Redeemable Preferred Shares and 3,000,000 depositary shares for $75.0
million. Each depositary share represents a 1/30 fractional interest in a share
of Series D Preferred. The Series D Preferred has a liquidation preference
$750.00 per share (equivalent to $25.00 per depositary share) and the holders
are entitled to cumulative dividends from the date of original issuance of
$50.625 per share (equivalent to $1.6875 per depositary share). The Series D
Preferred ranks on parity with the Series A Preferred, the Series B Preferred
and the Series C Preferred with respect to the payment of dividends and payments
upon liquidation. We may not redeem the Series D Preferred Shares before April
30, 2008. The redemption price per share of Series D Preferred is $750.00
(equivalent to $25.00 per depositary share), plus any accrued and unpaid
dividends through the date of such redemption. The Series D Preferred and the
depositary shares have no maturity date and will remain outstanding indefinitely
unless redeemed. The Series D Preferred and the depositary shares are not
convertible into or exchangeable for any of our other securities. The Series D
Preferred shareholders and holders of the depositary shares generally have no
voting rights, except if we fail to pay dividends for six quarters. In that
event, the holders of the Series A Preferred, Series B Preferred, Series C
Preferred and Series D Preferred, voting together as a single class, have the
right to elect two trust managers who shall serve until all dividend arrearages
have been paid. In such case, the entire board of trust managers will be
increased by two trust managers.
PAGE 28
The Series D Preferred will not be listed for trading on any exchange. The
depositary shares will be listed for trading on the New York Stock Exchange.
FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following summary of material federal income tax consequences that may
be relevant to a holder of our securities is based on current law, is for
general information only and is not intended as tax advice. The following
discussion, which is not exhaustive of all possible tax consequences, does not
include a detailed discussion of any state, local or foreign tax consequences.
Nor does it discuss all of the aspects of federal income taxation that may be
relevant to a prospective holder of our securities in light of his or her
particular circumstances or to certain types of holders (including insurance
companies, tax-exempt entities, financial institutions or broker-dealers,
foreign corporations and persons who are not citizens or residents of the United
States and persons holding securities as part of a conversion transaction, a
hedging transaction or as a position in a straddle for tax purposes) who are
subject to special treatment under the federal income tax laws.
The statements in this discussion are based on current provisions of the
Internal Revenue Code existing, temporary and currently proposed Treasury
Regulations under the Internal Revenue Code, the legislative history of the
Internal Revenue Code, existing administrative rulings and practices of the IRS
and judicial decisions. No assurance can be given that legislative, judicial or
administrative changes will not affect the accuracy of any statements in this
discussion with respect to transactions entered into or contemplated prior to
the effective date of such changes. Any such change could apply retroactively to
transactions preceding the date of the change. We do not plan to request any
rulings from the IRS concerning our tax treatment and the statements in this
discussion are not binding on the IRS or any court. Thus, we can provide no
assurance that these statements will not be challenged by the IRS or that such
challenge will not be sustained by a court.
THIS DISCUSSION IS NOT INTENDED AS A SUBSTITUTE FOR CAREFUL TAX PLANNING.
EACH PROSPECTIVE PURCHASER OF SECURITIES IS ADVISED TO CONSULT WITH HIS OR HER
OWN TAX ADVISOR REGARDING THE SPECIFIC TAX CONSEQUENCES TO HIM OR HER OF THE
PURCHASE, OWNERSHIP AND DISPOSITION OF SECURITIES IN AN ENTITY ELECTING TO BE
TAXED AS A REIT, INCLUDING THE FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX
CONSEQUENCES OF SUCH PURCHASE, OWNERSHIP, DISPOSITION AND ELECTION, AND OF
POTENTIAL CHANGES IN APPLICABLE TAX LAWS.
We have elected to be treated as a REIT under Sections 856 through 860 of
the Internal Revenue Code for federal income tax purposes commencing with our
taxable year ended December 31, 1985. We believe that we have been organized and
have operated in a manner that qualifies for taxation as a REIT under the
Internal Revenue Code. We also believe that we will continue to operate in a
manner that will preserve our status as a REIT. We cannot however, assure you
that such requirements will be met in the future.
Locke Liddell & Sapp LLP, our legal counsel, has issued an opinion to us to
the effect that we qualified as a REIT under the Internal Revenue Code for our
taxable year ended December 31, 2002, we have been organized and our manner of
operation has been in conformity with the requirements for qualification and
taxation as a REIT as of the date of this prospectus and that our proposed
manner of operation and diversity of equity ownership should enable us to
continue to satisfy the requirements for qualification as a REIT in calendar
year 2003 if we operate in accordance with the methods of operations described
herein including our representations concerning our intended method of
operation. However, you should be aware that opinions of counsel are not binding
on the IRS or on the courts, and, if the IRS were to challenge these
conclusions, no assurance can be given that these conclusions would be sustained
in court. The opinion of Locke Liddell & Sapp LLP is based on various
assumptions as well as on certain representations made by us as to factual
matters, including a factual representation letter provided by us. The rules
governing REITs are highly technical and require ongoing compliance with a
variety of tests that depend, among other things, on future operating results,
asset diversification, distribution levels and diversity of stock ownership.
Locke Liddell & Sapp LLP will not monitor our compliance with these
requirements. While we expect to satisfy these tests, and will use our best
efforts to do so, no assurance can be given that we will qualify as a REIT for
any particular year, or that the applicable law will not change and adversely
affect us and our shareholders. See " - Failure to Qualify as a REIT." The
following is a summary of the material federal income tax considerations
affecting us as a REIT and the holders of our securities. This summary is
PAGE 29
qualified in its entirety by the applicable Internal Revenue Code provisions,
relevant rules and regulations promulgated under the Internal Revenue Code, and
administrative and judicial interpretations of the Internal Revenue Code and
these rules and regulations.
REIT QUALIFICATION
We must be organized as an entity that would, if we do not maintain our
REIT status, be taxable as a regular corporation. We cannot be a financial
institution or an insurance company. We must be managed by one or more trust
managers. Our taxable year must be the calendar year. Our beneficial ownership
must be evidenced by transferable shares. Our capital shares must be held by at
least 100 persons 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. Not more
than 50% of the value of the shares of our capital shares may be held, directly
or indirectly, applying the applicable constructive ownership rules of the
Internal Revenue Code, by five or fewer individuals at any time during the last
half of each of our taxable years. We must also meet certain other tests,
described below, regarding the nature of our income and assets and the amount of
our distributions.
Our outstanding common shares are owned by a sufficient number of investors
and in appropriate proportions to permit us to satisfy these share ownership
requirements. To protect against violations of these share ownership
requirements, our declaration of trust provides that no person is permitted to
own, applying constructive ownership tests set forth in the Internal Revenue
Code, more than 9.8% of our outstanding common shares, unless the trust managers
(including a majority of the independent trust managers) are provided evidence
satisfactory to them in their sole discretion that our qualification as a REIT
will not be jeopardized. In addition, our declaration of trust contains
restrictions on transfers of capital shares, as well as provisions that
automatically convert common shares into excess securities to the extent that
the ownership otherwise might jeopardize our REIT status. These restrictions,
however may not ensure that we will, in all cases, be able to satisfy the share
ownership requirements. If we fail to satisfy these share ownership
requirements, except as provided in the next sentence, our status as a REIT will
terminate. However, if we comply with the rules contained in applicable Treasury
Regulations that require us to ascertain the actual ownership of our shares and
we do not know, or would not have known through the exercise of reasonable
diligence, that we failed to meet the 50% requirement described above, we will
be treated as having met this requirement. See the section below entitled " -
Failure to Qualify as a REIT."
To monitor our compliance with the share ownership requirements, we are
required to and we do maintain records disclosing the actual ownership of our
common shares. To do so, we will demand written statements each year from the
record holders of certain percentages of shares in which the record holders are
to disclose the actual owners of the shares (i.e., the persons required to
include in gross income the REIT dividends). A list of those persons failing or
refusing to comply with this demand will be maintained as part of our records.
Shareholders who fail or refuse to comply with the demand must submit a
statement with their tax returns disclosing the actual ownership of the shares
and certain other information.
We currently satisfy, and expect to continue to satisfy, each of these
requirements discussed above. We also currently satisfy, and expect to continue
to satisfy, the requirements that are separately described below concerning the
nature and amounts of our income and assets and the levels of required annual
distributions.
Sources of Gross Income. In order to qualify as a REIT for a particular
year, we also must meet two tests governing the sources of our income - a 75%
gross income test and a 95% gross income test. These tests are designed to
ensure that a REIT derives its income principally from passive real estate
investments. The Internal Revenue Code allows a REIT to own and operate a number
of its properties through wholly-owned subsidiaries which are "qualified REIT
subsidiaries." The Internal Revenue Code provides that a qualified REIT
subsidiary is not treated as a separate corporation, and all of its assets,
liabilities and items of income, deduction and credit are treated as assets,
liabilities and items of income of the REIT.
In the case of a REIT which is a partner in a partnership or any other
entity such as a limited liability company that is treated as a partnership for
federal income tax purposes, Treasury Regulations provide that the REIT will be
deemed to own its proportionate share of the assets of the partnership. Also,
the REIT will be deemed to be entitled to its proportionate share of the income
of the partnership. The character of the assets and gross income of the
partnership retains the same character in the hands of the REIT for purposes of
Section 856 of the Internal Revenue Code, including satisfying the gross income
tests and the asset tests. Thus, our proportionate share of the assets and items
PAGE 30
of income of any partnership in which we own an interest are treated as our
assets and items of income for purposes of applying the requirements described
in this discussion, including the income and asset tests described below.
75% Gross Income Test. At least 75% of a REIT's gross income for each
taxable year must be derived from specified classes of income that principally
are real estate related. The permitted categories of principal importance to us
are:
- rents from real property;
- interest on loans secured by real property;
- gains from the sale of real property or loans secured by real property
(excluding gain from the sale of property held primarily for sale to
customers in the ordinary course of our business, referred to below as
"dealer property");
- income from the operation and gain from the sale of property acquired
in connection with the foreclosure of a mortgage securing that property
("foreclosure property");
- distributions on, or gain from the sale of, shares of other qualifying
REITs;
- abatements and refunds of real property taxes;
- amounts received as consideration for entering into agreements to make
loans secured by real property or to purchase or lease real property; and
- "qualified temporary investment income" (described below).
In evaluating our compliance with the 75% gross income test, as well as the
95% gross income test described below, gross income does not include gross
income from "prohibited transactions." In general, a prohibited transaction is
one involving a sale of dealer property, not including foreclosure property and
not including certain dealer property we have held for at least four years.
We expect that substantially all of our operating gross income will be
considered rent from real property and interest income. Rent from real property
is qualifying income for purposes of the gross income tests only if certain
conditions are satisfied. Rent from real property includes charges for services
customarily rendered to tenants, and rent attributable to personal property
leased together with the real property so long as the personal property rent is
not more than 15% of the total rent received or accrued under the lease for the
taxable year. We do not expect to earn material amounts in these categories.
Rent from real property generally does not include rent based on the income
or profits derived from the property. However, rent based on a percentage of
gross receipt or sales is permitted as rent from real property and we will have
leases where rent is based on a percentage of gross receipt or sales. We
generally do not intend to lease property and receive rentals based on the
tenant's income or profit. Also excluded from "rents from real property" is rent
received from a person or corporation in which we (or any of our 10% or greater
owners) directly or indirectly through the constructive ownership rules
contained in Section 318 and Section 856(d)(5) of the Internal Revenue Code, own
a 10% or greater interest.
A third exclusion from qualifying rent income covers amounts received with
respect to real property if we furnish services to the tenants or manage or
operate the property, other than through an "independent contractor" from whom
we do not derive any income or through a "taxable REIT subsidiary." A taxable
REIT subsidiary is a corporation in which a REIT owns stock, directly or
indirectly, and with respect to which the corporation and the REIT have made a
joint election to treat the corporation as a taxable REIT subsidiary. The
obligation to operate through an independent contractor or a taxable REIT
subsidiary generally does not apply, however, if the services we provide are
"usually or customarily rendered" in connection with the rental of space for
PAGE 31
occupancy only and are not considered rendered primarily for the convenience of
the tenant (applying standards that govern in evaluating whether rent from real
property would be unrelated business taxable income when received by a
tax-exempt owner of the property). Further, if the gross income from
non-customary services with respect to a property, valued at no less than 150%
of our direct cost of performing such services, is 1% or less of the total
income derived from the property, then the provision of such non-customary
services shall not prohibit the rental income (except the non-customary service
income) from qualifying as "rents from real property."
We believe that the only material services generally to be provided to
tenants will be those usually or customarily rendered in connection with the
rental of space for occupancy only. We do not intend to provide services that
might be considered rendered primarily for the convenience of the tenants, such
as hotel, health care or extensive recreational or social services.
Consequently, we believe that substantially all of our rental income will be
qualifying income under the gross income tests, and that our provision of
services will not cause the rental income to fail to be included under that
test.
Upon the ultimate sale of our properties, any gains realized also are
expected to constitute qualifying income, as gain from the sale of real property
(not involving a prohibited transaction).
95% Gross Income Test. In addition to earning 75% of our gross income from
the sources listed above, 95% of our gross income for each taxable year must
come either from those sources, or from dividends, interest or gains from the
sale or other disposition of stock or other securities that do not constitute
dealer property. This test permits a REIT to earn a significant portion of its
income from traditional "passive" investment sources that are not necessarily
real estate related. The term "interest" (under both the 75% and 95% tests) does
not include amounts that are based on the income or profits of any person,
unless the computation is based only on a fixed percentage of receipts or sales.
Failing the 75% or 95% Tests; Reasonable Cause. As a result of the 75% and
95% tests, REITs generally are not permitted to earn more than 5% of their gross
income from active sources, including brokerage commissions or other fees for
services rendered. We may receive certain types of that income. This type of
income will not qualify for the 75% test or 95% test but is not expected to be
significant and that income, together with other nonqualifying income, is
expected to be at all times less than 5% of our annual gross income. While we do
not anticipate that we will earn substantial amounts of nonqualifying income, if
nonqualifying income exceeds 5% of our gross income, we could lose our status as
a REIT. We may establish taxable REIT subsidiaries to hold assets generating
non-qualifying income. The gross income generated by these subsidiaries would
not be included in our gross income. However, dividends we receive from these
subsidiaries would be included in our gross income and qualify for the 95%
income test.
If we fail to meet either the 75% or 95% income tests during a taxable
year, we may still qualify as a REIT for that year if (1) we report the source
and nature of each item of our gross income in our federal income tax return for
that year, (2) the inclusion of any incorrect information in our return is not
due to fraud with intent to evade tax, and (3) the failure to meet the tests is
due to reasonable cause and not to willful neglect. It is not possible, however,
to state whether in all circumstances we would be entitled to the benefit of
this relief provision. For example, if we fail to satisfy the gross income tests
because nonqualifying income that we intentionally accrue or receive causes us
to exceed the limits on nonqualifying income, the IRS could conclude that our
failure to satisfy the tests was not due to reasonable cause. If these relief
provisions do not apply to a particular set of circumstances, we will not
qualify as a REIT. As discussed below, even if these relief provisions apply,
and we retain our status as a REIT, a tax would be imposed with respect to our
non-qualifying income. We would be subject to a 100% tax based on the greater of
the amount by which we fail either the 75% or 95% income tests (but in the case
of the 95% income test, applied only to the extent that our qualifying income is
less than 90% of our gross income) for that year times a fraction intended to
reflect our profitability. See " - Taxation as a REIT" on page 34.
Prohibited Transaction Income. Any gain that we realize on the sale of any
property held as inventory or other property held primarily for sale to
customers in the ordinary course of business (including our share of any such
gain realized by any subsidiary partnerships), will be treated as income from a
prohibited transaction that is subject to a 100% penalty tax. This prohibited
transaction income may also adversely affect our ability to satisfy the income
tests for qualification as a REIT. Under existing law, whether property is held
PAGE 32
as inventory or primarily for sale to customers in the ordinary course of a
trade or business depends on all the facts and circumstances surrounding the
particular transaction. We intend to hold our and our subsidiary partnerships
intend to hold their properties for investment with a view to long-term
appreciation, to engage in the business of acquiring, developing and owning
properties, and to make occasional sales of the properties as are consistent
with their investment objectives. The IRS may contend, however, that one or more
of these sales is subject to the 100% penalty tax.
Character of Assets Owned. At the close of each calendar quarter of our
taxable year, we also must meet three tests concerning the nature of our
investments. First, at least 75% of the value of our total assets generally must
consist of real estate assets, cash, cash items (including receivables) and
government securities. For this purpose, "real estate assets" include interests
in real property, interests in loans secured by mortgages on real property or by
certain interests in real property, shares in other REITs and certain options,
but excluding mineral, oil or gas royalty interests. The temporary investment of
new capital in debt instruments also qualifies under this 75% asset test, but
only for the one-year period beginning on the date we receive the new capital.
Second, although the balance of our assets generally may be invested without
restriction, other than certain debt securities, we will not be permitted to own
(1) securities of any one non-governmental issuer (other than a taxable REIT
subsidiary) that represent more than 5% of the value of our total assets, (2)
securities possessing more than 10% of the voting power of the outstanding
securities of any single issuer or (3) securities having a value of more than
10% of the total value of the outstanding securities of any one issuer. A REIT,
however, may own 100% of the stock of a qualified REIT subsidiary, in which case
the assets, liabilities and items of income, deduction and credit of the
subsidiary are treated as those of the REIT. A REIT may also own more than 10%
of the voting power or value of a taxable REIT subsidiary. Third, securities of
a single taxable REIT subsidiary may represent more than 5% of the value of our
total assets but not more than 20% of the value of a REIT's total assets may be
represented by securities of one or more taxable REIT subsidiaries. In
evaluating a REIT's assets, if the REIT invests in a partnership, it is deemed
to own its proportionate share of the assets of the partnership.
After initially meeting the asset tests at the close of any quarter, we
will not lose our status as a REIT for failure to satisfy the asset tests at the
end of a later quarter solely by reason of changes in asset values. If we fail
to satisfy the asset tests because we acquire securities or other property
during a quarter, we can cure this failure by disposing of sufficient
nonqualifying assets within 30 days after the close of that quarter. We intend
to take such action within the 30 days after the close of any quarter as may be
required to cure any noncompliance. If we fail to cure noncompliance with the
asset tests within this time period, we would cease to qualify as a REIT.
Annual Distributions to Shareholders. To maintain our REIT status, we
generally must distribute as a dividend to our shareholders in each taxable year
at least 90% of our net ordinary income. Capital gain is not required to be
distributed. More precisely, we must distribute an amount equal to (1) 90% of
the sum of (a) our "REIT Taxable Income" before deduction of dividends paid and
excluding any net capital gain and (b) any net income from foreclosure property
less the tax on such income, minus (2) certain limited categories of "excess
noncash income," including, income attributable to leveled stepped rents,
cancellation of indebtedness and original issue discount income. REIT Taxable
Income is defined to be the taxable income of the REIT, computed as if it were
an ordinary corporation, with certain modifications. For example, the deduction
for dividends paid is allowed, but neither net income from foreclosure property,
nor net income from prohibited transactions, is included. In addition, the REIT
may carry over, but not carry back, a net operating loss for 20 years following
the year in which it was incurred.
A REIT may satisfy the 90% distribution test with dividends paid during the
taxable year and with certain dividends paid after the end of the taxable year.
Dividends paid in January that were declared during the last calendar quarter of
the prior year and were payable to shareholders of record on a date during the
last calendar quarter of that prior year are treated as paid on December 31 of
the prior year. Other dividends declared before the due date of our tax return
for the taxable year, including extensions, also will be treated as paid in the
prior year if they are paid (1) within 12 months of the end of that taxable year
and (2) no later than our next regular distribution payment. Dividends that are
paid after the close of a taxable year that do not qualify under the rule
governing payments made in January (described above) will be taxable to the
shareholders in the year paid, even though we may take them into account for a
prior year. A nondeductible excise tax equal to 4% will be imposed for each
calendar year to the extent that dividends declared and distributed or deemed
distributed on or before December 31 are less than the sum of (a) 85% of our
"ordinary income" plus (b) 95% of our capital gain net income plus (c) any
undistributed income from prior periods.
PAGE 33
To be entitled to a dividends paid deduction, the amount distributed by a
REIT must not be preferential. For example, every shareholder of the class of
shares to which a distribution is made must be treated the same as every other
shareholder of that class, and no class of shares may be treated otherwise than
in accordance with its dividend rights as a class.
We will be taxed at regular corporate rates to the extent that we retain
any portion of our taxable income. For example, if we distribute only the
required 90% of our taxable income, we would be taxed on the retained 10%. Under
certain circumstances we may not have sufficient cash or other liquid assets to
meet the distribution requirement. This could arise because of competing demands
for our funds, or due to timing differences between tax reporting and cash
receipts and disbursements (i.e., income may have to be reported before cash is
received, or expenses may have to be paid before a deduction is allowed).
Although we do not anticipate any difficulty in meeting this requirement, no
assurance can be given that necessary funds will be available. In the event
these circumstances do occur, then in order to meet the 90% distribution
requirement, we may cause our operating partnership to arrange for short-term,
or possibly long-term, borrowings to permit the payment of required dividends.
If we fail to meet the 90% distribution requirement because of an
adjustment to our taxable income by the IRS, we may be able to cure the failure
retroactively by paying a "deficiency dividend," as well as applicable interest
and penalties, within a specified period.
TAXATION AS A REIT
As a REIT, we generally will not be subject to corporate income tax to the
extent we currently distribute our REIT taxable income to our shareholders. This
treatment effectively eliminates the "double taxation" imposed on investments in
most corporations. Double taxation refers to taxation that occurs once at the
corporate level when income is earned and once again at the shareholder level
when such income is distributed. We generally will be taxed only on the portion
of our taxable income that we retain, which will include any undistributed net
capital gain, because we will be entitled to a deduction for dividends paid to
shareholders during the taxable year. A dividends paid deduction is not
available for dividends that are considered preferential within any given class
of shares or as between classes except to the extent that class is entitled to a
preference. We do not anticipate that we will pay any of those preferential
dividends. Because excess shares will represent a separate class of outstanding
shares, the fact that those shares will not be entitled to dividends should not
adversely affect our ability to deduct our dividend payments.
Even as a REIT, we will be subject to tax in certain circumstances as
follows:
- we would be subject to tax on any income or gain from foreclosure
property at the highest corporate rate (currently 35%). Foreclosure
property is generally defined as property acquired through foreclosure
or after a default on a loan secured by the property or a lease of the
property;
- a confiscatory tax of 100% applies to any net income from prohibited
transactions which are, in general, certain sales or other
dispositions of property held primarily for sale to customers in the
ordinary course of business;
- if we fail to meet either the 75% or 95% source of income tests
described above, but still qualify for REIT status under the
reasonable cause exception to those tests, a 100% tax would be imposed
equal to the amount obtained by multiplying (a) the greater of the
amount, if any, by which it failed either the 75% income test or the
95% income test (but in the case of the 95% income test, applied only
to the extent that our qualifying income is less than 90% of our gross
income), times (b) a fraction intended to reflect our profitability;
- we will be subject to the alternative minimum tax on items of tax
preference, excluding items specifically allocable to our
shareholders;
PAGE 34
- if we should fail to distribute with respect to each calendar year at
least the sum of (a) 85% of our REIT ordinary income for that year,
(b) 95% of our REIT capital gain net income for that year, and (c) any
undistributed taxable income from prior years, we would be subject to
a 4% excise tax on the excess of the required distribution over the
amounts actually distributed;
- under temporary regulations, we also may be taxed at the highest
regular corporate tax rate on any built-in gain attributable to assets
that we acquire in certain tax-free corporate transactions, to the
extent the gain is recognized during the first ten years after we
acquire those assets. Built-in gain is the excess of (a) the fair
market value of the asset over (b) our adjusted basis in the asset, in
each case determined as of the beginning of the ten-year recognition
period. The results described in this paragraph with respect to the
recognition of built-in gain assume that we will make an election
pursuant to the temporary regulations; and
- we will be taxed at regular corporate rates on any undistributed REIT
taxable income, including undistributed net capital gains.
As a result of recent legislation, a tax is imposed on a REIT equal to 100%
of redetermined rents, redetermined deductions and excess interest.
Redetermined rents are generally rents from real property which would otherwise
be reduced on distribution, apportionment or allocation to clearly reflect
income as a result of services furnished or rendered by a taxable REIT
subsidiary to tenants of the REIT. There are a number of exceptions with regard
to redetermined rents, which are summarized below.
- Redetermined rents do not include amounts received directly or
indirectly by a REIT for customary services.
- Redetermined rents do not include de minimis payments received by
the REIT with respect to non-customary services rendered to the
tenants of a property owned by the REIT that do not exceed 1% of
all amounts received by the REIT with respect to the property.
- The redetermined rent provisions do not apply with respect to
any services rendered by a taxable REIT subsidiary to the tenants
of the REIT, as long as the taxable REIT subsidiary renders a
significant amount of similar services to persons other than the
REIT and to tenants who are unrelated to the REIT or the taxable
REIT subsidiary or the REIT tenants, and the charge for these
services is substantially comparable to the charge for similar
services rendered to such unrelated persons.
- The redetermined rent provisions do not apply to any services
rendered by a taxable REIT subsidiary to a tenant of a REIT if
the rents paid by tenants leasing at least 25% of the net
leasable space in the REIT's property who are not receiving such
services are substantially comparable to the rents paid by
tenants leasing comparable space who are receiving the services
and the charge for the services is separately stated.
- The redetermined rent provisions do not apply to any services
rendered by a taxable REIT subsidiary to tenants of a REIT if the
gross income of the taxable REIT subsidiary from these services
is at least 150% of the taxable REIT subsidiary's direct cost of
rendering the service.
- The Secretary of the Treasury has the power to waive the tax that
would otherwise be imposed on redetermined rents if the REIT
establishes to the satisfaction of the Secretary that rents
charged to tenants were established on an arm's length basis even
though a taxable REIT subsidiary provided services to the
tenants.
Redetermined deductions are deductions, other than redetermined rents, of a
taxable REIT subsidiary if the amount of these deductions would be decreased on
distribution, apportionment or allocation to clearly reflect income between the
PAGE 35
taxable REIT subsidiary and the REIT. Excess interest means any deductions for
interest payments made by a taxable REIT subsidiary to the REIT to the extent
that the interest payments exceed a commercially reasonable rate of interest.
FAILURE TO QUALIFY AS A REIT
For any taxable year in which we fail to qualify as a REIT and certain
relief provisions do not apply, we would be taxed at regular corporate rates,
including alternative minimum tax rates on all of our taxable income.
Distributions to our shareholders would not be deductible in computing that
taxable income, and distributions would no longer be required to be made. Any
corporate level taxes generally would reduce the amount of cash available for
distribution to our shareholders and, because the shareholders would continue to
be taxed on the distributions they receive, the net after tax yield to the
shareholders from their investment likely would be reduced substantially. As a
result, failure to qualify as a REIT during any taxable year could have a
material adverse effect on an investment in our common shares. If we lose our
REIT status, unless certain relief provisions apply, we would not be eligible to
elect REIT status again until the fifth taxable year which begins after the
taxable year during which our election was terminated. It is not possible to
state whether in all circumstances we would be entitled to this statutory
relief.
TAXATION OF TAXABLE U.S. SHAREHOLDERS
Except as discussed below, distributions generally will be taxable to
taxable U.S. shareholders as ordinary income to the extent of our current or
accumulated earnings and profits. We may generate cash in excess of our net
earnings. If we distribute cash to shareholders in excess of our current and
accumulated earnings and profits (other than as a capital gain dividend), the
excess cash will be deemed to be a return of capital to each shareholder to the
extent of the adjusted tax basis of the shareholder's shares. Distributions in
excess of the adjusted tax basis will be treated as gain from the sale or
exchange of the shares. A shareholder who has received a distribution in excess
of our current and our accumulated earnings and profits may, upon the sale of
the shares, realize a higher taxable gain or a smaller loss because the basis of
the shares as reduced will be used for purposes of computing the amount of the
gain or loss. Distributions we make, whether characterized as ordinary income or
as capital gains, are not eligible for the dividends received deduction for
corporations. For purposes of determining whether distributions to holders of
common shares are out of current or accumulated earnings and profits, our
earnings and profits will be allocated first to the outstanding preferred
shares, if any, and then to the common shares. President Bush has proposed a
growth and jobs plan that includes a provision that would exclude dividends from
taxable income to the extent the corporation paid tax on such income in 2002 or
later. The Treasury Department has confirmed that this provision generally
would not apply to dividends paid by REITs.
Dividends we declare in October, November, or December of any year and
payable to a shareholder of record on a specified date in any of these months
shall be treated as both paid by us and received by the shareholder on December
31 of that year, provided we actually pay the dividend on or before January 31
of the following calendar year. Shareholders may not include in their own income
tax returns any of our net operating losses or capital losses.
Distributions that we properly designate as capital gain dividends will be
taxable to taxable U.S. shareholders as gains from the sale or disposition of a
capital asset to the extent that they do not exceed our actual net capital gain
for the taxable year. Depending on the period of time, the tax characteristics
of the assets which produced these gains, and on certain designations, if any,
which we may make, these gains may be taxable to non-corporate U.S. shareholders
at a 20% or 25% rate. U.S. shareholders that are corporations may, however, be
required to treat up to 20% of certain capital gain dividends as ordinary
income.
We may elect to retain, rather than distribute as a capital gain dividend,
our net long-term capital gains. If we make this election, we would pay tax on
our retained net long-term capital gains. In addition, to the extent we
designate, a U.S. shareholder generally would:
- include its proportionate share of our undistributed long-term capital
gains in computing its long-term capital gains in its return for its
taxable year in which the last day of our taxable year falls;
PAGE 36
- be deemed to have paid the capital gains tax imposed on us on the
designated amounts included in the U.S. shareholder's long-term capital
gains;
- receive a credit or refund for the amount of tax deemed paid by it;
- increase the adjusted basis of its common stock by the difference between
the amount of includable gains and the tax deemed to have been paid by it;
and
- in the case of a U.S. shareholder that is a corporation, appropriately
adjust its earnings and profits for the retained capital gains in
accordance with Treasury Regulations to be prescribed by the IRS.
Distributions we make and gain arising from the sale or exchange by a U.S.
shareholder of our shares will not be treated as income from a passive activity,
within the meaning of Section 469 of the Internal Revenue Code, since income
from a passive activity generally does not include dividends and gain
attributable to the disposition of property that produces dividends. As a
result, U.S. shareholders subject to the passive activity rules will generally
be unable to apply any "passive losses" against this income or gain.
Distributions we make, to the extent they do not constitute a return of capital,
generally will be treated as investment income for purposes of computing the
investment interest limitation. Gain arising from the sale or other disposition
of our shares, however, will be treated as investment income if a shareholder so
elects, in which case the capital gain is taxed at ordinary income rates.
Generally, gain or loss realized by a shareholder upon the sale of shares
will be reportable as capital gain or loss. If a shareholder receives a
long-term capital gain dividend from us and has held the shares for six months
or less, any loss incurred on the sale or exchange of the shares is treated as a
long-term capital loss to the extent of the corresponding long-term capital gain
dividend received.
In any year in which we fail to qualify as a REIT, the shareholders
generally will continue to be treated in the same fashion described above,
except that none of our dividends will be eligible for treatment as capital
gains dividends, corporate shareholders will qualify for the dividends received
deduction and the shareholders will not be required to report any share of our
tax preference items.
BACKUP WITHHOLDING
We will report to our shareholders and the IRS the amount of dividends paid
during each calendar year and the amount of tax withheld, if any. If a
shareholder is subject to backup withholding, we will be required to deduct and
withhold from any dividends payable to that shareholder a tax of 31%. These
rules may apply (1) when a shareholder fails to supply a correct taxpayer
identification number, (2) when the IRS notifies us that the shareholder is
subject to the rules or has furnished an incorrect taxpayer identification
number, or (3) in the case of corporations or others within certain exempt
categories, when they fail to demonstrate that fact when required. A shareholder
that does not provide a correct taxpayer identification number may also be
subject to penalties imposed by the IRS. Any amount withheld as backup
withholding may be credited against the shareholder's federal income tax
liability. We also may be required to withhold a portion of capital gain
distributions made to shareholders who fail to certify their non-foreign status.
TAXATION OF TAX-EXEMPT ENTITIES
In general, a tax-exempt entity that is a shareholder will not be subject
to tax on distributions or gain realized on the sale of shares. A tax-exempt
entity may be subject to unrelated business taxable income, however, to the
extent that it has financed the acquisition of its shares with "acquisition
indebtedness" within the meaning of the Internal Revenue Code. In determining
the number of shareholders a REIT has for purposes of the "50% test" described
above under " - REIT Qualification," generally, any shares held by tax-exempt
employees' pension and profit sharing trusts which qualify under Section 401(a)
of the Internal Revenue Code and are exempt from tax under Section 501(a) of the
Internal Revenue Code ("qualified trusts") will be treated as held directly by
its beneficiaries in proportion to their interests in the trust and will not be
treated as held by the trust.
PAGE 37
A qualified trust owning more than 10% of a REIT may be required to treat a
percentage of dividends from the REIT as UBTI. The percentage is determined by
dividing the REIT's gross income (less direct expenses related thereto) derived
from an unrelated trade or business for the year (determined as if the REIT were
a qualified trust) by the gross income of the REIT for the year in which the
dividends are paid. However, if this percentage is less than 5%, dividends are
not treated as UBTI. These UBTI rules apply only if the REIT qualifies as a REIT
because of the "look-thru" rule with respect to the 50% test discussed above and
if the trust is "predominantly held" by qualified trusts. A REIT is
predominantly held by qualified trusts if at least one pension trust owns more
than 25% of the value of the REIT or a group of pension trusts each owning more
than 10% of the value of the REIT collectively own more than 50% of the value of
the REIT. We do not currently meet either of these requirements.
For social clubs, voluntary employee benefit associations, supplemental
unemployment benefit trusts and qualified group legal services plans exempt from
federal income taxation under Sections 501(c)(7), (c)(9), (c)(17) and (c)(20) of
the Internal Revenue Code, respectively, income from an investment in our
capital stock will constitute UBTI unless the organization is able to deduct an
amount properly set aside or placed in reserve for certain purposes so as to
offset the UBTI generated by the investment in our capital stock. These
prospective investors should consult their own tax advisors concerning the "set
aside" and reserve requirements.
TAXATION OF FOREIGN INVESTORS
The rules governing federal income taxation of nonresident alien
individuals, foreign corporations, foreign partnerships and other foreign
shareholders are complex and no attempt will be made herein to provide more than
a summary of such rules. Prospective non-U.S. shareholders should consult with
their own tax advisors to determine the impact of federal, state and local
income tax laws with regard to an investment in common shares, including any
reporting requirements, as well as the tax treatment of such an investment under
the laws of their home country.
Dividends that are not attributable to gain from any sales or exchanges we
make of United States real property interests and which we do not designate as
capital gain dividends will be treated as dividends of ordinary income to the
extent that they are made out of our current or accumulated earnings and
profits. Those dividends ordinarily will be subject to a withholding tax equal
to 30% of the gross amount of the dividend unless an applicable tax treaty
reduces or eliminates that tax. However, if income from the investment in the
common shares is treated as effectively connected with the non-U.S.
shareholder's conduct of a United States trade or business, the non-U.S.
shareholder generally will be subject to a tax at graduated rates, in the same
manner as U.S. shareholders are taxed with respect to those dividends, and may
also be subject to the 30% branch profits tax in the case of a shareholder that
is a foreign corporation. For withholding tax purposes, we are currently
required to treat all distributions as if made out of our current and
accumulated earnings and profits and thus we intend to withhold at the rate of
30%, or a reduced treaty rate if applicable, on the amount of any distribution
(other than distributions designated as capital gain dividends) made to a
non-U.S. shareholder unless (1) the non-U.S. shareholder files on IRS Form
W-8BEN claiming that a lower treaty rate applies or (2) the non-U.S. shareholder
files an IRS Form W-8ECI claiming that the dividend is effectively connected
income.
Under the final regulations, we would not be required to withhold at the
30% rate on distributions we reasonably estimate to be in excess of our current
and accumulated earnings and profits. Dividends in excess of our current and
accumulated earnings and profits will not be taxable to a shareholder to the
extent that they do not exceed the adjusted basis of the shareholder's shares,
but rather will reduce the adjusted basis of those shares. To the extent that
those dividends exceed the adjusted basis of a non-U.S. shareholder's shares,
they will give rise to tax liability if the non-U.S. shareholder would otherwise
be subject to tax on any gain from the sale or disposition of his shares, as
described below. If it cannot be determined at the time a dividend is paid
whether or not a dividend will be in excess of current and accumulated earnings
and profits, the dividend will be subject to such withholding. We do not intend
to make quarterly estimates of that portion of dividends that are in excess of
earnings and profits, and, as a result, all dividends will be subject to such
withholding. However, the non-U.S. shareholder may seek a refund of those
amounts from the IRS.
For any year in which we qualify as a REIT, distributions that are
attributable to gain from our sales or exchanges of United States real property
interests will be taxed to a non-U.S. shareholder under the provisions of the
Foreign Investment in Real Property Tax Act of 1980, commonly known as "FIRPTA."
Under FIRPTA, those dividends are taxed to a non-U.S. shareholder as if the gain
PAGE 38
were effectively connected with a United States business. Non-U.S. shareholders
would thus be taxed at the normal capital gain rates applicable to U.S.
shareholders subject to applicable alternative minimum tax and a special
alternative minimum tax in the case of nonresident alien individuals. Also,
dividends subject to FIRPTA may be subject to a 30% branch profits tax in the
hands of a corporate non-U.S. shareholder not entitled to treaty exemption. We
are required by the Code and applicable Treasury Regulations to withhold 35% of
any dividend that could be designated as a capital gain dividend. This amount is
creditable against the non-U.S. shareholder's FIRPTA tax liability.
Gain recognized by a non-U.S. shareholder upon a sale of shares generally
will not be taxed under FIRPTA if we are a "domestically controlled REIT,"
defined generally as a REIT in which at all times during a specified testing
period less than 50% in value of the shares was held directly or indirectly by
foreign persons. It is currently anticipated that we will be a "domestically
controlled REIT," and therefore the sale of shares will not be subject to
taxation under FIRPTA. Because the common shares will be publicly traded,
however, no assurance can be given that we will remain a "domestically
controlled REIT." However, gain not subject to FIRPTA will be taxable to a
non-U.S. shareholder if (1) investment in the common shares is effectively
connected with the non-U.S. shareholder's United States trade or business, in
which case the non-U.S. shareholder will be subject to the same treatment as
U.S. shareholders with respect to that gain, and may also be subject to the 30%
branch profits tax in the case of a corporate non-U.S. shareholder, or (2) the
non-U.S. shareholder is a nonresident alien individual who was present in the
United States for 183 days or more during the taxable year and has a "tax home"
in the United States, in which case the nonresident alien individual will be
subject to a 30% withholding tax on the individual's capital gains. If we were
not a domestically controlled REIT, whether or not a non-U.S. shareholder's sale
of shares would be subject to tax under FIRPTA would depend on whether or not
the common shares were regularly traded on an established securities market
(such as the NYSE) and on the size of selling non-U.S. shareholder's interest in
our capital shares. If the gain on the sale of shares were to be subject to
taxation under FIRPTA, the non-U.S. shareholder will be subject to the same
treatment as U.S. shareholders with respect to that gain (subject to applicable
alternative minimum tax and a special alternative minimum tax in the case of
nonresident alien individuals and the possible application of the 30% branch
profits tax in the case of foreign corporations) and the purchaser of our common
shares may be required to withhold 10% of the gross purchase price.
STATE AND LOCAL TAXES
We, and our shareholders, may be subject to state or local taxation in
various state or local jurisdictions, including those in which it or they
transact business or reside. Consequently, prospective shareholders should
consult their own tax advisors regarding the effect of state and local tax laws
on an investment in our capital shares.
PLAN OF DISTRIBUTION
We may offer securities directly or through underwriters, dealers or
agents. The prospectus supplement will identify those underwriters, dealers or
agents and will describe the plan of distribution, including commissions to be
paid. If we do not name a firm in the prospectus supplement, the firm may not
directly or indirectly participate in any underwriting of those securities,
although it may participate in the distribution of securities under
circumstances entitling it to a dealer's allowance or agent's commission. Any
underwriting agreement will entitle the underwriters to indemnification against
designated civil liabilities under the federal securities laws and other laws.
The underwriters' obligations to purchase securities will be subject to
compliance with specific conditions and generally will require them to purchase
all of the securities if any are purchased.
Unless otherwise noted in the prospectus supplement, the securities will be
offered by the underwriters, if any, when, as and if issued by us, delivered to
and accepted by the underwriters and subject to their right to reject orders in
whole or in part.
We may sell securities to dealers as principals. Those dealers then may
resell the securities to the public at varying prices set by those dealers from
time to time. We may also offer securities through agents. Agents generally act
on a "best efforts" basis during their appointment, meaning that they are not
obligated to purchase securities. Dealers and agents may be entitled to
indemnification as underwriters by us against designated liabilities under the
federal securities laws and other laws.
PAGE 39
We or the underwriters or the agents may solicit offers from institutions
approved by us to purchase securities under delayed delivery contracts providing
for payment and delivery on the date or dates stated in the prospectus
supplement. Each delayed delivery contract will be for an amount not less than
the respective of amounts stated in the applicable supplement. Likewise, the
aggregate principal amount of the securities sold pursuant to delayed delivery
contracts will not be less or more than the respective amounts stated in the
applicable prospectus supplement. We may make delayed delivery contracts with
various institutions, including commercial and savings banks, insurance
companies, pension funds, investment companies, educational and charitable
institutions and others. Additional conditions will apply to those purchases.
An underwriter may engage in over-allotment, stabilizing transactions,
short covering transactions and penalty bids in accordance with securities laws.
Over-allotment involves sales in excess of the offering size, which creates a
short position. Stabilizing transactions permit bidders to purchase the
underlying security so long as the stabilizing bids do not exceed a specified
maximum. Short covering transactions involve purchases of the securities in the
open market after the distribution is completed to cover short positions.
Penalty bids permit the underwriters to reclaim a selling concession from a
dealer when the securities originally sold by the dealer are purchased in a
covering transaction to cover short positions. Those activities may cause the
price of the securities to be higher than it would otherwise be. The
underwriters may engage in these activities on any exchange or other market in
which the securities may be traded. If commenced, the underwriters may
discontinue these activities at any time.
Certain of the underwriters and their affiliates may be customers of,
engage in transactions with, and perform services for, us and our subsidiaries
in the ordinary course of business.
The prospectus supplement or pricing supplement, as applicable, will set
forth the anticipated delivery date of the securities being sold at that time.
LEGAL MATTERS
Unless otherwise noted in a prospectus supplement, Locke Liddell & Sapp
LLP, Dallas, Texas, will pass on the legality of the securities offered through
this prospectus and certain tax matters. Counsel for any underwriters or agents
will be noted in the applicable prospectus supplement.
EXPERTS
The financial statements and the related financial statement schedules
incorporated in this prospectus by reference from the Company's Annual Report on
Form 10-K have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their report, which is incorporated herein by reference, and have been
so incorporated in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the reporting requirements of the Securities and Exchange
Act of 1934, as amended, and file annual, quarterly and current reports, proxy
statements and other information with the SEC. You may read and copy any
document we file at the SEC's public reference room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. You can request copies of these documents by writing to
the SEC and paying a fee for the copying cost. Please call the SEC at
1-800-SEC-0330 for more information about the operation of the public reference
room. Our SEC filings are also available to the public at the SEC's web site at
www.sec.gov. In addition, you may read and copy our SEC filings at the offices
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of the New York Stock Exchange, 20 Broad Street, New York, New York 10005 or at
the SEC's Public Reference Room at Room 1200, 450 Fifth Street, N.W.,
Washington, D.C. 20549. Our website address is www.weingarten.com.
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This prospectus is only part of a registration statement we filed with the
SEC under the Securities Act of 1933, as amended, and therefore omits certain
information contained in the registration statement. We have also filed exhibits
and schedules to the registration statement that we have excluded from this
PAGE 40
prospectus, and you should refer to the applicable exhibit or schedule for a
complete description of any statement referring to any contract or document. You
may inspect or obtain a copy of the registration statement, including exhibits
and schedules, as described in the previous paragraph.
INCORPORATION OF DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" the information we file
with it. This means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus and the information we file later with
the SEC will automatically update and supersede this information.
We incorporate by reference the documents listed below and any future
filings we make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Exchange Act until this offering is completed:
- Annual Report on Form 10-K for the year ended December 31, 2002.
- Schedule 14A filed with the SEC on March 20, 2003.
- The description of our common shares of beneficial interest contained
in our registration statement on Form 8-A filed March 17, 1988.
- The description of our 7.44% Series A Cumulative Redeemable Preferred
Shares contained in our registration statement on Form 8-A filed
February 23, 1998.
- The description of our 7.00% Series C Cumulative Redeemable Preferred
Shares contained in our registration statement on Form 8-A filed
January 19, 1999.
- The description of our 6.75% Series D Cumulative Redeemable Preferred
Shares and the depositary shares relating thereto contained in our
registration statement on Form 8-A filed April 17, 2003.
You may request copies of these filings at no cost by writing or
telephoning our Investor Relations Department at the following address and
telephone number:
Weingarten Realty Investors
2600 Citadel Plaza Drive
Suite 300
Houston, Texas 77008
(713) 866-6000.
PAGE 41
3,200,000 SHARES
[GRAPHIC OMITED]
WEINGARTEN REALTY INVESTORS
COMMON SHARES OF BENEFICIAL INTEREST
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PROSPECTUS SUPPLEMENT
AUGUST 18, 2004
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BANC OF AMERICA SECURITIES LLC