sv3
As filed with the Securities and Exchange Commission on September 28, 2011
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
CoreSite Realty Corporation
(Exact Name of Registrant as Specified in Its Charter)
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Maryland
(State or Other Jurisdiction of Incorporation or Organization)
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27-1925611
(I.R.S. Employer Identification Number) |
1050
17th Street, Suite 800
Denver, Colorado 80265
(866) 777-2673
(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrants Principal Executive Offices)
Thomas M. Ray
President and Chief Executive Officer
CoreSite Realty Corporation
1050 17th Street, Suite 800
Denver, Colorado 80265
(866) 777-2673
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service)
Copies to:
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Patrick H. Shannon
Brandon J. Bortner
Latham & Watkins LLP
555 Eleventh Street NW, Suite 1000
Washington, District of Columbia 20004
(202) 637-2200
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Derek McCandless
Senior Vice President and General Counsel
CoreSite Realty Corporation
1050 17th Street, Suite 800
Denver, Colorado 80265
(866) 777-2673 |
Approximate date of commencement of proposed sale to the public: From time to time after
this registration statement becomes effective.
If the only securities being registered on this Form are being offered pursuant to dividend or
interest reinvestment plans, please check the following box: o
If any of the securities being registered on this Form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities
offered only in connection with dividend or interest reinvestment plans, check the following
box: þ
If this Form is filed to register additional securities for an offering pursuant to Rule
462(b) under the Securities Act, please check the following box and list the Securities Act
registration statement number of the earlier effective registration statement for the same
offering. o
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities
Act, check the following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. o
If this Form is a registration statement pursuant to General Instruction I.D. or a
post-effective amendment thereto that shall become effective upon filing with the Commission
pursuant to Rule 462(e) under the Securities Act, check the following box. o
If this Form is a post-effective amendment to a registration statement filed pursuant to
General Instruction I.D. filed to register additional securities or additional classes of
securities pursuant to Rule 413(b) under the Securities Act, check the following box. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act. (Check one):
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Large accelerated filer o
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Accelerated filer o
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Non-accelerated filer þ
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Smaller reporting company o |
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(Do not check if a smaller reporting company) |
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CALCULATION OF REGISTRATION FEE
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Proposed |
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Maximum |
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Amount |
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Offering |
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Proposed |
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to be |
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Price Per |
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Amount of |
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Title of Each Class of |
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Registered |
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Unit |
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Aggregate |
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Registration |
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Securities to be Registered |
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(2)(3) |
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(2)(3) |
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Offering Price(2) |
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Fee |
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Debt Securities (4)
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Common Stock, par value $0.01 per share
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Preferred Stock, par value $0.01 per share
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Depositary Shares, representing Preferred Stock
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Warrants (5)
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Rights
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Units
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Total
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800,000,000 |
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92,880 |
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Omitted pursuant to Form S-3 General Instruction II(D). |
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An indeterminate aggregate initial offering price or number of securities of each identified
class is being registered as may from time to time be issued at indeterminate prices.
Separate consideration may not be received for registered securities that are issuable upon
the exercise, conversion or exchange of other securities. |
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In U.S. dollars or the equivalent thereof for any security denominated in one or more, or
units of two or more, foreign currencies or composite currencies based on the exchange rate at
the time of sale. |
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Including such principal amount of debt securities as may, from time to time, be issued at
indeterminate prices. |
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The warrants covered by this registration statement may be warrants for common stock,
preferred stock or depositary shares. |
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Estimated solely for purposes of calculating the registration fee. The aggregate maximum
offering price of all securities issued under this registration statement will not exceed
$800,000,000. No separate consideration will be received for preferred stock or common stock
that are issued upon conversion or exchange of preferred stock or depositary shares registered
hereunder, upon exercise of common stock warrants registered hereunder or for preferred stock
distributed upon termination of a deposit arrangement for depositary shares. |
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Calculated under Rule 457(o) of the rules and regulations under the Securities Act of 1933,
as amended. |
The registrant hereby amends this registration statement on such date or dates as may be
necessary to delay its effective date until the registrant shall file a further amendment that
specifically states that this registration statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933, as amended or until this registration
statement shall become effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
The information in this prospectus is not complete and may be changed. We may not sell these
securities until the registration statement filed with the Securities and Exchange Commission
becomes effective. This prospectus is not an offer to sell these securities and it is not
soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not
permitted.
SUBJECT TO COMPLETION, DATED SEPTEMBER 28, 2011
PROSPECTUS
$800,000,000
CoreSite Realty Corporation
Debt Securities
Common Stock
Preferred Stock
Depositary Shares
Warrants
Rights
Units
We may from time to time offer, in one or more classes or series, separately or together,
and in amounts, at prices and on terms to be set forth in one or more supplements to this
prospectus, the following securities:
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debt securities, which may consist of debentures, notes or other types of debt; |
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shares of common stock; |
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shares of preferred stock; |
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shares of preferred stock represented by depositary shares; |
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warrants to purchase shares of preferred stock, common stock or depositary
shares; |
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rights to purchase shares of common stock; and |
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units consisting of two or more of the foregoing. |
We refer to the debt securities, common stock, preferred stock, depositary shares, warrants,
rights and units registered hereunder collectively as the securities in this prospectus. The
securities will have a maximum aggregate offering price of $800,000,000 or its equivalent in a
foreign currency based on the exchange rate at the time of the sale, in amounts, at prices and on
terms determined at the time of the offering of any such security.
The specific terms of each series or class of the securities will be set forth in the
applicable prospectus supplement and may include limitations on actual or constructive ownership
and restrictions on transfer of the securities, in each case as may be appropriate to preserve the
status of our company as a real estate investment trust, or REIT, for U.S. federal income tax
purposes.
The applicable prospectus supplement will also contain information, where applicable, about
certain federal income tax consequences relating to, and any listing on a securities exchange of,
the securities covered by such prospectus supplement.
The securities may be offered directly by us, through agents designated from time to time by
us or to or through underwriters or dealers. If any agents, dealers 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. See the
sections entitled Plan of Distribution and About this Prospectus for more information. No
securities may be sold without delivery of this prospectus and the applicable prospectus supplement
describing the method and terms of the offering of such series of securities.
Our common stock currently trades on the New York Stock Exchange, or NYSE, under the symbol
COR. On September 26, 2011, the last reported sales price of our common stock on the NYSE was
$14.23 per share.
Investing in our securities involves risks. See Risk Factors on page 2 of this prospectus.
Neither the Securities and Exchange Commission nor any state securities commission has
approved or disapproved of these securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal offense.
The
date of this prospectus
is ,
2011.
TABLE OF CONTENTS
References in this prospectus to we, our, us and our company collectively refer to
CoreSite Realty Corporation, a Maryland corporation, CoreSite, L.P., and any of our other
subsidiaries. CoreSite, L.P. is a Delaware limited partnership of which we are the sole general
partner and to which we refer in this prospectus as our operating partnership, and CoreSite
Services, Inc., a Delaware corporation, is our taxable REIT subsidiary, or TRS.
You should rely only on the information contained in this prospectus, in an accompanying
prospectus supplement or incorporated by reference herein or therein. We have not authorized anyone
to provide you with information or make any representation that is different. If anyone provides
you with different or inconsistent information, you should not rely on it. This prospectus and any
accompanying prospectus supplement do not constitute an offer to sell or a solicitation of an offer
to buy any securities other than the registered securities to which they relate, and this
prospectus and any accompanying prospectus supplement do not constitute an offer to sell or the
solicitation of an offer to buy securities in any jurisdiction where, or to any person to whom, it
is unlawful to make such an offer or solicitation. You should not assume that the information
contained in this prospectus and any accompanying prospectus supplement is correct on any date
after the respective dates of the prospectus and such prospectus supplement or supplements, as
applicable, even though this prospectus and such prospectus supplement or supplements are delivered
or shares are sold pursuant to the prospectus and such prospectus supplement or supplements at a
later date. Since the respective dates of the prospectus contained in this registration statement
and any accompanying prospectus supplement, our business, financial condition, results of
operations and prospects may have changed. We may only use this prospectus to sell the securities
if it is accompanied by a prospectus supplement.
CORESITE REALTY CORPORATION
We are an owner, developer and operator of strategically located data centers in some of the
largest and fastest growing data center markets in the United States, including Los Angeles, the
San Francisco Bay and Northern Virginia areas, Chicago and New York City. Our data centers feature
advanced power, cooling and security systems, including twenty-four hours a day, seven days a week
security staffing, and many are points of dense network interconnection. We are able to satisfy the
full spectrum of our customers data center requirements by providing data center space ranging in
size from an entire building or large dedicated suite to a cage or cabinet. We lease our space to a
broad and growing customer base ranging from enterprise customers to less space-intensive, more
network-centric customers. Our operational flexibility allows us to selectively lease data center
space to its highest and best use depending on customer demand, regional economies and property
characteristics.
The first data center in our portfolio was purchased in 2000 and since then we have continued
to acquire, redevelop, develop and operate these types of facilities. Our properties are
self-managed, including with respect to construction project management in connection with our
redevelopment and development initiatives. As of June 30, 2011, our property portfolio included 11
operating data center facilities, one data center under construction and one development site,
which collectively comprised over 2.0 million net rentable square feet, or NRSF, of which
approximately 1.1 million NRSF represented existing data center space.
The first data center in our portfolio was purchased in 2000 through an investment by a real
estate fund affiliated with The Carlyle Group, or Carlyle. Since the acquisition of that data
center, we have expanded our portfolio through additional investments by various Carlyle real
estate funds or their affiliates. Although our data center portfolio has been owned by these
various Carlyle real estate funds or their affiliates, all of our data centers have been operated
or managed by our management team since they initially were acquired or developed.
We are a fully integrated, self-administered, and self-managed real estate investment trust,
or REIT. As the sole general partner of our operating partnership, we are engaged in the business
of ownership, acquisition, construction and management of technology-related real estate.
CoreSite Realty Corporation was formed as a Maryland corporation on February 17, 2010. While
we initially elected to be treated as an S corporation for federal income tax purposes, we
terminated our S corporation status shortly before completion of our initial public offering
(thereby ending the S corporation tax year), elected to be a REIT for federal income tax purposes
for our short taxable year ended on December 31, 2010 and intend to qualify as a REIT for federal
income tax purposes for subsequent taxable years. We also conduct certain activities through our
TRS, CoreSite Services, Inc., a Delaware corporation.
Our corporate offices are located at 1050 17th Street, Suite 800, Denver, CO 80265. Our
telephone number is (866) 777-2673. Our website is www.coresite.com. The information contained on,
or accessible through, our website is not incorporated by reference into this prospectus and should
not be considered a part of this prospectus or any applicable prospectus supplement.
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RISK FACTORS
Investment in any securities offered pursuant to this prospectus involves risks. You should
carefully consider the risk factors incorporated by reference to our most recent Annual Report on
Form 10-K and subsequent quarterly reports on Form 10-Q and the other information contained in this
prospectus, as updated by our subsequent filings under the Securities Exchange Act of 1934, as
amended, or the Exchange Act, and the risk factors and other information contained in the
applicable prospectus supplement before acquiring any of such securities.
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the Securities and
Exchange Commission, or the SEC, using a shelf registration process. Under this process, we may
sell debt securities, common stock, preferred stock, depositary shares, warrants, rights and units
in one or more offerings up to a total dollar amount of $800,000,000. This prospectus provides you
with a general description of the securities we may offer. Each time we sell securities, we will
provide a prospectus supplement containing specific information about the terms of the applicable
offering. Such prospectus supplement may add, update or change information contained in this
prospectus. You should read this prospectus and the applicable prospectus supplement together with
additional information described under the heading Where You Can Find More Information.
We may offer the securities directly, through agents, or to or through underwriters. The
applicable prospectus supplement will describe the terms of the plan of distribution and set forth
the names of any underwriters involved in the sale of the securities. See Plan of Distribution
for more information. No securities may be sold without delivery of a prospectus supplement
describing the method and terms of the offering of those securities.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other information with the
SEC. You may read and copy any document we file with the SEC at the public reference room of the
SEC, 100 F Street, N.E., Washington, DC 20549. Information about the operation of the public
reference room may be obtained by calling the SEC at 1-800-SEC-0330. Copies of all or a portion of
the registration statement can be obtained from the public reference room of the SEC upon payment
of prescribed fees. Our SEC filings, including our registration statement, are also available to
you on the SECs website, www.sec.gov.
We have filed with the SEC a registration statement on Form S-3, of which this prospectus is a
part, including exhibits, schedules and amendments filed with, or incorporated by reference in,
this registration statement, under the Securities Act of 1933, as amended, or the Securities Act,
with respect to the securities registered hereby. This prospectus and any applicable prospectus
supplement do not contain all of the information set forth in the registration statement and
exhibits and schedules to the registration statement. For further information with respect to our
company and the securities registered hereby, reference is made to the registration statement,
including the exhibits to the registration statement. Statements contained in this prospectus and
any applicable prospectus supplement as to the contents of any contract or other document referred
to in, or incorporated by reference in, this prospectus and any applicable prospectus supplement
are not necessarily complete and, where that contract is an exhibit to the registration statement,
each statement is qualified in all respects by the exhibit to which the reference relates.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The SEC allows us to incorporate by reference into this prospectus the information that we
file with it, which means that we can disclose important information to you by referring you to
those documents. The incorporated documents contain significant information about us, our business
and our finances. Any information contained in this prospectus or in any document incorporated or
deemed to be incorporated by reference in this prospectus will be deemed to have been modified or
superseded to the extent that a statement contained in this prospectus, in any other document we
subsequently file with the SEC that is also incorporated or deemed to be incorporated by reference
in this prospectus or in the applicable prospectus supplement, modifies or supersedes the original
statement. Any
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statement so modified or superseded will not be deemed, except as so modified or superseded,
to be a part of this prospectus. We incorporate by reference the following documents we filed with
the SEC:
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our Annual Report on Form 10-K for the year ended December 31, 2010 filed with the
SEC on March 11, 2011; |
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our Definitive Proxy Statement on Schedule 14A filed with the SEC on April 4, 2011,
as amended on May 6, 2011; |
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our Quarterly Reports on Form 10-Q for the quarters ended March 31 and June 30, 2011
filed with the SEC on May 6, 2011 and August 5, 2011, respectively; |
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our Current Reports on Form 8-K or 8-K/A, as applicable, filed with the SEC on January 6, 2011, February 11, 2011, February 25, 2011, March 1, 2011, May
24, 2011 and August 15, 2011; |
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the description of our common stock included in our registration statement on Form
8-A filed with the SEC on September 21, 2010; and |
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all documents filed by us with the SEC pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this prospectus and prior to the
termination of the offering of the underlying securities. |
We also specifically incorporate by reference any documents filed by us with the SEC pursuant
to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of the initial
registration statement and prior to effectiveness of the registration statement.
To the extent that any information contained in any current report on Form 8-K, or any exhibit
thereto, was furnished to, rather than filed with, the SEC, such information or exhibit is
specifically not incorporated by reference in this prospectus.
We will provide without charge to each person, including any beneficial owner, to whom a
prospectus is delivered, on written or oral request of that person, a copy of any or all of the
documents we are incorporating by reference into this prospectus, other than exhibits to those
documents unless those exhibits are specifically incorporated by reference into those documents.
A request should be addressed in writing to CoreSite Realty Corporation, at 1050 17th Street, Suite
800, Denver, CO 80265 or by telephone at (866) 777-2673.
FORWARD-LOOKING STATEMENTS
This prospectus, any accompanying prospectus supplement and the information incorporated by
reference herein or therein contain certain forward-looking statements that relate to our future
performance and plans, results of operations, capital expenditures, acquisitions, divestitures and
operating costs, which are made pursuant to the safe-harbor provisions of Section 21E of the
Exchange Act and Section 27A of the Securities Act. Because these forward-looking statements
involve numerous known and unknown risks and uncertainties, there are important factors that could
cause our actual results to differ materially from those in the forward-looking statements, and you
should not rely on the forward-looking statements as predictions of future events. Forward-looking
statements are based on managements beliefs, assumptions made by, and information currently
available to, management that may be incorrect or imprecise and we may not be able to realize them.
These forward-looking statements are identified by their use of terms and phrases such as
anticipate, believe, could, estimate, expect, intend, may, plan, predict,
project, will, continue and other similar terms and phrases, including references to
assumptions and forecasts of future results.
The following factors, among others, could cause actual results and future events to differ
materially from those set forth or contemplated in the forward-looking statements:
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the geographic concentration of our data centers in certain markets and any adverse
developments in local economic conditions or the demand for data center space in these
markets; |
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fluctuations in interest rates and increased operating costs; |
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difficulties in identifying properties to acquire and completing acquisitions; |
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the significant competition in our industry and an inability to lease vacant space,
renew existing leases or release space as leases expire; |
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lack of sufficient customer demand to realize expected returns on our investments to
expand our property portfolio; |
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decreased revenue from costs and disruptions associated with any failure of our physical
infrastructure or services; |
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our ability to lease available space to existing or new customers; |
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our failure to obtain necessary outside financing; |
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our failure to qualify or maintain our status as a REIT; |
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financial market fluctuations; |
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changes in real estate and zoning laws and increases in real property tax rates; |
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delays or disruptions in third-party network connectivity; |
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inability to renew net leases on the data center properties we lease; and |
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other factors affecting the real estate industry generally. |
Except as required by law, we do not undertake any responsibility to release publicly any
revisions to these forward-looking statements to take into account events or circumstances that
occur after the date of this prospectus or to update you on the occurrence of any unanticipated
events which may cause actual results to differ from those expressed or implied by the
forward-looking statements contained in this prospectus.
Our success also depends upon economic trends generally, various market conditions and
fluctuations and those other risk factors discussed under the heading Risk Factors herein and
under the heading Risk Factors in our most recent annual report on Form 10-K and subsequent
quarterly reports on Form 10-Q and in our other filings with the SEC that are incorporated by
reference in this prospectus. We caution you not to place undue reliance on forward-looking
statements, which reflect our analysis only and speak as of the date of this prospectus or as of
the dates indicated in the statements. All of our forward-looking statements, including those
included and incorporated by reference in this prospectus, are qualified in their entirety by this
statement. We undertake no obligation to update any forward-looking statement to conform the
statement to actual results or changes in our expectations.
4
USE OF PROCEEDS
Unless otherwise set forth in a prospectus supplement, we plan to contribute the net proceeds
from any sale of the securities pursuant to this prospectus to our operating partnership. Our
operating partnership will subsequently use the net proceeds received from us to potentially
acquire or develop additional properties and for general corporate purposes, which may include
payment of dividends, the repayment of existing indebtedness and capital expenditures for
improvements to the properties in our portfolio. Pending application of cash proceeds, we will
invest the net proceeds in interest-bearing accounts and short-term, interest-bearing securities
that are consistent with our intention to continue to qualify as a REIT for federal income tax
purposes. Further details regarding the use of the net proceeds of a specific series or class of
the securities will be set forth in the applicable prospectus supplement.
RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED DIVIDENDS
The following table sets forth our ratio of earnings (loss) to combined fixed charges and
preferred dividends for us (referred to in the table as The Company) for the six months ended
June 30, 2011 and for the period from September 28, 2010 to December 31, 2010 and for our
predecessor (referred to in the table as The Predecessor), for the period from January 1, 2010 to
September 27, 2010 and for the years ending December 31, 2009, 2008, 2007 and 2006. For the purpose
of computing the ratio of earnings to combined fixed charges and preferred dividends, and the
amount of coverage deficiency, earnings (loss) have been calculated by adding fixed charges,
excluding capitalized interest, to net income (loss). Fixed charges and preferred dividends consist
of interest costs, whether expensed or capitalized, amortization of deferred financing costs,
whether expensed or capitalized, preferred dividends and estimated interest within rental expense.
This information below is given on an unaudited historical basis.
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The Company |
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The Predecessor |
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For the |
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For the |
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period from |
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period from |
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Six Months |
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September 28, |
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January 1, |
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Ended |
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2010 to |
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2010 to |
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Year Ended |
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Year Ended |
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Year Ended |
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Year Ended |
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June 30, |
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December 31, |
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September 27, |
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December 31, |
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December 31, |
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December 31, |
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December 31, |
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2011 |
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2010 |
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2010(1) |
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2009 |
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2008 |
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2007 |
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2006 (4) |
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Ratio of
earnings (loss) to
combined fixed
charges
(2)(3) |
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(0.95 |
) |
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(2.11 |
) |
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0.39 |
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(0.71 |
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(2.18 |
) |
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2.08 |
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N/A |
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(1) |
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Our initial public offering was completed on September 28, 2010. |
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(2) |
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The Company and its Predecessor did not have any preferred stock outstanding for the
periods presented. |
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(3) |
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The shortfall of earnings (loss) to combined fixed charges and preferred dividends for
the Company for the six months ended June 30, 2011 and for the period from September 28, 2010
to December 31, 2010 was $11.8 million and $10.7 million, respectively, and for the
Predecessor for the period from January 1, 2010 to September 27, 2010 and for the years ended
December 31, 2009 and 2008 was $2.0 million, $7.3 million and $14.2 million, respectively. |
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(4) |
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The Predecessor acquired its first property in December 2006 and did not commence
operations until 2007. Accordingly, the computation of earnings to combined fixed charges
does not include operating results for the year ended December 31, 2006. |
5
DESCRIPTION OF DEBT SECURITIES
This prospectus describes the general terms and provisions of our debt securities. When we
offer to sell a particular series of debt securities, we will describe the specific terms of the
series in a supplement to this prospectus. We also will indicate in the prospectus supplement
whether the general terms and provisions described in this prospectus apply to a particular series
of debt securities. To the extent the information contained in the prospectus supplement differs
from this summary description, you should rely on the information in the prospectus supplement.
The debt securities will be issued under an indenture between us and a trustee. We have
summarized select portions of the indenture below. The summary is not complete. The form of the
indenture has been filed as an exhibit to the registration statement and you should read the
indenture carefully for provisions that may be important to you. Capitalized terms used in the
summary and not defined in this prospectus have the meaning specified in the indenture.
General
The terms of each series of debt securities will be established by or pursuant to a resolution
of our board of directors and set forth or determined in the manner provided in an officers
certificate or by a supplemental indenture. The particular terms of each series of debt securities
will be described in a prospectus supplement relating to such series, including any pricing
supplement.
Each indenture will provide that we may, but need not, designate more than one trustee for the
indenture, each with respect to one or more series of our debt securities. Any trustee under an
indenture may resign or be removed with respect to one or more series of our debt securities, and a
successor trustee may be appointed to act with respect to that series. If two or more persons are
acting as trustee to different series of our debt securities, each trustee shall be a trustee of a
trust under the applicable indenture separate and apart from the trust administered by any other
trustee and, except as otherwise indicated in this prospectus, any action taken by a trustee may be
taken by that trustee with respect to, and only with respect to, the one or more series of debt
securities for which it is trustee under the applicable indenture.
Unless otherwise specified in a supplement to this prospectus, the debt securities will be our
direct, unsecured obligations and will rank equally with all of our other unsecured and
unsubordinated indebtedness. We can issue an unlimited amount of debt securities under the
indenture that may be in one or more series with the same or various maturities, at par, at a
premium, or at a discount. We will set forth in a prospectus supplement, including any pricing
supplement, relating to any series of debt securities being offered, the aggregate principal amount
and the following terms of the debt securities, to the extent applicable:
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the title of the debt securities; |
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the price or prices (expressed as a percentage of the principal amount) at which we will
sell the debt securities; |
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any limit on the aggregate principal amount of the debt securities; |
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the date or dates on which we will pay the principal on the debt securities; |
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the rate or rates (which may be fixed or variable) per annum or the method used to
determine the rate or rates (including any commodity, commodity index, stock exchange index
or financial index) at which the debt securities will bear interest, the date or dates from
which interest will accrue, the date or dates on which interest will commence and be
payable and any regular record date for the interest payable on any interest payment date; |
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the place or places where principal of, premium and interest on the debt securities will
be payable, where debt securities may be surrendered for registration of transfer and
exchange and where notices or demands to or upon us relating to debt securities and the
indenture may be served; |
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the terms and conditions upon which we may redeem the debt securities; |
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any obligation we have to redeem or purchase the debt securities pursuant to any sinking
fund or analogous provisions or at the option of a holder of debt securities; |
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the dates on which and the price or prices at which we will repurchase debt securities
at the option of the holders of debt securities and other detailed terms and provisions of
these repurchase obligations; |
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the denominations in which the debt securities will be issued, if other than
denominations of $1,000 and any integral multiple thereof; |
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whether the debt securities will be issued in the form of certificated debt securities
or global debt securities; |
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the portion of principal amount of the debt securities payable upon declaration of
acceleration of the maturity date, if other than the principal amount; |
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the currency of denomination of the debt securities; |
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the designation of the currency, currencies or currency units in which payment of
principal of, premium and interest on the debt securities will be made; |
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if payments of principal of, premium or interest on the debt securities will be made in
one or more currencies or currency units other than that or those in which the debt
securities are denominated, the manner in which the exchange rate with respect to these
payments will be determined; |
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the manner in which the amounts of payment of principal of, premium or interest on the
debt securities will be determined, if these amounts may be determined by reference to an
index based on a currency or currencies other than that in which the debt securities are
denominated or designated to be payable or by reference to a commodity, commodity index,
stock exchange index or financial index; |
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any provisions relating to any security provided for the debt securities; |
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any addition to or change in the events of default described in this prospectus or in
the indenture with respect to the debt securities and any change in the acceleration
provisions described in this prospectus or in the indenture with respect to the debt
securities; |
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any addition to or change in the covenants described in this prospectus or in the
indenture with respect to the debt securities; |
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any other terms of the debt securities, which may supplement, modify or delete any
provision of the indenture as it applies to that series; |
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a discussion of any material federal income tax consequences applicable to an investment
in such debt securities; |
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any depositaries, interest rate calculation agents, exchange rate calculation agents or
other agents with respect to the debt securities; |
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any provisions relating to conversion of any debt securities, including if applicable,
the conversion price, the conversion period, provisions as to whether conversion will be
mandatory, at the option of the holders thereof or at our option, the events requiring an
adjustment of the conversion price and provisions affecting conversion if such debt
securities are redeemed; and |
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whether the debt securities will be senior debt securities or subordinated debt
securities and, if applicable, a description of the subordination terms thereof. |
In addition, the indenture does not limit our ability to issue convertible or subordinated
debt securities. Any conversion or subordination provisions of a particular series of debt
securities will be set forth in the officers certificate or supplemental indenture related to that
series of debt securities and will be described in the relevant prospectus supplement. Such terms
may include provisions for conversion, either mandatory, at the option of the holder or at our
option, in which case the number of shares of common stock or other securities or the amount of
cash to be received by the holders of debt securities would be calculated as of a time and in the
manner stated in the prospectus supplement.
7
We may issue debt securities that provide for an amount less than their stated principal
amount to be due and payable upon declaration of acceleration of their maturity pursuant to the
terms of the indenture. We will provide you with information on the other special considerations
applicable to any of these debt securities in the applicable prospectus supplement.
If we denominate the purchase price of any of the debt securities in a foreign currency or
currencies or a foreign currency unit or units, or if the principal of and any premium and interest
on any series of debt securities is payable in a foreign currency or currencies or a foreign
currency unit or units, we will provide you with information on the restrictions, elections,
specific terms and other information with respect to that issue of debt securities and such foreign
currency or currencies or foreign currency unit or units in the applicable prospectus supplement.
Transfer and Exchange
Each debt security will be represented by either one or more global securities registered in
the name of The Depository Trust Company, as Depositary, or a nominee (we will refer to any debt
security represented by a global debt security as a book-entry debt security), or a certificate
issued in definitive registered form (we will refer to any debt security represented by a
certificated security as a certificated debt security) as set forth in the applicable prospectus
supplement. Except as set forth under the heading Global Debt Securities and Book-Entry System
below, book-entry debt securities will not be issuable in certificated form.
Certificated Debt Securities. You may transfer or exchange certificated debt securities at any
office we maintain for this purpose in accordance with the terms of the indenture. No service
charge will be made for any transfer or exchange of certificated debt securities, but we may
require payment of a sum sufficient to cover any tax or other governmental charge payable in
connection with a transfer or exchange.
You may effect the transfer of certificated debt securities and the right to receive the
principal of, and premium and interest on, certificated debt securities only by surrendering the
certificate representing those certificated debt securities and either reissuance by us or the
trustee of the certificate to the new holder or the issuance by us or the trustee of a new
certificate to the new holder.
Global Debt Securities and Book-Entry System. Each global debt security representing
book-entry debt securities will be deposited with, or on behalf of, the depositary, and registered
in the name of the depositary or a nominee of the depositary.
We will require the depositary to agree to follow the following procedures with respect to
book-entry debt securities.
Ownership of beneficial interests in book-entry debt securities will be limited to persons who
have accounts with the depositary for the related global debt security, which we refer to as
participants, or persons who may hold interests through participants. Upon the issuance of a global
debt security, the depositary will credit, on its book-entry registration and transfer system, the
participants accounts with the respective principal amounts of the book-entry debt securities
represented by such global debt security beneficially owned by such participants. The accounts to
be credited will be designated by any dealers, underwriters or agents participating in the
distribution of the book-entry debt securities. Ownership of book-entry debt securities will be
shown on, and the transfer of such ownership interests will be effected only through, records
maintained by the depositary for the related global debt security (with respect to interests of
participants) and on the records of participants (with respect to interests of persons holding
through participants). The laws of some states may require that certain purchasers of securities
take physical delivery of such securities in definitive form. These laws may impair the ability to
own, transfer or pledge beneficial interests in book-entry debt securities.
So long as the depositary for a global debt security, or its nominee, is the registered owner
of that global debt security, the depositary or its nominee, as the case may be, will be considered
the sole owner or holder of the book-entry debt securities represented by such global debt security
for all purposes under the indenture. Except as described below, beneficial owners of book-entry
debt securities will not be entitled to have securities registered in their names, will not receive
or be entitled to receive physical delivery of a certificate in definitive form representing
securities and will not be considered the owners or holders of those securities under the
indenture. Accordingly, each
8
person beneficially owning book-entry debt securities must rely on the procedures of the
depositary for the related global debt security and, if such person is not a participant, on the
procedures of the participant through which such person owns its interest, to exercise any rights
of a holder under the indenture.
We understand, however, that under existing industry practice, the depositary will authorize
the persons on whose behalf it holds a global debt security to exercise certain rights of holders
of debt securities, and the indenture provides that we, the trustee and our respective agents will
treat as the holder of a debt security the persons specified in a written statement of the
depositary with respect to that global debt security for purposes of obtaining any consents or
directions required to be given by holders of the debt securities pursuant to the indenture.
We will make payments of principal of, and premium and interest on, book-entry debt securities
to the depositary or its nominee, as the case may be, as the registered holder of the related
global debt security. We, the trustee and any other agent of ours or agent of the trustee will not
have any responsibility or liability for any aspect of the records relating to or payments made on
account of beneficial ownership interests in a global debt security or for maintaining, supervising
or reviewing any records relating to beneficial ownership interests.
We expect that the depositary, upon receipt of any payment of principal of, and premium or
interest on, a global debt security, will immediately credit participants accounts with payments
in amounts proportionate to the respective amounts of book-entry debt securities held by each
participant as shown on the records of such depositary. We also expect that payments by
participants to owners of beneficial interests in book-entry debt securities held through those
participants will be governed by standing customer instructions and customary practices, as is now
the case with the securities held for the accounts of customers registered in street name, and
will be the responsibility of those participants.
We will issue certificated debt securities in exchange for each global debt security if the
depositary is at any time unwilling or unable to continue as depositary or ceases to be a clearing
agency registered under the Exchange Act and a successor depositary registered as a clearing agency
under the Exchange Act is not appointed by us within 90 days. In addition, we may at any time and
in our sole discretion determine not to have the book-entry debt securities of any series
represented by one or more global debt securities and, in that event, will issue certificated debt
securities in exchange for the global debt securities of that series. Any certificated debt
securities issued in exchange for a global debt security will be registered in such name or names
as the depositary shall instruct the trustee. We expect that such instructions will be based upon
directions received by the depositary from participants with respect to ownership of book-entry
debt securities relating to such global debt security.
We have obtained the foregoing information concerning the depositary and the depositarys
book-entry system from sources we believe to be reliable, but we take no responsibility for the
accuracy of this information.
No Protection in the Event of a Change of Control
Unless we state otherwise in the applicable prospectus supplement, the debt securities will
not contain any provisions that may afford holders of the debt securities protection in the event
we have a change in control or in the event of a highly leveraged transaction (whether or not such
transaction results in a change in control) that could adversely affect holders of debt securities.
Covenants
We will set forth in the applicable prospectus supplement any restrictive covenants applicable
to any issue of debt securities.
Consolidation, Merger and Sale of Assets
We may not consolidate with or merge with or into, or convey, transfer or lease all or
substantially all of our properties and assets to, any person, which we refer to as a successor
person, unless:
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we are the surviving corporation or the successor person (if other than us) is a
corporation organized and validly existing under the laws of any U.S. domestic jurisdiction
and expressly assumes our obligations on the debt securities and under the indenture; |
9
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immediately after giving effect to the transaction, no event of default, and no event
which, after notice or lapse of time, or both, would become an event of default, shall have
occurred and be continuing under the indenture; and |
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certain other conditions are met. |
Events of Default
Event of default means, with respect to any series of debt securities, any of the following:
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default in the payment of any interest upon any debt security of that series when it
becomes due and payable, and continuance of that default for a period of 30 days (unless
the entire amount of the payment is deposited by us with the trustee or with a paying agent
prior to the expiration of the 30-day period); |
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default in the payment of principal of or premium on any debt security of that series
when due and payable; |
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default in the performance or breach of any other covenant or warranty by us in the
indenture (other than a covenant or warranty that has been included in the indenture solely
for the benefit of a series of debt securities other than that series), which default
continues uncured for a period of 60 days after we receive written notice from the trustee
or we and the trustee receive written notice from the holders of not less than a majority
in principal amount of the outstanding debt securities of that series as provided in the
indenture; |
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certain events of bankruptcy, insolvency or reorganization of our company; and |
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any other event of default provided with respect to debt securities of that series that
is described in the applicable prospectus supplement accompanying this prospectus. |
No event of default with respect to a particular series of debt securities (except as to
certain events of bankruptcy, insolvency or reorganization) necessarily constitutes an event of
default with respect to any other series of debt securities. The occurrence of an event of default
may constitute an event of default under our bank credit agreements in existence from time to time.
In addition, the occurrence of certain events of default or an acceleration under the indenture may
constitute an event of default under certain of our other indebtedness outstanding from time to
time.
If an event of default with respect to debt securities of any series at the time outstanding
occurs and is continuing, then the trustee or the holders of not less than a majority in principal
amount of the outstanding debt securities of that series may, by a notice in writing to us (and to
the trustee if given by the holders), declare to be due and payable immediately the principal (or,
if the debt securities of that series are discount securities, that portion of the principal amount
as may be specified in the terms of that series) of, and accrued and unpaid interest, if any, on
all debt securities of that series. In the case of an event of default resulting from certain
events of bankruptcy, insolvency or reorganization, the principal (or such specified amount) of and
accrued and unpaid interest, if any, on all outstanding debt securities will become and be
immediately due and payable without any declaration or other act on the part of the trustee or any
holder of outstanding debt securities. At any time after a declaration of acceleration with respect
to debt securities of any series has been made, but before a judgment or decree for payment of the
money due has been obtained by the trustee, the holders of a majority in principal amount of the
outstanding debt securities of that series may rescind and annul the acceleration if all events of
default, other than the non-payment of accelerated principal and interest, if any, with respect to
debt securities of that series, have been cured or waived as provided in the indenture. We refer
you to the prospectus supplement relating to any series of debt securities that are discount
securities for the particular provisions relating to acceleration of a portion of the principal
amount of such discount securities upon the occurrence of an event of default.
The indenture provides that the trustee will be under no obligation to exercise any of its
rights or powers under the indenture at the request of any holder of outstanding debt securities,
unless the trustee receives indemnity satisfactory to it against any loss, liability or expense.
Subject to certain rights of the trustee, the holders of a majority in principal amount of the
outstanding debt securities of any series will have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the trustee or exercising any trust or
power conferred on the trustee with respect to the debt securities of that series.
10
No holder of any debt security of any series will have any right to institute any proceeding,
judicial or otherwise, with respect to the indenture or for the appointment of a receiver or
trustee, or for any remedy under the indenture, unless:
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that holder previously has given to the trustee written notice of a continuing event of
default with respect to debt securities of that series; and |
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the holders of at least a majority in principal amount of the outstanding debt
securities of that series have made written request, and offered reasonable indemnity, to
the trustee to institute the proceeding as trustee, and the trustee has not received from
the holders of a majority in principal amount of the outstanding debt securities of that
series a direction inconsistent with that request and has failed to institute the
proceeding within 60 days. |
Notwithstanding the foregoing, the holder of any debt security will have an absolute and
unconditional right to receive payment of the principal of, premium and any interest on that debt
security on or after the due dates expressed in that debt security and to institute suit for the
enforcement of payment.
The indenture requires us, within 120 days after the end of our fiscal year, to furnish to the
trustee a statement as to compliance with the indenture. The indenture provides that the trustee
may withhold notice to the holders of debt securities of any series of any default or event of
default (except in payment on any debt securities of that series) with respect to debt securities
of that series if it in good faith determines that withholding notice is in the interest of the
holders of those debt securities.
Modification and Waiver
We may modify and amend the indenture with the consent of the holders of at least a majority
in principal amount of the outstanding debt securities of each series affected by the modifications
or amendments. We may not make any modification or amendment without the consent of the holders of
each affected debt security then outstanding if that amendment will:
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reduce the amount of debt securities whose holders must consent to an amendment or
waiver; |
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reduce the rate of or extend the time for payment of interest (including default
interest) on any debt security; |
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reduce the principal of or premium on or change the fixed maturity of any debt security
or reduce the amount of, or postpone the date fixed for, the payment of any sinking fund or
analogous obligation with respect to any series of debt securities; |
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reduce the principal amount of discount securities payable upon acceleration of
maturity; |
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waive a default in the payment of the principal of, premium or interest on any debt
security (except a rescission of acceleration of the debt securities of any series by the
holders of at least a majority in aggregate principal amount of the then outstanding debt
securities of that series and a waiver of the payment default that resulted from such
acceleration); |
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make the principal of or premium or interest on any debt security payable in currency
other than that stated in the debt security; |
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make any change to certain provisions of the indenture relating to, among other things,
the right of holders of debt securities to receive payment of the principal of, premium and
interest on those debt securities and to institute suit for the enforcement of any such
payment and to waivers or amendments; or |
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waive a redemption payment with respect to any debt security. |
Except for certain specified provisions, the holders of at least a majority in principal
amount of the outstanding debt securities of any series may on behalf of the holders of all debt
securities of that series waive our compliance with provisions of the indenture. The holders of a
majority in principal amount of the outstanding debt securities of any series may on behalf of the
holders of all the debt securities of such series waive any past default under the
11
indenture with respect to that series and its consequences, except a default in the payment of
the principal of, or premium or any interest on, any debt security of that series or in respect of
a covenant or provision, which cannot be modified or amended without the consent of the holder of
each outstanding debt security of the series affected; provided, however, that the holders of a
majority in principal amount of the outstanding debt securities of any series may rescind an
acceleration and its consequences, including any related payment default that resulted from the
acceleration.
Defeasance of Debt Securities and Certain Covenants in Certain Circumstances
Legal Defeasance. The indenture provides that, unless otherwise provided by the terms of the
applicable series of debt securities, we may be discharged from any and all obligations in respect
of the debt securities of any series (except for certain obligations to register the transfer or
exchange of debt securities of such series, to replace stolen, lost or mutilated debt securities of
such series, and to maintain paying agencies and certain provisions relating to the treatment of
funds held by paying agents). We will be so discharged upon the deposit with the trustee, in trust,
of money and/or U.S. government obligations or, in the case of debt securities denominated in a
single currency other than U.S. dollars, foreign government obligations, that, through the payment
of interest and principal in accordance with their terms, will provide money in an amount
sufficient in the opinion of a nationally recognized firm of independent public accountants to pay
and discharge each installment of principal, premium and interest on and any mandatory sinking fund
payments in respect of the debt securities of that series on the stated maturity of those payments
in accordance with the terms of the indenture and those debt securities.
This discharge may occur only if, among other things, we have delivered to the trustee an
opinion of counsel stating that we have received from, or there has been published by, the United
States Internal Revenue Service, or IRS, a ruling or, since the date of execution of the indenture,
there has been a change in the applicable federal income tax law, in either case to the effect
that, and based thereon such opinion shall confirm that, the holders of the debt securities of that
series will not recognize income, gain or loss for federal income tax purposes as a result of the
deposit, defeasance and discharge and will be subject to federal income tax on the same amounts and
in the same manner and at the same times as would have been the case if the deposit, defeasance and
discharge had not occurred.
Defeasance of Certain Covenants. The indenture provides that, unless otherwise provided by the
terms of the applicable series of debt securities, upon compliance with certain conditions:
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we may omit to comply with the covenant described under the heading Consolidation,
Merger and Sale of Assets and certain other covenants set forth in the indenture, as well
as any additional covenants that may be set forth in the applicable prospectus supplement;
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any omission to comply with those covenants will not constitute a default or an event of
default with respect to the debt securities of that series, or covenant defeasance. |
The conditions include:
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depositing with the trustee money and/or U.S. government obligations or, in the case of
debt securities denominated in a single currency other than U.S. dollars, foreign
government obligations, that, through the payment of interest and principal in accordance
with their terms, will provide money in an amount sufficient in the opinion of a nationally
recognized firm of independent public accountants to pay and discharge each installment of
principal of, premium and interest on and any mandatory sinking fund payments in respect of
the debt securities of that series on the stated maturity of those payments in accordance
with the terms of the indenture and those debt securities; and |
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delivering to the trustee an opinion of counsel to the effect that the holders of the
debt securities of that series will not recognize income, gain or loss for federal income
tax purposes as a result of the deposit and related covenant defeasance and will be subject
to federal income tax on the same amounts and in the same manner and at the same times as
would have been the case if the deposit and related covenant defeasance had not occurred. |
Covenant Defeasance and Events of Default. In the event we exercise our option to effect
covenant defeasance with respect to any series of debt securities and the debt securities of that
series are declared due and payable because of the occurrence of any event of default, the amount
of money and/or U.S. government obligations
12
or foreign government obligations on deposit with the trustee will be sufficient to pay
amounts due on the debt securities of that series at the time of their stated maturity but may not
be sufficient to pay amounts due on the debt securities of that series at the time of the
acceleration resulting from the event of default. In such a case, we would remain liable for those
payments.
Foreign Government Obligations means, with respect to debt securities of any series that are
denominated in a currency other than U.S. dollars:
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direct obligations of the government that issued or caused to be issued such currency
for the payment of which obligations its full faith and credit is pledged which are not
callable or redeemable at the option of the issuer thereof; or |
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obligations of a person controlled or supervised by or acting as an agency or
instrumentality of that government the timely payment of which is unconditionally
guaranteed as a full faith and credit obligation by that government which are not callable
or redeemable at the option of the issuer thereof. |
Governing Law
The indenture and the debt securities will be governed by, and construed in accordance with,
the internal laws of the State of New York.
13
DESCRIPTION OF COMMON STOCK
General
This prospectus describes the general terms of our common stock. For a more detailed
description of these securities, you should read the applicable provisions of the Maryland General
Corporation Law, or MGCL, and our charter and bylaws. When we offer to sell a particular class or
series of stock, we will describe the specific terms of the series in a prospectus supplement.
Accordingly, for a description of the terms of any class or series of stock, you must refer to both
the prospectus supplement relating to that class or series and the description of stock in this
prospectus. To the extent the information contained in the prospectus supplement differs from this
summary description, you should rely on the information in the prospectus supplement.
Our charter provides that we may issue up to 100,000,000 shares of common stock, par value
$0.01 per share, or common stock. Our charter authorizes our board of directors, with the approval
of a majority of the entire board and without any action by our stockholders, to amend our charter
to increase or decrease the aggregate number of shares of stock or the number of authorized shares
of stock of any class or series. As of September 26, 2011, there were
19,850,442 shares of our common
stock issued and outstanding.
Under Maryland law, stockholders generally are not personally liable for our debts or
obligations solely as a result of their status as stockholders.
All shares of our common stock offered hereby will be duly authorized, fully paid and
nonassessable. Subject to the preferential rights of any other class or series of stock and to the
provisions of our charter regarding the restrictions on ownership and transfer of stock, holders of
shares of our common stock are entitled to receive dividends on such stock if, as and when
authorized by our board of directors out of assets legally available therefor and declared by us
and to share ratably in the assets of our company legally available for distribution to our
stockholders in the event of our liquidation, dissolution or winding up after payment of or
adequate provision for all known debts and liabilities of our company.
Subject to the provisions of our charter regarding the restrictions on ownership and transfer
of stock, each outstanding share of our common stock entitles the holder to one vote on all matters
submitted to a vote of stockholders, including the election of directors and, except as provided
with respect to any other class or series of stock, the holders of such shares will possess the
exclusive voting power. There is no cumulative voting in the election of our board of directors,
which means that the holders of a majority of the outstanding shares of our common stock can elect
all of the directors then standing for election and the holders of the remaining shares will not be
able to elect any directors.
Holders of shares of our common stock have no preference, conversion, exchange, sinking fund
or redemption rights, and have no preemptive rights to subscribe for any of our securities. Our
charter provides that stockholders generally have no appraisal rights unless our board of directors
determines prospectively that appraisal rights will apply to one or more transactions in which
holders of our common stock would otherwise be entitled to exercise appraisal rights. Subject to
the provisions of our charter regarding the restrictions on ownership and transfer of stock, shares
of our common stock will have equal dividend, liquidation and other rights.
Under the MGCL, a Maryland corporation generally cannot dissolve, amend its charter, merge,
sell all or substantially all of its assets, engage in a statutory share exchange or engage in
similar transactions outside the ordinary course of business unless such action is advised by its
board of directors and approved by the affirmative vote of stockholders holding at least two-thirds
of the votes entitled to be cast on the matter unless a lesser percentage (but not less than a
majority of all of the votes entitled to be cast on the matter) is set forth in the corporations
charter. Under the MGCL, the term substantially all of the companys assets is not defined and
is, therefore, subject to Maryland common law and to judicial interpretation and review in the
context of the unique facts and circumstances of any particular transaction. Our charter provides
that the foregoing items may be approved by a majority of all the votes entitled to be cast on the
matter. However, Maryland law permits a corporation to transfer all or substantially all of its
assets without the approval of the stockholders of the corporation to one or more persons,
including a subsidiary, if all of the equity interests of the person or persons are owned, directly
or indirectly, by the corporation. In addition, operating assets may be held by a corporations
subsidiaries, as in our
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situation, and these subsidiaries may be able to transfer all or substantially all of such
assets without a vote of the parent corporations stockholders.
Our charter authorizes our board of directors to reclassify any unissued shares of our common
stock into other classes or series of stock, to establish the designation and number of shares of
each such class or series and to set, subject to the provisions of our charter regarding the
restrictions on ownership and transfer of our stock, the preferences, conversion or other rights,
voting powers, restrictions, limitations as to dividends or other distributions, qualifications or
terms or conditions of redemption of each such class or series.
Power to Increase or Decrease Authorized Shares of Common Stock and Issue Additional Shares of
Common Stock
We believe that the power of our board of directors to amend our charter to increase the
number of authorized shares of stock, to cause us to issue additional authorized but unissued
shares of our common stock or preferred stock and to classify or reclassify unissued shares of our
common stock or preferred stock and thereafter to cause us to issue such classified or reclassified
shares of stock will provide us with increased flexibility in structuring possible future
financings and acquisitions and in meeting other needs which might arise. The additional classes or
series, as well as the common stock, will be available for issuance without further action by our
stockholders, unless stockholder consent is required by applicable law or the rules of any stock
exchange or automated quotation system on which our securities may be listed or traded. Although
our board of directors does not currently intend to do so, it could authorize us to issue a class
or series that could, depending upon the terms of the particular class or series, delay, defer or
prevent a transaction or a change of control of our company that might involve a premium price for
our stockholders or otherwise be in their best interest.
Restrictions on Ownership and Transfer
To assist us in complying with certain federal income tax requirements applicable to REITs,
among other purposes, our charter contains certain restrictions relating to the ownership and
transfer of our common stock. See Restrictions on Ownership and Transfer beginning on page 27.
Transfer Agent and Registrar
The transfer agent and registrar for our shares of common stock is American Stock Transfer &
Trust Company, LLC.
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DESCRIPTION OF PREFERRED STOCK
General
This prospectus describes the general terms of our preferred stock. For a more detailed
description of these securities, you should read the applicable provisions of the MGCL and our
charter and bylaws. When we offer to sell a particular class or series of stock, we will describe
the specific terms of the series in a prospectus supplement. Accordingly, for a description of the
terms of any class or series of stock, you must refer to both the prospectus supplement relating to
that class or series and the description of stock in this prospectus. To the extent the information
contained in the prospectus supplement differs from this summary description, you should rely on
the information in the prospectus supplement.
Our charter provides that we may issue up to 20,000,000 shares of preferred stock, par value
$0.01 per share, or preferred stock. Our charter authorizes our board of directors, with the
approval of a majority of the entire board of directors and without any action of our stockholders,
to amend our charter to increase or decrease the aggregate number of shares of stock or the number
of authorized shares of any class or series.
Our charter authorizes our board of directors to classify and reclassify from time to time any
unissued shares of preferred stock or common stock into other classes or series of stock. Prior to
issuance of shares of each class or series, our board of directors is required by the MGCL and our
charter to establish the number of shares in each class or series and to set, subject to the
provisions of our charter regarding the restrictions on transfer of stock, the preferences,
conversion or other rights, voting powers, restrictions, limitations as to dividends or other
distributions, qualifications and terms and conditions of redemption for each such class or series.
The issuance of preferred stock could adversely affect the voting power, dividend rights and other
rights of holders of our common stock. Our board of directors could establish a series of preferred
stock that could, depending on the terms of the series, delay, defer or prevent a transaction or a
change in control of us that might involve a premium price for our common stock or otherwise be in
the best interest of the holders thereof. Management believes that the availability of preferred
stock provides the company with increased flexibility in structuring possible future financing and
acquisitions and in meeting other needs that might arise.
The specific terms of a particular class or series of preferred stock will be described in the
prospectus supplement relating to that class or series, including a prospectus supplement providing
that preferred stock may be issuable upon the exercise of warrants we issue. The description of
preferred stock set forth below and the description of the terms of a particular class or series of
preferred stock set forth in the applicable prospectus supplement do not purport to be complete and
are qualified in their entirety by reference to the articles supplementary relating to that class
or series.
Under Maryland law, stockholders are generally not personally liable for our debts or
obligations solely as a result of their status as stockholders.
The preferences and other terms of the preferred stock of each class or series will be fixed
by the articles supplementary relating to such class or series. A prospectus supplement, relating
to each class or series, will specify the terms of the preferred stock as follows:
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the designation and stated value of the preferred stock; |
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the number of shares of the preferred stock offered, the liquidation preference per
share and the offering price of the preferred stock; |
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the dividend rate(s), period(s), and/or payment date(s) or method(s) of calculation
thereof applicable to the preferred stock; |
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whether the dividends on the preferred stock are cumulative or not and, if cumulative,
the date from which dividends on the preferred stock shall accumulate; |
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the provision for a sinking fund, if any, for the preferred stock; |
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the provision for redemption, if applicable, of the preferred stock; |
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any listing of the preferred stock on any securities exchange; |
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preemptive rights, if any; |
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the terms and conditions, if applicable, upon which the preferred stock will be
converted into our common stock, including the conversion price (or manner of calculation
thereof); |
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a discussion of any material federal income tax consequences applicable to an investment
in the preferred stock; |
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any limitations on actual and constructive ownership and restrictions on transfer, in
each case as may be appropriate to preserve our status as a REIT; |
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the relative ranking and preferences of the preferred stock as to dividend rights and
rights upon liquidation, dissolution or winding up of the affairs of our company; |
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any limitations on issuance of any class or series of preferred stock ranking senior to
or on a parity with such class or series of preferred stock as to dividend rights and
rights upon liquidation, dissolution or winding up of our affairs; |
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any voting rights, if any, of the preferred stock; and |
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any other specific terms, preferences, rights, limitations or restrictions of the
preferred stock. |
Rank
Unless otherwise specified in the applicable prospectus supplement, the preferred stock will,
with respect to dividend rights and rights upon liquidation, dissolution or winding up of our
company, rank: (1) senior to all classes or series of our common stock, and to any other class or
series of our stock expressly designated as ranking junior to the preferred stock; (2) on parity
with any class or series of our stock expressly designated as ranking on parity with the preferred
stock; and (3) junior to any other class or series of our stock expressly designated as ranking
senior to the preferred stock.
Conversion Rights
The terms and conditions, if any, upon which any shares of any class or series of preferred
stock are convertible into our common stock will be set forth in the applicable prospectus
supplement relating thereto. Such terms will include the number of shares of our common stock into
which the shares of preferred stock are convertible, the conversion price (or manner of calculation
thereof), the conversion period, provisions as to whether conversion will be at the option of the
holders of such class or series of preferred stock, the events requiring an adjustment of the
conversion price and provisions affecting conversion in the event of the redemption of such class
or series of preferred stock.
Power to Increase Authorized Stock and Issue Additional Shares of Our Preferred Stock
Our board of directors has the power, without stockholder approval, to amend our charter to
increase the number of authorized shares of stock, to cause us to issue additional authorized but
unissued shares of our preferred stock and to classify or reclassify unissued shares of our
preferred stock and thereafter to cause us to issue such classified or reclassified shares of
stock. The additional classes or series will be available for issuance without further action by
our stockholders, unless stockholder consent is required by applicable law or the rules of any
stock exchange or automated quotation system on which our securities may be listed or traded.
Although our board of directors does not currently intend to do so, it could authorize us to issue
a class or series that could, depending upon the terms of the particular class or series, delay,
defer or prevent a transaction or a change of control of our company that might involve a premium
price for our stockholders or otherwise be in their best interest.
Restrictions on Ownership and Transfer
To assist us in complying with certain federal income tax requirements applicable to REITs,
among other purposes, we have adopted certain restrictions relating to the ownership and transfer
of our stock. We expect to adopt similar restrictions with respect to any class or series offered
pursuant to this prospectus under the articles
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supplementary for each such class or series. The applicable prospectus supplement will specify
any additional ownership limitation relating to such class or series. See Restrictions on
Ownership and Transfer.
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DESCRIPTION OF DEPOSITARY SHARES
We may, at our option, elect to offer depositary shares rather than full shares of preferred
stock. Each depositary share will represent ownership of and entitlement to all rights and
preferences of a fraction of a share of preferred stock of a specified series (including dividend,
voting, redemption and liquidation rights). The applicable fraction will be specified in a
prospectus supplement. The shares of preferred stock represented by the depositary shares will be
deposited with a depositary named in the applicable prospectus supplement, under a deposit
agreement, among us, the depositary and the holders of the certificates representing depositary
shares, or depositary receipts. Depositary receipts will be delivered to those persons purchasing
depositary shares in the offering. The depositary will be the transfer agent, registrar and
dividend disbursing agent for the depositary shares. Holders of depositary receipts agree to be
bound by the deposit agreement, which requires holders to take certain actions such as filing proof
of residence and paying certain charges.
The summary of the terms of the depositary shares contained in this prospectus does not
purport to be complete and is subject to, and qualified in its entirety by, the provisions of the
deposit agreement, our charter and the form of articles supplementary for the applicable class or
series of preferred stock.
Dividends
The depositary will distribute all cash dividends or other cash distributions received in
respect of the series of preferred stock represented by the depositary shares to the record holders
of depositary receipts, subject to any withholding tax obligations, in proportion to the number of
depositary shares owned by such holders on the relevant record date, which will be the same date as
the record date fixed by us for the applicable series of preferred stock. The depositary, however,
will distribute only such amount as can be distributed without attributing to any depositary share
a fraction of one cent, and any balance not so distributed will be added to and treated as part of
the next sum received by the depositary for distribution to record holders of depositary receipts
then outstanding.
In the event of a distribution other than in cash, the depositary will distribute property
received by it to the record holders of depositary receipts entitled thereto, in proportion, as
nearly as may be practicable, to the number of depositary shares owned by such holders on the
relevant record date, unless the depositary determines (after consultation with us) that it is not
feasible to make such distribution, in which case the depositary may (with our approval) adopt any
other method for such distribution as it deems equitable and appropriate, including the sale of
such property (at such place or places and upon such terms as it may deem equitable and
appropriate) and distribution of the net proceeds from such sale to such holders.
No distribution will be made in respect of any depositary share to the extent that it
represents any preferred stock transferred to a trust for the benefit of one or more charitable
beneficiaries. See Restrictions on Ownership and Transfer.
Liquidation Preference
In the event of the liquidation, dissolution or winding up of the affairs of our company,
whether voluntary or involuntary, the holders of each depositary share will be entitled to the
fraction of the liquidation preference accorded each share of the applicable series of preferred
stock as set forth in the applicable prospectus supplement.
Redemption
If the series of preferred stock represented by the applicable series of depositary shares is
redeemable, such depositary shares will be redeemed from the proceeds received by the depositary
resulting from the redemption, in whole or in part, of preferred stock held by the depositary.
Whenever we redeem any preferred stock held by the depositary, the depositary will redeem as of the
same redemption date the number of depositary shares representing the preferred stock so redeemed.
The depositary will mail the notice of redemption promptly upon receipt of such notice from us and
not less than 30 nor more than 60 days prior to the date fixed for redemption of the preferred
stock and the depositary shares to the record holders of the depositary receipts.
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Voting
Promptly upon receipt of notice of any meeting at which the holders of the series of preferred
stock represented by the applicable series of depositary shares are entitled to vote, the
depositary will mail the information contained in such notice of meeting to the record holders of
the depositary receipts as of the record date for such meeting. Subject to the provisions of our
charter regarding the restrictions on ownership and transfer of stock, each such record holder of
depositary receipts will be entitled to instruct the depositary as to the exercise of the voting
rights pertaining to the number of shares of preferred stock represented by such record holders
depositary shares. The depositary will endeavor, insofar as practicable, to vote such preferred
stock represented by such depositary shares in accordance with such instructions, and we will agree
to take all action which may be deemed necessary by the depositary in order to enable the
depositary to do so. The depositary will abstain from voting any of the preferred stock to the
extent that it does not receive specific instructions from the holders of depositary receipts.
Withdrawal of Preferred Stock
Upon surrender of depositary receipts at the principal office of the depositary and payment of
any unpaid amount due the depositary, and subject to the terms of the deposit agreement, the owner
of the depositary shares represented thereby is entitled to delivery of the number of whole shares
of preferred stock and all money and other property, if any, represented by such depositary shares.
Partial shares of preferred stock will not be issued. If the depositary receipts delivered by the
holder represent a number of depositary shares in excess of the number of depositary shares
representing the number of whole shares of preferred stock to be withdrawn, the depositary will
deliver to such holder at the same time a new depositary receipt representing such excess number of
depositary shares. Holders of preferred stock thus withdrawn will not thereafter be entitled to
deposit such shares under the deposit agreement or to receive depositary receipts representing
depositary shares therefor.
Amendment and Termination of Deposit Agreement
The form of depositary receipt representing the depositary shares and any provision of the
deposit agreement may at any time and from time to time be amended by agreement between us and the
depositary. However, any amendment which materially and adversely alters the rights of the holders
(other than any change in fees) of depositary shares will not be effective unless such amendment
has been approved by at least a majority of the depositary shares then outstanding. No such
amendment may impair the right, subject to the terms of the deposit agreement, of any owner of any
depositary shares to surrender the depositary receipt representing such depositary shares with
instructions to the depositary to deliver to the holder of the preferred stock and all money and
other property, if any, represented thereby, except in order to comply with mandatory provisions of
applicable law.
The deposit agreement will be permitted to be terminated by us upon not less than 30 days
prior written notice to the applicable depositary if (1) such termination is necessary to preserve
our status as a REIT or (2) a majority of each series of preferred stock affected by such
termination consents to such termination, whereupon such depositary will be required to 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 shares of preferred stock as are
represented by the depositary shares represented by such depositary receipts together with any
other property held by such depositary with respect to such depositary receipts. We will agree that
if the deposit agreement is terminated to preserve our status as a REIT, then we will use our best
efforts to list the preferred stock issued upon surrender of the related depositary shares on a
national securities exchange. In addition, the deposit agreement will automatically terminate if
(a) all outstanding depositary shares thereunder shall have been redeemed, (b) there shall have
been a final distribution in respect of the related preferred stock in connection with any
liquidation, dissolution or winding-up of our company and such distribution shall have been
distributed to the holders of depositary receipts representing the depositary shares representing
such preferred stock or (c) each share of the related preferred stock shall have been converted
into stock of our company not so represented by depositary shares.
Restrictions on Ownership and Transfer
To assist us in complying with certain federal income tax requirements applicable to REITs,
among other purposes, we have adopted certain restrictions relating to the ownership and transfer
of our stock. We expect to adopt similar restrictions with respect to any series of preferred stock
represented by the applicable series of depositary shares offered pursuant to this prospectus under
the articles supplementary for each such class or series of
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preferred stock. The applicable prospectus supplement will specify any additional ownership
limitation relating to such depositary shares. See Restrictions on Ownership and Transfer.
Charges of Depositary
We will pay all transfer and other taxes and governmental charges arising solely from the
existence of the depositary arrangements. We will pay charges of the depositary in connection with
the initial deposit of the preferred stock and initial issuance of the depositary shares, and
redemption of the preferred stock and all withdrawals of preferred stock by owners of depositary
shares. Holders of depositary receipts will pay transfer, income and other taxes and governmental
charges and certain other charges as are provided in the deposit agreement to be for their
accounts. In certain circumstances, the depositary may refuse to transfer depositary shares, may
withhold dividends and distributions and sell the depositary shares represented by such depositary
receipt if such charges are not paid. The applicable prospectus supplement will include information
with respect to fees and charges, if any, in connection with the deposit or substitution of the
underlying securities, the receipt and distribution of dividends, the sale or exercise of rights,
the withdrawal of the underlying security, and the transferring, splitting or grouping of receipts.
The applicable prospectus supplement will also include information with respect to the right to
collect the fees and charges, if any, against dividends received and deposited securities.
Miscellaneous
The depositary will forward to the holders of depositary receipts all notices, reports and
proxy soliciting material from us which are delivered to the depositary and which we are required
to furnish to the holders of the preferred stock. In addition, the depositary will make available
for inspection by holders of depositary receipts at the principal office of the depositary, and at
such other places as it may from time to time deem advisable, any notices, reports and proxy
soliciting material received from us which are received by the depositary as the holder of
preferred stock. The applicable prospectus supplement will include information about the rights, if
any, of holders of receipts to inspect the transfer books of the depositary and the list of holders
of receipts.
Neither the depositary nor our company assumes any obligation or will be subject to any
liability under the deposit agreement to holders of depositary receipts other than for its
negligence or willful misconduct. Neither the depositary nor our company will be liable if it is
prevented or delayed by law or any circumstance beyond its control in performing its obligations
under the deposit agreement. The obligations of our company and the depositary under the deposit
agreement will be limited to performance in good faith of their duties thereunder, and they will
not be obligated to prosecute or defend any legal proceeding in respect of any depositary shares or
preferred stock unless satisfactory indemnity is furnished. Our company and the depositary may rely
on written advice of counsel or accountants, on information provided by holders of the depositary
receipts or other persons believed in good faith to be competent to give such information and on
documents believed to be genuine and to have been signed or presented by the proper party or
parties.
In the event 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.
Resignation and Removal of Depositary
The depositary may resign at any time by delivering to us notice of its election to do so, and we
may at any time remove the depositary, any such resignation or removal to take effect upon the
appointment of a successor depositary and its acceptance of such appointment. Such successor
depositary must be appointed within 60 days after delivery of the notice for resignation or removal
and must be a bank or trust company having its principal office in the United States and having a
combined capital and surplus of at least $150,000,000.
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DESCRIPTION OF WARRANTS
We may issue warrants for the purchase of debt securities, common stock, preferred stock or
depositary shares and may issue warrants independently or together with debt securities, common
stock, preferred stock or depositary shares or attached to or separate from such 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 agreement will be set forth in the applicable prospectus
supplement.
Debt Warrants
The applicable prospectus supplement will describe the terms of the debt warrants in respect
of which this prospectus is being delivered, including, where applicable, the following:
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the title of the debt warrants; |
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the aggregate number of the debt warrants outstanding; |
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the price or prices at which the debt warrants will be issued; |
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the designation, aggregate principal amount and terms of the debt securities purchasable
upon exercise of the debt warrants, and the procedures and conditions relating to the
exercise of the debt warrants; |
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the designation and terms of any related debt securities with which the debt warrants
are issued, and the number of the debt warrants issued with each security; |
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the date, if any, on and after which the debt warrants and the related securities will
be separately transferable; |
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the principal amount of debt securities purchasable upon exercise of each debt warrant,
and the price at which the debt securities may be purchased upon exercise; |
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the provisions, if any, for changes to or adjustments in the exercise price; |
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the date on which the right to exercise the debt warrants shall commence and the date on
which such right shall expire; |
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the minimum or maximum amount of debt warrants that may be exercised at any one time; |
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information with respect to book-entry procedures, if any; |
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a discussion of certain material federal income tax considerations applicable to an
investment in the debt warrants; and |
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any other terms of the debt warrants, including terms, procedures and limitations
relating to the transferability, exercise and exchange of such warrants. |
Debt warrant certificates will be exchangeable for new debt warrant certificates of different
denominations and debt 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 debt warrants, holders of debt warrants will not have any of the rights of holders, and will
not be entitled to payments of principal, premium or interest on, the securities purchasable upon
the exercise of debt warrants.
Equity Warrants
The applicable prospectus supplement will describe the terms of the warrants to purchase
depositary shares, common stock or preferred stock, or equity warrants, in respect of which this
prospectus is being delivered, including, where applicable, the following:
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the title of the equity warrants; |
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the aggregate number of the equity warrants outstanding; |
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the price or prices at which the equity warrants will be issued; |
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the type and number of securities purchasable upon exercise of the equity warrants; |
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the date, if any, on and after which the equity warrants and the related securities will
be separately transferable; |
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the price at which each security purchasable upon exercise of the equity warrants may be
purchased; |
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the provisions, if any, for changes to or adjustments in the exercise price; |
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the date on which the right to exercise the equity warrants shall commence and the date
on which such right shall expire; |
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the minimum or maximum amount of equity warrants that may be exercised at any one time; |
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information with respect to book-entry procedures, if any; |
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any anti-dilution protection; |
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a discussion of certain material federal income tax considerations applicable to an
investment in the equity warrants; and |
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any other terms of the equity warrants, including terms, procedures and limitations
relating to the transferability, exercise and exchange of such warrants. |
Equity warrant certificates will be exchangeable for new equity 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 equity warrants, holders of equity 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 depositary shares, common stock or preferred stock purchasable upon such
exercise may be entitled.
Except as provided in the applicable prospectus supplement, the exercise price and the number
of depositary shares, shares of common stock or shares of preferred stock purchasable upon the
exercise of each equity warrant will be subject to adjustment in certain events, including the
issuance of a stock dividend to the holders of the underlying common stock or preferred stock or a
stock split, reverse stock split, combination, subdivision or reclassification of the underlying
common stock or preferred stock, as the case may be. In lieu of adjusting the number of shares
purchasable upon exercise of each equity warrant, we may elect to adjust the number of equity
warrants. Unless otherwise provided in the applicable prospectus supplement, no adjustments in the
number of shares purchasable upon exercise of the equity warrants will be required until all
cumulative adjustments require an adjustment of at least 1% thereof. We may, at our option, reduce
the exercise price at any time. No fractional shares will be issued upon exercise of equity
warrants, but we will pay the cash value of any fractional shares otherwise issuable.
Notwithstanding the foregoing, except as otherwise provided in the applicable prospectus
supplement, in case of any consolidation, merger or sale or conveyance of our property as an
entirety or substantially as an entirety, the holder of each outstanding equity warrant will have
the right to the kind and amount of shares of stock and other securities and property, including
cash, receivable by a holder of the number of depositary shares, shares of common stock or shares
of preferred stock into which each equity warrant was exercisable immediately prior to the
particular triggering event.
Restrictions on Ownership and Transfer
To assist us in complying with certain federal income tax requirements applicable to REITs,
among other purposes, we have adopted certain restrictions relating to the ownership and transfer
of our stock. We expect to adopt similar restrictions with respect to any series or class of stock
underlying the equity warrants offered pursuant to this prospectus under the articles supplementary
or charter, as applicable, for each such class or series of stock.
The applicable prospectus supplement will specify any additional ownership limitation relating
to such equity warrants. See Restrictions on Ownership and Transfer.
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Exercise of Warrants
Each warrant will entitle the holder to purchase for cash such number of debt securities,
depositary shares, shares of common stock or shares of preferred stock, 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. New York City
time on the expiration date, unexercised warrants will be 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 that are represented by such warrant certificate
are exercised, a new warrant certificate will be issued for the remaining amount of
warrants.
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DESCRIPTION OF RIGHTS
We may issue rights to our stockholders to purchase shares of our common stock. Each series of
rights will be issued under a separate rights agreement to be entered into between us and a bank or
trust company, as rights agent. The rights agent will act solely as our agent in connection with
the certificates relating to the rights of the series of certificates and will not assume any
obligation or relationship of agency or trust for or with any holders of rights certificates or
beneficial owners of rights. The statements made in this section relating to the rights are
summaries only. These summaries are not complete. When we issue rights, we will provide the
specific terms of the rights and the applicable rights agreement in a prospectus supplement. To the
extent the information contained in the prospectus supplement differs from this summary
description, you should rely on the information in the prospectus supplement. For more detail, we
refer you to the applicable rights agreement itself, which we will file as an exhibit to, or
incorporate by reference in, the registration statement.
We will provide in a prospectus supplement the following terms of the rights being issued:
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the date of determining the stockholders entitled to the rights distribution; |
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the aggregate number of shares of common stock purchasable upon exercise of the rights; |
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the exercise price; |
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the aggregate number of rights issued; |
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the date, if any, on and after which the rights will be separately transferable; |
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the date on which the right to exercise the rights will commence, and the date on which
the right will expire; |
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a discussion of any material federal income tax considerations applicable to an
investment in the rights; and |
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any other terms of the rights, including terms, procedures and limitations relating to
the distribution, exchange and exercise of the rights. |
Restrictions on Ownership and Transfer
To assist us in complying with certain federal income tax requirements applicable to REITs,
among other purposes, we have adopted certain restrictions relating to the ownership and transfer
of our common stock, which rights to purchase such shares of common stock are offered pursuant to
this prospectus. The applicable prospectus supplement will specify any additional ownership
limitation relating to such rights. See Restrictions on Ownership and Transfer.
Exercise of Rights
Each right will entitle the holder of rights to purchase for cash the principal amount of
shares of common stock at the exercise price provided in the applicable prospectus supplement.
Rights may be exercised at any time up to the close of business on the expiration date for the
rights provided in the applicable prospectus supplement. After the close of business on the
expiration date, all unexercised rights will be void.
Holders may exercise rights as described in the applicable prospectus supplement. Upon receipt
of payment and the rights certificate properly completed and duly executed at the corporate trust
office of the rights agent or any other office indicated in the prospectus supplement, we will, as
soon as practicable, forward the shares of common stock purchasable upon exercise of the rights. If
less than all of the rights issued in any rights offering are exercised, we may offer any
unsubscribed securities directly to persons other than stockholders, to or through agents,
underwriters or dealers or through a combination of such methods, including pursuant to standby
underwriting arrangements, as described in the applicable prospectus supplement.
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DESCRIPTION OF UNITS
We may issue units consisting of two or more other constituent securities. These units may be
issuable as, and for a specified period of time may be transferable only as, a single security,
rather than as the separate constituent securities comprising such units. The statements made in
this section relating to the units are summaries only. These summaries are not complete. When we
issue units, we will provide the specific terms of the units in a prospectus supplement. To the
extent the information contained in the prospectus supplement differs from this summary
description, you should rely on the information in the prospectus supplement.
When we issue units, we will provide in a prospectus supplement the following terms of the
units being issued:
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the title of any series of units; |
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identification and description of the separate constituent securities comprising the
units; |
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the price or prices at which the units will be issued; |
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the date, if any, on and after which the constituent securities comprising the units
will be separately transferable; |
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information with respect to any book-entry procedures; |
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a discussion of any material federal income tax considerations applicable to an
investment in the units; and |
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any other terms of the units and their constituent securities. |
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RESTRICTIONS ON OWNERSHIP AND TRANSFER
The following summary with respect to restrictions on ownership and transfer of our stock
(including warrants and rights to acquire our stock) sets forth certain general terms and
provisions of our charter documents to which any prospectus supplement may relate. This summary
does not purport to be complete and is subject to and qualified in its entirety by reference to our
charter documents, as amended and supplemented from time to time, including any articles
supplementary relating to any issuance of preferred stock pursuant to this prospectus. Copies of
our existing charter documents are filed with the Securities and Exchange Commission and are
incorporated by reference as exhibits to the registration statement of which this prospectus is a
part. Any amendment or supplement to our charter documents relating to an issuance of securities
pursuant to this prospectus shall be filed with the Securities and Exchange Commission and shall be
incorporated by reference as an exhibit to the applicable prospectus supplement. See Where You Can
Find More Information.
In order to qualify as a REIT under the Code, our stock must be beneficially owned by 100 or
more persons during at least 335 days of a taxable year of 12 months (other than the first year for
which an election to be a REIT has been made) or during a proportionate part of a shorter taxable
year. Also, not more than 50% in value of our shares of stock outstanding may be owned, directly or
indirectly, by five or fewer individuals, as defined in the Code to include certain entities during
the last half of a taxable year other than the first year for which an election to be treated as a
REIT has been made.
In addition, if we, or one or more owners of 10% or more of our stock, actually or
constructively owns 10% or more of a customer or a customer of any partnership in which we are a
partner, the rent received by us either directly or through any such partnership from such customer
generally will not be qualifying income for purposes of the REIT gross income tests of the Code.
The constructive ownership rules under the Code are complex and may cause capital stock owned
actually or constructively by a group of related individuals and/or entities to be owned
constructively by one individual or entity. As a result, the acquisition of less than 9.8% of the
common stock or capital stock or the acquisition or ownership of an interest in an entity that
owns, actually or constructively, common stock or capital stock, by an individual or entity could
nevertheless cause that individual or entity, or another individual or entity, to own
constructively in excess of 9.8% of the outstanding common stock or capital stock and thus subject
such common stock or capital stock to the remedy provision under the ownership limits.
Our charter contains restrictions on the ownership and transfer of any shares of our common
stock and capital stock that are intended to assist us in complying with these requirements and
continuing to qualify as a REIT. The relevant sections of our charter
provide, and any articles
supplementary creating our preferred stock will provide, provide that, subject to the exceptions described below, no person or entity may
actually or beneficially own, or be deemed to own by virtue of the applicable constructive
ownership provisions of the Code, more than 9.8% (in value or in number of shares, whichever is
more restrictive) of the outstanding shares of our common stock, or the common stock ownership
limit, or 9.8% (in value) of the aggregate of the outstanding shares of our capital stock,
excluding any shares of our capital stock that are not treated as outstanding for federal income
tax purposes, or the aggregate stock ownership limit. For purposes of determining the percentage
ownership of our capital stock by any person, warrants and rights to acquire capital stock that are
treated as owned by that person are deemed outstanding. The value and number of the outstanding
shares of our common stock and the value of the outstanding shares of capital stock will be
determined by the board of directors in good faith, which will be conclusive for all purposes. We
refer to these restrictions as the ownership limits. In addition, except as a person may be
exempted by our board of directors, no person may own capital stock either actually or
constructively to the extent that such ownership would cause us to actually or constructively own
10% or more of the ownership interests of any of our tenants or customers.
Subject to various conditions and limitations, our board of directors has granted exemptions
from the ownership limits to certain real estate funds affiliated with Carlyle and
their affiliates.
In addition to the ownership limits, our charter prohibits (a) any person from actually,
beneficially or constructively owning shares of our stock that would result in our being closely
held under Section 856(h) of the Code (without regard to whether the interest is held during the
last half of a taxable year) or otherwise cause us to
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fail to qualify as a REIT and (b) any transfer of our stock if the transfer would result in
our stock being beneficially owned by fewer than 100 persons. Any person who acquires or attempts
or intends to acquire beneficial or constructive ownership of shares of our stock that will or may
violate any of these restrictions, or who is the intended transferee of shares of our stock that
are transferred to the trust as described below, must give us contemporaneous written notice or, in
the case of a proposed or attempted transaction, at least 15 days prior written notice, and provide
us with such information as we may request in order to determine the effect of the transfer on our
status as a REIT.
The restrictions on ownership and transfer of our common stock described above became
effective upon our initial public offering and, with respect to any other series of capital stock,
will become effective upon the completion of that offering and will not apply if our board of
directors determines that it is no longer in our best interests to attempt to, or continue to,
qualify as a REIT or that compliance is no longer required in order for us to qualify as a REIT.
Our board of directors may, in its sole discretion, prospectively or retroactively, exempt a
person from one or any of the ownership limits. However, our board of directors may not exempt any
person whose actual, beneficial or constructive ownership of our outstanding stock in excess of the
ownership limits would result in us being closely held within the meaning of Section 856(h) of
the Code (without regard to whether the interest is held during the last half of a taxable year) or
otherwise would result in our failing to qualify as a REIT. Prior to granting an exemption our
board of directors may require the person seeking an exemption to make certain representations and
undertakings or to agree that any violation or attempted violation of these restrictions will
result in the automatic transfer of the shares of stock causing the violation to the trust
described below. Our board of directors may also require a ruling from the Internal Revenue
Service, or the IRS, or an opinion of counsel in order to determine or ensure our status as a REIT
and may impose any conditions or restrictions on an exemption as it deems appropriate.
Any attempted transfer of our stock that, if effective, would result in our stock being owned
by fewer than 100 persons will be null and void and the intended transferee shall acquire no rights
in such shares. Any attempted transfer of our stock which, if effective, would result in a
violation of any of the ownership limits, our being closely held under Section 856(h) of the Code
(without regard to whether the interest is held during the last half of a taxable year) or our
otherwise failing to qualify as a REIT will cause the number of shares of stock causing the
violation (rounded up to the nearest whole share) to be automatically transferred to a trustee of a
trust for the exclusive benefit of one or more charitable beneficiaries, and the proposed
transferee will not acquire any rights in the shares of stock. The automatic transfer will be
effective as of the close of business on the business day prior to the date of the attempted
transfer or other event that resulted in the transfer to the trust. If a transfer to the trust does
not occur or is not automatically effective, for any reason, to prevent a violation of the
applicable restrictions on ownership and transfer of our stock, then the attempted transfer that,
if effective, would have resulted in a violation of the restrictions on ownership and transfer of
our stock will be null and void and the intended transferee shall acquire no rights in such shares.
Shares of our stock held in the trust will be issued and outstanding. The proposed transferee
shall have no rights in the shares held by the trustee. The proposed transferee will not benefit
economically from ownership of any shares of our stock held in the trust, and will have no rights
to dividends and no rights to vote or other rights attributable to the shares of stock held in the
trust. The trustee of the trust will have all voting rights and rights to dividends or other
distributions with respect to shares of stock held in the trust. These rights will be exercised by
the trustee of the trust for the exclusive benefit of the charitable beneficiary. Any dividend or
other distribution paid prior to our discovery that shares of stock have been transferred to the
trustee must be paid by the recipient to the trustee upon demand. Any dividend or other
distribution authorized but unpaid will be paid when due to the trustee. Any dividend or other
distribution paid to the trustee will be held in trust for the charitable beneficiary. Subject to
Maryland law, the trustee may (i) rescind as void any vote cast by the proposed transferee prior to
our discovery that the shares of our stock have been transferred to the trustee and (ii) recast the
vote in accordance with the desires of the trustee acting for the benefit of the charitable
beneficiary. However, if we have already taken irreversible corporate action, then the trustee may
not rescind or recast the vote.
Within 20 days of receiving notice from us that shares of stock have been transferred to the
trust, the trustee must sell the shares of stock to a person designated by the trustee whose
ownership of the stock will not violate any of the foregoing restrictions on ownership and transfer
of our stock. Upon the sale, the interest of the charitable
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beneficiary in the stock sold will terminate and the trustee must distribute the net proceeds
of the sale to the proposed transferee and to the charitable beneficiary as follows. The proposed
transferee will receive the lesser of (i) the price paid by the proposed transferee for the shares
of stock or, if the proposed transferee did not give value for the shares of stock in connection
with the event causing the shares of stock to be held in the trust (e.g., a gift, devise or other
similar transaction), the market price of the shares of stock, which will generally be the last
sale price of our stock reported on the NYSE, on the day of the event that resulted in the transfer
of such stock to the trust and (ii) the price per share received by the trustee (net of any
commissions and other expenses of the sale) from the sale or other disposition of the stock. The
trustee may reduce the amount payable to the proposed transferee by the amount of any dividends or
other distributions that we paid to the proposed transferee before we discovered that the shares of
stock had been transferred to the trust and that is owed by the proposed transferee to the trustee
as described above. Any net sale proceeds in excess of the amount payable to the proposed
transferee must be paid immediately to the charitable beneficiary. If, prior to our discovery that
shares of stock have been transferred to the trust, the shares of stock are sold by the proposed
transferee, then (i) the shares of stock will be deemed to have been sold on behalf of the trust
and (ii) to the extent that the proposed transferee received an amount for the shares of our stock
that exceeds the amount the proposed transferee was entitled to receive, the excess must be paid to
the trustee upon demand.
In addition, shares of our stock held in the trust will be deemed to have been offered for
sale to us, or our designee, at a price per share equal to the lesser of (i) the price per share in
the transaction that resulted in the transfer to the trust (or, in the case of a devise or gift,
the market price of the shares at the time of the devise or gift) and (ii) the market price, on the
date we, or our designee, accept the offer. We may reduce the amount payable to the proposed
transferee by the amount of any dividends or other distributions that we paid to the proposed
transferee and are owed by the proposed transferee to the trustee as described above, and we may
pay such amount to the trustee for distribution to the charitable beneficiary. We may accept the
offer until the trustee has sold the stock. Upon a sale to us, the interest of the charitable
beneficiary in the stock sold will terminate and the trustee must distribute the net proceeds of
the sale to the proposed transferee.
Any certificates representing shares of our stock, and any notices delivered in lieu of
certificates with respect to the issuance or transfer of uncertificated shares of our stock, will
bear a legend referring to the restrictions described above.
Every owner of 5% or more (or such lower percentage as required by the Code or the regulations
promulgated thereunder) of our outstanding stock, within 30 days after the end of each taxable
year, must give us written notice, stating the stockholders name and address, the number of shares
of each class and series of our stock beneficially owned and a description of the manner in which
such shares are held. Each such owner must provide us with any additional information we may
request in order to determine the effect, if any, of the stockholders beneficial ownership on our
status as a REIT and to ensure compliance with the common stock ownership limit and the aggregate
stock ownership limit. In addition, each stockholder must, upon demand, provide us with such
information as we may request, in good faith, in order to determine our status as a REIT and to
comply with the requirements of any taxing authority or governmental authority or to determine such
compliance.
The board of directors has determined that the restrictions on transferability and ownership
of shares of stock are necessary and advisable for us to qualify as a REIT. The charter provides
that the current restrictions may be modified by our board of directors, without a stockholder
vote, provided that (a) the board of directors determines that such modification is necessary or
advisable to assist us in qualifying as a REIT as a result of a change in the provisions of the
Code or any regulation thereunder, published ruling or interpretation of such provisions or
regulations relating to requirements to qualify as a REIT; (b) upon such determination, the board
of directors will adopt a resolution setting forth such modification; and (c) we will file a
certificate of notice with the State Department of Assessments and Taxation of Maryland that sets
forth the modification.
These restrictions on ownership and transfer of our stock could delay, defer or prevent a
transaction or a change in control that might involve a premium price for the common stock or that
our common stockholders might otherwise believe is in their best interests.
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DESCRIPTION OF THE PARTNERSHIP AGREEMENT OF CORESITE, L.P.
We have summarized the material terms and provisions of the Amended and Restated Agreement of
Limited Partnership of CoreSite, L.P., which we refer to as the partnership agreement. This summary
is not complete. For more detail, you should refer to the partnership agreement itself, a copy of
which is filed as an exhibit to the registration statement of which this prospectus is part. For
purposes of this section, references to we, our, us and our company refer to CoreSite
Realty Corporation.
General
All of our assets are held by, and substantially all of our operations are conducted through,
our operating partnership, either directly or through subsidiaries. We are the general partner of
the operating partnership and as of June 30, 2011, we owned 43% of the outstanding common units in
the operating partnership, or the partnership units.
Certain persons who contributed interests in properties and/or other assets pursuant to the
restructuring transactions that occurred concurrently with our companys initial public offering
received common units in our operating partnership. Holders of common units in the operating
partnership are generally entitled to share in cash distributions from, and in the profits and
losses of, the operating partnership in proportion to their respective percentage interests of
common units in the operating partnership if and to the extent authorized by us and subject to the
preferential rights of holders of outstanding preferred units. The units in the operating
partnership are not listed on any exchange or quoted on any national market system.
Provisions in the partnership agreement could discourage third parties from making proposals
involving an unsolicited acquisition of us or change of our control, although some stockholders
might consider such proposals, if made, desirable. These provisions also make it more difficult for
third parties to alter the management structure of the operating partnership without the
concurrence of our board of directors. These provisions include, among others:
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redemption rights of qualifying parties; |
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transfer restrictions on units, including our partnership units; |
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our ability, as general partner, in some cases, to amend the partnership agreement and
to cause the partnership to issue preferred units with terms that we, in our capacity as
the general partner of our operating partnership, may determine, without the consent of the
limited partners; and |
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the right of the limited partners to consent to transfers of the general partnership
interest and mergers under specified circumstances. |
Management of Our Operating Partnership
Our operating partnership, CoreSite, L.P., is a Delaware limited partnership that was formed
on May 4, 2010. Our company is the sole general partner of our operating partnership, and we
conduct substantially all of our business in or through it. As sole general partner of our
operating partnership, we exercise exclusive and complete responsibility and discretion in its
day-to-day management and control. We can cause our operating partnership to enter into major
transactions including acquisitions, dispositions and refinancings, subject to certain limited
exceptions. The limited partners of our operating partnership may not transact business for, or
participate in the management activities or decisions of, our operating partnership, except as
provided in the partnership agreement and as required by applicable law. We may not be removed as
general partner by the limited partners without our consent. The partnership agreement restricts
our ability to engage in a business combination as more fully described in Termination
Transactions below.
The limited partners of our operating partnership expressly acknowledge that we, as general
partner of our operating partnership, are acting for the benefit of the operating partnership, the
limited partners and our stockholders collectively. Neither our company nor our board of directors
is under any obligation to give priority to the separate interests of the limited partners or our
stockholders in deciding whether to cause our operating
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partnership to take or decline to take any actions, except as described below. If there is a
conflict between the interests of our stockholders on the one hand and the limited partners on the
other, we will endeavor in good faith to resolve the conflict in a manner not adverse to either our
stockholders or the limited partners. The limited partners agree that the status of the general
partner as a REIT and as a reporting company under Section 12 of the Exchange Act with our shares
listed on an exchange is of benefit to the operating partnership and that all actions taken in good
faith by the general partner in support thereof shall be deemed actions taken for the benefit of
the operating partnership and all partners including the limited partners. We are not liable under
the partnership agreement to our operating partnership or to any partner for monetary damages for
losses sustained, liabilities incurred or benefits not derived by the limited partners in
connection with such decisions; provided, that we have acted in good faith and in accordance with
the terms of the partnership agreement.
The partnership agreement provides that all of our business activities, including all
activities pertaining to the acquisition and operation of properties, must be conducted through our
operating partnership, and that our operating partnership must be operated in a manner that will
enable us to continue to satisfy the requirements for being classified as a REIT.
Transferability of Interests
Except in connection with a transaction described in Termination Transactions below, we,
as general partner, may not voluntarily withdraw from our operating partnership, or transfer or
assign all or any portion of our interest in our operating partnership, without the consent of the
holders of a majority of the limited partnership interests. The limited partners have agreed not to
sell, assign, encumber or otherwise dispose of their operating partnership units to any person
(other than to us, as general partner, to immediate family members or any trust for their benefit,
to affiliates of such partner, including, without limitation, any entity controlled by such
partner, to a charitable entity or a trust for their benefit, or to a lending institution as
collateral for a bona fide loan, subject to certain limitations) unless they have provided us a
right of first offer. All transfers must be made only to accredited investors as defined under
Rule 501 of the Securities Act or otherwise in accordance with applicable securities laws.
Board of Directors
Our bylaws require that nominees for director, whether for election by the stockholders or by
the board of directors, shall include such number of individuals as are entitled to be nominated
pursuant to the partnership agreement. The operating partnership agreement provides that for so
long as the number of operating partnership units and shares of common stock held collectively by
the Carlyle real estate funds or their affiliates is equal to or greater than 50% of the total
number of shares of outstanding common stock (assuming all operating partnership units are
exchanged for common stock), certain of these funds shall have the right to nominate the number of
directors that is one less than the lowest whole number that would exceed one-third of the
directors, but not less than one director. With the board of directors having seven members, this
would enable these Carlyle real estate funds to nominate two directors, although such nomination
will be subject to the vote of the stockholders. Such rights to nominate directors would also
decrease as follows (in each case assuming all operating partnership units are exchanged for common
stock):
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if the Carlyle real estate funds or their affiliates collectively owned less than 50%
but at least 10% of the outstanding common stock, then certain of these funds or their
affiliates would be entitled to nominate the number of directors that is one less than the
lowest whole number that would exceed 20% of the directors, but not less than one director; |
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if the Carlyle real estate funds or their affiliates collectively owned less than 10% of
the outstanding common stock, then such funds would no longer be entitled to nominate any
directors. |
Our board of directors consists of seven directors. Our charter and bylaws provide that the
number of directors constituting our board of directors may be increased or decreased by a majority
vote of our entire board of directors, provided that the number of directors may not be decreased
to fewer than the minimum number required under the MGCL, which is one, nor increased to more than
15.
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Amendments of the Partnership Agreement
Amendments to the partnership agreement may be proposed by us, as general partner, or by the
limited partners owning at least 50% of the operating partnership units held by the limited
partners.
Generally, the partnership agreement may not be amended, modified or terminated without the
approval of both the general partner and limited partners holding a majority of all outstanding
operating partnership units held by the limited partners (other than, in each case, operating
partnership units owned directly or indirectly by us). As general partner, we have the power to
unilaterally make certain amendments to the partnership agreement without obtaining the consent of
the limited partners as may be required to:
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add to our obligations as general partner or surrender any right or power granted to us
as general partner or any of our affiliates for the benefit of the limited partners; |
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reflect the issuance of additional operating partnership units, transfer of any
partnership interest or the admission, substitution, termination or withdrawal of limited
partners in each case in accordance with the terms of the partnership agreement; |
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reflect a change of an inconsequential nature that does not adversely affect the limited
partners in any material respect, or cure any ambiguity, correct or supplement any
provisions of the partnership agreement not inconsistent with law or with other provisions
of the partnership agreement, or make other changes concerning matters under the
partnership agreement that will not otherwise be inconsistent with the partnership
agreement or law; |
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set forth or amend the designations, rights, preferences, privileges and other terms and
conditions of any new class of partnership interest permitted to be issued under the
partnership agreement; |
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satisfy any requirements, conditions or guidelines of federal or state law; |
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reflect changes that are reasonably necessary for us, as general partner, to maintain
our status as a REIT or to satisfy REIT requirements, reflect the transfer of all or any
part of a partnership interest among the general partner and any entity disregarded as
separate from the general partner for tax purposes or to ensure that the operating
partnership will not be classified as a publicly traded partnership for tax purposes; |
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modify the manner in which capital accounts are computed or net income or net loss are
allocated; or |
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reflect any other modification as is reasonably necessary for the business or operation
of the operating partnership or the general partner, which does not violate the
restrictions on the general partner. |
Amendments that would, among other things, convert a limited partners interest into a general
partners interest, modify the limited liability of a limited partner, adversely alter a partners
right to receive any distributions or allocations of profits or losses, adversely alter or modify
the redemption rights, reduce any limited partners right to indemnity, create any liability of a
limited partner, amend the nominating rights of the Carlyle limited partners, amend these
restrictions or admit any other person as a general partner other than in accordance with the
successor provisions of the agreement or alter the protections of the limited partners in
connection with termination transactions described below, which, in each case, must be approved by
each limited partner that would be adversely affected by such amendment.
In addition, without the written consent of a majority of the operating partnership units held
by limited partners (other than operating partnership units owned directly or indirectly by us),
we, as general partner, may not do any of the following:
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take any action in contravention of an express prohibition or limitation contained in
the partnership agreement; |
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perform any act that would subject a limited partner to liability as a general partner
in any jurisdiction or any liability not contemplated in the limited partnership agreement; |
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enter into any contract, mortgage loan or other agreement that prohibits or restricts,
or has the effect of prohibiting or restricting, the ability of a limited partner to
exercise its redemption/exchange rights explained below; |
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withdraw from the operating partnership or transfer any portion of our general
partnership interest; or |
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be relieved of our obligations under the partnership agreement following any permitted
transfer of our general partnership interest. |
Distributions to Unitholders
Our partnership agreement provides that we are required to distribute quarterly all, or such
portions as we may determine in our sole and absolute discretion, of the available cash (as such
term is defined in the partnership agreement) of our operating partnership to us and the limited
partners as follows:
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first, with respect to any other units that are entitled to any preference in
distribution, in accordance with the rights of such class or classes of units, and, within
such class or classes, among the holders of such units, pro rata in proportion to their
respective percentage interests; and |
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second, with respect to any units that are not entitled to any preference in
distribution, including partnership units, in accordance with the rights of holders of such
units, as applicable, and, within such class, among the holders of such units, pro rata in
proportion to their respective percentage interests. |
Distributions payable with respect to any units that were not outstanding during the entire
quarterly period in respect of which a distribution is made, other than units issued to us in
connection with the issuance of shares of our common stock, will be prorated based on the portion
of the period that such units were outstanding.
Redemption/Exchange Rights
After 12 months of becoming a holder of partnership units, limited partners have the right to
require our operating partnership to redeem part or all of their partnership units for cash based
upon the fair market value of an equivalent number of shares of our companys common stock at the
time of the redemption. Alternatively, we may elect to acquire those partnership units in exchange
for shares of our companys common stock. Any such exchange will be on a one-for-one basis, subject
to adjustment in the event of stock splits, stock dividends, issuances of stock rights, specified
extraordinary distributions and similar events. We presently anticipate that we will elect to issue
shares of our companys common stock in exchange for partnership units in connection with each
redemption request, rather than having our operating partnership redeem the partnership units for
cash. With each redemption or exchange, we increase our companys percentage ownership interest in
our operating partnership. Commencing 12 months following the date of acquisition of partnership
units, limited partners who hold partnership units may exercise this redemption right from time to
time, in whole or in part, except when, as a consequence of shares of our common stock being
issued, any persons actual or constructive stock ownership would exceed our companys ownership
limits, or any other limit as provided in our charter or as otherwise determined by our board of
directors as described under the section entitled Restrictions on Ownership and Transfer.
In addition, if the number of partnership units delivered by a limited partner for redemption,
together with other shares of our common stock owned or attributed to that limited partner, exceeds
9.8% of our outstanding common stock (in value or number, whichever is more restrictive) and we are
eligible to file a registration statement on Form S-3 under the Securities Act, then we may also
elect to redeem the partnership units with the proceeds from a public offering or private placement
of our common stock. In the event we elect this option, we may require the other limited partners
also to elect whether or not to participate. Participating limited partners will receive on the
redemption date the proceeds per share in the public offering (less any discount or commission),
but will have a limited opportunity to withdraw their partnership units from the redemption
immediately prior to the pricing of the public offering.
Issuance of Additional Securities
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As sole general partner, we have the ability to cause the operating partnership to issue
additional operating partnership units representing general and limited partnership interests in
one or more classes and series of any such class. These additional operating partnership units may
include preferred limited partnership units. In addition, we may issue additional shares of our
common stock or convertible securities, but only if we cause our operating partnership to issue to
us partnership interests or rights, options, warrants or convertible or exchangeable securities of
our operating partnership having designations, preferences and other rights, so that the economic
interests of our operating partnerships interests issued are substantially similar to the economic
interests of the securities that we have issued.
Capital Contributions
The partnership agreement provides that we, as general partner, may determine that our
operating partnership requires additional funds for the acquisition of additional properties or for
other purposes. Under the partnership agreement, we are obligated to contribute the proceeds of any
offering of our shares of stock as additional capital to our operating partnership.
The partnership agreement provides that we may make additional capital contributions,
including properties, to our operating partnership in exchange for additional operating partnership
units. If we contribute additional capital and receive additional partnership interests for the
capital contribution, our percentage interests will be increased on a proportionate basis based on
the amount of the additional capital contributions and the value of our operating partnership at
the time of the contributions. Conversely, the percentage interests of the other limited partners
will be decreased on a proportionate basis. In addition, if we contribute additional capital and
receive additional partnership interests for the capital contribution, the capital accounts of the
partners may be adjusted upward or downward to reflect any unrealized gain or loss attributable to
the properties as if there were an actual sale of the properties at the fair market value thereof.
No person has any preemptive, preferential or other similar right with respect to making additional
capital contributions or loans to the operating partnership or the issuance or sale of any
operating partnership units or other partnership interests.
Our operating partnership could issue preferred partnership interests in connection with
acquisitions of property or otherwise. Any such preferred partnership interests would have priority
over common partnership interests with respect to distributions from our operating partnership,
including the partnership interests that our wholly owned subsidiaries own.
Tax Matters
We are the tax matters partner of our operating partnership and, as such, we have authority to
make tax elections under the Code on behalf of our operating partnership.
Allocations of Net Income and Net Losses to Partners
The
net income and loss of our operating partnership are allocated in accordance with the
terms of the partnership agreement. In general, the net income of our
operating partnership is allocated first to reverse certain prior net losses (if any) and then to us and to holders of partnership units in accordance with our respective
percentage interests in our operating partnership. In general, net
loss is allocated first to
us and to holders of partnership units in accordance with our respective percentage interests in
our operating partnership until the capital account in the relevant units is
reduced to zero and then to us
as general partner in the amount of any remaining net loss. However, in some cases losses may be
disproportionately allocated to partners who have guaranteed debt of our operating partnership. The
allocations described above are subject to special allocations relating to depreciation deductions
and to compliance with the provisions of Sections 704(b) and 704(c) of the Code and the associated
Treasury Regulations. See Federal Income Tax ConsiderationsTaxation of Our CompanyTax Aspects
of Our Operating Partnership, the Subsidiary Partnerships and the Limited Liability Companies.
Operations
The partnership agreement provides that we, as general partner, will determine in our
discretion and distribute available cash on a quarterly basis, pro rata in accordance with the
partners percentage interests. Available cash is
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the operating partnerships cash available for distribution as determined by us. We intend to
manage the operating partnership in a manner that will enable us to maintain our qualification as a
REIT and to avoid any federal income tax liability.
The partnership agreement provides that our operating partnership will assume and pay when
due, or reimburse us for payment of all costs and expenses relating to the operations of, or for
the benefit of, our operating partnership.
Termination Transactions
The partnership agreement provides that our company may not and the operating partnership
shall not engage in any merger, consolidation or other combination with or into another person,
sale of all or substantially all of its assets or any reclassification or any recapitalization or
change in outstanding shares of our common stock or the operating partnerships partnership
interests (a termination transaction), unless in connection with a termination transaction,
(i) we obtain the consent of the holders of at least a majority of our partnership units
(including units held by us and the Carlyle real estate funds or their affiliates), or
(ii) any of:
(A) all limited partners will receive, or have the right to elect to receive, for each
partnership unit an amount of cash, securities or other property equal to the product of:
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the number of shares of our companys common stock into which each unit is
then exchangeable; and |
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the greatest amount of cash, securities or other property paid to the holder
of one share of our companys common stock in consideration of one share of our
common stock in connection with the termination transaction, |
provided that, if, in connection with a termination transaction, a purchase, tender or exchange
offer is made to and accepted by the holders of more than 50% of the outstanding shares of our
companys common stock, each holder of partnership units will receive, or will have the right to
elect to receive, the greatest amount of cash, securities or other property which such holder would
have received had it exercised its redemption right and received shares of our common stock in
exchange for its operating partnership units immediately prior to the expiration of such purchase,
tender or exchange offer and accepted such purchase, tender or exchange offer; or
(B) the following conditions are met:
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substantially all of the assets of the surviving entity are held directly or
indirectly by our operating partnership or another limited partnership or
limited liability company which is the surviving partnership of a merger,
consolidation or combination of assets with our operating partnership; |
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the holders of partnership units own a percentage interest of the surviving
partnership based on the relative fair market value of the net assets of our
operating partnership and the other net assets of the surviving partnership
immediately prior to the consummation of this transaction; |
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the rights, preferences and privileges of such unit holders in the surviving
partnership are at least as favorable as those in effect immediately prior to
the consummation of the transaction and as those applicable to any other
limited partners or non-managing members of the surviving partnership; and |
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the limited partners may exchange their interests in the surviving
partnership for either the consideration available to the limited partners
pursuant to the first paragraph in this section, or |
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the right to redeem their partnership units for cash on terms equivalent to
those in effect with respect to their units immediately prior to the
consummation of the transaction if the ultimate controlling person of the
surviving partnership has publicly traded common equity securities, shares of
those common equity securities, at an exchange ratio based on the relative fair
market value of those securities and our common stock; or |
(C) the terms are otherwise consented to by the limited partners holding a majority of
the limited partnership units.
Dissolution
Our operating partnership will dissolve, and its affairs will be wound up, upon the first to
occur of any of the following:
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an event of withdrawal, as defined in Delaware law, including, without limitation, by
reason of our bankruptcy, as general partner, unless, within 90 days after the withdrawal,
a majority of interest of the remaining partners agree in writing to continue the business
of our operating partnership and to the appointment, effective as of the date of
withdrawal, of a successor general partner; |
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an election to dissolve our operating partnership made by us as the general partner,
with the consent of the limited partners; or |
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the entry of a decree of judicial dissolution of our operating partnership pursuant to
the provisions of Delaware law. |
Upon dissolution of our operating partnership, the general partner, or, in the event that
there is no remaining general partner, a liquidator will proceed to liquidate the assets of our
operating partnership and apply the proceeds from such liquidation in the order of priority set
forth in the partnership agreement.
Indemnification and Limitation of Liability
The partnership agreement indemnifies us, as general partner, our limited partners and our and
their respective directors, officers, employees, agents and any other persons we may designate from
and against any and all claims arising from operations of our operating partnership in which any
indemnitee may be involved, or is threatened to be involved, as a party or otherwise, to the
fullest extent provided under Delaware law.
Similarly, we, as general partner of our operating partnership, and our officers, directors,
agents or employees, are not liable or accountable to our operating partnership for losses
sustained, liabilities incurred or benefits not derived as a result of errors in judgment or
mistakes of fact or law or any act or omission so long as we acted in good faith.
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CERTAIN PROVISIONS OF MARYLAND LAW AND OF OUR CHARTER AND BYLAWS
The following summary of certain provisions of Maryland law and of our charter and bylaws does
not purport to be complete and is subject to and qualified in its entirety by reference to Maryland
law and our charter and bylaws, copies of which are exhibits to the registration statement of which
this prospectus is a part. See Where You Can Find More Information and Incorporation of Certain
Information by Reference.
Board of Directors
Our charter provides that the number of directors may be increased or decreased by a majority
vote of our entire board of directors pursuant to our bylaws, provided the number of directors may
not be decreased to fewer than the minimum number required under the MGCL, which is one, nor
increased to more than 15. Under our partnership agreement, for so long as the Carlyle real estate
funds and their affiliates collectively own 10% or more of the outstanding common stock (assuming
all operating partnership units are exchanged for common stock), the board of directors may not
increase or decrease the number of directors unless, in the case of an increase, the number of
directors that the Carlyle real estate funds and their affiliates are entitled to nominate is also
increased, provided that the number of Carlyle nominees shall not exceed one-third of the entire
board of directors. Any and all vacancies on our board of directors may be filled by the
affirmative vote of a majority of the remaining directors, even if less than a quorum, except that
a vacancy resulting from an increase in the size of the board of directors must be filled by a
majority vote of the entire board of directors, and any individual elected to fill such vacancy
will serve until the next annual meeting of stockholders and until a successor is duly elected and
qualifies.
Our bylaws require that nominees for director, whether for election by the stockholders or by
the board of directors, shall include such number of individuals as are entitled to be nominated
pursuant to the partnership agreement. Each of our directors will be elected by our stockholders to
serve for a one-year term and until his or her successor is duly elected and qualifies. A plurality
of all votes cast on the matter at a meeting of stockholders at which a quorum is present is
sufficient to elect a director. The presence in person or by proxy of stockholders entitled to cast
a majority of all the votes entitled to be cast at a meeting constitutes a quorum.
Removal of Directors
Our charter provides that, subject to the rights of our preferred stockholders to elect or
remove one or more of our directors, a director may be removed with or without cause only by the
affirmative vote of a majority of the votes entitled to be cast generally in the election of
directors.
Business Combinations
Under Maryland law, business combinations between a Maryland corporation and an interested
stockholder or an affiliate of an interested stockholder are prohibited for five years after the
most recent date on which the interested stockholder becomes an interested stockholder. These
business combinations include, among other things, a merger, consolidation, statutory share
exchange, or, in circumstances specified in the statute, an asset transfer or issuance or
reclassification of equity securities.
An interested stockholder is defined as:
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any person who beneficially owns ten percent or more of the voting power of the
corporations outstanding voting stock; or |
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an affiliate or associate of the corporation who, at any time within the two-year period
prior to the date in question, was the beneficial owner of ten percent or more of the
voting power of the then outstanding voting stock of the corporation. |
A person is not an interested stockholder under the statute if the board of directors approved
in advance the transaction by which he otherwise would have become an interested stockholder.
However, in approving a transaction, the board of directors may provide that its approval is
subject to compliance, at or after the time of approval, with any terms and conditions determined
by the board of directors.
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After the five-year prohibition, any business combination between the Maryland corporation and
an interested stockholder generally must be recommended by the board of directors of the
corporation and approved by the affirmative vote of at least:
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80% of the votes entitled to be cast by holders of outstanding shares of voting stock of
the corporation; and |
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two-thirds of the votes entitled to be cast by holders of voting stock of the
corporation other than shares held by the interested stockholder with whom or with whose
affiliate the business combination is to be effected or held by an affiliate or associate
of the interested stockholder. |
These super-majority voting requirements do not apply if the corporations common stockholders
receive a minimum price, as defined under Maryland law, for their shares in the form of cash or
other consideration in the same form as previously paid by the interested stockholder for its
shares.
The statute permits various exemptions from its provisions, including business combinations
that are exempted by the board of directors before the time that the interested stockholder becomes
an interested stockholder. As permitted by statute, we have opted out of the business combination
provisions of the MGCL by resolution of our board of directors. However, our board of directors may
opt into these provisions if approved by our stockholders by the affirmative vote of a majority of
votes cast and with the consent of the Carlyle real estate funds or their affiliates, provided that
such consent of the Carlyle entities will not be required if at such time, they own less than 10%
of our outstanding common stock (assuming all operating partnership units are exchanged for common
stock).
If the foregoing resolution is rescinded, the business combination statute may discourage
others from trying to acquire control of us and increase the difficulty of consummating an offer.
Control Share Acquisitions
Maryland law provides that a holder of control shares of a Maryland corporation acquired in a
control share acquisition have no voting rights with respect to such shares except to the extent
approved by at least two-thirds of the votes entitled to be cast by stockholders entitled to vote
generally in the election of directors, but excluding the acquiring person, officers and employees
who are directors of the corporation. Control shares are voting shares of stock that, if aggregated
with all other shares of stock owned by the acquiring person or in respect of which the acquiring
person is able to exercise or direct the exercise of voting power (except solely by virtue of a
revocable proxy), would entitle the acquiring person to exercise voting power in electing directors
within one of the following ranges of voting power:
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one-tenth or more but less than one-third; |
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one-third or more but less than a majority; or |
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a majority or more of all voting power. |
Control shares do not include shares that the acquiring person is then entitled to vote as a
result of having previously obtained stockholder approval or shares acquired directly from the
corporation. A control share acquisition means the direct or indirect acquisition of issued and
outstanding control shares, subject to certain exceptions.
A person who has made or proposes to make a control share acquisition may compel the board of
directors of the corporation to call a special meeting of stockholders to be held within 50 days of
demand to consider the voting rights of the holder of the shares acquired or proposed to be
acquired. The right to compel the calling of a special meeting is subject to the satisfaction of
certain conditions, including an undertaking to pay the expenses of the meeting. If no request for
a meeting is made, the corporation may itself present the question at any stockholders meeting.
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If voting rights are not approved at the meeting or if the acquiring person does not deliver
an acquiring person statement as required by the statute, then the corporation may redeem for fair
value any or all of the control shares, except those for which voting rights have previously been
approved. The right of our company to redeem control shares is subject to certain conditions and
limitations. Fair value is determined, without regard to the absence of voting rights for the
control shares, as of the date of the last control share acquisition by the acquiring person or of
any meeting of stockholders at which the voting rights of the holders of the shares are considered
and not approved. If voting rights for the holder of the control shares are approved at a
stockholders meeting and the acquiring person becomes entitled to vote a majority of the shares
entitled to vote, all other stockholders may exercise appraisal rights. The fair value of the
shares as determined for purposes of appraisal rights may not be less than the highest price per
share paid by the acquiring person in the control share acquisition.
The control share acquisition statute does not apply (i) to shares acquired in a merger,
consolidation or statutory share exchange if the corporation is a party to the transaction, or (ii)
to acquisitions approved or exempted by the charter or bylaws of the corporation.
Our bylaws contain a provision exempting from the control share acquisition statute any and
all acquisitions by any person of shares of our stock. However, our board of directors may opt into
these provisions if approved by our stockholders by the affirmative vote of a majority of votes
cast and, as it would apply to the Carlyle real estate funds or their affiliates, with the Carlyle
real estate funds or their affiliates consent, provided that the consent of the Carlyle entities
will not be required if at such time they own less than 10% of our outstanding common stock
(assuming all operating partnership units are exchanged for common stock).
There can be no assurance that, subject to the approval of our stockholders, this provision
will not be amended or eliminated at any time in the future by our board of directors.
Amendment to our Charter and Bylaws
In general, our charter may be amended if an amendment is declared advisable by our board of
directors and approved by the affirmative vote of stockholders entitled to cast a majority of the
votes entitled to be cast on the matter. With certain exceptions, our board of directors has the
exclusive power to adopt, alter or repeal any provision of our bylaws or to make new bylaws.
Dissolution of our Company
The dissolution of our company must be approved by the affirmative vote of a majority of each
of our entire board of directors and our stockholders entitled to cast a majority of all of the
votes entitled to be cast on the matter.
Advance Notice of Director Nominations and New Business
Our bylaws provide that nominations of individuals for election to our board of directors and
proposals of other business to be considered at any annual meeting of our stockholders must be made
(i) pursuant to our notice of the meeting, (ii) by or at the direction of our board of directors or
(iii) by any stockholder who was a stockholder of record both at the time of notice required by our
bylaws and at the time of the meeting, is entitled to vote at the meeting in the election of the
individuals so nominated or on such other proposed business and has complied with the advance
notice requirements of, and provided the information and certifications required by, our bylaws.
Only the business specified in our notice of the meeting may be brought before a special
meeting of our stockholders. Nominations of individuals for election as directors at a special
meeting of stockholders must be made (i) by or at the direction of our board of directors or (ii)
if the special meeting has been called in accordance with our bylaws for the purpose of electing
directors, by any stockholder who is a stockholder of record both at the time of notice required by
our bylaws and the time of the special meeting, is entitled to vote at the meeting in the election
of each individual so nominated and has complied with the advance notice requirements of, and
provided the information and certifications required by, our bylaws.
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Special Meetings of Stockholders
Our Chairman, Chief Executive Officer, President, board of directors or any three members of
the board of directors may call special meetings of our stockholders. A special meeting of our
stockholders to act on any matter that may properly be considered at a meeting of our stockholders
must also be called by our Secretary upon the written request of the stockholders entitled to cast
not less than a majority of all the votes entitled to be cast on such matter at the meeting and
containing the information and certifications required by our bylaws. Our Secretary will inform the
requesting stockholders of the reasonably estimated cost of preparing and mailing the notice of
meeting (including our proxy materials), and the requesting stockholder must pay such estimated
cost before our Secretary is required to prepare and mail the notice of the special meeting.
Subtitle 8
Subtitle 8 of Title 3 of the MGCL permits a Maryland corporation with a class of equity
securities registered under the Exchange Act and at least three independent directors to elect to
be subject, by provision in its charter or bylaws or a resolution of its board of directors and
notwithstanding any contrary provision in such charter or bylaws, to any or all of five provisions
of the MGCL, which provide for:
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a classified board; |
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a two-thirds vote requirement for removing a director; |
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a requirement that the number of directors be fixed only by vote of the directors; |
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a requirement that a vacancy on the board be filled only by the remaining directors and
for the remainder of the full term of the class of directors in which the vacancy occurred;
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a majority vote requirement for the calling of a special meeting of stockholders. |
Through provisions in our charter and bylaws unrelated to Subtitle 8, we already (1) vest in
our board of directors the exclusive power, subject to the limitations described above, to fix the
number of directors, by vote of a majority of the entire board of directors, and (2) require,
unless called by our Chairman of our board of directors, our Chief Executive Officer, our
President, our board of directors or any three members of our board of directors, the request of
stockholders entitled to cast a majority of votes entitled to be cast on a matter at the meeting to
call a special meeting to act on the matter. We have not elected to create a classified board. In
the future, our board of directors may elect, without stockholder approval, to create a classified
board or elect to be subject to any of the other provisions of Subtitle 8. Notwithstanding the
foregoing, for so long as the Carlyle real estate funds or their affiliates have the right to
designate at least one member to the board of directors in accordance with the bylaws and
partnership agreement, a resolution adopted by our board of directors prohibits us from electing to
be subject to the provisions of Subtitle 8 relating to a (i) two-thirds vote requirement for the
removing of a director, (ii) requirement that the number of directors be fixed only by a vote of
the directors and (iii) requirement that a vacancy on the board of directors be filled only by the
remaining directors and for the remainder of the full term of the class of directors in which the
vacancy occurred.
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FEDERAL INCOME TAX CONSIDERATIONS
The following is a general summary of certain material U.S. federal income tax considerations
regarding our company and the acquisition, ownership or disposition of our common stock.
Supplemental U.S. federal income tax considerations relevant to the ownership of the other
securities offered by this prospectus may be provided in the prospectus supplement that relates to
those securities. For purposes of this discussion, references to we, our and us mean only
CoreSite Realty Corporation and do not include any of its subsidiaries, except as otherwise
indicated. This summary is for general information only and is not tax advice. The information in
this summary is based on:
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the Internal Revenue Code of 1986, as amended, or the Code; |
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current, temporary and proposed Treasury Regulations promulgated under the Code; |
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the legislative history of the Code; |
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administrative interpretations and practices of the IRS; and |
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court decisions; |
in each case, as of the date of this prospectus. In addition, the administrative interpretations
and practices of the IRS include its practices and policies as expressed in private letter rulings
that are not binding on the IRS except with respect to the particular taxpayers who requested and
received those rulings. Future legislation, Treasury Regulations, administrative interpretations
and practices and/or court decisions may adversely affect the tax considerations contained in this
discussion. Any such change could apply retroactively to transactions preceding the date of the
change. Although we have requested a private letter ruling from the IRS on certain matters, we have
not requested and do not intend to request a ruling from the IRS that we qualify as a REIT, and the
statements in this prospectus are not binding on the IRS or any court. Thus, we can provide no
assurance that the tax considerations contained in this discussion will not be challenged by the
IRS or will be sustained by a court if challenged by the IRS. This summary does not discuss any
state, local or non-U.S. tax consequences associated with the acquisition, ownership, or
disposition of our common stock or our election to be taxed as a REIT.
You are urged to consult your tax advisors regarding the tax consequences to you of:
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the acquisition, ownership or disposition of our common stock, including the
federal, state, local, non-U.S. and other tax consequences; |
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our election to be taxed as a REIT for federal income tax purposes; and |
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potential changes in applicable tax laws. |
Taxation of Our Company
General
We elected to be taxed as a REIT under Sections 856 through 860 of the Code commencing with
our short taxable year ended December 31, 2010. We believe that we have been organized and have
operated in a manner that has allowed us to qualify for taxation as a REIT under the Code
commencing with our short taxable year ended December 31, 2010, and we intend to continue to be
organized and operate in this manner. However, qualification and taxation as a REIT depend upon our
ability to meet the various qualification tests imposed under the Code, including through actual
annual operating results, asset composition, distribution levels and diversity of stock ownership.
Accordingly, no assurance can be given that we have been organized and have operated, or will
continue to be organized and operate, in a manner so as to qualify or remain qualified as a REIT.
See Failure to Qualify. We have received a private letter ruling from the IRS substantially to
the effect that our buildings (including the structural components) will be treated as real property for purposes of the gross income tests
and the asset tests and
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that certain services that we will provide directly to our customers will
not cause any amounts received from our customers to fail to be treated as qualifying rents from
real property for purposes of the gross income tests. We have not received, and do not expect to
seek, a private letter ruling from the IRS on any other issue.
The sections of the Code and the corresponding Treasury Regulations that relate to
qualification and taxation as a REIT are highly technical and complex. The following discussion
sets forth certain material aspects of the sections of the Code that govern the federal income tax
treatment of a REIT and its stockholders. This summary is qualified in its entirety by the
applicable Code provisions, Treasury Regulations promulgated under the Code, and administrative and
judicial interpretations thereof.
Our qualification and taxation as a REIT depend upon our ability to meet the various
qualification tests imposed under the Code, which are discussed below, including through actual
annual operating results, asset composition, distribution levels and diversity of stock ownership.
Accordingly, no assurance can be given that our actual results of operation for any particular
taxable year will satisfy those requirements. Further, the anticipated federal income tax treatment
described in this discussion may be changed, perhaps retroactively, by legislative, administrative
or judicial action at any time.
Provided we qualify for taxation as a REIT, we generally will not be required to pay federal
corporate income taxes on our REIT taxable income that is currently distributed to our
stockholders. This treatment substantially eliminates the double taxation that ordinarily results
from investment in a C corporation. A C corporation is a corporation that generally is required to
pay tax at the corporate level. Double taxation means taxation once at the corporate level when
income is earned and once again at the stockholder level when the income is distributed. We will,
however, be required to pay federal income tax as follows:
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First, we will be required to pay tax at regular corporate rates on any
undistributed REIT taxable income, including undistributed net capital gains. |
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Second, we may be required to pay the alternative minimum tax on our items of tax
preference under some circumstances. |
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Third, if we have (1) net income from the sale or other disposition of foreclosure
property held primarily for sale to customers in the ordinary course of business or
(2) other nonqualifying income from foreclosure property, we will be required to pay
tax at the highest corporate rate on this income. To the extent that income from
foreclosure property is otherwise qualifying income for purposes of the 75% gross
income test, this tax is not applicable. Subject to certain other requirements,
foreclosure property generally is defined as property we acquired through foreclosure
or after a default on a loan secured by the property or a lease of the property. |
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Fourth, we will be required to pay a 100% tax on any net income from prohibited
transactions. Prohibited transactions are, in general, sales or other taxable
dispositions of property, other than foreclosure property, held as inventory or
primarily for sale to customers in the ordinary course of business. We intend to
conduct our operations so that no asset owned by us or any of our pass-through
subsidiaries will be treated as inventory or property held for sale to customers, and
that a sale or other disposition of any such asset will not be made in our ordinary
course of our business. Whether property is held primarily for sale to customers in
the ordinary course of a trade or business depends, however, on the particular facts
and circumstances. We cannot assure you that any property in which we hold a direct or
indirect interest will not be treated as inventory or property held for sale to
customers, or that we will comply with certain safe-harbor provisions of the Code that
would prevent such treatment. |
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Fifth, if we fail to satisfy the 75% gross income test or the 95% gross income test,
as described below, but have otherwise maintained our qualification as a REIT because
certain other requirements are met, we will be required to pay a tax equal to (1) the
greater of (A) the amount by which we fail to satisfy the 75% gross income test and (B) the amount by which we fail to satisfy the 95% gross
income test, multiplied by (2) a fraction intended to reflect our profitability. |
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Sixth, if we fail to satisfy any of the asset tests (other than a de minimis failure
of the 5% or 10% asset test), as described below, due to reasonable cause and not due
to willful neglect, and we nonetheless maintain our REIT qualification because of
specified cure provisions, we will be required to pay a tax equal to the greater of
$50,000 or the highest corporate tax rate multiplied by the net income generated by the
nonqualifying assets that caused us to fail such test. |
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Seventh, if we fail to satisfy any provision of the Code that would result in our
failure to qualify as a REIT (other than a violation of the gross income tests or
certain violations of the asset tests, as described below) and the violation is due to
reasonable cause and not due to willful neglect, we may retain our REIT qualification
but we will be required to pay a penalty of $50,000 for each such failure. |
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Eighth, we will be required to pay a 4% excise tax to the extent we fail to
distribute during each calendar year at least the sum of (1) 85% of our ordinary income
for the year, (2) 95% of our capital gain net income for the year, and (3) any
undistributed taxable income from prior periods. |
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Ninth, if we acquire any asset from a corporation that is or has been a C
corporation in a transaction in which our basis in the asset is determined by reference
to the C corporations basis in the asset, and we subsequently recognize gain on the
disposition of the asset during the ten-year period beginning on the date on which we
acquired the asset, then we will be required to pay tax at the highest regular
corporate tax rate on this gain to the extent of the excess of (1) the fair market
value of the asset over (2) our adjusted basis in the asset, in each case determined as
of the date on which we acquired the asset. The results described in this paragraph
with respect to the recognition of gain assume that the C corporation will refrain from
making an election to receive different treatment under applicable Treasury Regulations
on its tax return for the year in which we acquire the asset from the C corporation. |
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Tenth, our subsidiaries that are C corporations, including our taxable REIT
subsidiaries, generally will be required to pay federal corporate income tax on their
earnings. |
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Eleventh, we will be required to pay a 100% tax on any redetermined rents,
redetermined deductions or excess interest. See Penalty Tax. In general,
redetermined rents are rents from real property that are overstated as a result of
services furnished to any of our customers by a taxable REIT subsidiary of ours.
Redetermined deductions and excess interest generally represent amounts that are
deducted by a taxable REIT subsidiary of ours for amounts paid to us that are in excess
of the amounts that would have been deducted based on arms length negotiations. |
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Twelfth, we may elect to retain and pay income tax on our net capital gain. In that
case, a stockholder would include its proportionate share of our undistributed net
capital gain (to the extent we make a timely designation of such gain to the
stockholder) in its income, would be deemed to have paid the tax that we paid on such
gain, and would be allowed a credit for its proportionate share of the tax deemed to
have been paid, and an adjustment would be made to increase the basis of the
stockholder in our common stock. |
Requirements for Qualification as a REIT. The Code defines a REIT as a corporation, trust or
association:
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that is managed by one or more trustees or directors; |
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that issues transferable shares or transferable certificates to evidence its
beneficial ownership; |
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that would be taxable as a domestic corporation, but for Sections 856 through
860 of the Code; |
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that is not a financial institution or an insurance company within the meaning
of certain provisions of the Code; |
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that is beneficially owned by 100 or more persons; |
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not more than 50% in value of the outstanding stock of which is owned, actually
or constructively, by five or fewer individuals, including certain specified entities,
during the last half of each taxable year; and |
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that meets other tests, described below, regarding the nature of its income and
assets and the amount of its distributions. |
The Code provides that conditions (1) to (4), inclusive, must be met during the entire taxable
year and that condition (5) must be met during at least 335 days of a taxable year of 12 months, or
during a proportionate part of a taxable year of less than 12 months. Conditions (5) and (6) do not
apply until after the first taxable year for which an election is made to be taxed as a REIT. For
purposes of condition (6), the term individual includes a supplemental unemployment compensation
benefit plan, a private foundation or a portion of a trust permanently set aside or used
exclusively for charitable purposes, but generally does not include a qualified pension plan or
profit sharing trust.
We believe that we have been organized and have operated in a manner that has or, as
applicable, will allow us to satisfy conditions (1) through (7) inclusive, during the relevant time
periods. In addition, our charter provides for restrictions regarding ownership and transfer of our
shares which are intended to assist us in continuing to satisfy the share ownership requirements
described in (5) and (6) above. A description of the share ownership and transfer restrictions
relating to our outstanding common stock is contained in the discussion in this prospectus under
the heading Restrictions on Ownership and Transfer. These restrictions, however, may not ensure
that we will, in all cases, be able to satisfy the share ownership requirements described in
conditions (5) and (6) above. To monitor compliance with the stock ownership requirements, we are
generally required to maintain records regarding the actual ownership of our stock. To do so, we
must demand written statements each year from the record holders of significant percentages of our
stock 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 dividends paid by us. A list of those persons
failing or refusing to comply with this demand must be maintained as part of our records. Failure
to comply with these record keeping requirements could subject us to monetary penalties. A
stockholder that fails or refuses to comply with the demand is required by Treasury Regulations to
submit a statement with its tax return disclosing the actual ownership of the shares and other
information. If we fail to satisfy these share ownership requirements, except as provided in the
next sentence, our status as a REIT will terminate. If, however, we comply with the rules contained
in 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 requirement described in condition (6) above, we will be treated as having met
this requirement. See Failure to Qualify.
In addition, we may not maintain our status as a REIT unless our taxable year is the calendar
year. We have and will continue to have a calendar taxable year.
Ownership of Interests in Partnerships, Limited Liability Companies and Qualified REIT
Subsidiaries. In the case of a REIT that is a partner in a partnership or a member in a limited
liability company 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 or limited liability company, as the case may be, based on its interest in partnership
capital, subject to special rules relating to the 10% asset test described below. Also, the REIT
will be deemed to be entitled to its proportionate share of the income of that entity. The assets
and gross income of the partnership or limited liability company retain the same character in the
hands of the REIT for purposes of Section 856 of the Code, including satisfying the gross income
tests and the asset tests. Thus, our pro rata share of the assets and items of income of our
operating partnership, including our operating partnerships share of these items of any
partnership or limited liability company treated as a partnership or disregarded entity for federal
income tax purposes in which it owns an interest, is treated as our assets and items of income for
purposes of applying the requirements described in this discussion, including the gross income and
asset tests described below. A brief summary of the rules governing the federal income taxation of
partnerships and limited liability companies is set forth below in Tax Aspects of Our Operating Partnership, the Subsidiary Partnerships and
the Limited Liability Companies.
We generally have control of our operating partnership and the subsidiary partnerships and
limited liability companies and intend to operate them in a manner consistent with the requirements
for our qualification as a REIT. If we become a limited partner or non-managing member in any
partnership or limited liability company and such
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entity takes or expects to take actions that
could jeopardize our status as a REIT or require us to pay tax, we may be forced to dispose of our
interest in such entity. In addition, it is possible that a partnership or limited liability
company could take an action which could cause us to fail a gross income or asset test, and that we
would not become aware of such action in time to dispose of our interest in the partnership or
limited liability company or take other corrective action on a timely basis. In that case, we could
fail to qualify as a REIT unless we were entitled to relief, as described below.
We may from time to time own and operate certain properties through subsidiaries that we
intend to be treated as qualified REIT subsidiaries under the Code. A corporation will qualify as
our qualified REIT subsidiary if we own 100% of the corporations outstanding stock and do not
elect with the subsidiary to treat it as a taxable REIT subsidiary, as described below. A
qualified REIT subsidiary is not treated as a separate corporation, and all assets, liabilities and
items of income, gain, loss, deduction and credit of a qualified REIT subsidiary are treated as
assets, liabilities and items of income, gain, loss, deduction and credit of the parent REIT for
all purposes under the Code, including all REIT qualification tests. Thus, in applying the federal
tax requirements described in this discussion, any qualified REIT subsidiaries we own are ignored,
and all assets, liabilities and items of income, gain, loss, deduction and credit of such
corporations are treated as our assets, liabilities and items of income, gain, loss, deduction and
credit. A qualified REIT subsidiary is not subject to federal income tax, and our ownership of the
stock of a qualified REIT subsidiary will not violate the restrictions on ownership of securities,
as described below under Asset Tests.
Ownership of Interests in Taxable REIT Subsidiaries. We currently own an interest in one
taxable REIT subsidiary and may acquire securities in additional taxable REIT subsidiaries in the
future. A taxable REIT subsidiary is a corporation other than a REIT in which a REIT directly or
indirectly holds stock, and that has made a joint election with such REIT to be treated as a
taxable REIT subsidiary. If a taxable REIT subsidiary owns more than 35% of the total voting power
or value of the outstanding securities of another corporation, such other corporation will also be
treated as a taxable REIT subsidiary. Other than some activities relating to lodging and health
care facilities, a taxable REIT subsidiary may generally engage in any business, including the
provision of customary or non-customary services to customers of its parent REIT. A taxable REIT
subsidiary is subject to federal income tax as a regular C corporation. In addition, a taxable REIT
subsidiary may be prevented from deducting interest on debt funded directly or indirectly by its
parent REIT if certain tests regarding the taxable REIT subsidiarys debt to equity ratio and
interest expense are not satisfied. A REITs ownership of securities of a taxable REIT subsidiary
is not subject to the 5% or 10% asset test described below. See Asset Tests.
Income Tests
We must satisfy two gross income requirements annually to maintain our qualification as a
REIT. First, in each taxable year we must derive directly or indirectly at least 75% of our gross
income (excluding gross income from prohibited transactions, certain hedging transactions, and
certain foreign currency gains) from investments relating to real property or mortgages on real
property, including rents from real property and, in certain circumstances, interest, or certain
types of temporary investments. Second, in each taxable year we must derive at least 95% of our
gross income (excluding gross income from prohibited transactions, certain hedging transactions,
and certain foreign currency gains) from the real property investments described above or
dividends, interest and gain from the sale or disposition of stock or securities, or any
combination of the foregoing. For these purposes, the term interest generally does not include
any amount received or accrued, directly or indirectly, if the determination of all or some of the
amount depends in any way on the income or profits of any person. However, an amount received or
accrued generally will not be excluded from the term interest solely by reason of being based on
a fixed percentage or percentages of receipts or sales.
A significant portion of the value of our properties is attributable to structural components
related to the provision of electricity, heating ventilation and air conditioning, humidification
regulation, security and fire protection, and telecommunication infrastructure. We have received a private letter ruling
from the IRS holding, among other things, that our buildings, including the structural components,
constitute real property for purposes of the gross income tests and asset tests. We are entitled to
rely upon that private letter ruling only to the extent that we did not misstate or omit a material
fact in the ruling request we submitted to the IRS and that we operate in the future in accordance
with the facts described in that request. Moreover, the IRS, in its sole discretion, may decide to
revoke the private letter ruling. If, despite the private letter ruling, the IRS were to determine
that structural
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components at our properties constituted personal property rather than real
property, a significant portion of our rent would not constitute rents from real property and we
would fail to satisfy the 75% and 95% gross income tests.
Rents we receive from a customer will qualify as rents from real property for the purpose of
satisfying the gross income requirements for a REIT described above only if all of the following
conditions are met:
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The amount of rent is not based in any way on the income or profits of any person.
However, an amount we receive or accrue generally will not be excluded from the term
rents from real property solely because it is based on a fixed percentage or
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Neither we nor an actual or constructive owner of 10% or more of our capital stock
actually or constructively owns 10% or more of the interests in the assets or net
profits of a non-corporate customer, or, if the customer is a corporation, 10% or more
of the voting power or value of all classes of stock of the customer. Rents we receive
from such a customer that is a taxable REIT subsidiary of ours, however, will not be
excluded from the definition of rents from real property as a result of this
condition if at least 90% of the space at the property to which the rents relate is
leased to third parties, and the rents paid by the taxable REIT subsidiary are
substantially comparable to rents paid by our other customers for comparable space.
Whether rents paid by a taxable REIT subsidiary are substantially comparable to rents
paid by other customers is determined at the time the lease with the taxable REIT
subsidiary is entered into, extended, and modified, if such modification increases the
rents due under such lease. Notwithstanding the foregoing, however, if a lease with a
controlled taxable REIT subsidiary is modified and such modification results in an
increase in the rents payable by such taxable REIT subsidiary, any such increase will
not qualify as rents from real property. For purposes of this rule, a controlled
taxable REIT subsidiary is a taxable REIT subsidiary in which the parent REIT owns
stock possessing more than 50% of the voting power or more than 50% of the total value
of the outstanding stock of such taxable REIT subsidiary. To the extent any rent from a
lease with a taxable REIT subsidiary does not satisfy the 90% rental exception
described above, our receipt of such rent would not qualify under the gross income
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Rent attributable to personal property, leased in connection with a lease of real
property, is not greater than 15% of the total rent received under the lease. If this
condition is not met, then the portion of the rent attributable to personal property
will not qualify as rents from real property; and |
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We generally do not operate or manage the property or furnish or render services to
our customers, subject to a 1% de minimis exception and except as provided below. We
may, however, perform services that are usually or customarily rendered in connection
with the rental of space for occupancy only and are not otherwise considered rendered
to the occupant of the property. Examples of these services include the provision of
light, heat, or other utilities, trash removal and general maintenance of common areas.
In addition, we may employ an independent contractor from whom we derive no revenue to
provide customary services, or a taxable REIT subsidiary (which may be wholly or
partially owned by us) to provide both customary and non-customary services to our
customers without causing the rent we receive from those customers to fail to qualify
as rents from real property. Any amounts we receive from a taxable REIT subsidiary
with respect to the taxable REIT subsidiarys provision of non-customary services will,
however, be nonqualifying income under the 75% gross income test and, except to the
extent received through the payment of dividends, the 95% gross income test. |
We generally do not intend, and as a general partner of our operating partnership, do not
intend to permit our operating partnership, to take actions we believe will cause us to fail to
satisfy the rental conditions described above. However, we may intentionally fail to satisfy some of these conditions to the extent we
determine, based on the advice of our tax counsel, that the failure will not jeopardize our tax
status as a REIT. In addition, with respect to the limitation on the rental of personal property,
we have not obtained appraisals of the real property and personal property leased to customers.
Accordingly, there can be no assurance that the IRS will not disagree with our determinations of
value.
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The private letter ruling we received from the IRS held that certain services that we will
provide to our customers directly would not prevent the rent received from those properties as
constituting rents from real property. The private letter ruling specifically addressed services
related to utilities; controlled humidity; security; fire protection; common area maintenance;
management, operation and maintenance, and repair of the major building systems and components of
the data system buildings (including structural components); acceptance of customer deliveries;
parking for customers and their visitors; and telecommunication infrastructure to allow customers
to connect to third-party telecommunication providers. The private letter ruling was based, in
part, on our representation that those services are customarily rendered in connection with the
rental of comparable buildings in the geographic market in which our buildings are located. Our
ability to rely upon the private letter ruling is dependent on the accuracy of that representation
and on our not misstating or omitting another material fact in the ruling request we submitted to
the IRS. Moreover, the IRS, in its sole discretion, may decide to revoke the private letter ruling.
If, despite the private letter ruling, the IRS were to determine that services we directly provide
at our properties were not usually and customarily rendered in connection with the rental of real
property, the rent from our property would not constitute rents from real property and we would
likely fail to satisfy the 95% and 75% gross income tests. We intend to provide any services that
are not usually and customarily rendered or that are for the benefit of a particular customer in
connection with the rental of real property through our TRS or through an independent contractor.
Income we receive that is attributable to the rental of parking spaces at the properties generally
will constitute rents from real property for purposes of the gross income tests if certain services
provided with respect to the parking spaces are performed by independent contractors from whom we
derive no revenue, either directly or indirectly, or by a taxable REIT subsidiary, and certain
other conditions are met. We believe that the income we receive that is attributable to parking
spaces meets these tests and, accordingly, will constitute rents from real property for purposes of
the gross income tests.
From time to time, we may enter into hedging transactions with respect to one or more of our
assets or liabilities. Our hedging activities may include entering into interest rate swaps, caps,
and floors, options to purchase these items, and futures and forward contracts. Income from a
hedging transaction, including gain from the sale or disposition of such a transaction, that is
clearly identified as a hedging transaction as specified in the Code will not constitute gross
income and thus will be exempt from the 75% and 95% gross income tests. The term hedging
transaction, as used above, generally means any transaction we enter into in the normal course of
our business primarily to manage risk of (1) interest rate changes or fluctuations with respect to
borrowings made or to be made by us to acquire or carry real estate assets, or (2) currency
fluctuations with respect to an item of qualifying income under the 75% or 95% gross income test.
To the extent that we do not properly identify such transactions as hedges or we hedge with other
types of financial instruments, the income from those transactions is not likely to be treated as
qualifying income for purposes of the gross income tests. We intend to structure any hedging
transactions in a manner that does not jeopardize our status as a REIT.
To the extent our taxable REIT subsidiaries pay dividends, we generally will derive our
allocable share of such dividend income through our interest in our operating partnership. Such
dividend income will qualify under the 95%, but not the 75%, gross income test.
We will monitor the amount of the dividend and other income from our taxable REIT subsidiaries
and will take actions intended to keep this income, and any other nonqualifying income, within the
limitations of the gross income tests. Although we expect these actions will be sufficient to
prevent a violation of the gross income tests, we cannot guarantee that such actions will in all
cases prevent such a violation.
If we fail to satisfy one or both of the 75% or 95% gross income tests for any taxable year,
we may nevertheless qualify as a REIT for the year if we are entitled to relief under certain
provisions of the Code. We generally may make use of the relief provisions if:
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following our identification of the failure to meet the 75% or 95% gross income
tests for any taxable year, we file a schedule with the IRS setting forth each item of
our gross income for purposes of the 75% or 95% gross income tests for such taxable
year in accordance with Treasury Regulations to be issued; and |
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our failure to meet these tests was due to reasonable cause and not due to willful
neglect. |
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It is not possible, however, to state whether in all circumstances we would be entitled to the
benefit of these relief provisions. For example, if we fail to satisfy the gross income tests
because nonqualifying income that we intentionally accrue or receive exceeds 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 above in Taxation of Our CompanyGeneral, even if
these relief provisions apply, and we retain our status as a REIT, a tax would be imposed with
respect to our nonqualifying income. We may not always be able to comply with the gross income
tests for REIT qualification despite periodic monitoring of our income.
Prohibited Transaction Income. Any gain that we realize on the sale of property held as
inventory or otherwise held primarily for sale to customers in the ordinary course of business,
including our share of any such gain realized by our operating partnership, either directly or
through its subsidiary partnerships and limited liability companies, will be treated as income from
a prohibited transaction that is subject to a 100% penalty tax, unless certain safe harbor
exceptions apply. This prohibited transaction income may also adversely affect our ability to
satisfy the gross income tests for qualification as a REIT. Under existing law, whether property is
held as inventory or primarily for sale to customers in the ordinary course of a trade or business
is a question of fact that depends on all the facts and circumstances surrounding the particular
transaction. Our operating partnership intends to hold its properties for investment with a view to
long-term appreciation, to engage in the business of acquiring, developing and owning its
properties and to make occasional sales of the properties as are consistent with our operating
partnerships investment objectives. However, the IRS may successfully contend that some or all of
the sales made by our operating partnership or its subsidiary partnerships or limited liability
companies are prohibited transactions. We would be required to pay the 100% penalty tax on our
allocable share of the gains resulting from any such sales. We cannot assure you that we can comply
with certain safe-harbor provisions of the Code that would prevent the imposition of the 100%
penalty tax.
Penalty Tax. Any redetermined rents, redetermined deductions or excess interest we generate
will be subject to a 100% penalty tax. In general, redetermined rents are rents from real property
that are overstated as a result of any services furnished to any of our customers by a taxable REIT
subsidiary of ours, and redetermined deductions and excess interest represent any amounts that are
deducted by a taxable REIT subsidiary of ours for amounts paid to us that are in excess of the
amounts that would have been deducted based on arms length negotiations. Rents we receive will not
constitute redetermined rents if they qualify for certain safe harbor provisions contained in the
Code.
From time to time, our taxable REIT subsidiary provides services to our customers. We believe
we have set, and we intend to set in the future, the fees paid to our taxable REIT subsidiaries for
such services at arms-length rates, although such rates may not satisfy any of the safe-harbor
provisions described above. These determinations are inherently factual, and the IRS has broad
discretion to assert that amounts paid between related parties should be reallocated to clearly
reflect their respective incomes. If the IRS successfully made such an assertion, we would be
required to pay a 100% penalty tax on the excess of an arms-length fee for customer services over
the amount actually paid.
Asset Tests
At the close of each calendar quarter of our taxable year, we must also satisfy certain tests
relating to the nature and diversification of our assets. First, at least 75% of the value of our
total assets must be represented by real estate assets, cash, cash items and government securities.
For purposes of this test, the term real estate assets generally means real property (including
interests in real property and interests in mortgages on real property) and shares (or transferable
certificates of beneficial interest) in other REITs, as well as any stock or debt instrument
attributable to the investment of the proceeds of a stock offering or a public offering of debt with a term of
at least five years, but only for the one-year period beginning on the date the REIT receives such
proceeds.
Second, not more than 25% of the value of our total assets may be represented by securities
(including securities of taxable REIT subsidiaries), other than those securities includable in the
75% asset test.
Third, of the investments included in the 25% asset class, and except for investments in other
REITs, our qualified REIT subsidiaries and taxable REIT subsidiaries, the value of any one issuers
securities may not exceed 5% of the value of our total assets, and we may not own more than 10% of
the total vote or value of the outstanding
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securities of any one issuer except, in the case of the
10% value test, securities satisfying the straight debt safe-harbor or securities issued by a
partnership that itself would satisfy the 75% income test if it were a REIT. Certain types of
securities we may own are disregarded as securities solely for purposes of the 10% value test,
including, but not limited to, any loan to an individual or an estate, any obligation to pay rents
from real property and any security issued by a REIT. In addition, solely for purposes of the 10%
value test, the determination of our interest in the assets of a partnership or limited liability
company in which we own an interest will be based on our proportionate interest in any securities
issued by the partnership or limited liability company, excluding for this purpose certain
securities described in the Code.
Our operating partnership currently owns 100% of the securities of a corporation that has
elected, together with us, to be treated as our taxable REIT subsidiary. So long as this
corporation qualifies as our taxable REIT subsidiary, we will not be subject to the 5% asset test,
the 10% voting securities limitation or the 10% value limitation with respect to our ownership of
its securities. We may acquire securities in other taxable REIT subsidiaries in the future. We
believe that the aggregate value of our taxable REIT subsidiary and our other securities (other
than those securities includable in the 75% asset test) has not exceeded, and in the future will
not exceed, 25% of the aggregate value of our gross assets. No independent appraisals have been
obtained to support these conclusions. In addition, there can be no assurance that the IRS will not
disagree with our determinations of value.
The asset tests must be satisfied at the close of each calendar quarter of our taxable year in
which we (directly or through our operating partnership) acquire securities in the applicable
issuer, and also at the close of each calendar quarter in which we increase our ownership of
securities of such issuer (including as a result of increasing our interest in our operating
partnership). For example, our indirect ownership of securities of each issuer will increase as a
result of our capital contributions to our operating partnership or as limited partners exercise
their redemption/exchange rights. Accordingly, 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 an asset
test because we acquire securities or other property during a quarter (including as a result of an
increase in our interest in our operating partnership), we may cure this failure by disposing of
sufficient nonqualifying assets within 30 days after the close of that quarter. As described above
in Taxation of Our CompanyIncome Tests, we have received a ruling from the IRS holding that
our buildings (including certain structural components) will constitute real property for purposes
of the asset tests. No independent appraisals have been obtained, however, to support our
conclusions as to the value of our total assets, or the value of any particular security or
securities. Moreover, we cannot assure you that the IRS will not contend that any of our assets or
our interests in the securities violate the REIT asset requirements. Although we plan to take steps
to ensure that we satisfy such tests for any quarter with respect to which testing is to occur,
there can be no assurance that such steps will always be successful, or will not require a
reduction in our operating partnerships overall interest in an issuer. If we fail to cure any
noncompliance with the asset tests within the 30 day cure period, we would cease to qualify as a
REIT unless we are eligible for certain relief provisions discussed below.
Certain relief provisions may be available to us if we discover a failure to satisfy the asset
tests described above after the 30-day cure period. Under these provisions, we will be deemed to
have met the 5% and 10% asset tests if the value of our nonqualifying assets (i) does not exceed
the lesser of (a) 1% of the total value of our assets at the end of the applicable quarter or (b)
$10,000,000, and (ii) we dispose of the nonqualifying assets or otherwise satisfy such tests within
(a) six months after the last day of the quarter in which the failure to satisfy the asset tests is
discovered or (b) the period of time prescribed by Treasury Regulations to be issued. For
violations of any of the asset tests due to reasonable cause and not due to willful neglect and
that are, in the case of the 5% and 10% asset tests, in excess of the de minimis exception
described above, we may avoid disqualification as a REIT after the 30-day cure period by taking
steps including (i) the disposition of sufficient nonqualifying assets, or the taking of other actions, which allow us to meet the asset tests within (a) six months after the last day of
the quarter in which the failure to satisfy the asset tests is discovered or (b) the period of time
prescribed by Treasury Regulations to be issued, (ii) paying a tax equal to the greater of (a)
$50,000 or (b) the highest corporate tax rate multiplied by the net income generated by the
nonqualifying assets, and (iii) disclosing certain information to the IRS.
Although we believe we have satisfied the asset tests described above and plan to take steps
to ensure that we satisfy such tests for any quarter with respect to which retesting is to occur,
there can be no assurance that we will always be successful, or will not require a reduction in our
operating partnerships overall interest in an issuer
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(including in a taxable REIT subsidiary). If
we fail to cure any noncompliance with the asset tests in a timely manner, and the relief
provisions described above are not available, we would cease to qualify as a REIT.
Annual Distribution Requirements
To maintain our qualification as a REIT, we are required to distribute dividends, other than
capital gain dividends, to our stockholders in an amount at least equal to the sum of:
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the excess of the sum of certain items of non-cash income over 5% of our REIT
taxable income. |
For these purposes, our REIT taxable income is computed without regard to the dividends paid
deduction and our net capital gain. In addition, for purposes of this test, non-cash income means
income attributable to leveled stepped rents, original issue discount on purchase money debt,
cancellation of indebtedness, or a like-kind exchange that is later determined to be taxable.
In addition, if we dispose of any asset we acquired from a corporation which is or has been a
C corporation in a transaction in which our basis in the asset is determined by reference to the
basis of the asset in the hands of that C corporation, within the ten-year period following our
acquisition of such asset, we would be required to distribute at least 90% of the after-tax gain,
if any, we recognized on the disposition of the asset, to the extent that gain does not exceed the
excess of (a) the fair market value of the asset over (b) our adjusted basis in the asset, in each
case, on the date we acquired the asset.
We generally must pay, or be treated as paying, the distributions described above in the
taxable year to which they relate. At our election, a distribution will be treated as paid in a
taxable year if it is declared before we timely file our tax return for such year and paid on or
before the first regular dividend payment after such declaration, provided such payment is made
during the 12-month period following the close of such year. These distributions are treated as
received by our stockholders in the year in which paid. This is so even though these distributions
relate to the prior year for purposes of the 90% distribution requirement. In order to be taken
into account for purposes of our distribution requirement, the amount distributed must not be
preferentiali.e., every stockholder of the class of stock to which a distribution is made must be
treated the same as every other stockholder of that class, and no class of stock may be treated
other than according to its dividend rights as a class. To the extent that we do not distribute all
of our net capital gain, or distribute at least 90%, but less than 100%, of our REIT taxable
income, as adjusted, we will be required to pay tax on the undistributed amount at regular
corporate tax rates. We believe that we have made, and we intend to continue to make, timely
distributions sufficient to satisfy these annual distribution requirements and to minimize our
corporate tax obligations. In this regard, the partnership agreement of our operating partnership
authorizes us, as general partner of our operating partnership, to take such steps as may be
necessary to cause our operating partnership to distribute to its partners an amount sufficient to
permit us to meet these distribution requirements and to minimize our federal income or excise tax
liability.
We expect that our REIT taxable income will be less than our cash flow because of depreciation
and other non-cash charges included in computing REIT taxable income. Accordingly, we anticipate
that we generally will have sufficient cash or liquid assets to enable us to satisfy the
distribution requirements described above. However, from time to time, we may not have sufficient
cash or other liquid assets to meet these distribution requirements due to timing differences between the actual receipt of income and actual payment of deductible
expenses, and the inclusion of income and deduction of expenses in determining our taxable income.
In addition, we may decide to retain our cash, rather than distribute it, in order to repay debt or
for other reasons. If these timing differences occur, we may borrow funds to pay dividends or pay
dividends in the form of taxable stock dividends in order to meet the distribution requirements,
while preserving our cash.
Pursuant to recent guidance issued by the IRS, certain part-stock and part-cash dividends
distributed by publicly traded REITs with respect to calendar years 2008 through 2011, and in some
cases declared as late as December 31,
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2012, will be treated as distributions for purposes of the
REIT distribution requirements. Under the terms of this guidance, up to 90% of distributions by a
REIT could be paid in shares of its stock. If we make such a distribution, taxable stockholders
would be required to include the full amount of the dividend (i.e., the cash and the stock portion)
as ordinary income (subject to limited exceptions), to the extent of our current and accumulated
earnings and profits for federal income tax purposes, as described under the headings Federal
Income Tax Considerations for Holders of Our Common StockTaxation of Taxable U.S.
StockholdersDistributions Generally and Federal Income Tax Considerations for Holders of Our
Common StockTaxation of Non-U.S. StockholdersDistributions Generally. As a result, our
stockholders could recognize taxable income in excess of the cash received and may be required to
pay tax with respect to such dividends in excess of the cash received. If a taxable stockholder
sells the stock it receives as a dividend, the sales proceeds may be less than the amount included
in income with respect to the dividend, depending on the market price of the stock at the time of
the sale. Furthermore, with respect to non-U.S. stockholders, we may be required to withhold U.S.
tax with respect to such dividends, including in respect of all or a portion of such dividend that
is payable in stock.
Under some circumstances, we may be able to rectify an inadvertent failure to meet the 90%
distribution requirement for a year by paying deficiency dividends to our stockholders in a later
year, which may be included in our deduction for dividends paid for the earlier year. Thus, we may
be able to avoid being taxed on amounts distributed as deficiency dividends, subject to the 4%
excise tax described below. However, we will be required to pay interest to the IRS based upon the
amount of any deduction claimed for deficiency dividends.
Furthermore, we will be required to pay a 4% excise tax to the extent we fail to distribute
during each calendar year at least the sum of 85% of our ordinary income for such year, 95% of our
capital gain net income for the year and any undistributed taxable income from prior periods. Any
ordinary income and net capital gain on which this excise tax is imposed for any year is treated as
an amount distributed during that year for purposes of calculating such tax.
For purposes of the 90% distribution requirement and excise tax described above, dividends
declared during the last three months of the taxable year, payable to stockholders of record on a
specified date during such period and paid during January of the following year, will be treated as
paid by us and received by our stockholders on December 31 of the year in which they are declared.
Like-Kind Exchanges
We may dispose of properties in transactions intended to qualify as like-kind exchanges under
the Code. Such like-kind exchanges are intended to result in the deferral of gain for federal
income tax purposes. The failure of any such transaction to qualify as a like-kind exchange could
require us to pay federal income tax, possibly including the 100% prohibited transaction tax,
depending on the facts and circumstances surrounding the particular transaction.
Failure to Qualify
If we discover a violation of a provision of the Code that would result in our failure to
qualify as a REIT, certain specified cure provisions may be available to us. Except with respect to
violations of the gross income tests and asset tests (for which the cure provisions are described
above), and provided the violation is due to reasonable cause and not due to willful neglect, these
cure provisions generally impose a $50,000 penalty for each violation in lieu of a loss of REIT
status. If we fail to satisfy the requirements for taxation as a REIT in any taxable year, and the
relief provisions do not apply, we will be required to pay tax, including any applicable
alternative minimum tax, on our taxable income at regular corporate rates. Distributions to
stockholders in any year in which we fail to qualify as a REIT will not be deductible by us, and we
will not be required to distribute any amounts to our stockholders. As a result, we anticipate that our failure to qualify as a REIT would reduce the cash available
for distribution by us to our stockholders. In addition, if we fail to qualify as a REIT, all
distributions to stockholders will be taxable as regular corporate dividends to the extent of our
current and accumulated earnings and profits. In such event, corporate distributees may be eligible
for the dividends-received deduction. In addition, non-corporate stockholders, including
individuals, may be eligible for the preferential tax rates on qualified dividend income. See
Federal Income Tax Considerations for Holders of Our Common StockTaxation of Taxable U.S.
StockholdersTax Rates for a discussion of the scheduled sunset of the preferential tax rates
on qualified dividend income. Unless entitled to relief under specific statutory provisions, we
would also be ineligible to elect to be treated as a REIT for
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the four taxable years following the
year for which we lose our qualification. It is not possible to state whether in all circumstances
we would be entitled to this statutory relief.
Tax
Aspects of Our Operating Partnership, the Subsidiary Partnerships and the Limited Liability Companies
General. All of our investments are held indirectly through our operating partnership. In
addition, our operating partnership holds certain of its investments indirectly through subsidiary
partnerships and limited liability companies which we believe have been and will continue to be
treated as partnerships or disregarded entities for federal income tax purposes. In general,
entities that are treated as partnerships or disregarded entities for federal income tax purposes
are pass-through entities which are not required to pay federal income tax. Rather, partners or
members of such entities are allocated their shares of the items of income, gain, loss, deduction
and credit of the partnership or limited liability company, and are potentially required to pay tax
on this income, without regard to whether they receive a distribution from the partnership or
limited liability company. We will include in our income our share of these partnership and limited
liability company items for purposes of the various gross income tests, the computation of our REIT
taxable income, and the REIT distribution requirements. Moreover, for purposes of the asset tests,
we will include our pro rata share of assets held by our operating partnership, including its share
of its subsidiary partnerships and limited liability companies, based on our capital interests in
each such entity. See Taxation of Our Company.
Entity Classification. Our interests in our operating partnership and the subsidiary
partnerships and limited liability companies involve special tax considerations, including the
possibility that the IRS might challenge the status of these entities as partnerships (or
disregarded entities). For example, an entity that would otherwise be treated as a partnership for
federal income tax purposes may nonetheless be taxable as a corporation if it is a publicly traded
partnership and certain other requirements are met. A partnership or limited liability company
would be treated as a publicly traded partnership if its interests are traded on an established
securities market or are readily tradable on a secondary market or a substantial equivalent
thereof, within the meaning of applicable Treasury Regulations. We do not anticipate that our
operating partnership or any subsidiary partnership or limited liability company will be treated as
a publicly traded partnership that is taxable as a corporation. However, if any such entity were
treated as a corporation, it would be required to pay an entity-level tax on its income. In this
situation, the character of our assets and items of gross income would change and could prevent us
from satisfying the REIT asset tests and possibly the REIT income tests. See Taxation of Our
CompanyAsset Tests and Taxation of Our CompanyIncome Tests. This, in turn, could prevent
us from qualifying as a REIT. See Failure to Qualify for a discussion of the effect of our
failure to meet these tests. In addition, a change in the tax status of our operating partnership
or a subsidiary partnership or limited liability company might be treated as a taxable event. If
so, we might incur a tax liability without any related cash payment.
Allocations of Income, Gain, Loss and Deduction. The net income and loss of our operating
partnership are allocated in accordance with the terms of the partnership agreement. In
general, the net income of our operating partnership is allocated first to us to reverse
certain prior net losses (if any) and then to us and to holders of
partnership units in accordance with our respective percentage interests in our operating
partnership. In general, net loss is allocated first to us and to holders of partnership units
in accordance with our respective percentage interests in our operating partnership until the
capital account in the relevant units is reduced to zero and then to us as general partner in the amount of
any remaining net loss. Certain limited partners have guaranteed debt of our operating partnership,
indirectly through an agreement to make capital contributions to our operating partnership under
limited circumstances. As a result of these guaranties or contribution agreements, and
notwithstanding the foregoing discussion of allocations of income and loss of our operating
partnership to holders of units, such limited partners could under limited circumstances be allocated a disproportionate amount of net loss upon a
liquidation of our operating partnership, which net loss would have otherwise been allocable to us.
If an allocation of partnership income or loss does not comply with the requirements of
Section 704(b) of the Code and the Treasury Regulations thereunder, the item subject to the
allocation will be reallocated in accordance with the partners interests in the partnership. This
reallocation will be determined by taking into account all of the facts and circumstances relating
to the economic arrangement of the partners with respect to such item. Our
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operating partnerships
allocations of taxable income and loss are intended to comply with the requirements of Section
704(b) of the Code and the Treasury Regulations thereunder.
Tax Allocations with Respect to the Properties. Under Section 704(c) of the Code, income,
gain, loss and deduction attributable to appreciated or depreciated property that is contributed to
a partnership in exchange for an interest in the partnership, must be allocated in a manner so that
the contributing partner is charged with the unrealized gain or benefits from the unrealized loss
associated with the property at the time of the contribution. The amount of the unrealized gain or
unrealized loss generally is equal to the difference between the fair market value or book value
and the adjusted tax basis of the contributed property at the time of contribution, as adjusted
from time to time. These allocations are solely for federal income tax purposes and do not affect
the book capital accounts or other economic or legal arrangements among the partners.
Our operating partnership may, from time to time, acquire interests in property in exchange
for interests in our operating partnership. In that case, the tax basis of these property interests
generally carries over to the operating partnership, notwithstanding their different book (i.e.,
fair market) value (this difference is referred to as a book-tax difference). The partnership
agreement requires that income and loss allocations with respect to these properties be made in a
manner consistent with Section 704(c) of the Code. Treasury Regulations issued under Section 704(c)
of the Code provide partnerships with a choice of several methods of accounting for book-tax
differences. We and our operating partnership have agreed to use the traditional method for
accounting for book-tax differences for the properties initially contributed to our operating
partnership. Under the traditional method, which is the least favorable method from our
perspective, the carryover basis of contributed interests in the properties in the hands of our
operating partnership (i) will or could cause us to be allocated lower amounts of depreciation
deductions for tax purposes than would be allocated to us if all contributed properties were to
have a tax basis equal to their fair market value at the time of the contribution and (ii) could
cause us to be allocated taxable gain in the event of a sale of such contributed interests or
properties in excess of the economic or book income allocated to us as a result of such sale, with
a corresponding benefit to the other partners in our operating partnership. An allocation described
in (ii) above might cause us or the other partners to recognize taxable income in excess of cash
proceeds in the event of a sale or other disposition of property, which might adversely affect our
ability to comply with the REIT distribution requirements. See Taxation of Our
CompanyRequirements for Qualification as a Real Estate Investment Trust and Taxation of Our
CompanyAnnual Distribution Requirements. With respect to properties contributed to our operating
partnership subsequent to the contribution of the initial properties, we and our operating
partnership have agreed to account for book-tax differences using any method approved under Section
704(c) of the Code and the applicable Treasury Regulations as chosen by the general partner under
the partnership agreement.
Any property acquired by our operating partnership in a taxable transaction will initially
have a tax basis equal to its fair market value, and Section 704(c) of the Code generally will not
apply.
Federal Income Tax Considerations for Holders of Our Common Stock
The following summary describes the principal federal income tax consequences to you of
acquiring, owning and disposing of our common stock. This summary assumes you hold shares of our
common stock as capital assets (generally, property held for investment within the meaning of
Section 1221 of the Code). It does not address all the tax consequences that may be relevant to you
in light of your particular circumstances. In addition, this discussion does not address the tax
consequences relevant to persons who receive special treatment under the federal income tax law,
except where specifically noted. Holders receiving special treatment include, without limitation:
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financial institutions, banks and thrifts; |
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insurance companies; |
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tax-exempt organizations; |
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S corporations; |
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traders in securities that elect to mark to market; |
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partnerships, pass-through entities and persons holding our common stock through a
partnership or other pass-through entity; |
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stockholders subject to the alternative minimum tax; |
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regulated investment companies and REITs; |
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non-U.S. governments and international organizations; |
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non-U.S. stockholders that are passive foreign investment companies or controlled
foreign corporations; |
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broker-dealers or dealers in securities or currencies; |
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U.S. expatriates; |
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persons holding our common stock as part of a hedge, straddle, conversion,
integrated or other risk reduction or constructive sale transaction; or |
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U.S. stockholders (as defined below) whose functional currency is not the U.S.
dollar. |
If you are considering acquiring our common stock, you should consult your tax advisors
concerning the application of federal income tax laws to your particular situation as well as any
consequences of the acquisition, ownership and disposition of our common stock arising under the
laws of any state, local or non-U.S. taxing jurisdiction.
When we use the term U.S. stockholder, we mean a holder of shares of our common stock who,
for federal income tax purposes, is:
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an individual who is a citizen or resident of the United States; |
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a corporation, including an entity treated as a corporation for federal income tax
purposes, created or organized in or under the laws of the United States or of any
state thereof or in the District of Columbia; |
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an estate the income of which is subject to federal income taxation regardless of
its source; or |
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a trust that (1) is subject to the primary supervision of a U.S. court and the
control of one or more U.S. persons or (2) has a valid election in effect under
applicable Treasury Regulations to be treated as a U.S. person. |
If you hold shares of our common stock and are neither a U.S. stockholder nor a partnership
for federal income tax purposes, you are a non-U.S. stockholder.
If a partnership or other entity treated as a partnership for federal income tax purposes
holds shares of our common stock, the tax treatment of a partner generally will depend on the
status of the partner and on the activities of the partnership. Partners of partnerships holding
shares of our common stock are encouraged to consult their tax advisors.
Taxation of Taxable U.S. Stockholders
Distributions Generally. Distributions out of our current or accumulated earnings and profits
will be treated as dividends and, other than with respect to capital gain dividends and certain
amounts which have previously been subject to corporate level tax discussed below, will be taxable
to our taxable U.S. stockholders as ordinary income
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when actually or constructively received. See
Tax Rates below. As long as we qualify as a REIT, these distributions will not be eligible for
the dividends-received deduction in the case of U.S. stockholders that are corporations or, except
to the extent provided in Tax Rates below, the preferential rates on qualified dividend income
applicable to non-corporate U.S. stockholders, including individuals. For purposes of determining
whether distributions to holders of our common stock are out of our current or accumulated earnings
and profits, our earnings and profits will be allocated first to our outstanding preferred stock,
if any, and then to our outstanding common stock.
To the extent that we make distributions on our common stock in excess of our current and
accumulated earnings and profits allocable to such stock, these distributions will be treated first
as a tax-free return of capital to a U.S. stockholder. This treatment will reduce the U.S.
stockholders adjusted tax basis in such shares of stock by the amount of the distribution, but not
below zero. Distributions in excess of our current and accumulated earnings and profits and in
excess of a U.S. stockholders adjusted tax basis in its shares will be taxable as capital gain.
Such gain will be taxable as long-term capital gain if the shares have been held for more than one
year. Dividends we declare in October, November, or December of any year and which are payable to a
stockholder of record on a specified date in any of these months will be treated as both paid by us
and received by the stockholder on December 31 of that year, provided we actually pay the dividend
on or before January 31 of the following year. U.S. stockholders may not include in their own
income tax returns any of our net operating losses or capital losses.
Certain stock dividends, including dividends partially paid in our capital stock and partially
paid in cash that comply with recent IRS guidance, generally will be taxable to the recipient U.S.
stockholder to the same extent as if paid in cash.
Capital Gain Dividends. Dividends that we properly designate as capital gain dividends will be
taxable to our taxable U.S. stockholders as a gain from the sale or disposition of a capital asset
held for more than one year, to the extent that such gain does not exceed our actual net capital
gain for the taxable year. U.S. stockholders that are corporations may, however, be required to
treat up to 20% of certain capital gain dividends as ordinary income. If we properly designate any
portion of a dividend as a capital gain dividend, then, except as otherwise required by law, we
presently intend to allocate a portion of the total capital gain dividends paid or made available
to holders of all classes of our capital stock for the year to the holders of our common stock in
proportion to the amount that our total dividends, as determined for federal income tax purposes,
paid or made available to the holders of our common stock for the year bears to the total
dividends, as determined for federal income tax purposes, paid or made available to holders of all
classes of our capital stock for the year.
Retention of Net Capital Gains. We may elect to retain, rather than distribute as a capital
gain dividend, all or a portion of our net capital gains. If we make this election, we would pay
tax on our retained net capital gains. In addition, to the extent we so elect, our earnings and
profits (determined for federal income tax purposes) would be adjusted accordingly, and a U.S.
stockholder generally would:
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include its pro rata share of our undistributed net capital gains in computing its
long-term capital gains in its return for its taxable year in which the last day of our
taxable year falls, subject to certain limitations as to the amount that is includable; |
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be deemed to have paid its share of the capital gains tax imposed on us on the
designated amounts included in the U.S. stockholders income as long-term capital gain; |
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receive a credit or refund for the amount of tax deemed paid by it; |
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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 |
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in the case of a U.S. stockholder that is a corporation, appropriately adjust its
earnings and profits for the retained capital gains in accordance with Treasury
Regulations to be promulgated by the IRS. |
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Passive Activity Losses and Investment Interest Limitations. Distributions we make and gain
arising from the sale or exchange by a U.S. stockholder of our shares will not be treated as
passive activity income. As a result, U.S. stockholders generally will not be able to apply any
passive losses against this income or gain. A U.S. stockholder may elect to treat capital gain
dividends, capital gains from the disposition of our stock and income designated as qualified
dividend income, described in Tax Rates below, as investment income for purposes of computing
the investment interest limitation, but in such case, the stockholder will be taxed at ordinary
income rates on such amount. Other distributions made by us, 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.
Dispositions of Our Common Stock. If a U.S. stockholder sells or disposes of shares of common
stock, it will recognize gain or loss for federal income tax purposes in an amount equal to the
difference between the amount of cash and the fair market value of any property received on the
sale or other disposition and the holders adjusted basis in the shares. This gain or loss, except
as provided below, will be a long-term capital gain or loss if the holder has held such common
stock for more than one year. However, if a U.S. stockholder recognizes a loss upon the sale or
other disposition of common stock that it has held for six months or less, after applying certain
holding period rules, the loss recognized will be treated as a long-term capital loss to the extent
the U.S. stockholder received distributions from us which were required to be treated as long-term
capital gains.
Tax Rates. The maximum tax rate for non-corporate taxpayers for (1) capital gains, including
certain capital gain dividends, has generally been reduced to 15% (although depending on the
characteristics of the assets which produced these gains and on designations which we may make,
certain capital gain dividends may be taxed at a 25% rate) and (2) qualified dividend income has
generally been reduced to 15%. In general, dividends payable by REITs are not eligible for the
reduced tax rate on qualified dividend income, except to the extent that certain holding
requirements have been met and the REITs dividends are attributable to dividends received from
taxable corporations (such as its taxable REIT subsidiaries) or to income that was subject to tax
at the corporate/REIT level (for example, if it distributed taxable income that it retained and
paid tax on in the prior taxable year) or to dividends properly designated by the REIT as capital
gain dividends. The currently applicable provisions of the federal income tax laws relating to the
15% tax rate are currently scheduled to sunset or revert to the provisions of prior law effective
for taxable years beginning after December 31, 2012, at which time the capital gains tax rate will
be increased to 20% and the rate applicable to dividends will be increased to the tax rate then
applicable to ordinary income. U.S. stockholders that are corporations may be required to treat up
to 20% of some capital gain dividends as ordinary income.
Medicare Tax on Unearned Income. Certain U.S. stockholders that are individuals, estates or
trusts will be required to pay an additional 3.8% tax on, among other things, dividends on and
capital gains from the sale or other disposition of stock for taxable years beginning after
December 31, 2012. U.S. stockholders should consult their tax advisors regarding the effect, if
any, of this tax on their ownership and disposition of our common stock.
Foreign Accounts. Certain future payments made to foreign financial institutions in respect
of accounts of U.S. stockholders at such financial institutions may be subject to withholding at a
rate of 30%. U.S. stockholders should consult their tax advisors regarding the effect, if any, of
this withholding provision on their ownership and disposition of our common stock and the effective
date of such provision. See Taxation of Non-U.S. StockholdersForeign Accounts.
Information Reporting and Backup Withholding. We are required to report to our U.S.
stockholders and the IRS the amount of dividends paid during each calendar year, and the amount of
any tax withheld. Under the backup withholding rules, a stockholder may be subject to backup
withholding with respect to dividends paid unless the holder is a corporation or comes within certain other exempt categories and, when required,
demonstrates this fact, or provides a taxpayer identification number, certifies as to no loss of
exemption from backup withholding, and otherwise complies with applicable requirements of the
backup withholding rules. A U.S. stockholder that does not provide us with its correct taxpayer
identification number may also be subject to penalties imposed by the IRS. Backup withholding is
not an additional tax. Any amount paid as backup withholding will be creditable against the
stockholders federal income tax liability, provided the required information is timely furnished
to the IRS. In addition, we may be required to withhold a portion of capital gain distributions to
any stockholders who fail to certify their non-foreign status. See Taxation of Non-U.S.
Stockholders.
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Taxation of Tax-Exempt Stockholders
Dividend income from us and gain arising upon a sale of our shares generally should not be
unrelated business taxable income, or UBTI, to a tax-exempt stockholder, except as described below.
This income or gain will be UBTI, however, if a tax-exempt stockholder holds its shares as
debt-financed property within the meaning of the Code or if the shares are used in a trade or
business of the tax-exempt stockholder. Generally, debt-financed property is property the
acquisition or holding of which was financed through a borrowing by the tax-exempt stockholder.
For tax-exempt stockholders that are social clubs, voluntary employee benefit associations,
supplemental unemployment benefit trusts, or qualified group legal services plans exempt from
federal income taxation under Sections 501(c)(7), (c)(9), (c)(17) or (c)(20) of the Code,
respectively, income from an investment in our shares will constitute UBTI unless the organization
is able to properly claim a deduction for amounts set aside or placed in reserve for specific
purposes so as to offset the income generated by its investment in our shares. These prospective
investors should consult their tax advisors concerning these set aside and reserve requirements.
Notwithstanding the above, however, a portion of the dividends paid by a pension-held REIT
may be treated as unrelated business taxable income as to certain trusts that hold more than 10%,
by value, of the interests in the REIT. A REIT will not be a pension-held REIT if it is able to
satisfy the not closely held requirement without relying on the look-through exception with
respect to certain trusts or if such REIT is not predominantly held by qualified trusts. As a
result of restrictions on ownership and transfer of our stock contained in our charter, we do not
expect to be classified as a pension-held REIT, and as a result, the tax treatment described
above should be inapplicable to our stockholders. However, because our common stock is (and, we
anticipate, will continue to be) publicly traded, we cannot guarantee that this will always be the
case.
Taxation of Non-U.S. Stockholders
The following discussion addresses the rules governing federal income taxation of the
acquisition, ownership and disposition of our common stock by non-U.S. stockholders. These rules
are complex, and no attempt is made herein to provide more than a brief summary of such rules.
Accordingly, the discussion does not address all aspects of federal income taxation and does not
address state, local or non-U.S. tax consequences that may be relevant to a non-U.S. stockholder in
light of its particular circumstances. We urge non-U.S. stockholders to consult their tax advisors
to determine the impact of federal, state, local and non-U.S. income tax laws on the acquisition,
ownership and disposition of shares of our common stock, including any reporting requirements.
Distributions Generally. Distributions (including any taxable stock dividends) that are
neither attributable to gains from sales or exchanges by us of U.S. real property interests nor
designated by us as capital gain dividends (except as described below) will be treated as dividends
of ordinary income to the extent that they are made out of our current or accumulated earnings and
profits. Such distributions ordinarily will be subject to withholding of federal income tax at a
30% rate or such lower rate as may be specified by an applicable income tax treaty, unless the
distributions are treated as effectively connected with the conduct by the non-U.S. stockholder of
a U.S. trade or business. Under certain treaties, however, lower withholding rates generally
applicable to dividends do not apply to dividends from a REIT. Certain certification and disclosure
requirements must be satisfied to be exempt from withholding under the effectively connected income
exemption. Dividends that are treated as effectively connected with a U.S. trade or business will
generally not be subject to withholding but will be subject to federal income tax on a net basis at
graduated rates, in the same manner as dividends paid to U.S. stockholders are subject to federal
income tax. Any such dividends received by a non-U.S. stockholder that is a corporation may also be
subject to an additional branch profits tax at a 30% rate (applicable after deducting federal
income taxes paid on such effectively connected income) or such lower rate as may be specified by
an applicable income tax treaty.
Except as otherwise provided below, we expect to withhold federal income tax at the rate of
30% on any distributions made to a non-U.S. stockholder unless:
|
(1) |
|
a lower treaty rate applies and the non-U.S. stockholder files with us an IRS
Form W-8BEN evidencing eligibility for that reduced treaty rate; or |
57
|
(2) |
|
the non-U.S. stockholder files an IRS Form W-8ECI with us claiming that the
distribution is income effectively connected with the non-U.S. stockholders trade or
business. |
Distributions in excess of our current and accumulated earnings and profits will not be
taxable to a non-U.S. stockholder to the extent that such distributions do not exceed the adjusted
basis of the stockholders common stock, but rather will reduce the adjusted basis of such stock.
To the extent that such distributions exceed the non-U.S. stockholders adjusted basis in such
common stock, they will give rise to gain from the sale or exchange of such stock, the tax
treatment of which is described below. For withholding purposes, we expect to treat all
distributions as made out of our current or accumulated earnings and profits. However, amounts
withheld may be refundable if it is subsequently determined that the distribution was, in fact, in
excess of our current and accumulated earnings and profits, provided that certain conditions are
met.
Capital Gain Dividends and Distributions Attributable to a Sale or Exchange of U.S. Real
Property Interests. Distributions to a non-U.S. stockholder that we properly designate as capital
gain dividends, other than those arising from the disposition of a U.S. real property interest,
generally should not be subject to federal income taxation, unless:
|
(1) |
|
the investment in our common stock is treated as effectively connected with the
non-U.S. stockholders U.S. trade or business, in which case the non-U.S. stockholder
will be subject to the same treatment as U.S. stockholders with respect to such gain,
except that a non-U.S. stockholder that is a non-U.S. corporation may also be subject
to a branch profits tax of up to 30%, as discussed above; or |
|
|
(2) |
|
the non-U.S. stockholder is a nonresident alien individual who is present in
the United States for 183 days or more during the taxable year and certain other
conditions are met, in which case the nonresident alien individual will be subject to a
30% tax on the individuals capital gains. |
Pursuant to the Foreign Investment in Real Property Tax Act, or FIRPTA, distributions to a
non-U.S. stockholder that are attributable to gain from sales or exchanges by us of U.S. real
property interests, or USRPIs, whether or not designated as capital gain dividends, will cause the
non-U.S. stockholder to be treated as recognizing such gain as income effectively connected with a
U.S. trade or business. Non-U.S. stockholders would generally be taxed at the same rates applicable
to U.S. stockholders, subject to any applicable alternative minimum tax. We also will be required
to withhold and to remit to the IRS 35% (or 15% to the extent provided in Treasury Regulations) of
any distribution to non-U.S. stockholders that is designated as a capital gain dividend or, if
greater, 35% of any distribution to non-U.S. stockholders that could have been designated as a
capital gain dividend. The amount withheld is creditable against the non-U.S. stockholders federal
income tax liability. However, any distribution with respect to any class of stock that is
regularly traded on an established securities market located in the United States is not subject
to FIRPTA, and therefore, not subject to the 35% U.S. withholding tax described above, if the
non-U.S. stockholder did not own more than 5% of such class of stock at any time during the
one-year period ending on the date of the distribution. Instead, such distributions will generally
be treated as ordinary dividend distributions and subject to withholding in the manner described
above with respect to ordinary dividends.
Retention of Net Capital Gains. Although the law is not clear on the matter, it appears that
amounts we designate as retained net capital gains in respect of the common stock held by
stockholders generally should be treated with respect to non-U.S. stockholders in the same manner
as actual distributions of capital gain dividends. Under this approach, the non-U.S. stockholders
would be able to offset as a credit against their federal income tax liability their proportionate
share of the tax that we paid on such retained net capital gains and to receive from the IRS a
refund to the extent their proportionate share of such tax that we paid exceeds their actual
federal income tax liability. If we were to designate any portion of our net capital gain as
retained net capital gain, a non-U.S. stockholder should consult its tax advisor regarding the
taxation of such retained net capital gain.
Sale of Our Common Stock. Gain recognized by a non-U.S. stockholder upon the sale, exchange or
other taxable disposition of our common stock generally will not be subject to federal income
taxation unless such stock constitutes a USRPI. In general, stock of a domestic corporation that constitutes a U.S. real
property holding corporation, or USRPHC, will constitute a USRPI. We believe that we are a USRPHC.
Our common stock will not, however, constitute a USRPI so long as we are a domestically controlled
qualified investment entity. A
58
domestically controlled qualified investment entity includes a
REIT in which at all times during a specified testing period less than 50% in value of its stock is
held directly or indirectly by non-U.S. stockholders. We believe, but cannot guarantee, that we are
a domestically controlled qualified investment entity. Because our common stock is (and, we
anticipate, will continue to be) publicly traded, no assurance can be given that we will continue
to be a domestically controlled qualified investment entity.
Notwithstanding the foregoing, gain from the sale, exchange or other taxable disposition of
our common stock not otherwise subject to FIRPTA will be taxable to a non-U.S. stockholder if
either (a) the investment in our common stock is treated as effectively connected with the non-U.S.
stockholders U.S. trade or business or (b) the non-U.S. stockholder is a nonresident alien
individual who is present in the United States for 183 days or more during the taxable year and
certain other conditions are met. In addition, even if we are a domestically controlled qualified
investment entity, upon disposition of our common stock, a non-U.S. stockholder may be treated as
having gain from the sale or other taxable disposition of a USRPI if the non-U.S. stockholder (1)
disposes of such stock within a 30-day period preceding the ex-dividend date of a distribution, any
portion of which, but for the disposition, would have been treated as gain from the sale or
exchange of a USRPI and (2) acquires, or enters into a contract or option to acquire, or is deemed
to acquire, other shares of that stock during the 61-day period beginning with the first day of the
30-day period described in clause (1), subject to an exception applicable to regularly traded
stock if the non-U.S. stockholder did not own more than 5% of the stock at any time during the
one-year period ending on the date of the distribution described in clause (1).
Even if we do not qualify as a domestically controlled qualified investment entity at the
time a non-U.S. stockholder sells our common stock, gain arising from the sale or other taxable
disposition by a non-U.S. stockholder of such stock would not be subject to federal income taxation
under FIRPTA as a sale of a USRPI if:
|
(1) |
|
such class of stock is regularly traded, as defined by applicable Treasury
Regulations, on an established securities market such as the NYSE; and |
|
|
(2) |
|
such non-U.S. stockholder owned, actually and constructively, 5% or less of
such class of our stock throughout the five-year period ending on the date of the sale
or exchange. |
If gain on the sale, exchange or other taxable disposition of our common stock were subject to
taxation under FIRPTA, the non-U.S. stockholder would be subject to regular federal income tax with
respect to such gain in the same manner as a taxable U.S. stockholder (subject to any applicable
alternative minimum tax and a special alternative minimum tax in the case of nonresident alien
individuals). In addition, if the sale, exchange or other taxable disposition of our common stock
were subject to taxation under FIRPTA, and if shares of our common stock were not regularly
traded on an established securities market, the purchaser of such common stock would generally be
required to withhold and remit to the IRS 10% of the purchase price.
Information Reporting and Backup Withholding Tax. Generally, we must report annually to the
IRS the amount of dividends paid to a non-U.S. stockholder, such holders name and address, and the
amount of tax withheld, if any. A similar report is sent to the non-U.S. stockholder. Pursuant to
tax treaties or other agreements, the IRS may make its reports available to tax authorities in the
non-U.S. stockholders country of residence.
Payments of dividends or of proceeds from the disposition of stock made to a non-U.S.
stockholder may be subject to information reporting and backup withholding unless such holder
establishes an exemption, for example, by properly certifying its non-U.S. status on an IRS Form
W-8BEN or another appropriate version of IRS Form W-8. Notwithstanding the foregoing, backup
withholding and information reporting may apply if either we have or our paying agent has actual
knowledge, or reason to know, that a non-U.S. stockholder is a U.S. person.
Backup withholding is not an additional tax. Rather, the federal income tax liability of
persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund or credit may be obtained, provided that the required
information is timely furnished to the IRS.
Foreign Accounts. Withholding taxes may apply to certain types of payments made to foreign
financial institutions and certain other non-U.S. entities. Specifically, a 30% withholding tax
will be imposed on dividends
59
on, and gross proceeds from the sale or other disposition of, our
stock paid to a foreign financial institution or to a foreign nonfinancial entity, unless (i) the
foreign financial institution undertakes certain diligence and reporting obligations or (ii) the
foreign non-financial entity either certifies it does not have any substantial U.S. owners or
furnishes identifying information regarding each substantial U.S. owner. In addition, if the payee
is a foreign financial institution, it generally must enter into an agreement with the U.S.
Treasury that requires, among other things, that it undertake to identify accounts held by certain
U.S. persons or U.S.-owned foreign entities, annually report certain information about such
accounts, and withhold 30% on payments to certain other account holders.
Although these rules currently apply to applicable payments made after December 31, 2012, in
recent guidance, the IRS has indicated that Treasury Regulations will be issued providing that the
withholding provisions described above will apply to payments of dividends on our common stock made
on or after January 1, 2014 and to payments of gross proceeds from a sale or other disposition of
such stock on or after January 1, 2015. Prospective investors should consult their tax advisors
regarding these withholding provisions.
Other Tax Consequences
State, local and non-U.S. income tax laws may differ substantially from the corresponding
federal income tax laws, and this discussion does not purport to describe any aspect of the tax
laws of any state, local or non-U.S. jurisdiction. You should consult your tax advisor regarding
the effect of state, local and non-U.S. tax laws with respect to our tax treatment as a REIT and an
investment in our common stock.
60
PLAN OF DISTRIBUTION
We may sell the securities domestically or abroad to one or more underwriters for public
offering and sale by them or may sell the securities to investors directly or through dealers or
agents, or through a combination of methods. Any underwriter, dealer or agent involved in the offer
and sale of the securities will be named in the applicable prospectus supplement.
Underwriters may offer and sell the securities at: (i) a fixed price or prices, which may be
changed; (ii) market prices prevailing at the time of sale; (iii) prices related to the prevailing
market prices at the time of sale or (iv) negotiated prices. We also may, from time to time,
authorize underwriters acting as our agents to offer and sell the securities upon the terms and
conditions as are set forth in the applicable prospectus supplement. In connection with the sale of
securities, underwriters may be deemed to have received compensation from us in the form of
underwriting discounts or commissions and may also receive commissions from purchasers of
securities for whom they may act as agent. Underwriters may sell securities to or through dealers,
and the dealers may receive compensation in the form of discounts, concessions or commissions from
the underwriters and/or commissions from the purchasers for whom they may act as agent.
Any underwriting compensation paid by us to underwriters, dealers or agents in connection with
the offering of securities, and any discounts, concessions or commissions allowed by underwriters
to participating dealers, will be set forth in the applicable prospectus supplement. Dealers and
agents participating in the distribution of the securities may be deemed to be underwriters, and
any discounts and commissions received by them and any profit realized by them on resale of the
securities may be deemed to be underwriting discounts and commissions under the Securities Act.
Underwriters, dealers and agents may be entitled, under agreements entered into with us and our
operating partnership, to indemnification against and contribution toward civil liabilities,
including liabilities under the Securities Act. We will describe any indemnification agreement in
the applicable prospectus supplement.
Unless we specify otherwise in the applicable prospectus supplement, any series of securities
issued hereunder will be a new issue with no established trading market (other than our common
stock, which is listed on the NYSE). If we sell any shares of our common stock pursuant to a
prospectus supplement, such shares will be listed on the NYSE, subject to official notice of
issuance. We may elect to list any other securities issued hereunder on any exchange, but we are
not obligated to do so. Any underwriters or agents to or through whom such securities are sold by
us or our operating partnership for public offering and sale may make a market in such securities,
but such underwriters or agents will not be obligated to do so and may discontinue any market
making at any time without notice. We cannot assure you as to the liquidity of the trading market
for any such securities.
If indicated in the applicable prospectus supplement, we may authorize underwriters or other
persons acting as our agents to solicit offers by institutions or other suitable purchasers to
purchase the securities from us at the public offering price set forth in the prospectus
supplement, pursuant to delayed delivery contracts providing for payment and delivery on the date
or dates stated in the prospectus supplement. These purchasers may include, among others,
commercial and savings banks, insurance companies, pension funds, investment companies and
educational and charitable institutions. Delayed delivery contracts will be subject to the
condition that the purchase of the securities covered by the delayed delivery contracts will not at
the time of delivery be prohibited under the laws of any jurisdiction in the United States to which
the purchaser is subject. The underwriters and agents will not have any responsibility with respect
to the validity or performance of these contracts.
To facilitate the offering of the securities, certain persons participating in the offering
may engage in transactions that stabilize, maintain, or otherwise affect the price of the
securities. This may include over-allotments or short sales of the securities, which involves the
sale by persons participating in the offering of more securities than we sold to them. In these
circumstances, these persons would cover the over-allotments or short positions by making purchases
in the open market or by exercising their over-allotment option. In addition, these persons may
stabilize or maintain the price of the securities by bidding for or purchasing securities in the
open market or by imposing penalty bids, whereby selling concessions allowed to dealers
participating in the offering may be reclaimed if securities sold by them are repurchased in
connection with stabilization transactions. The effect of these transactions may be to stabilize or
maintain the market price of the securities at a level above that which might otherwise prevail in
the open market. These transactions may be discontinued at any time.
61
The underwriters, dealers and agents and their affiliates may be customers of, engage in
transactions with and perform services for us and our operating partnership in the ordinary course
of business.
62
LEGAL MATTERS
Certain legal matters will be passed upon for us by Latham & Watkins LLP, Washington, District
of Columbia. Certain matters of Maryland law, including the validity of the securities covered by
this prospectus, will be passed upon for us by Venable LLP, Baltimore, Maryland.
EXPERTS
The consolidated balance sheets of CoreSite Realty Corporation as of December 31, 2010 and
2009, and the related consolidated statements of operations and cash flows for the period from
September 28, 2010 through December 31, 2010, the period from January 1, 2010 through September 27,
2010, and the years ended December 31, 2009 and 2008, and stockholders equity and comprehensive
income for each of the years in the three-year period ended December 31, 2010, and the related
financial statement schedule, Schedule III Real Estate and Accumulated Depreciation, have been
incorporated by reference herein and in the registration statement in reliance upon the report of
KPMG LLP, independent registered public accounting firm, incorporated by reference herein, and upon
the authority of said firm as experts in accounting and auditing.
63
$800,000,000
CoreSite Realty Corporation
Debt Securities
Common Stock
Preferred Stock
Depositary Shares
Warrants
Rights
Units
PROSPECTUS
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following table itemizes the expenses incurred by us in connection with the issuance and
registration of the securities being registered hereunder. All amounts shown are estimates except
the Securities and Exchange Commission registration fee.
|
|
|
|
|
SEC Registration Fee |
|
$ |
92,880 |
|
*Printing and Duplicating Expenses |
|
|
2,500 |
|
*Legal Fees and Expenses |
|
|
100,000 |
|
*Accounting Fees and Expenses |
|
|
5,000 |
|
*Miscellaneous |
|
|
15,000 |
|
|
|
|
|
*Total |
|
$ |
215,380 |
|
|
|
|
|
|
|
|
(*) |
|
Does not include expenses of preparing any accompanying prospectus supplements, listing fees,
transfer agent fees and other expenses related to offerings of particular securities. |
We will pay all of the costs identified above.
Item 15. Indemnification of Directors and Officers
Maryland law permits a Maryland corporation to include in its charter a provision eliminating
the liability of its directors and officers to the corporation and its stockholders for money
damages, except for liability resulting from (a) actual receipt of an improper benefit or profit in
money, property or services or (b) active and deliberate dishonesty that is established by a final
judgment and is material to the cause of action. Our charter contains a provision that eliminates
our directors and officers liability to the maximum extent permitted by Maryland law.
Maryland law requires a Maryland corporation (unless its charter provides otherwise, which our
charter does not) to indemnify a director or officer who has been successful, on the merits or
otherwise, in the defense of any proceeding to which he or she is made or threatened to be made a
party by reason of his or her service in that capacity. Maryland law permits a Maryland corporation
to indemnify its present and former directors and officers, among others, against judgments,
penalties, fines, settlements and reasonable expenses actually incurred by them in connection with
any proceeding to which they may be made or threatened to be made a party by reason of their
service in those or other capacities unless it is established that:
|
|
|
the act or omission of the director or officer was material to the matter giving rise
to the proceeding and (i) was committed in bad faith or (ii) was the result of active and
deliberate dishonesty; |
|
|
|
|
the director or officer actually received an improper personal benefit in money,
property or services; or |
|
|
|
|
in the case of any criminal proceeding, the director or officer had reasonable cause to
believe that the act or omission was unlawful. |
Under Maryland law, a Maryland corporation also may not indemnify a director or officer in a
suit by or in the right of the corporation in which the director or officer was adjudged liable to
the corporation or for a judgment of liability on the basis that a personal benefit was improperly
received. A court may order indemnification if it determines that the director or officer is fairly
and reasonably entitled to indemnification in view of all the relevant circumstances, whether or
not the director or officer met the prescribed standard of conduct; however, indemnification for an
adverse judgment in a suit by us or in our right, or for a judgment of liability on the basis that personal benefit was improperly
received, is limited to expenses.
In addition, Maryland law permits a Maryland corporation to advance reasonable expenses to a
director or officer upon receipt of (a) a written affirmation by the director or officer of his or
her good faith belief that he or she has met the standard of conduct necessary for indemnification
and (b) a written undertaking by him or her or on his
or her behalf to repay the amount paid or
reimbursed if it is ultimately determined that the standard of conduct was not met.
Our charter authorizes us to obligate our company, and our bylaws obligate us, to the maximum
extent permitted by Maryland law, to indemnify
|
|
|
any present or former director or officer who is made or threatened to be made a party
to a proceeding by reason of his or her service in such capacity and |
|
|
|
|
any individual who, while a director or officer and, at our request, serves or has
served as a director, officer, trustee, partner, member or manager of another corporation,
real estate investment trust, partnership, limited liability company, joint venture,
trust, employee benefit plan or other enterprise who is made or threatened to be made a
party to a proceeding by reason of his or her service in such capacity, |
against any claim or liability by reason of that status and to pay or reimburse his or her
reasonable expenses in advance of final disposition of a proceeding without requiring a preliminary
determination of his or her ultimate entitlement to indemnification. The rights to indemnification
and advance of expenses provided by our charter and bylaws vest immediately upon election of a
director or officer. Our charter and bylaws also permit us to indemnify and advance expenses to any
individual who served a predecessor of our company or any entity acquired by our company, or its
predecessors, if any, or any partnership controlled by our company, or its predecessors, if any, in
any of the capacities described above and any employee or agent of us or a predecessor of our
company or acquired entity.
In addition, our directors and officers are indemnified for specified liabilities and expenses
pursuant to the partnership agreement of CoreSite, L.P., the partnership in which we serve as sole
general partner.
Insofar as the foregoing provisions permit indemnification of directors, officers or persons
controlling us for liability arising under the Securities Act, we have been informed that, in the
opinion of the Securities and Exchange Commission, this indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable.
Item 16. Exhibits
The following exhibits are filed as part of, or incorporated by reference into, this
registration statement on Form S-3:
|
|
|
Exhibit |
|
|
No. |
|
Description |
1.1
|
|
Form of Underwriting Agreement (1) |
|
|
|
3.1
|
|
Articles of Amendment and Restatement of CoreSite Realty Corporation (2) |
|
|
|
3.2
|
|
Amended and Restated Bylaws of CoreSite Realty Corporation (2) |
|
|
|
3.3
|
|
Form of Articles Supplementary of CoreSite Realty Corporation (1) |
|
|
|
4.1
|
|
Form of Common Stock Certificate (3) |
|
|
|
4.2
|
|
Form of Preferred Stock Certificate (1) |
|
|
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4.3*
|
|
Form of Indenture |
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|
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4.4
|
|
Form of Debt Security (1) |
|
|
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4.5
|
|
Form of Deposit Agreement (1) |
|
|
|
4.6
|
|
Form of Warrant (1) |
II -2
|
|
|
Exhibit |
|
|
No. |
|
Description |
4.7
|
|
Form of Warrant Agreement and Warrant Certificate (1) |
|
|
|
4.8
|
|
Form of Rights Agreement (1) |
|
|
|
5.1*
|
|
Opinion of Venable LLP regarding the legality of the securities being registered* |
|
|
|
5.2*
|
|
Opinion of Latham & Watkins LLP regarding debt securities being registered |
|
|
|
8.1*
|
|
Opinion of Latham & Watkins LLP regarding certain tax matters |
|
|
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12.1*
|
|
Calculation of Ratios of Earnings to Fixed Charges |
|
|
|
23.1*
|
|
Consent of KPMG LLP |
|
|
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23.2*
|
|
Consent of Venable LLP (included as part of Exhibit 5.1) |
|
|
|
23.3*
|
|
Consent of Latham & Watkins LLP (included as part of Exhibit 5.2) |
|
|
|
23.4*
|
|
Consent of Latham & Watkins LLP (included as part of Exhibit 8.1) |
|
|
|
24.1*
|
|
Power of Attorney (included in signature pages) |
|
|
|
(1) |
|
To be filed by amendment or incorporated by reference in connection with the offering of a
particular class or series of securities. |
|
(2) |
|
Incorporated by reference to our Registration Statement (Amendment No. 7) on Form S-11
(Registration No. 333-166810), filed on September 22, 2010. |
|
(3) |
|
Incorporated by reference to our Post-Effective Amendment to the Registration Statement on Form
S-11 (Registration No. 333-166810), filed on September 22, 2010. |
|
* |
|
Filed herewith. |
Item 17. Undertakings
(a) |
|
The undersigned Registrant hereby undertakes: |
|
(1) |
|
To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement: |
|
(i) |
|
To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933; |
|
|
(ii) |
|
To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered (if
the total dollar value of securities offered would not exceed that which
was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the SEC pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than a 20
percent change in the maximum aggregate offering price set forth in the
Calculation of Registration Fee table in the effective registration
statement; |
II -3
|
(iii) |
|
To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement; |
provided, however, that paragraphs (a)(1)(i), (a)(1)(ii) and (a)(1)(iii) do not apply if the
information required to be included in a post-effective amendment by those paragraphs is contained
in reports filed with or furnished to the SEC by the registrant pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934 that are incorporated by reference in the registration
statement, or is contained in a form of prospectus filed pursuant to Rule 424(b) that is part of
the registration statement.
|
(2) |
|
That, for the purpose of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering thereof. |
|
|
(3) |
|
To remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of the offering. |
|
|
(4) |
|
That, for the purpose of determining liability under the Securities Act of
1933 to any purchaser: |
|
(i) |
|
each prospectus filed by the registrant pursuant to Rule
424(b)(3) shall be deemed to be part of the registration statement as of the
date the filed prospectus was deemed part of and included in the registration
statement; and |
|
|
(ii) |
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each prospectus required to be filed pursuant to Rule
424(b)(2), (b)(5), or (b)(7) as part of a registration statement in reliance
on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i),
(vii), or (x) for the purpose of providing the information required by Section
10(a) of the Securities Act of 1933 shall be deemed to be part of and included
in the registration statement as of the earlier of the date such form of
prospectus is first used after effectiveness or the date of the first contract
of sale of securities in the offering described in the prospectus. As
provided in Rule 430B, for liability purposes of the issuer and any person
that is at that date an underwriter, such date shall be deemed to be a new
effective date of the registration statement relating to the securities in the
registration statement to which that prospectus relates, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof; provided, however, that no statement made in a registration
statement or prospectus that is part of the registration statement or made in
a document incorporated or deemed incorporated by reference into the
registration statement or prospectus that is part of the registration
statement will, as to a purchaser with a time of contract of sale prior to
such effective date, supersede or modify any statement that was made in the
registration statement or prospectus that was part of the registration
statement or made in any such document immediately prior to such effective
date; |
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(5) |
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That, for the purpose of determining liability of the registrant under the
Securities Act of 1933 to any purchaser in the initial distribution of the securities,
the undersigned registrant undertakes that in a primary offering of securities of the
undersigned registrant pursuant to this registration statement, regardless of the
underwriting method used to sell the securities to the purchaser, if the securities
are offered or sold to such purchaser by means of any of the following communications,
the undersigned registrant will be a seller to the purchaser and will be considered to
offer or sell such securities to such purchaser: |
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(i) |
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Any preliminary prospectus or prospectus of the undersigned
registrant relating to the offering required to be filed pursuant to Rule 424; |
II -4
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(ii) |
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Any free writing prospectus relating to the offering prepared
by or on behalf of the undersigned registrant or used or referred to by the
undersigned registrant; |
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(iii) |
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The portion of any other free writing prospectus relating to
the offering containing material information about the undersigned registrant
or its securities provided by or on behalf of the undersigned registrant; and |
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(iv) |
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Any other communication that is an offer in the offering made
by the undersigned registrant to the purchaser. |
(b) |
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The undersigned registrant hereby undertakes that, for purposes of determining any liability
under the Securities Act of 1933, each filing of the registrants annual report pursuant to
Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and where applicable,
each filing of an employee benefit plans annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in this registration
statement shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof. |
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(c) |
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The undersigned registrant hereby undertakes to supplement the prospectus, after the
expiration of the subscription period, to set forth the results of the subscription offer, the
transactions by the underwriters during the subscription period, the amount of unsubscribed
securities to be purchased by the underwriters, and the terms of any subsequent reoffering
thereof. If any public offering by the underwriters is to be made on terms differing from
those set forth on the cover page of the prospectus, a post-effective amendment will be filed
to set forth the terms of such offering. |
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(d) |
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The undersigned registrant hereby undertakes that for purposes of determining any liability
under the Securities Act of 1933, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4), or 497(h) under the
Securities Act of 1933 shall be deemed to be part of this registration statement as of the
time it was declared effective. |
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(e) |
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The undersigned registrant hereby undertakes that for the purpose of determining any
liability under the Securities Act of 1933, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof. |
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(f) |
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Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be
permitted to directors, officers and controlling persons of the registrant pursuant to the
foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the successful defense
of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as expressed in the
Act and will be governed by the final adjudication of such issue. |
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(g) |
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The undersigned registrant hereby undertakes to file an application for the purpose of
determining the eligibility of the trustee to act under subsection (a) of section 310 of the
Trust Indenture Act (Act) in accordance with the rules and regulations prescribed by the
Commission under section 305(b)2 of the Act. |
II -5
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it
has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and
has duly caused this registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Denver, State of Colorado, on September 28, 2011.
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CORESITE REALTY CORPORATION
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By: |
/s/ Thomas M. Ray
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Name: |
Thomas M. Ray |
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Title: |
President |
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POWER OF ATTORNEY
We, the undersigned directors and officers of CoreSite Realty Corporation, do hereby
constitute and appoint Thomas M. Ray and Jeffrey S. Finnin, and each of them, our true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution, to do any and all
acts and things in our names and on our behalf in our capacities as directors and officers and to
execute any and all instruments for us in the capacities indicated below, which said attorney and
agent may deem necessary or advisable to enable said corporation to comply with the Securities Act
of 1933 and any rules, regulations and agreements of the Securities and Exchange Commission, in
connection with this registration statement, or any registration statement for this offering that
is to be effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933, including
specifically, but without limitation, any and all amendments (including post-effective amendments)
hereto; and we hereby ratify and confirm all that said attorney and agent shall do or cause to be
done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this registration statement has
been signed by the following persons in the capacities and on the dates indicated.
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Signature |
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Title |
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Date |
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/s/ Thomas M. Ray
Thomas M. Ray
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President and Director
(Principal Executive Officer)
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September 28, 2011 |
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/s/ Jeffrey S. Finnin
Jeffrey S. Finnin
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Treasurer and Chief
Financial Officer
(Principal Financial Officer
and Principal Accounting
Officer)
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September 28, 2011 |
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Chairman of the Board of
Directors
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September 28, 2011 |
Robert G. Stuckey |
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/s/ James A. Attwood, Jr.
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Director
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September 28, 2011 |
James A. Attwood, Jr. |
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Director
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September 28, 2011 |
Michael Koehler |
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Director
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September 28, 2011 |
Paul E. Szurek |
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Director
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September 28, 2011 |
J. David Thompson |
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Director
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September 28, 2011 |
David A. Wilson |
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II -6
Exhibit Index
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Exhibit |
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No. |
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Description |
1.1
|
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Form of Underwriting Agreement (1) |
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3.1
|
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Articles of Amendment and Restatement of CoreSite Realty Corporation (2) |
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3.2
|
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Amended and Restated Bylaws of CoreSite Realty Corporation (2) |
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3.3
|
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Form of Articles Supplementary of CoreSite Realty Corporation (1) |
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4.1
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Form of Common Stock Certificate (3) |
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4.2
|
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Form of Preferred Stock Certificate (1) |
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4.3*
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Form of Indenture |
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4.4
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Form of Debt Security (1) |
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4.5
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Form of Deposit Agreement (1) |
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4.6
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Form of Warrant (1) |
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4.7
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Form of Warrant Agreement and Warrant Certificate (1) |
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4.8
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Form of Rights Agreement (1) |
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5.1*
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Opinion of Venable LLP regarding the legality of the securities being registered |
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5.2*
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Opinion of Latham & Watkins LLP regarding debt securities being registered |
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8.1*
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Opinion of Latham & Watkins LLP regarding certain tax matters |
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12.1*
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Calculation of Ratios of Earnings to Fixed Charges |
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23.1*
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Consent of KPMG LLP |
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23.2*
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Consent of Venable LLP (included as part of Exhibit 5.1) |
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23.3*
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Consent of Latham & Watkins LLP (included as part of Exhibit 5.2) |
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23.4*
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Consent of Latham & Watkins LLP (included as part of Exhibit 8.1) |
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24.1*
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Power of Attorney (included in signature pages) |
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(1) |
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To be filed by amendment or incorporated by reference in connection with the offering of a particular class or series of securities. |
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(2) |
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Incorporated by reference to our Registration Statement
(Amendment No. 7) on Form S-11 (Registration No. 333-166810), filed on September 22, 2010. |
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(3) |
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Incorporated by reference to our Post-Effective Amendment to the Registration Statement on Form S-11 (Registration No. 333-166810), filed on September 22, 2010. |
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* |
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Filed herewith. |
II -7