AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 19, 2003
REGISTRATION NO. 333-107803
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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PRE-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
URSTADT BIDDLE PROPERTIES INC.
(Exact name of registrant as specified in its charter)
MARYLAND 04-2458042
(State or other jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
--------------------------------
321 RAILROAD AVENUE
GREENWICH, CONNECTICUT 06830
(203) 863-8200
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
CHARLES J. URSTADT WILLING L. BIDDLE
CHAIRMAN AND CHIEF EXECUTIVE OFFICER PRESIDENT AND CHIEF OPERATING OFFICER
URSTADT BIDDLE PROPERTIES INC. URSTADT BIDDLE PROPERTIES INC.
321 RAILROAD AVENUE 321 RAILROAD AVENUE
GREENWICH, CONNECTICUT 06830 GREENWICH, CONNECTICUT 06830
(203) 863-8200 (203) 863-8200
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
THOMAS J. DRAGO, ESQ.
COUDERT BROTHERS LLP
GRACE BUILDING
1114 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036-7703
(212) 626-4400
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: |_|
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, please check the following box. |X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_| _____________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_| _____________
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. |_|
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SUCH SECTION 8(a), MAY DETERMINE.
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The information in this prospectus is not complete and may be changed. The
selling stockholders may not sell their 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 seeking
an offer to buy these securities in any state where the offer or sale is not
permitted.
SUBJECT TO COMPLETION, DATED SEPTEMBER 19, 2003
PROSPECTUS
URSTADT BIDDLE PROPERTIES INC.
400,000 Shares of 8.5% Series C Senior Cumulative Preferred Stock
This prospectus relates to the registration for resale of 400,000
shares of our 8.5% Series C senior cumulative preferred stock, $.01 par value
per share.
The Series C preferred stock was originally issued by us in a private
placement on May 29, 2003. Under the terms of a registration rights agreement,
dated May 29, 2003, we agreed to file a registration statement, of which this
prospectus is a part, with the SEC to enable the selling stockholders identified
in this prospectus to sell their shares of Series C preferred stock.
Pursuant to this prospectus, the selling stockholders may sell some or
all of the shares they hold through ordinary brokerage transactions, directly to
market makers of our shares, or through any of the other means described in the
"Plan of Distribution" section of this prospectus, beginning on page 62. The
selling stockholders, and not us, will receive all of the proceeds from any
sales of the shares, less any brokerage or other expenses of the sales incurred
by them.
We will pay all registration expenses including, without limitation,
all SEC and blue sky registration and filing fees, printing expenses, transfer
agents' and registrars' fees, and the fees and disbursements of our outside
counsel in connection with this offering, but the selling stockholders will pay
all selling expenses including, without limitation, any brokers' fees or
discounts relating to the shares registered hereby, or the fees or expenses of
separate counsel to the selling stockholders.
Each selling stockholder may be deemed to be an "Underwriter" as such
term is defined in the Securities Act of 1933, and any commissions paid or
discounts or concessions allowed to any such person and any profits received on
resale of the securities offered hereby may be deemed to be underwriting
compensation under the Securities Act of 1933.
Each share of our Series C preferred stock has a liquidation preference
of $100 per share (the "Liquidation Preference"), plus an amount equal to any
accrued and unpaid dividends to the date of payment. Cash dividends on our
Series C preferred stock are cumulative from May 29, 2003, the date of original
issue, and are payable quarterly in arrears on January 31, April 30, July 31 and
October 31 of each year at the rate of 8.5% per annum of the Liquidation
Preference (the "initial dividend yield"). The initial dividend yield is subject
to adjustment under certain circumstances.
Except in certain circumstances relating to the preservation of our
qualification as a real estate investment trust, or REIT, under the Internal
Revenue Code, and to a Change of Control (as defined in this prospectus) of our
Company, our Series C preferred stock is not redeemable before May 29, 2013 (the
"tenth anniversary date"). On or after the tenth anniversary date, our Series C
preferred stock may be
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redeemed for cash at our option, in whole or in part, at a redemption price of
$100 per share, plus accrued and unpaid dividends, if any, up to the redemption
date, without interest.
The Series C preferred stock is listed on the New York Stock Exchange
(the "NYSE") under the symbol "UBPPrC."
INVESTING IN OUR SERIES C PREFERRED STOCK INVOLVES RISKS. YOU SHOULD
READ THE SECTION ENTITLED "RISK FACTORS" BEGINNING ON PAGE 4 BEFORE BUYING OUR
SERIES C PREFERRED STOCK.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is __________ ___, 2003
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You should rely only on the information incorporated by reference or
provided in this prospectus or a prospectus supplement or amendment. We have not
authorized anyone else to provide you with different information. The selling
stockholders are not making an offer of these securities in any state where the
offer is not permitted. You should not assume the information in this prospectus
or a prospectus supplement or amendment is accurate as of any date other than
the date on the front of the documents.
TABLE OF CONTENTS
Page
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A WARNING ABOUT FORWARD-LOOKING STATEMENTS..................................1
OUR COMPANY.................................................................2
RISK FACTORS................................................................4
RATIOS OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS..13
USE OF PROCEEDS.............................................................13
DESCRIPTION OF OUR SERIES C PREFERRED STOCK.................................14
FEDERAL INCOME TAX CONSEQUENCES OF OUR STATUS AS A REIT.....................30
DESCRIPTION OF OUR CAPITAL STOCK............................................45
CERTAIN PROVISIONS OF OUR CHARTER AND BYLAWS, MARYLAND LAW, OUR STOCKHOLDER
RIGHTS PLAN, CHANGE OF CONTROL AGREEMENTS AND INDEMNIFICATION AGREEMENTS....53
SELLING STOCKHOLDERS........................................................60
PLAN OF DISTRIBUTION........................................................62
EXPERTS.....................................................................62
LEGAL OPINIONS..............................................................63
WHERE YOU CAN FIND MORE INFORMATION.........................................63
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A WARNING ABOUT FORWARD-LOOKING STATEMENTS
This prospectus, and the documents incorporated by reference, may
contain "forward-looking" statements as described in Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
These forward-looking statements usually include words like "believes,"
"anticipates" and "expects" and describe our expectations for the future. Some
of these expectations may not be met in important ways for a variety of reasons.
We have described these reasons under the heading "Risk Factors" in this
prospectus and in the other reports we file with the SEC, and you should review
them before you make any investment decision. We are not required to update any
forward-looking statements we make and we may not make any updates.
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OUR COMPANY
We are a self-administered real estate investment trust, or REIT, which
owns and manages income-producing commercial real estate. We have been in
business, and our common equity has been listed on the New York Stock Exchange,
since 1969. During that time, we have paid 135 consecutive quarterly cash
dividends to our stockholders.
Our primary investment focus is neighborhood and community shopping
centers which are typically anchored by grocery or drug stores and located in
suburban areas of the northeastern United States, with a primary concentration
in Fairfield County, Connecticut, and Westchester and Putnam Counties, New York.
We currently own 21 neighborhood and community shopping centers and five office
buildings, one of which contains our corporate headquarters, in the northeastern
United States. We refer to these 26 properties, which contain 2.6 million square
feet of space, as our "core properties." As of September 10, 2003, our core
properties collectively had 447 tenants and were 97% leased based upon leasable
square footage.
Our investment objective is to increase the cash flow and,
consequently, the value of our properties, and to seek continued growth through
(i) strategic re-leasing, renovation and expansion of our existing properties,
and (ii) selective acquisition of income-producing properties, primarily
neighborhood and community shopping centers, in our targeted geographic region.
We may also invest in other types of real estate and real estate-related assets
in our targeted and other geographic regions from time to time.
We are owners and operators of income-producing real estate and not
real estate developers. We invest in properties where we believe cost-effective
expansion and renovation programs, combined with effective leasing and operating
strategies, can improve the existing properties' value while providing superior
current economic returns. We believe that investment in and operation of
commercial real estate is a local business and we focus our investments in areas
where we have strong knowledge of the local markets. Our home office is located
in Greenwich, Connecticut, at the center of the region representing our primary
investment focus. All of the members of our senior management team and a
majority of our directors live in the areas where our core properties are
located.
The areas where a majority of our core properties are located are
densely populated, affluent bedroom communities for people who work in New York
City and the surrounding areas. The population in the three counties in our
target market tends to be high-income, with a median annual household income in
each of these counties of over $55,000 compared to the national average of
approximately $37,000, based upon the 2000 U.S. National Census. We believe
these areas also have barriers to entry for competitors seeking to develop new
properties. For example, in many of these communities, it is difficult to
develop new shopping centers due to the lack of available land, zoning
restrictions and the anti-development bias of many local planning boards. We
generally target for purchase properties which are smaller in size than those
which are typically sought by pension funds and other large institutional
owners. Owners of commercial properties which we target for purchase tend to be
individuals, families or private real estate companies rather than institutional
owners, including other REITs. We believe our status as a publicly traded REIT
provides us with substantial advantages over non-REIT competitors in making
investments in our targeted market, especially through our ability to offer
sellers the opportunity to defer taxable gains by exchanging their properties
for partnership interests that are convertible into our Class A common stock.
We directly manage the operations and leasing at all of our core
properties. We also own four non-core properties, which are located outside of
the northeastern United States and consist of one office building, one retail
property and two industrial properties. Two of our non-core properties, which
represented approximately 3.6% of our total revenues for our 2002 fiscal year,
are net leased to single
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tenants under long-term lease arrangements where property management is handled
by the tenants. The other non-core properties are managed by us or property
management companies supervised by us.
When evaluating potential acquisitions, we consider such factors as:
o economic, demographic and regulatory conditions in the property's
local and regional market;
o location, construction quality and design of the property;
o current and projected cash flow of the property and the potential to
increase cash flow;
o potential for capital appreciation of the property;
o terms of tenant leases, including the relationship between the
property's current rents and market rents and the ability to increase
rents upon lease rollover;
o occupancy and demand by tenants for properties of a similar type in
the market area;
o potential to complete a strategic renovation, expansion or re-leasing
of the property;
o the property's current expense structure and the potential to increase
operating margins; and
o competition from comparable properties in the market area.
We believe that there are more than 250 shopping centers located in our
targeted region containing more than 20 million square feet of leasable space
that we consider to be potentially attractive acquisition candidates.
Our shopping center tenants consist of national, regional and local
retailers. Our typical shopping center is anchored by an established major
grocery store operator in the region. The balance of our retail properties are
leased to regional drug stores, national value oriented retail stores and other
regional and local retailers. Three of our shopping centers, not anchored by
grocery stores, are located adjacent to large regional malls which create
substantial retail shopping traffic. Our properties generally attract tenants
who provide basic staples and convenience items to local customers. We believe
sales of these items are less sensitive to fluctuations in the business cycle
than higher priced retail items. No single retail tenant currently represents
more than 5% of the estimated total annual base rent of our retail properties
for fiscal 2003.
Our offices are located at 321 Railroad Avenue, Greenwich, Connecticut
06830. Our telephone number is (203) 863-8200. We maintain an internet site at
www.ubproperties.com; however, the information found on our site is not a part
of this prospectus.
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RISK FACTORS
An investment in our Series C preferred stock involves a number of
risks. Before making an investment decision, you should carefully consider all
of the risk factors described in this prospectus. If any of the risks actually
occurs, our business, financial condition and results of operations could be
materially adversely affected. If this were to occur, the market price of our
Series C preferred stock could decline significantly and you may lose all or
part of your investment.
You may not be able to sell your Series C preferred stock at a favorable price.
Our Series C preferred stock is listed on the NYSE under the symbol
"UBPPrC." Prior to September , 2003, the date of this prospectus, there has
been no existing public market for our Series C preferred stock and there can be
no assurance as to the liquidity of any market that may develop for our Series C
preferred stock as a result of its listing on the NYSE or that an active trading
market will develop. If a trading market for our Series C preferred stock does
develop, the trading price may fluctuate depending upon prevailing interest
rates, the market for similar securities, our performance and other factors.
As a result of certain recent acquisitions, our portfolio is more concentrated.
Although we generally invest between $5 million and $35 million in
property interests, we recently acquired certain properties at purchase prices
which exceeded these general investment parameters. As a result of these
purchases, our assets are more concentrated and our business is more dependent
upon the operating results of these properties. Various factors may impact the
profitability of these properties. Aside from the general economic factors which
impact these types of commercial properties, the local economies in which these
properties are located may have a more significant impact on these properties
and our business. Thus, stockholders may be exposed to greater risk than if our
properties were less concentrated.
We may be unable to acquire or may be delayed in acquiring appropriate
properties with the proceeds of our recent private placement of the Series C
preferred stock.
The Series C preferred stock offered hereby was originally issued by us
in a private placement on May 29, 2003, pursuant to which we received
approximately $38,450,000 in net proceeds. We purchased one property for $21.65
million in June 2003 and currently have no other property under contract for
acquisition and we may be unable to acquire or may be delayed in acquiring
appropriate properties with the remaining proceeds of the private placement that
will generate returns consistent with our historical returns on our other
properties. We intend to use the net proceeds to acquire properties, fund
renovations, make capital improvements to or pay leasing costs in connection
with our existing properties and make investments in short-term income producing
securities. Making short-term investments generally will provide us with a lower
rate of return than investing in income-producing real estate. As a result, our
inability to acquire, or delays in acquiring, appropriate properties may likely
dilute the amount of cash available to pay dividends to the holders of Series C
preferred stock.
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Our business strategy is mainly concentrated in one type of commercial property
and in one geographic location.
Our primary investment focus is neighborhood and community shopping
centers located in the northeastern United States, with a concentration in
Fairfield County, Connecticut, and Westchester and Putnam Counties, New York.
Various factors may adversely affect a shopping center's profitability. These
factors include circumstances that affect consumer spending, such as general
economic conditions, economic business cycles, rates of employment, income
growth, interest rates and general consumer sentiment. These factors could have
a more significant localized effect on the areas where our core properties are
concentrated. As a result, we may be exposed to greater risks than if our
investment focus was based on more diversified types of properties and in more
diversified geographic areas. In addition, although we generally invest between
$5 million and $35 million in property interests, we have no limit on the size
of our investments. For example, we recently acquired certain properties at
purchase prices which exceeded these general investment parameters. If in the
future we buy larger property interests than we historically have, our portfolio
will be concentrated in a smaller number of assets, increasing the risk to
stockholders.
We are dependent on anchor tenants in many of our retail properties.
Several of our retail properties are dependent on a major or anchor
tenant. If we are unable to renew any lease we have with the anchor tenant at
one of these properties upon expiration of the current lease, or re-lease the
space to another anchor tenant of similar or better quality upon expiration of
the current lease on similar or better terms, we could experience material
adverse consequences such as higher vacancy, re-leasing on less favorable
economic terms, reduced net income and reduced funds from operations. In
addition, other tenants may not be attracted to these properties without an
anchor tenant. Under certain circumstances, certain of our anchor tenants may be
able to cease operations at our properties while continuing to pay rent. Failure
to have an operating anchor tenant could reduce the attractiveness of our
properties to other prospective tenants and could adversely affect the business
of existing tenants. Similarly, if one or more of our anchor tenants goes
bankrupt, we could experience material adverse consequences like those described
above. There can be no assurance that our anchor tenants will renew their leases
when they expire or will be willing to renew on similar economic terms.
We face potential difficulties or delays in renewing leases or re-leasing space.
We derive most of our income from rent received from our tenants.
Although our properties currently have favorable occupancy rates, we cannot
predict that current tenants will renew their leases upon the expiration of
their terms. In addition, we cannot predict that current tenants will not
attempt to terminate their leases prior to the expiration of their current
terms. If this occurs, we may not be able to locate qualified replacement
tenants and, as a result, we would lose a source of revenue while remaining
responsible for the payment of our obligations. Even if tenants decide to renew
their leases, the terms of renewals or new leases, including the cost of
required renovations or concessions to tenants, may be less favorable than
current lease terms. Additionally, properties we may acquire in the future may
not be fully leased and the cash flow from existing operations may be
insufficient to pay the operating expenses and debt service associated with that
property until the property is fully leased. As a result, our ability to pay
dividends to holders of Series C preferred stock could be adversely affected.
Our business strategy includes the acquisition of properties, which may be
hindered by various circumstances.
We compete for the purchase of commercial property with many entities,
including other publicly traded commercial REITs. Many of our competitors have
substantially greater financial resources than ours. In addition, our
competitors may be willing to accept lower returns on their investments. If our
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competitors prevent us from buying the properties that we have targeted for
acquisition, we may not be able to meet our property acquisition and development
goals. We may incur costs on unsuccessful acquisitions that we will not be able
to recover. The operating performance of our property acquisitions may also fall
short of our expectations, which could adversely affect our financial
performance.
Leverage can reduce cash available for distribution and cause losses.
Our charter does not limit the amount of indebtedness we may incur,
although we may not exceed certain debt to capitalization ratios without the
consent of our preferred stockholders, including the holders of our Series C
preferred stock. Using debt, whether with recourse to us generally or only with
respect to a particular property, to acquire properties creates an opportunity
for increased net income, but at the same time creates risks. For example,
variable rate debt can reduce the cash available to pay dividends to holders of
Series C preferred stock in periods of rising interest rates. We use debt to
fund investments only when we believe it will enhance our risk-adjusted returns.
However, we cannot be sure that our use of leverage will prove to be beneficial.
Moreover, when our debt is secured by our assets, we can lose those assets
through foreclosure if we do not meet our debt service obligations. While we
generally attempt to minimize the use of variable rate mortgage debt whenever
possible, we could experience circumstances where variable rate mortgage debt is
our only economically viable option.
We face risks associated with the use of debt to fund acquisitions and
developments, including refinancing risk.
We are subject to the risks normally associated with debt financing,
including the risk that our cash flow will be insufficient to meet required
payments of principal and interest. We anticipate that a portion of the
principal of our debt will not be repaid prior to maturity. Therefore, we will
likely need to refinance at least a portion of our outstanding debt as it
matures. There is a risk that we may not be able to refinance existing debt or
that the terms of any refinancing will not be as favorable as the terms of the
existing debt. If principal payments due at maturity cannot be refinanced,
extended or repaid with proceeds from other sources, such as new equity capital
or sales of properties, our cash flow will not be sufficient to repay all
maturing debt in years when significant "balloon" payments come due.
Construction risks could adversely affect our profitability.
We currently are renovating some of our properties and may in the
future renovate other properties, including tenant improvements required under
leases. Our renovation and related construction activities may expose us to
certain risks. We may incur renovation costs for a property which exceed our
original estimates due to increased costs for materials or labor or other costs
that are unexpected. We also may be unable to complete renovation of a property
on schedule, which could result in increased debt service expense or
construction costs. Additionally, the time frame required to recoup our
renovation and construction costs and to realize a return on such costs can
often be significant.
Uninsured and underinsured losses may affect the value of, or return from, our
property interests.
Our properties, and the properties securing our loans, have
comprehensive insurance in amounts we believe are sufficient to permit the
replacement of the properties in the event of a total loss, subject to
applicable deductibles. There are certain types of losses, such as earthquakes,
floods and hurricanes, that may be uninsurable or not economically insurable.
Changes in building codes and ordinances, environmental considerations and other
factors also might make it impracticable for us to use insurance proceeds to
replace a damaged or destroyed property. If any of these or similar events
occurs, it may reduce our return from an affected property and the value of our
investment.
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The real estate business is highly competitive.
We compete for real estate investments with all types of investors,
including domestic and foreign corporations, financial institutions, other real
estate investment trusts and individuals. Many of these competitors have greater
resources than we do. Our shopping centers compete for tenants with other
regional, community or neighborhood shopping centers in the respective areas
where our retail properties are located. Our office buildings compete for
tenants with office buildings throughout the areas in which they are located.
The value of our property interests depends on conditions beyond our control.
Real property investments are illiquid and subject to varying degrees
of risk. Yields from our real properties depend on their net income and capital
appreciation. We are particularly dependent on the Connecticut and New York
market due to the concentration of a majority of our real estate assets in this
area. Real property income and capital appreciation may be adversely affected by
general and local economic conditions, neighborhood values, competitive
overbuilding, weather, casualty losses and other factors beyond our control.
General and local economic conditions may be adversely affected by circumstances
like the terrorist incidents that occurred in New York and Washington D.C. in
September 2001. We are unable to determine the long-term impact, if any, of
these incidents or of any acts of war or terrorism in the United States or
worldwide on the U.S. economy, on our Company or on the market price of our
securities. The value of our real property may also be adversely affected by
factors such as costs of complying with regulations and liability under
applicable environmental laws, interest rate changes and the availability of
financing. Income from a property will be adversely affected if a large tenant
is, or a significant number of tenants are, unable to pay rent or if available
space cannot be rented on favorable terms. Operating and other expenses of our
properties, particularly significant expenses such as debt payments, real estate
taxes and maintenance costs, generally do not decrease when income decreases
and, even if revenues increase, operating and other expenses may increase faster
than revenues.
Our Board of Directors may change our investment and operational policies
without stockholder consent.
Our Board of Directors determines our investment and operational
policies and, in particular, our investment policies. Our Board of Directors may
amend or revise our investment and operational policies, including our policies
with respect to acquisitions, growth, operations, indebtedness, capitalization
and dividends, or approve transactions that deviate from these policies without
a vote of or notice to our stockholders. Investment and operational policy
changes could adversely affect the market price of our securities and our
ability to make distributions to our stockholders.
We are dependent on key personnel.
We depend on the services of our existing senior management to carry
out our business and investment strategies. As we expand, we will continue to
need to attract and retain qualified additional senior management. The loss of
the services of any of our key management personnel, or our inability to recruit
and retain qualified personnel in the future, could have an adverse effect on
our business and financial results.
We are the general partner of limited partnerships and may become liable for the
debts and other obligations of these partnerships beyond the amount of our
investment.
Three of our properties are owned by limited partnerships for which we
are the general partner. As a general partner of these limited partnerships, we
are liable for the limited partnerships' debts and other obligations. If these
limited partnerships are unable to pay their debts and other obligations we will
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be liable for such debts and other obligations beyond the amount of our
investment in these limited partnerships.
Real properties with environmental problems may create liabilities for us.
The existence of hazardous or toxic substances on a property will
adversely affect its value and our ability to sell or borrow against the
property. Contamination of a real property by hazardous substances or toxic
wastes not only may give rise to a lien on that property to assure payment of
the cost of remediation, but also can result in liability to owners, operators
or lenders for that cost. Many environmental laws impose liability whether a
person knows of, or is responsible for, the contamination. In addition, if a
property owner arranges for the disposal of hazardous or toxic substances at
another site, it may be liable for the costs of cleaning up and removing those
substances from the site, even if it neither owned nor operated the disposal
site. Environmental laws may require us to incur substantial expenses and may
materially limit our use of our properties. In addition, future or amended laws,
or more stringent interpretations or enforcement policies of existing
environmental requirements, may increase exposure to environmental liability.
Compliance with the Americans with Disabilities Act could be costly.
Under the Americans with Disabilities Act of 1990, all public
accommodations must meet federal requirements for access and use by disabled
persons. We believe that our properties substantially comply with the
requirements of the Americans with Disabilities Act. However, a determination
that these properties do not comply with the Americans with Disabilities Act
could result in liability for both governmental fines and damages to private
parties. If we were required to make unanticipated major modifications to comply
with the Americans with Disabilities Act, it could adversely affect our ability
to make distributions to stockholders.
We will be taxed as a regular corporation if we fail to maintain our REIT
status.
Since our founding in 1969, we have operated, and intend to continue to
operate, in a manner that enables us to qualify as a real estate investment
trust, or REIT, for federal income tax purposes. However, the federal income tax
laws governing REITs are complex. We have received an opinion of counsel that we
qualify as a REIT based on our current operations and on certain assumptions and
representations concerning future operations. Opinions of counsel are not
binding on the Internal Revenue Service (the "IRS") or any court. The opinion
only represents the view of counsel based on counsel's review and analysis of
existing law. Furthermore, our continued qualification as a REIT will depend on
our satisfaction of the asset, income, organizational, distribution and
stockholder ownership requirements of the Internal Revenue Code on a continuing
basis. If we fail to qualify as a REIT in any taxable year, we will be subject
to federal income tax, including any applicable alternative minimum tax, on our
taxable income at regular corporate rates. In addition, distributions to
stockholders would not be deductible in computing our taxable income. Corporate
tax liability would reduce the amount of cash available for distribution to
stockholders which, in turn, would reduce the market price of our securities.
Unless entitled to relief under certain Internal Revenue Code provisions, we
also would be disqualified from taxation as a REIT for the four taxable years
following the year during which we ceased to qualify as a REIT.
Failure to make required distributions would subject us to tax.
In order to qualify as a REIT, each year we must distribute to our
stockholders at least 90% of our taxable income, other than any net capital
gain. To the extent that we satisfy the distribution requirement, but distribute
less than 100% of our taxable income, we will be subject to federal corporate
income tax on
8
our undistributed income. In addition, we will incur a 4% nondeductible excise
tax on the amount, if any, by which our distributions in any year are less than
the sum of:
o 85% of our ordinary income for that year;
o 95% of our capital gain net income for that year; and
o 100% of our undistributed taxable income from prior years.
We have paid out, and intend to continue to pay out, our income to our
stockholders in a manner intended to satisfy the distribution requirement and to
avoid corporate income tax and the 4% excise tax. Differences in timing between
the recognition of income and the related cash receipts or the effect of
required debt amortization payments could require us to borrow money or sell
assets to pay out enough of our taxable income to satisfy the distribution
requirement and to avoid corporate income tax and the 4% excise tax in a
particular year.
Gain on disposition of assets deemed held for sale in the ordinary course is
subject to 100% tax.
If we sell any of our assets, the IRS may determine that the sale is a
disposition of an asset held primarily for sale to customers in the ordinary
course of a trade or business. Gain from this kind of sale generally will be
subject to a 100% tax. Whether an asset is held "primarily for sale to customers
in the ordinary course of a trade or business" depends on the particular facts
and circumstances of the sale. Although we will attempt to comply with the terms
of safe-harbor provisions in the Internal Revenue Code prescribing when asset
sales will not be so characterized, we cannot assure you that we will be able to
do so.
Changes to the federal tax laws could adversely affect your investment.
The rules dealing with federal income taxation are constantly under review
by persons involved in the legislative process and by the IRS and the Treasury
Department. Changes to the federal tax laws and interpretations of federal tax
laws could adversely affect an investment in our Company. Recently enacted
legislation reduces the rate of taxation on corporate dividends and long-term
capital gains. This legislation could make an investment in a REIT comparatively
less attractive than an investment in a non-REIT corporation because generally
dividends paid by a REIT are not eligible for the reduced rates (except to the
extent the REIT distribution consists of capital gains, dividends received from
non-REIT corporations, and income which was taxed at the REIT level). Moreover,
this legislation could adversely affect the attractiveness of real estate
generally relative to alternative investments. Accordingly, this legislation
could adversely affect the price of our stock.
Our ownership limitation may restrict business combination opportunities.
To qualify as a REIT under the Internal Revenue Code, no more than 50% in
value of our outstanding capital stock may be owned, directly or indirectly, by
five or fewer individuals during the last half of each taxable year. To preserve
our REIT qualification, our charter generally prohibits any person from owning
more than 7.5% of the value of all of our outstanding capital stock and provides
that:
o a transfer that violates the limitation is void;
o a transferee gets no rights to the shares that violate the limitation;
o shares transferred to a stockholder in excess of the ownership
limitation are automatically converted, by the terms of our charter,
into shares of "excess stock"; and
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o the excess stock will be held by us as trustee of a trust for the
exclusive benefit of future transferees to whom the shares of capital
stock will ultimately be transferred without violating the ownership
limitation.
We may also redeem excess stock at a price which may be less than the
price paid by a stockholder.
Pursuant to authority under our charter, our Board of Directors has
determined that the ownership limitation does not apply to Mr. Charles J.
Urstadt, our Chairman and Chief Executive Officer, who beneficially owns 35.5%
and 1.7% of our outstanding common stock and Class A common stock, respectively.
Such holdings represent approximately 31.4% of our outstanding voting interests.
In addition, our directors and executive officers, as a group, hold
approximately 46.1% of our outstanding voting interests through their beneficial
ownership of our common stock and Class A common stock. The ownership limitation
may discourage a takeover or other transaction that our stockholders believe to
be desirable.
Certain provisions in our charter and bylaws and Maryland law may prevent or
delay a change of control or limit our stockholders from receiving a premium for
their shares.
Our charter and bylaws and Maryland law contain the following provisions:
o Our Board of Directors is divided into three classes, with
directors in each class elected for three-year staggered terms.
o Our directors may be removed only for cause upon the vote of the
holders of two-thirds of the voting power of our common equity
securities.
o Our stockholders may act by written consent only if all
stockholders entitled to vote execute such written consent.
o Our stockholders may call a special meeting of stockholders only
if the holders of a majority of the voting power of our common
equity securities request such a meeting in writing.
o Our stockholders who wish to make proposals or nominate directors
must comply with certain advance notification requirements.
o Any consolidation, merger, share exchange or transfer of all or
substantially all of our assets must be approved by (a) a
majority of our directors who are currently in office or who are
approved or recommended by a majority of our directors who are
currently in office (the "continuing directors") and (b) the
holders of two-thirds of the voting power of our common equity
securities.
o Certain provisions of our charter may only be amended by (a) a
vote of a majority of our continuing directors and (b) the
holders of two-thirds of the voting power of our common equity
securities. These provisions relate to the election,
classification and removal of directors, the ownership limit and
the stockholder vote required for certain business combination
transactions.
These provisions could delay, defer or prevent a transaction or a
change of control in which holders of Series C preferred stock might have the
right to require us to repurchase all or any part of their shares or otherwise
receive a premium for their shares above then-current market prices or might
otherwise deem to be in their best interests.
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In view of the common equity securities controlled by Mr. Charles J.
Urstadt, Mr. Urstadt may control a sufficient percentage of the voting power of
our common equity securities to effectively block approval of any proposal which
requires a vote of our stockholders.
Our preferred stock may deter a change in control.
Our charter authorizes our Board of Directors to issue preferred stock,
to establish the preferences and rights of any preferred stock issued, to
classify any unissued preferred stock and reclassify any previously classified
but unissued preferred stock without stockholder approval. We currently have
20,000,000 shares of preferred stock authorized, of which 150,000 shares of
Series B preferred stock and 400,000 shares of Series C preferred stock are
issued and outstanding. The terms of our Series B and Series C preferred stock
contain change of control provisions which, under certain circumstances, may
require us to pay a substantial premium above the liquidation preference if we
repurchase the Series B or Series C preferred stock when a change of control
occurs. This may deter changes of control of our Company because of the
increased cost for a third party to acquire control.
Our stockholder rights plan could deter a change of control.
We have adopted a stockholder rights plan. This plan will generally
deter a person or a group from acquiring more than 10% of the combined voting
power of our outstanding shares of common stock and Class A common stock
because, after (i) the person acquires more than 10% of the combined voting
power of our outstanding common stock and Class A common stock, or (ii) the
commencement of a tender offer or exchange offer by any person (other than us,
any one of our wholly owned subsidiaries or any of our employee benefit plans,
or certain exempt persons), if, upon consummation of the tender offer or
exchange offer, the person or group would beneficially own 30% or more of the
combined voting power of our outstanding shares of common stock and Class A
common stock, all other stockholders will have the right to purchase securities
from us at a price that is less than their fair market value. This would
substantially reduce the value and influence of the stock owned by the acquiring
person. Our Board of Directors can prevent the plan from operating by approving
the transaction and redeeming the rights. This gives our Board of Directors
significant power to approve or disapprove of the efforts of a person or group
to acquire a large interest in us. The rights plan exempts acquisitions of
common stock and Class A common stock by Mr. Charles J. Urstadt, members of his
family and certain of his affiliates.
Maryland anti-takeover statutes may restrict business combination opportunities.
As a Maryland corporation, we are subject to various provisions of
Maryland law that impose restrictions and require affected persons to follow
specified procedures with respect to certain takeover offers and business
combinations, including combinations with persons who own 10% or more of our
outstanding shares. These provisions of Maryland law could delay, defer or
prevent a transaction or a change of control in which holders of Series C
preferred stock might have the right to require us to repurchase all or any part
of their shares or otherwise receive a premium for their shares above
then-current market prices or might otherwise deem to be in their best
interests. In view of the common equity securities controlled by Mr. Charles J.
Urstadt, Mr. Urstadt may control a sufficient percentage of the voting power of
our common equity securities to effectively block a proposal respecting a
business combination under these provisions of Maryland law.
Maryland law also eliminates the voting rights of shares deemed to be "control
shares."
Under Maryland law, "control shares" are those which, when aggregated
with any other shares held by the acquiror, allow the acquiror to exercise
voting power within specified ranges. Shares acquired in a control share
acquisition have no voting rights, except to the extent approved by the
affirmative vote of two-thirds of all votes entitled to be cast on the matter,
excluding all interested shares. The control
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share provisions of Maryland law could delay, defer or prevent a transaction or
a change of control in which holders of Series C preferred stock might have the
right to require us to repurchase all or any part of their shares, otherwise
receive a premium for their shares above then-current market prices or might
otherwise deem to be in their best interests.
We have exceptions to the "business combinations" and "control share" provisions
of Maryland law.
As permitted by Maryland law, our charter and bylaws provide that the
"control shares" and "business combinations" provisions of Maryland law
described above will not apply to acquisitions of those shares by Mr. Charles J.
Urstadt or to transactions between us and Mr. Urstadt or any of his affiliates.
Consequently, unless such exemptions are amended or repealed, we may in the
future enter into business combinations or other transactions with Mr. Urstadt
or any of his affiliates without complying with the requirements of Maryland
anti-takeover laws.
Additional issuances of equity securities could dilute stockholder interests.
Our charter authorizes our Board of Directors to issue additional
shares of our common stock, Class A common stock and preferred stock without
stockholder approval. Any additional issuances of common stock, Class A common
stock or preferred stock could have the effect of diluting the interests of our
then-existing holders of Series C preferred stock.
Our change of control agreements could deter a change of control.
We have entered into change of control agreements with each of our
executives providing for the payment of money to these executives upon the
occurrence of our change of control as defined in these agreements. If, within
18 months following a change of control, we terminate the executive's employment
other than for cause, or if the executive elects to terminate his employment
with us for reasons specified in the agreement, we will make a severance payment
equal to a portion of the executive's base salary, together with medical and
other benefits. In the case of Messrs. Charles J. Urstadt, Willing L. Biddle,
James R. Moore and Raymond P. Argila, we will make a payment equal to their
respective annual salaries plus benefits. Based upon their current salary and
benefit levels, this provision would result in payments totaling $1,000,000 to
Messrs. Urstadt, Biddle, Moore and Argila, in the aggregate. These agreements
may deter changes of control of our company because of the increased cost for a
third party to acquire control.
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RATIOS OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
The following table sets forth our ratio of earnings to combined fixed
charges and preferred stock dividends for the periods shown:
Nine Months
Ended
July 31, Year ended October 31,
------------------- ------------------------------------------------
2003 2002 2002 2001 2000 1999 1998
---- ---- ---- ---- ---- ---- ----
Ratio of earnings to
combined fixed charges and
preferred stock dividends..................... 2.68 2.92 2.84 1.88 1.70 1.80 2.06
The ratio of earnings to combined fixed charges and preferred stock
dividends was computed by dividing earnings by the total of fixed charges and
preferred stock dividends. For purposes of computing this ratio, earnings
consist of net income reduced by the equity in earnings of unconsolidated joint
ventures, plus fixed charges. Fixed charges consist of interest expense.
USE OF PROCEEDS
The selling stockholders will receive all of the proceeds from the sale
of the shares of our Series C preferred stock, less any brokerage or other
expenses of sale incurred by them. We will not receive any proceeds from the
sale of the shares of our Series C preferred stock offered hereby. See "Selling
Stockholders."
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DESCRIPTION OF OUR SERIES C PREFERRED STOCK
The following description of certain provisions of our Series C
preferred stock is intended as a summary only, and you should read this
description together with the complete text of our charter and the articles
supplementary of our Series C preferred stock. The capitalized terms used but
not otherwise defined in this prospectus have the respective meanings given to
them in the articles supplementary. Our charter and the articles supplementary
are each incorporated by reference in this prospectus.
GENERAL
Under our charter, we are authorized to issue up to 20,000,000 shares
of preferred stock in one or more series, with such designations, powers,
preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends or other distributions, qualifications and terms or
conditions of redemption, in each case, if any, as are permitted by Maryland law
and as our Board of Directors may determine by adoption of an amendment to our
charter without any further vote or action by our stockholders. We currently
have 150,000 shares of Series B preferred stock outstanding and 400,000 shares
of Series C preferred stock outstanding. For further discussion of the rights of
the Series B preferred stock, see "Description of Capital Stock - Description of
Series B Senior Cumulative Preferred Stock" below.
On May 29, 2003, we issued 400,000 shares of our Series C preferred
stock in a private placement. The holders of our Series C preferred stock have
no preemptive rights with respect to any shares of our capital stock or any of
our other securities convertible into or carrying rights or options to purchase
any shares of our capital stock.
We currently have reserved 150,000 shares of Series A Participating
preferred stock, $0.01 par value (the "Series A preferred stock"), for issuance
pursuant to a rights agreement, dated March 12, 1997, as amended, between our
Company and The Bank of New York, as rights agent. Under the rights agreement,
one right to purchase 1/100th of a share of Series A preferred stock (structured
so as to be substantially the equivalent of one share of our common stock or our
Class A common stock, as applicable) is attached to each issued and outstanding
share of our common stock and to each issued and outstanding share of our Class
A common stock. The rights are not exercisable and are attached to, and may not
trade separately from, our common stock or Class A common stock, as applicable,
and the Series A preferred stock will not be issued, unless certain
change-in-control events occur. In the event that the rights become exercisable,
the Series A preferred stock will rank junior to our Series C preferred stock as
to dividends and amounts distributed upon liquidation. See "- Rank" and "Certain
Provisions of our Charter and Bylaws, Maryland Law, Our Stockholder Rights Plan,
Change of Control Agreements and Indemnification Agreements."
MATURITY
Our Series C preferred stock has no stated maturity and is not subject
to any sinking fund or mandatory redemption.
RANK
Our Series C preferred stock ranks, with respect to dividend rights and
rights upon our liquidation, dissolution or winding up:
o senior to our common stock and Class A common stock and to all
other equity securities we issue ranking junior to our Series C
preferred stock with respect to dividend rights or rights
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upon our liquidation, dissolution or winding up, including the
Series A preferred stock, if and when issued;
o on a parity with our Series B preferred stock and with all other
equity securities we issue the terms of which specifically
provide that such equity securities rank on a parity with our
Series C preferred stock with respect to dividend rights or
rights upon our liquidation, dissolution or winding up; and
o junior to all our existing and future indebtedness.
Without the affirmative vote or consent of at least two-thirds of the
outstanding Series C preferred stock, we may not issue any equity securities
which rank senior to our Series C preferred stock with respect to dividend
rights or rights upon our liquidation, dissolution, or winding up. The term
"equity securities" does not include convertible debt securities, which rank
senior to our Series C preferred stock prior to conversion.
DIVIDENDS
Holders of shares of our Series C preferred stock are entitled to
receive, when and as declared by our Board of Directors, out of our funds
legally available for the payment of dividends, preferential cumulative cash
dividends at the rate of 8.5% per annum of the Liquidation Preference. If we
violate the fixed charge coverage ratio covenant or the capitalization ratio
covenant, and fail to cure the violation on or before the second succeeding
dividend payment date, the initial dividend yield will be increased to 2.0% over
the initial dividend yield (the "first default dividend yield") as of that
second succeeding dividend payment date. If we remain in violation of either the
fixed charge ratio covenant or the capitalization ratio covenant on four
consecutive dividend payment dates subsequent to the initial violation of either
covenant, the initial dividend yield will increase to the greater of (a) the
discount rate (as defined below) plus 7.0% or (b) 15% (the "second default
dividend yield") as of that fourth consecutive dividend payment date. See "-
Covenants." The first default dividend yield and the second default dividend
yield will revert back to the initial dividend yield if we remain in compliance
with the fixed charge coverage ratio covenant and the capitalization ratio
covenant on two consecutive dividend payment dates after the first default
dividend yield or second default dividend yield takes effect.
These dividends are cumulative from May 29, 2003, the date of original
issue, and are payable quarterly in arrears on January 31, April 30, July 31 and
October 31 of each year, or, if not a business day, the next succeeding business
day, for the quarterly periods ended January 31, April 30, July 31 and October
31, as applicable. A dividend payable on our Series C preferred stock for any
partial dividend period is computed on the basis of a 360-day year consisting of
twelve 30-day months. Dividends are payable to holders of record as they appear
in our stockholder records at the close of business on the applicable record
date determined each quarter by our Board of Directors, as provided by the
Maryland General Corporation Law.
We will not declare dividends on our Series C preferred stock or pay or
set aside for payment dividends on our Series C preferred stock at any time if
the terms and provisions of any agreement of our Company, including any
agreement relating to our indebtedness, prohibits the declaration, payment or
setting aside for payment or provides that the declaration, payment or setting
apart for payment would constitute a breach or a default under the agreement, or
if the declaration or payment is restricted or prohibited by law.
Notwithstanding the foregoing, dividends on our Series C preferred
stock accrue whether or not we have earnings, whether or not there are funds
legally available for the payment of those dividends and whether or not those
dividends are declared. Accrued but unpaid dividends on our Series C preferred
15
stock do not bear interest and holders of our Series C preferred stock are not
entitled to any distributions in excess of full cumulative distributions
described above.
Except as described in the next sentence, we will not declare or pay or
set apart for payment dividends on any of our capital stock ranking, as to
dividends, on a parity with or junior to our Series C preferred stock (other
than a dividend in shares of our common stock or Class A common stock or in
shares of any other class of stock ranking junior to our Series C preferred
stock as to dividends and upon liquidation) for any period unless full
cumulative dividends on our Series C preferred stock for all past dividend
periods and the then current dividend period have been or contemporaneously are
declared and paid or declared and a sum sufficient for the payment thereof is
set apart for such payment. When we do not pay dividends in full (or we do not
set apart a sum sufficient to pay them in full) upon our Series C preferred
stock and the shares of any other series of preferred stock ranking on a parity
as to dividends with our Series C preferred stock, we will declare all dividends
upon our Series C preferred stock and any other series of preferred stock
ranking on a parity as to dividends with our Series C preferred stock
proportionately so that the amount of dividends declared per share of Series C
preferred stock and such other series of preferred stock will in all cases bear
to each other the same ratio that accrued dividends per share on our Series C
preferred stock and such other series of preferred stock (which will not include
any accrual in respect of unpaid dividends for prior dividend periods if such
preferred stock does not have a cumulative dividend) bear to each other.
Except as described in the immediately preceding paragraph, unless full
cumulative dividends on our Series C preferred stock have been or
contemporaneously are declared and paid or declared and a sum sufficient for the
payment thereof is set apart for payment for all past dividend periods and the
then current dividend period, we will not declare or pay or set aside for
payment dividends (other than on shares of our common stock or Class A common
stock or other shares of capital stock ranking junior to our Series C preferred
stock as to dividends and upon liquidation) or declare or make any other
distribution on our common stock or Class A common stock, or any other capital
stock ranking junior to or on a parity with our Series C preferred stock as to
dividends or upon liquidation, nor will we redeem, purchase or otherwise acquire
for any consideration, or pay or make available any monies for a sinking fund
for the redemption of, any of our shares of common stock or Class A common stock
or any other shares of our capital stock ranking junior to or on a parity with
our Series C preferred stock as to dividends or upon liquidation (except by
conversion into or exchange for our other capital stock ranking junior to our
Series C preferred stock as to dividends and upon liquidation or redemption for
the purpose of preserving our qualification as a REIT).
Holders of shares of our Series C preferred stock are not entitled to
any dividend, whether payable in cash, property or stock, in excess of full
cumulative dividends on our Series C preferred stock as described above. Any
dividend payment made on shares of our Series C preferred stock is first
credited against the earliest accrued but unpaid dividend due with respect to
those shares which remains payable. So long as no dividends are in arrears, we
are entitled at any time and from time to time to repurchase shares of Series C
preferred stock in open-market transactions duly authorized by our Board of
Directors and effected in compliance with applicable laws.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding
up of our affairs, the holders of shares of Series C preferred stock are
entitled to be paid out of our assets legally available for distribution to our
stockholders a liquidation preference of $100 per share (the "Liquidation
Preference"), plus an amount equal to any accrued and unpaid dividends to the
date of payment, but without interest, before any distribution of assets may be
made to holders of our common stock or Class A common stock or any other class
or series of our capital stock ranking junior to our Series C preferred stock as
to liquidation rights. However, the holders of the shares of Series C preferred
stock are not entitled to
16
receive the liquidating distribution described above until the liquidation
preference of any other series or class of our capital stock hereafter issued
ranking senior as to liquidation rights to our Series C preferred stock has been
paid in full. The holders of Series C preferred stock and all series or classes
of our capital stock ranking on a parity as to liquidation rights with our
Series C preferred stock are entitled to share proportionately, in accordance
with the respective preferential amounts payable on such capital stock, in any
distribution (after payment of the liquidation preference of any of our capital
stock ranking senior to our Series C preferred stock as to liquidation rights)
which is not sufficient to pay in full the aggregate of the amounts of the
liquidating distributions to which they would otherwise be respectively
entitled. Holders of Series C preferred stock are entitled to written notice of
any liquidation. After payment of the full amount of the liquidating
distributions to which they are entitled, the holders of Series C preferred
stock have no right or claim to any of our remaining assets. Our consolidation
or merger with or into any other corporation, trust or entity or of any other
corporation with or into the Company, or the sale, lease or conveyance of all or
substantially all of our property or business, is not deemed to constitute our
liquidation, dissolution or winding up.
Our charter provides that, in determining whether a distribution to
holders of Series C preferred stock (other than upon voluntary or involuntary
liquidation) by dividend, redemption or other acquisition of shares of our stock
or otherwise is permitted under the Maryland General Corporation Law, no effect
will be given to amounts that would be needed, if we were to be dissolved at the
time of the distribution, to satisfy the preferential rights upon distribution
of holders of shares of our stock whose preferential rights upon dissolution are
superior to those receiving the distribution.
RATING
Our Series C preferred stock has been rated BB by Fitch Ratings. A
security rating is not a recommendation to buy, sell or hold securities and may
be subject to revision or withdrawal at any time by the assigning rating
organization.
REDEMPTION
Except in certain circumstances relating to the preservation of our
qualification as a REIT under the Internal Revenue Code, and to a change in
control, our Series C preferred stock is not redeemable before May 29, 2013 (the
"tenth anniversary date"). See "- Change of Control." However, in order to
ensure that we remain qualified as a REIT for federal income tax purposes, we
have the right to purchase from a holder of shares of Series C preferred stock
at any time any shares of Series C preferred stock in excess of 7.5% of the
value of our outstanding capital stock. See "- Restrictions on Ownership and
Transfer." On and after the tenth anniversary date, we may, at our option, upon
not less than 30 nor more than 60 days' written notice, redeem shares of our
Series C preferred stock, in whole or in part, at any time or from time to time,
for cash at a redemption price of $100 per share, plus all accrued and unpaid
dividends to the date fixed for redemption (except with respect to shares of
Series C preferred stock which have been converted into shares of excess stock
pursuant to our charter), without interest. Holders of Series C preferred stock
to be redeemed will be required to surrender our Series C preferred stock at the
place designated in such notice and will be entitled to the redemption price and
any accrued and unpaid dividends payable upon the redemption following surrender
of the preferred stock. If we have given notice of redemption of any shares of
Series C preferred stock and if we have set aside the funds necessary for the
redemption in trust for the benefit of the holders of any shares of Series C
preferred stock so called for redemption, then from and after the redemption
date dividends will cease to accrue on such shares of Series C preferred stock,
the shares of Series C preferred stock will no longer be deemed outstanding and
all rights of the holders of the shares will terminate, except the right to
receive the redemption price. If less then all of the outstanding shares of
Series C preferred stock is to be redeemed, our Series C preferred stock to be
redeemed will be selected proportionately (as nearly as may be practicable
without creating fractional shares) or by any other equitable method we
determine.
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Unless we have declared and paid, we are contemporaneously declaring
and paying, or we have declared and set aside a sum sufficient for the payment
of the full cumulative dividends on all shares of Series C preferred stock for
all past dividend periods and the then current dividend period, we may not
redeem any Series C preferred stock unless we simultaneously redeem all
outstanding shares of Series C preferred stock and we will not purchase or
otherwise acquire directly or indirectly any shares of Series C preferred stock
(except by exchange for shares of our capital stock ranking junior to our Series
C preferred stock as to dividends and upon liquidation). Notwithstanding the
foregoing, we may purchase excess stock in order to ensure that we continue to
meet the requirements for qualification as a REIT or any purchase or exchange
offer made on the same terms to holders of all outstanding shares of Series C
preferred stock. So long as no dividends are in arrears, we are entitled at any
time and from time to time to repurchase shares of Series C preferred stock in
open-market transactions duly authorized by our Board of Directors and effected
in compliance with applicable laws.
We will give notice of redemption by publication in a newspaper of
general circulation in the City of New York, such publication to be made once a
week for two successive weeks commencing not less than 30 nor more than 60 days
prior to the redemption date. We will mail a similar notice, postage prepaid,
not less than 30 nor more than 60 days prior to the redemption date, addressed
to the respective holders of record of our Series C preferred stock to be
redeemed at their respective addresses as they appear on our stock transfer
records. No failure to give such notice or any defect in the notice or in the
mailing of the notice will affect the validity of the proceedings for the
redemption of any shares of Series C preferred stock except as to a holder to
whom notice was defective or not given. Each notice will state:
o the redemption date;
o the redemption price;
o the number of shares of Series C preferred stock to be redeemed;
o the place or places where our Series C preferred stock is to be
surrendered for payment of the redemption price; and
o that dividends on the shares to be redeemed will cease to accrue
on such redemption date.
If we redeem less than all of our Series C preferred stock held by any
holder, the notice mailed to such holder will also specify the number of shares
of Series C preferred stock held by such holder to be redeemed.
Immediately prior to any redemption of Series C preferred stock, we
will pay, in cash, any accumulated and unpaid dividends through the redemption
date, unless a redemption date falls after the applicable dividend record date
and prior to the corresponding dividend payment date, in which case each holder
of Series C preferred stock at the close of business on the applicable dividend
record date is entitled to the dividend payable on such shares on the
corresponding dividend payment date notwithstanding the redemption of such
shares before the dividend payment date.
CHANGE OF CONTROL
In the event of a change of control of the Company, each holder of
shares of Series C preferred stock has the right, at the holder's option, to
require us to repurchase all or any part of the holder's Series C preferred
stock for cash at a repurchase price of $100 per share, plus all accrued and
unpaid dividends, if any, up to the date fixed for repurchase (except with
respect to shares of Series C preferred stock which have been converted into
shares of excess stock pursuant to our charter), without interest
18
pursuant to the procedures described below (the "change of control put option"),
subject to the Maryland General Corporation Law.
In connection with any change of control, we will be required to mail
to each holder of shares of Series C preferred stock, not later than the date of
the occurrence of the change of control, a notice of such occurrence, which will
specify the purchase price and the purchase date, which will be no fewer than 30
business days and no more than 40 business days from the date the notice is
mailed (the "put option payment date"), and describe the procedure that must be
followed by the holder to tender the holder's shares of Series C preferred
stock. We will be required to deliver a copy of this notice to each record and
known beneficial holder of shares of Series C preferred stock as of the date
that is 15 days prior to the date the notice is mailed. To exercise the change
of control put option, a holder of shares of Series C preferred stock must
deliver, on or before the third business day preceding the put option payment
date, written notice to us (or to a paying agent designated by us for such
purpose) of the holder's exercise of the change of control put option,
indicating the number of shares of Series C preferred stock to be repurchased by
us. Holders of shares of Series C preferred stock will be entitled to withdraw,
in whole or in part, any tender of shares of Series C preferred stock pursuant
to an exercise of the change of control put option by delivering to us (or to a
paying agent designated by us for such purpose), on or before the second
business day preceding the put option payment date, a telegram, telex, facsimile
transmission or letter stating the name of the holder, the number of shares of
Series C preferred stock initially to be delivered for purchase, and a statement
that the holder is withdrawing its exercise of the change of control put option
as to all or part of the tendered shares of Series C preferred stock.
In the event of a change of control of the Company, we will have the
right, at our option, to redeem all or any part of the shares of each holder of
Series C preferred stock at (a) before the tenth anniversary date, the
make-whole price (as defined below) as of the date fixed for redemption (except
with respect to shares of Series C preferred stock converted into shares of
excess stock pursuant to our charter) and (b) on or after the tenth anniversary
date, the redemption price of $100 per share, plus all accrued and unpaid
dividends, if any, up to the date fixed for redemption (except with respect to
shares of Series C preferred stock converted into shares of excess stock
pursuant to our charter), in each case pursuant to the procedures applicable to
other redemptions of shares of Series C preferred stock. See "- Redemption."
We will comply, to the extent applicable, with Sections 13 and 14 of
the Exchange Act and the provisions of Regulation 14E promulgated thereunder and
any other securities laws and regulations applicable to a repurchase of our
Series C preferred stock pursuant to a change of control.
VOTING RIGHTS
Holders of our Series C preferred stock do not have any voting rights,
except as described below.
Whenever dividends on any shares of Series C preferred stock are in
arrears for three or more consecutive or non-consecutive quarterly periods
within any five-year period a preferred dividend default will exist, the number
of directors then constituting our Board of Directors will be increased by two
(if not already increased by reason of a similar arrearage with respect to any
parity preferred as defined below), and the holders of the shares of Series C
preferred stock (subject to certain restrictions in the case of any regulated
person (as defined below)) will be entitled to vote separately as a class with
all other series of preferred stock ranking on a parity with our Series C
preferred stock as to dividends or upon liquidation and upon which like voting
rights have been conferred and are exercisable, including, in that instance, our
Series B preferred stock ("parity preferred"), in order to fill the newly
created vacancies, for the election of a total of two additional directors of
the Company (the "preferred stock directors") at a special meeting called by us
at the request of holders of record of at least 20% of our Series C preferred
stock or the holders of record of at least 20% of any series of parity preferred
so in arrears (unless the
19
request is received less than 90 days before the date fixed for the next annual
or special meeting of stockholders) or at the next annual meeting of
stockholders, and at each subsequent annual meeting until all dividends
accumulated on the shares of Series C preferred stock and parity preferred for
the past dividend periods and the dividend for the then current dividend period
are fully paid or declared and a sum sufficient for payment has been set aside
to pay them. In the event our directors are divided into classes, each vacancy
will be apportioned among the classes of directors to prevent stacking in any
one class and to insure that the number of directors in each of the classes of
directors are as nearly equal as possible.
Each preferred stock director, as a qualification for election (and
regardless of how elected), will submit to our Board of Directors a duly
executed, valid, binding and enforceable letter of resignation from the Board of
Directors, to be effective upon the date upon which all dividends accumulated on
the shares of Series C preferred stock and parity preferred for the past
dividend periods and the dividend for the then current dividend period are fully
paid or declared and a sum sufficient for payment has been set aside to pay them
at which time the terms of office of all persons elected as preferred stock
directors by the holders of our Series C preferred stock and any parity
preferred will, upon the effectiveness of their respective letters of
resignation, terminate, and the number of directors then constituting the Board
of Directors will be reduced accordingly. A quorum for any meeting will exist if
at least a majority of the outstanding shares of Series C preferred stock and
shares of parity preferred are represented in person or by proxy at the
meetings.
The preferred stock directors will be elected upon the affirmative vote
of a plurality of the shares of Series C preferred stock and the parity
preferred present and voting in person or by proxy at a duly called and held
meeting at which a quorum is present. If and when all accumulated dividends and
the dividend for the then current dividend period on our Series C preferred
stock are paid in full or declared and set aside for payment in full, the
holders of Series C preferred stock will be divested of the foregoing voting
rights (subject to revesting in the event of each and every preferred dividend
default).
Any preferred stock director may be removed at any time with or without
cause by, and will not be removed otherwise than by the vote of, the holders of
record of a majority of the outstanding shares of Series C preferred stock when
they have the voting rights described above (voting separately as a class with
all series of parity preferred). So long as a preferred dividend default
continues, any vacancy in the office of a preferred stock director may be filled
by written consent of the preferred stock director remaining in office, or if
none remains in office, by a vote of the holders of record of a majority of the
outstanding shares of Series C preferred stock when they have the voting rights
described above (voting separately as a class with all series of parity
preferred). The preferred stock directors will each be entitled to one vote per
director on any matter properly coming before our Board of Directors.
Notwithstanding the preceding paragraph, any and all shares of Series C
preferred stock owned by a regulated person which exceed 4.9% of the total
issued and outstanding shares of Series C preferred stock will not be entitled
to vote for the election of preferred stock directors (and will not be counted
for purposes of determining the percentage of holders of Series C preferred
stock necessary to call the special meeting described above or whether a quorum
is present at the special meeting or for any other similar purpose described
above) so long as those shares are owned by a regulated person.
So long as any shares of Series C preferred stock remain outstanding,
we will not, without the affirmative vote or consent of the holders of at least
two-thirds of the shares of our Series C preferred stock outstanding at the
time, given in person or by proxy, either in writing or at a meeting (voting
separately as a class):
o voluntarily terminate our status as a REIT;
20
o enter into or undertake any senior obligations (as defined below)
at any time during which we are in violation of the fixed charge
coverage ratio covenant or the capitalization ratio covenant; or
o amend, alter or repeal the provisions of our charter or the
articles supplementary, whether by merger, consolidation or
otherwise (an "Event"), so as to materially and adversely affect
any preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications, and
terms and conditions of redemption of our Series C preferred
stock or the holders our Series C preferred stock.
However, without the affirmative vote or consent of each holder
of shares of our Series C preferred stock outstanding at the
time, no amendment, alteration or repeal of the provisions of our
charter or of the articles supplementary may be made that will
(w) reduce the number of shares of our Series C preferred stock
required to consent to certain amendments, alterations or repeals
of our charter or the articles supplementary, (x) reduce the
initial dividend yield or the Liquidation Preference or change
the method of calculation of the first default dividend yield,
the second default dividend yield, or the make-whole price, (y)
change the payment date for payment of dividends with respect to
our Series C preferred stock or change the period with respect to
which such dividends are paid, or (z) alter or modify the rights
of any holder of Series C preferred stock arising under certain
provisions of the articles supplementary described in "- Change
of Control." With respect to the occurrence of any Event
described above, so long as our Series C preferred stock (or any
equivalent class or series of stock issued by the surviving
corporation in any merger or consolidation to which we became a
party) remains outstanding with the terms thereof materially
unchanged, the occurrence of any such Event will not be deemed to
materially and adversely affect any preferences, conversion and
other rights, voting powers, restrictions, limitations as to
dividends, qualifications, and terms and conditions of redemption
of holders of our Series C preferred stock. Any increase in the
amount of the authorized preferred stock or the creation or
issuance of any other series of preferred stock, or any increase
in the amount of the authorized shares of such series, in each
case ranking on a parity with or junior to our Series C preferred
stock with respect to payment of dividends or the distribution of
assets upon our liquidation, dissolution or winding up, or the
issuance of additional shares of Series C preferred stock or up
to 100 additional shares of Series B preferred stock will not be
deemed to materially and adversely affect any preferences,
conversion and other rights, voting power, restrictions,
limitations as to dividends, qualifications, and terms and
conditions of redemption.
So long as any shares of Series C preferred stock remain outstanding
and any holder of our Series C preferred stock as of the date of its issuance
continues to hold, beneficially or of record, at least 75% of the number of
shares of Series C preferred stock which the holder owns, beneficially or of
record, as of the date of its issuance, we will not without the affirmative vote
or consent of the holders of at least 85% of the shares of our Series C
preferred stock outstanding at the time, given in person or by proxy, either in
writing or at a meeting (voting separately as a class), amend or waive certain
provisions of the articles supplementary described in "- Covenants."
The foregoing voting provisions will not apply if, at or prior to the
time when the act with respect to which the vote would otherwise be required is
effected, all outstanding shares of Series C preferred stock are redeemed or
called for redemption upon proper notice and we deposit sufficient funds in
trust to effect the redemption.
Except as expressly stated in the articles supplementary, our Series C
preferred stock will not have any relative, participating, optional or other
special voting rights and powers, and the consent of the
21
holders of our Series C preferred stock will not be required for the taking of
any corporate action, including any merger or consolidation involving us, our
liquidation or dissolution or a sale of all or substantially all of our assets,
irrespective of the effect that the merger, consolidation or sale may have upon
the rights, preferences or voting power of the holders of our Series C preferred
stock.
CONVERSION
Our Series C preferred stock is not convertible into or exchangeable
for any of our other securities or property.
COVENANTS
The articles supplementary provide that so long as any share of Series
C preferred stock remains outstanding:
o We will not permit the fixed charge coverage ratio to be less
than 1.30 or the capitalization ratio to exceed 0.55 measured, in
each case, at the end of each fiscal quarter.
o We will not enter into any senior obligation which results in a
violation of the fixed charge coverage ratio covenant or the
capitalization ratio covenant, compliance with these covenants
being determined (a) in the case of the fixed charge coverage
ratio covenant, after giving effect on a pro forma basis to any
senior obligation as if the senior obligation had been issued on
the first day of the calculation period (as defined below), and
(b) in the case of the capitalization ratio covenant, as of the
end of our fiscal quarter immediately preceding our fiscal
quarter in which the senior obligation is issued and undertaken,
after giving effect on a pro forma basis to any senior obligation
as if the senior obligation had been issued on the first day of
such immediately preceding quarter.
CERTAIN DEFINITIONS
Below is a summary of certain of the defined terms used in the articles
supplementary. You should refer to the articles supplementary for the full
definition of all these terms, as well as any other terms used but not defined
in this prospectus.
"Calculation period" means, as of any date of determination, the period
comprised of our two most recently completed fiscal quarters immediately
preceding our fiscal quarter in which that date of determination occurs.
"Capitalization ratio" means, as of any date of determination, the
ratio obtained by dividing (i) the sum of (A) the aggregate amount of our debt
and (B) the aggregate amount of our preferred stock by (ii) the sum of (A) the
aggregate amount of our debt, (B) the aggregate amount of our preferred stock,
(C) the aggregate amount of capital (including additional paid in capital) which
in accordance with generally accepted accounting principles would be reflected
on our balance sheet in connection with our common equity securities as of the
end of the quarter immediately preceding our fiscal quarter in which that date
of determination occurs and (D) our accumulated depreciation as set forth on our
balance sheet as of the end of the quarter immediately preceding our fiscal
quarter in which that date of determination occurs.
"Change of control" means either (a) the occurrence of any merger or
other acquisition as a consequence of which a majority of the outstanding shares
of our common equity securities are owned or acquired by the merging or
acquiring person, entity or group or (b) the occurrence of any event or
transaction as a consequence of which the persons, entities or organizations
described in (A), (B) and (C),
22
below, cease, in the aggregate, to own, beneficially or of record, or cease to
control the voting or disposition or the power to direct the voting or
disposition of, at least 75% of the number of shares of our common equity
securities which the persons, entities or organizations in (A), (B) or (C),
below, in the aggregate, own, beneficially or of record, or control the voting
or disposition or have the power to direct the voting or disposition of, as of
the May 29, 2003 (excluding any stock options or other stock rights which any
such person, entity or organization may now own or subsequently acquire for
purposes of this definition): (A) Charles J. Urstadt; (B) Charles J. Urstadt's
spouse, any of his children or any of their spouses, or any of his grandchildren
or any of their spouses; or (C) any trust, corporation, partnership, limited
liability company or other entity or organization controlled by Charles J.
Urstadt or any of his relatives described in (B) above or in which Charles J.
Urstadt or any of his relatives described in (B) above has any economic,
beneficial or other interest.
"Debt" of our Company or any subsidiary means any indebtedness of our
Company or any subsidiary, whether or not contingent, in respect of (a) borrowed
money or evidenced by bonds, notes, debentures or similar instruments, (b)
indebtedness secured by any mortgage, pledge, lien, charge, encumbrance or any
security interest existing on property owned by our Company or any subsidiary,
(c) reimbursement obligations, contingent or otherwise, in connection with
letters of credit or amounts representing the balance deferred and unpaid of the
purchase price of any property except any balance that constitutes an accrued
expense or trade payable or (d) any lease of property by our Company or any
subsidiary as lessee which is reflected on our consolidated balance sheet as a
capitalized lease in accordance with generally accepted accounting principles,
in the case of items of indebtedness under (a) through (c) above to the extent
that any of those items (other than reimbursement obligations in connection with
letters of credit) would appear as a liability on our consolidated balance sheet
in accordance with generally accepted accounting principles, and also includes,
to the extent not otherwise included, any obligation by our Company or any
subsidiary to be liable for, or to pay, as obligor, guarantor or otherwise
(other than for purposes of collection in the ordinary course of business),
indebtedness of another person (other than our Company or any subsidiary) (it
being understood that debt will be deemed to be incurred by our Company or any
subsidiary whenever our Company or the subsidiary creates, assumes, guarantees
or otherwise becomes liable in respect of the debt).
"Discount rate" means, as of any date of determination, the yield to
maturity implied by (a) the yields reported, as of 10:00 A.M. (New York City
time) on the second business day preceding that date of determination on the
display designated as "Page 678" on the Telerate Access Service (or any other
display as may replace Page 678 on Telerate Access Service) for actively traded
U.S. Treasury securities having a 30-year maturity as of that date of
determination, or (b) if the yields are not reported at that time or the yields
reported at that time are not ascertainable, the Treasury Constant Maturity
Series Yields reported for the latest day for which the yields have been so
reported as of the second business day preceding the date of determination in
Federal Reserve Statistical Release H.15 (519) (or any comparable successor
publication) for actively traded U.S. Treasury securities having a 30-year
constant maturity as of that date of determination.
"Fixed charge coverage ratio" means, as of any date of determination,
the ratio obtained by dividing (i) the sum of (A) interest expense for the
calculation period and preferred dividends for the calculation period and (B)
funds from operations for the calculation period by (ii) the sum of (A) interest
expense for the calculation period and (B) preferred dividends for the
calculation period; provided, however, that (x) if we have issued any debt or
preferred stock since the beginning of the calculation period that remains
outstanding or (y) if the transactions giving rise to the need to calculate the
fixed charge coverage ratio is an issuance of debt or preferred stock, or both
(x) and (y), interest expense and preferred dividends for the calculation period
shall be calculated after giving effect on a pro forma basis to the debt or
preferred stock as if the debt or preferred stock had been issued on the first
day of the calculation period and the discharge of any other debt or preferred
stock refinanced, refunded, exchanged
23
or otherwise discharged with the proceeds of the new debt or preferred stock as
if any such discharge had occurred on the first day of the calculation period.
"Funds from operations" ("FFO") means, with respect to any fiscal
quarter, the measure of FFO as recently defined and clarified by the National
Association of Real Estate Investment Trusts from time to time. FFO is currently
defined as net income, computed in accordance with generally accepted accounting
principles, for that quarter, excluding gains (or losses) from sales of
properties, plus depreciation and amortization and after adjustments for
unconsolidated joint ventures.
"Interest expense" means, for any period, our total interest expense,
including (a) interest expense attributable to capital leases, (b) amortization
of debt discount and debt issuance cost, (c) capitalized interest, (d) non-cash
interest payments, and (e) interest actually paid by us under any guarantee of
debt or other obligation of any other person.
"Make-whole price" means, for any share of Series C preferred stock, as
of any date of determination, the sum of (a) the present value as of that date
of determination of all remaining scheduled dividend payments of that share of
Series C preferred stock until the tenth anniversary date, discounted by the
discount rate, (b) the Liquidation Preference and (c) all accrued and unpaid
dividends thereon to such date of determination.
"Preferred Dividends" means, for any period, dividends accrued during
such period in respect of all preferred stock held by persons other than us.
"Regulated Person" means any bank holding company, subsidiary of a bank
holding company or other person or entity that is subject to the Bank Holding
Company Act of 1956, as amended from time to time.
"Senior Obligation" means any (a) debt other than accounts payable
incurred in the ordinary course of our business and (b) any of our equity
securities which rank senior to our Series C preferred stock with respect to the
payment of dividends or the distribution of assets upon our liquidation,
dissolution, or winding up.
RESTRICTIONS ON OWNERSHIP AND TRANSFER
To qualify as a REIT under the Internal Revenue Code, we must meet
several requirements regarding the number of our stockholders and concentration
of ownership of our shares. Our charter contains provisions that restrict the
ownership and transfer of our shares to assist us in complying with these
Internal Revenue Code requirements. We refer to these restrictions as the
"ownership limit."
The ownership limit provides that, in general, no person may own more
than 7.5% of the aggregate value of all outstanding stock of the Company. It
also provides that:
o a transfer that violates the limitation is void;
o a transferee gets no rights to the shares that violate the
limitation;
o shares transferred to a stockholder in excess of the ownership
limit are automatically converted, by operation of law, into
shares of "excess stock"; and
o the excess stock will be held by us as trustee of a trust for the
exclusive benefit of future transferees to whom the shares of
capital stock will ultimately be transferred without violating
the ownership limit.
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Pursuant to authority under our charter, our Board of Directors has
determined that the ownership limit does not apply to Mr. Charles J. Urstadt,
our Chairman and Chief Executive Officer, and his affiliates and associates who
currently own in the aggregate 35.4% and 1.7% of our outstanding common stock
and Class A common stock, respectively. Such holdings represent approximately
31.4% of our outstanding voting interests. The ownership limitation may
discourage a takeover or other transaction in which holders of Series C
preferred stock might have the right to require us to repurchase all or any part
of their shares or otherwise receive a premium for their shares above
then-current market prices or might otherwise deem to be in their best
interests.
Ownership of our stock is subject to attribution rules under the
Internal Revenue Code, which may result in a person being deemed to own stock
held by other persons. The Board of Directors may waive the ownership limit if
it determines that the waiver will not jeopardize our status as a REIT. As a
condition of such a waiver, the Board of Directors may require an opinion of
counsel satisfactory to it or undertakings or representations from the applicant
with respect to preserving our REIT status. We required no such waiver with
respect to Mr. Urstadt's ownership rights, which are established as part of our
charter.
Any person who acquires stock in violation of the ownership limit must
notify us immediately and provide us with any information we may request in
order to determine the effect of the acquisition on our status as a REIT. The
ownership limit will not apply if our Board of Directors determines that it is
no longer in our best interests to qualify as a REIT. Otherwise, the ownership
limit may be changed only by an amendment to our charter by a vote of two-thirds
of the voting power of our common equity securities.
Our charter provides that any purported transfer which results in a
direct or indirect ownership of shares of capital stock in excess of the
ownership limit or that would result in the disqualification of the Company as a
REIT will be null and void, and the intended transferee will acquire no rights
to the shares of capital stock. The foregoing restrictions on transferability
and ownership will not apply if our Board of Directors determines that it is no
longer in our best interests to attempt to qualify, or to continue to qualify,
as a REIT. Our Board of Directors may, in its sole discretion, waive the
ownership limit if evidence satisfactory to our Board of Directors and our tax
counsel is presented that the changes in ownership will not then or in the
future jeopardize our REIT status and our Board of Directors otherwise decides
that such action is in our best interests.
Shares of Series C preferred stock owned, or deemed to be owned, or
transferred to a stockholder in excess of the ownership limit will automatically
be converted into shares of "excess stock" that will be transferred, by
operation of law, to us as trustee of a trust for the exclusive benefit of the
transferees to whom such shares of capital stock may be ultimately transferred
without violating the ownership limit. While the excess stock is held in trust,
it will not be entitled to vote, it will not be considered for purposes of any
stockholder vote or the determination of a quorum for such vote, and except upon
liquidation it will not be entitled to participate in dividends or other
distributions. Any distribution paid to a proposed transferee of excess stock
prior to the discovery by us that Series C preferred stock has been transferred
in violation of the provision of our charter is required to be repaid to us upon
demand. The excess stock is not treasury stock, but rather constitutes a
separate class of our issued and outstanding stock. The original
transferee-stockholder may, at any time the excess stock is held by us in trust,
transfer the interest in the trust representing the excess stock to any person
whose ownership of shares of capital stock exchanged for such excess stock would
be permitted under the ownership limit, at a price not in excess of (a) the
price paid by the original transferee-stockholder for shares of Series C
preferred stock that were exchanged into excess stock, or (b) if the original
transferee-stockholder did not give value for such shares (e.g., the shares were
received through a gift, devise or other transaction), the average closing price
for our Series C preferred stock for the ten days immediately preceding such
sale, gift or other transaction if such Series C preferred stock is then listed
on a national securities exchange, and if such Series C preferred stock is not
then listed on a national securities exchange, its redemption price, as
applicable.
25
Immediately upon the transfer to the permitted transferee, the excess stock will
automatically be converted back into shares of Series C preferred stock. If the
foregoing transfer restrictions are determined to be void or invalid by virtue
of any legal decision, statute, rule or regulation, then the intended transferee
of any shares of excess stock may be deemed, at our option, to have acted as an
agent on behalf of us in acquiring the excess stock and to hold the excess stock
on behalf of us.
In addition, we will have the right, for a period of 90 days during the
time any shares of excess stock are held by us in trust, to purchase all or any
portion of the excess stock from the original transferee-stockholder at the
lesser of (a) the price initially paid for such shares by the original
transferee-stockholder, or if the original transferee-stockholder did not give
value for such shares (e.g., the shares were received through a gift, devise or
other transaction), the average closing price for our Series C preferred stock
for the ten days immediately preceding such sale, gift or other transaction, and
(b) the average closing price for our Series C preferred stock for the ten
trading days immediately preceding the date we elect to purchase such shares, or
in each case if our Series C preferred stock is not then listed on a national
securities exchange, its redemption price, as applicable. The 90-day period
begins on the date notice is received of the violative transfer if the original
transferee-stockholder gives notice to us of the transfer, or, if no such notice
is given, the date our Board of Directors determines that a violative transfer
has been made.
All stock certificates bear a legend referring to the restrictions
described above.
REGISTRATION RIGHTS
Pursuant to the registration rights agreement we agreed to use
reasonable efforts to (a) file and cause to become effective with the SEC as
soon as reasonably practicable after May 29, 2003, this registration statement;
and (b) keep effective the registration statement until the earlier of two years
following the effective date of the registration statement and the time when all
of our Series C preferred stock has been sold under the registration statement
or otherwise ceased to be a Restricted Security (as defined in the registration
rights agreement). We agreed to provide to each holder of Series C preferred
stock prior written notice of the filing of the registration statement so that
each holder may participate in the resales of our Series C preferred stock
beneficially owned by the holder pursuant to the registration statement and each
holder is entitled to obtain from our transfer agent certificates issued in the
name of the holder or its nominee in fully registered form representing our
Series C preferred stock beneficially owned by the holder. We also agreed to
provide each holder of Series C preferred stock copies of the prospectus which
is a part of the registration statement, notify each holder of Series C
preferred stock when the registration statement for our Series C preferred stock
has become effective and take certain other actions as are required to permit
unrestricted resales of our Series C preferred stock. A holder of Series C
preferred stock who sells such Series C preferred stock under the registration
statement generally is required to be named as a selling security holder in the
related prospectus and to deliver a prospectus to purchasers, is subject to
certain of the civil liability provisions under the Securities Act in connection
with the sales and is bound by the provisions of the registration rights
agreement which are applicable to the holder (including certain indemnification
and contribution rights and obligations).
The preceding summary of certain provisions of the registration rights
agreement is not intended to be complete and you should read this summary
together with the complete text of the registration rights agreement.
LISTING
Our Series C preferred stock is listed on the NYSE under the symbol
"UBPPrC."
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TRANSFER AND DIVIDEND PAYING AGENT
The Bank of New York is the transfer and dividend paying agent in
respect of our Series C preferred stock.
BOOK-ENTRY; DELIVERY AND FORM
The Depository Trust Company ("DTC"), New York, NY, acts as securities
depository for our Series C preferred stock. Our Series C preferred stock has
been issued as fully-registered securities registered in the name of Cede & Co.
(DTC's partnership nominee). One fully-registered Series C preferred stock
certificate has been issued for our Series C preferred stock, representing all
400,000 shares, and has been deposited with DTC.
DTC, the world's largest depository, is a limited-purpose trust company
organized under the New York Banking Law, a "banking organization" within the
meaning of the New York Banking Law, a member of the Federal Reserve System, a
"clearing corporation" within the meaning of the New York Uniform Commercial
Code, and a "clearing agency" registered pursuant to the provisions of Section
17A of the Exchange Act. DTC holds and provides asset servicing for over 2
million issues of U.S. and non-U.S. equity issues, corporate and municipal debt
issues, and money market instruments from over 85 countries that DTC's
participants ("Direct Participants") deposit with DTC. DTC also facilitates the
post-trade settlement among Direct Participants of sales and other securities
transactions in deposited securities, through electronic computerized book-entry
transfers and pledges between Direct Participants' accounts. This eliminates the
need for physical movement of securities certificates. Direct Participants
include both U.S. and non-U.S. securities brokers and dealers, banks, trust
companies, clearing corporations, and certain other organizations. DTC is a
wholly-owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC").
DTCC, in turn, is owned by a number of Direct Participants of DTC and Members of
the National Securities Clearing Corporation, Government Securities Clearing
Corporation, MBS Clearing Corporation, and Emerging Markets Clearing Corporation
(NSCC, GSCC, MBSCC, and EMCC, also subsidiaries of DTCC), as well as by the
NYSE, the American Stock Exchange, Inc. (the "AMEX"), and the National
Association of Securities Dealers, Inc. Access to the DTC system is also
available to others such as both U.S. and non-U.S. securities brokers and
dealers, banks, trust companies, and clearing corporations that clear through or
maintain a custodial relationship with a Direct Participant, either directly or
indirectly ("Indirect Participants"). DTC has Standard & Poor's highest rating:
AAA. The DTC Rules applicable to its Participants are on file with the SEC.
Purchases of shares of our Series C preferred stock under the DTC
system must be made by or through Direct Participants, which will receive a
credit for the shares of our Series C preferred stock on DTC's records. The
ownership interest of each actual purchaser of each share of our Series C
preferred stock ("Beneficial Owner") is in turn to be recorded on the Direct and
Indirect Participants' records. Beneficial Owners will not receive written
confirmation from DTC of their purchase. Beneficial Owners are, however,
expected to receive written confirmations providing details of the transaction,
as well as periodic statements of their holdings, from the Direct or Indirect
Participant through which the Beneficial Owner entered into the transaction.
Transfers of ownership interests in shares of our Series C preferred stock are
to be accomplished by entries made on the books of Direct and Indirect
Participants acting on behalf of Beneficial Owners. Beneficial Owners will not
receive certificates representing their ownership interests in shares of our
Series C preferred stock, except in the event that use of the book-entry system
for shares of our Series C preferred stock is discontinued.
To facilitate subsequent transfers, all shares of our Series C
preferred stock deposited by Direct Participants with DTC are registered in the
name of DTC's partnership nominee, Cede & Co., or such other name as may be
requested by an authorized representative of DTC. The deposit of shares of our
Series C preferred stock with DTC and their registration in the name of Cede &
Co. or such other DTC
27
nominee do not effect any change in beneficial ownership. DTC has no knowledge
of the actual Beneficial Owners of our Series C preferred stock; DTC's records
reflect only the identity of the Direct Participants to whose accounts such
shares of our Series C preferred stock are credited, which may or may not be the
Beneficial Owners. The Direct and Indirect Participants will remain responsible
for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time. Beneficial Owners of Series C preferred
stock may wish to take certain steps to augment the transmission to them of
notices of significant events with respect to the Series C preferred stock, such
as redemptions, tenders, defaults, and proposed amendments to the Series C
preferred stock documents. For example, Beneficial Owners of Series C preferred
stock may wish to ascertain that the nominee holding the Series C preferred
stock for their benefit has agreed to obtain and transmit notices to Beneficial
Owners. In the alternative, Beneficial Owners may wish to provide their names
and addresses to the registrar and request that copies of notices be provided
directly to them.
Redemption notices shall be sent to DTC. If less than all of the Series
C preferred stock are being redeemed, DTC's practice is to determine by lot the
amount of the interest of each Direct Participant in such issue to be redeemed.
Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or
vote with respect to shares of our Series C preferred stock, when the Series C
preferred stock is eligible to vote, unless authorized by a Direct Participant
in accordance with DTC's Procedures. Under its usual procedures, DTC mails an
Omnibus Proxy to the issuer as soon as possible after the record date. The
Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct
Participants to whose accounts shares of our Series C preferred stock are
credited on the record date (identified in a listing attached to the Omnibus
Proxy).
Redemption proceeds, distributions, and dividend payments on our Series
C preferred stock will be made to Cede & Co., or such other nominee as may be
requested by an authorized representative of DTC. DTC's practice is to credit
Direct Participants' accounts upon DTC's receipt of funds and corresponding
detail information from the issuer, on payable date in accordance with their
respective holdings shown on DTC's records. Payments by Participants to
Beneficial Owners will be governed by standing instructions and customary
practices, as is the case with securities held for the accounts of customers in
bearer form or registered in "street name," and will be the responsibility of
such Participant and not of DTC nor its nominee, the Bank of New York, or us,
subject to any statutory or regulatory requirements as may be in effect from
time to time. Payment of redemption proceeds, distributions, and dividend
payments to Cede & Co. (or such other nominee as may be requested by an
authorized representative of DTC) is our responsibility, disbursement of such
payments to Direct Participants will be the responsibility of DTC, and
disbursement of such payments to the Beneficial Owners will be the
responsibility of Direct and Indirect Participants.
DTC may discontinue providing its services as depository with respect
to our Series C preferred stock at any time by giving reasonable notice to our
Company. Under such circumstances, in the event that a successor depository is
not obtained, Series C preferred stock certificates are required to be printed
and delivered.
We may decide to discontinue use of the system of book-entry transfers
through DTC (or a successor securities depository). In that event, Series C
preferred stock certificates will be printed and delivered.
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The information in this section concerning DTC and DTC's book-entry
system has been obtained from sources that we believe to be reliable, but we
take no responsibility for the accuracy thereof.
29
FEDERAL INCOME TAX CONSEQUENCES OF OUR STATUS AS A REIT
This section summarizes the federal income tax issues that you, as a
stockholder, may consider relevant. Because this section is a summary, it does
not address all of the tax issues that may be important to you. In addition,
this section does not address the tax issues that may be important to certain
types of stockholders that are subject to special treatment under the federal
income tax laws, such as insurance companies, tax-exempt organizations (except
to the extent discussed in "Taxation of Tax-Exempt Stockholders" below),
financial institutions or broker-dealers, and non-U.S. individuals and foreign
corporations (except to the extent discussed in "Taxation of Non-U.S.
Stockholders" below).
The statements in this section are based on the current federal income
tax laws governing qualification as a REIT. We cannot assure you that new laws,
interpretations of law, or court decisions, any of which may take effect
retroactively, will not cause any statement in this section to be inaccurate.
In connection with this registration statement, Coudert Brothers LLP
has rendered an opinion that we qualified to be taxed as a REIT under the
federal income tax laws for our taxable years ended October 31, 2000 through
October 31, 2002, and our organization and current and proposed method of
operation will enable us to continue to qualify as a REIT for our taxable year
ending October 31, 2003 and in the future. You should be aware that the opinion
is based on current law and is not binding on the IRS or any court. In addition,
the opinion is based on customary assumptions and on our representations as to
factual matters, all of which are described in the opinion. Moreover, we urge
you to consult your own tax advisor regarding the specific tax consequences to
you of investing in our Series C preferred stock and of our election to be taxed
as a REIT. Specifically, you should consult your own tax advisor regarding the
federal, state, local, foreign, and other tax consequences of such investment
and election, and regarding potential changes in applicable tax laws.
TAXATION OF THE COMPANY
We elected to be taxed as a REIT under the federal income tax laws
beginning with our taxable year ended October 31, 1970. We believe that we have
operated in a manner qualifying us as a REIT since our election and intend to
continue so to operate. This section discusses the laws governing the federal
income tax treatment of a REIT and its stockholders. These laws are highly
technical and complex.
Our qualification as a REIT depends on our ability to meet, on a
continuing basis, qualification tests in the federal tax laws. Those
qualification tests involve the percentage of income that we earn from specified
sources, the percentages of our assets that fall within specified categories,
the diversity of our stock ownership, and the percentage of our earnings that we
distribute. We describe the REIT qualification tests in more detail below. For a
discussion of the tax treatment of us and our stockholders if we fail to qualify
as a REIT, see "Failure to Qualify", below.
If we qualify as a REIT, we generally will not be subject to federal
income tax on the taxable income that we distribute to our stockholders. The
benefit of that tax treatment is that it avoids the "double taxation," or
taxation at both the corporate and stockholder levels, that generally results
from owning stock in a corporation. However, we will be subject to federal tax
in the following circumstances:
o We will pay federal income tax on taxable income, including net
capital gain, that we do not distribute to stockholders during,
or within a specified time period after, the calendar year in
which the income is earned.
o We may be subject to the "alternative minimum tax" on any items
of tax preference that we do not distribute or allocate to
stockholders.
30
o We will pay income tax at the highest corporate rate on:
o net income from the sale or other disposition of property
acquired through foreclosure ("foreclosure property") that
we hold primarily for sale to customers in the ordinary
course of business, and
o other non-qualifying income from foreclosure property.
o We will pay a 100% tax on net income from sales or other
dispositions of property, other than foreclosure property, that
we hold primarily for sale to customers in the ordinary course of
business.
o If we fail to satisfy the 75% gross income test or the 95% gross
income test, as described below under "Requirements for
Qualification -- Income Tests," and nonetheless continue to
qualify as a REIT because we meet other requirements, we
generally will pay a 100% tax on:
o the gross income attributable to the greater of the amounts
by which we fail the 75% and 95% gross income tests,
multiplied by,
o a fraction intended to reflect our profitability.
o If we fail to distribute during a calendar year at least the sum
of:
o 85% of our REIT ordinary income for the year,
o 95% of our REIT capital gain net income for the year, and
o any undistributed taxable income from earlier periods, we
will pay a 4% excise tax on the excess of the required
distribution over the amount we actually distributed.
o We may elect to retain and pay income tax on our net long-term
capital gain.
o We will be subject to a 100% excise tax on transactions with a
taxable REIT subsidiary that are not conducted on an arm's-length
basis.
o If we acquire any asset from a C corporation, or a corporation
that generally is subject to full corporate-level tax, in a
merger or other transaction in which we acquire a basis in the
asset that is determined by reference either to the C
corporation's basis in the asset or to another asset, we will pay
tax at the highest regular corporate rate applicable if we
recognize gain on the sale or disposition of the asset during the
10-year period after we acquire the asset. The amount of gain on
which we will pay tax is the lesser of:
o the amount of gain that we recognize at the time of the sale
or disposition, and
o the amount of gain that we would have recognized if we had
sold the asset at the time we acquired it.
REQUIREMENTS FOR QUALIFICATION
A REIT is an entity that meets each of the following requirements:
1. It is managed by trustees or directors.
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2. Its beneficial ownership is evidenced by transferable shares, or
by transferable certificates of beneficial interest.
3. It would be taxable as a domestic corporation, but for the REIT
provisions of the federal income tax laws.
4. It is neither a financial institution nor an insurance company
subject to special provisions of the federal income tax laws.
5. At least 100 persons are beneficial owners of its shares or
ownership certificates.
6. Not more than 50% in value of its outstanding shares or ownership
certificates is owned, directly or indirectly, by five or fewer
individuals, which the federal income tax laws define to include
certain entities, during the last half of any taxable year.
7. It elects to be a REIT, or has made such election for a previous
taxable year, and satisfies all relevant filing and other
administrative requirements established by the IRS that must be
met to elect and maintain REIT status.
8. It meets certain other qualification tests, described below,
regarding the nature of its income and assets.
We must meet requirements 1 through 4 during our entire taxable year
and must meet requirement 5 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.
If we comply with all the requirements for ascertaining the ownership of our
outstanding shares in a taxable year and have no reason to know that we violated
requirement 6, we will be deemed to have satisfied requirement 6 for that
taxable year. For purposes of determining share ownership under requirement 6,
an "individual" generally includes a supplemental unemployment compensation
benefits plan, a private foundation, or a portion of a trust permanently set
aside or used exclusively for charitable purposes. An "individual," however,
generally does not include a trust that is a qualified employee pension or
profit sharing trust under the federal income tax laws, and beneficiaries of
such a trust will be treated as holding our shares in proportion to their
actuarial interests in the trust for purposes of requirement 6.
We have issued sufficient shares of common stock and Class A common
stock with sufficient diversity of ownership to satisfy requirements 5 and 6. In
addition, our charter restricts the ownership and transfer of the shares of
common stock and Class A common stock so that we should continue to satisfy
these requirements. The provisions of our charter restricting the ownership and
transfer of shares of common stock and Class A common stock are described in
this prospectus under "Description of Capital Stock -- Restrictions on Ownership
and Transfer."
For U.S. federal income tax purposes, a corporation that is a
"qualified REIT subsidiary" is not treated as a corporation separate from its
parent REIT. All assets, liabilities and items of income, deduction and credit
of a "qualified REIT subsidiary" are treated as assets, liabilities and items of
income, deduction and credit of the REIT. A "qualified REIT subsidiary" is a
corporation, all of the capital stock of which is owned by the REIT and for
which no election has been made to treat such corporation as a "Taxable REIT
Subsidiary." We have four corporate subsidiaries, 323 Railroad Corp., UB
Danbury, Inc., UB Darien, Inc. and UB Somers, Inc., and own all of their capital
stock. For federal income tax purposes, 323 Railroad Corp., UB Danbury, Inc., UB
Darien, Inc. and UB Somers, Inc. are ignored as separate entities, and all of
their assets, liabilities and items of income, deduction and credit are treated
as our assets, liabilities and items of income, deduction and credit.
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An unincorporated domestic entity, such as a partnership, that has a
single owner generally is not treated as an entity separate from its parent for
federal income tax purposes. An unincorporated domestic entity with two or more
owners is generally treated as a partnership for federal income tax purposes. In
the case of a REIT that is a partner in a partnership that has other partners,
the REIT is treated as owning its proportionate share of the assets of the
partnership and as earning its allocable share of the gross income of the
partnership for purposes of the applicable REIT qualification tests. Thus, our
proportionate share of the assets, liabilities and items of income of any
partnership or joint venture or limited liability company that is treated as a
partnership for federal income tax purposes in which we have acquired or will
acquire an interest, directly or indirectly (a "subsidiary partnership"), will
be treated as our assets and gross income for purposes of applying the various
REIT qualification requirements.
A REIT may own up to 100% of the stock of a "taxable REIT subsidiary,"
or TRS. A TRS may earn income that would not be qualifying income if earned
directly by the parent REIT. Both the subsidiary and the REIT must jointly elect
to treat the subsidiary as a TRS. A TRS will pay income tax at regular corporate
rates on any income that it earns. In addition, the TRS rules limit the
deductibility of interest paid or accrued by a TRS to its parent REIT to assure
that the TRS is subject to an appropriate level of corporate taxation. Further,
the rules impose a 100% excise tax on transactions between a TRS and its parent
REIT or the REIT's tenants that are not conducted on an arm's-length basis. We
do not currently have any TRSs, but may form one or more TRS in future taxable
years.
INCOME TESTS
We must satisfy two gross income tests annually to maintain our
qualification as a REIT. First, at least 75% of our gross income for each
taxable year must consist of defined types of income that we derive, directly or
indirectly, from investments relating to real property or mortgages on real
property or qualified temporary investment income. Qualifying income for
purposes of that 75% gross income test generally includes:
o rents from real property;
o interest on debt secured by mortgages on real property, or on
interests in real property;
o dividends or other distributions on, and gain from the sale of,
shares in other REITs; and gain from the sale of real estate
assets.
Second, in general, at least 95% of our gross income for each taxable
year must consist of income that is qualifying income for purposes of the 75%
gross income test, other types of interest and dividends, gain from the sale or
disposition of stock or securities, income from certain interest rate hedging
contracts, or any combination of these. Gross income from any origination fees
is not qualifying income for purposes of either gross income test, and gross
income from our sale of property that we hold primarily for sale to customers in
the ordinary course of business is excluded from both the numerator and the
denominator in both income tests. The following paragraphs discuss the specific
application of the gross income tests to us.
A REIT will incur a 100% tax on the net income derived from any sale or
other disposition of property, other than foreclosure property, that the REIT
holds primarily for sale to customers in the ordinary course of a trade or
business. We believe that none of our assets are held primarily for sale to
customers and that a sale of any of our assets would not be in the ordinary
course of our business. Whether a REIT holds an asset "primarily for sale to
customers in the ordinary course of a trade or business" depends, however, on
the facts and circumstances in effect from time to time, including those related
to a particular asset. Nevertheless, we will attempt to comply with the terms of
safe-harbor provisions in the federal income tax laws prescribing when an asset
sale will not be characterized as a
33
prohibited transaction. We cannot assure you, however, that we can comply with
the safe-harbor provisions or that we will avoid owning property that may be
characterized as property that we hold "primarily for sale to customers in the
ordinary course of a trade or business."
We will be subject to tax at the maximum corporate rate on any income
from foreclosure property, other than income that otherwise would be qualifying
income for purposes of the 75% gross income test, less expenses directly
connected with the production of that income. However, gross income from
foreclosure property will qualify under the 75% and 95% gross income tests.
"Foreclosure property" is any real property, including interests in real
property, and any personal property incident to such real property:
o that is acquired by a REIT as the result of the REIT having bid
on such property at foreclosure, or having otherwise reduced such
property to ownership or possession by agreement or process of
law, after there was a default or default was imminent on a lease
of such property or on indebtedness that such property secured;
o for which the related loan was acquired by the REIT at a time
when the default was not imminent or anticipated;
o and for which the REIT makes a proper election to treat the
property as foreclosure property.
We have no foreclosure property as of the date of this prospectus.
However, a REIT will not be considered to have foreclosed on a property
where the REIT takes control of the property as a mortgagee-in-possession and
cannot receive any profit or sustain any loss except as a creditor of the
mortgagor. Property generally ceases to be foreclosure property at the end of
the third taxable year following the taxable year in which the REIT acquired the
property, or longer if an extension is granted by the Secretary of the Treasury.
This grace period terminates and foreclosure property ceases to be foreclosure
property on the first day:
o on which a lease is entered into for the property that, by its
terms, will give rise to income that does not qualify for
purposes of the 75% gross income test, or any amount is received
or accrued, directly or indirectly, pursuant to a lease entered
into on or after such day that will give rise to income that does
not qualify for purposes of the 75% gross income test;
o on which any construction takes place on the property, other than
completion of a building or any other improvement, where more
than 10% of the construction was completed before default became
imminent; or
o which is more than 90 days after the day on which the REIT
acquired the property and the property is used in a trade or
business which is conducted by the REIT, other than through an
independent contractor from whom the REIT itself does not derive
or receive any income.
Rent that we receive from real property that we own and lease to
tenants will qualify as "rents from real property," which is qualifying income
for purposes of the 75% and 95% gross income tests, only if each of the
following conditions is met:
o The rent must not be based, in whole or in part, on the income or
profits of any person, but may be based on a fixed percentage or
percentages of receipts or sales.
o Neither we nor a direct or indirect owner of 10% or more of our
shares may own, actually or constructively, 10% or more of a
tenant from whom we receive rent (other than a TRS). Rent
34
we receive from a TRS will qualify as "rents from real property"
if at least 90% of the leased space of the property is rented to
persons other than TRSs and 10%-owned tenants and the amount of
rent paid by the TRS is substantially comparable to the rent paid
by the other tenants of the property for comparable space.
o None of the rent received under a lease of real property will
qualify as "rents from real property" unless the rent
attributable to the personal property leased in connection with
such lease is no more than 15% of the total rent received under
the lease. The allocation of rent between real and personal
property is based on the relative fair market values of the real
and personal property.
o We generally must not operate or manage our real property or
furnish or render services to our tenants, other than through an
independent contractor who is adequately compensated and from
whom we do not derive revenue. However, we need not provide
services through an independent contractor, but instead may
provide services directly, if the services are "usually or
customarily rendered" in connection with the rental of space for
occupancy only and are not considered to be provided for the
tenants' convenience. In addition, we may provide a minimal
amount of "noncustomary" services to the tenants of a property,
other than through an independent contractor, as long as our
income from the services does not exceed 1% of our income from
the related property. Further, we may own up to 100% of the stock
of a TRS. A TRS generally can provide customary and noncustomary
services to our tenants without tainting our rental income.
We believe that the rents we receive meet all of these conditions.
If we fail to satisfy one or both of the gross income tests for any
taxable year, we nevertheless may qualify as a REIT for that year if we qualify
for relief under certain provisions of the federal income tax laws. Those relief
provisions generally will be available if:
o our failure to meet such tests is due to reasonable cause and not
due to willful neglect;
o we attach a schedule of the sources of our income to our tax
return; and
o any incorrect information on the schedule was not due to fraud
with intent to evade tax.
We cannot predict, however, whether in all circumstances we would
qualify for the relief provisions. In addition, as discussed above in
"Taxation," even if the relief provisions apply, we generally would incur a 100%
tax on the gross income attributable to the greater of the amounts by which we
fail the 75% and 95% gross income tests, multiplied by a fraction intended to
reflect our profitability.
ASSET TESTS
To maintain our qualification as a REIT, we also must satisfy two asset
tests at the end of each quarter of each taxable year. First, at least 75% of
the value of our total assets must consist of:
o cash or cash items, including certain receivables;
o government securities;
o interests in real property, including leaseholds and options to
acquire real property and leaseholds;
35
o interests in mortgages on real property;
o stock in other REITs; and
o investments in stock or debt instruments during the one-year
period following our receipt of new capital that we raise through
equity offerings or offerings of debt with at least a five-year
term.
Under the second asset test, except for securities in the 75% asset
class, securities in a TRS or qualified REIT subsidiary, and certain partnership
interests and certain debt obligations:
o not more than 5% of the value of our total assets may be
represented by securities of any one issuer;
o we may not own securities that possess more than 10% of the total
voting power of the outstanding securities of any one issuer; and
o we may not own securities that have a value of more than 10% of
the total value of the outstanding securities of any one issuer
(the "10% value test").
In addition, not more than 20% of the value of our total assets may be
represented by securities of one or more TRSs.
We believe that our existing assets are qualifying assets for purposes
of the 75% asset test. We also believe that any additional real property that we
acquire, loans that we extend and temporary investments that we make generally
will be qualifying assets for purposes of the 75% asset test, except to the
extent that the principal balance of any loan exceeds the value of the
associated real property or to the extent the asset is a loan that is not deemed
to be an interest in real property. We will monitor the status of our acquired
assets for purposes of the various asset tests and will manage our portfolio in
order to comply at all times with such tests. If we fail to satisfy the asset
tests at the end of a calendar quarter, we will not lose our REIT status if:
o we satisfied the asset tests at the end of the preceding calendar
quarter; and
o the discrepancy between the value of our assets and the asset
test requirements arose from changes in the market values of our
assets and was not wholly or partly caused by the acquisition of
one or more non-qualifying assets.
If we did not satisfy the condition described in the first item, above,
we still could avoid disqualification by eliminating any discrepancy within 30
days after the close of the calendar quarter in which it arose.
DISTRIBUTION REQUIREMENTS
Each taxable year, we must distribute dividends, other than capital
gain dividends and deemed distributions of retained capital gain, to our
stockholders in an aggregate amount at least equal to:
o the sum of
o 90% of our "REIT taxable income," computed without regard to
the dividends paid deduction and our net capital gain or
loss, and
36
o 90% of our after-tax income, if any, from foreclosure
property, minus
o the sum of certain items of non-cash income.
We must pay such distributions in the taxable year to which they
relate, or in the following taxable year if we declare the distribution before
we timely file our federal income tax return for the year and pay the
distribution on or before the first regular dividend payment date after such
declaration.
We will pay federal income tax on taxable income, including net capital
gain, that we do not distribute to stockholders. Furthermore, if we fail to
distribute during a calendar year, or by the end of January following the
calendar year in the case of distributions with declaration and record dates
falling in the last three-months of the calendar year, at least the sum of:
o 85% of our REIT ordinary income for such year,
o 95% of our REIT capital gain income for such year, and
o any undistributed taxable income from prior periods,
we will incur a 4% nondeductible excise tax on the excess of such required
distribution over the amounts we actually distribute. We may elect to retain and
pay income tax on the net long-term capital gain we receive in a taxable year.
See "Taxation of Taxable U.S. Stockholders" below. If we so elect, we will be
treated as having distributed any such retained amount for purposes of the 4%
excise tax described above. We have made, and we intend to continue to make,
timely distributions sufficient to satisfy the annual distribution requirements.
It is possible that, from time to time, we may experience timing
differences between:
o the actual receipt of income and actual payment of deductible
expenses, and
o the inclusion of that income and deduction of such expenses in
arriving at our REIT taxable income.
Under certain circumstances, we may be able to correct a failure to
meet the distribution requirement for a year by paying "deficiency dividends" to
our stockholders in a later year. We may include such deficiency dividends in
our deduction for dividends paid for the earlier year. Although we may be able
to avoid income tax on amounts distributed as deficiency dividends, we will be
required to pay interest to the IRS based upon the amount of any deduction we
take for deficiency dividends.
RECORDKEEPING REQUIREMENTS
We must maintain certain records in order to qualify as a REIT. In
addition, to avoid a monetary penalty, we must request on an annual basis
information from our stockholders designed to disclose the actual ownership of
our outstanding shares. We have complied, and we intend to continue to comply,
with these requirements.
FAILURE TO QUALIFY
If we fail to qualify as a REIT in any taxable year, and no relief
provision applies, we would be subject to federal income tax and any applicable
alternative minimum tax on our taxable income at regular corporate rates. In
calculating our taxable income in a year in which we fail to qualify as a REIT,
we would not be able to deduct amounts paid out to stockholders. In fact, we
would not be required to
37
distribute any amounts to stockholders in that year. In such event, to the
extent of our current and accumulated earnings and profits, all distributions to
stockholders would be taxable as ordinary income. Subject to certain limitations
of the federal income tax laws, corporate stockholders might be eligible for the
dividends received deduction. Unless we qualified for relief under specific
statutory provisions, we also would be disqualified from taxation as a REIT for
the four taxable years following the year during which we ceased to qualify as a
REIT. We cannot predict whether in all circumstances we would qualify for such
statutory relief.
TAXATION OF TAXABLE U.S. STOCKHOLDERS
As long as we qualify as a REIT, a taxable "U.S. stockholder" must take
into account as ordinary income distributions made out of our current or
accumulated earnings and profits that we do not designate as capital gain
dividends or retained long-term capital gain. A U.S. stockholder will not
qualify for the dividends received deduction generally available to
corporations. The term "U.S. stockholder" means a holder of our stock that, for
United States federal income tax purposes, is:
o a citizen or resident of the United States,
o an entity created or organized under the laws of the United
States or of a political subdivision of the United States,
o an estate whose income is includible in gross income for United
States federal income tax purposes regardless of its source, or
o any trust with respect to which:
o a United States court is able to exercise primary
supervision over its administration, and
o one or more United States persons have the authority to
control all of its substantial decisions.
A U.S. stockholder generally will recognize distributions that we
designate as capital gain dividends as long-term capital gain without regard to
the period for which the U.S. stockholder has held its stock. A corporate U.S.
stockholder, however, may be required to treat up to 20% of certain capital gain
dividends as ordinary income.
We may elect to retain and pay income tax on the net long-term capital
gain that we receive in a taxable year. In that case, a U.S. stockholder would
be taxed on its proportionate share of our undistributed long-term capital gain.
The U.S. stockholder would receive a credit or refund for its proportionate
share of the tax we paid. The U.S. stockholder would increase the basis in its
shares of our stock by the amount of its proportionate share of our
undistributed long-term capital gain, minus its share of the tax we paid. If we
make such an election, we may, if possible without jeopardizing our status as a
REIT, make such an election only with respect to capital gains allocable to our
common stock and Class A common stock.
A U.S. stockholder will not incur tax on a distribution in excess of
our current and accumulated earnings and profits if the distribution does not
exceed the adjusted basis of the U.S. stockholder's shares of our stock.
Instead, the distribution will reduce the adjusted basis of such shares of our
stock. A U.S. stockholder will recognize a distribution in excess of both our
current and accumulated earnings and profits and the U.S. stockholder's adjusted
basis in his or her shares of our stock as long-term capital gain, or short-term
capital gain if the shares of our stock have been held for one year or less,
assuming the shares of our stock are a capital asset in the hands of the U.S.
stockholder. For purposes of determining
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whether a distribution is made out of our current or accumulated earnings and
profits, our earnings and profits will be allocated first to dividends on our
preferred stock and then to dividends on our common equity.
Stockholders may not include in their individual income tax returns any
of our net operating losses or capital losses. Instead, these losses are
generally carried over by us for potential offset against our future income.
Taxable distributions from us and gain from the disposition of the shares of our
stock will not be treated as passive activity income and, therefore,
stockholders generally will not be able to apply any "passive activity losses,"
such as losses from certain types of limited partnerships in which the
stockholder is a limited partner, against such income. In addition, taxable
distributions from us and gain from the disposition of shares of our stock
generally will be treated as investment income for purposes of the investment
interest limitations. We will notify stockholders after the close of our taxable
year as to the portions of the distributions attributable to that year that
constitute ordinary income, return of capital and capital gain.
TAXATION OF U.S. STOCKHOLDERS ON THE DISPOSITION OF STOCK
In general, a U.S. stockholder who is not a dealer in securities must
treat any gain or loss realized upon a taxable disposition of his or her shares
of our stock as long-term capital gain or loss if the U.S. stockholder has held
the shares of our stock for more than one year. However, a U.S. stockholder must
treat any loss upon a sale or exchange of shares of our stock held by such
stockholder for six-months or less as a long-term capital loss to the extent of
capital gain dividends and other distributions from us that such U.S.
stockholder treats as long-term capital gain. All or a portion of any loss that
a U.S. stockholder realizes upon a taxable disposition of the shares of our
stock may be disallowed if the U.S. stockholder purchases other shares of
substantially identical stock within 30 days before or after the disposition.
CAPITAL GAINS AND LOSSES
The tax rate differential between capital gain and ordinary income for
non-corporate taxpayers may be significant. A taxpayer generally must hold a
capital asset for more than one year for gain or loss derived from its sale or
exchange to be treated as long-term capital gain or loss. The highest marginal
individual income tax rate is currently 35%. The maximum tax rate on long-term
capital gain applicable to individual taxpayers is 15% for sales and exchanges
of assets held for more than one year and occurring after May 6, 2003 through
December 31, 2008. A 20% tax rate applies to a sale or exchange of assets held
for more than one year occurring on or before May 6, 2003. The maximum tax rate
on long-term capital gain from the sale or exchange of "section 1250 property,"
or depreciable real property, is 25% to the extent that such gain would have
been treated as ordinary income if the property were "section 1245 property."
With respect to distributions that we designate as capital gain dividends and
any retained capital gain that we are deemed to distribute, we generally may
designate whether such a distribution is taxable to our non-corporate
stockholders at a 15%, 20%, or 25% rate. In addition, the characterization of
income as capital gain or ordinary income may affect the deductibility of
capital losses. A non-corporate taxpayer may deduct capital losses not offset by
capital gains against its ordinary income only up to a maximum annual amount of
$3,000. A non-corporate taxpayer may carry forward unused capital losses
indefinitely. A corporate taxpayer must pay tax on its net capital gain at
ordinary corporate rates. A corporate taxpayer can deduct capital losses only to
the extent of capital gains, with unused losses being carried back three years
and forward five years.
INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING
We will report to our stockholders and to the IRS the amount of
distributions we pay during each calendar year, and the amount of tax we
withhold, if any. Under the backup withholding rules, a
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stockholder may be subject to backup withholding at a rate of 28% with respect
to distributions unless the holder:
o is a corporation or comes within certain other exempt categories
and, when required, demonstrates this fact;
o or provides a taxpayer identification number, certifies as to no
loss of exemption from backup withholding, and otherwise complies
with the applicable requirements of the backup withholding rules.
A stockholder who does not provide us with its correct taxpayer
identification number also may be subject to penalties imposed by the IRS. Any
amount paid as backup withholding will be creditable against the stockholder's
income tax liability. 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 to us. For a discussion of the backup withholding rules as
applied to non-U.S. stockholders, see "Taxation of Non-U.S. Stockholders."
CASH REDEMPTION OF SERIES C PREFERRED STOCK
A cash redemption of shares of Series C preferred stock will be treated
under the Internal Revenue Code as a distribution taxable as a dividend (to the
extent of our current and accumulated earnings and profits) at ordinary income
rates unless the redemption satisfies one of the tests described in the
following sentence in which case the redemption is instead treated as a sale or
exchange of the redeemed shares. The cash redemption will be treated as a sale
or exchange if it:
o is "substantially disproportionate" with respect to the holder,
o results in a "complete termination" of the holder's stock
interest in the Company, or
o is "not essentially equivalent to a dividend" with respect to the
holder.
In determining whether any of these tests have been met, shares of capital stock
(including our common stock and Class A common stock and any other equity
interests) considered to be owned by the holder by reason of certain
constructive ownership rules set forth in the Internal Revenue Code, as well as
shares of capital stock actually owned by the holder, must generally be taken
into account. Because the determination as to whether any of these alternative
tests will be satisfied with respect to any particular holder of our Series C
preferred stock depends upon the facts and circumstances at the time that the
determination must be made, you should consult your tax advisor to determine
such tax treatment.
If a cash redemption of shares of Series C preferred stock is not
treated as a distribution taxable as a dividend to a particular holder, it will
be treated, as to that holder, as a taxable sale or exchange. As a result, the
holder will recognize gain or loss for federal income tax purposes in an amount
equal to the difference between (a) the amount of cash and the fair market value
of any property received (less any portion attributable to accumulated and
declared but unpaid dividends, which will be taxable as a dividend to the extent
of our current and accumulated earnings and profits), and (b) the holder's
adjusted basis in the shares of Series C preferred stock for tax purposes. Such
gain or loss will be capital gain or loss if the shares of Series C preferred
stock have been held as a capital asset and will be long-term gain or loss if
such shares have been held for more than one year.
If a cash redemption of shares of Series C preferred stock is treated
as a distribution taxable as a dividend, the amount of the distribution will be
measured by the amount of cash and the fair market value of any property
received by the holder. The holder's adjusted basis in the redeemed shares of
Series C
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preferred stock for tax purposes will be transferred to the holder's remaining
shares of our capital stock, if any. If the holder owns no other shares of our
capital stock, such basis, may under certain circumstances, be transferred to a
related person or it may be lost entirely. Proposed regulations issued in
October 2002, are intended to prevent a loss of such basis. It is not certain
whether and in what form these regulations will become effective.
TAXATION OF TAX-EXEMPT STOCKHOLDERS
Tax-exempt entities, including qualified employee pension and profit
sharing trusts and individual retirement accounts, generally are exempt from
federal income taxation. However, they are subject to taxation on their
unrelated business taxable income. While many investments in real estate
generate unrelated business taxable income, the IRS has issued a ruling that
dividend distributions from a REIT to an exempt employee pension trust do not
constitute unrelated business taxable income so long as the exempt employee
pension trust does not otherwise use the shares of the REIT in an unrelated
trade or business of the pension trust. Based on that ruling, amounts that we
distribute to tax-exempt stockholders generally should not constitute unrelated
business taxable income. However, if a tax-exempt stockholder were to finance
its acquisition of shares of our stock with debt, a portion of the income that
it receives from us would constitute unrelated business taxable income pursuant
to the "debt-financed property" rules. Furthermore, social clubs, voluntary
employee benefit associations, supplemental unemployment benefit trusts and
qualified group legal services plans that are exempt from taxation under special
provisions of the federal income tax laws are subject to different unrelated
business taxable income rules, which generally will require them to characterize
distributions that they receive from us as unrelated business taxable income.
Finally, in certain circumstances, a qualified employee pension or profit
sharing trust that owns more than 10% of our shares must treat a percentage of
the dividends that it receives as unrelated business taxable income. Such
percentage is equal to the gross income we derive from an unrelated trade or
business, determined as if we were a pension trust, divided by our total gross
income for the year in which we pay the dividends. That rule applies to a
pension trust holding more than 10% of our shares only if:
o the percentage of our dividends that the tax-exempt trust must
treat as unrelated business taxable income is at least 5%;
o we qualify as a REIT by reason of the modification of the rule
requiring that no more than 50% of our shares be owned by five or
fewer individuals that allows the beneficiaries of a pension
trust to be treated as holding our shares in proportion to their
actuarial interests in such pension trust; and
o either
o one pension trust owns more than 25% of the value of our
shares; or
o a group of pension trusts individually holding more than 10%
of the value of our shares collectively owns more than 50%
of the value of our shares.
TAXATION OF NON-U.S. STOCKHOLDERS
The rules governing U.S. federal income taxation of nonresident alien
individuals, foreign corporations, foreign partnerships, and other foreign
stockholders are complex. This section is only a summary of such rules. We urge
non-U.S. stockholders to consult their own tax advisors to determine the impact
of federal, state, and local income tax laws on ownership of the shares of our
stock, including any reporting requirements.
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A non-U.S. stockholder that receives a distribution that is not
attributable to gain from our sale or exchange of U.S. real property interests,
as defined below, and that we do not designate as a capital gain dividend or
retained capital gain, will recognize ordinary income to the extent that we pay
the distribution out of our current or accumulated earnings and profits. A
withholding tax equal to 30% of the gross amount of the distribution ordinarily
will apply unless an applicable tax treaty reduces or eliminates the tax.
However, if a distribution is treated as effectively connected with the non-U.S.
stockholder's conduct of a U.S. trade or business, the non-U.S. stockholder
generally will be subject to federal income tax on the distribution at graduated
rates, in the same manner as U.S. stockholders are taxed on distributions and
also may be subject to the 30% branch profits tax in the case of a non-U.S.
stockholder that is a non-U.S. corporation. We plan to withhold U.S. income tax
at the rate of 30% on the gross amount of any distribution paid to a non-U.S.
stockholder unless either:
o a lower treaty rate applies and the non-U.S. stockholder files
the required form evidencing eligibility for that reduced rate
with us, or
o the non-U.S. stockholder files the required form with us claiming
that the distribution is effectively connected income.
A non-U.S. stockholder will not incur tax on a distribution in excess
of our current and accumulated earnings and profits if the distribution does not
exceed the adjusted basis of its shares of Series C preferred stock. Instead,
the distribution will reduce the adjusted basis of those shares of Series C
preferred stock. A non-U.S. stockholder will be subject to tax on a distribution
that exceeds both our current and accumulated earnings and profits and the
adjusted basis of its shares of Series C preferred stock, if the non-U.S.
stockholder otherwise would be subject to tax on gain from the sale or
disposition of its shares of Series C preferred stock, as described below.
Because we generally cannot determine at the time we make a distribution whether
or not the distribution will exceed our current and accumulated earnings and
profits, we normally will withhold tax on the entire amount of any distribution
at the same rate as we would withhold on a dividend. However, a non-U.S.
stockholder may obtain a refund of amounts that we withhold if we later
determine that a distribution in fact exceeded our current and accumulated
earnings and profits.
We are generally required to withhold 10% of any distribution that
exceeds our current and accumulated earnings and profits. Consequently, although
we intend to withhold at a rate of 30% on the entire amount of any distribution,
to the extent that we do not do so, we generally will withhold at a rate of 10%
on any portion of a distribution not subject to withholding at a rate of 30%.
For any year in which we qualify as a REIT, a non-U.S. stockholder will
incur tax on distributions that are attributable to gain from our sale or
exchange of "U.S. real property interests" under special provisions of the
federal income tax laws known as "FIRPTA." The term "U.S. real property
interests" includes interests in real property and shares in corporations at
least 50% of whose assets consist of interests in real property. Under those
rules, a non-U.S. stockholder is taxed on distributions attributable to gain
from sales of U.S. real property interests as if the gain were effectively
connected with a U.S. business of the non-U.S. stockholder. A non-U.S.
stockholder thus would be taxed on this distribution at the normal capital gain
rates applicable to U.S. stockholders, subject to applicable alternative minimum
tax and a special alternative minimum tax in the case of a nonresident alien
individual. A non-U.S. corporate stockholder not entitled to treaty relief or
exemption also may be subject to the 30% branch profits tax on such a
distribution. We must withhold 35% of any distribution that we could designate
as a capital gain dividend. A non-U.S. stockholder may receive a credit against
our tax liability for the amount we withhold.
A non-U.S. stockholder generally will not incur tax under FIRPTA on
gain from the sale of our stock as long as at all times non-U.S. persons hold,
directly or indirectly, less than 50% in value of such
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stock. We cannot assure you that that test will be met. In addition, a non-U.S.
stockholder that owned, actually or constructively, 5% or less of the shares of
Series C preferred stock at all times during a specified testing period will not
incur tax on such gain under FIRPTA if the shares of Series C preferred stock
are "regularly traded" on an established securities market. Our Series C
preferred stock currently is not regularly traded on an established securities
market, although it is listed on the NYSE under the symbol "UBPPrC". In the
event that our Series C preferred stock becomes regularly traded on an
established securities market, a non-U.S. stockholder will not thereafter incur
tax under FIRPTA on gain from the sale of our Series C preferred stock unless it
owns more than 5% of the Series C preferred stock. If the gain on the sale of
the shares of Series C preferred stock is taxed under FIRPTA, a non-U.S.
stockholder would be taxed on that gain in the same manner as U.S. stockholders
subject to applicable alternative minimum tax, a special alternative minimum tax
in the case of nonresident alien individuals, and the possible application of
the 30% branch profits tax in the case of non-U.S. corporations.
A non-U.S. stockholder generally will incur tax on gain not subject to
FIRPTA if:
o the gain is effectively connected with the non-U.S. stockholder's
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, or
o the non-U.S. stockholder is a nonresident alien individual who
was present in the U.S. for 183 days or more during the taxable
year and has a "tax home" in the United States, in which case the
non-U.S. stockholder will incur a 30% tax on his or her capital
gains.
LEGISLATIVE OR OTHER ACTIONS AFFECTING REITS
On May 28, 2003, President Bush signed into law the Jobs and Growth Tax
Relief Reconciliation Act of 2003. This new tax legislation reduces the maximum
individual tax rate for long-term capital gains generally from 20% to 15% (for
sales occurring after May 6, 2003 through December 31, 2008) and for dividends
generally from 38.6% to 15% (for tax years from 2003 through 2008). Without
future congressional action, the maximum tax rate on long-term capital gains
will return to 20% in 2009, and the maximum rate on dividends will move to 35%
in 2009 and 39.6% in 2011. Because we are not generally subject to federal
income tax on the portion of our REIT taxable income or capital gains
distributed to our shareholders, our dividends are generally not eligible for
the new 15% tax rate on dividends. As a result, our ordinary REIT dividends will
continue to be taxed at the higher tax rates applicable to ordinary income.
However, the 15% tax rate for long-term capital gains and dividends generally
apply to:
o your long-term capital gains, if any, recognized on the
disposition of our shares;
o our distributions designated as long-term capital gain dividends
(except to the extent attributable to real estate depreciation,
in which case such distributions continue to be subject to a 25%
tax rate);
o our dividends attributable to dividends received by us from
non-REIT corporations, such as taxable REIT subsidiaries; and
o our dividends to the extent attributable to income upon which we
have paid corporate income tax (e.g., to the extent that we
distribute less than 100% of our taxable income).
STATE AND LOCAL TAXES
We and/or our stockholders may be subject to taxation by various states
and localities, including those in which we or a stockholder transacts business,
owns property or resides. The state and local tax
43
treatment may differ from the federal income tax treatment described above.
Consequently, prospective investors should consult their own tax advisors
regarding the effect of state and local tax laws on an investment in the shares
of Series C preferred stock.
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DESCRIPTION OF OUR CAPITAL STOCK
GENERAL
Under our charter we may issue up to 30,000,000 shares of common stock,
40,000,000 shares of Class A common stock, 20,000,000 shares of preferred stock
and 10,000,000 shares of excess stock. At September 10, 2003, we had outstanding
6,771,442 shares of common stock, 18,541,447 shares of Class A common stock,
150,000 shares of Series B Senior Cumulative preferred stock, 400,000 shares of
Series C preferred stock and no shares of excess stock. We have reserved 2,406
shares of common stock and no shares of Class A common stock for outstanding
grants and future issuance under our employee stock option plan, 124,956 shares
of common stock and 148,040 shares of Class A common stock for issuance under
our dividend reinvestment and share purchase plan, no shares of common stock,
107,500 shares of Class A common stock and 190,500 shares which, at our
Compensation Committee's discretion, may be awarded in any combination of shares
of common stock or Class A common stock for issuance under our restricted stock
plan and 54,553 shares of common stock and 309,650 shares of Class A common
stock upon redemption of operating partnership interests.
DESCRIPTION OF OUR COMMON STOCK AND CLASS A COMMON STOCK
Voting
Under our charter, holders of our common stock are entitled to one vote
per share on all matters submitted to the common stockholders for vote at all
meetings of stockholders. Holders of our Class A common stock are entitled to
1/20th of one vote per share on all matters submitted to the common stockholders
for vote at all meetings of stockholders. Except as otherwise required by law or
as to certain matters as to which separate class voting rights may be granted in
the future to holders of one or more other classes or series of our capital
stock, holders of common stock and Class A common stock vote together as a
single class, and not as separate classes, on all matters voted upon by our
stockholders. The holders of our Class A common stock, as a group, control 12.0%
of the voting power of our common equity securities and the holders of our
common stock, as a group, control 88.0% of the voting power of our common equity
securities. Therefore, holders of our common stock have sufficient voting power
to approve or disapprove all matters voted upon by our stockholders.
Dividends and Distributions
Subject to the requirements with respect to preferential dividends on
any of our preferred stock, dividends and distributions are declared and paid to
the holders of common stock and Class A common stock in cash, property or other
securities of the Company (including shares of any class or series whether or
not shares of such class or series are already outstanding) out of funds legally
available therefor. Each share of common stock and each share of Class A common
stock has identical rights with respect to dividends and distributions, subject
to the following:
o with respect to regular quarterly dividends, each share of Class
A common stock entitles the holder thereof to receive not less
than 110% of amounts paid on each share of common stock, the
precise amount of such dividends on the Class A common stock
being subject to the discretion of our Board of Directors;
o a stock dividend on the common stock may be paid in shares of
common stock or shares of Class A common stock; and
o a stock dividend on shares of Class A common stock may be paid
only in shares of Class A common stock.
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If a stock dividend on the common stock is paid in shares of common
stock, we are required to pay a stock dividend on the Class A common stock in a
proportionate number of shares of Class A common stock.
Mergers and Consolidations
In the event we merge, consolidate or combine with another entity
(whether or not we are the surviving entity), holders of shares of Class A
common stock will be entitled to receive the same per share consideration as the
per share consideration, if any, received by holders of common stock in that
transaction.
Liquidation Rights
Holders of common stock and Class A common stock have the same rights
with respect to distributions in connection with a partial or complete
liquidation of our Company.
Restrictions on Ownership and Transfer
We have the right to refuse transfers of capital stock that could
jeopardize our qualification as a REIT and to redeem any shares of capital stock
in excess of 7.5% of the value of our outstanding capital stock beneficially
owned by any person (other than an exempted person).
Transferability
The common stock and Class A common stock are freely transferable, and
except for the ownership limit and federal and state securities laws
restrictions on our directors, officers and other affiliates and on persons
holding "restricted" stock, our stockholders are not restricted in their ability
to sell or transfer shares of the common stock or Class A common stock.
Sinking Fund, Preemptive, Subscription and Redemption Rights
Neither the common stock nor the Class A common stock carries any
sinking fund, preemptive, subscription or redemption rights enabling a holder to
subscribe for or receive shares of any class of our stock or any other
securities convertible into shares of any class of our stock.
Transfer Agent and Registrar
The transfer agent and registrar for the common stock and Class A
common stock is The Bank of New York.
DESCRIPTION OF PREFERRED STOCK
General
Under our charter, our Board of Directors is authorized, without
further stockholder action, to provide for the issuance of up to 20,000,000
shares of preferred stock, in such series, with such preferences, conversion or
other rights, voting powers, restrictions and limitations as to dividends,
qualifications and terms and conditions of redemption, as may be fixed by our
Board of Directors.
We currently have 150,000 shares of Series B preferred stock
outstanding. Without the affirmative vote or consent of the holders of at least
two-thirds of the outstanding Series B preferred stock, we may not issue more
than 100 additional shares of Series B preferred stock or any equity
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securities which rank senior to the Series B preferred stock with respect to
dividend rights or rights upon our liquidation, dissolution or winding up. For
further discussion of the rights of the Series B preferred stock, see
"Description of Series B Senior Cumulative Preferred Stock" below.
We also have 400,000 shares of Series C preferred stock outstanding.
For further discussion of the rights of the Series C preferred stock, see
"Description of Series C Cumulative Preferred Stock" above.
DESCRIPTION OF SERIES B SENIOR CUMULATIVE PREFERRED STOCK
General
In January 1998, we issued 350,000 shares of the Series B preferred
stock to three investors in a private placement for aggregate proceeds of
$35,000,000. On November 30, 2001, we repurchased 200,000 of these shares for
$16,050,000. 150,000 shares of our Series B preferred stock remain outstanding.
Maturity
The Series B preferred stock has no stated maturity and is not subject
to any sinking fund or mandatory redemption.
Rank
With respect to the payment of dividends and amounts upon liquidation,
the Series B preferred stock ranks senior to the common stock and Class A common
stock and to all equity securities we issue ranking junior to the Series B
preferred stock with respect to dividend rights or rights upon our liquidation,
dissolution or winding up and will rank equally with our Series C preferred
stock and all other equity securities we issue which specifically provide that
the equity securities rank equally with the Series B preferred stock with
respect to dividend rights or rights upon our liquidation, dissolution or
winding up. Without the affirmative vote or consent of the holders of at least
two-thirds of the outstanding Series B preferred stock, we may not issue more
than 100 additional shares of Series B preferred stock or any equity securities
which rank senior to the Series B preferred stock with respect to dividend
rights or rights upon our liquidation, dissolution or winding up.
Dividends
Dividends on the Series B preferred stock are cumulative from
January 8, 1998, the date of original issue, and are payable quarterly on
January 31, April 30, July 31 and October 31 of each year, to stockholders of
record on the applicable record date determined each quarter by our Board of
Directors for the quarterly periods ended January 31, April 30, July 31 and
October 31, as applicable, at the rate of 8.99% per annum of the Series B
liquidation preference (as defined below) (the "initial Series B dividend
yield"). If we violate the Series B fixed charge coverage ratio covenant (as
defined below) or the Series B capitalization ratio covenant (as defined below),
and fail to cure this violation on or before the second succeeding dividend
payment date, the initial Series B dividend yield will be increased to 2.0% over
the initial Series B dividend yield (the "first Series B default dividend
yield") as of that second succeeding dividend payment date. If we remain in
violation of either the Series B fixed charge ratio covenant or the Series B
capitalization ratio covenant on four consecutive dividend payment dates after
the initial violation of either covenant, the initial Series B dividend yield
will increase to the greater of (a) the Series B discount rate (as defined
below) plus 7.0% or (b) 15% (the "second Series B default dividend yield") as of
that fourth consecutive dividend payment date. The first Series B default
dividend yield and the second Series B default dividend yield will revert back
to the initial Series B dividend yield if we
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remain in compliance with the Series B fixed charge coverage ratio covenant and
the Series B capitalization ratio covenant on two consecutive dividend payment
dates after the first Series B default dividend yield or second Series B default
dividend yield takes effect.
Liquidation Preference
Upon any voluntary or involuntary liquidation, dissolution or winding
up of our affairs, the holders of shares of Series B preferred stock are
entitled to be paid out of our assets legally available for distribution to our
stockholders a liquidation preference of $100 per share (the "Series B
liquidation preference"), plus an amount equal to any accrued and unpaid
dividends to the date of payment.
Redemption
Except in certain circumstances relating to preservation of our status
as a REIT under the Internal Revenue Code, and to a change of control involving
the Company, the Series B preferred stock is not redeemable before January 8,
2008 (the "Series B tenth anniversary date"). On and after the Series B tenth
anniversary date, the Series B preferred stock is redeemable for cash at our
option, in whole or in part, at a redemption price of $100 per share, plus
dividends accrued and unpaid at the redemption date (whether or not declared),
without interest.
Change of Control
In the event we experience a change of control, each holder of shares
of Series B preferred stock has the right, at the holder's option, to require us
to repurchase all or any part of the holder's Series B preferred stock at a
repurchase price of $100 per share, plus all accrued and unpaid dividends on the
shares, if any, up to the date fixed for repurchase, without interest, subject
to the Maryland General Corporation Law. In the event we experience a change of
control, we have the right, at our option, to redeem all or any part of the
shares of each holder of Series B preferred stock (a) before the Series B tenth
anniversary date, at the Series B make-whole price (as defined below) and (b) on
or after the Series B tenth anniversary date, at the redemption price of $100
per share, plus all accrued and unpaid dividends on the shares, if any, without
interest, pursuant to the procedures applicable to other redemptions of shares
of Series B preferred stock.
Voting Rights
Holders of Series B preferred stock generally have no voting rights.
However, whenever dividends on any shares of Series B preferred stock are in
arrears for three or more consecutive or non-consecutive quarterly periods
within any five-year period the holders of the shares (subject to certain
restrictions in the case of entities regulated by the Bank Holding Company Act
of 1956) are entitled to elect, voting separately as a class with all other
shares of Series B parity preferred (as defined below) upon which like voting
rights have been conferred and are exercisable, two additional directors of our
Board of Directors until all dividends accumulated on the shares of Series B
preferred stock have been fully paid or declared and a sum sufficient for the
payment of the dividends is set aside for payment. Without the affirmative vote
or consent of at least two-thirds of the outstanding Series B preferred stock,
we may not:
o effect any voluntary termination of our status as a REIT,
o effect certain changes to the terms of the Series B preferred
stock that would be materially adverse to the rights of the
holders of the Series B preferred stock (including the issuance
of more than 100 additional shares of Series B preferred stock)
or
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o enter into or undertake any Series B senior obligations (as
defined below) at any time during which we are in violation of
the Series B fixed charge ratio covenant or the Series B
capitalization ratio covenant.
Without the affirmative vote or consent of all of the outstanding
Series B preferred stock, we may not effect changes to certain terms of the
Series B preferred stock, including among others, the initial Series B dividend
yield, the Series B liquidation preference, the Series B dividend payment dates
and the Series B make-whole price (all as defined below). Moreover, without the
affirmative vote or consent of at least 85% of the outstanding Series B
preferred stock, subject to certain conditions, we may not effect changes to
certain terms of the Series B preferred stock related to the Series B fixed
charge coverage ratio covenant and the Series B capitalization ratio covenant.
Conversion
The Series B preferred stock is not convertible into or exchangeable
for any other securities or property of the Company.
Certain Covenants
The articles supplementary of the Series B preferred stock provide that
so long as any share of Series B preferred stock remains outstanding, we may not
permit:
o the Series B fixed charge coverage ratio (as defined below) for
the period comprised of our two most recently completed fiscal
quarters immediately preceding the date of determination to be
less than 1.30 (the "Series B fixed charge coverage ratio
covenant") or
o the Series B capitalization ratio (as defined below) to exceed
0.55 (the "Series B capitalization ratio covenant").
We may not enter into or undertake any Series B senior obligation which
results in a violation of the Series B fixed charge coverage ratio covenant or
the Series B capitalization ratio covenant, compliance with the covenants being
determined (a) in the case of the Series B fixed charge coverage ratio covenant,
after giving effect on a pro forma basis to any such Series B senior obligation
as if the Series B senior obligation had been issued on the first day of the
Series B calculation period (as defined below), and (b) in the case of the
Series B capitalization ratio covenant, as of the end of our fiscal quarter
immediately preceding our fiscal quarter in which the Series B senior obligation
is issued or undertaken, after giving effect on a pro forma basis to any such
Series B senior obligation as if the Series B senior obligation had been issued
on the first day of the immediately preceding quarter.
Restrictions on Ownership and Transfer
We have the right to refuse transfers of capital stock that could
jeopardize our qualification as a REIT and to redeem any shares of capital stock
in excess of 7.5% of the value of our outstanding capital stock beneficially
owned by any person. Pursuant to a subscription agreement executed between our
Company and each of the initial holders of the Series B preferred stock, we and
the holders agreed that if, at any time prior to the Series B listing date (as
defined below), we determine that we intend to revoke the exemption granted to a
certain initial holder of the Series B preferred stock which permits the holder
to own shares of Series B preferred stock in excess of 7.5% of the value of
outstanding capital stock, (a) we have an obligation to purchase from the
holder, and the holder has an obligation to sell to us, the shares of Series B
preferred stock in excess of the 7.5% ownership limit at the Series B make-whole
Price, and (b) we have an obligation to purchase from each other holder of
Series B preferred stock, and each other holder has an obligation to sell to us,
a pro rata number of the shares of Series B preferred stock held by
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each other holder at that time. Each and every transferee of shares of Series B
preferred stock will be required, as a condition to transfer, to agree to be
bound by any obligations of the transferor.
In addition, the Series B preferred stock has not been registered under
the Securities Act, or any state securities laws and pending the registration
may not be offered or sold except pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities Act
and applicable state securities laws.
Registration Rights
Pursuant to a registration rights agreement (as amended, the "Series B
registration rights agreement") between our Company and the holders of the
Series B preferred stock, upon receipt of a written request from a holder of the
Series B preferred stock, we are required to file and use reasonable efforts to
cause to become effective a registration statement with the SEC under the
Securities Act with respect to the Series B preferred stock within 90 days after
the receipt of the written request.
Listing
Pursuant to the Series B registration rights agreement, if any
registration statement relating to the offer and sale of the outstanding Series
B preferred stock is declared effective by the SEC, we must use reasonable
efforts to cause the listing of the Series B preferred stock on the NYSE or, if
the Series B preferred stock is not then eligible for listing on the NYSE, to
apply for listing of the Series B preferred stock on the AMEX or, if the Series
B preferred stock is not then eligible for listing on the AMEX, to apply for
quotation of the Series B preferred stock through the National Association
of Securities Dealers, Inc. Automated Quotation System ("NASDAQ") (the date of
any such listing, the "Series B listing date").
Certain Series B Preferred Stock Definitions
"Series B calculation period" means, as of any date of determination,
the period comprised of our two most recently completed fiscal quarters
immediately preceding our fiscal quarter in which that date of determination
occurs.
"Series B capitalization ratio" means, as of any date of determination,
the ratio obtained by dividing (i) the sum of (A) the aggregate amount of our
debt and (B) the aggregate amount of our preferred stock by (ii) the sum of (A)
the aggregate amount of our debt, (B) the aggregate amount of our preferred
stock, (C) the aggregate amount of capital (including surplus) which in
accordance with generally accepted accounting principles would be reflected on
our balance sheet in connection with our common equity securities as of the end
of the quarter immediately preceding our fiscal quarter in which that date of
determination occurs and (D) our accumulated depreciation as set forth on our
balance sheet as of the end of the quarter immediately preceding our fiscal
quarter in which that date of determination occurs.
"Series B discount rate" means, as of any date of determination, the
yield to maturity implied by (a) the yields reported, as of 10:00 A.M. (New York
City time) on the second business day preceding that date of determination on
the display designated as "Page 678" on the Telerate Access Service (or any
other display that may replace Page 678 on Telerate Access Service) for actively
traded U.S. Treasury securities having a 30-year maturity as of that date of
determination, or (b) if the yields are not reported at that time or the yields
reported at that time are not ascertainable, the Treasury Constant Maturity
Series Yields reported for the latest day for which the yields have been so
reported as of the second business day preceding the date of determination in
Federal Reserve Statistical Release H.15 (519) (or any comparable successor
publication) for actively traded U.S. Treasury securities having a 30-year
constant maturity as of that date of determination.
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"Series B fixed charge coverage ratio" means, as of any date of
determination, the ratio obtained by dividing (i) the sum of (A) Series B
interest expense for the Series B calculation period and (B) Series B funds from
operations for the Series B calculation period by (ii) the sum of (A) Series B
interest expense for the Series B calculation period and (B) Series B preferred
dividends for the Series B calculation period; provided, however, that (x) if we
have issued any debt or preferred stock since the beginning of the Series B
calculation period that remains outstanding or (y) if the transactions giving
rise to the need to calculate the Series B fixed charge coverage ratio is an
issuance of debt or preferred stock, or both (x) and (y), Series B interest
expense and Series B preferred dividends for the Series B calculation period
shall be calculated after giving effect on a pro forma basis to the debt or
preferred stock as if the debt or preferred stock had been issued on the first
day of the Series B calculation period and the discharge of any other debt or
preferred stock refinanced, refunded, exchanged or otherwise discharged with the
proceeds of the new debt or preferred stock as if any such discharge had
occurred on the first day of the Series B calculation period.
"Series B funds from operations" means, with respect to any fiscal
quarter, (a) our net income for that quarter, plus (b) any loss resulting from
the restructuring of debt, or sale of property during that period, minus (c) any
gain resulting from the restructuring of debt, or sale of property during that
period, plus (d) depreciation and amortization of properties (including with
respect to trade fixtures and tenant allowances or improvements which are a part
thereof and capitalized leasing expenses, such as leasing commissions), and
adjusted to take into account (i) the results of operations of any
unconsolidated joint venture or partnership calculated to reflect funds from
operations on the same basis and (ii) any unusual and non-recurring items which
otherwise would materially distort the comparative measurement of Series B funds
from operations for different fiscal periods. Series B funds from operations
shall be determined in accordance with the March 1995 White Paper on Funds From
Operations approved by the Board of Governors of the National Association of
Real Estate Investment Trusts, as in effect on the date of issuance of the
Series B preferred stock.
"Series B interest expense" means, for any period, our total interest
expense, including (a) interest expense attributable to capital leases, (b)
amortization of debt discount and debt issuance cost, (c) capitalized interest,
(d) non-cash interest payments, (e) commissions, discounts and other fees and
charges owed with respect to letters of credit and bankers' acceptance
financing, (f) net costs under hedging obligations (including amortization of
fees), and (g) interest actually paid by us under any guarantee of debt or other
obligation of any other person.
"Series B make-whole price" means, for any share of Series B preferred
stock, as of any date of determination, the sum of (a) the present value as of
that date of determination of all remaining scheduled dividend payments of that
share of Series B preferred stock until the Series B tenth anniversary date,
discounted by the Series B discount rate, (b) the Series B liquidation
preference and (c) all accrued and unpaid dividends thereon to that date of
determination.
"Series B parity preferred" means all other series of preferred stock
ranking on a parity with the Series B preferred stock as to dividends or upon
liquidation and upon which like voting rights have been conferred and are
exercisable.
"Series B preferred dividends" means dividends accrued in respect of
all preferred stock held by persons other than us.
"Series B senior obligations" means any (a) debt other than accounts
payable incurred in the ordinary course of our business and (b) any equity
securities which rank senior to the Series B preferred stock with respect to the
payment of dividends or the distribution of assets upon our liquidation,
dissolution or winding up.
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RESTRICTIONS ON OWNERSHIP AND TRANSFER
To qualify as a REIT under the Internal Revenue Code, we must meet
several requirements regarding the number of our stockholders and concentration
of ownership of our shares. Our charter contains provisions that restrict the
ownership and transfer of our shares to assist us in complying with these
Internal Revenue Code requirements. We refer to these restrictions as the
"ownership limit."
The ownership limit provides that, in general, no person may own more
than 7.5% of the aggregate value of all outstanding stock of the Company. It
also provides that:
o a transfer that violates the limitation is void;
o a transferee gets no rights to the shares that violate the
limitation;
o shares transferred to a stockholder in excess of the ownership
limit are automatically converted, by operation of law, into
shares of "excess stock"; and
o the excess stock will be held by us as trustee of a trust for the
exclusive benefit of future transferees to whom the shares of
capital stock will ultimately be transferred without violating
the ownership limit.
For further discussion of the ownership limit and the corresponding
restrictions on ownership and transfer, see "Description of our Series C
Preferred Stock - Restrictions on Ownership and Transfer."
52
CERTAIN PROVISIONS OF OUR CHARTER AND BYLAWS, MARYLAND LAW, OUR
STOCKHOLDER RIGHTS PLAN, CHANGE OF CONTROL AGREEMENTS AND
INDEMNIFICATION AGREEMENTS
PROVISIONS OF OUR CHARTER AND BYLAWS
Classification of Board, Vacancies and Removal of Directors
Our charter provides that our Board of Directors is divided into three
classes. Directors of each class serve for staggered terms of three years each,
with the terms of each class beginning in different years. We currently have
eight directors. The number of directors in each Class and the expiration of the
current term of each class is as follows:
Class I 3 directors Expires 2004
Class II 2 directors Expires 2005
Class III 3 directors Expires 2006
At each annual meeting of our stockholders, successors of the class of
directors whose term expires at that meeting will be elected for a three-year
term and the directors in the other two classes will continue in office. A
classified board may delay, defer or prevent a change in control or other
transaction in which holders of our Series C preferred stock might have the
right to require us to repurchase all or any part of their shares or otherwise
receive a premium for their shares above then-current market price or might
otherwise deem to be in their best interests. In addition, a classified board
could prevent stockholders who do not agree with the policies of our Board of
Directors from replacing a majority of the Board of Directors for two years,
except in the event of removal for cause.
Our charter provides that, subject to the rights of holders of our
preferred stock, any director may be removed (a) only for cause and (b) only by
the affirmative vote of not less than two-thirds of the common equities then
outstanding and entitled to vote for the election of directors. Our charter
additionally provides that any vacancy occurring on our Board of Directors
(other than as a result of the removal of a director) shall be filled only by a
majority of the remaining directors except that a vacancy resulting from an
increase in the number of directors shall be filled by a majority of the entire
Board of Directors. A vacancy resulting from the removal of a director may be
filled by the affirmative vote of a majority of all the votes cast at a meeting
of the stockholders called for that purpose.
The provisions of our charter relating to the removal of directors and
the filling of vacancies on our Board of Directors could preclude a third party
from removing incumbent directors without cause and simultaneously gaining
control of our Board of Directors, by filling, with its own nominees, the
vacancies created by such removal. The provisions also limit the power of
stockholders generally, and those with a majority interest, to remove incumbent
directors and to fill vacancies on our Board of Directors without the support of
incumbent directors.
Stockholder Action by Written Consent
Our charter provides that any action required or permitted to be taken
by our stockholders may be effected by a consent in writing signed by the
holders of all of our outstanding shares of common equity securities entitled to
vote on the matter. This requirement could deter a change of control because it
could delay or deter a stockholder's ability to take action with respect to us.
53
Meetings of Stockholders
Our bylaws provide for annual stockholder meetings to elect directors.
Special stockholder meetings may be called by our Chairman, President or a
majority of the Board of Directors or may be called by our Secretary at the
written request of stockholders entitled to cast at least a majority of all
votes entitled to be cast at the meeting. This requirement could deter a change
of control because it could delay or deter a stockholder's ability to take
action with respect to us.
Stockholder Proposals and Director Nominations
Under our bylaws, in order to have a stockholder proposal or director
nomination considered at an annual meeting of stockholders, stockholders are
generally required to deliver to us certain information concerning themselves
and their stockholder proposal or director nomination not less than 75 days nor
more than 120 days prior to the anniversary date of the immediately preceding
annual meeting (the "anniversary date"); provided, however, that in the event
the annual meeting is scheduled to be held on a date more than 30 days before or
more than 60 days after the anniversary date, notice must be delivered to us not
later than the close of business on the later of (a) the 75th day prior to the
scheduled date of such annual meeting or (b) the 15th day after public
disclosure of the date of such meeting. Failure to comply with such timing and
informational requirements will result in such proposal or director nomination
not being considered at the annual meeting. The purpose of requiring
stockholders to give us advance notice of nominations and other business, and
certain related information is to ensure that we and our stockholders have
sufficient time and information to consider any matters that are proposed to be
voted on at an annual meeting, thus promoting orderly and informed stockholder
voting. Such Bylaw provisions could have the effect of precluding a contest for
the election of our directors or the making of stockholder proposals if the
proper procedures are not followed, and of delaying or deterring a third party
from conducting a solicitation of proxies to elect its own slate of directors or
to have its own proposals approved.
Authorization of Consolidations, Mergers and Sales of Assets
Our charter provides that any consolidation, merger, share exchange or
transfer of all or substantially all of our assets must first be approved by the
affirmative vote of a majority of our Board of Directors (including a majority
of the continuing directors) and thereafter must be approved by a vote of at
least two-thirds of all the votes cast on such matter, by holders of voting
common equities voting as a single class at a meeting of the stockholders. These
provisions could make it more difficult for us to enter into any consolidation,
merger or sale of assets as described above.
Amendment of our Charter and Bylaws
Our charter may be amended by the affirmative vote of a majority of the
vote entitled to be cast on the matter, except that provisions relating to the
directors, the ownership limit, amendments to the charter, indemnification,
limitation of liability, the required percentage vote of stockholders for
certain transactions and amendment of the bylaws by directors may only be
amended by a vote of at least two-thirds of the common equities then outstanding
and entitled to vote. Our bylaws may be amended only by the Board of Directors.
Indemnification; Limitation of Directors' and Officers' Liability
Our charter limits the liability of our directors and officers to our
company and stockholders for money damages to the maximum extent permitted by
Maryland law. Maryland law permits limiting liability except for liability
resulting from:
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o actual receipt of an improper benefit or profit in money,
property or services; or
o a final judgment based upon a finding of active and deliberate
dishonesty by the director that was material to the cause of
action adjudicated.
According to our charter and bylaws, our company will, to the maximum
extent permitted by Maryland law, indemnify and pay or reimburse reasonable
expenses to any of our present or former directors or officers or any individual
who, while a director or officer and at our request, serves or has served
another entity, employee benefit plan or any other enterprise as a trustee,
director, officer, partner or otherwise. The indemnification covers any claim or
liability against the person. Our bylaws permit us to indemnify each 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 a party by reason of his or her
service to us.
Under Maryland law, unless limited by the charter, indemnification by
the corporation is mandatory if the director is successful, on the merits or
otherwise, in the defense of such a proceeding. Moreover, a court may order
indemnification if it determines that the director is fairly and reasonably
entitled to indemnification.
Maryland law permits a corporation to indemnify its present and former
directors and officers against liabilities and reasonable expenses actually
incurred by them in any proceeding unless:
o the act or omission of the director or officer was material to
the matter giving rise to the proceeding; and
o was committed in bad faith; or
o was the result of active and deliberate dishonesty; or
o in a criminal proceeding, the director or officer had reasonable
cause to believe that the act or omission was unlawful.
However, a Maryland corporation may not indemnify for an adverse
judgment in a derivative action. Our bylaws and Maryland law require us, as a
condition to advancing expenses in certain circumstances, to obtain:
o 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
o a written undertaking to repay the amount reimbursed if the
standard of conduct was not met.
PROVISIONS OF MARYLAND LAW
Business Combinations
Under Maryland law, certain "business combinations" between us and any
person who beneficially owns, directly or indirectly, 10% or more of the voting
power of our shares, an affiliate of ours who, at any time within the previous
two years was the beneficial owner of 10% or more of the voting power of our
shares (who the statute terms an "interested stockholder"), or an affiliate of
an interested stockholder, are prohibited for five years after the most recent
date on which they became such persons. The business combinations that are
subject to this law include mergers, consolidations, share exchanges or, in
certain circumstances, asset transfers or issuances or reclassifications of
equity securities.
55
After the five-year period has elapsed, a proposed business combination must be
recommended by the Board of Directors and approved by the affirmative vote of at
least:
o 80% of the votes entitled to be cast by our outstanding voting
shares; and
o two-thirds of the votes entitled to be cast by the outstanding
voting shares, excluding shares held by the interested
stockholder,
unless, among other conditions, the stockholders receive a fair price, as
defined by Maryland law, for their shares and the consideration is received in
cash or in the same form as previously paid by the interested stockholder for
its shares.
These provisions do not apply, however, to business combinations that
the Board of Directors approves or exempts before the time that the interested
stockholder becomes an interested stockholder or transactions between us and Mr.
Charles J. Urstadt, Chairman and Chief Executive Officer of the Company or any
of his affiliates or associates.
Control Share Acquisitions
Maryland law provides that "control shares" acquired in a "control
share acquisition" have no voting rights unless approved by a vote of two-thirds
of our outstanding voting shares, excluding shares owned by the acquiror or by
officers or directors who are employees of ours. "Control shares" are voting
shares which, if aggregated with all other shares previously acquired by the
acquiring person, or in respect of which the acquiring person is able to
exercise or direct the exercise of voting power, other than by revocable proxy,
would entitle the acquiring person to exercise voting power in electing
directors within one of the following ranges of voting power:
o one-tenth or more but less than one-third;
o one-third or more but less than a majority; or
o a majority of all voting power.
Control shares do not include shares the acquiring person is then
entitled to vote as a result of having previously obtained stockholder approval.
A "control share acquisition" means the acquisition of control shares, subject
to certain exceptions.
A person who has made or proposes to make a control share acquisition,
upon satisfaction of certain conditions, including an undertaking to pay
expenses, may compel our Board of Directors to call a special meeting of
stockholders to be held within 50 days of demand to consider the voting rights
of the shares. If no request for a meeting is made, we may present the question
at any stockholders' meeting.
If voting rights are not approved at the stockholders' meeting or if
the acquiring person does not deliver the statement required by Maryland law,
then, subject to certain conditions and limitations, we may redeem any or all of
the control shares, except those for which voting rights have previously been
approved, for fair value. Fair value is determined without regard to the absence
of voting rights for the control shares and as of the date of the last control
share acquisition or of any meeting of stockholders at which the voting rights
of the shares were considered and not approved. If voting rights for control
shares are approved at a stockholders' meeting, the acquiror may then vote a
majority of the shares entitled to vote, and all other stockholders may exercise
appraisal rights. The fair value of the shares for purposes of these appraisal
rights may not be less than the highest price per share paid by the acquiror in
the control share acquisition. The control share acquisition statute does not
apply to shares acquired in a merger,
56
consolidation or share exchange if we are a party to the transaction, nor does
it apply to acquisitions approved or exempted by our charter or bylaws.
Our bylaws exempt from the Maryland control share statute any and all
acquisitions of our common or preferred shares by any person who, as of December
31, 1996, owned in excess of 20% of the then outstanding shares of common stock
and preferred stock of the Company. As of December 31, 1996, only Mr. Charles J.
Urstadt, Chairman and Chief Executive Officer of the Company, beneficially owned
in excess of 20% of the outstanding common and preferred shares of the Company.
The Board of Directors has the right, however, to amend this exemption at any
time in the future.
Dissolution Requirements
Maryland law generally permits the dissolution of a corporation if
approved (a) first by the affirmative vote of a majority of the entire Board of
Directors declaring such dissolution to be advisable and directing that the
proposed dissolution be submitted for consideration at an annual or special
meeting of stockholders, and (b) upon proper notice being given as to the
purpose of the meeting, then by the stockholders of the corporation by the
affirmative vote of two-thirds of all the votes entitled to be cast on the
matter. This provision of the Maryland law could delay or deter our liquidation.
Certain Recent Provisions of Maryland Law
Maryland law also provides that Maryland corporations that are subject
to the Exchange Act and have at least three outside directors can elect by
resolution of the board of directors to be subject to some corporate governance
provisions that may be inconsistent with the corporation's charter and bylaws.
Under the applicable statute, a board of directors may classify itself without
the vote of stockholders. A board of directors classified in that manner cannot
be altered by amendment to the charter of the corporation. Further, the board of
directors may, by electing into applicable statutory provisions and
notwithstanding the charter or bylaws:
o provide that a special meeting of stockholders will be called
only at the request of stockholders entitled to cast at least a
majority of the votes entitled to be cast at the meeting,
o reserve for itself the right to fix the number of directors,
o provide that a director may be removed only by the vote of the
holders of two-thirds of the stock entitled to vote,
o retain for itself sole authority to fill vacancies created by the
death, removal or resignation of a director, and
o provide that all vacancies on the board of directors may be
filled only by the affirmative vote of a majority of the
remaining directors, in office, even if the remaining directors
do not constitute a quorum.
In addition, a director elected to fill a vacancy under this provision
will serve for the balance of the unexpired term instead of until the next
annual meeting of stockholders. A board of directors may implement all or any of
these provisions without amending the charter or bylaws and without stockholder
approval. A corporation may be prohibited by its charter or by resolution of its
board of directors from electing any of the provisions of the statute. We are
not prohibited from implementing any or all of the statute. While certain of
these provisions are already contemplated by our charter and bylaws, the law
would permit our Board of Directors to override further changes to the charter
or bylaws. If
57
implemented, these provisions could discourage offers to acquire our common
stock or Class A common stock and could increase the difficulty of completing an
offer.
STOCKHOLDER RIGHTS PLAN
We have adopted a stockholder rights plan. Under the terms of this
plan, we can in effect prevent a person or a group from acquiring more than 10%
of the combined voting power of our outstanding shares of common stock and Class
A common stock because, after (a) the person acquires more than 10% of the
combined voting power of our outstanding common stock and Class A common stock,
or (b) the commencement of a tender offer or exchange offer by any person (other
than us, any one of our wholly owned subsidiaries or any of our employee benefit
plans, or any Exempted Person (as defined below)), if, upon consummation of the
tender offer or exchange offer, the person or group would beneficially own 30%
or more of the combined voting power of our outstanding shares of common stock
and Class A common stock, all other stockholders will have the right to purchase
securities from us at a price that is less than their fair market value, which
would substantially reduce the value and influence of the stock owned by the
acquiring person. Our Board of Directors can prevent the plan from operating by
approving of the transaction and redeeming the rights. This gives our Board of
Directors significant power to approve or disapprove of the efforts of a person
or group to acquire a large interest in our Company. The rights plan exempts
acquisitions of common stock and Class A common stock by Mr. Charles J. Urstadt,
members of his family and certain of his affiliates.
CHANGE OF CONTROL AGREEMENTS
We have entered into change of control agreements with four of our
senior executives providing for the payment of money to these executives upon
the occurrence of a change of control of the Company as defined in these
agreements. If, within 18 months following a change of control, the Company
terminates the executive's employment other than for cause, or if the executive
elects to terminate his employment with the Company for reasons specified in the
agreement, we will make a severance payment equal to a portion of the
executive's base salary, together with medical and other benefits. In the case
of Messrs. Charles J. Urstadt, Willing L. Biddle, James R. Moore and Raymond P.
Argila, we will make a payment equal to their respective annual salaries plus
benefits. Based upon their current salary and benefit levels, this provision
would result in payments totaling $1,000,000 to Messrs. Urstadt, Biddle, Moore
and Argila, in the aggregate. These agreements may deter changes of control of
the Company because of the increased cost for a third party to acquire control
of the Company.
INDEMNIFICATION AGREEMENTS
We have entered into indemnification agreements with certain of our
directors, indemnifying them against expenses, settlements, judgments and levies
incurred in connection with any action, suit or proceeding, whether civil or
criminal, where the individual's involvement results from his or her present or
former position as a director.
POSSIBLE ANTI-TAKEOVER EFFECT OF CERTAIN PROVISIONS OF OUR CHARTER AND BYLAWS,
MARYLAND LAW, STOCKHOLDER RIGHTS PLAN AND CHANGE OF CONTROL AGREEMENTS
Certain provisions of our charter and bylaws, certain provisions of
Maryland law, our stockholder rights plan and our change of control agreements
with our officers could have the effect of delaying or preventing a transaction
or a change in control in which holders of our Series C preferred stock might
have the right to require us to repurchase all or any part of their shares or
otherwise receive a premium for their shares above then-current market price or
might otherwise deem to be in their best interests.
58
INTERESTS OF MR. CHARLES J. URSTADT
As of September 10, 2003, Mr. Charles J. Urstadt, our Chairman and
Chief Executive Officer, beneficially owns 2,403,019 shares of common stock and
307,850 shares of Class A common stock constituting approximately 31.4% of the
voting power of our outstanding common equity securities. In view of the common
equity securities beneficially owned by Mr. Urstadt, Mr. Urstadt may control a
sufficient percentage of the voting power of our common equity securities to
effectively block certain proposals which require a vote of our stockholders. In
addition, under Maryland law, certain business combinations between us and an
interested stockholder will require the recommendation of our Board of Directors
and the affirmative vote of at least (a) 80% of the outstanding shares of our
common equity securities and (b) two-thirds of the outstanding shares of our
common equity securities not held by such interested stockholder or its
affiliates unless, among other things, certain "fair price" and other conditions
are met. In view of the common equity securities beneficially owned by Mr.
Urstadt, Mr. Urstadt may control a sufficient percentage of the voting power of
common equity securities to effectively block a proposal respecting a business
combination under these provisions of Maryland law with an interested
stockholder.
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SELLING STOCKHOLDERS
We originally issued the Series C preferred stock on May 29, 2003 in a
private placement to Ferris, Baker Watts, Incorporated and Stifel, Nicolaus &
Company, Incorporated, whom we refer to as the initial purchasers. The initial
purchasers then resold the Series C preferred stock in transactions not
requiring registration under the Securities Act or applicable state securities
laws to persons the initial purchasers reasonably believed to be "qualified
institutional buyers", as defined in Rule 144A under the Securities Act, in
compliance with Rule 144A.
This prospectus relates to resales of Series C preferred stock by the
selling stockholders as described below under "Plan of Distribution." The
registration statement of which this prospectus forms a part has been filed with
the SEC pursuant to the registration rights granted in connection with the
original issue of the Series C preferred stock to afford the holders of the
Series C preferred stock the opportunity to sell their shares in public
transactions rather than pursuant to exemptions from the registration and
prospectus delivery requirements of the Securities Act. In order to take
advantage of that opportunity, a holder of the Series C preferred stock must
provide information about itself and the shares it is selling as required under
the Securities Act.
The shares of Series C preferred stock offered hereby represent 100% of
our outstanding Series C preferred stock as of the date of this prospectus.
Because the selling stockholders may sell all or some portion of the shares of
Series C preferred stock they beneficially own, we cannot estimate the number of
shares of Series C preferred stock that will be beneficially owned by the
selling stockholders after this offering. In addition, each selling stockholder
may have sold, transferred or otherwise disposed of, or may sell, transfer or
otherwise dispose of, at any time or from time to time since the date on which
it provided the information regarding the shares of Series C preferred stock
beneficially owned by it, all or a portion of the shares of Series C preferred
stock beneficially owned by it in transactions exempt from the registration
requirements of the Securities Act. Beneficial ownership is determined in
accordance with Rule 13d-3(d) promulgated by the SEC under the Exchange Act.
The following table sets forth: (i) the number of shares of Series C
preferred stock beneficially owned by each selling stockholder as of August 6,
2003 and (ii) the number of shares of Series C preferred stock to be offered
hereby by each selling stockholder. The information set forth below is based on
information provided by each selling stockholder. The percentage ownership is
based on 400,000 shares of Series C preferred stock outstanding. None of the
selling stockholders has had a material relationship with us within the past
three years, other than as a result of the ownership of our shares or other of
our securities.
60
Shares Beneficially Owned Prior to Offering Number of
------------------------------------------- Shares
Name of Selling Stockholder(1) Number Percent Offered
------------------------------ ------ ------- -------
Admiral Insurance Company....................... 8,000 2.00% 8,000
AEW Real Estate Income Fund..................... 27,000 6.75% 27,000
Cohen & Steers Advantage Income Realty
Fund, Inc.................................... 16,000 4.00% 16,000
Cohen & Steers Equity Income Fund, Inc.......... 10,000 2.50% 10,000
Cohen & Steers Premium Income Realty Fund, Inc.. 16,000 4.00% 16,000
Cohen & Steers Quality Income Realty Fund, Inc.. 24,000 6.00% 24,000
Cohen & Steers Total Return Realty Fund, Inc.... 4,000 1.00% 4,000
Cornell University.............................. 2,000 0.50% 2,000
Kensington Select Income Fund................... 95,000 23.75% 95,000
Neuberger Berman Realty Income Fund Inc......... 60,000 15.00% 60,000
Real Estate Income Fund, Inc.................... 63,000 15.75% 63,000
Scudder RREEF Real Estate Fund, Inc............. 75,000 18.75% 75,000
(1) Such persons have sole voting and investment power with respect to all
shares of Series C preferred stock shown as being beneficially owned by
them, and the information contained in the footnotes to this table.
We will pay all registration expenses including, without limitation,
all the SEC and blue sky registration and filing fees, printing expenses,
transfer agents' and registrars' fees, and the fees and disbursements of our
outside counsel in connection with this offering, but the selling stockholders
will pay all selling expenses including, without limitation, any brokers' fees
or discounts relating to the shares registered hereby, or the fees or expenses
of separate counsel to the selling stockholders. In addition, we have agreed to
indemnify the selling stockholders against certain liabilities, including
liabilities under the Securities Act, in connection with this offering. The
selling stockholders have agreed to indemnify us against certain liabilities,
including liabilities under the Securities Act. Insofar as indemnification for
liabilities under the Securities Act may be permitted to our directors or
officers, or persons that control us, we have been informed that in the opinion
of the SEC such indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable.
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PLAN OF DISTRIBUTION
The selling stockholders may from time to time sell all or a portion of
the Series C preferred stock offered by the selling stockholders hereby (a) in
transactions at prevailing market prices on the NYSE, (b) in privately
negotiated transactions at negotiated prices, or (c) in a combination of such
methods of sale. Our Series C preferred stock is listed on the NYSE. However,
there can be no assurance as to the liquidity of any market for our Series C
preferred stock or at what price holders of our Series C preferred stock will be
able to sell their Series C preferred stock. Our Series C preferred stock may
trade at a discount from its initial offering price depending upon prevailing
interest rates, the market for similar securities, our performance and other
factors.
The selling stockholders may sell the securities offered hereby to
purchasers directly or may from time to time offer the securities through
dealers or agents who may receive compensation in the form of discounts,
concessions or commissions from the selling stockholders or the purchasers of
the securities for whom they may act as agents. The selling stockholders and any
persons who participate in the sale of the securities offered hereby may be
deemed to be "underwriters" within the meaning of the Securities Act and any
commissions paid or discounts or concessions allowed to any such person and any
profits received on resale of the securities offered hereby may be deemed to be
underwriting compensation under the Securities Act.
In order to comply with the securities laws of certain states, if
applicable, the shares of Series C preferred stock offered hereby will be sold
in such jurisdictions only through registered or licensed brokers or dealers. In
addition, in certain jurisdictions, the securities may not be offered or sold
unless they have been registered or qualified for sale in such jurisdictions or
an exemption from any registration or qualification requirement is available and
the requirements have been satisfied.
Any dealer or broker participating in any distribution of the Series C
preferred stock offered hereby may be required to deliver a copy of this
prospectus, including a prospectus supplement, if any, to any person who
purchases any of such Series C preferred stock from or through this dealer or
broker. We have advised the selling stockholders that they are required to
comply with Regulation M promulgated under the Exchange Act during such time as
they may be engaged in a distribution of the shares of Series C preferred stock
offered hereby. With certain exceptions, Regulation M precludes a selling
stockholder, any affiliated purchasers and any broker-dealer or other person who
participates in such distribution from bidding for or purchasing, or attempting
to induce any person to bid for or purchase any security that is the subject of
the distribution until the entire distribution is complete. Regulation M also
prohibits any bids or purchases made to stabilize the price of a security in
connection with the distribution of that security. All of the foregoing may
affect the marketability of the Series C preferred stock.
We will not receive any of the proceeds from the selling stockholders'
sale of our Series C preferred stock. This registration statement will remain
effective until the earlier of two years following the effective date of the
registration statement and the time when all of our Series C preferred stock has
been sold under the registration statement or otherwise ceased to be a
Restricted Security (as defined in the registration rights agreement). In the
event that any shares registered by this registration statement remain unsold at
the end of such period, we may file a post-effective amendment to the
registration statement for the purpose of deregistering any such unsold shares.
EXPERTS
The consolidated financial statements of Urstadt Biddle Properties Inc.
appearing in Urstadt Biddle Properties Inc.'s Annual Report (Form 10-K) for the
year ended October 31, 2002 and the Statement of Revenues and Certain Expenses
of Somers Commons appearing in Urstadt Biddle Properties
62
Inc.'s Current Report on Form 8-K dated July 29, 2003 have been audited by Ernst
& Young LLP, independent auditors, as set forth in their reports thereon
included therein and incorporated herein by reference. Such financial statements
are incorporated herein by reference in reliance upon such reports given on the
authority of such firm as experts in accounting and auditing.
LEGAL OPINIONS
The legality of the shares of Series C preferred stock offered in this
offering has been passed upon by Miles & Stockbridge P.C., Baltimore, Maryland.
The description of federal income tax consequences contained in the section of
this prospectus entitled "Federal Income Tax Consequences of Our Status as a
REIT" is based upon an opinion of Coudert Brothers LLP, New York, New York.
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 reports, statements or
other information that we file with the SEC at the SEC's public reference room
at 450 Fifth Street, N.W., Washington, D.C. 20549. You may request copies of
these documents, upon payment of a copying fee, by writing to the SEC. Please
call the SEC at 1-800-SEC-0330 for information on the operation of the public
reference room. Our SEC filings are also available to the public on the SEC
internet site at http://www.sec.gov.
The SEC allows us to "incorporate by reference" the information we file
with it, which means that we can disclose important information to you by
referring you to documents we have filed with the SEC that are not included in
this prospectus. The information incorporated by reference is considered part of
this prospectus. We incorporate by reference the documents listed below:
o Our Annual Report on Form 10-K for the year ended October 31,
2002 filed on January 29, 2003;
o Our Quarterly Report on Form 10-Q for the quarter ended January
31, 2003 filed on March 14, 2003, as amended on March 19, 2003;
o Our Quarterly Report on Form 10-Q for the quarter ended April 30,
2003 filed on June 12, 2003;
o Our Quarterly Report on Form 10-Q for the quarter ended July 31,
2003 filed on September 11, 2003;
o Our Definitive Proxy Statement filed on January 29, 2003;
o Our Current Report on Form 8-K filed on December 9, 2002;
o Our Current Report on Form 8-K filed on December 12, 2002 as
amended on January 29, 2003;
o Our Current Report on Form 8-K filed on April 29, 2003; and
o Our Current Report on Form 8-K filed on July 29, 2003.
We also incorporate by reference additional documents that may be
subsequently filed pursuant to Sections 13(a), 13(c), 14 or 15(d) of the
Exchange Act after the date of this prospectus and prior to the termination of
this offering. These include periodic reports, such as Annual Reports on Form
10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as well as
proxy statements.
63
You may request a copy of these filings, at no cost, by writing or
telephoning:
Urstadt Biddle Properties Inc.
Attn: James R. Moore
Executive Vice President and Chief Financial Officer
321 Railroad Avenue
Greenwich, Connecticut 06830
(203) 863-8200
You should rely only on the information incorporated by reference or
provided in this prospectus or any supplement to this prospectus. We have not
authorized anyone else to provide you with different information. The selling
stockholders are not making an offer of our securities in any state where the
offer or solicitation is not authorized. You should not assume that the
information in this prospectus or any supplement is accurate as of any date
other than the date on the front of those documents.
The statements that we make in this prospectus about the contents of
any other documents are not necessarily complete, and are qualified in their
entirety by referring you to the copy of that document, which is filed as an
exhibit to our registration statement on Form S-3. You can obtain copies of
these documents from the SEC or from us, as described above.
64
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
SEC registration fee................... $3,236
Printing expenses...................... $15,000*
Accountants' fees...................... $15,000*
Listing fees........................... $14,750*
Counsel fees........................... $25,000*
Miscellaneous.......................... $2,014*
Total.................................. $75,000*
---------------------
* Estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Charter and Bylaws of the Registrant provide that the Registrant
shall indemnify its directors, officers and certain other parties to the fullest
extent permitted from time to time by the Maryland General Corporation Law (the
"MGCL"). The MGCL permits a corporation to indemnify its directors, officers and
certain other parties against judgments, penalties, fines, settlements and
reasonable expenses actually incurred by them in connection with any proceeding
to which they may be made a party by reason of their service to or at the
request of the Registrant, unless it is established that the act or omission of
the indemnified party was material to the matter giving rise to the proceeding
and (i) the act or omission was committed in bad faith or was the result of
active and deliberate dishonesty, or (ii) in the case of any criminal
proceeding, the indemnified party had reasonable cause to believe that the act
or omission was unlawful.
The MGCL does not permit indemnification in respect of any proceeding
in which the party seeking indemnification shall have been adjudged to be liable
to the Corporation. Further, a party may not be indemnified for a proceeding
brought by that party against the Corporation, except (i) for a proceeding
brought to enforce indemnification or (ii) if the charter or by laws, a
resolution of the board of directors or an agreement approved by the board of
directors to which the Corporation is a party expressly provide otherwise.
ITEM 16. EXHIBITS
EXHIBIT NUMBER DESCRIPTION
-------------- -----------
*4.1 Registration Rights Agreement between Urstadt Biddle Properties Inc. and
Ferris, Baker Watts, Incorporated dated May 29, 2003.
*4.2 Articles Supplementary for 8.5% Series C Senior Cumulative Preferred
Stock setting forth the powers, preferences and rights, and the
qualifications, limitations and restrictions thereof.
**4.3 Specimen 8.5% Series C Senior Cumulative Preferred Stock Certificate.
4.4 Amended Articles of Incorporation of the Company (incorporated by
reference to Exhibit C of Amendment No. 1 to Registrant's Statement on
Form S-4 (SEC File No. 333-19113)).
II-1
EXHIBIT NUMBER DESCRIPTION
-------------- -----------
4.5 Articles Supplementary of the Company (incorporated by reference to
Annex A of Exhibit 4.1 of the Registrant's Current Report on Form 8-K
dated August 3, 1998 (SEC File No. 001-12803)).
4.6 Articles Supplementary of the Company (incorporated by reference to
Exhibit 4.1 of the Registrant's Current Report on Form 8-K dated January
8, 1998 (SEC File No. 001-12803)).
4.7 Articles Supplementary of the Company (incorporated by reference to
Exhibit A of Exhibit 4.1 of the Registrant's Current Report on Form 8-K
dated March 12, 1997 (SEC File No. 001-12803)).
4.8 By-laws of the Company (incorporated by reference to Exhibit D of
Amendment No. 1 to Registrant's Registration Statement on Form S-4 (SEC
File No. 333-19113).
4.9 Amended and Restated Rights Agreement, dated as of July 31, 1998,
between the Company and The Bank of New York, as Rights Agent
(incorporated by reference to Exhibit 10.1 of the Registrant's Current
Report on Form 8-K dated November 5, 1998 (SEC File No. 001-12803)).
*5.1 Opinion of Miles & Stockbridge P.C. as to the legality of the securities.
*8.1 Opinion of Coudert Brothers LLP as to tax matters.
**12.1 Statement Regarding Computation of Ratio of Earnings to Combined Fixed
Charges and Preferred Stock Dividends.
**23.1 Consent of Ernst & Young LLP.
*23.2 Consent of Miles & Stockbridge P.C. (included in Exhibit 5.1).
*23.3 Consent of Coudert Brothers LLP (included in Exhibit 8.1).
**23.4 Consent of PricewaterhouseCoopers LLP.
*24.1 Power of Attorney.
-------------------
* Previously filed as part of this registration statement.
** As 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 (the "Securities Act");
II-2
(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% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement; and
(iii) to include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed with
or furnished to the Securities and Exchange Commission (the "SEC") by the
registrant pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 (the "Exchange Act") that are incorporated by reference in the
registration statement.
(2) that, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) to remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer 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 Securities Act and will be governed by the final
adjudication of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Amendment
No. 1 to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the Town of Greenwich, State of
Connecticut, September 19, 2003.
URSTADT BIDDLE PROPERTIES INC.
By: /s/ Willing L. Biddle
-----------------------------
Willing L. Biddle
President and
Chief Operating Officer
SIGNATURES
* Chairman, Chief Executive Officer and
------------------------------------ Director (Principal Executive Officer) September 19, 2003
Charles J. Urstadt
/s/ Willing L. Biddle President, Chief Operating Officer and
------------------------------------ Director September 19, 2003
Willing L. Biddle
* Executive Vice President and Chief
----------------------------------- Financial Officer (Principal Financial
James R. Moore Officer and Principal Accounting Officer) September 19, 2003
*
-----------------------------------
E. Virgil Conway Director September 19, 2003
*
-----------------------------------
Charles D. Urstadt Director September 19, 2003
*
-----------------------------------
Peter Herrick Director September 19, 2003
*
-----------------------------------
Robert R. Douglass Director September 19, 2003
II-4
*
-----------------------------------
George H.C. Lawrence Director September 19, 2003
*
-----------------------------------
George J. Vojta Director September 19, 2003
* By: /s/ Willing L. Biddle
----------------------
Willing L. Biddle, individually and as
an attorney-in-fact for each such other
person pursuant to the power of attorney
filed as a part of this Registration
Statement. September 19, 2003
Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 1 to the Registration Statement has been signed by the above
persons in the capacities and on the dates indicated.
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EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION
-------------- -----------
*4.1 Registration Rights Agreement between Urstadt Biddle Properties Inc. and
Ferris, Baker Watts, Incorporated dated May 29, 2003.
*4.2 Articles Supplementary for 8.5% Series C Senior Cumulative Preferred
Stock setting forth the powers, preferences and rights, and the
qualifications, limitations and restrictions thereof.
**4.3 Specimen 8.5% Series C Senior Cumulative Preferred Stock Certificate.
4.4 Amended Articles of Incorporation of the Company (incorporated by
reference to Exhibit C of Amendment No. 1 to Registrant's Statement on
Form S-4 (SEC File No. 333-19113)).
4.5 Articles Supplementary of the Company (incorporated by reference to
Annex A of Exhibit 4.1 of the Registrant's Current Report on Form 8-K
dated August 3, 1998 (SEC File No. 001-12803)).
4.6 Articles Supplementary of the Company (incorporated by reference to
Exhibit 4.1 of the Registrant's Current Report on Form 8-K dated January
8, 1998 (SEC File No. 001-12803)).
4.7 Articles Supplementary of the Company (incorporated by reference to
Exhibit A of Exhibit 4.1 of the Registrant's Current Report on Form 8-K
dated March 12, 1997 (SEC File No. 001-12803)).
4.8 By-laws of the Company (incorporated by reference to Exhibit D of
Amendment No. 1 to Registrant's Registration Statement on Form S-4 (SEC
File No. 333-19113)).
4.9 Amended and Restated Rights Agreement, dated as of July 31, 1998,
between the Company and The Bank of New York, as Rights Agent
(incorporated by reference to Exhibit 10.1 of the Registrant's Current
Report on Form 8-K dated November 5, 1998 (SEC File No. 001-12803)).
*5.1 Opinion of Miles & Stockbridge P.C. as to the legality of the securities.
*8.1 Opinion of Coudert Brothers LLP as to tax matters.
**12.1 Statement Regarding Computation of Ratio of Earnings to Combined Fixed
Charges and Preferred Stock Dividends.
**23.1 Consent of Ernst & Young LLP.
*23.2 Consent of Miles & Stockbridge P.C. (included in Exhibit 5.1).
*23.3 Consent of Coudert Brothers LLP (included in Exhibit 8.1).
**23.4 Consent of PricewaterhouseCoopers LLP.
*24.1 Power of Attorney (located on the signature page of this Registration
Statement).
-------------------
* Previously filed as part of this registration statement.
** As filed herewith.
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