e424b5
Filed Pursuant to Rule 424(b)(5)
Registration File No. 333-140978
CALCULATION OF
REGISTRATION FEE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximum
|
|
|
Maximum
|
|
|
Maximum
|
|
|
Amount of
|
|
|
|
Amount to be
|
|
|
Offering
|
|
|
Aggregate
|
|
|
Registration
|
Title of Each Class of Securities Offered
|
|
|
Registered
|
|
|
Price per Unit
|
|
|
Offering Price
|
|
|
Fee(1)
|
9.00% Series E cumulative convertible preferred shares of
beneficial interest
|
|
|
|
3,450,000 shares
|
|
|
|
$
|
25.00
|
|
|
|
$
|
86,250,000
|
|
|
|
$
|
3,390
|
|
Common shares of beneficial interest
|
|
|
|
1,789,860(2)(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Calculated in accordance with Rule
457(r) of the Securities Act of 1933, as amended, and reflects
the potential additional issuance of Series E preferred
shares pursuant to an over-allotment option.
|
|
(2)
|
|
Represents the maximum number of
common shares that could be issuable upon conversion of the
Series E preferred shares, at the maximum rate of 0.5188 of
a common share per $25.00 liquidation preference. Pursuant to
Rule 416 of the Securities Act, Registration Statement No.
333-140978 also covers such additional common shares that may be
issued from time to time upon conversion of the Series E
preferred shares as a result of the anti-dilution provisions of
the Series E preferred stock.
|
|
(3)
|
|
Pursuant to Rule 457(i) under the
Securities Act, there is no filing fee payable with respect to
the common shares issuable upon conversion of the Series E
preferred shares because no additional consideration will be
received in connection with the exercise of the conversion right.
|
Explanatory Note: This prospectus supplement is filed to
update the prospectus supplement, dated March 27, 2008,
that was filed with the SEC on March 28, 2008, to include
the filing fee table above. All filing fees were paid in advance
of March 28, 2008.
Prospectus Supplement
(To prospectus dated
February 27, 2007)
3,000,000
Shares
Entertainment Properties
Trust
9.00% Series E cumulative
convertible preferred shares
liquidation preference $25.00
per share
We are offering 3,000,000 shares of our 9.00% Series E
cumulative convertible preferred shares of beneficial interest,
par value $0.01 per share, or the Series E preferred
shares, in this offering. We will pay cumulative distributions
on the Series E preferred shares from and including the
date of original issuance in the amount of $2.25 per share each
year, which is equivalent to 9.00% of the $25.00 liquidation
preference per share. Distributions on the Series E
preferred shares will be payable quarterly in arrears, beginning
on July 15, 2008. Our only other preferred shares
outstanding as of the date of this prospectus supplement are
3,200,000 shares of our 7.75% Series B cumulative
redeemable preferred shares with a liquidation preference of
$25.00 per share, or Series B preferred shares,
5,400,000 shares of our 5.75% Series C cumulative
convertible preferred shares with a liquidation preference of
$25.00 per share, or Series C preferred shares, and
4,600,000 shares of our 7.375% Series D cumulative
redeemable preferred shares with a liquidation preference of
$25.00 per share, or Series D preferred shares. The
Series E preferred shares will rank on a parity with the
Series B, Series C and Series D preferred shares.
You may convert the Series E preferred shares into our
common shares subject to certain conditions. The conversion rate
will initially be 0.4512 common shares per $25.00
liquidation preference, which is equivalent to an initial
conversion price of approximately $55.41 per common share.
The conversion rate will be subject to adjustment upon the
occurrence of specified events. On or after April 20, 2013,
we may, at our option, convert some or all of the Series E
preferred shares into common shares in certain circumstances
based on the market price of our common shares. Upon any
conversion of Series E preferred shares, we will have the
option to deliver either (1) a number of common shares
based upon the applicable conversion rate, or (2) an amount
of cash and common shares, as described in this prospectus
supplement.
If you elect to convert your Series E preferred shares in
connection with a fundamental change that occurs on or prior to
April 20, 2018, we will increase the conversion rate for
the Series E preferred shares surrendered for conversion to
the extent disclosed in this prospectus supplement. In addition,
upon a fundamental change, when the actual applicable price of
our common shares is less than $48.18 per share, you may
require us to convert some or all of your Series E
preferred shares at a conversion rate equal to the liquidation
preference of the Series E preferred shares being converted
plus accrued and unpaid distributions divided by 98% of the
market price of our common shares. We will have the right to
repurchase for cash some or all of the Series E preferred
shares that would otherwise be required to be converted, as
described in this prospectus supplement.
We have filed an application to list the Series E preferred
shares on the New York Stock Exchange, or NYSE, under the symbol
EPR PrE. If the application is approved, trading of
the Series E preferred shares on the NYSE is expected to
begin within 30 days after the date of initial delivery of
the Series E preferred shares. Our common shares are listed
on the NYSE under the symbol EPR. The last reported
sale price of our common shares on March 27, 2008 was
$48.18 per share.
Investing in our Series E preferred shares involves
risks. Before buying any Series E preferred shares you
should carefully read this entire prospectus supplement and the
accompanying prospectus and the documents incorporated by
reference herein and therein, including the section of this
prospectus supplement entitled Risk factors
beginning on page S-14, the section of the accompanying
prospectus entitled Risk Factors on page 3 and the
Risk Factors section of our annual report on
Form 10-K
for the year ended December 31, 2007 filed with the
Securities and Exchange Commission, or SEC, on February 26,
2008, and, to the extent applicable, our quarterly reports on
Form 10-Q.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or determined if this prospectus supplement is
truthful or complete. Any representation to the contrary is a
criminal offense.
|
|
|
|
|
|
|
|
|
|
Per Share
|
|
Total
|
|
|
Public offering price(1)
|
|
$
|
25.00
|
|
$
|
75,000,000
|
Underwriting discount
|
|
$
|
0.75
|
|
$
|
2,250,000
|
Proceeds, before expenses, to us
|
|
$
|
24.25
|
|
$
|
72,750,000
|
|
|
|
|
(1) |
Plus accrued distributions, if any, from (and including) the
original date of issuance.
|
The underwriters have an option to purchase up to an additional
450,000 Series E preferred shares from us to cover
over-allotments, if any.
The Series E preferred shares are subject to certain
restrictions on ownership and transfer designed to preserve our
qualification as a real estate investment trust for federal
income tax purposes. See Description of the Series E
Preferred Shares Restrictions on Ownership and
Transfer on page S-52 of this prospectus supplement and
Description of Certain Provisions of Maryland Law and
EPRs Declaration of Trust and Bylaws
Restrictions on Ownership and Transfer of Shares on page
29 of the accompanying prospectus for more information about
these restrictions.
The underwriters expect that the Series E preferred shares
will be ready for delivery in book-entry form through the
facilities of The Depository Trust Company on or about
April 2, 2008.
Joint Book-Running
Managers
Co-Manager
RBC Capital Markets
The date of this prospectus
supplement is March 27, 2008
You should rely only on the information contained in or
incorporated by reference into this prospectus supplement and
the accompanying prospectus. Neither we nor the underwriters
have authorized any person to provide you with different or
additional information. If anyone provides you with different or
additional information, you should not rely on it. We are not,
and the underwriters are not, making an offer to sell these
securities in any jurisdiction where the offer or sale is not
permitted. The information contained in this prospectus
supplement, the accompanying prospectus and the documents
incorporated by reference herein and therein is accurate only as
of their respective dates or as of other dates which are
specified in those documents. Our business, financial condition,
results of operations and prospects may have changed since those
dates.
Table of
contents
|
|
|
Prospectus Supplement
|
|
|
S-ii
|
|
|
S-ii
|
|
|
S-iii
|
|
|
S-1
|
|
|
S-6
|
|
|
S-13
|
|
|
S-14
|
|
|
S-20
|
|
|
S-22
|
|
|
S-23
|
|
|
S-25
|
|
|
S-53
|
|
|
S-64
|
|
|
S-67
|
|
|
S-67
|
|
|
S-68
|
Prospectus
|
About This Prospectus
|
|
1
|
Incorporation of Certain Information by Reference
|
|
1
|
Cautionary Statement Concerning Forward-Looking Statements
|
|
2
|
Risk Factors
|
|
3
|
The Company
|
|
3
|
Ratio of Earnings to Fixed Charges and Ratio of Earnings to
Combined Fixed Charges and Preferred Share Distributions
|
|
4
|
Description of Debt Securities
|
|
5
|
Description of Shares of Beneficial Interest
|
|
14
|
Description of Depositary Shares
|
|
21
|
Description of Warrants
|
|
25
|
Description of Certain Provisions of Maryland Law and EPRS
Declaration of Trust and Bylaws
|
|
27
|
U.S. Federal Income Tax Considerations
|
|
32
|
Plan of Distribution
|
|
46
|
Legal Matters
|
|
47
|
Experts
|
|
48
|
Available Information
|
|
48
|
|
|
S-i
About this
prospectus supplement
We are providing information to you about this offering of our
Series E preferred shares in two parts. The first part is
this prospectus supplement, which provides the specific details
regarding this offering. The second part is the accompanying
prospectus, which provides general information, including
information about our common shares. Generally, when we refer to
this prospectus, we are referring to both documents
combined. Some of the information in the accompanying prospectus
may not apply to this offering. If information in this
prospectus supplement is inconsistent with the accompanying
prospectus, you should rely on the information contained in this
prospectus supplement.
References to we, us, our,
EPR or the Company refer to
Entertainment Properties Trust. When we refer to our
Declaration of Trust we mean Entertainment
Properties Trusts Amended and Restated Declaration of
Trust, including the articles supplementary for each series of
preferred shares, as amended. When we refer to our
Bylaws we mean Entertainment Properties Trusts
Bylaws, as amended. The term you refers to a
prospective investor.
Incorporation of
certain information by reference
The SEC allows us to incorporate by reference the
information we file with the SEC, which means we can disclose
important information to you by referring to those documents.
The information incorporated by reference is an important part
of this prospectus supplement and the accompanying prospectus.
Any statement contained in a document which is incorporated by
reference in this prospectus supplement or the accompanying
prospectus is automatically updated and superseded if
information contained in this prospectus supplement, the
accompanying prospectus, or information we later file with the
SEC, modifies or replaces that information.
The documents listed below have been filed by us under the
Securities Exchange Act of 1934, as amended (the Exchange
Act) (File
No. 1-13561)
and are incorporated by reference in this prospectus supplement:
1. Our annual report on
Form 10-K
for the year ended December 31, 2007, filed on
February 26, 2008.
2. Our current report on
Form 8-K
filed on March 27, 2008 (only as to Item 8.01).
3. The description of our common shares included in our
registration statement on
Form 8-A
filed on November 4, 1997.
4. The description of our Series B Preferred Shares
included in our registration statement filed on
Form 8-A/A
filed on January 14, 2005.
5. The description of our Series C Preferred Shares
included in our registration statement filed on
Form 8-A
filed on December 21, 2006.
6. The description of our Series D Preferred Shares
included in our registration statement filed on
Form 8-A
filed on May 4, 2007.
In addition, all documents filed by us under Section 13(a),
13(c), 14 or 15(d) of the Exchange Act (excluding any
information that is deemed to have been furnished
and not filed with the SEC) after the date of this
prospectus supplement and prior to the termination of the
offering of the securities covered by this prospectus
supplement, are incorporated by reference herein.
S-ii
To obtain a free copy of any of the documents incorporated by
reference in this prospectus supplement (other than exhibits,
unless they are specifically incorporated by reference in the
documents) please contact us at:
Investor Relations Department
Entertainment Properties Trust
30 W. Pershing Road, Suite 201
Kansas City, Missouri 64108
(816) 472-1700/FAX
(816) 472-5794
Email info@eprkc.com
Our SEC filings also are available on our Internet website at
www.eprkc.com. The information on our website is not, and you
must not consider the information to be, a part of this
prospectus supplement or the accompanying prospectus.
As you read these documents, you may find some differences in
information from one document to another. You should assume that
the information appearing in the prospectus supplement or the
accompanying prospectus is accurate only as of the date on their
respective covers, and you should assume the information
appearing in any document incorporated or deemed to be
incorporated by reference in this prospectus supplement or the
accompanying prospectus is accurate only as of the date that
document was filed with the SEC. Our business, financial
condition, results of operations and prospects may have changed
since those dates.
Cautionary
statement concerning
forward-looking
statements
With the exception of historical information, this prospectus
supplement and the accompanying prospectus and our reports filed
under the Exchange Act and incorporated by reference in this
prospectus supplement and the accompanying prospectus and other
offering materials and documents deemed to be incorporated by
reference herein or therein may contain forward-looking
statements within the meaning of Section 27A of the
Securities Act of 1933, as amended (the Securities
Act), and Section 21E of the Exchange Act, such as
those pertaining to our acquisition or disposition of
properties, our capital resources, future expenditures for
development projects and our results of operations.
Forward-looking statements involve numerous risks and
uncertainties and you should not rely on them as predictions of
actual events. There is no assurance the events or circumstances
reflected in the forward-looking statements will occur. You can
identify forward-looking statements by use of words such as
will be, intend, continue,
believe, may, expect,
hope, anticipate, goal,
forecast, or other comparable terms, or by
discussions of strategy, plans or intentions. Forward-looking
statements necessarily are dependent on assumptions, data or
methods that may be incorrect or imprecise.
Factors that could materially and adversely affect us include,
but are not limited to, the factors listed below:
|
|
|
General international, national, regional and local business and
economic conditions;
|
|
|
Our ability to compete effectively;
|
|
|
Defaults in the performance of lease terms by our tenants;
|
S-iii
|
|
|
The financial condition of our tenants, including the extent of
tenant bankruptcies or defaults;
|
|
|
Risk of our tenants not renewing their leases;
|
|
|
The concentration of leases with our single largest tenant;
|
|
|
Our continued qualification as a REIT;
|
|
|
Risks relating to real estate ownership and development, for
example local conditions such as an oversupply of space or a
reduction in demand for real estate in the area, competition
from other available space, whether tenants and users such as
customers of our tenants consider a property attractive, changes
in real estate taxes and other expenses, changes in market
rental rates, the timing and costs associated with property
improvements and rentals, changes in taxation or zoning laws or
other governmental regulation, whether we are able to pass some
or all of any increased operating costs through to tenants, how
well we manage our properties;
|
|
|
Risks associated with use of leverage to acquire properties;
|
|
|
Fluctuations in interest rates;
|
|
|
Acts of terrorism or armed conflicts;
|
|
|
Our ability to secure adequate insurance and risk of potential
uninsured losses, including from natural disasters;
|
|
|
Risks involved in joint ventures;
|
|
|
Risks in leasing multi-tenant properties;
|
|
|
Risks of environmental liability;
|
|
|
Risks associated with owning or financing properties for which
the tenants or mortgagors operations may be impacted
by weather conditions;
|
|
|
Risks associated with the ownership of vineyards;
|
|
|
Our ability to raise capital;
|
|
|
Our ability to pay distributions to our shareholders;
|
|
|
Changes in laws and regulations, including tax laws and
regulations;
|
|
|
Risks associated with changes in the Canadian exchange rate; and
|
|
|
Certain limits on change in control imposed under law and by our
Declaration of Trust and Bylaws.
|
You should consider the risks described in the Risk
factors section on page S-14 of this prospectus
supplement, the Risk Factors section on page 3 of
the accompanying prospectus and the Risk Factors
section of our annual report on
Form 10-K
for the year ended December 31, 2007, filed with the SEC on
February 26, 2008, and, to the extent applicable, our
quarterly reports on
Form 10-Q,
in evaluating any forward-looking statements included or
incorporated by reference in this prospectus supplement and the
accompanying prospectus.
S-iv
Given these uncertainties, you should not place undue reliance
on these forward-looking statements. We undertake no obligation
to publicly update or revise any forward-looking statements
included or incorporated by reference in this prospectus
supplement or the accompanying prospectus, whether as a result
of new information, future events or otherwise. In light of the
factors referred to above, the future events discussed or
incorporated by reference in this prospectus supplement or the
accompanying prospectus may not occur and actual results,
performance or achievements could differ materially from those
anticipated or implied in the forward-looking statements.
S-v
Prospectus
supplement summary
This summary may not contain all of the information that is
important to you. Before making a decision to purchase our
Series E preferred shares, you should carefully read this
entire prospectus supplement and the accompanying prospectus,
especially the Risk factors section on page S-14 of
this prospectus supplement, the Risk Factors section
on page 3 of the accompanying prospectus and the Risk
Factors section of our annual report on
Form 10-K
for the year ended December 31, 2007, filed on
February 26, 2008, and incorporated by reference herein, as
well as the Risk Factors section in our quarterly
reports on
Form 10-Q,
to the extent applicable, and the other documents incorporated
by reference in this prospectus supplement and in the
accompanying prospectus. Unless otherwise indicated, financial
information included in this prospectus supplement is presented
on a historical basis.
About
EPR
We are a self-administered real estate investment trust, or
REIT, that develops, owns, acquires and finances
properties for consumer preferred high-quality businesses,
including megaplex movie theatres, entertainment retail centers
and other destination recreational and specialty properties.
Our real estate portfolio is comprised of over $1.9 billion
in assets (before accumulated depreciation) and consists of:
|
|
|
79 megaplex movie theatre properties (including four joint
venture properties) located in 26 states and Ontario, Canada
|
|
|
one theatre property under development in California
|
|
|
eight entertainment retail centers (including two joint venture
properties) located in Westminster, Colorado, New Rochelle, New
York, White Plains, New York, Burbank, California, and Ontario,
Canada
|
|
|
other specialty properties, including six wineries and six
vineyards located in California and a ski property located in
Ohio
|
|
|
a 50% joint venture interest in JERIT CS Fund I (CS
Fund I), which owns 12 public charter school
properties located in seven states and the District of Columbia
|
|
|
land parcels leased to restaurant and retail operators adjacent
to several of our theatre properties
|
As of March 25, 2008, we had invested approximately
$19.6 million in development land and construction in
progress for real-estate development.
Also, as of March 25, 2008, we had the following mortgage
notes receivable:
|
|
|
$107.2 million (including accrued interest) in mortgage
financing for the development of Toronto Life Square, an
entertainment retail center in Canada
|
|
|
$123.0 million (including accrued interest) in mortgage
financing for ten ski properties and development land located in
New Hampshire, Vermont, Missouri, Indiana, Ohio and Pennsylvania
|
S-1
|
|
|
$3.6 million (including accrued interest) in mortgage
financing for the development of an amphitheatre located in
Illinois.
|
|
|
$107.3 million (including accrued interest) in mortgage
financing for the development of a water park anchored
entertainment village in the greater Kansas City area
|
The theatre project under development has been pre-leased to the
prospective tenant under a long-term triple-net lease. The cost
of development will be paid by us in periodic draws. The related
timing and amount of rental payments to be received by us from
the tenant under the lease correspond to the timing and amount
of funding by us of the cost of development. This theatre will
have 12 screens and we anticipate that the total development
cost will be approximately $13.2 million. Through
March 25, 2008, we had not yet invested any funds in this
project but have commitments to fund the $13.2 million in
improvements. We plan to fund development primarily with funds
generated by debt financing and/or equity offerings. If we
determine that construction is not being completed in accordance
with the terms of the development agreement, we can discontinue
funding construction draws.
We generally lease our single-tenant properties to tenants on a
long-term triple-net basis that requires the tenant to assume
the primary risks involved in operating the property and to pay
substantially all expenses associated with the operation and
maintenance of the property. We also provide secured mortgage
financing and we own multi-tenant properties which are managed
for us by third-party management companies.
Our theatre properties are leased to prominent theatre
operators, including American
Multi-Cinema, Inc.
(referred to in this prospectus as AMC), Muvico
Entertainment LLC, Regal Cinemas, Consolidated Theatres, Loews
Cineplex Entertainment (now part of AMC), Rave Motion Pictures,
Wallace Theatres, Southern Theatres, Cobb Theatres and Kerasotes
Showplace Theatres. As of March 25, 2008, approximately 51%
of our megaplex theatre properties were leased to AMC as a
result of a series of sale-leaseback transactions relating to a
number of AMC megaplex theatres, and approximately 51% of our
total annual lease revenues were derived from rental payments by
AMC under these leases.
Approximately 15% of our total annual revenue is derived from
our four entertainment retail centers in Ontario, Canada and a
mortgage note receivable secured by an additional property under
development in Ontario, Canada. The Canadian entertainment
retail centers combined with the carrying value of our mortgage
note receivable represent approximately 23% of the
Companys net assets as of March 25, 2008.
Beginning with our taxable year ended December 31, 1997, we
elected to be treated as a REIT for U.S. federal income tax
purposes. In order to maintain our status as a REIT, we must
comply with a number of requirements under federal income tax
law that are discussed in Additional U.S. federal income
tax considerations on page S-53 of this prospectus
supplement and U.S. Federal Income Tax
Considerations on page 32 of the accompanying
prospectus.
Our executive offices are located at 30 W. Pershing Road,
Suite 201, Kansas City, Missouri 64108. Our telephone
number is
(816) 472-1700.
Growth
Strategies
As a part of our growth strategies, we will consider developing
or acquiring additional megaplex theatre properties, and
developing or acquiring single-tenant entertainment,
entertainment-related,
recreational or specialty properties. We will also consider
developing or
S-2
acquiring additional entertainment retail centers. In lieu of
acquisition or development, we may also pursue opportunities to
provide mortgage financing for these same property types.
Our investing strategies center on certain guiding principles,
which we refer to as our Five Star Principles:
Inflection
Opportunity
We look for a new generation of facilities emerging as a result
of age, technology, or change in the lifestyle of consumers
which create development, renewal or restructuring opportunities
requiring significant capital.
Enduring
Value
We look for real estate that supports activities that are
commercially successful and have a reasonable basis for
continued and sustainable customer demand in the future.
Further, we seek circumstances where the magnitude of change in
the new generation of facilities adds substantially to the
customer experience.
Excellent
Execution
We seek attractive locations and
best-of-class
executions that create market-dominant properties which we
believe create a competitive advantage and enhance sustainable
customer demand within the category despite a potential change
in tenant. We minimize the potential for turnover by seeking
quality tenants with a reliable track record of customer service
and satisfaction.
Attractive
Economics
We seek investments that provide accretive returns initially and
increasing returns over time with rent escalators and percentage
rent features that allow participation in the financial
performance of the property. Further, we are interested in
investments that provide a depth of opportunity to invest
sufficient capital to be meaningful to our total financial
results and also provide a diversity by market, geography or
tenant operator.
Advantageous
Position
In combination with the preceding principles, when investing we
look for a competitive advantage such as unique knowledge of the
category, access to industry information, a preferred tenant
relationship, or other relationships that provide access to
sites and development projects.
Recent
Developments
The following are principal recent developments since
January 1, 2008:
Debt
Financing
On January 11, 2008, the Company obtained a
$17.5 million non-recourse mortgage loan maturing on
February 1, 2018 and secured by a theatre property located
in Garland, Texas,
S-3
which bears interest at 6.19% per year, and requires monthly
principal and interest payments of $127 thousand and a final
principal payment at maturity of $11.6 million.
On March 13, 2008, the Companys subsidiary VinREIT,
LLC entered into a $65.0 million term loan and revolving
credit facility with Bank of the West and various lenders. The
credit facility is evidenced by a Credit Agreement dated as of
March 4, 2008 and includes pricing of LIBOR plus 1.5% on
loans advanced against real property and LIBOR plus 1.75% on
loans advanced against fixtures and equipment. The Credit
Agreement provides for an aggregate advance rate of 65% based on
the lesser of cost or appraised value. Term loans against real
property may be drawn on through March 14, 2010. These
loans are amortized over a
25-year
period and mature on the earlier of ten years after disbursement
or the maturity of the related real property lease. The
equipment and fixture loans have a maturity date that is the
earlier of ten years or the maturity of the related lease and
require full principal amortization over the term of the loan.
The Credit Agreement contains an accordion feature whereby,
subject to lender approval, VinREIT, LLC may obtain additional
revolving credit and term loan commitments in an aggregate
principal amount not to exceed $35.0 million. The Credit
Agreement is secured by the existing and future personal
property of VinREIT, LLC, and is jointly and severally
guaranteed by two wholly-owned subsidiaries of VinREIT, LLC,
Havens VinREIT, LLC and Duncan Peak VinREIT LLC. Each of these
subsidiaries granted a lien on its existing real estate and its
existing and future personal property to secure its guaranty.
The initial disbursement under the Credit Agreement consisted of
two term loans in the aggregate principal amount of
approximately $9.5 million with maturity dates of
December 1, 2017 and March 13, 2018, respectively, and
we simultaneously entered into interest rate swap agreements
that fixed the interest rates at an average of 5.52%. On
March 24, 2007, we obtained $3.2 million of equipment
loans that mature on December 1, 2017. Other wholly-owned
subsidiaries of VinREIT, LLC may subsequently become eligible to
join in the credit facility as secured guarantors, thus
facilitating credit extensions under the Credit Agreement.
The net proceeds from the above-referenced loans were used to
pay down outstanding indebtedness under our unsecured revolving
credit facility.
Investments
As previously announced, on October 30, 2007, we acquired,
through our wholly-owned subsidiary, EPT Schoolhouse, LLC
(EPT Schoolhouse), a 50% ownership interest in CS
Fund I for $39.3 million. CS Fund I currently
owns 12 public charter school properties located in Nevada,
Arizona, Ohio, Georgia, Missouri, Michigan, Florida and
Washington D.C. and leases them under a long-term triple net
master lease. Our partner in CS Fund I is JERIT CS
Fund I Member (JERIT Fund Member). On
March 25, 2008, EPT Schoolhouse entered into a membership
purchase agreement with JERIT Fund Member, pursuant to
which EPT Schoolhouse will purchase all of JERIT
Fund Members 50% ownership interest in CS Fund I
for approximately $39.5 million. Upon completion of this
transaction, CS Fund I will become a wholly-owned
subsidiary of the Company. The member purchase agreement
provides that EPT Schoolhouse shall pay JERIT Fund Member a
monthly asset management fee of 1.875% of the monthly rent for
the public charter school properties, for the six month period
following the closing. The membership purchase agreement also
contains an option pursuant to which JERIT Fund Member may
re-acquire its 50% interest in CS Fund I within six months
after the acquisition of such interest by EPT Schoolhouse. We
anticipate that the acquisition of JERIT Fund Members
50% interest in CS Fund I by EPT Schoolhouse will be
completed in early April; however, we cannot assure you that
this transaction will be completed or completed for the amount
or on the terms summarized above. Depending on the timing of
this acquisition, we may finance the purchase price
S-4
with a portion of the proceeds from this offering and the
concurrent offering of our common shares, or we may finance the
purchase price with borrowings under our unsecured revolving
credit facility which would be repaid using a portion of the
proceeds from this offering and the concurrent common shares
offering.
CS Fund I currently has an option to purchase an additional
$120 million of public charter school properties, of which
$60 million of properties would be scheduled to close
within the next 60 to 90 days if such option is exercised.
We cannot offer any assurance that this option will be exercised
or as to the timing or terms of the transaction or that the
transaction will be completed.
Concurrent
Offering of Common Shares
Concurrently with this offering, we are offering 2,100,000
common shares pursuant to a separate offering registered under
the Securities Act. We have granted the underwriters for the
common shares offering an over-allotment option to purchase up
to 315,000 additional common shares. If we complete the offering
of the common shares, we expect to use the proceeds from that
offering and from this offering as described in Use of
Proceeds. The completion of this offering of Series E
preferred shares is not subject to the completion of the
concurrent offering of common shares and the completion of the
concurrent offering of common shares is not subject to the
completion of this offering of Series E preferred shares.
For a description of the common shares, please see the
prospectus supplement and other offering materials for the
common shares, all of which have been or will be filed with
the SEC.
This prospectus supplement shall not be deemed to be an offer
to sell or a solicitation of an offer to buy any common shares
and we cannot assure you that the concurrent offering of our
common shares will be completed or completed for the amount or
on the terms contemplated.
S-5
The
offering
The following is a brief summary of certain terms of this
offering and is not intended to be complete. It does not contain
all of the information that will be important to a holder or the
issuer of the Series E preferred shares. For a more
complete description of the terms of the Series E preferred
shares, see Description of the Series E Preferred
Shares in this prospectus supplement and Description
of Shares of Beneficial Interest and Description of
Certain Provisions of Maryland Law and EPRs Declaration of
Trust and Bylaws in the accompanying prospectus.
|
|
|
Issuer |
|
Entertainment Properties Trust. |
|
Securities Offered |
|
3,000,000 shares of 9.00% Series E cumulative
convertible preferred shares plus up to an additional
450,000 shares of Series E preferred shares that we
may issue and sell upon the exercise of the underwriters
overallotment option. |
|
Ranking |
|
The Series E preferred shares will rank, with respect to
distribution rights and rights upon our liquidation, dissolution
or winding up: |
|
|
|
junior to all of our existing and future debt
obligations, including convertible or exchangeable debt
securities;
|
|
|
|
senior to our common shares and to any other
of our equity securities that by their terms rank junior to the
Series E preferred shares with respect to distribution
rights or payments upon our liquidation, dissolution or winding
up; |
|
|
|
on a parity with our existing Series B,
Series C, and Series D preferred shares and with other
series of our preferred shares or other equity securities that
we may later authorize and that by their terms are on a parity
with the Series E preferred shares with respect to
distribution rights or payments upon our liquidation,
dissolution or winding up; and |
|
|
|
junior to any equity securities that we may
later authorize or issue and that by their terms rank senior to
the Series E preferred shares (which we may only authorize
with the affirmative vote of the holders of at least two-thirds
of the Series E preferred shares). |
|
Distributions |
|
Holders of Series E preferred shares will be entitled to
receive cumulative cash distributions on the Series E
preferred shares from the original date of issuance at a rate of
9.00% per year of the $25.00 liquidation preference (equivalent
to $2.25 per year per share). Distributions on the Series E
preferred shares are payable quarterly in arrears on
January 15, April 15, July 15 and October 15 of each
year, or if not a business day, the next succeeding business
day. The first distribution will be paid on July 15, 2008,
and will be a pro rata distribution from and including the
original issue date to and including July 15, 2008 in the
amount of $0.65 per share. See Description of the
Series E Preferred Shares Distributions. |
S-6
|
|
|
Liquidation Preference |
|
If we liquidate, dissolve or wind up, you will have the right to
receive $25.00 per Series E preferred share, plus accrued
and unpaid distributions (whether or not authorized or declared)
to the date of payment, before any payments are made to our
common shareholders or to holders of any other of our equity
securities that we may issue ranking junior to the Series E
preferred shares as to liquidation rights (but after any
payments are made to holders of our debt, holders of our
subsidiaries debt and holders of any other of our equity
securities that we may issue ranking senior to the Series E
preferred shares as to liquidation rights (which equity
securities we may authorize only with the affirmative vote of
the holders of at least two-thirds of the Series E
preferred shares)). Your rights to receive the liquidation
preference will be subject to the proportionate rights of each
other series or class of our equity securities ranking on a
parity with the Series E preferred shares that we have
issued or may issue in the future (including our Series B,
Series C, and Series D preferred shares). See
Description of the Series E Preferred
Shares Liquidation Preference. |
|
Conversion Rights |
|
You, at your option, may convert some or all of your outstanding
Series E preferred shares initially at a conversion rate of
common shares per $25.00 liquidation preference, referred to as
the Conversion Rate, which is equivalent to an initial
conversion price of approximately $55.41 per common share
(subject to adjustment in certain events). Except as otherwise
provided, our Series E preferred shares will only be
convertible into our common shares. See Description of the
Series E Preferred Shares Conversion
Rights. |
|
Company Conversion Option |
|
On or after April 20, 2013, we may, at our option, convert
some or all of the Series E preferred shares into that
number of common shares that are issuable at the then applicable
Conversion Rate, which we refer to as the Company Conversion
Option. We may exercise the Company Conversion Option only if
(1) the Closing Sale Price (as defined below) of our
common shares equals or exceeds 150% of then applicable
conversion price of the Series E preferred shares for at
least 20 Trading Days (as defined below) in a period of 30
consecutive Trading Days (including the last Trading Day of such
period) ending on the Trading Day immediately prior to our
issuance of a press release announcing our exercise of the
Company Conversion Option and our form of payment as described
below under Conversion Settlement and (2) on or
prior to the effective date of the Company Conversion Option, we
have either declared and paid, or declared and set apart for
payment, any unpaid distributions that are in arrears on the
Series E preferred shares. See Description of the
Series E Preferred Shares Company Conversion
Option. |
S-7
|
|
|
Conversion Settlement |
|
Upon conversion, we will deliver, at our option, either
(1) a number of common shares based upon the applicable
Conversion Rate, or (2) an amount of cash and common shares
as follows: |
|
|
|
cash in an amount equal to the lesser of
(a) the Conversion Value and (b) the $25.00
liquidation preference, and |
|
|
|
if the Conversion Value (as defined below) is
greater than the $25.00 liquidation preference, a number of
common shares equal to the difference between the Conversion
Value and the $25.00 liquidation preference, divided by the
average of the Closing Sale Price of our common shares during
the Cash Settlement Averaging Period. |
|
|
|
See Description of Series E Preferred
Shares Conversion Rights Conversion
Settlement. |
|
|
|
The Conversion Value for each Series E preferred share to
be converted is an amount equal to the applicable Conversion
Rate multiplied by the average of the Closing Sale Price of our
common shares during the Cash Settlement Averaging Period. The
Cash Settlement Averaging Period for each Series E
preferred share is equal to the average of the Closing Sale
Price over the 20 consecutive Trading Days (including the last
Trading Day of such period) starting on, and including the third
Trading Day following the conversion date for such shares. |
|
|
|
At any time, we may irrevocably waive in our sole discretion our
right to satisfy our conversion obligation solely in our common
shares as described above. |
|
Payment of Distributions Upon Conversion |
|
If you exercise your conversion rights, upon delivery of the
Series E preferred shares for conversion, those
Series E preferred shares will cease to cumulate
distributions as of the conversion date and you will not receive
any cash payment representing accrued and unpaid distributions
on the Series E preferred shares, except in those limited
circumstances discussed below. Except as provided below, we will
make no payment for accrued and unpaid distributions, whether or
not in arrears, on Series E preferred shares converted at
your election, or for distributions on the common shares issued
upon such conversion. If we convert your Series E preferred
shares pursuant to the Company Conversion Option, whether prior
to, on, or after the record date for the current period, all
unpaid distributions that are in arrears as of the Company
Conversion Option Date will be payable to you. See
Description of the Series E Preferred
Shares Payment of Distributions Upon
Conversion. |
S-8
|
|
|
Conversion Rate Adjustments |
|
The Conversion Rate is subject to adjustment upon the occurrence
of certain events, including if we distribute in any fiscal
quarter to our common shareholders any cash, including quarterly
cash distributions, in excess of $0.84 per common share (subject
to adjustment). See Description of the Series E
Preferred Shares Conversion Rate Adjustments. |
|
Adjustment to Conversion Rate Upon Certain Fundamental Changes |
|
If you elect to convert your Series E preferred shares in
connection with a Fundamental Change (as defined below) that
occurs on or prior to April 20, 2018, we will increase the
Conversion Rate for the Series E preferred shares
surrendered for conversion by a number of additional shares
determined based on our share price at the time of such
Fundamental Change. See Description of the Series E
Preferred Shares The Increase in the Conversion
Rate. |
|
Rights Upon Fundamental Change |
|
On or prior to April 20, 2018, in the event of a
Fundamental Change, when the actual applicable price of our
common shares described in Description of the
Series E preferred shares The Increase in the
Conversion Rate is less than $48.18 per share, then you
will have a special right to convert some or all of your
Series E preferred shares on the Fundamental Change
Conversion Date (as defined below) into a number of our common
shares per $25.00 liquidation preference equal to such
liquidation preference, plus accrued and unpaid distributions
to, but not including, the Fundamental Change Conversion Date,
divided by 98% of the Market Price (as defined below) of our
common shares. In the event that you exercise that special
conversion right, we have the right to repurchase for cash all
or any part of your Series E preferred shares as to which
the conversion right was exercised at a repurchase price equal
to 100% of the liquidation preference of the Series E
preferred shares to be repurchased plus accrued and unpaid
distributions to, but not including, the Fundamental Change
Conversion Date. If we elect to exercise our repurchase right,
you will not have the special conversion right described in this
paragraph. See Description of the Series E Preferred
Shares Special Conversion Right of Series E
Preferred Shares upon a Fundamental Change; Company Repurchase
Right. |
|
No Maturity; Redemption |
|
Our Series E preferred shares have no maturity date and
will not be subject to any sinking fund. We are not required to
redeem or repurchase the Series E preferred shares, and,
except as described under Description of the Series E
Preferred Shares Special Conversion Right of
Series E preferred shares upon a Fundamental Change;
Company Repurchase Right or Restrictions
on Ownership and Transfer, we may not elect to redeem or
repurchase, the Series E |
S-9
|
|
|
|
|
preferred shares. On or after April 20, 2013, we have the
right, in certain circumstances, to require you to convert your
Series E preferred shares. See Description of the
Series E Preferred Shares Company Conversion
Option. |
|
Voting Rights |
|
Holders of any series of our preferred shares, including the
Series E preferred shares, generally have no voting rights.
However, if we do not pay distributions on our Series E
preferred shares for six or more quarterly periods (whether or
not consecutive), the holders of the Series E preferred
shares, voting together with the holders of any other series of
our preferred shares which have similar voting rights, including
our Series B, Series C, and Series D preferred
shares, will be entitled to vote for the election of two
additional trustees to serve on our board of trustees until we
pay or declare and set aside for payment all distributions which
we owe on our preferred shares. In addition, the affirmative
vote of the holders of at least two-thirds of the Series E
preferred shares is required for us to authorize, create or
increase the number of shares ranking senior to the
Series E preferred shares or to amend our Declaration of
Trust in a manner that materially and adversely affects the
rights of the holders of the Series E preferred shares. See
Description of the Series E Preferred
Shares Voting Rights. |
|
Listing |
|
We have filed an application to list the Series E preferred
shares on the NYSE under the symbol EPR PrE. If the
application is approved, trading of the Series E preferred
shares on the NYSE is expected to begin within 30 days
after the date of initial delivery of the Series E
preferred shares. |
|
Form |
|
The Series E preferred shares will be issued and maintained
initially in book-entry form registered in the name of the
nominee of The Depository Trust Company. |
|
Restrictions on Ownership and Transfer |
|
For us to qualify as a REIT under the Internal Revenue Code of
1986, as amended, referred to herein as the Code, not more than
50% in value of our outstanding shares of beneficial interest
may be owned, directly or constructively, by five or fewer
individuals, as defined in the Code to include certain entities,
during the last half of any taxable year. In addition, our
Declaration of Trust and the articles supplementary establishing
the Series E preferred shares contain provisions that limit
to 9.8% the percentage ownership of our equity by class or
series, including the Series E preferred shares or our
common shares, by any one person or group of affiliated persons.
Our Declaration of Trust and articles supplementary establishing
the Series E preferred shares allow our board of trustees
to waive this ownership limit, subject to certain conditions.
See Description of the Series E Preferred
Shares Restrictions on Ownership and Transfer
in this prospectus supplement and Description of Certain
Provisions of |
S-10
|
|
|
|
|
Maryland Law and EPRs Declaration of Trust and
Bylaws Restrictions on Ownership and Transfer of
Shares on page 29 of the accompanying prospectus for
more information about these restrictions. |
|
Tax consequences |
|
The U.S. federal income tax consequences of purchasing, owning
and disposing of the Series E preferred shares and common
shares into which the shares are convertible are summarized in
Additional U.S. Federal Income Tax
Considerations on
page S-53
of this prospectus supplement and U.S. Federal Income Tax
Considerations on page 32 of the accompanying prospectus. |
|
Concurrent Offering |
|
Concurrently with this public offering of Series E
preferred shares, we are offering 2,100,000 common shares (or
2,415,000 common shares if the underwriters exercise their
over-allotment option) pursuant to a separate public offering
registered under the Securities Act. The completion of the
offering of the common shares is not subject to the completion
of the offering of Series E preferred shares and the
completion of the offering of Series E preferred shares is
not subject to the completion of the offering of common shares.
See Concurrent Offering of Common Shares. |
|
Use of Proceeds |
|
The net proceeds to us from the sale of Series E preferred
shares offered hereby are expected to be approximately
$72.53 million ($83.44 million if the underwriters
exercise their over-allotment option in full), after deducting
the underwriting discount and commissions and our estimated
offering expenses. As summarized above in this prospectus
supplement, we are concurrently offering our common shares
pursuant to a separate offering registered under the Securities
Act. The net proceeds to us from the sale of our common shares
are expected to be approximately $96.65 million
($111.18 million if the underwriters exercise their
over-allotment option in full), after deducting the underwriting
discount and commissions and our estimated offering expenses. We
intend to use the net proceeds from this offering and the
concurrent offering of our common shares for general business
purposes, which may include funding the acquisition, development
or financing of properties or the repayment of debt. We are
continuously seeking acquisition, development and financing
opportunities relating to megaplex movie theatres, entertainment
retail centers and other destination recreational and specialty
properties. We believe we have a strong pipeline of development,
acquisition and financing transaction opportunities and we are a
party to several letters of intent and have entered into other
commitments in furtherance of these efforts, including our
agreement to purchase the remaining 50% interest in CS
Fund I for approximately $39.5 million. For a
description of this transaction, see Prospectus Supplement
Summary Recent Developments
Investments. Pending application of net proceeds from this
offering and the concurrent offering of our common shares to the
uses described above, we intend to use the net proceeds from
this offering and the |
S-11
|
|
|
|
|
concurrent offering of our common shares to reduce indebtedness
under our unsecured revolving credit facility and to invest any
remaining net proceeds in interest-bearing accounts and
short-term interest-bearing securities which are consistent with
our qualification as a REIT under the Code. The proceeds we
ultimately receive from this offering of Series E preferred
shares and the concurrent offering of common shares are
dependent upon numerous factors and subject to general market
conditions. We may not consummate the concurrent offering of
common shares or we may not consummate it for the amount or on
the terms planned. Accordingly, the amounts described above may
differ materially from the actual amounts we receive. This
offering of Series E preferred shares is not conditioned on
completion of the concurrent offering of our common shares and
the concurrent offering of our common shares is not conditioned
on the completion of this offering of Series E preferred
shares. See Use of Proceeds. |
|
Settlement Date |
|
Delivery of the Series E preferred shares will be made
against payment therefor on or about April 2, 2008. |
|
Risk Factors |
|
See the Risk factors section on page S-14 of this
prospectus supplement, the Risk Factors section on
page 3 of the accompanying prospectus and the Risk
Factors section of our annual report on
Form 10-K
for the year ended December 31, 2007, filed on
February 26, 2008, and, to the extent applicable, our
quarterly reports on
Form 10-Q
for other information you should consider before buying our
Series E preferred shares. |
S-12
Ratio of earnings
to fixed charges and
preferred share distributions
The table below presents our ratio of earnings to combined fixed
charges and preferred share distributions by dividing earnings
by combined fixed charges and preferred share distributions. For
this purpose, earnings is the sum of net income
before discontinued operations, equity in earnings of
unconsolidated subsidiaries, minority interest in earnings
(excluding those that have not incurred fixed charges) and fixed
charges (excluding capitalized interest) plus distributed income
from unconsolidated subsidiaries. Fixed charges
consist of interest incurred on all indebtedness related to
continuing operations (including amortization of original issue
discount, if any). The ratios are based solely on historical
financial information and no pro forma adjustments have been
made.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
2007
|
|
2006
|
|
2005
|
|
2004
|
|
2003
|
|
|
Ratio of earnings to combined fixed charges and preferred share
distributions
|
|
|
1.9X
|
|
|
2.1X
|
|
|
2.0X
|
|
|
2.0X
|
|
|
1.8X
|
|
|
S-13
Risk
factors
Before you decide to purchase our Series E preferred
shares, you should be aware that there are risks in making this
investment. You should carefully consider the risks described
below, in the Risk Factors section on page 3 of the
accompanying prospectus, in the Risk Factors section
of our annual report of on
Form 10-K
for the year ended December 31, 2007 filed on
February 26, 2008, and to the extent applicable, in our
quarterly reports on
Form 10-Q,
together with all other information included or incorporated by
reference in this prospectus supplement and the accompanying
prospectus, before you decide to invest in our Series E
preferred shares.
The trading
price for the Series E preferred shares will be directly
affected by the trading price for our common shares, which is
impossible to predict.
The trading price of the Series E preferred shares will be
affected by the trading price for our common shares. Our common
share trading price may depend on many factors, including
prevailing interest rates, general economic conditions, capital
market conditions (which may not be related to the operating
performance of companies), the market for similar securities,
our financial condition, performance and prospects, variations
from analysts expectations and our issuance of additional
debt or equity securities, and may be more volatile than the
general trading prices of preferred shares that are not
convertible.
The price of our common shares could be affected by possible
sales of our common shares by investors who view the
Series E preferred shares as a more attractive means of
equity participation in us and by hedging or arbitrage trading
activity that may develop involving our common shares. The
hedging or arbitrage trading activity could, in turn, affect the
trading prices of the Series E preferred shares.
The trading
price for the Series E preferred shares could be
substantially affected by various other factors.
As with other publicly-traded securities, the trading price for
the Series E preferred shares will depend on many factors
other than the trading price of our common shares, which may
change from time to time, including:
|
|
|
the trading price for our Series B, Series C, and
Series D Preferred Shares;
|
|
|
any increases in prevailing interest rates, which may negatively
affect the market for the Series E preferred shares;
|
|
|
the market for similar securities;
|
|
|
additional issuances of other series or classes of preferred
shares;
|
|
|
general economic conditions or conditions in the financial or
real estate markets; and
|
|
|
our financial condition, performance and prospects.
|
S-14
The Conversion
Rate of the Series E preferred shares may not be adjusted
for all dilutive events. Accordingly, we may engage in
transactions that could dilute the value of the common shares
into which your Series E preferred shares may be
convertible.
As described under Description of the Series E
Preferred Shares Conversion Rate Adjustments,
we will adjust the Conversion Rate of the Series E
preferred shares only for certain events. We will not adjust the
Conversion Rate, among other things, for:
|
|
|
the issuance of any of our common shares pursuant to any present
or future plan providing for the reinvestment of distributions
or interest payable on our securities and the investment of
additional optional amounts in common shares under any plan;
|
|
|
the issuance of any of our common shares or rights, warrants or
options to purchase such shares pursuant to any present or
future employee, trustee or consultant benefit plan, employee
agreement or arrangement or program of ours;
|
|
|
the issuance of any of our common shares pursuant to any option,
warrant, right, or exercisable, exchangeable or convertible
security outstanding as of the date the Series E preferred
shares were first issued;
|
|
|
the issuance of any of our common shares in connection with an
acquisition;
|
|
|
the issuance of shares of our common stock or the payment of
cash upon redemption thereof;
|
|
|
the issuance of any of our common shares in the offering of our
common shares we are conducting concurrently with this offering;
|
|
|
accumulated and unpaid distributions; or
|
|
|
a change in the par value of our common shares.
|
If we engage in any of these types of transactions, the value of
the common shares into which your Series E preferred shares
may be convertible may be diluted.
The adjustment
to the conversion rate of the Series E preferred shares
upon a conversion in connection with certain fundamental changes
may not adequately compensate you for the lost option value of
the Series E preferred shares as a result of that
fundamental change.
If a Fundamental Change occurs on or prior to April 20,
2018, we will under certain circumstances adjust the Conversion
Rate to provide for the issuance of additional common shares
upon any conversion of Series E preferred shares in
connection with such Fundamental Change. See Description
of the Series E Preferred Shares Adjustment to
the Conversion Rate upon the Occurrence of a Fundamental
Change. This adjustment to the Conversion Rate is only an
approximation of the lost option value of the Series E
preferred shares as a result of the Fundamental Change and may
not adequately compensate shareholders for the loss. In
addition, if a Fundamental Change occurs after April 20,
2018, or if the applicable price is less than $48.18 per share
or greater than $125.00 per share (in each case, subject to
adjustment), we will not make an adjustment to the Conversion
Rate.
S-15
We may not
have the ability to raise the funds necessary to purchase for
cash Series E preferred shares upon a fundamental change or
otherwise.
Following a Fundamental Change, you may, in addition to other
conversion rights, exercise a special right, which we refer to
as the Fundamental Change Conversion Right, to convert your
shares of Series E preferred shares as described under
Description of the Series E Preferred
Shares Special Conversion Right of Series E
Preferred Shares upon a Fundamental Change; Company Repurchase
Right. Upon conversion of the Series E preferred
shares, pursuant to the Fundamental Change Conversion Right or
otherwise, we may elect instead to repurchase all or some of
your Series E preferred shares to be converted for cash. If
we elect to repurchase some or all of your Series E
preferred shares in that circumstance, such Series E
preferred shares will no longer be entitled to be converted into
common shares, and you will be entitled to receive the cash
repurchase price from us. We cannot assure you that we will have
sufficient financial resources, or will be able to arrange
financing, to pay the repurchase price in cash with respect to
any Series E preferred shares tendered by holders for
conversion upon a Fundamental Change or otherwise. In addition,
our then existing indebtedness could provide that a Fundamental
Change would constitute an event of default or prepayment event
under, and result in the acceleration of the maturity of, such
indebtedness or could otherwise contain restrictions which would
not allow us to repurchase your Series E preferred shares.
Your right to
receive common shares upon conversion of the Series E
preferred shares in connection with a fundamental change may be
limited.
The aggregate number of our common shares issuable in connection
with an exercise of the Fundamental Change Conversion Right may
not exceed the number of common shares as shall then be
authorized and available for issuance. If the number of common
shares issuable upon such conversion would exceed shares (or if
the underwriters over-allotment option is exercised,
shares) or such other number of common shares as shall then be
authorized and available for issuance, we will have the option
to satisfy the remainder of such conversion in common shares
that are authorized for issuance in the future. We will use our
best efforts to have any such additional number of common shares
authorized for issuance within 180 days of the conversion
date but we cannot assure you that we will be able to do so. If
we are unable to do so, you will not receive all of the common
shares that you would otherwise be entitled to receive.
You should
consider the United States federal income tax consequences of
owning Series E preferred shares.
The U.S. federal income tax consequences of acquiring, owning
and disposing of Series E preferred shares and any common
shares received upon conversion are summarized under
Additional U.S. Federal Income Tax Considerations.
Certain of our actions, including an increase in the cash
distribution on our common shares, may result in an adjustment
to the Conversion Rate that could cause you to be deemed to
receive a taxable distribution subject to U.S. federal income
tax without the receipt of any cash. If you are a non-U.S.
shareholder (as defined in the Additional U.S.
Federal Income Tax Considerations), such deemed
distribution may be subject to U.S. federal withholding tax at a
30% rate or any lower rate as may be specified by an applicable
treaty. See Additional U.S. Federal Income Tax
Considerations. Also, federal tax may be imposed on the
gain realized by a non-U.S. shareholder on the sale, repurchase
or conversion of Series E preferred shares, depending on
whether those shares
S-16
constitute United States real property interests, all as more
fully explained under Additional U.S. Federal Income Tax
Considerations.
Moreover, prospective investors should be aware that as of
January 1, 2011, absent legislative action, the maximum
capital gains federal income tax rate for U.S. shareholders who
are individuals will revert to 20% and the maximum ordinary
income tax rate will revert to 39.6%.
An active
trading market for Series E preferred shares may not
develop, which may negatively impact their market value and your
ability to transfer or sell your shares, and the Series E
preferred shares have no stated maturity date.
The Series E preferred shares are a new issue of securities
for which there is currently no public market. Because the
Series E preferred shares do not have a stated maturity
date, investors seeking liquidity will be limited to selling
their shares in the secondary market. Although we will apply to
list the Series E preferred shares on the NYSE under the
symbol EPR PrE, we cannot assure you that an active
or sustained trading market for the Series E preferred
shares will develop or that the holders will be able to sell
their Series E preferred shares. The underwriters have
informed us that they intend to make a market in the
Series E preferred shares after this offering is completed.
However, the underwriters may cease their market making
activities at any time. Moreover, even if you are able to sell
your Series E preferred shares, we cannot assure you as to
the price at which any sales will be made. Future trading prices
of the Series E preferred shares will depend on many
factors, including, among other things, prevailing interest
rates, our operating results, the price of our common shares,
and the market for similar securities. Historically, the market
for convertible preferred securities has been subject to
disruptions that have caused volatility in prices. It is
possible that the market for the Series E preferred shares
will be subject to disruptions which may have a negative effect
on the holders of the Series E preferred shares, regardless
of our prospects or financial performance.
If you hold
Series E preferred shares, you will not be entitled to any
rights with respect to our common shares, but you will be
subject to all changes made with respect to our common
shares.
If you hold Series E preferred shares, you will not be
entitled to any rights with respect to our common shares
(including, without limitation, voting rights and rights to
receive any distributions on our common shares), but you will be
subject to all changes affecting the common shares. You will
have rights with respect to our common shares only if and when
we deliver common shares to you upon conversion of your
Series E preferred shares and, in limited cases, under the
conversion rate adjustments applicable to the Series E
preferred shares. For example, in the event that an amendment is
proposed to our Declaration of Trust or bylaws requiring
shareholder approval and the record date for determining the
shareholders of record entitled to vote on the amendment occurs
prior to delivery of the common shares to you following a
conversion, you will not be entitled to vote on the amendment,
although you will nevertheless be subject to any changes in the
powers, preferences or special rights of our common shares.
We may issue
additional securities and thereby materially and adversely
affect the price of our common shares and Series E
preferred shares.
We are not restricted from issuing additional common shares,
preferred shares, or securities convertible into or exchangeable
for our common shares, except that we may not authorize equity
securities ranking senior to the Series E preferred shares
with respect to distribution
S-17
rights or payments upon our liquidation, dissolution or winding
up without the affirmative vote of the holders of at least
two-thirds of the Series E preferred shares (and the
affirmative vote of the requisite number of holders of any other
class or series of preferred shares which are entitled to
similar voting rights). If we issue additional common shares,
preferred shares or convertible or exchangeable securities, the
price of our common shares and, in turn, the price of the
Series E preferred shares may be materially and adversely
affected.
The value of
the conversion right associated with the Series E preferred
shares may be substantially lessened or eliminated if we are
party to a merger, consolidation, or other similar
transaction.
If we are party to a consolidation, merger, share exchange or
sale or lease of all or substantially all of our assets pursuant
to which our common shares are converted into the right to
receive cash, securities or other property, at the effective
time of the transaction, the right to convert the Series E
preferred shares into our common shares will be changed into a
right to convert such shares into the kind and amount of cash,
securities, or other property which the holder would have
received if the holder had converted its shares of Series E
preferred shares immediately prior to the transaction. This
change could substantially lessen or eliminate the value of the
conversion privilege associated with the Series E preferred
shares in the future. For example, if all of our outstanding
common shares were acquired for cash in a merger transaction,
each Series E preferred share would become convertible
solely into cash and would no longer be convertible into
securities whose value would vary depending on our future
prospects and other factors.
Conversion of
Series E preferred shares will dilute the ownership
interest of existing shareholders.
The conversion of some or all of the Series E preferred
shares, including a conversion upon exercise of the Fundamental
Change Conversion Right, will dilute the ownership interests of
existing shareholders. Any sales in the public market of the
common shares issuable upon such conversion could adversely
affect prevailing market prices of our common shares. In
addition, the existence of the Series E preferred shares
may encourage short selling by market participants because the
conversion of the Series E preferred shares could depress
the price of our common shares.
The
Series E preferred shares have not been rated and are
subordinated to our existing and future debt, and there is no
restriction on the issuance of parity preferred
securities.
The Series E preferred shares have not been rated by any
nationally recognized statistical rating organization, which may
negatively affect their market value and your ability to sell
them. The payment of amounts due on the Series E preferred
shares will be subordinated to all of our existing and future
debt, including our unsecured revolving credit facility, and
will be structurally subordinated to the obligations of our
subsidiaries. The Series E preferred shares will be on a
parity with our existing Series B, Series C, and
Series D preferred shares. We may also issue additional
preferred shares in the future which are on a parity with (or,
upon the affirmative vote or consent of the holders of
two-thirds of the outstanding Series E preferred shares and
each other class or series of preferred shares ranking on a
parity with the Series E preferred shares which are
entitled to similar voting rights, voting as a single class,
senior to) the Series E preferred shares with respect to
the payment of distributions and the distribution of assets
upon
S-18
liquidation, dissolution or winding up. Any of these factors may
affect the trading price for the Series E preferred shares.
We may not be
able to pay distributions upon events of default under our
financing documents.
Some of our financing documents contain restrictions on
distributions upon the occurrence of events of default
thereunder. If such an event of default occurs, such as our
failure to pay principal at maturity or interest when due for a
specified period of time, we would be prohibited from making
payments on our shares, including the Series E preferred
shares and our common shares.
If our common
shares are delisted, your ability to transfer or sell the
Series E preferred shares, or common shares upon
conversion, may be limited and the market value of the
Series E preferred shares will be materially adversely
affected.
The Series E preferred shares do not contain provisions
that protect you if our common shares are delisted. Since the
Series E preferred shares have no stated maturity date, you
may be forced to elect between converting your Series E
preferred shares into illiquid shares of our common shares or
holding your Series E preferred shares and receiving stated
distributions on the shares when, as and if authorized by our
board of trustees and declared by us with no assurance as to
ever receiving the liquidation preference. In addition, if our
common shares are delisted and the Series E preferred
shares are then listed, it is likely that the Series E
preferred shares will be delisted as well. Accordingly, if our
common shares are delisted, your ability to transfer or sell
your Series E preferred shares, or common shares upon
conversion, may be limited and the market value of the
Series E preferred shares will be materially adversely
affected.
We may
continue to acquire, develop or finance ski properties,
vineyards and wineries, and public charter school properties or
real estate related companies focused on those types of
properties and this may create risks.
We have made, and expect to continue to make, acquisition,
development and financing investments in ski properties,
vineyard and wineries, and public charter school properties, as
well as, real estate related companies focused on those types of
properties. These investments are subject to various risks,
including those specifically attributable to the type of
property involved. For instance, ski properties and vineyards
and wineries are subject to risks related to weather conditions
impacting such properties and the ability of the tenant or
mortgagor to satisfy its obligations owed to the Company with
respect to such properties. In addition, our investments in
public charter schools are subject to various risks including
the ability of a school to satisfy the accreditation
requirements to receive or maintain its charter, as well as the
potential of decreasing enrollment, all of which may impact the
ability of the tenant to meet its obligations to the Company.
S-19
Use of
proceeds
The net proceeds to us from the sale of Series E preferred
shares offered hereby are expected to be approximately
$72.53 million ($83.44 million if the underwriters
exercise their over-allotment option in full), after deducting
the underwriting discount and commissions and our estimated
offering expenses.
We are concurrently offering our common shares pursuant to a
separate offering registered under the Securities Act. The net
proceeds to us from the concurrent offering of our common shares
are expected to be approximately $96.65 million
($111.18 million if the underwriters exercise their
over-allotment option in full), after deducting the underwriting
discount and commissions and our estimated offering expenses.
We intend to use the net proceeds from this offering and the
concurrent offering of our common shares for general business
purposes, which may include funding the acquisition, development
or financing of properties or the repayment of debt. We are
continuously seeking acquisition, development and financing
opportunities relating to megaplex movie theatres, entertainment
retail centers and other destination recreational and specialty
properties. We believe we have a strong pipeline of development,
acquisition and financing transaction opportunities and we are a
party to several letters of intent and have entered into other
commitments in furtherance of these efforts, including our
agreement to purchase the remaining 50% interest in CS
Fund I for approximately $39.5 million. Depending on
the timing of this acquisition, we may finance the purchase
price with a portion of the proceeds from this offering and the
concurrent offering of our common shares or we may finance the
purchase price with borrowings under our unsecured revolving
credit facility which would then be repaid using a portion of
the proceeds from this offering and the concurrent common shares
offering.
For a description of this transaction see, Prospectus
Supplement Summary Recent Developments
Investments. There can be no assurance as to the
completion, timing or terms of any of these potential
transactions.
Pending application of net proceeds from this offering and the
concurrent offering of our common shares to the uses described
above, we intend to use a portion of the net proceeds from this
offering and the concurrent offering of our common shares to
reduce indebtedness under our unsecured revolving credit
facility and to invest any remaining net proceeds in
interest-bearing accounts and short-term interest-bearing
securities which are consistent with our qualification as a REIT
under the Code.
The unsecured revolving credit facility bears interest at LIBOR
plus 1.30% to 1.75% or the Applicable Base Rate plus 0.00% to
0.20% depending on our leverage ratio at the time of each
advance. The unsecured revolving credit facility matures on
January 31, 2009 and may be extended for an additional year
at our option subject to certain terms and conditions, including
payment of an extension fee. JPMorgan Chase Bank, N.A., an
affiliate of one of the underwriters, J.P. Morgan Securities,
Inc., is a lender under this credit facility and will receive
approximately 15% of any proceeds from this offering and the
concurrent offering of our common shares that are used to repay
indebtedness under the credit facility. In addition, a holding
company of JPMorgan Chase Bank, N.A. has entered into a merger
agreement with a holding company of Bear Stearns Corporate
Lending Inc. Bear Stearns Corporate Lending, Inc. is a lender
under the credit facility and will receive approximately 4% of
any proceeds from this offering and the concurrent offering of
our common shares that are used to repay indebtedness under the
credit facility. Royal Bank of Canada, an affiliate of one of
the underwriters, RBC
S-20
Capital Markets Corporation, is also a lender under the credit
facility and will receive approximately 15% of the proceeds of
this offering and the concurrent offering of our common shares
that are used to repay indebtedness under the credit facility.
The proceeds we ultimately receive from this offering of
Series E preferred shares and the concurrent offering of
our common shares are dependent upon numerous factors and
subject to general market conditions. We may not consummate the
offering of the common shares or we may not consummate it for
the amount or on the terms planned. Accordingly, the amounts
described above may differ materially from the actual amounts we
receive. This offering of Series E preferred shares is not
conditioned on completion of the concurrent offering of our
common shares and the concurrent offering of our common shares
is not conditioned on the completion of this offering of
Series E preferred shares.
S-21
Capitalization
The following table describes our actual capitalization as of
December 31, 2007, and our capitalization on an as adjusted
basis to reflect (1) the issuance and sale of the 3,000,000
Series E preferred shares offered by this prospectus
supplement (assuming no exercise of the underwriters
over-allotment option) and the application of the net proceeds
from this offering as described in Use of Proceeds
and (2) the issuance and sale of both the 3,000,000
Series E preferred shares offered by this prospectus
supplement (assuming no exercise of the underwriters
over-allotment option) and the 2,100,000 common shares pursuant
to a separate offering registered under the Securities Act
(assuming no exercise of the underwriters over-allotment
option) and the application of the net proceeds from both
offerings as described in Use of Proceeds. The
proceeds we ultimately receive from this offering of
Series E preferred shares and the concurrent offering of
our common shares are dependent upon numerous factors and
subject to general market conditions. We may not consummate the
concurrent offering of our common shares or we may not
consummate it for the amount or on the terms planned. The
completion of this offering of Series E preferred shares is
not subject to the completion of the concurrent offering of the
common shares and the completion of the concurrent offering of
the common shares is not subject to the completion of this
offering of Series E preferred shares. Accordingly, the
actual amounts shown in the As Adjusted columns may
differ materially from those shown below.
This information should be read in conjunction with, and is
qualified in its entirety by, the consolidated financial
statements and schedules and notes thereto included in our
annual report on
Form 10-K
for the year ended December 31, 2007, incorporated by
reference in this prospectus supplement.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2007
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
Actual
|
|
|
As Adjusted (1)
|
|
|
As Adjusted (2)
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
Debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
Unsecured revolving credit facility (3)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Other long-term debt
|
|
|
1,081,264
|
|
|
|
1,081,264
|
|
|
|
1,081,264
|
|
|
|
|
|
|
|
Total debt
|
|
|
1,081,264
|
|
|
|
1,081,264
|
|
|
|
1,081,264
|
|
Minority interest
|
|
|
18,141
|
|
|
|
18,141
|
|
|
|
18,141
|
|
Shareholders equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares, $0.01 par value, 50,000,000 shares
authorized; 28,878,285 shares issued, actual and
30,978,285 shares issued, as adjusted
|
|
|
289
|
|
|
|
289
|
|
|
|
310
|
|
Preferred shares, $0.01 par value, 25,000,000 shares
authorized, actual and as adjusted; 3,200,000 Series B
preferred shares issued, actual and as adjusted; 5,400,000
Series C preferred shares issued, actual and as adjusted;
4,600,000 Series D preferred shares issued, actual and as
adjusted; and no Series E preferred shares issued, actual
and 3,000,000 Series E preferred shares issued, as adjusted
|
|
|
132
|
|
|
|
162
|
|
|
|
162
|
|
Additional paid-in capital
|
|
|
1,023,598
|
|
|
|
1,096,093
|
|
|
|
1,192,725
|
|
Treasury shares, at cost, 793,676 shares
|
|
|
(22,889
|
)
|
|
|
(22,889
|
)
|
|
|
(22,889
|
)
|
Loans to shareholders
|
|
|
(3,525
|
)
|
|
|
(3,525
|
)
|
|
|
(3,525
|
)
|
Accumulated other comprehensive income
|
|
|
35,994
|
|
|
|
35,994
|
|
|
|
35,994
|
|
Distributions in excess of net income
|
|
|
(25,706
|
)
|
|
|
(25,706
|
)
|
|
|
(25,706
|
)
|
|
|
|
|
|
|
Total shareholders equity
|
|
|
1,007,893
|
|
|
|
1,080,418
|
|
|
|
1,177,071
|
|
|
|
|
|
|
|
TOTAL CAPITALIZATION
|
|
$
|
2,107,298
|
|
|
$
|
2,179,823
|
|
|
$
|
2,276,476
|
|
|
|
|
|
|
(1)
|
|
This column reflects the issuance
and sale of the 3,000,000 Series E preferred shares offered
by this prospectus supplement (assuming no exercise of the
underwriters over-allotment option) and the application of
the net proceeds from this offering as described in Use of
Proceeds.
|
|
(2)
|
|
This column reflects the issuance
and sale of both the 3,000,000 Series E preferred shares
offered by this prospectus supplement (assuming no exercise of
the underwriters over-allotment option) and the 2,100,000
common shares pursuant to a concurrent offering registered under
the Securities Act (assuming no exercise of the
underwriters over-allotment option) and the application of
the net proceeds from each offering as described in Use of
Proceeds.
|
|
(3)
|
|
At March 25, 2008, we had
$5.0 million of indebtedness outstanding under our
unsecured revolving credit facility.
|
S-22
Selected
financial data
This table includes selected historical financial data of EPR.
You should read carefully the consolidated financial statements
and schedules, and Managements Discussion and
Analysis of Financial Condition and Results of Operations,
included in our annual report on
Form 10-K
for the year ended December 31, 2007 and our quarterly
reports on
Form 10-Q,
to the extent applicable. The selected financial data in this
table are not intended to replace the consolidated financial
statements and schedules included in our annual report on
Form 10-K
for the year ended December 31, 2007 or our quarterly
reports on
Form 10-Q,
which are incorporated by reference herein. This operating data
for each of the five years ended December 31, 2007 reflects
the reclassification of discontinued operations related to the
June 2007 sale of property. Figures are in thousands except per
share data.
Operating
Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
|
|
Rental revenue
|
|
$
|
185,949
|
|
|
$
|
167,283
|
|
|
$
|
144,950
|
|
|
$
|
124,093
|
|
|
$
|
89,696
|
|
Other income
|
|
|
2,402
|
|
|
|
3,274
|
|
|
|
3,517
|
|
|
|
557
|
|
|
|
1,195
|
|
Mortgage and other financing income
|
|
|
28,841
|
|
|
|
10,968
|
|
|
|
4,882
|
|
|
|
1,957
|
|
|
|
452
|
|
Property operating expense, net of tenant reimbursements
|
|
|
4,591
|
|
|
|
4,317
|
|
|
|
3,593
|
|
|
|
2,292
|
|
|
|
698
|
|
General and administrative expense
|
|
|
12,970
|
|
|
|
12,515
|
|
|
|
7,249
|
|
|
|
6,093
|
|
|
|
4,785
|
|
Other expense
|
|
|
4,205
|
|
|
|
3,486
|
|
|
|
2,985
|
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
|
60,505
|
|
|
|
48,866
|
|
|
|
43,749
|
|
|
|
40,011
|
|
|
|
31,022
|
|
Costs associated with loan refinancing
|
|
|
|
|
|
|
673
|
|
|
|
|
|
|
|
1,134
|
|
|
|
|
|
Depreciation and amortization
|
|
|
37,422
|
|
|
|
31,021
|
|
|
|
27,473
|
|
|
|
23,241
|
|
|
|
16,235
|
|
|
|
|
|
|
|
Income before gain on sale of land, minority interests, income
from joint ventures and discontinued operations
|
|
|
97,499
|
|
|
|
80,647
|
|
|
|
68,300
|
|
|
|
53,836
|
|
|
|
38,603
|
|
|
|
|
|
|
|
Gain on sale of land
|
|
|
129
|
|
|
|
345
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority interests
|
|
|
1,436
|
|
|
|
|
|
|
|
(34
|
)
|
|
|
(953
|
)
|
|
|
(1,555
|
)
|
Equity in income from joint ventures
|
|
|
1,583
|
|
|
|
759
|
|
|
|
728
|
|
|
|
654
|
|
|
|
401
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
100,647
|
|
|
|
81,751
|
|
|
|
68,994
|
|
|
|
53,537
|
|
|
|
37,449
|
|
Discontinued operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations
|
|
|
777
|
|
|
|
538
|
|
|
|
66
|
|
|
|
176
|
|
|
|
145
|
|
Gain on sale of real estate
|
|
|
3,240
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
104,664
|
|
|
|
82,289
|
|
|
|
69,060
|
|
|
|
53,713
|
|
|
|
37,594
|
|
Preferred dividend requirements
|
|
|
(21,312
|
)
|
|
|
(11,857
|
)
|
|
|
(11,353
|
)
|
|
|
(5,463
|
)
|
|
|
(5,463
|
)
|
Series A preferred share redemption costs
|
|
|
(2,101
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common shareholders
|
|
$
|
81,251
|
|
|
$
|
70,432
|
|
|
$
|
57,707
|
|
|
$
|
48,250
|
|
|
$
|
32,131
|
|
|
|
|
|
|
|
S-23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
2007
|
|
2006
|
|
2005
|
|
2004
|
|
2003
|
|
|
Per share data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations available to common
shareholders
|
|
|
2.89
|
|
|
2.67
|
|
|
2.31
|
|
|
2.11
|
|
|
1.80
|
Income from discontinued operations
|
|
|
0.15
|
|
|
0.02
|
|
|
|
|
|
0.01
|
|
|
0.01
|
|
|
|
|
|
|
Net income available to common shareholders
|
|
|
3.04
|
|
|
2.69
|
|
|
2.31
|
|
|
2.12
|
|
|
1.81
|
Diluted earnings per share data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations available to common
shareholders
|
|
|
2.84
|
|
|
2.63
|
|
|
2.26
|
|
|
2.06
|
|
|
1.76
|
Income from discontinued operations
|
|
|
0.15
|
|
|
0.02
|
|
|
|
|
|
0.01
|
|
|
0.01
|
|
|
|
|
|
|
Net income available to common shareholders
|
|
|
2.99
|
|
|
2.65
|
|
|
2.26
|
|
|
2.07
|
|
|
1.77
|
Shares used for computation (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
26,690
|
|
|
26,147
|
|
|
25,019
|
|
|
22,721
|
|
|
17,780
|
Diluted
|
|
|
27,171
|
|
|
26,627
|
|
|
25,504
|
|
|
23,664
|
|
|
19,051
|
Cash dividends declared per common share
|
|
$
|
3.04
|
|
$
|
2.75
|
|
$
|
2.50
|
|
$
|
2.25
|
|
$
|
2.00
|
|
|
Balance Sheet
Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
|
2007
|
|
2006
|
|
2005
|
|
2004
|
|
2003
|
|
|
|
|
Net real estate investments
|
|
$
|
1,673,313
|
|
$
|
1,415,175
|
|
$
|
1,303,758
|
|
$
|
1,144,553
|
|
$
|
900,096
|
|
|
|
Mortgage notes and related accrued interest receivable
|
|
|
325,442
|
|
|
76,093
|
|
|
44,067
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
2,171,633
|
|
|
1,571,279
|
|
|
1,414,165
|
|
|
1,213,448
|
|
|
965,918
|
|
|
|
Common dividends payable
|
|
|
21,344
|
|
|
18,204
|
|
|
15,770
|
|
|
14,097
|
|
|
9,829
|
|
|
|
Preferred dividends payable
|
|
|
5,611
|
|
|
3,110
|
|
|
2,916
|
|
|
1,366
|
|
|
1,366
|
|
|
|
Long-term debt
|
|
|
1,081,264
|
|
|
675,305
|
|
|
714,591
|
|
|
592,892
|
|
|
506,555
|
|
|
|
Total liabilities
|
|
|
1,145,599
|
|
|
714,123
|
|
|
742,509
|
|
|
620,059
|
|
|
521,509
|
|
|
|
Minority interests
|
|
|
18,141
|
|
|
4,474
|
|
|
5,235
|
|
|
6,049
|
|
|
21,630
|
|
|
|
Shareholders equity
|
|
$
|
1,007,893
|
|
$
|
852,682
|
|
$
|
666,421
|
|
$
|
587,340
|
|
$
|
422,779
|
|
|
|
|
|
S-24
Description of
the Series E preferred shares
The following is a summary of the material terms and
provisions of the Series E preferred shares. This
description supplements the description of the general terms and
provisions of our preferred shares contained in the accompanying
prospectus. To the extent the terms described herein differ from
the terms described in the accompanying prospectus, you should
rely on the terms set forth below. This is a summary and does
not completely describe our Series E preferred shares. For
a complete description, we refer you to our Declaration of
Trust, the Articles Supplementary designating the
Series E preferred shares and our Bylaws, each of which is
incorporated by reference in this prospectus supplement and the
accompanying prospectus and is available from us upon
request.
General
Under our Declaration of Trust, we are authorized to issue up to
50,000,000 common shares and up to 25,000,000 preferred shares.
As of March 25, 2008, a total of 28,209,974 common shares
were issued and outstanding and 836,647 common shares were held
in treasury, 3,200,000 Series B preferred shares
(liquidation preference $25.00 per share) were outstanding,
5,400,000 shares of our 5.75% Series C preferred
shares (liquidation preference of $25.00 per share) were
outstanding, and 4,600,000 shares of our 7.375%
Series D preferred shares (liquidation preference of $25.00
per share) were outstanding. See Capitalization. See
the Articles Supplementary relating to the Series B
preferred shares attached as Exhibit 4.6 to our
Form 8-K
filed with the SEC on January 14, 2005, Series C
preferred shares attached as Exhibit 3.2 to our
Form 8-K
filed with the SEC on December 21, 2006 and Series D
preferred shares attached as Exhibit 3.2 to our
Form 8-K
filed with the SEC on May 4, 2007 for information regarding
our Series B, Series C and Series D preferred
shares.
We are authorized to issue preferred shares in one or more
series, with such designations, preferences, conversion and
other rights, voting powers, restrictions, limitations as to
dividends, qualifications and terms and conditions of
redemption, in each case as permitted by Maryland law and
determined by our board of trustees. See Description of
Shares of Beneficial Interest and Description of
Certain Provisions of Maryland Law and EPRs Declaration of
Trust and Bylaws in the accompanying prospectus.
Prior to completing this offering, we will adopt articles
supplementary establishing the Series E preferred shares.
You may obtain a complete copy of the articles supplementary
describing the Series E preferred shares by contacting us.
The articles supplementary will initially authorize 3,450,000
Series E preferred shares. Our board of trustees may
authorize additional Series E preferred shares from time to
time.
The transfer agent, registrar and distribution disbursing agent
for the Series E preferred shares will be Computershare
Trust Company, N.A. Shares will be subject to the transfer
restrictions described below in Restrictions on
Ownership and Transfer and in Description of Certain
Provisions of Maryland Law and EPRs Declaration of Trust
and Bylaws Restrictions on Ownership and Transfer of
Shares in the accompanying prospectus.
We have filed an application to list the Series E preferred
shares on the NYSE. If the application is approved, trading of
the Series E preferred shares on the NYSE is expected to
begin within 30 days after the date of initial delivery of
the Series E preferred shares.
S-25
We expect that the Series E preferred shares initially will
be issued in uncertificated, book-entry form.
Ranking
The Series E preferred shares will rank, with respect to
distribution rights and rights upon our liquidation, dissolution
or winding up:
|
|
|
junior to all of our existing and future debt obligations,
including convertible or exchangeable debt securities;
|
|
|
senior to our common shares and to any other of our equity
securities that by their terms rank junior to the Series E
preferred shares with respect to distribution rights or payments
upon our liquidation, dissolution or winding up;
|
|
|
on a parity with our existing Series B, Series C, and
Series D preferred shares and with other series of our
preferred shares or other equity securities that we may later
authorize and that by their terms are on a parity with the
Series E preferred shares; and
|
|
|
junior to any equity securities that we may later authorize and
that by their terms rank senior to the Series E preferred
shares (which we may only authorize with the affirmative vote of
the holders of at least two-thirds of the Series E
preferred shares).
|
Distributions
Subject to the rights of holders of any senior securities we may
authorize and designate in the future, holders of the
Series E preferred shares will be entitled to receive,
when, as and if authorized by our board of trustees and declared
by us, out of funds legally available for the payment of
distributions, cumulative cash distributions at the rate of
9.00% of the liquidation preference per year (equivalent to
$2.25 per Series E preferred share per year).
Distributions on the Series E preferred shares issued in
this offering will accrue and be cumulative from and including
the date of original issue by us and will be payable quarterly
in arrears on the 15th day of each January, April, July and
October (except that the first distribution will be paid on
July 15, 2008) or, if not a business day, the next
business day, referred to in each case as a Distribution Payment
Date. The term business day means each day, other
than a Saturday or a Sunday, which is not a day on which banks
in New York are required to close.
Distributions payable on the Series E preferred shares for
any partial period will be computed on the basis of a
360-day year
consisting of twelve
30-day
months. We will pay distributions to holders of record as they
appear in our share records at the close of business on the
applicable record date, which will be the same date set for any
quarterly distribution payable to holders of our common shares
and Series B, Series C and Series D preferred
shares, or on such other date designated by our board of
trustees for the payment of distributions that is not more than
30 nor less than 10 days prior to the Distribution
Payment Date, each referred to as a Distribution Record Date. A
holders right to receive distributions upon conversion of
Series E preferred shares is limited. For a description of
these limitations, see Payment of Distributions Upon
Conversion.
The first distribution on the Series E preferred shares
will be paid on July 15, 2008, and will be a pro rata
distribution from and including the original issue date to and
including July 15, 2008 in the amount of $0.65 per share.
S-26
We will not authorize or pay any distributions on the
Series E preferred shares or set aside funds for the
payment of distributions if restricted or prohibited by law, or
if the terms of any of our agreements, including agreements
relating to our indebtedness or our other series of preferred
shares, prohibit that authorization, payment or setting aside of
funds or provide that the authorization, payment or setting
aside of funds is a breach of or a default under that agreement.
We are, and may in the future become, a party to agreements
which restrict or prevent the payment of distributions on, or
the purchase of, shares. These restrictions may include indirect
covenants which require us to maintain specified levels of net
worth or assets. We do not believe that these restrictions
currently have any adverse impact on our ability to pay
distributions on the Series E preferred shares.
Notwithstanding the foregoing, distributions on the
Series E preferred shares will be cumulative and will
accrue whether or not we have earnings, whether or not there are
funds legally available for the payment of distributions and
whether or not distributions are authorized or declared. Accrued
but unpaid distributions on the Series E preferred shares
will accumulate as of the due date on which each such
distribution payment first becomes payable. Accrued but unpaid
distributions on the Series E preferred shares will not
bear interest, and holders of the Series E preferred shares
will not be entitled to any distributions, whether payable in
cash, property or shares, in excess of full cumulative
distributions as described above. All of our distributions on
the Series E preferred shares, including any capital gain
distributions, will be credited first to the earliest accrued
and unpaid distribution due with respect to those shares which
remain payable.
Unless full cumulative distributions on the Series E
preferred shares for all past distribution periods and the then
current distribution period have been or contemporaneously are
declared and paid in cash or declared and contemporaneously a
sum sufficient to pay them in full in cash is set apart for
payment, we will not directly or indirectly:
|
|
|
declare, pay, set apart for payment or otherwise make any
distributions on any common shares or any other class or series
of preferred shares or other equity securities ranking on parity
with or junior to the Series E preferred shares as to
distributions and upon liquidation (other than a distribution
paid in common shares or in any other class or series of
preferred shares or other equity securities ranking junior to
the Series E preferred shares as to distributions and upon
liquidation) or on any class or series of preferred shares or
other equity securities ranking on parity with the Series E
Preferred Shares as to distributions and upon liquidation;
|
|
|
redeem, purchase or otherwise acquire for any consideration (or
pay or make available any monies for a sinking fund for the
redemption of any such shares) any common shares or any other
class or series of preferred shares or other equity securities
ranking junior to or on parity with the Series E preferred
shares as to distributions and upon liquidation; provided that
this restriction will not limit our acquisition of any such
common shares or junior shares (1) by conversion into or
exchange for any such common shares or junior shares,
(2) by redemption, purchase or other acquisition of our
common shares made for purposes of an incentive, benefit or
share purchase plan of ours for officers, trustees or employees
or others performing or providing similar services, or
(3) for the purpose of preserving our status as a real
estate investment trust for federal income tax purposes.
|
When we do not pay distributions in full (or we do not set apart
a sum sufficient to pay them in full) upon the Series E
preferred shares and any other class or series of preferred
shares or other equity securities ranking on a parity as to
distributions with the Series E preferred shares, we
S-27
will declare any distributions upon the Series E preferred
shares and any other class or series of preferred shares or
other equity securities ranking on a parity as to distributions
with the Series E preferred shares proportionately so that
the distributions declared per share of Series E preferred
shares and those other classes or series of preferred shares or
other equity securities will in all cases bear to each other the
same ratio that accumulated, accrued and unpaid distributions
per share on the Series E preferred shares and those other
classes or series of preferred shares or other equity securities
(which will not include any accumulation in respect of unpaid
distributions on such other classes or series of preferred
shares or other equity securities for prior distribution periods
if those other classes or series of preferred shares or other
equity securities do not have cumulative distributions) bear to
each other. No interest, or sum of money in lieu of interest,
will be payable in respect of any distribution payment or
payments on the Series E preferred shares which may be in
arrears.
If, for any taxable year, we elect to designate any portion of
the distributions, within the meaning of the Code, paid or made
available for the year to holders of all classes of our shares
of beneficial interest as capital gain dividends, as
defined in Section 857 of the Code, then the portion of the
distributions designated as capital gain dividends that will be
allocable to the record holders of our Series E preferred
shares will be the portion of the distributions designated as
capital gain dividends multiplied by a fraction, the numerator
of which will be the total distributions paid or made available
to such record holders of our Series E preferred shares for
the year and the denominator of which will be the total
distributions paid or made available for the year to holders of
all classes of our shares of beneficial interest.
Liquidation
Rights
In the event of our voluntary or involuntary liquidation,
dissolution or winding up of our affairs, the holders of the
Series E preferred shares will be entitled to be paid out
of our assets legally available for distribution to our
shareholders, after payment of or provision for our debts and
other liabilities, a liquidation preference of $25.00 per share,
plus any accrued and unpaid distributions (whether or not
authorized or declared) through the date of the payment. The
holders of Series E preferred shares will be entitled to
receive this liquidating distribution before we distribute any
assets to holders of our common shares or any other equity
securities that rank junior to the Series E preferred
shares as to payments upon our liquidation, dissolution or
winding up. If, upon our voluntary or involuntary liquidation,
dissolution or winding up, our available assets are insufficient
to pay the amount of the liquidation distributions on all
outstanding Series E preferred shares and the corresponding
amounts payable on all other equity securities ranking on a
parity with the Series E preferred shares as to liquidation
rights, then the record holders of the Series E preferred
shares and all other equity securities ranking on a parity with
the Series E preferred shares as to liquidation rights will
share proportionately in any such distribution of assets in
proportion to the full liquidating distributions to which they
would otherwise be respectively entitled. The rights of holders
of Series E preferred shares to receive their liquidation
preference would be subject to the preferential rights of the
holders of any equity securities which are senior to the
Series E preferred shares as to liquidation rights.
Holders of the Series E preferred shares will be entitled
to notice of any event triggering the right to receive a
distribution in connection with any voluntary or involuntary
liquidation, dissolution or winding up of our affairs. After
payment of the full amount of the liquidating distributions to
which they are entitled, holders of our Series E preferred
shares will have no right or claim to any of our remaining
assets. The consolidation or merger of us with or into any other
corporation, trust or entity, or the voluntary sale, lease,
transfer or conveyance of all or
S-28
substantially all of our properties or business, will not be
deemed to constitute a liquidation, dissolution or winding up of
our affairs. In determining whether a distribution (other than
upon voluntary or involuntary liquidation), by redemption or
other acquisition of shares or otherwise, is permitted under
Maryland law, amounts that would be needed, if we were to be
dissolved at the time of the distribution, to satisfy the
preferential rights upon dissolution of the holders of
Series E preferred shares will not be added to our total
liabilities.
Voting
Rights
Holders of Series E preferred shares generally will have no
voting rights, except as described below.
If full cumulative distributions are not paid on the
Series E preferred shares for six or more quarterly periods
(whether or not consecutive), a preferred distribution default
will exist, and holders of the Series E preferred shares,
voting together as a class with the holders of all other classes
or series of our preferred shares ranking on a parity with the
Series E preferred shares upon which like voting rights
have been conferred and are exercisable, will be entitled to
elect two additional trustees to our board of trustees, referred
to as preferred share trustees. The election will take place at
the next annual meeting of shareholders, or at a special meeting
of the holders of Series E preferred shares and any other
class or series of preferred shares upon which like voting
rights have been conferred and are exercisable called for that
purpose and each subsequent annual meeting (or special meeting
held in its place) unless and until all distributions
accumulated on the Series E preferred shares and on any
other class or series of preferred shares upon which like voting
rights have been conferred and are exercisable have been paid in
full for all past distribution periods and the distribution for
the then current distribution period shall have been fully paid
or declared and a sum sufficient for the payment thereof set
aside for payment. Each preferred share trustee will be elected
by a plurality of the votes cast in the election to serve until
the trustees successor is duly elected and qualifies or
until the trustees right to hold the office terminates,
whichever occurs earlier, and will be entitled to one vote on
any matter.
Upon such election, the size of our board of trustees will be
increased by two trustees. So long as a preferred distribution
default continues, any vacancy in the office of a preferred
distribution trustee elected under this paragraph may be filled
by written consent of the other preferred distribution trustee
who remains in office or by a vote of the holders of the
outstanding Series E preferred shares when they have the
voting rights described above (voting together as a class with
all other classes or series of preferred shares ranking on a
parity with the Series E preferred shares upon which like
voting rights have been conferred and are exercisable). If and
when all such accumulated distributions shall have been paid in
full on the Series E preferred shares and all other classes
or series of preferred shares ranking on a parity with the
Series E preferred shares upon which like voting rights
have been conferred and are exercisable, the voting rights set
forth above will terminate (subject to reinstatement in the
event of each and every preferred distribution default) the term
of office of each of the preferred share trustees so elected
will terminate and the size of our board of trustees will be
reduced accordingly.
S-29
In addition, so long as any Series E preferred shares
remain outstanding, the affirmative vote or consent of the
holders of at least two-thirds of the outstanding Series E
preferred shares (voting separately as a class) will be required
to:
|
|
|
amend, alter or repeal any of the provisions of our Declaration
of Trust (including the articles supplementary) or our bylaws,
whether by merger, consolidation, transfer or conveyance of
substantially all of our assets or otherwise, in a manner that
materially and adversely affects the powers, rights, privileges
or preferences of the Series E preferred shares or the
holders of the Series E preferred shares; provided,
however, that the amendment of, or supplement to, the
provisions of our Declaration of Trust so as to authorize,
create, increase or decrease the authorized amount of any shares
ranking on a parity with or junior to the Series E
preferred shares with respect to the payment of distributions
and the distribution of assets upon liquidation, dissolution or
winding up, or the issuance of any such shares, shall not be
deemed to materially adversely affect the powers, rights or
preferences of the Series E preferred shares;
|
|
|
effect a share exchange that affects the Series E preferred
shares, a consolidation with or merger of us into another
entity, or a consolidation with or merger of another entity into
us, unless in each such case each Series E preferred share
(A) shall remain outstanding without a material and adverse
change to its terms and rights or (B) shall be converted
into or exchanged for preferred shares of the surviving entity
having preferences, rights, powers, restrictions, limitations as
to distributions, qualifications and terms or conditions of
redemption identical to that of the Series E preferred
shares (except for changes that do not materially and adversely
affect the holders of the Series E preferred shares);
|
|
|
authorize, reclassify or create, or increase the authorized or
issued amount of, any class or series of shares ranking senior
to the Series E preferred shares as to distributions and
upon liquidation or any security convertible into or evidencing
the right to purchase any class or series of such shares; or
|
Holders of the Series E preferred shares will not have any
voting rights with respect to, and the consent of the holders of
the Series E preferred shares is not required for, the
taking of any corporate action, including any merger or
consolidation involving us or a sale of all or substantially all
of our assets, regardless of the effect that such merger,
consolidation or sale may have upon the powers, preferences,
voting power or other rights or privileges of our Series E
preferred shares, except as set forth above.
In addition, the voting provisions above will not apply if, at
or prior to the time when the act with respect to which the vote
would otherwise be required would occur, we have converted,
repurchased or otherwise reacquired or called for conversion or
repurchase upon proper procedures all outstanding Series E
preferred shares.
In any matter in which the Series E preferred shares are
entitled to vote, each Series E preferred share will be
entitled to one vote. If the holders of Series E preferred
shares and another class or series of preferred shares are
entitled to vote together as a single class on any matter, the
Series E preferred shares and the shares of the other class
or series will have one vote for each $25.00 of liquidation
preference.
S-30
Conversion
Rights
The holders of the Series E preferred shares, at their
option, may, at any time and from time to time, convert some or
all of their outstanding Series E preferred shares, by
following the procedures described under Voluntary
Conversion Procedures below, initially at a Conversion
Rate of 0.4512 common shares per $25.00 liquidation preference,
which is equivalent to an initial conversion price of
approximately $55.41 per common share (subject to adjustment in
certain events). The Series E preferred shares will be
convertible, at our option, into either (1) a number of
common shares equal to the applicable Conversion Rate, or
(2) an amount of cash and common shares as described under
Conversion Settlement below. In addition, at any
time we may irrevocably waive, in our sole discretion, our right
to satisfy our obligation to convert the Series E preferred
shares (our conversion obligation) solely into our
common shares.
We may elect not to issue fractional common shares upon the
conversion of Series E preferred shares, in which case we
will pay the cash value of such fractional shares based upon the
Closing Sale Price of our common shares on the Trading Day
immediately prior to the Conversion Date or the Company
Conversion Option Date, as the case may be (each as defined
below).
Holders of Series E preferred shares are not entitled to
any rights of a common shareholder until such holder of
Series E preferred shares has converted its Series E
preferred shares or unless we have exercised the Company
Conversion Option, and only to the extent the Series E
preferred shares are deemed to have been converted into common
shares under the articles supplementary establishing the
Series E preferred shares.
Company
Conversion Option
On or after April 20, 2013, we may, at our option, convert
some or all of the Series E preferred shares into that
number of common shares that are issuable at the then applicable
Conversion Rate. We refer to this as the Company Conversion
Option. We may exercise the Company Conversion Option only if:
|
|
|
the Closing Sale Price of our common shares equals or exceeds
150% of the then applicable conversion price of the
Series E preferred shares for at least 20 Trading Days
in a period of 30 consecutive Trading Days (including the
last Trading Day of such period) ending on the Trading Day
immediately prior to our issuance of a press release announcing
our exercise of the Company Conversion Option as described
below; and
|
|
|
on or prior to the effective date of the exercise of the Company
Conversion Option, we have either declared and paid, or declared
and set apart for payment, any unpaid distributions that are
accumulated on the Series E preferred shares.
|
If we convert less than all of the outstanding Series E
preferred shares, the transfer agent will select the shares to
be converted by lot, on a pro rata basis or in accordance with
any other method the transfer agent considers fair and
appropriate. We may convert the Series E preferred shares
only in a whole number of shares. If a portion of a
holders Series E preferred shares is selected for
partial conversion by us and the holder converts a portion of
such Series E preferred shares, the number of Series E
preferred shares subject to conversion by us will be reduced by
the number of shares that the holder converted.
The Closing Sale Price of our common shares on any date means
the closing sale price per share (or, if no closing sale price
is reported, the average of the bid and asked prices or, if more
than
S-31
one in either case, the average of the average bid and the
average asked prices) on such date as reported by the NYSE or,
if our common shares are not reported by the NYSE, in composite
transactions for the principal other U.S. national or regional
securities exchange on which our common shares are traded. If
our common shares are not listed for trading on a U.S. national
or regional securities exchange on the relevant date, the
Closing Sale Price will be the last quoted bid price for our
common shares in the over-the-counter market on the relevant
date as reported by the National Quotation Bureau Incorporated
or similar organization. If our common shares are not so quoted,
the Closing Sale Price will be the average of the mid-point of
the last bid and asked prices for our common shares on the
relevant date from each of at least three independent nationally
recognized investment banking firms selected by us for this
purpose.
A Trading Day is any day during which trading in our common
shares generally occurs, and there is no market disruption
event. For purposes of the definition of Trading Day,
market disruption event means the occurrence or
existence during the one-half hour period ending on the
scheduled close of trading on the principal U.S. national or
regional securities exchange on which our common shares is
listed for trading of any material suspension or limitation
imposed on trading (by reason of movements in price exceeding
limits permitted by the stock exchange or otherwise) in our
common shares or in any options contracts or future contracts
relating to our common shares.
To exercise our Company Conversion Option described above, we
must issue a press release for publication on the Dow
Jones & Company, Inc., Business Wire or Bloomberg
Business News (or, if such organizations are not in existence at
the time of issuance of such press release, such other news or
press organization as is reasonably calculated to broadly
disseminate the relevant information to the public) prior to the
opening of business on the first Trading Day following any date
on which the conditions to our exercise of the Company
Conversion Option described above are met, announcing such
conversion and our form of payment. We will also give notice by
mail or by publication (with subsequent prompt notice by mail)
to holders of our Series E preferred shares (not more than
four Trading Days after the date of the press release) and, if
required by the rules and regulations of the SEC, we will file a
Current Report on
Form 8-K
(or make such other filing on an appropriate form as may be
permitted by the rules and regulations of the SEC), of our
exercise of the Company Conversion Option announcing our
intention to convert the Series E preferred shares. The
effective date for any Company Conversion Option, referred to as
the Company Conversion Option Date, will be the date that is
selected by us that is no later than five Trading Days after the
date on which we issue such press release.
In addition to any information required by applicable law or
regulation, the press release and notice of our exercise of the
Company Conversion Option will state, as appropriate:
|
|
|
the Company Conversion Option Date;
|
|
|
the form of payment that we elect to deliver upon conversion
(unless we have irrevocably elected to waive our right to
satisfy our conversion obligation solely in our common shares);
|
|
|
the number of common shares to be issued upon conversion of each
Series E preferred share;
|
|
|
the number of Series E preferred shares to be converted; and
|
|
|
that distributions on the Series E preferred shares to be
converted will cease to accrue on the Company Conversion Option
Date.
|
S-32
Voluntary
Conversion Procedures
Holders of Series E preferred shares may convert some or
all of their shares by surrendering to us at our principal
office or at the office of our transfer agent, as may be
designated by our board of trustees, the certificate or
certificates, if any, for the Series E preferred shares to
be converted accompanied by a written notice stating that the
holder of Series E preferred shares elects to convert all
or a specified whole number of those shares in accordance with
the provisions described in this prospectus supplement and the
articles supplementary for the Series E preferred shares
and specifying the name or names in which the holder of the
Series E preferred shares wishes the certificate or
certificates, if any, for any common shares to be issued. In
case the notice specifies a name or names other than the name of
the holder of Series E preferred shares, the notice must be
accompanied by payment of all transfer taxes payable upon the
issuance of any common shares in that name or names. Other than
such transfer taxes, we will pay any documentary, stamp or
similar issue or transfer taxes that may be payable in respect
of any issuance or delivery of common shares upon conversion of
the Series E preferred shares.
The voluntary conversion of any Series E preferred share by
a holder of such share will be deemed to have been made at the
close of business on the date, referred to as the Conversion
Date, on which we have received all of the certificates, if any,
to be surrendered, the notice relating to the conversion and
payment of all required transfer taxes, if any, or the
demonstration to our satisfaction that those taxes have been
paid. At the close of business on the Conversion Date, the
rights of a holder of Series E preferred shares as to the
shares being converted will cease except for the right to
receive the conversion payment as described under
Conversion Settlement below, and, if applicable, the
person entitled to receive common shares will be treated for all
purposes as having become the record holder of those common
shares at that time.
In addition to the foregoing procedures, if the Series E
preferred shares are held in global form, the holder of
Series E preferred shares must comply with applicable
procedures of The Depository Trust Company or any successor
entity (which we collectively refer to as DTC) to convert such
holders Series E preferred shares.
In case any Series E preferred shares are to be converted
pursuant to the Company Conversion Option, the right of a holder
of Series E preferred shares to voluntarily convert those
shares of Series E preferred shares will terminate if we
have not received from such holder of Series E preferred
shares its conversion notice by 5:00 p.m., New York City
time, on the business day immediately preceding the Company
Conversion Option Date.
If we have elected to repurchase your Series E preferred
shares as described under Description of the Series E
Preferred Shares Special Conversion Right of
Series E preferred shares upon a Fundamental Change;
Company Repurchase Right, your conversion rights (other
than the Fundamental Change Conversion Right) as a holder of
Series E preferred shares with respect to the Series E
preferred shares so subject to repurchase will expire if we have
not received your conversion notice by 5:00 p.m., New York
City time, on the business day immediately preceding the
repurchase date, unless we default on the payment of the
Fundamental Change Repurchase Price (as defined below), and your
Fundamental Change Conversion Right will automatically not be
exercisable but instead you will be entitled to receive the
Fundamental Change Repurchase Price from us unless you have
converted your Series E preferred shares other than by
exercise of the Fundamental Change Conversion Right.
S-33
If more than one share of our Series E preferred shares is
surrendered for conversion by the same shareholder at the same
time, the number of whole common shares issuable upon conversion
of those Series E preferred shares will be computed on the
basis of the total number of Series E preferred shares so
surrendered.
We will at all times reserve and keep available, free from
preemptive rights, out of our authorized but unissued shares of
beneficial interest, for issuance upon the conversion of
Series E preferred shares, a number of our authorized but
unissued common shares that will from time to time be sufficient
to permit the conversion of all outstanding Series E
preferred shares as described above.
Conversion
Settlement
Upon conversion (whether upon a Company Conversion Option or a
voluntary conversion by a holder of Series E preferred
shares), we will deliver, at our option, either (1) a
number of common shares based upon the applicable Conversion
Rate, or (2) an amount of cash and common shares as follows:
|
|
|
cash in an amount equal to the lesser of (a) the Conversion
Value and (b) the $25.00 liquidation preference, and
|
|
|
if the Conversion Value is greater than the $25.00 liquidation
preference, a number of common shares equal to the difference
between the Conversion Value and the $25.00 liquidation
preference, divided by the average of the Closing Sale Price of
our common shares during the Cash Settlement Averaging Period.
|
The Conversion Value for each Series E preferred share to
be converted is an amount equal to the then applicable
Conversion Rate multiplied by the average of the Closing Sale
Price of our common shares during the Cash Settlement Averaging
Period.
The Cash Settlement Averaging Period for each Series E
preferred share is the 20 consecutive Trading Days (including
the last Trading Day of such period), starting on, and including
the third Trading Day following the Company Conversion Date or
the Conversion Date, as the case may be.
At any time, we may irrevocably waive, in our sole discretion,
by notice to the holders of the Series E preferred shares,
our right to satisfy our conversion obligation solely in common
shares pursuant to clause (1) above. We will not be
permitted to elect the payment option in clause (1) above
if we have made the election to waive our right to do so. If we
decide in our sole discretion to irrevocably waive such right,
then we will give notice of such waiver by mail or publication
(with subsequent prompt notice by mail) to our holders of our
Series E preferred shares, and such waiver shall be
effective as of the date specified in such notice, or if no date
is specified, then as of the date of such notice.
If we exercise the Company Conversion Option, then the press
release and notice of our exercise of the Company Conversion
Option will state the form of payment we elect to deliver upon
conversion (unless we have irrevocably elected to waive our
right to satisfy our conversion obligation solely in our common
shares), as described above under Company Conversion
Option, and such payment election shall apply to all such
Series E preferred shares to be converted pursuant to the
such Company Conversion Option.
S-34
If we receive proper notice of conversion by a holder in
accordance with the conversion procedures described under
Voluntary Conversion Procedures above, then we will
notify the relevant holders of Series E Preferred Stock
within two scheduled Trading Days following the Conversion Date
of the form of payment we elect to deliver upon conversion
(unless we have irrevocably elected to waive our right to
satisfy our conversion obligation solely in our common shares).
We will treat all holders converting on the same Trading Day in
the same manner. We will not, however, have any obligation to
satisfy our conversion obligation arising on different Trading
Days in the same manner. That is, we may elect to choose on one
Trading day to settle our conversion obligation solely in common
shares pursuant to clause (1) above, and choose on another
Trading Day to settle in cash and/or common shares pursuant to
clause (2) above.
On settlement of our conversion obligation, we will:
|
|
|
reflect the issuance of such number of validly issued, fully
paid and non-assessable common shares to which the holder of
Series E preferred shares, or the transferee of a holder of
Series E preferred shares, will be entitled as described in
the first paragraph of this subsection; and
|
|
|
deliver or cause to be delivered, depending upon the form of
payment we elect to deliver upon settlement of our conversion
obligation (1) if our common shares are then certificated,
certificates evidencing the number of validly issued, fully paid
and non-assessable common shares, if any, and/or (2) cash,
if any, in each case to which the holder of Series E
preferred shares, or the transferee of a holder of Series E
preferred shares, will be entitled as described in the first
paragraph of this subsection.
|
To the extent that we elect to settle our conversion obligation
solely in common shares, we will deliver payment as promptly as
practicable after the Company Conversion Option Date or the
Conversion Date as the case may be (after giving of any
requisite notice and surrender of the certificate or
certificates, if any, evidencing the shares of the Series E
preferred shares to be converted). To the extent that we elect
to settle our conversion obligation in cash and/or common
shares, we will deliver payment as promptly as practicable
following the third Trading Day after the Cash Settlement
Averaging Period (after giving of any requisite notice and
surrender of the certificate or certificates, if any, evidencing
the shares of the Series E preferred shares to be
converted). If less than the full number of Series E
preferred shares evidenced by the surrendered certificate or
certificates are being converted, we will issue a new
certificate or certificates, of like tenor, for the number of
shares evidenced by the surrendered certificate or certificates,
less the number of shares being converted.
Before the delivery of any common shares upon conversion of the
Series E preferred shares, we will comply with all
applicable federal and state laws and regulations. All common
shares delivered upon conversion of the Series E preferred
shares will upon delivery be duly and validly issued, fully paid
and non-assessable, free of all liens and charges and not
subject to any preemptive rights.
Payment of
Distributions Upon Conversion
Voluntary
Conversion
General. If a holder of Series E
preferred shares exercises its conversion rights, upon delivery
of the Series E preferred shares for conversion, those
Series E preferred shares will cease to cumulate
distributions as of the end of the Conversion Date and the
holder of those Series E preferred shares will not receive
any cash payment representing accrued and unpaid
S-35
distributions on the Series E preferred shares, except in
those limited circumstances discussed below. Except as provided
below, we will make no payment for accrued and unpaid
distributions, whether or not in arrears, on Series E
preferred shares converted at the election of the holder of
Series E preferred shares, or for distributions on the
common shares issued upon such conversion.
Conversion On or Before Record Date. If we
receive a conversion notice before the close of business on a
Distribution Record Date, the holder of Series E preferred
shares will not be entitled to receive any portion of the
distribution payable on such converted shares on the
corresponding Distribution Payment Date.
Conversion After Record Date and Prior to Payment
Date. If we receive a conversion notice after the
Distribution Record Date but prior to the corresponding
Distribution Payment Date, the holder of Series E preferred
shares on the record date will receive on that Distribution
Payment Date accrued distributions on those Series E
preferred shares, notwithstanding the conversion of those
Series E preferred shares prior to that Distribution
Payment Date, because that holder of Series E preferred
shares will have been the holder of record of the Series E
preferred shares on the corresponding record date. At the time
that such holder of the Series E preferred shares
surrenders Series E preferred shares for conversion,
however, it must pay to us an amount equal to the distribution
that has accrued and that will be paid on the related
Distribution Payment Date.
Conversion On or After Distribution Payment Date and On or
Prior to the Immediately Succeeding Record
Date. If the holder of Series E preferred
shares is a holder of Series E preferred shares on a
Distribution Record Date and converts such shares of
Series E preferred shares into common shares on or after
the corresponding Distribution Payment Date, such holder of
Series E preferred shares will be entitled to receive the
distribution payable on such shares of Series E preferred
shares on such Distribution Payment Date, and the holder of
Series E preferred shares will not need to include payment
of the amount of such distribution upon surrender for conversion
of shares of the Series E preferred shares.
Fundamental Change Conversion Right. The
provisions described in the three preceding paragraphs do not
apply to Series E preferred shares which are converted into
common shares pursuant to the Fundamental Change Conversion
Right or which are repurchased by us in lieu of such conversion.
The rights of the holders of such Series E preferred shares
to receive accrued and unpaid distributions are described below
under Special Conversion Right of Series E
preferred shares upon a Fundamental Change; Company Repurchase
Right.
Company
Conversion Option
General. If we convert Series E preferred
shares pursuant to the Company Conversion Option, whether prior
to, on, or after the Distribution Record Date for the current
period, all unpaid distributions that are in arrears as of the
Company Conversion Option Date will be payable to the holders of
Series E preferred shares.
Conversion After a Payment Date and Prior to the next Record
Date. If we exercise the Company Conversion
Option and the Company Conversion Option Date is a date and time
that is after the close of business on a Distribution Payment
Date and prior to the close of business on the next Distribution
Record Date, the holder of Series E preferred shares will
not be entitled to receive any portion of the distribution
payable for such period on such converted shares on the
corresponding Distribution Payment Date.
S-36
Conversion On or After Record Date and Prior to Payment
Date. If we exercise the Company Conversion
Option and the Company Conversion Option Date is a date and time
that is on or after the close of business on any Distribution
Record Date and prior to the close of business on the
corresponding Distribution Payment Date, all distributions,
including accrued and unpaid distributions, whether or not in
arrears, with respect to the Series E preferred shares
called for a conversion on such date, will be payable on such
Distribution Payment Date to the holder of Series E
preferred shares if the holder of Series E preferred shares
is the record holder of such shares on such Distribution Record
Date.
Conversion Rate
Adjustments
Subject to and in accordance with the terms of the articles
supplementary establishing the Series E preferred shares,
we will adjust the Conversion Rate from time to time as follows:
(1) If we issue our common shares as a distribution on our
common shares to all holders of our common shares, or if we
effect a share split or share combination, we will adjust the
Conversion Rate based on the following formula:
CR1
=
CRO
×
OS1/OSO
Where
CRO
= the Conversion Rate in effect immediately prior to the
ex-dividend date for such distribution, or the effective date of
such share split or share combination;
CR1
= the Conversion Rate in effect immediately on and after the
ex-dividend date for such distribution, or the effective date of
such share split or share combination;
OS1
= the number of our common shares outstanding immediately after
such distribution, or the effective date of such share split or
share combination; and
OSO
= the number of our common shares outstanding immediately prior
to such distribution, or the effective date of such share split
or share combination.
Any adjustment made pursuant to this paragraph (1) shall
become effective at the open of business on (a) the
ex-dividend date for such distribution or (b) the date on
which such split or combination becomes effective, as
applicable. If any distribution described in this paragraph
(1) is declared but not so paid or made, the new Conversion
Rate shall be readjusted to the Conversion Rate that would then
be in effect if such dividend or distribution had not been
declared.
(2) If we distribute to all holders of our common shares
any rights, warrants or options entitling them, for a period
expiring not more than 45 days after the date of issuance
of such rights, warrants or options, to subscribe for or
purchase our common shares at a price per share that is less
than the Closing Sale Price of our common shares on the business
day immediately preceding the time of announcement of such
distribution, we will adjust the Conversion Rate based on the
following formula:
CR1
=
CRO
×
(OSO+X)/(OSO+Y)
Where
S-37
CRO
= the Conversion Rate in effect immediately prior to the
ex-dividend date for such distribution;
CR1
= the Conversion Rate in effect immediately on and after the
ex-dividend date for such distribution;
OSO
= the number of our common shares outstanding immediately prior
to the ex-dividend date for such distribution;
X = the total number of our common shares issuable pursuant to
such rights, warrants or options; and
Y = the number of our common shares equal to the quotient of
(A) the aggregate price payable to exercise such rights,
warrants or options and (B) the average of the Closing Sale
Prices of our common shares for the 10 consecutive Trading Days
ending on the business day immediately preceding the date of
announcement for the issuance of such rights, warrants or options
For purposes of this paragraph (2), in determining whether any
rights, warrants or options entitle the holders of our common
shares to subscribe for or purchase our common shares at less
than the applicable Closing Sale Price of our common shares, and
in determining the aggregate exercise or conversion price
payable for such common shares, there shall be taken into
account any consideration we receive for such rights, warrants
or options and any amount payable on exercise or conversion
thereof, with the value of such consideration, if other than
cash, to be determined by our board of trustees. If any right,
warrant or option described in this paragraph (2) is not
exercised or converted prior to the expiration of the
exercisability or convertibility thereof, we will adjust the new
Conversion Rate to the Conversion Rate that would then be in
effect if such right, warrant or option had not been so issued.
(3) If we distribute shares of our beneficial interest,
evidence of indebtedness or other assets or property to all
holders of our common shares, excluding:
|
|
|
|
|
distributions, rights, warrants or options referred to in
paragraph (1) or (2) above;
|
|
|
|
distributions paid exclusively in cash; and
|
|
|
|
spin-offs, as described below in this paragraph (3),
|
then we will adjust the Conversion Rate based on the following
formula:
CR1
=
CRO
×
SPO/(SPO
FMV)
Where
CRO
= the Conversion Rate in effect immediately prior to the
ex-dividend date for such distribution;
CR1
= the Conversion Rate in effect immediately on and after the
ex-dividend date for such distribution;
S-38
SPO
= the average of the Closing Sale Prices of our common shares
for the 10 consecutive Trading Days ending on the business day
immediately preceding the ex-dividend date for such
distribution; and
FMV = the fair market value (as determined in good faith by our
board of trustees) of such shares of beneficial interest,
evidences of indebtedness or other assets or property
distributed with respect to each of our outstanding common
shares on the earlier of the record date or the ex-dividend date
for such distribution.
An adjustment made pursuant to the immediately preceding
paragraph shall become effective on the ex-dividend date for
such distribution.
If we distribute to all of our common shareholders beneficial
interests of any class or series, or similar equity interests,
of or relating to one of our subsidiaries or other business
units, which we refer to as a spin-off, we will adjust the
Conversion Rate in effect immediately before the tenth Trading
Day from and including the effective date of the spin-off based
on the following formula:
CR1
=
CRO
×
(FMVO+MPO)/MPO
Where
CRO
= the Conversion Rate in effect immediately prior to the tenth
Trading Day immediately following, and including, the effective
date of the spin-off;
CR1
= the Conversion Rate in effect immediately on and after the
tenth Trading Day immediately following, and including, the
effective date of the spin-off;
FMVO
= the average of the Closing Sale Prices of the beneficial
interest or similar equity interest distributed to holders of
our common shares applicable to one share of our common shares
over the first 10 consecutive Trading Days after the effective
date of the spin-off; and
MPO
= the average of the Closing Sale Prices of our common shares
over the first 10 consecutive Trading Days after the
effective date of the spin-off.
Any adjustment to the Conversion Rate made pursuant to the
immediately preceding paragraph will occur on the tenth
consecutive Trading Day from, and including, the effective date
of the spin-off; provided that in respect of any
conversion within the 10 Trading Days following the effective
date of any spin-off, references within this paragraph
(3) to 10 Trading Days shall be deemed replaced with such
lesser number of Trading Days as have elapsed between the
effective date of such spin-off and the conversion date in
determining the applicable Conversion Rate.
If any such distribution described in this paragraph (3) is
declared but not paid or made, the new Conversion Rate shall be
re-adjusted to be the Conversion Rate that would then be in
effect if such distribution had not been declared.
(4) If we make a cash distribution to all holders of our
common shares (excluding any distribution in connection with our
liquidation, dissolution or winding up) during any of our
quarterly fiscal periods in an aggregate amount that, together
with other cash distributions made during such quarterly fiscal
period, exceeds the product of $0.84, which we refer to as the
reference distribution, multiplied by the number of our common
shares outstanding on
S-39
the record date for such distribution, we will adjust the
Conversion Rate based on the following formula:
CR1
=
CRO
×
SPO/(SPO−C)
Where
CRO
= the Conversion Rate in effect immediately prior to the
ex-dividend date for such distribution;
CR1
= the Conversion Rate in effect immediately after the
ex-dividend date for such distribution;
SPO
= the average of the Closing Sale Prices of our common shares
for the 10 consecutive Trading Days ending on the business
day immediately preceding the earlier of the record date or the
day prior to the ex-dividend date for such distribution; and
C = the amount in cash per share we distribute to holders of our
common shares that exceeds the reference distribution.
An adjustment to the Conversion Rate made pursuant to this
paragraph (4) shall become effective on the ex-dividend
date for such distribution. If any distribution described in
this paragraph (4) is declared but not so paid or made, the
new Conversion Rate shall be re-adjusted to the Conversion Rate
that would then be in effect if such distribution had not been
declared.
The reference distribution is subject to adjustment in a manner
inversely proportional to adjustments to the Conversion Rate;
provided that no adjustment will be made to the reference
distribution amount for any adjustment made to the Conversion
Rate under this paragraph (4).
Notwithstanding the foregoing, if an adjustment is required to
be made under this paragraph (4) as a result of a
distribution that is not a quarterly dividend, the reference
distribution amount will be deemed to be zero.
(5) If we or any of our subsidiaries make a payment in
respect of a tender offer or exchange offer for our common
shares to the extent that the cash and value of any other
consideration included in the payment per share of our common
shares exceeds the Closing Sale Price of our common shares on
the Trading Day next succeeding the last date on which tenders
or exchanges may be made pursuant to such tender offer or
exchange offer, we will adjust the Conversion Rate based on the
following formula:
CR1
=
CRO
× (AC +
(SP1
×
OS1))/(OSO
×
SP1)
Where
CRO
= the Conversion Rate in effect on the date immediately
following the date such tender or exchange offer expires;
CR1
= the Conversion Rate in effect on the second day immediately
following the date such tender or exchange offer expires;
AC = the aggregate value of all cash and any other consideration
(as determined by our board of trustees) paid or payable for our
common shares purchased in such tender or exchange offer;
S-40
OSO
= the number of our common shares outstanding immediately prior
to the date such tender or exchange offer expires;
OS1
= the number of our common shares outstanding immediately after
the date such tender or exchange offer expires (after giving
effect to the purchase or exchange of shares pursuant to such
tender or exchange offer); and
SP1
= the Closing Sale Price of our common shares for the Trading
Day commencing on the Trading Day next succeeding the date such
tender or exchange offer expires.
If the application of the foregoing formula would result in a
decrease in the Conversion Rate, no adjustment to the Conversion
Rate will be made.
Any adjustment to the conversion rate made pursuant to this
paragraph (5) shall become effective on the second day
immediately following the date such tender offer or exchange
offer expires. If we or one of our subsidiaries is obligated to
purchase our common shares pursuant to any such tender or
exchange offer but is permanently prevented by applicable law
from effecting any such purchase or all such purchases are
rescinded, we will re-adjust the new Conversion Rate to be the
Conversion Rate that would be in effect if such tender or
exchange offer had not been made.
If we have in effect a rights plan while any of the
Series E preferred shares remain outstanding, holders of
the Series E preferred shares will receive, upon a
conversion of such shares in respect of which we have elected to
deliver our common shares, in addition to such common shares,
rights under our shareholder rights agreement unless, prior to
conversion, the rights have expired, terminated or been redeemed
or unless the rights have separated from our common shares. If
the rights provided for in any rights plan that our board of
trustees may adopt have separated from the common shares in
accordance with the provisions of the applicable shareholder
rights agreement so that holders of the Series E preferred
shares would not be entitled to receive any rights in respect of
our common shares that we elect to deliver upon conversion of
the Series E preferred shares, we will adjust the
Conversion Rate at the time of separation as if we had
distributed to all holders of our capital shares, evidences of
indebtedness or other assets or property pursuant to paragraph
(3) above, subject to readjustment upon the subsequent
expiration, termination or redemption of the rights.
Notwithstanding the foregoing, in no event will the Conversion
Price be reduced below $0.01, subject to adjustment for share
splits and combinations and similar events.
We will not make any adjustment to the Conversion Rate if
holders of our Series E preferred shares are permitted to
participate, on an as-converted basis, in the transactions
described above.
The Conversion Rate will not be adjusted except as specifically
set forth in this subsection entitled
Conversion Rate Adjustments and in
Special Conversion Right of Series E
Preferred Shares upon a Fundamental Change; Company Repurchase
Right. Without limiting the foregoing, the conversion rate
will not be adjusted for:
|
|
|
the issuance of any of our common shares pursuant to any present
or future plan providing for the reinvestment of distributions
or interest payable on our securities and the investment of
additional optional amounts in common shares under any plan;
|
S-41
|
|
|
the issuance of any of our common shares or options or rights to
purchase such shares pursuant to any present or future employee,
trustee, manager or consultant incentive or benefit plan or
program of or assumed by us or any of our subsidiaries;
|
|
|
the issuance of any common shares pursuant to any option,
warrant, right, or exercisable, exchangeable or convertible
security outstanding as of the date Series E preferred
shares were first issued;
|
|
|
the issuance of any common shares, including in the offering of
our common shares that we are conducting concurrently with this
offering, or the payment of cash upon redemption of any of our
common shares;
|
|
|
a change in the par value of the common shares;
|
|
|
accumulated and unpaid distributions; or
|
|
|
the issuance of our common shares or the payment of cash upon
redemption thereof.
|
No adjustment in the Conversion Rate pursuant to the numbered
paragraphs above will be required unless the adjustment would
require an increase or decrease of at least 1% of the Conversion
Rate. If the adjustment is not made because the adjustment does
not change the Conversion Rate by at least 1%, then the
adjustment that is not made will be carried forward and taken
into account in any future adjustment. In addition, at the end
of each fiscal year, beginning with the fiscal year ending on
December 31, 2008, we will give effect to any adjustments
that we have otherwise deferred pursuant to this provision, and
those adjustments, if any, will no longer be carried forward and
taken into account in any subsequent adjustment. All required
calculations will be made to the nearest cent or 1/1000th of a
share, as the case may be. Notwithstanding the foregoing, if the
Series E preferred shares are called for redemption, all
adjustments not previously made will be made on the applicable
redemption date. If certain of the possible adjustments to the
Conversion Price of the common shares of the Series E
preferred shares are made (or if failures to make certain
adjustments occur), a holder of such shares may be deemed to
have received a distribution from us even though such holder has
not received any cash or property as a result of such
adjustments. We intend to withhold federal income tax (in the
case of a non-United States holder) with respect to any deemed
distribution from us from cash payments of distributions and any
payments in redemption, repurchase or conversion of the shares
of the Series E preferred shares. See Additional U.S.
Federal Income Tax Considerations in this prospectus
supplement.
In the case of the following events, each of which we refer to
as a Business Combination:
|
|
|
any recapitalization, reclassification or change of our common
shares (other than changes resulting from a subdivision or
combination);
|
|
|
a consolidation, merger or combination involving us;
|
|
|
a sale, conveyance or lease to another entity of all or
substantially all of our property and assets (other than to one
or more of our subsidiaries); or
|
|
|
a statutory share exchange;
|
in each case, as a result of which our common shareholders are
entitled to receive stock, other securities, other property or
assets (including cash or any combination thereof) with respect
to or in exchange for our common shares, a holder of
Series E preferred shares will be entitled
S-42
thereafter to convert such Series E preferred shares into
the kind and amount of stock, other securities or other property
or assets (including cash or any combination thereof) which a
holder of Series E preferred shares would have owned or
been entitled to receive upon such Business Combination as if
such holder of Series E preferred shares held a number of
our common shares equal to the Conversion Rate in effect on the
effective date for such Business Combination, multiplied by the
number of Series E preferred shares held by such holder of
Series E preferred shares, except that, for a Business
Combination that also constitutes a Fundamental Change, a holder
of Series E preferred shares will not receive the
Make-Whole Premium (as defined below) if a holder of
Series E preferred shares does not convert its
Series E preferred shares in connection with such
Fundamental Change. See Adjustment to the
Conversion Rate upon the Occurrence of a Fundamental
Change. In the event that our common shareholders have the
opportunity to elect the form of consideration to be received in
such Business Combination, we will make adequate provision
whereby the holders of Series E preferred shares shall have
a reasonable opportunity to determine the form of consideration
into which all of the Series E preferred shares, treated as
a single class, shall be convertible from and after the
effective date of such Business Combination. Such determination
shall be based on the weighted average of elections made by the
holders of Series E preferred shares who participate in
such determination, shall be subject to any limitations to which
all of our common shareholders are subject, such as pro rata
reductions applicable to any portion of the consideration
payable in such Business Combination, and shall be conducted in
such a manner as to be completed by the date which is the
earliest of (1) the deadline for elections to be made by
our common shareholders, and (2) two business days prior to
the anticipated effective date of the Business Combination.
We will provide notice of the opportunity to determine the form
of such consideration, as well as notice of the determination
made by the holders of our Series E preferred shares (and
the weighted average of elections), by posting such notice with
DTC and providing a copy of such notice to the transfer agent.
If the effective date of a Business Combination is delayed
beyond the initially anticipated effective date, holders of
Series E preferred shares will be given the opportunity to
make subsequent similar determinations in regard to such delayed
effective date. We may not become a party to any such
transaction unless its terms are consistent with the foregoing.
None of the foregoing provisions shall affect the rights of the
holders of Series E preferred shares to convert
Series E preferred shares into our common shares prior to
the effective date.
To the extent permitted by law, we may, from time to time,
increase the Conversion Rate by any amount for a period of at
least 20 days or any longer period required by law, so long
as the increase is irrevocable during that period and our board
of trustees determines that the increase is in our best
interests. Such a determination by our board of trustees shall
be conclusive. We will mail a notice of the increase to holders
at least 15 business days before the day the increase commences.
In addition, we may also increase the Conversion Rate as we
determine to be advisable in order to avoid taxes to recipients
of certain distributions.
Except as described above in this section, we will not adjust
the Conversion Rate for any issuance of our common shares or any
securities convertible into or exchangeable or exercisable for
our common shares or rights to purchase our common shares or
such convertible, exchangeable or exercisable securities.
S-43
Adjustment to the
Conversion Rate upon the Occurrence of a Fundamental
Change
If, on or prior to April 20, 2018, a Fundamental Change
takes place (See Special Conversion Right of
Series E Preferred Shares upon a Fundamental Change;
Company Repurchase Right), and a holder converts the
Series E preferred shares in connection with such
Fundamental Change, we will increase, as described below under
The Increase in the Conversion Rate, the
Conversion Rate applicable to shares that are surrendered for
conversion. A conversion of the Series E preferred shares
will be deemed for these purposes to be in connection
with a Fundamental Change if the notice of conversion of
the Series E preferred shares is received by the conversion
agent from and including the effective date of such Fundamental
Change to, and including, the Fundamental Change Conversion Date
(as defined below under Special Conversion
Right of Series E Preferred Shares upon a Fundamental
Change; Company Repurchase Right) for that Fundamental Change.
We will also give notice by mail or by publication (with
subsequent prompt notice by mail) to holders of our
Series E preferred shares of the anticipated effective date
of any proposed Fundamental Change which will occur on or prior
to April 20, 2018. We must make this mailing or publication
at least 15 days before the anticipated effective date of
the Fundamental Change. In addition, no later than the third
business day after the completion of such Fundamental Change, we
must make an additional notice announcing such completion.
If a holder surrenders Series E preferred shares for
conversion in connection with such Fundamental Change we have
announced, but such Fundamental Change is not consummated, then
the holder will not be entitled to the increased Conversion Rate
referred to above in connection with the conversion.
The Increase in
the Conversion Rate
If a holder elects to convert in connection with a Fundamental
Change on or prior to April 20, 2018, we will increase the
Conversion Rate by reference to the table below, based on the
date when the Fundamental Change becomes effective, which we
refer to as the effective date, and the applicable price. If the
Fundamental Change is a transaction or series of related
transactions and the consideration (excluding cash payments for
fractional shares or pursuant to statutory appraisal rights) for
our common shares in the Fundamental Change consists solely of
cash, then the applicable price will be the cash amount paid per
share of our common shares in the transaction. If the
transaction is an asset sale and the consideration paid for our
property and assets (or for the property and assets of us and
our subsidiaries on a consolidated basis) consists solely of
cash, then the applicable price will be the cash amount paid for
our property and assets, expressed as an amount per share of our
common shares outstanding on the effective date of the asset
sale. In all other cases, the applicable price will be the
average of the Closing Sale Price of our common shares for the
ten consecutive Trading Days immediately preceding the effective
date. Our board of trustees will make appropriate adjustments,
in its good faith determination, to account for any adjustment
to the Conversion Rate that becomes effective, or any event
requiring an adjustment to the Conversion Rate where the
ex-dividend date of the event occurs, at any time during those
ten consecutive Trading Days.
The following table sets forth the number of additional common
shares per $25.00 liquidation preference per Series E
preferred share that will be added to the Conversion Rate
applicable to Series E preferred shares that are converted
in connection with a Fundamental Change, which
S-44
we refer to as the Make-Whole Premium. If an event occurs that
requires an adjustment to the Conversion Rate, we will, on the
date we must adjust the Conversion Rate, adjust each applicable
price set forth in the first column of the table below by
multiplying the applicable price in effect immediately before
the adjustment by a fraction:
|
|
|
whose numerator is the Conversion Rate in effect immediately
before the adjustment; and
|
|
|
whose denominator is the adjusted Conversion Rate.
|
In addition, we will adjust the number of additional shares in
the table below in the same manner in which, and for the same
events for which, we must adjust the Conversion Rate as
described under Conversion Rate Adjustments.
Number of
Additional Common Shares Issuable
per $25.00 Liquidation
Preference
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Applicable Price
|
Effective Date
|
|
$48.18
|
|
$55.00
|
|
$65.00
|
|
$75.00
|
|
$85.00
|
|
$95.00
|
|
$105.00
|
|
$115.00
|
|
$125.00
|
|
|
April 2, 2008
|
|
|
0.0676
|
|
|
0.0598
|
|
|
0.0414
|
|
|
0.0303
|
|
|
0.0234
|
|
|
0.0186
|
|
|
0.0152
|
|
|
0.0126
|
|
|
0.0106
|
April 15, 2008
|
|
|
0.0676
|
|
|
0.0598
|
|
|
0.0414
|
|
|
0.0303
|
|
|
0.0234
|
|
|
0.0186
|
|
|
0.0152
|
|
|
0.0126
|
|
|
0.0106
|
April 15, 2009
|
|
|
0.0676
|
|
|
0.0563
|
|
|
0.0378
|
|
|
0.0269
|
|
|
0.0203
|
|
|
0.0159
|
|
|
0.0129
|
|
|
0.0107
|
|
|
0.0090
|
April 15, 2010
|
|
|
0.0676
|
|
|
0.0525
|
|
|
0.0333
|
|
|
0.0226
|
|
|
0.0164
|
|
|
0.0126
|
|
|
0.0101
|
|
|
0.0083
|
|
|
0.0070
|
April 15, 2011
|
|
|
0.0676
|
|
|
0.0484
|
|
|
0.0279
|
|
|
0.0172
|
|
|
0.0115
|
|
|
0.0084
|
|
|
0.0066
|
|
|
0.0054
|
|
|
0.0046
|
April 15, 2012
|
|
|
0.0676
|
|
|
0.0441
|
|
|
0.0206
|
|
|
0.0093
|
|
|
0.0047
|
|
|
0.0030
|
|
|
0.0023
|
|
|
0.0019
|
|
|
0.0017
|
April 15, 2013
|
|
|
0.0676
|
|
|
0.0447
|
|
|
0.0156
|
|
|
0.0001
|
|
|
0.0000
|
|
|
0.0000
|
|
|
0.0000
|
|
|
0.0000
|
|
|
0.0000
|
April 15, 2014
|
|
|
0.0676
|
|
|
0.0475
|
|
|
0.0180
|
|
|
0.0026
|
|
|
0.0000
|
|
|
0.0000
|
|
|
0.0000
|
|
|
0.0000
|
|
|
0.0000
|
April 15, 2015
|
|
|
0.0676
|
|
|
0.0516
|
|
|
0.0225
|
|
|
0.0041
|
|
|
0.0000
|
|
|
0.0000
|
|
|
0.0000
|
|
|
0.0000
|
|
|
0.0000
|
April 15, 2016
|
|
|
0.0676
|
|
|
0.0522
|
|
|
0.0251
|
|
|
0.0079
|
|
|
0.0000
|
|
|
0.0000
|
|
|
0.0000
|
|
|
0.0000
|
|
|
0.0000
|
April 15, 2017
|
|
|
0.0676
|
|
|
0.0518
|
|
|
0.0246
|
|
|
0.0078
|
|
|
0.0000
|
|
|
0.0000
|
|
|
0.0000
|
|
|
0.0000
|
|
|
0.0000
|
April 15, 2018
|
|
|
0.0676
|
|
|
0.0459
|
|
|
0.0175
|
|
|
0.0020
|
|
|
0.0000
|
|
|
0.0000
|
|
|
0.0000
|
|
|
0.0000
|
|
|
0.0000
|
|
|
The exact applicable price and effective date may not be as set
forth in the table above, in which case:
|
|
|
if the actual applicable price is between two applicable prices
listed in the table above, or the actual effective date is
between two dates listed in the table above, we will determine
the number of additional shares by linear interpolation between
the numbers of additional shares set forth for the two
applicable prices, or for the two dates based on a
365-day
year, as applicable;
|
|
|
if the actual applicable price is greater than $125.00 per share
(subject to adjustment), we will not increase the Conversion
Rate as described above and no additional shares will be
issuable upon conversion; and
|
|
|
if the actual applicable price is less than $48.18 per share
(subject to adjustment), we will not increase the Conversion
Rate as described above and no additional shares will be
issuable upon conversion.
|
S-45
However, we will not increase the Conversion Rate as described
above to the extent the increase will cause the Conversion Rate
to exceed 0.5188. We will adjust this maximum Conversion Rate in
the same manner in which, and for the same events for which, we
must adjust the Conversion Rate as described under
Conversion Rate Adjustments.
Our obligation to satisfy the additional share requirement could
be considered a penalty, in which case the enforceability
thereof would be subject to general principles of reasonableness
of economic remedies.
Special
Conversion Right of Series E preferred shares upon a
Fundamental Change; Company Repurchase Right
In the event of a Fundamental Change described below, when the
applicable price of our common shares described under
The Increase in the Conversion Rate is less
than $48.18 per share, then each holder of Series E
preferred shares will have the special right, referred to as the
Fundamental Change Conversion Right, in addition to any other
applicable conversion right, to convert some or all of its
Series E preferred shares on the relevant Fundamental
Change Conversion Date into a number of our common shares per
$25.00 liquidation preference equal to such liquidation
preference plus accrued and unpaid distributions to, but not
including, such Fundamental Change Conversion Date divided by
98% of the Market Price of our common shares, referred to as the
Fundamental Change Conversion Rate. The Market Price of our
common shares will be determined prior to the applicable
Fundamental Change Conversion Date. The determination of the
Market Price is described below under
Determination of Market Price. A holder of Series E
preferred shares which has elected to convert such shares
otherwise than pursuant to the Fundamental Change Conversion
Right will not be able to exercise the Fundamental Change
Conversion Right.
If a holder of Series E preferred shares elects to convert
Series E preferred shares as described in the preceding
paragraph, we may elect, in lieu of that conversion, to
repurchase for cash some or all of such Series E preferred
shares at a repurchase price equal to 100% of the liquidation
preference of the Series E preferred shares to be
repurchased plus accrued and unpaid distributions to, but not
including, such Fundamental Change Conversion Date, referred to
as the Fundamental Change Repurchase Price; provided that
if the relevant Fundamental Change Conversion Date is on a date
that is after a Distribution Record Date and on or prior to the
corresponding Distribution Payment Date, we will pay such
distributions to the holder of record on the corresponding
Distribution Record Date, which may or may not be the same
person to whom we will pay the Fundamental Change Repurchase
Price, and the Fundamental Change Repurchase Price will be equal
to 100% of the liquidation preference of the Series E
preferred shares to be repurchased.
In the event we elect to repurchase Series E preferred
shares that would otherwise be converted into common shares on a
Fundamental Change Conversion Date, such Series E preferred
shares shall not be converted into common shares and the holder
of such shares will be entitled to receive the Fundamental
Change Repurchase Price in cash from us.
Subject to the next sentence, the aggregate number of our common
shares issuable in connection with the exercise of the
Fundamental Change Conversion Right may not exceed
2,223,804 shares (or if the underwriters
over-allotment option is exercised, 2,557,375 shares) or
such other number of common shares as shall then be authorized
and available for issuance. If the number of common shares
issuable upon such conversion would exceed 2,223,804 shares
(or
S-46
if the underwriters over-allotment option is exercised,
2,557,375 shares) or such other number of common shares as
shall then be authorized and available for issuance, we will
have the option to satisfy the remainder of such conversion in
common shares that are authorized for issuance in the future. We
will use our best efforts to have any such additional number of
common shares authorized for issuance within 180 days of
the Fundamental Change Conversion Date.
Within 15 days after the occurrence of a Fundamental
Change, we will provide to the holder of Series E preferred
shares and the transfer agent a notice of the occurrence of the
Fundamental Change and of the resulting repurchase right. Such
notice will state:
|
|
|
the events constituting the Fundamental Change;
|
|
|
the date of the Fundamental Change;
|
|
|
the last date on which the holder of Series E preferred
shares may exercise the Fundamental Change Conversion Right;
|
|
|
to the extent applicable, the Fundamental Change Conversion Rate
and the Fundamental Change Repurchase Price;
|
|
|
whether we will elect to repurchase some or all of the
Series E preferred shares as to which the Fundamental
Change Conversion Right may be exercised and, if we will not
purchase all such Series E preferred shares, indicating the
percentage which we may elect to repurchase;
|
|
|
unless we have elected to repurchase all Series E preferred
shares as to which the Fundamental Change Conversion Right has
been exercised, the method of calculating the Market Price of
our common shares;
|
|
|
the Fundamental Change Conversion Date;
|
|
|
the name and address of the paying agent and the conversion
agent;
|
|
|
the Conversion Rate and any adjustment to the Conversion Rate
that will result from the Fundamental Change;
|
|
|
that Series E preferred shares as to which the Fundamental
Change Conversion Right has been exercised may be converted at
the applicable Conversion Rate, if otherwise convertible, only
if the notice of exercise of the Fundamental Change Conversion
Right has been properly withdrawn; and
|
|
|
the procedures that the holder of Series E preferred shares
must follow to exercise the Fundamental Change Conversion Right.
|
We will also issue a press release for publication on the Dow
Jones & Company, Inc., Business Wire or Bloomberg
Business News (or, if such organizations are not in existence at
the time of issuance of such press release, such other news or
press organization as is reasonably calculated to broadly
disseminate the relevant information to the public) prior to the
opening of business on the first Trading Day following any date
on which we provide such notice to the holders of Series E
preferred shares.
The Fundamental Change Conversion Date will be a date no less
than 20 days nor more than 35 days after the date on
which we give the above notice. To exercise the Fundamental
Change Conversion Right, the holder of Series E preferred
shares must deliver, on or before the close of
S-47
business on the Fundamental Change Conversion Date, the
Series E preferred shares to be converted, duly endorsed
for transfer, together with a written conversion notice
completed, to our transfer agent. The conversion notice will
state:
|
|
|
the relevant Fundamental Change Conversion Date;
|
|
|
the number of Series E preferred shares to be converted; and
|
|
|
that the Series E preferred shares are to be converted
pursuant to the applicable provisions of the Series E
preferred shares.
|
If the Series E preferred shares are held in global form,
the conversion notice must comply with applicable DTC procedures.
Holders of Series E preferred shares may withdraw any
notice of exercise of its Fundamental Change Conversion Right
(in whole or in part) by a written notice of withdrawal
delivered to our transfer agent prior to the close of business
on the business day prior to the Fundamental Change Conversion
Date. The notice of withdrawal shall state:
|
|
|
the number of withdrawn Series E preferred shares;
|
|
|
if certificated Series E preferred shares have been issued,
the certificate numbers of the withdrawn Series E preferred
shares; and
|
|
|
the number of shares, if any, which remains subject to the
conversion notice.
|
If the Series E preferred shares are held in global form,
the notice of withdrawal must comply with applicable DTC
procedures.
Series E preferred shares as to which the Fundamental
Change Conversion Right has been properly exercised and for
which the conversion notice has not been properly withdrawn will
be converted into common shares in accordance with the
Fundamental Change Conversion Right on the Fundamental Change
Conversion Date, unless we have elected to repurchase such
Series E preferred shares.
The holder of any Series E preferred share which we have
elected to repurchase and as to which the conversion election
has not been properly withdrawn will receive payment of the
Fundamental Change Repurchase Price promptly following the later
of the Fundamental Change Conversion Date or the time of
book-entry transfer or delivery of the Series E preferred
shares. If the paying agent holds cash sufficient to pay the
Fundamental Change Repurchase Price of the Series E
preferred shares on the business day following the Fundamental
Change Conversion Date, then:
|
|
|
the Series E preferred shares will cease to be outstanding
and distributions will cease to accrue (whether or not
book-entry transfer of the Series E preferred shares is
made or whether or not the Series E preferred shares
certificate is delivered to the transfer agent); and
|
|
|
all of the other rights of the holders of Series E
preferred shares will terminate (other than the right to receive
the Fundamental Change Repurchase Price upon delivery or
transfer of the Series E preferred shares).
|
A Fundamental Change generally will be deemed to occur upon the
occurrence of a change in control or a
termination of trading.
S-48
A change in control generally will be deemed to
occur at such time as:
|
|
|
any person or group (as those terms are
used in Sections 13(d) and 14(d) of the Securities Exchange Act
of 1934 as amended, referred to as the Exchange Act) is or
becomes the beneficial owner (as that term is used
in
Rule 13d-3
under the Exchange Act), directly or indirectly, of 50% or more
of the total outstanding voting power of all classes of our
shares of beneficial interest entitled to vote generally in the
election of trustees, or the voting share;
|
|
|
there occurs a sale, transfer, lease, conveyance or other
disposition of all or substantially all of our property or
assets, or of all or substantially all of the property or assets
of us and our subsidiaries on a consolidated basis, in one
transaction or a series of related transactions, to any
person or group (as those terms are used
in Sections 13(d) and 14(d) of the Exchange Act), including
any group acting for the purpose of acquiring, holding, voting
or disposing of securities within the meaning of Rule
13d-5(b)(1) under the Exchange Act;
|
|
|
we consolidate with, or merge with or into, another person or
any person consolidates with, or merges with or into, us, unless
the persons that beneficially owned, directly or
indirectly, our voting share(s) immediately prior to such
consolidation or merger beneficially owned, directly
or indirectly, immediately after such consolidation or merger,
shares of the surviving or continuing corporations voting
share representing at least a majority of the total outstanding
voting power of all outstanding classes of voting share of the
surviving or continuing corporation;
|
|
|
the following persons cease for any reason to constitute a
majority of our board of trustees:
|
|
|
|
|
|
individuals who on the first issue date of the Series E
preferred shares constituted our board of trustees; and
|
|
|
|
any new trustees whose election to our board of trustees or
whose nomination for election by our shareholders was approved
by at least a majority of our trustees then still in office
either who were trustees on such first issue date of the
Series E preferred shares or whose election or nomination
for election was previously so approved; or
|
|
|
|
we are liquidated or dissolved or holders of our shares of
beneficial interest approve any plan or proposal for our
liquidation or dissolution.
|
Notwithstanding the foregoing, a transaction described in the
second and third bullet points above will not constitute a
change in control if at least 90% of the consideration (other
than cash payments for fractional shares or pursuant to
statutory appraisal rights) in such transaction consists of
common shares and any associated rights traded on a U.S.
national securities exchange (or which will be so traded when
issued or exchanged in connection with such transaction).
A termination of trading is deemed to occur if our
common shares (or other common shares into which the
Series E preferred shares are then convertible) are neither
listed for trading on a United States national securities
exchange nor approved for trading on an established automated
over-the-counter trading market in the United States.
There is no precise, established definition of the phrase
all or substantially all under applicable law.
Accordingly, there may be uncertainty as to whether a sale,
transfer, lease, conveyance or other disposition of less than
all of our property or assets, or of less than all of the
property or assets of us and our subsidiaries on a consolidated
basis, would permit a holder to exercise the Fundamental Change
Conversion Right above.
S-49
In connection with a Fundamental Change repurchase, we will
comply with all U.S. federal and state securities laws in
connection with any offer by us to repurchase the Series E
preferred shares upon a Fundamental Change.
This Fundamental Change conversion and repurchase feature may
make more difficult or discourage a party from taking over our
company and removing incumbent management. We are not aware,
however, of any specific effort to accumulate our shares of
beneficial interest with the intent to obtain control of our
company by means of a merger, tender offer, solicitation or
otherwise. In addition, the Fundamental Change repurchase
feature is not part of a plan by management to adopt a series of
anti-takeover provisions. Instead, the Fundamental Change
conversion and repurchase feature is a result of negotiations
between us and the underwriters.
We could, in the future, enter into certain transactions,
including recapitalizations that would not constitute a
Fundamental Change but would increase the amount of debt
outstanding or otherwise adversely affect the holders of
Series E preferred shares. The incurrence of significant
amounts of additional debt could adversely affect our ability to
service our debt, and to permit us to elect to repurchase the
Series E preferred shares upon a Fundamental Change.
If a Fundamental Change were to occur, we may not have enough
funds to pay the Fundamental Change Repurchase Price. In
addition, we may in the future incur indebtedness with similar
change in control provisions permitting the holders thereof to
accelerate or to require us to purchase such indebtedness upon
the occurrence of similar events or on some specific dates. Our
option to make a repurchase upon a Fundamental Change may be
exercised by a third party that effects the payment of the
Fundamental Change Repurchase Price in the manner, at the times
and otherwise in compliance in all material respects with the
requirements hereof and purchases all Series E preferred
shares as to which the Fundamental Change Conversion Right was
properly exercised and not withdrawn and which we elected to
repurchase and otherwise complies with the obligations in
connection therewith.
Determination of
Market Price
Market Price means, with respect to any Fundamental Change
Conversion Date, the average of the Closing Sale Prices of our
common shares for the ten consecutive Trading Days ending on the
third Trading Day prior to the Fundamental Change Conversion
Date, appropriately adjusted to take into account the
occurrence, during the period commencing on the first Trading
Day of such ten Trading Day period and ending on the Fundamental
Change Conversion Date of any event requiring an adjustment of
the Conversion Rate as described under Conversion
Rate Adjustments; provided that in no event shall
the Market Price be less than $0.01, subject to adjustment for
share splits and combinations, reclassifications and similar
events.
Because the Market Price of our common shares is determined
prior to the Fundamental Change Conversion Date, you will bear
the market risk with respect to the value of our common shares,
if any, to be received from the date as of which the Market
Price is determined to the date on which you receive such
shares. In addition, the Market Price of our common shares is an
average price rather than the price as of a single date.
S-50
No Maturity;
Redemption
The Series E preferred shares have no maturity date and
will not be subject to any sinking fund. We are not required to
redeem or repurchase the Series E preferred shares, and,
except in certain circumstances described above under
Special Conversion Right of Series E Preferred
Shares upon a Fundamental Change; Company Repurchase
Right, we may not repurchase or redeem Series E
preferred shares except to the extent necessary to preserve the
companys qualification as a real estate investment trust.
Accordingly, the Series E preferred shares will remain
outstanding indefinitely unless Series E preferred
shareholders or we decide to convert them or we decide to
purchase them in connection with a Fundamental Change. See
Conversion Rights, Company
Conversion Option and Special Conversion
Right of Series E Preferred Shares upon a Fundamental
Change; Company Repurchase Right.
Subject to applicable law, we may purchase Series E
preferred shares in the open market, by tender or by private
agreement. Any Series E preferred shares that we reacquire
will be returned to the status of authorized but unissued
Series E preferred shares, unless determined otherwise by
our board of trustees.
Restrictions on
Ownership and Transfer
Our Declaration of Trust restricts the number of shares which
may be owned by shareholders. Generally, for us to qualify as a
REIT under the Code, not more than 50% in value of our
outstanding shares may be owned, directly or indirectly, by five
or fewer individuals (defined in the Code to include certain
entities and constructive ownership among specified family
members) at any time during the last half of a taxable year. The
shares must also be beneficially owned by 100 or more persons
during at least 335 days of a taxable year of
12 months or a proportionate part of a shorter taxable
year. In order to maintain our qualification as a REIT, our
Declaration of Trust contains restrictions on the acquisition of
shares intended to ensure compliance with these requirements.
Our Declaration of Trust generally provides that any person (not
just individuals) holding more than 9.8% in number of shares or
value, of the outstanding shares of any class or series of our
common shares or preferred shares (the Ownership
Limit) may be subject to forfeiture of the shares
(including common shares and preferred shares) owned in excess
of the Ownership Limit (Excess Shares). The Excess
Shares may be transferred to a trust for the benefit of one or
more charitable beneficiaries. The trustee of that trust would
have the right to vote the voting Excess Shares, and
distributions on the Excess Shares would be payable to the
trustee for the benefit of the charitable beneficiaries. Holders
of Excess Shares would be entitled to compensation for their
Excess Shares, but that compensation may be less than the price
they paid for the Excess Shares. Persons who hold Excess Shares
or who intend to acquire Excess Shares must provide written
notice to us.
Our Ownership Limit may also act to deter an unfriendly takeover
of the Company.
The Series E preferred shares will be subject to provisions
of our Declaration of Trust, including the articles
supplementary for the Series E preferred shares, under
which any Series E preferred shares owned by a shareholder
in excess of the Ownership Limit, will automatically be
designated Excess Shares and transferred to a trust for the
exclusive benefit of a charitable beneficiary which we will
designate. Owners of Excess Shares are entitled to compensation
for their Excess Shares in accordance with the terms of our
Declaration of Trust, but such compensation may be less than the
amount they paid for those Excess Shares.
S-51
The articles supplementary for the Series E preferred
shares and our Declaration of Trust contain provisions that
allow our board of trustees to waive this ownership limit,
subject to certain conditions.
Form and
Book-Entry System
The Series E preferred shares will initially be issued and
maintained in the form of global securities held in book-entry
form. DTC or its nominee will be the sole registered holder of
the Series E preferred shares. Owners of beneficial
interests in the Series E preferred shares represented by
the global securities will hold their interests pursuant to the
procedures and practices of DTC. As a result, beneficial
interests in any such securities will be shown on, and transfers
will be effected only through, records maintained by DTC and its
direct and indirect participants and any such interest may not
be exchanged for certificated securities, except in limited
circumstances. Owners of beneficial interests must exercise any
rights in respect of other interests, including any right to
convert or require repurchase of their interests in the
Series E preferred shares, in accordance with the
procedures and practices of DTC. Owners of such beneficial
interests will not be holders and will not be entitled to any
rights provided to the holders of the Series E preferred
shares under the global securities or the articles
supplementary. We and any of our agents may treat DTC as the
sole holder and registered owner of the global securities.
Any holder of Series E preferred shares will have the right
to request a certificate therefor and upon such request made in
writing to the Transfer Agent and Registrar for the
Series E preferred Shares, we will cause to be issued a
duly executed certificate for such Series E preferred
shares registered in the name in which the Series E
preferred shares were held in book-entry form or such other
name(s) as specified by the holder in writing. In addition, the
Series E preferred shares, represented by one or more
global securities, will be exchangeable for certificated
securities with the same terms if:
|
|
|
DTC is unwilling or unable to continue as depositary or if DTC
ceases to be a clearing agency registered under the Exchange Act
and a successor depositary is not appointed by us within ninety
(90) days; or
|
|
|
we decide to discontinue use of the system of book-entry
transfer through DTC.
|
DTC has advised us as follows: DTC is a limited-purpose trust
company organized under the New York Banking Law, a
banking organization within the meaning of the New
York Uniformed Commercial Code, and a clearing
agency registered pursuant to the provisions of
Section 17A of the Exchange Act. DTC facilitates the
settlement of transactions amongst participants through
electronic computerized book-entry changes in participants
accounts, eliminating the need for physical movement of
securities certificates. DTCs participants include
securities brokers and dealers, including the underwriters,
banks, trust companies, clearing corporations and other
organizations, some of whom and/or their representatives own
DTC. Access to DTCs book-entry system is also available to
others, such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a
participant, either directly or indirectly.
S-52
Additional U.S.
federal income tax considerations
Please read the prospectus under the heading U.S. Federal
Income Tax Considerations on page 32 of the accompanying
prospectus for additional U.S. federal income tax considerations
that apply to this offering.
The following summary describes certain material U.S. federal
income tax consequences relating to the acquisition, ownership
and disposition of the Series E preferred shares. This
summary supplements and updates the more detailed description of
these matters in the U.S. Federal Income Tax
Considerations section of the accompanying prospectus.
Stinson Morrison Hecker LLP will render a legal opinion that the
discussions in this section and in the U.S. Federal Income
Tax Considerations section of the accompanying prospectus
are accurate in all material respects and, taken together,
fairly summarize the federal income tax consequences discussed
in those sections. Specifically, subject to qualifications and
assumptions contained in its opinion, Stinson Morrison Hecker
LLP will give opinions to the effect that we have been organized
and have qualified as a REIT under the Internal Revenue Code of
1986, as amended (the Code), for our 1997 taxable
year through the date hereof, and that our actual operation
through the date hereof and current investments and proposed
plan of operation will enable us to continue to meet the
requirements for qualification and taxation as a REIT under the
Code. Investors should be aware, however, that opinions of
counsel are not binding upon the Internal Revenue Service or any
court.
In providing its opinion, Stinson Morrison Hecker LLP is
relying, without independent investigation, as to certain
factual matters upon the statements and representations
contained in an officers certificate provided by the
Company.
This summary is based on current law and does not address all
aspects of taxation that may be relevant to particular
shareholders in light of their personal investment or tax
circumstances, or to certain types of shareholders (including,
without limitation, dealers or traders in securities, insurance
companies, financial institutions, partnerships, broker-dealers,
and shareholders that hold our shares as part of a hedge,
straddle, conversion transaction or other arrangement) subject
to special treatment under U.S. federal income tax laws.
It should be noted that the current tax rates referenced in this
discussion are set to expire at the end of 2010. Absent
legislative action, the maximum capital gains federal income tax
rate for U.S. Shareholders who are individuals will revert to
20% at that time and the maximum ordinary income tax rate will
revert to 39.6%.
You should consult your own tax advisor regarding the
specific tax consequences of the purchase, ownership and sale or
conversion of the Series E preferred shares.
Taxation of the
Company
As a REIT, the Company generally will not have to pay Federal
corporate income taxes on its net income that it currently
distributes to shareholders. This treatment substantially
eliminates the double taxation at the corporate and
shareholder levels that generally results from investment in a
regular corporation, subject to general exceptions that result
in corporate level tax. See U.S. Federal Income Tax
Consequences Taxation of the Company
General in the prospectus. In order to maintain its status
as a REIT, the Company must meet certain asset and income tests.
See U.S. Federal Income Tax Consequences
Taxation of the Company Requirements for
Qualification in the prospectus.
S-53
Foreign
investments
We and our subsidiaries may hold investments in, and pay taxes
to, foreign countries. Taxes we pay in foreign jurisdictions may
not be passed through to, or used by, our U.S. Shareholders as a
foreign tax credit or otherwise. However, such taxes would
create a tax deduction which would reduce REIT taxable income.
Our foreign investments might also generate foreign currency
gains and losses. According to recent guidance provided by the
IRS, to the extent that a REIT incurs foreign currency gain
which is attributable to income recognized by a REIT that is
qualifying income under the 95% and 75% income tests, then the
foreign currency gain is also qualifying income under the 95%
and 75% income tests. No assurance can be given that foreign
currency gains that we recognize directly or through
pass-through subsidiaries will be qualifying income under the
95% or 75% income tests. Furthermore, no assurance can be given
that a combination of non-qualifying income, such as certain
foreign currency gains, personal property rents, and other
non-qualifying income, will not adversely affect our ability to
satisfy the REIT qualification requirements.
Taxation of
shareholders
Taxation of
taxable domestic shareholders
As used herein, the term U.S. Shareholder means a
holder of Series E preferred shares who (for U.S. federal
income tax purposes) (i) is a citizen or resident of the
United States, (ii) is a corporation, partnership or other
entity created or organized in or under the laws of the United
States or any political subdivision thereof (except, in the case
of a partnership, the Treasury provides otherwise by
regulations), (iii) is an estate the income of which is
subject to U.S. federal income taxation regardless of its
source, or (iv) is a trust whose administration is subject
to the primary supervision of a U.S. court and which has one or
more U.S. persons who have the authority to control all
substantial decisions of the trust, or has a valid election in
effect under applicable U.S. Treasury regulations to be treated
as a U.S. person.
As long as EPR qualifies as a REIT, we generally will not be
subject to federal income tax on our net income distributed to
our shareholders. As long as EPR qualifies as a REIT,
distributions made out of our current or accumulated earnings
and profits (and not designated as capital gain distributions)
will generally constitute dividends taxable to our taxable
corporate U.S. Shareholders as ordinary income taxed at a
maximum rate of 35% and such U.S. Shareholders will not be
eligible for the dividends received deduction otherwise
available with respect to distributions received by corporate
U.S. Shareholders. Because we are a REIT for federal income tax
purposes, ordinary dividend income paid to individual U.S.
Shareholders generally will not constitute qualified
dividend income eligible for the current reduced tax rate
of 15%. Dividends received from a REIT generally are treated as
qualified dividend income eligible for the reduced
tax rate only to the extent that the REIT has received
qualified dividend income from other non-REIT
corporations, such as taxable REIT subsidiaries. In addition, if
a REIT pays U.S. federal income tax on its undistributed net
taxable income or on certain gains from the disposition of
assets acquired from C corporations, the excess of the income
subject to tax over the taxes paid will be treated as
qualified dividend income in the subsequent taxable
year.
Distributions made by us that are properly designated as capital
gain dividends will be taxable to U.S. Shareholders as gains (to
the extent they do not exceed our actual net capital gain for
the taxable year) from the sale or disposition of a capital
asset. Depending on the period of time we held the assets which
produced the gains, and on certain designations, if any, which
S-54
may be made by us, such gains may be taxable to noncorporate
U.S. Shareholders at a 15% or 25% rate (through 2010 under
current law), without regard to the period for which the U.S.
Shareholder has held the Series E preferred shares. U.S.
Shareholders that are corporations may, however, be required to
treat up to 20% of certain capital gain dividends as ordinary
income. To the extent we make distributions (not designated as
capital gain dividends) in excess of our current and accumulated
earnings and profits, such distributions will be treated first
as a tax-free return of capital to each U.S. Shareholder,
reducing the adjusted basis which such U.S. Shareholder has in
his Series E preferred shares for tax purposes by the
amount of such distribution (but not below zero). Distributions
in excess of a U.S. Shareholders adjusted basis in his
shares will be taxable as capital gain (provided that the shares
have been held as a capital asset) and will be taxable as
long-term capital gain if the Series E preferred shares
have been held for more than one year. Dividends declared by us
in October, November or December of any year and payable to a
shareholder of record on a specified date in any such month
shall be treated as both paid by us and received by the
shareholder on December 31st of that year; provided the
dividend is actually paid by us on or before January 31st
of the following calendar year. Shareholders may not include in
their own income tax returns any net operating losses or capital
losses of EPR.
Distributions made by us and gain arising from the sale or
exchange by a U.S. Shareholder of shares will not be treated as
passive activity income, and, as a result, U.S. Shareholders
generally will not be able to apply any passive
losses against such income or gain. Distributions made by
us (to the extent they do not constitute a return of capital)
generally will be treated as investment income for purposes of
computing the investment interest limitation. Gain arising from
the sale or other disposition of Series E preferred shares
and certain qualifying distributions (or distributions treated
as such), will not be treated as investment income under certain
circumstances.
Redemption of
Series E preferred shares
Redemption of Series E preferred shares for cash will be
treated under Section 302 of the Code as a dividend taxable
as a distribution (to the extent of our current and accumulated
earnings and profits) unless the redemption satisfies one of the
tests set forth in Section 302(b) of the Code and is
therefore treated as a sale or exchange of the redeemable
shares. A redemption characterized as a dividend distribution
would not be eligible for the dividends received deduction for
corporate shareholders. The redemption will be treated as a sale
or exchange if it (i) is substantially
disproportionate with respect to you, (ii) results in
a complete termination of your share interest in
EPR, or (iii) is not essentially equivalent to a
dividend with respect to you, all within the meaning of
Section 302(b) of the Code. In determining whether any of
these tests have been met, common shares considered to be owned
by you by reason of certain constructive ownership rules set
forth in the Code, as well as common shares actually owned by
you, must generally be taken into account. If you do not own
(actually or constructively) any common shares of EPR, or an
insubstantial percentage of our outstanding common shares, a
redemption of your Series E preferred shares is likely to
qualify for sale or exchange treatment because the redemption
would not be essentially equivalent to a dividend.
However, because the determination as to whether any of the
alternative tests of Section 302(b) of the Code will be
satisfied with respect to your Series E preferred shares
depends upon the facts and circumstances at the time the
determination must be made, you are advised to consult your own
tax advisor to determine such tax treatment.
S-55
If a redemption of Series E preferred shares is treated as
a sale or exchange to you, it will be treated as a taxable sale
or exchange of the shares. As a result, you will recognize gain
or loss for federal income tax purposes in an amount equal to
the difference between (i) the amount of cash and the fair
market value of any property received (less any portion thereof
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 (ii) your
adjusted basis in the Series E preferred shares for tax
purposes. Such gain or loss will be capital gain or loss if the
Series E preferred shares have been held as a capital
asset, and will be long-term gain or loss if the Series E
preferred shares have been held for more than one year. The
deductibility of capital losses are subject to limitations. If a
redemption of Series E preferred shares is treated as a
distribution taxable as a dividend, the amount of the dividend
will be measured by the amount of cash and the fair market value
of any property received by you and your adjusted basis in the
redeemable Series E preferred shares will be transferred to
your remaining shares in EPR. If you do not own any of our other
shares, such basis may, under certain circumstances, be
transferred to a related person or it may be lost entirely.
Disposition of
Series E preferred shares
If you are a U.S. Shareholder (as defined below) and you sell or
dispose of your Series E preferred shares, you will
recognize gain or loss for federal income tax purposes in an
amount equal to the difference between the amount of cash and
the fair market value of any property you receive on the sale or
other disposition and your adjusted basis in the Series E
preferred shares for tax purposes. This gain or loss will be
capital gain or loss if you have held the Series E
preferred shares as a capital asset and, if you are a U.S.
Shareholder, will be long-term capital gain or loss if you have
held the Series E preferred shares for more than one year
at the time of disposition. Long term capital gains of an
individual U.S. Shareholder are generally taxed at preferential
rates.
In general, if you are a U.S. Shareholder and you recognize loss
upon the sale or other disposition of Series E preferred
shares that you have held for six months or less, after applying
the holding period rules set forth in the Code, the loss you
recognize will be treated as a long-term capital loss to the
extent you received distributions from us which were required to
be treated as long-term capital gains.
Capital losses recognized by a U.S. Shareholder upon disposition
of our Series E preferred shares that were held more than
one year at the time of disposition will be considered long term
capital losses and are generally available only to offset
capital gain income of the U.S. Shareholder but not ordinary
income (except in the case of individuals who may apply up to
$3,000 per year of the excess, if any, of capital losses over
capital gains to offset ordinary income).
Conversion of
Series E preferred shares
If you receive a number of our common shares as a result of a
conversion or repurchase of our Series E preferred shares,
then the transaction will be treated as a recapitalization. As
such, you would recognize income or gain only to the extent of
the lesser of (1) the excess, if any, of the value of the
cash and common shares you receive over your adjusted tax basis
in your Series E preferred shares surrendered or
(2) the cash you receive. Any cash you receive, up to the
amount of income or gain recognized, would generally be
characterized as a dividend to the extent that a surrender of
your Series E preferred shares to us for cash only would be
taxable as a dividend,
S-56
taking into account your continuing actual or constructive
ownership interest in our shares, if any, as discussed above,
and the balance of the recognized amount, if any, will be gain.
Your basis in your common shares received would be equal to your
basis for your Series E preferred shares surrendered, less
any cash received, plus any income or gain recognized. Your
holding period in your common shares received would be the same
as your holding period for the Series E preferred shares
surrendered. Non-U.S. shareholders may not be eligible for the
foregoing partial nonrecognition rules and may instead be
subject to special rules discussed below.
Under Section 305 of the Code, convertible preferred stock
that may be redeemed at a premium (that is, a price higher than
its issue price) may have this redemption premium
treated as a constructive distribution.
Under applicable Treasury Regulations, constructive distribution
treatment is required in the case of callable preferred stock
only if, based on all of the facts and circumstances as of the
issue date, redemption pursuant to this call right is more
likely than not to occur. Even if this redemption is more likely
than not to occur, constructive distribution treatment is not
required if the redemption premium is solely in the nature of a
penalty for premature redemption, i.e., it is a premium paid as
a result of changes in economic conditions over which neither we
nor you have control. The Treasury Regulations also provide a
safe harbor pursuant to which an issuers right to redeem
will not be treated as more likely than not to occur. While
there can be no assurance in this regard, we believe that
constructive distribution treatment on the Series E
preferred shares will not be required.
You generally will not recognize any income, gain or loss upon
conversion of Series E preferred shares into common shares
except with respect to cash, if any, you receive in lieu of a
fractional common share. Your income tax basis in the common
shares you receive on the conversion generally will be the same
as your adjusted tax basis in the Series E preferred shares
just prior to the time of conversion, reduced by any basis
allocable to any fractional share. Your holding period for the
common shares you receive will generally include the holding
period of the Series E preferred shares converted. Any cash
you receive in lieu of a fractional common share upon conversion
will be treated as a payment in exchange for the fractional
common share. Accordingly, your receipt of cash in lieu of a
fractional share generally will result in capital gain or loss,
measured by the difference between the cash you receive for the
fractional share and your adjusted tax basis attributable to the
fractional share. Non-U.S. shareholders may not be eligible for
the foregoing rules and may instead be subject to special rules
discussed below.
Your rights to convert your Series E preferred shares into
common shares allow for the conversion price to be adjusted
under a number of circumstances, generally to ensure that you
receive an economically equivalent number of shares from a
conversion following stock splits and stock dividends of our
common shares, and also following certain cash distributions on
common shares in excess of threshold amounts. Section 305
of the Code treats some of these adjustments as constructive
taxable distributions. In general, you would be deemed to
receive a constructive distribution if the conversion price is
adjusted for a taxable distribution to the holders of common
shares. Constructive distributions so treated would be taxable
first as dividends to the extent paid out of our allocable
current or accumulated earnings and profits, next as a
nontaxable return of capital to the extent of your basis in your
Series E preferred shares, and finally as gain from the
sale or exchange of your Series E preferred shares. Your
adjusted tax basis in your Series E preferred shares would
be increased by constructive distributions to you taxable as
dividends or gain, and would be unaffected by constructive
distributions
S-57
that were nontaxable returns of capital. Conversely, a failure
to appropriately adjust the conversion price of your
Series E preferred shares could result in a constructive
distribution to holders of common shares that would be taxable
to them in a similar manner.
As more fully explained in the section Taxation of
Non-U.S. Shareholders below, nonrecognition treatment may
not apply at all, and a non-U.S. shareholder may be subject to
federal income tax, increased United States tax filing
requirements, and possibly a branch profits tax, in respect of
all the gain realized on the sale, repurchase or conversion of
our Series E preferred shares, if those shares constitute
United States real property interests under Section 897 of
the Code and related Treasury regulations. The Series E
preferred shares will not constitute such United States real
property interests if we are a domestically controlled
REIT. A domestically controlled REIT is a REIT in which at
all times during the preceding five-year period less than 50% in
value of its shares is held directly or indirectly by foreign
persons. We believe that we are and will be a domestically
controlled REIT and thus a non-U.S. shareholders gain on
sale, repurchase or conversion of our Series E preferred
shares will not be subject to United States federal income
taxation. However, because our shares are publicly traded, we
can provide no assurance that we will be a domestically
controlled REIT. If we are not a domestically controlled REIT,
but the Series E preferred shares are regularly
traded, as defined by applicable Treasury regulations, on
an established securities market like the NYSE, then
a non-U.S. shareholders gain on sale, repurchase or
conversion of our Series E preferred shares will not be
subject to United States federal income taxation as a sale of a
United States real property interest, if the non-U.S.
shareholder has at all times during the preceding five years
owned 5% or less by value of that class of shares. In this
regard, because the Series E preferred shares of others may
be repurchased and are convertible, your percentage interest in
the Series E preferred shares may increase even if you
acquire no additional Series E preferred shares.
Backup
withholding
We will report to our domestic shareholders and to the IRS the
amount of distributions paid during each calendar year, and the
amount of tax withheld, if any from those distributions. Under
the backup withholding rules, a shareholder may be subject to
backup withholding at the rate equal to the fourth lowest rate
of tax under Section 1(c) of the Code (which is currently
28%) with respect to distributions paid and redemption proceeds
unless the shareholder (a) is a corporation or comes within
certain other exempt categories and, when required, demonstrates
this fact, or (b) provides a taxpayer identification
number, certifies as to no loss of exemption from backup
withholding, and otherwise complies with applicable requirements
of the backup withholding rules. Notwithstanding the foregoing,
we will institute backup withholding with respect to a
shareholder when instructed to do so by the IRS. A shareholder
that does not provide us with his correct taxpayer
identification number may also be subject to penalties imposed
by the IRS. Any amount paid as backup withholding will be
creditable against the shareholders U.S. federal income
tax liability.
Taxation of
tax-exempt shareholders
The IRS has issued a revenue ruling in which it held that
amounts distributed by a REIT to a tax-exempt employees
pension trust do not constitute unrelated business taxable
income (UBTI). Revenue rulings, however, are
interpretive in nature and are subject to revocation or
modification by the IRS. Based upon the ruling and the analysis
therein, distributions by us to a shareholder that is a
tax-exempt entity should not constitute UBTI, provided the tax
exempt
S-58
entity has not financed the acquisition of its Series E
preferred shares with acquisition indebtedness
within the meaning of the Code, and the Series E preferred
shares are not otherwise used in an unrelated trade or business
of the tax-exempt entity. In addition, REITs generally treat the
beneficiaries of qualified pension trusts as the beneficial
owners of REIT shares owned by such pension trusts for purposes
of determining if more than 50% of the REITs shares are
owned by five or fewer individuals. However, if a pension trust
owns more than 10% of the REITs shares (by value), it can
be subject to UBTI on all or a portion of REIT distributions
made to it, if the REIT is treated as a pension-held
REIT. A pension-held REIT is any REIT if more than 25% (by
value) of its shares are owned by one pension trust, or one or
more pension trusts each owns 10% (by value) of such shares, and
in the aggregate, such pension trusts own more than 50% (by
value) of its shares. We do not expect to be treated as a
pension-held REIT. However, because our common
shares are publicly traded, and it is anticipated the
Series E preferred shares will be publicly traded, no
assurance can be given in this regard.
For social clubs, voluntary employee benefit associations,
supplemental unemployment benefit trusts and qualified group
legal services plans exempt from U.S. federal income tax under
Section 501(c)(7), (9), (17) and (20) of the
Code, respectively, income from an investment in EPR will
constitute UBTI. However, income from an investment in EPR will
not constitute UBTI for voluntary employee benefit associations,
supplemental unemployment trusts and qualified group legal
services plans if the organization is able to deduct amounts
set aside or placed in reserve for certain purposes
so as to offset the UBTI generated by its investment in EPR.
Such prospective shareholders should consult with their own tax
advisors concerning these set aside and reserve
requirements.
Taxation of
Non-U.S. shareholders
The rules governing U.S. federal income taxation of the
ownership and disposition of Series E preferred shares by
persons who are not U.S. Shareholders (Non-U.S.
Shareholders) are complex and no attempt is made in this
prospectus supplement to provide more than a summary of these
rules. Prospective Non-U.S. Shareholders should consult with
their own tax advisors to determine the impact of federal,
state, local and any foreign income tax laws with regard to an
investment in EPR, including any reporting requirements.
Distributions that are not attributable to gain from sales or
exchanges by us of United States real property
interests (USRPIs), as defined in the Code,
and not designated by us as capital gain distributions will be
treated as distributions of ordinary income to the extent they
are made out of our current or accumulated earnings and profits.
Unless such distributions are effectively connected with the
Non-U.S. Shareholders conduct of a U.S. trade or business
(or, if an income tax treaty applies, are attributable to a U.S.
permanent establishment of the Non-U.S. Shareholder), the gross
amount of the distributions will ordinarily be subject to U.S.
withholding tax at a 30% or lower treaty rate, if applicable. In
general, Non-U.S. Shareholders will not be considered engaged in
a U.S. trade or business (or, in the case of an income tax
treaty, as having a U.S. permanent establishment) solely by
reason of their ownership of Series E preferred shares. If
income on Series E preferred shares is treated as
effectively connected with the Non-U.S. Shareholders
conduct of a U.S. trade or business (or, if an income tax treaty
applies, is attributable to a U.S. permanent establishment of
the Non-U.S. Shareholder), the Non-U.S. Shareholder generally
will be subject to a tax at graduated rates, in the same manner
as U.S. Shareholders are taxed with respect to such
distributions (and may also be subject to the 30% branch profits
tax in the case of a shareholder that is a foreign corporation).
We expect to withhold U.S. income tax at the rate of 30% on the
gross amount of any distributions of
S-59
ordinary income made to a Non-U.S. Shareholder unless the
Non-U.S. Shareholder provides us with a (i) properly
executed IRS
Form W-8BEN
claiming an exemption from or reduction in the rate of
withholding under the benefit of a tax treaty, or (ii) IRS
Form W-8ECI
claiming that the distribution is not subject to withholding
because it is effectively connected with the Non-U.S.
Shareholders conduct of a U.S. trade or business (or, if
an income tax treaty applies, is attributable to a U.S.
permanent establishment of the Non-U.S. Shareholder).
Unless the Series E preferred shares constitute USRPIs,
distributions in excess of our current and accumulated earnings
and profits will not be taxable to a shareholder to the extent
such distributions do not exceed the adjusted basis of the
shareholders Series E preferred shares but rather
will reduce the adjusted basis of the shares. To the extent such
distributions exceed the adjusted basis of a Non-U.S.
Shareholders Series E preferred shares, such
distributions will give rise to tax liability if the Non-U.S.
Shareholder would otherwise be subject to tax on any gain from
the sale or disposition of his shares, as described below. If it
cannot be determined at the time a distribution is made whether
or not the distribution will be in excess of our current and
accumulated earnings and profits, the distributions will be
subject to withholding at the same rate as distributions. If,
however, Series E preferred shares are treated as USRPIs,
then, unless otherwise treated as a distribution for withholding
tax purposes as described below, any distributions in excess of
our current or accumulated earnings and profits will generally
be subject to 10% withholding and to the extent such
distributions also exceed the adjusted basis of a Non-U.S.
Shareholders Series E preferred shares, they will
also give rise to gain from the sale or exchange of the shares,
the tax treatment of which is described below.
Distributions that are designated by us at the time of
distribution as capital gain distributions (other than those
arising from the disposition of a USRPI) generally will not be
subject to taxation, unless (i) investment in the
Series E preferred shares is effectively connected with the
Non-U.S. Shareholders U.S. trade or business (or, if an
income tax treaty applies, is attributable to a U.S. permanent
establishment of the Non-U.S. Shareholder), in which case the
Non-U.S. Shareholder will be subject to the same treatment as
U.S. Shareholders with respect to such gain (except that a
shareholder that is a foreign corporation may also be subject to
the 30% branch profits tax), or (ii) the Non-U.S.
Shareholder is a non-resident alien individual who is present in
the U.S. for 183 days or more during the taxable year and
either has a tax home in the U.S. or sold his shares
under circumstances in which the sale was attributable to a U.S.
office, in which case the non-resident alien individual will be
subject to a 30% tax on the individuals capital gains.
Under the provisions of the Foreign Investment in Real Property
Tax Act of 1980 (FIRPTA), a distribution made to a
non-U.S. Shareholder, to the extent attributable to gains from
dispositions of USRPIs held by us directly or through
pass-through subsidiaries (USRPI capital gains),
will be considered effectively connected with a U.S. trade or
business of the non-U.S. Shareholder and will be subject to U.S.
federal income tax at the rates applicable to U.S. Shareholders,
without regard to whether the distribution is designated as a
capital gain dividend. In addition, we will be required to
withhold tax equal to 35% of the amount of capital gain
dividends to the extent the dividends constitute USRPI capital
gains. Distributions subject to FIRPTA may also be subject to a
30% branch profits tax in the hands of a non-U.S. Shareholder
that is a corporation. However, the 35% withholding tax will not
apply to any capital gain dividend with respect to any class of
our stock which is regularly traded on an established securities
market located in the U.S. if the non-U.S. Shareholder did not
own more than 5% of such class of stock at any time during the
taxable year. Instead any capital gain dividend will be treated
as a
S-60
distribution subject to the rules discussed under the paragraph
above. Also, the branch profits tax will not apply to such a
distribution.
Gain recognized by a Non-U.S. Shareholder upon a sale,
repurchase or conversion of Series E preferred shares will
generally not be taxed under FIRPTA if the shares do not
constitute USRPIs. Series E preferred shares will not be
considered USRPIs if we qualify as a domestically
controlled REIT, or if the Series E preferred shares
are part of a class that is regularly traded on an established
securities market and the holder owned less than 5% of the class
sold during a specified testing period. A domestically
controlled REIT is defined generally as a real estate
investment trust in which at all times during a specified
testing period less than 50% in value of its shares was held
directly or indirectly by foreign persons. We believe we are a
domestically controlled REIT, and therefore the sale
of Series E preferred shares will not be subject to
taxation under FIRPTA. If the gain on the sale of Series E
preferred shares were to be subject to taxation under FIRPTA,
the Non-U.S. Shareholder would be subject to the same treatment
as U.S. Shareholders with respect to such gain (subject to
applicable alternative minimum tax and a special alternative
minimum tax in the case of nonresident alien individuals), and
the purchaser of the shares may be required to withhold 10% of
the purchase price and remit such amount to the IRS. However,
since our common shares are publicly traded and it is
anticipated our Series E preferred shares will be publicly
traded as well, no assurance can be given in this regard.
Gain not subject to FIRPTA will be taxable to a Non-U.S.
Shareholder if (i) investment in the Series E
preferred shares is effectively connected with a U.S. trade or
business of the Non-U.S. Shareholder (or, if an income tax
treaty applies, is attributable to a U.S. permanent
establishment of the Non-U.S. Shareholder), in which case the
Non-U.S. Shareholder will be subject to the same treatment as
U.S. Shareholders with respect to such gain, or (ii) the
Non-U.S. Shareholder 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 U.S., in which case
the nonresident alien individual will be subject to a 30% tax on
the individuals capital gains. If the gain on the sale of
Series E preferred shares were to be subject to taxation
under FIRPTA, the Non-U.S. Shareholder would be subject to the
same treatment as U.S. Shareholders with respect to such gain
(subject to applicable alternative minimum tax and a special
alternative minimum tax in the case of nonresident alien
individuals).
Effective generally from and after 2006, a special wash
sale rule applies to a non-U.S. shareholder who owns any
class of our shares if (1) the shareholder owns more than
5% of that class of shares at any time during the one-year
period ending on the date of the distribution described below,
or (2) that class of our shares is not, within the meaning
of applicable Treasury Regulations, regularly traded
on a domestic established securities market such as
the NYSE. Although there can be no assurance in this regard, we
believe that our common shares and our Series E preferred
shares will be regularly traded on an
established securities market within the meaning of
applicable Treasury regulations, as described in the
accompanying prospectus. We thus anticipate this new wash sale
rule to apply, if at all, only to a non-U.S. shareholder that
owns more than 5% of either our common shares or our
Series E preferred shares. Such a non-U.S. shareholder will
be treated as having made a wash sale of our shares
if it (1) disposes of an interest in our shares during the
30 days preceding the ex-distribution date of a
distribution by us that, but for such disposition, would have
been treated by the non-U.S. shareholder in whole or in part as
gain from the sale or exchange of a United States real property
interest, and then (2) acquires or enters into a contract
to acquire a substantially identical interest in our shares,
either actually or constructively through a related party,
during the
61-day
period beginning 30 days prior to the ex-distribution date.
In the event of such a wash sale, the non-
S-61
U.S. shareholder will have gain from the sale or exchange of a
USRPI in an amount equal to the portion of the distribution
that, but for the wash sale, would have been a gain from the
sale or exchange of a USRPI. As described in the accompanying
prospectus, a non-U.S. shareholders gain from the sale or
exchange of a USRPI can trigger increased United States taxes,
such as the branch profits tax applicable to non-U.S.
corporations, and increased United States tax filing
requirements.
If the proceeds of a disposition of Series E preferred
shares are paid by or through a U.S. office of a broker, the
payment is subject to information reporting and backup
withholding unless the disposing Non-U.S. Shareholder certifies
as to his name, address and non-U.S. status or otherwise
establishes an exemption. Generally, U.S. information reporting
and backup withholding will not apply to a payment of
disposition proceeds if the payment is made outside the U.S.
through a non-U.S. office of a non-U.S. broker.
U.S. information reporting requirements (but not backup
withholding) will apply, however, to a payment of disposition
proceeds outside the U.S. if (i) the payment is made
through an office outside the U.S. of a broker that is either
(a) a U.S. person, (b) a foreign person that derives
50% or more of its gross income for certain periods from the
conduct of a trade or business in the U.S., (c) a
controlled foreign corporation for U.S. federal
income tax purposes, or (d) a foreign partnership more than
50% of the capital or profits of which is owned by one or more
U.S. persons or which engages in a U.S. trade or business, and
(ii) the broker fails to obtain documentary evidence that
the shareholder is a Non-U.S. Shareholder and that certain
conditions are met or that the Non-U.S. Shareholder otherwise is
entitled to an exemption.
Possible
legislative or other actions affecting tax
consequences
Prospective investors should recognize that the present U.S.
federal income tax treatment of an investment in our shares may
be modified by legislative, judicial or administrative action at
any time, and that any such action may affect investments and
commitments previously made. The rules dealing with U.S. federal
income taxation are constantly under review by persons involved
in the legislative process and by the IRS and the U.S. Treasury
Department, resulting in revisions or regulations and revised
interpretations of established concepts as well as statutory
changes. Revisions in U.S. federal tax laws and interpretations
thereof could adversely affect the tax consequences of an
investment in our shares.
Moreover, prospective investors should be aware that as of
January 1, 2011, absent legislative action, the maximum
capital gains federal income tax rate for U.S. shareholders who
are individuals will revert to 20% and the maximum ordinary
income tax rate will revert to 39.6%.
State tax
consequences and withholding
We and our shareholders may be subject to state or local
taxation in various state or local jurisdictions, including
those in which we or they transact business or reside. The state
and local tax treatment of EPR and our shareholders may not
conform to the U.S. federal income tax consequences discussed
above. Several states in which we may own properties may treat
REITs as ordinary corporations. We do not believe, however, that
shareholders will be required to file state tax returns, other
than in their respective states of residence, as a result of the
ownership of shares. However, you should consult your own tax
advisor regarding the effect of state and local tax laws on an
investment in our shares.
S-62
You are advised to consult with your own tax advisor
regarding the specific tax consequences to you of the ownership
and sale of shares in an entity electing to be taxed as a real
estate investment trust, including the federal, state, local,
foreign, and other tax consequences of such purchase, ownership,
sale, and election and of potential changes in applicable tax
laws.
S-63
Underwriting
J.P. Morgan Securities Inc. and Morgan Stanley & Co.
Incorporated are acting as the representatives of the
underwriters named below. We and J.P. Morgan Securities Inc. and
Morgan Stanley & Co. Incorporated as representatives
of the underwriters, have entered into an underwriting agreement
concerning the Series E preferred shares being offered by
this prospectus supplement and the accompanying prospectus. The
underwriters obligations are several and not joint, which
means that each underwriter is required to purchase a specified
number of shares, but is not responsible for the commitment of
any other underwriter to purchase shares. Subject to the terms
and conditions of the underwriting agreement, each underwriter
has severally agreed to purchase the number of Series E
preferred shares set forth opposite its name below at the public
offering price on the cover page of this prospectus supplement
less the underwriting discount.
|
|
|
|
|
Underwriter
|
|
Number of Shares
|
|
|
J.P. Morgan Securities, Inc.
|
|
|
1,350,000
|
Morgan Stanley & Co. Incorporated
|
|
|
1,200,000
|
RBC Capital Markets Corporation
|
|
|
450,000
|
Total
|
|
|
3,000,000
|
|
|
The underwriting agreement provides that the obligations of the
underwriters are conditional and may be terminated at their
discretion based on their assessment of the state of the
financial markets. The obligations of the underwriters may also
be terminated upon the occurrence of the events specified in the
underwriting agreement. The underwriters are severally committed
to purchase all of the Series E preferred shares being
offered if any shares are purchased, other than those shares
covered by the over-allotment option described below.
We have granted the underwriters an option to purchase up to
450,000 additional Series E preferred shares to be sold in
this offering at the public offering price, less the
underwriting discounts and commissions described on the cover
page of this prospectus supplement. The underwriters may
exercise this option solely to cover over-allotments, if any.
This option may be exercised, in whole or in part, at any time
within the
30-day
period after the date of this prospectus supplement. To the
extent the option is exercised, the underwriters will be
severally committed, subject to certain conditions, to purchase
the additional Series E preferred shares in proportion to
their respective commitments as indicated in the table above.
The underwriters are offering the shares, subject to prior sale,
when, as and if issued to and accepted by them, subject to
approval of legal matters by their counsel, including the
validity of the shares, and other conditions contained in the
underwriting agreement, such as the receipt by the underwriters
of officers certificates and legal opinions. The
underwriters reserve the right to withdraw, cancel or modify
offers to the public without notice and to reject orders in
whole or in part.
The underwriters propose to offer the Series E preferred
shares directly to the public initially at the public offering
price set forth on the cover page of this prospectus supplement
and to selected dealers at such price less a concession not to
exceed $0.45 per share. The underwriters may allow, and
such selected dealers may reallow, a concession not to exceed
$0.15 per share. After the commencement of this offering,
the underwriters may change the public offering price and other
selling terms.
S-64
The following table shows the initial public offering price,
underwriting discount and proceeds, before expenses, to us. The
information assumes either no exercise or full exercise by the
underwriters of their over-allotment option.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
Per Share
|
|
No Exercise
|
|
Full Exercise
|
|
|
Initial public offering price
|
|
$
|
25.00
|
|
$
|
75,000,000
|
|
$
|
86,250,000
|
Underwriting discounts and commissions payable by us
|
|
$
|
0.75
|
|
$
|
2,250,000
|
|
$
|
2,587,500
|
Proceeds, before expenses, to us
|
|
$
|
24.25
|
|
$
|
72,750,000
|
|
$
|
83,662,500
|
|
|
We estimate that the total expenses of this offering payable by
us, excluding underwriting discounts and commissions, will be
approximately $225,000.
We have agreed in the underwriting agreement to indemnify the
underwriters against certain liabilities, including liabilities
under the Securities Act of 1933, as amended, and, where such
indemnification is unavailable, to contribute to payments that
the underwriters may be required to make in respect of such
liabilities.
The Series E preferred shares are a new issue of securities
and, prior to acceptance of the Series E preferred shares
for listing on the NYSE, there will be no established trading
market for the Series E preferred shares. We have filed an
application to list the Series E preferred shares on the
NYSE under the symbol, EPR PrE. If this application
is approved, we expect trading in the Series E preferred
shares to commence within a
30-day
period after the initial delivery of the Series E preferred
shares. In order to meet the requirements for listing the
Series E preferred shares on the NYSE, the underwriters
have undertaken to sell (i) Series E preferred shares
to ensure a minimum of 100 beneficial holders with a minimum of
100,000 Series E preferred shares outstanding and
(ii) a sufficient number of Series E preferred shares
so that following this offering, the Series E preferred
shares have a minimum aggregate market value of $2 million.
The underwriters have advised us that they intend to make a
market in the Series E preferred shares, but they are not
obligated to do so and may discontinue market making at any time
without notice. No assurance can be given as to the liquidity of
the trading market for the Series E preferred shares.
In order to facilitate this offering of Series E preferred
shares, the underwriters may engage in transactions that
stabilize, maintain or otherwise affect the market price of the
Series E preferred shares in accordance with
Regulation M under the Securities Exchange Act of 1934, as
amended.
The underwriters have advised us that they may make short sales
of Series E preferred shares in connection with this
offering, resulting in the sale by the underwriters of a greater
number of shares than they are required to purchase pursuant to
the underwriting agreement. The short position resulting from
those short sales will be deemed a covered short
position to the extent it does not exceed the number of shares
the underwriters have the right to purchase in this offering
including the 450,000 shares subject to their
over-allotment option and will be deemed a naked
short position to the extent it exceeds the number. A naked
short position is more likely to be created if the underwriters
are concerned that there may be downward pressure on the trading
price of the Series E preferred shares in the open market
that could adversely affect investors who purchase shares in
this offering.
S-65
The underwriters may reduce or close out a covered short
position either by exercising the over-allotment option or by
purchasing shares in the open market. In determining which of
these alternatives to pursue, the underwriters will consider the
price at which shares are available for purchase in the open
market as compared to the price at which they may purchase
shares through the over-allotment option. Any naked
short position will be closed out by purchasing shares in the
open market. Open market purchases made by the underwriters to
cover all or a portion of their short position may be effected
on the NYSE or otherwise. Similar to other purchase
transactions, the underwriters purchases to cover a short
position or to stabilize the market price of the Series E
preferred shares may have the effect of raising or maintaining
the market price of the Series E preferred shares or
preventing or mitigating a decline in the market price of the
Series E preferred shares following this offering. As a
result, the common shares may trade at a price that is higher
than the price that otherwise might prevail in the open market.
No representation is made as to the magnitude or effect of any
such stabilization or other activities. The underwriters are not
required to engage in these activities and, if commenced, may
discontinue any of these activities at any time.
We have agreed that, except pursuant to the underwriting
agreement or the concurrent offering of our common shares, we
will not offer, sell, contract to sell, pledge, grant any option
to purchase or otherwise dispose of, directly or indirectly, or
file with the SEC or cause to be declared effective a
registration statement under the Securities Act relating to, any
common shares, any other equity security of ours or any of our
subsidiaries on parity with or senior to the common shares (with
respect to distribution rights or payments upon our liquidation,
dissolution or winding up) or any securities that are
convertible into, that are exchangeable or exercisable for, or
that represent the right to receive, any such securities (which
we refer to as relevant securities), or publicly disclose the
intention to make any such offer, sale, pledge, grant,
disposition or filing, in each case for a period of 90 days
after the date of this prospectus supplement, without the prior
written consent of J.P. Morgan Securities Inc. and Morgan
Stanley & Co. Incorporated, subject to certain exceptions
and the extension described below.
Our executive officers have agreed that they will not (1)
(a) offer, sell, contract to sell, pledge, grant any option
to purchase or otherwise dispose of, directly or indirectly, any
relevant security or (b) enter into any swap, hedge or
other arrangement that transfers, in whole or in part, any of
the economic consequences of ownership of a relevant security,
whether any of these transactions are to be settled by delivery
of relevant securities or other securities, in cash or
otherwise, or publicly disclose the intention to make any such
offer, sale, pledge, grant or disposition, or enter into any
such transaction, swap, hedge or other arrangement, or
(2) file, or participate in the filing of, with the SEC a
registration statement under the Securities Act of 1933, as
amended, relating to, or exercise any rights to require
registration with the SEC of, or circulate or participate in the
circulation of any preliminary or final prospectus or other
disclosure document with respect to, any proposed offering or
sale of any relevant security without, in each case, the prior
written consent of J.P. Morgan Securities Inc. and Morgan
Stanley & Co. Incorporated for a period of 90 days
after the date of this prospectus supplement, subject to certain
exceptions and to the extension described below.
In the event that either (1) during the last 17 days
of the
lock-up
period applicable to us or our executive officers, we release
earnings results or material news or a material event relating
to us occurs or (2) prior to the expiration of the
applicable
lock-up
period, we announce that we will release earnings results during
the 16-day
period beginning on the last day of the
S-66
applicable
lock-up
period, then in either case the expiration of the applicable
lock-up
period will be extended until the expiration of the
18-day
period beginning on the date of the release of the earnings
results or the occurrence of the material news or event, as
applicable, unless J.P. Morgan Securities Inc. and Morgan
Stanley & Co. Incorporated waive in writing, such an
extension.
From time to time, the underwriters and/or their affiliates have
engaged in, and may in the future engage in, investment banking
and other commercial dealings in the ordinary course of business
with us for which they have received, and expect to receive,
customary fees and commissions for these transactions. JPMorgan
Chase Bank, N.A., an affiliate of one of the underwriters, J.P.
Morgan Securities, Inc., is a lender under our unsecured
revolving credit facility and will receive approximately 15% of
any proceeds from this offering and the concurrent offering of
our common shares that are used to repay indebtedness under the
credit facility. In addition, a holding company of JPMorgan
Chase Bank, N.A. has entered into a merger agreement with a
holding company of Bear Stearns Corporate Lending Inc. Bear
Stearns Corporate Lending, Inc. is a lender under the credit
facility and will receive approximately 4% of any proceeds from
this offering and the concurrent offering of our common shares
that are used to repay indebtedness under the credit facility.
Royal Bank of Canada, an affiliate of one of the underwriters,
RBC Capital Markets Corporation, is also a lender under the
credit facility and will receive approximately 15% of the
proceeds of this offering and the concurrent offering of our
common shares that are used to repay indebtedness under the
credit facility. Each underwriter is an underwriter for our
concurrent offering of common shares.
It is expected that delivery of the Series E preferred
shares will be made on or about April 2, 2008, which will
be the fourth business day following the date of pricing of the
Series E preferred shares.
Legal
matters
Stinson Morrison Hecker LLP will issue an opinion regarding the
validity of the Series E preferred shares offered by this
prospectus supplement. In addition, the discussion under the
caption Additional U.S. Federal Income Tax
Considerations in this prospectus supplement and
U.S. Federal Income Tax Considerations in the
accompanying prospectus (as amended and supplemented by
Additional U.S. Federal Income Tax Considerations in
this prospectus supplement) is based on the tax opinion of
Stinson Morrison Hecker LLP. Certain legal matters in connection
with this offering will be passed upon for the underwriters by
Dechert LLP.
Experts
The consolidated financial statements and schedules of EPR as of
December 31, 2007 and 2006 and for each of the years in the
three-year period ended December 31, 2007 have been
incorporated by reference in this prospectus supplement and the
accompanying prospectus and in the registration statement of
which this prospectus supplement and the accompanying prospectus
are a part, in reliance upon the reports of KPMG LLP,
independent registered public accounting firm, incorporated by
reference herein and upon the authority of that firm as experts
in accounting and auditing. The audit report covering the
December 31, 2006 financial statements refers to a change
in the method of quantifying errors in 2006.
S-67
Available
information
We are subject to the informational requirements of the Exchange
Act, and in accordance with those requirements, we file reports
and other information with the SEC. The reports and other
information can be inspected and copied at the public reference
facilities maintained by the SEC at Room 1580, 100 F
Street, N.E., Washington, D.C. 20549. Copies of this material
can be obtained by mail from the Public Reference Section of the
SEC at Room 1580,100 F Street, N.E., Washington, D.C. 20549
at prescribed rates. The public may obtain information on the
operation of the public reference room by calling the SEC at
1-800-SEC-0330.
The SEC maintains an Internet website (http://www.sec.gov) that
contains reports, proxy and information statements and other
materials that are filed through the SEC Electronic Data
Gathering, Analysis and Retrieval (EDGAR) system. In addition,
our common shares, our Series B preferred shares,
Series C preferred shares and Series D preferred
shares are listed on the New York Stock Exchange and we are
required to file reports, proxy and information statements and
other information with the New York Stock Exchange. These
documents can be inspected at the principal office of the New
York Stock Exchange, 20 Broad Street, New York, New York 10005.
We have filed with the SEC a registration statement on
Form S-3
(Registration File
No. 333-140978)
covering the securities offered by this prospectus supplement.
You should be aware that this prospectus supplement does not
contain all of the information contained or incorporated by
reference in that registration statement and its exhibits and
schedules. You may inspect and obtain the registration
statement, including exhibits, schedules, reports and other
information that we have filed with the SEC, as described in the
preceding paragraph. Statements contained in this prospectus
supplement concerning the contents of any document we refer you
to are not necessarily complete and in each instance we refer
you to the applicable document filed with the SEC for more
complete information.
S-68
PROSPECTUS
Entertainment
Properties Trust
Debt Securities, Common Shares,
Preferred Shares,
Depositary Shares and Warrants
We may offer, from time to time, in one or more series or
classes and in amounts, at prices and on terms that we will
determine at the time of offering:
|
|
|
|
|
debt securities which may be either senior debt securities or
subordinated debt securities;
|
|
|
|
common shares of beneficial interest (common shares);
|
|
|
|
preferred shares of beneficial interest (preferred
shares);
|
|
|
|
depositary shares representing preferred shares of beneficial
interest (depositary shares); or
|
|
|
|
warrants.
|
These securities may be offered and sold separately or together
in units with other securities described in this prospectus. We
will provide the specific terms of these securities in
supplements to this prospectus or other offering materials. You
should read this prospectus, the applicable prospectus
supplement and other applicable offering materials carefully
before you invest.
The securities may be sold directly or through agents,
underwriters or dealers. If any agent, dealer or underwriter is
involved in selling the securities, its name, the applicable
purchase price, fee, commission or discount arrangement, and the
net proceeds to us from the sale of the securities will be
described in a prospectus supplement or other offering
materials. See Plan of Distribution.
Our common shares are listed on the New York Stock Exchange
under the symbol EPR. The last reported sale price
of our common shares on the New York Stock Exchange on
February 26, 2007 was $67.88 per share. Our Series A
Cumulative Redeemable Preferred Shares (Series A
Preferred Shares), Series B Cumulative Redeemable
Preferred Shares (Series B Preferred Shares)
and Series C Cumulative Convertible Preferred Shares
(Series C Preferred Shares) are listed on the
New York Stock Exchange under the symbols EPR PrA,
EPR PrB, and EPR PrC, respectively.
To preserve our qualification as a real estate investment trust
or REIT for U.S. federal income tax purposes
and for other purposes, we impose restrictions on ownership of
our common and preferred shares. See U.S. Federal
Income Tax Considerations and Description of Certain
Provisions of Maryland Law and EPRs Declaration of Trust
and Bylaws in this prospectus.
Investing in these securities involves certain risks. See the
Risk Factors section on page 3 of this
prospectus as well as the Risk Factors section of
our most recent annual report on
Form 10-K
and, to the extent applicable, our quarterly reports on
Form 10-Q.
Neither the Securities and Exchange Commission nor any
state securities commission has approved or disapproved of these
securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal
offense.
Our principal executive office is located at 30 W. Pershing
Road, Suite 201, Kansas City, Missouri 64108. The telephone
number for our principal executive office is
(816) 472-1700.
The date of
this prospectus is February 27, 2007.
TABLE OF
CONTENTS
|
|
|
|
|
|
|
|
1
|
|
|
|
|
1
|
|
|
|
|
2
|
|
|
|
|
3
|
|
|
|
|
3
|
|
|
|
|
4
|
|
|
|
|
4
|
|
|
|
|
5
|
|
|
|
|
14
|
|
|
|
|
21
|
|
|
|
|
25
|
|
|
|
|
27
|
|
|
|
|
32
|
|
|
|
|
46
|
|
|
|
|
47
|
|
|
|
|
48
|
|
|
|
|
48
|
|
i
ABOUT
THIS PROSPECTUS
This prospectus is part of a registration statement
(No. 333- )
that we filed with the Securities and Exchange Commission
(SEC) using a shelf registration
process. Under this shelf process, we may sell any combination
of the securities described in this prospectus from time to time
in one or more offerings.
This prospectus provides you with a general description of the
securities we may offer. Each time we offer and sell securities,
we will provide a prospectus supplement or other offering
materials that contain specific information about the terms of
the offering and the securities offered. The prospectus
supplement or other offering materials also may add to, update
or change information provided in this prospectus. You should
read this prospectus, the applicable prospectus supplement, the
other applicable offering materials and the other information
described in Available Information and
Incorporation of Certain Information by Reference
prior to investing.
As allowed by SEC rules, this prospectus does not contain all
the information you can find in the registration statement or
the exhibits to the registration statement. For further
information, we refer you to the registration statement,
including its exhibits and schedules. Statements contained in
this prospectus about the provisions or contents of any
contract, agreement or any other document referred to are not
necessarily complete. For each of these contracts, agreements or
documents filed as an exhibit to the registration statement, we
refer you to the actual exhibit for a more complete description
of the matters involved.
We have not authorized any dealer, salesman or other person to
give any information or to make any representation other than
those contained or incorporated by reference in this prospectus,
any applicable supplement to this prospectus or any other
applicable offering materials. You must not rely upon any
information or representation not contained or incorporated by
reference in this prospectus or any applicable supplement to
this prospectus or any other applicable offering materials as if
we had authorized it. This prospectus, any applicable prospectus
supplement and any other applicable offering materials do not
constitute an offer to sell or the solicitation of an offer to
buy any securities other than the registered securities to which
they relate. Nor do this prospectus, any accompanying prospectus
supplement or any other applicable offering materials constitute
an offer to sell or the solicitation of an offer to buy
securities in any jurisdiction to any person to whom it is
unlawful to make such offer or solicitation in such
jurisdiction. You should assume that the information appearing
in this prospectus, the accompanying prospectus supplement or
any other offering materials is accurate only as of the date on
their respective covers, and you should assume that the
information appearing in any document incorporated or deemed to
be incorporated by reference in this prospectus, any
accompanying prospectus supplement or any other applicable
offering materials is accurate only as of the date that document
was filed with the SEC. Our business, financial condition,
results of operations and prospects may have changed since those
dates.
Unless otherwise indicated or unless the context requires
otherwise, all references in this prospectus to we,
us, our, the Company or
EPR mean Entertainment Properties Trust. When we
refer to our Declaration of Trust we mean
Entertainment Properties Trusts Amended and Restated
Declaration of Trust, including the articles supplementary for
each series of preferred shares, as amended. When we refer to
our Bylaws we mean Entertainment Properties
Trusts Bylaws, as amended.
INCORPORATION
OF CERTAIN INFORMATION BY REFERENCE
The SEC allows us to incorporate by reference the
information we file with the SEC, which means we can disclose
important information to you by referring to those documents.
The information incorporated by reference is an important part
of this prospectus. Any statement contained in a document which
is incorporated by reference in this prospectus is automatically
updated and superseded if information contained in this
prospectus or information we later file with the SEC, modifies
or replaces that information.
The documents listed below have been filed by us under the
Securities Exchange Act of 1934, as amended (the Exchange
Act), (File
No. 1-13561)
and are incorporated by reference in this prospectus:
1. Our annual report on
Form 10-K
for the year ended December 31, 2006 filed on
February 28, 2007.
2. The description of our common shares included in our
registration statement on
Form 8-A
filed on November 4, 1997.
1
3. The description of our Series A Preferred Shares
included in our registration statement on
Form 8-A
filed on May 24, 2002.
4. The description of our Series B Preferred Shares
included in our registration statement on
Form 8-A
filed on January 12, 2005.
5. The description of our Series C Preferred Shares
included in our registration statement on
Form 8-A
filed on December 21, 2006.
In addition, all documents filed by us under Section 13(a),
13(c), 14 or 15(d) of the Exchange Act (excluding any
information that is deemed to have been furnished
and not filed with the SEC) after the date of this
prospectus and prior to the termination of the offering of the
securities covered by this prospectus are incorporated by
reference herein.
To obtain a free copy of any of the documents incorporated by
reference in this prospectus (other than exhibits, unless they
are specifically incorporated by reference in the documents)
please contact us at:
Investor Relations Department
Entertainment Properties Trust
30 W. Pershing Road, Suite 201
Kansas City, Missouri 64108
(816) 472-1700/FAX
(816) 472-5794
Email info@eprkc.com
Our SEC filings also are available on our Internet website at
www.eprkc.com. The information on our website is not, and you
must not consider the information to be, a part of this
prospectus.
CAUTIONARY
STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
With the exception of historical information, this prospectus
and our reports filed under the Exchange Act and incorporated by
reference in this prospectus and other offering materials and
documents deemed to be incorporated by reference herein or
therein may contain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as
amended (the Securities Act), and Section 21E
of the Exchange Act, such as those pertaining to our acquisition
or disposition of properties, our capital resources, future
expenditures for development projects and our results of
operations. Forward-looking statements involve numerous risks
and uncertainties and you should not rely on them as predictions
of actual events. There is no assurance the events or
circumstances reflected in the forward-looking statements will
occur. You can identify forward-looking statements by use of
words such as will be, intend,
continue, believe, may,
expect, hope, anticipate,
goal, forecast, or other comparable
terms, or by discussions of strategy, plans or intentions.
Forward-looking statements necessarily are dependent on
assumptions, data or methods that may be incorrect or imprecise.
Factors that could materially and adversely affect us include,
but are not limited to, the factors listed below:
|
|
|
|
|
General business and economic conditions;
|
|
|
|
Our ability to compete effectively;
|
|
|
|
Defaults in the performance of lease terms by our tenants;
|
|
|
|
Risk of our tenants filing for bankruptcy;
|
|
|
|
Risk of our tenants not renewing their leases;
|
|
|
|
The concentration of leases with our single largest tenant;
|
|
|
|
Our continued qualification as a REIT;
|
|
|
|
Risks relating to real estate ownership and development;
|
|
|
|
Risks associated with use of leverage to acquire properties;
|
2
|
|
|
|
|
Fluctuations in interest rates;
|
|
|
|
Acts of terrorism;
|
|
|
|
Risk of potential uninsured losses, including from natural
disasters;
|
|
|
|
Risks involved in joint ventures;
|
|
|
|
Risks in leasing multi-tenant properties;
|
|
|
|
Risks of environmental liability;
|
|
|
|
Our ability to raise capital;
|
|
|
|
Our ability to pay distributions to our shareholders;
|
|
|
|
Changes in laws and regulations, including tax laws and
regulations;
|
|
|
|
Risks associated with changes in the Canadian exchange
rate; and
|
|
|
|
Certain limits on change in control imposed under law and by our
Declaration of Trust and Bylaws.
|
You should consider the risks described in the Risk
Factors section of our most recent annual report on
Form 10-K
and, to the extent applicable, our quarterly reports on
Form 10-Q,
in evaluating any forward-looking statements included or
incorporated by reference in this prospectus.
Given these uncertainties, you should not place undue reliance
on these forward-looking statements. We undertake no obligation
to publicly update or revise any forward-looking statements
included or incorporated by reference in this prospectus whether
as a result of new information, future events or otherwise. In
light of the factors referred to above, the future events
discussed or incorporated by reference in this prospectus may
not occur and actual results, performance or achievements could
differ materially from those anticipated or implied in the
forward-looking statements.
RISK
FACTORS
An investment in our securities involves certain risks. See the
Risk Factors section of our most recent annual
report on
Form 10-K
and, to the extent applicable, our quarterly reports on
Form 10-Q,
to read about factors you should consider before investing in
our securities.
THE
COMPANY
We are a self-administered real estate investment trust, or
REIT. As of February 26, 2007, our real estate
portfolio consists of:
|
|
|
|
|
megaplex movie theatre properties (including joint venture
properties)
|
|
|
|
entertainment retail centers (including joint venture properties)
|
|
|
|
other specialty properties
|
|
|
|
megaplex movie theatre properties, entertainment retail centers
and other specialty properties under development
|
|
|
|
land parcels leased to restaurant and retail operators adjacent
to several of our theatre properties
|
We generally lease our single-tenant properties to tenants on a
long-term
triple-net
basis that requires the tenant to assume the primary risks
involved in operating the property and to pay substantially all
expenses associated with the operation and maintenance of the
property. We also provide secured mortgage financing, as
appropriate, and we own multi-tenant properties which are
managed for us by third-party management companies.
3
Beginning with our taxable year ended December 31, 1997, we
elected to be treated as a REIT for U.S. federal income tax
purposes. In order to maintain our status as a REIT, we must
comply with a number of requirements under federal income tax
law that are discussed in U.S. Federal Income Tax
Considerations.
Our executive offices are located at 30 W. Pershing Road,
Suite 201, Kansas City, Missouri 64108. Our telephone
number is
(816) 472-1700.
USE OF
PROCEEDS
Unless otherwise indicated in the applicable prospectus
supplement or other applicable offering materials, EPR intends
to use the net proceeds from any sale of common shares,
preferred shares, depositary shares, warrants or debt securities
under this prospectus for general business purposes, which may
include funding the acquisition, development or financing of
properties and repayment of debt. Further details relating to
the use of net proceeds from any specific offering will be
described in the applicable prospectus supplement or other
applicable offering materials.
RATIO OF
EARNINGS TO FIXED CHARGES AND
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED
SHARE DISTRIBUTIONS
The table below presents our ratio of earnings to fixed charges
by dividing earnings by fixed charges. For this purpose,
earnings is the sum of net income before equity in
earnings of unconsolidated subsidiaries, minority interest in
earnings and fixed charges (excluding capitalized interest) plus
distributed income from unconsolidated joint ventures.
Fixed charges consist of interest incurred on all
indebtedness. The ratios are based solely on historical
financial information and no pro forma adjustments have been
made.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
Ratio of earning to fixed charges
|
|
|
2.7X
|
|
|
|
2.6X
|
|
|
|
2.3X
|
|
|
|
2.2X
|
|
|
|
2.2X
|
|
The table below presents our ratio of earnings to combined fixed
charges and preferred share distributions by dividing earnings
by combined fixed charges and preferred share distributions. The
terms earnings and fixed charges have
the meanings assigned above. The ratios are based solely on
historical financial information and no pro forma adjustments
have been made.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
Ratio of earning to combined fixed
charges and preferred share distributions
|
|
|
2.2X
|
|
|
|
2.0X
|
|
|
|
2.0X
|
|
|
|
1.8X
|
|
|
|
1.9X
|
|
4
DESCRIPTION
OF DEBT SECURITIES
The following description, together with the additional
information we include in any applicable prospectus supplements
or other applicable offering materials, summarizes the material
terms and provisions of the debt securities that we may offer
under this prospectus. Because it is a summary, it does not
contain all information that may be important to you. If you
want more information, you should read the forms of indentures
we have filed as exhibits to the registration statement of which
this prospectus is a part. While the terms we have summarized
below will apply generally to any future debt securities we may
offer, we will describe the particular terms of any debt
securities that we may offer in more detail in the applicable
prospectus supplement or other offering materials. This summary
is also subject to and qualified by reference to the
descriptions of the particular terms of the securities described
in the applicable prospectus supplement or other applicable
offering materials and by the terms of the applicable final
indenture, applicable indenture supplement and debt security.
See Available Information.
General
The debt securities that we may issue will constitute
debentures, notes, bonds or other evidences of indebtedness of
the Company, to be issued in one or more series, which may
include senior debt securities, subordinated debt securities and
senior subordinated debt securities. The particular terms of any
series of debt securities we offer, including the extent to
which the general terms set forth below may be applicable to a
particular series, will be described in a prospectus supplement
relating to such series.
Debt securities that we may issue will be issued under one or
more separate indentures between us and a trustee to be named in
the related prospectus supplement. Senior debt securities will
be issued under a senior indenture and subordinated debt
securities will be issued under a subordinated indenture.
Together the senior indenture and the subordinated indenture are
called indentures. We have filed the forms of the
indentures as exhibits to the registration statement of which
this prospectus is a part. If we enter into any indenture
supplement, we will file a copy of that supplement with the SEC.
Unless otherwise indicated in the applicable prospectus
supplement, the debt securities will be our direct obligations.
The senior debt securities will rank equally with all of our
other senior and unsubordinated debt. The subordinated debt
securities will have a junior position to certain of our debt,
as described in the subordinated securities themselves or under
the supplemental indenture under which they are issued. Unless
we otherwise provide, we may reopen a series, without the
consent of the holders of the series, for issuances of
additional securities of that series.
We conduct a significant portion of our operations through our
subsidiaries. Therefore, holders of debt securities will have a
position junior to the prior claims of creditors of our
subsidiaries, including trade creditors, debtholders, secured
creditors, taxing authorities and guarantee holders, and any
preferred stockholders, except to the extent that we may
ourselves be a creditor with recognized and unsubordinated
claims against any subsidiary. Our ability to pay principal of
and premium, if any, and interest on any debt securities is, to
a large extent, dependent upon the payment to us of dividends,
interest or other charges by our subsidiaries.
The following description is a summary of the material
provisions of the forms of indentures. It does not restate the
indentures in their entireties. The indentures are governed by
the Trust Indenture Act of 1939. The terms of the debt
securities include those stated in the indentures and those made
part of the indentures by reference to the Trust Indenture Act.
We urge you to read the indentures because they, and not this
description, define your rights as a holder of the debt
securities. The following description is subject to and
qualified by reference to the terms of the final indentures and
any supplement thereto.
Information
You Will Find in the Prospectus Supplement or Other Offering
Materials
The indentures provide that we may issue debt securities from
time to time in one or more series and that we may denominate
the debt securities and make them payable in foreign currencies.
The indentures do not limit the aggregate principal amount of
debt securities that can be issued thereunder. The prospectus
supplement or other
5
offering materials for a series of debt securities will provide
information relating to the terms of the series of debt
securities being offered, which may include:
|
|
|
|
|
the issue price of the debt securities of the series;
|
|
|
|
the title and denominations of the debt securities of the series;
|
|
|
|
the aggregate principal amount and any limit on the aggregate
principal amount of the debt securities of the series;
|
|
|
|
the date or dates on which the principal and premium, if any,
with respect to the debt securities of the series are payable,
the amount or amounts of such payments or principal and premium,
if any, or the method of determination thereof;
|
|
|
|
the amount payable upon maturity or upon acceleration;
|
|
|
|
the rate or rates, which may be fixed or variable, at which the
debt securities of the series shall bear interest, if any, or
the method of calculating and/or resetting such rate or rates of
interest;
|
|
|
|
any limits on ownership or transferability;
|
|
|
|
the person to whom such interest will be payable, if other than
the person in whose name the debt securities are registered;
|
|
|
|
the dates from which such interest shall accrue or the method by
which such dates shall be determined and the basis upon which
interest shall be calculated;
|
|
|
|
the interest payment dates for the series of debt securities or
the method by which such dates will be determined, the terms of
any deferral of interest and any right of ours to extend the
interest payment periods;
|
|
|
|
the place or places where the principal of and any premium and
interest on the series of debt securities will be payable, or
where the debt securities may be surrendered for conversion,
transfer or exchange;
|
|
|
|
the terms and conditions, if any, upon which debt securities of
the series may be redeemed, in whole or in part, at our option
or otherwise;
|
|
|
|
our obligation, if any, to redeem, purchase, or repay debt
securities of the series pursuant to any sinking fund or other
specified event or at the option of the holders and the terms of
any such redemption, purchase, or repayment;
|
|
|
|
the terms, if any, upon which the debt securities of the series
may be convertible into or exchanged for other securities,
including, among other things, the initial conversion or
exchange price or rate and the conversion or exchange period;
|
|
|
|
if the amount of principal, premium, if any, or interest with
respect to the debt securities of the series may be determined
with reference to an index, formula or other method, the manner
in which such amounts will be determined;
|
|
|
|
if any payments on the debt securities of the series are to be
made in a currency or currencies (or by reference to an index or
formula) other than that in which such securities are
denominated or designated to be payable, the currency or
currencies (or index or formula) in which such payments are to
be made and the terms and conditions of such payments;
|
|
|
|
any additional amounts payable in respect of taxes or government
charges or assessments;
|
|
|
|
the extent to which the debt securities of the series, in whole
or any specified part, shall be defeasible pursuant to the
indenture and the terms and conditions of such defeasance;
|
|
|
|
the currency or currencies in which payment of the principal and
premium, if any, and interest with respect to debt securities of
the series will be payable, or in which the debt securities of
the series shall be denominated, and the particular provisions
applicable thereto;
|
|
|
|
whether the debt securities of the series will be secured or
guaranteed and, if so, on what terms;
|
6
|
|
|
|
|
the covenants and events of default if different from or in
addition to those described in this prospectus;
|
|
|
|
any addition to or change in the events of default with respect
to the debt securities of the series;
|
|
|
|
the identity of any trustees, authenticating or paying agents,
transfer agents or registrars;
|
|
|
|
the applicability of, and any addition to or change in, the
covenants currently set forth in the indenture;
|
|
|
|
the subordination, if any, of the debt securities of the series
and terms of the subordination;
|
|
|
|
whether our subsidiaries will provide guarantees of the debt
securities, and the terms of any subordination of such guarantee;
|
|
|
|
provisions, if any, granting special rights to holders of the
debt securities upon the occurrence of such events as may be
specified;
|
|
|
|
whether we will issue the debt securities in certificate or book
entry form;
|
|
|
|
whether such debt securities shall be issuable in registered
form or bearer form, and if in registered form, the denomination
if other than in even multiples of $1,000, and any restrictions
applicable to the offering, sale or delivery of bearer debt
securities;
|
|
|
|
identity of registrar and paying agent;
|
|
|
|
the forms of the debt securities of the series;
|
|
|
|
the terms, if any, which may be related to warrants, options, or
other rights to purchase securities issued by the Company in
connection with debt securities of the series;
|
|
|
|
whether the debt securities will be governed by, and the extent
to which the debt securities will be governed by, any law other
than the laws of the State of New York;
|
|
|
|
any other terms of the debt securities of the series which are
not prohibited by the indenture.
|
Subordination
We will describe in the applicable prospectus supplement or
other offering materials the terms and conditions, if any, upon
which any series of subordinated securities is subordinated to
debt securities of another series or to our other indebtedness.
The terms will include a description of:
|
|
|
|
|
the indebtedness ranking senior to the debt securities being
offered;
|
|
|
|
the restrictions, if any, on payments to the holders of the debt
securities being offered while a default with respect to the
senior indebtedness is continuing;
|
|
|
|
the restrictions, if any, on payments to the holders of the debt
securities being offered following an event of default; and
|
|
|
|
provisions requiring holders of the debt securities being
offered to remit some payments to holders of senior indebtedness.
|
Interest
Rate
Debt securities that bear interest will do so at a fixed rate or
a floating rate.
Original
Issue Discount
One or more series of debt securities offered by this prospectus
may be sold at a substantial discount below their stated
principal amount, bearing no interest or interest at a rate that
at the time of issuance is below market rates. The material
federal income tax consequences and special considerations
applicable to any series of debt securities generally will be
described in the applicable prospectus supplement or other
applicable offering materials.
7
Registered
Global Securities
We may issue registered debt securities of a series in the form
of one or more fully registered global securities. We will
deposit the registered global security with a depositary or with
a nominee for a depositary identified in the prospectus
supplement or other offering materials relating to such series.
The global security or global securities will represent and will
be in a denomination or aggregate denominations equal to the
portion of the aggregate principal amount of outstanding
registered debt securities of the series to be represented by
the registered global security or securities. Unless otherwise
specified in the applicable prospectus supplement or other
applicable offering materials, unless it is exchanged in whole
or in part for debt securities in definitive registered form, a
registered global security may not be transferred, except as a
whole in three cases:
|
|
|
|
|
by the depositary for the registered global security to a
nominee of the depositary;
|
|
|
|
by a nominee of the depositary to the depositary or another
nominee of the depositary; and
|
|
|
|
by the depositary or any nominee to a successor of the
depositary or a nominee of the successor.
|
The prospectus supplement or other offering materials relating
to a series of debt securities will describe the specific terms
of the depositary arrangement concerning any portion of that
series of debt securities to be represented by a registered
global security. We anticipate that the following provisions
will generally apply to all depositary arrangements.
Upon the issuance of a registered global security, the
depositary will credit, on its book-entry registration and
transfer system, the principal amounts of the debt securities
represented by the registered global security to the accounts of
persons that have accounts with the depositary. These persons
are referred to as participants. Any underwriters,
agents or debtors participating in the distribution of debt
securities represented by the registered global security will
designate the accounts to be credited. Only participants or
persons that hold interests through participants will be able to
beneficially own interests in a registered global security. The
depositary for a global security will maintain records of
beneficial ownership interests in a registered global security
for participants. Participants or persons that hold through
participants will maintain records of beneficial ownership
interests in a global security for persons other than
participants. These records will be the only means to transfer
beneficial ownership in a registered global security.
The laws of some states may require that specified purchasers of
securities take physical delivery of the securities in
definitive form. These laws may limit the ability of those
persons to own, transfer or pledge beneficial interests in
global securities.
So long as the depositary, or its nominee, is the registered
owner of a registered global security, the depositary or its
nominee will be considered the sole owner or holder of the debt
securities represented by the registered global security for all
purposes under the indenture. Except as set forth below, or in
the applicable supplemental indenture, owners of beneficial
interests in a registered global security:
|
|
|
|
|
may not have the debt securities represented by a registered
global security registered in their names;
|
|
|
|
will not receive or be entitled to receive physical delivery of
debt securities represented by a registered global security in
definitive form; and
|
|
|
|
will not be considered the owners or holders of debt securities
represented by a registered global security under the indenture.
|
Accordingly, each person owning a beneficial interest in a
registered global security must rely on the procedures of the
depositary for the registered global security and, if the person
is not a participant, on the procedures of the participant
through which the person owns its interests, to exercise any
rights of a holder under the indenture applicable to the
registered global security.
Payment
of Interest on and Principal of Registered Global
Securities
Unless otherwise specified in the applicable prospectus
supplement or other applicable offering materials, we will make
payments of principal, premium, if any, interest on and
additional amounts with respect to debt securities
8
represented by a registered global security registered in the
name of a depositary or its nominee to the depositary or its
nominee as the registered owner of the registered global
security. None of the Company, the trustee, or any paying agent
for debt securities represented by a registered global security
will have any responsibility or liability for
|
|
|
|
|
any aspect of the records relating to, or payments made on
account of, beneficial ownership interests in such registered
global security;
|
|
|
|
maintaining, supervising, or reviewing any records relating to
beneficial ownership interests;
|
|
|
|
the payments to beneficial owners of the global security of
amounts paid to the depositary or its nominee; or
|
|
|
|
any other matter relating to the actions and practices of the
depositary, its nominee or any of its participants.
|
Generally, a depositary, upon receipt of any payment of
principal, premium, interest on or additional amounts with
respect to the global security, will immediately credit
participants accounts with payments in amounts
proportionate to their beneficial interests in the principal
amount of a registered global security as shown on the
depositarys records. Generally, payments by participants
to owners of beneficial interests in a registered global
security held through participants will be governed by standing
instructions and customary practices. This is currently the case
with the securities held for the accounts of customers
registered in street name. Such payments will be the
responsibility of participants.
Exchange
of Registered Global Securities
We may issue debt securities in definitive form in exchange for
the registered global security if both of the following occur:
|
|
|
|
|
the depositary for any debt securities represented by a
registered global security is at any time unwilling or unable to
continue as depositary or ceases to be a clearing agency
registered under the Exchange Act; and
|
|
|
|
we do not appoint a successor depositary within 90 days.
|
In addition, we may, at any time, determine not to have any of
the debt securities of a series represented by one or more
registered global securities. In this event, we will issue debt
securities of that series in definitive form in exchange for all
of the registered global security or securities representing
those debt securities.
Covenants
by the Company
The indenture includes covenants by us, including among other
things that (i) we will make all payments of principal and
interest at the times and places required and (ii) we will
do or cause to be done all things necessary to preserve and keep
in full force our existence, subject to certain terms as
generally described under Mergers,
Consolidations and Certain Sales of Assets. The board
resolution or supplemental indenture establishing each series of
debt securities may contain additional covenants, including
covenants which could restrict our right to incur additional
indebtedness or liens and to take certain actions with respect
to our businesses and assets.
The indentures contain no covenant or provision which affords
debt holders protection in the event of a highly leveraged
transaction.
Events of
Default
Unless otherwise indicated in the applicable prospectus
supplement or other applicable offering materials, the following
will be events of default under the indenture with respect to
each series of debt securities issued under the indenture:
|
|
|
|
|
failure to pay when due any interest on or additional amounts
with respect to any debt security of that series, continued for
30 days;
|
|
|
|
failure to pay when due the principal of, or premium, if any,
on, any debt security of that series at its maturity;
|
|
|
|
default in the payment of any sinking fund installment with
respect to any debt security of that series when due and
payable, continued for 30 days;
|
9
|
|
|
|
|
failure to perform any other covenant or agreement of ours under
the indenture or the supplemental indenture with respect to that
series or the debt securities of that series, continued for
60 days after written notice to us by the trustee or
holders of at least 25% in aggregate principal amount of the
outstanding debt securities of a series to which the covenant or
agreement relates;
|
|
|
|
certain events of bankruptcy, insolvency or similar proceedings
affecting us; and
|
|
|
|
any other event of default specified in any supplemental
indenture under which such series of debt securities is issued.
|
Except as to certain events of bankruptcy, insolvency or similar
proceedings affecting us and except as provided in the
applicable prospectus supplement, if any event of default shall
occur and be continuing with respect to any series of debt
securities under the indenture, either the trustee or the
holders of at least 25% in aggregate principal amount of
outstanding debt securities of such series may accelerate the
maturity of all debt securities of such series. Upon certain
events of bankruptcy, insolvency or similar proceedings
affecting us, the principal, premium, if any, and interest on
all debt securities of each series shall be immediately due and
payable. After any such acceleration, but before a judgment or
decree based on acceleration has been obtained by the trustee,
the holders of a majority in aggregate principal amount of each
affected series of debt securities may waive all defaults with
respect to such series and rescind and annul such acceleration
if all events of default, other than the non-payment of
accelerated principal, have been cured, waived or otherwise
remedied.
An event of default for a particular series of debt securities
does not necessarily constitute an event of default for any
other series of debt securities issued under an indenture. The
trustee may withhold notice to the holders of debt securities of
any default (except in the payment of principal, premium, if
any, interest on or any additional amounts with respect to such
debt securities) if it considers such withholding of notice to
be in the best interests of the holders.
No holder of any debt securities of any series will have any
right to institute any proceeding with respect to the applicable
indenture or for any remedy under such indenture, unless:
|
|
|
|
|
an event of default with respect to such series shall have
occurred and be continuing and such holder shall have previously
given to the trustee written notice of such continuing event of
default;
|
|
|
|
the holders of at least 25% in aggregate principal amount of the
outstanding debt securities of the relevant series shall have
made written request and offered reasonable indemnity to the
trustee to institute such proceeding as trustee;
|
|
|
|
the trustee shall not have received from the holders of a
majority in aggregate principal amount of the outstanding debt
securities of such series a direction inconsistent with such
request; and
|
|
|
|
the trustee shall have failed to institute such proceeding
within 60 days.
|
However, such limitations do not apply to a suit instituted by a
holder of a debt security for enforcement of payment of the
principal of and premium, if any, interest on or any additional
amounts with respect to such debt security on or after the
respective due dates expressed in such debt security.
Supplemental
Indentures
We and the applicable trustee may, at any time and from time to
time, without prior notice to or consent of any holders of debt
securities, enter into one or more indentures supplemental to
the indentures, among other things to:
|
|
|
|
|
add additional obligors on, guarantees to or secure any series
of debt securities;
|
|
|
|
evidence the succession of another person pursuant to the
provisions of the indentures relating to consolidations, mergers
and sales of assets and the assumption by such successor of our
covenants and obligations or those of any guarantor;
|
|
|
|
surrender any right or power conferred upon us under the
indentures or to add to our covenants for the protection of the
holders of all or any series of debt securities;
|
10
|
|
|
|
|
add any additional events of default for the benefit of the
holders of any one or more series of debt securities;
|
|
|
|
add to or change any of the provisions of the indentures to such
extent as shall be necessary to permit or facilitate the
issuance of debt securities in bearer form, or to permit or
facilitate the issuance of debt securities in global form or
uncertificated form;
|
|
|
|
add to, change or eliminate any of the provisions of the
indentures in respect of one or more series of debt securities,
provided that any such addition, change or elimination
(a) shall neither (1) apply to any outstanding debt
security of any series created prior to the execution of such
supplemental indenture and entitled to the benefit of such
provision, or (2) modify the rights of any holder of any
outstanding debt security with respect to such provision, or
(b) shall become effective when there is no debt security
then outstanding;
|
|
|
|
correct or supplement any provision which may be defective or
inconsistent with any other provision or to cure any ambiguity
or omission or to correct any mistake;
|
|
|
|
make any other provisions with respect to matters or questions
arising under the indentures, provided such action shall not
adversely affect the rights of any holder of debt securities of
any series;
|
|
|
|
evidence and provide for the acceptance of appointment by a
successor or separate trustee; or
|
|
|
|
establish the form or terms of debt securities of any series and
to make any change that does not adversely affect the rights of
any holder of debt securities.
|
With the consent of the holders of at least a majority in
principal amount of debt securities of each series affected by
such supplemental indenture (voting as one class), we and the
trustee may enter into one or more supplemental indentures for
the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of the indentures or
modifying in any manner the rights of the holders of debt
securities of each such series.
Notwithstanding our rights and the rights of the trustee to
enter into one or more supplemental indentures with the consent
of the holders of debt securities of the affected series as
described above, no such supplemental indenture shall, without
the consent of the holder of each outstanding debt security of
the affected series, among other things:
|
|
|
|
|
change the maturity of the principal of or any installment of
principal of, or the date fixed for payment of interest on, any
additional amounts or any sinking fund payment with respect to,
any debt securities;
|
|
|
|
reduce the principal amount of any debt securities or the rate
of interest on or any additional amounts with respect to any
debt securities;
|
|
|
|
change the place of payment or the currency in which any debt
securities are payable;
|
|
|
|
impair the right of the holders to institute a proceeding for
the enforcement of any right to payment on or after
maturity; or
|
|
|
|
reduce the percentage in principal amount of any series of debt
securities whose holders must consent to an amendment or
supplemental indenture or any waiver provided in the indenture.
|
Unless otherwise provided in a supplemental indenture with
respect to any series of debt securities, under the indenture,
the holders of at least a majority of the principal amount of
debt securities of each series may, on behalf of that series:
|
|
|
|
|
waive compliance by the Company of certain restrictive covenants
of the indenture; and
|
|
|
|
waive any past default under the indenture, except
|
|
|
|
|
|
a default in the payment of principal of or any premium or
interest, or any additional amounts with respect to such series;
or
|
|
|
|
a default under any provision of the indenture which itself
cannot be modified or amended without the consent of the holder
of each outstanding debt security affected.
|
11
Satisfaction
and Discharge of the Indenture; Defeasance
Except to the extent set forth in a supplemental indenture with
respect to any series of debt securities, we, at our election,
may discharge the applicable indenture and such indenture shall
generally cease to be of any further effect with respect to that
series of debt securities if (i) we have delivered to the
trustee for cancellation all debt securities of that series or
(ii) all debt securities of that series not previously
delivered to the trustee for cancellation shall have become due
and payable, or are by their terms to become due and payable
within one year or are to be called for redemption within one
year, and we have deposited with the trustee the entire amount
sufficient to pay at maturity or upon redemption all such debt
securities.
In addition, to the extent set forth in a supplemental indenture
with respect to a series of debt securities, we may have a
legal defeasance option (pursuant to which we may
terminate, with respect to the debt securities of a particular
series, all of our obligations under such debt securities and
the indenture with respect to such debt securities) and a
covenant defeasance option (pursuant to which we may
terminate, with respect to the debt securities of a particular
series, our obligations with respect to such debt securities
under certain specified covenants contained in the indenture).
If we have and exercise a legal defeasance option with respect
to a series of debt securities, payment of such debt securities
may not be accelerated because of an event of default. If we
have and exercise a covenant defeasance option with respect to a
series of debt securities, payment of such debt securities may
not be accelerated because of an event of default related to the
specified covenants.
To the extent set forth in a supplemental indenture with respect
to a series of debt securities, we may exercise a legal
defeasance option or a covenant defeasance option with respect
to the debt securities of a series only if we irrevocably
deposit in trust with the trustee cash or U.S. government
obligations (for debt securities denominated in
U.S. dollars) or certain foreign government obligations
(for debt securities denominated in a currency other than
U.S. dollars) for the payment of principal, premium, if
any, and interest and any additional amounts with respect to
such debt securities to maturity or redemption, as the case may
be. In addition, to exercise either of the defeasance options,
we must comply with certain other conditions, including for debt
securities denominated in U.S. dollars the delivery to the
trustee of an opinion of counsel to the effect that the holders
of debt securities of such series will not recognize income,
gain or loss for federal income tax purposes as a result of such
defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have
been the case if such defeasance had not occurred (and, in the
case of legal defeasance only, such opinion of counsel must be
based on a ruling from the Internal Revenue Service or other
change in applicable federal income tax law).
The trustee will hold in trust the cash or government
obligations deposited with it as described above and will apply
the deposited cash and the proceeds from deposited government
obligations to the payment of principal, premium, if any, and
interest and any additional amounts with respect to the debt
securities of the defeased series.
Mergers,
Consolidations and Certain Sales of Assets
Except to the extent set forth in a supplemental indenture with
respect to any series of debt securities, we may not:
|
|
|
|
|
consolidate with or merge into any other person or entity or
permit any other person or entity to consolidate with or merge
into us in a transaction in which we are not the surviving
entity, or
|
|
|
|
transfer, lease or dispose of all or substantially all of our
assets to any other person or entity; unless in the case of both
preceding clauses:
|
|
|
|
|
|
the resulting, surviving or transferee entity shall be a
corporation organized and existing under the laws of the United
States or any state thereof or the District of Columbia and such
resulting, surviving or transferee entity shall expressly
assume, by supplemental indenture, all of our obligations under
the debt securities and the applicable indenture;
|
|
|
|
immediately after giving effect to such transaction, no default
or event of default would occur or be continuing; and
|
12
|
|
|
|
|
we shall have delivered to the trustee an officers
certificate and an opinion of counsel, each stating that such
consolidation, merger or transfer and such supplemental
indenture (if any) comply with the applicable indenture.
|
Governing
Law
The indentures and the debt securities will be governed by the
laws of the State of New York, except as may be provided as to
any series in a supplemental indenture.
Conversion
or Exchange Rights
Any debt securities that we may issue pursuant to this
prospectus may be convertible into or exchangeable for shares of
our equity or other securities. The terms and conditions of such
conversion or exchange will be set forth in the applicable
prospectus supplement or other offering materials. Such terms
may include, among others, the following:
|
|
|
|
|
the conversion or exchange price;
|
|
|
|
the conversion or exchange period;
|
|
|
|
restrictions on conversion, including to maintain REIT status;
|
|
|
|
provisions regarding our ability or that of the holder to
convert or exchange the debt securities;
|
|
|
|
events requiring adjustment to the conversion or exchange
price; and
|
|
|
|
provisions affecting conversion or exchange in the event of our
redemption of such debt securities.
|
Concerning
the Trustee
The indentures provide that there may be more than one trustee
with respect to one or more series of debt securities but we
need not designate more than one trustee. If there are different
trustees for different series of debt securities, each trustee
will be a trustee of a trust under a supplemental indenture
separate and apart from the trust administered by any other
trustee under such indenture. Except as otherwise indicated in
this prospectus or any prospectus supplement, any action
permitted to be taken by a trustee may be taken by the trustee
only with respect to the one or more series of debt securities
for which it is the trustee under an indenture. Any trustee
under an indenture or a supplemental indenture may resign or be
removed with respect to one or more series of debt securities.
All payments of principal or, premium, if any, interest on and
any additional amounts with respect to, and all registration,
transfer, exchange authentication and delivery of, the debt
securities of a series will be effected with respect to such
series at an office designated by us.
The indentures contain limitations on the rights of any trustee,
should it become a creditor of the Company, to obtain payment of
claims in certain cases or to realize on certain property
received in respect of any such claim as security or otherwise.
If any trustee acquires an interest that conflicts with any
duties with respect to the debt securities, such trustee is
required to either resign or eliminate such conflicting interest
to the extent and in the manner provided by the applicable
indenture.
Notices
Notices to holders of debt securities will be given by mail to
the addresses of such holders as they appear in the security
register.
13
DESCRIPTION
OF SHARES OF BENEFICIAL INTEREST
The following description of our shares of beneficial
interest (shares) is only a summary and is subject
to, and qualified in its entirety by reference to, the provision
governing such shares contained in our Declaration of Trust and
Bylaws, copies of which we have previously filed with the SEC.
Because it is a summary, it does not contain all of the
information that may be important to you. See Available
Information for information about how to obtain copies of
the Declaration of Trust and Bylaws. This summary also is
subject to and qualified by reference to the descriptions of the
particular terms of the securities described in the applicable
prospectus supplement or other applicable offering materials.
Our Declaration of Trust authorizes us to issue up to 50,000,000
common shares, par value $0.01 per share, and 15,000,000
preferred shares, par value $0.01 per share, 2,300,000 of
which are designated as Series A Preferred Shares,
3,200,000 of which are designated as Series B Preferred
Shares, and 6,000,000 of which are designated as Series C
Preferred Shares, and authorizes our Board of Trustees to
determine, at any time and from time to time the number of
authorized shares of beneficial interest, as described below. As
of February 26, 2007, we had 26,458,875 common shares
issued and outstanding, 2,300,000 Series A Preferred Shares
issued and outstanding, 3,200,000 Series B Preferred Shares
issued and outstanding, and 5,400,000 Series C Preferred
Shares issued and outstanding. As of the date of this prospectus
no other class or series of preferred shares has been
established. For a summary of restrictions on ownership and
transfers of shares, see Description of Certain Provisions
of Maryland Law and EPRs Declaration of Trust and
Bylaws Restrictions on Ownership and Transfers of
Shares.
Our Declaration of Trust contains a provision permitting our
Board of Trustees, without any action by our shareholders, to
amend the Declaration of Trust at any time to increase or
decrease the aggregate number of shares or the number of shares
of any class that we have authority to issue. Our Declaration of
Trust further authorizes our Board of Trustees to cause us to
issue our authorized shares and to reclassify any unissued
shares into other classes or series. We believe that this
ability of our Board of Trustees will provide us with
flexibility in structuring possible future financings and
acquisitions and in meeting other business needs which might
arise. Although our Board of Trustees has no intention at the
present time of doing so, it could authorize us to issue a new
class or series that could, depending upon the terms of the
class or series, delay, defer or prevent a change of control of
EPR.
The transfer agent and registrar for our shares is UMB Bank, n.a.
Common
Shares
All of our common shares are entitled to the following, subject
to the preferential rights of any other class or series of
shares which may be issued and to the provisions of our
Declaration of Trust regarding the restriction of the ownership
of shares:
|
|
|
|
|
to receive distributions on our shares if, as and when
authorized by our Board of Trustees and declared by us out of
assets legally available for distribution;
|
|
|
|
upon our liquidation, dissolution, or winding up, to receive all
remaining assets available for distribution to common
shareholders after satisfaction of our liabilities and the
preferential rights of any preferred shares.
|
Subject to the provisions of our Declaration of Trust on
restrictions on transfer, each outstanding common share entitles
the holder to one vote on all matters submitted to a vote of
shareholders, including the election of trustees. Holders of our
common shares do not have cumulative voting rights in the
election of trustees.
Holders of our common shares have no preference, conversion,
exchange, sinking fund, redemption or, except to the extent
expressly required by the law pertaining to Maryland real estate
investment trusts, appraisal rights. Shareholders have no
preemptive rights to subscribe for any of our securities.
For other information with respect to our common shares,
including effects that provisions in our Declaration of Trust
and Bylaws may have in delaying, deferring or preventing a
change in our control, see Description of Certain
Provisions of Maryland Law and EPRs Declaration of Trust
and Bylaws below.
14
Preferred
Shares
General
Our Declaration of Trust authorizes our Board of Trustees to
determine the preferences, conversion or other rights, voting
powers, restrictions, limitations as to dividends or other
distributions, qualifications and terms and conditions of
redemption of our authorized and unissued preferred shares.
These may include:
|
|
|
|
|
the distinctive designation of each series and the number of
shares that will constitute the series;
|
|
|
|
the voting rights, if any, of shares of the series;
|
|
|
|
the distribution rate on the shares of the series, any
restriction, limitation or condition upon the payment of the
distribution, whether distributions will be cumulative, and the
dates on which distributions accumulate and are payable;
|
|
|
|
the prices at which, and the terms and conditions on which, the
shares of the series may be redeemed, if the shares are
redeemable;
|
|
|
|
the purchase or sinking fund provisions, if any, for the
purchase or redemption of shares of the series;
|
|
|
|
any preferential amount payable upon shares of the series upon
our liquidation or the distribution of our assets;
|
|
|
|
if the shares are convertible, the price or rates of conversion
at which, and the terms and conditions on which, the shares of
the series may be converted into other securities; and
|
|
|
|
whether the series can be exchanged, at our option, into debt
securities, and the terms and conditions of any permitted
exchange.
|
The issuance of preferred shares, or the issuance of any rights
or warrants to purchase preferred shares, could discourage an
unsolicited acquisition proposal. In addition, the rights of
holders of common shares will be subject to, and may be
adversely affected by, the rights of holders of any preferred
shares that we may issue in the future.
The following describes some general terms and provisions of the
preferred shares to which a prospectus supplement or other
applicable offering materials may relate. The statements below
describing the preferred shares are in all respects subject to
and qualified in their entirety by reference to the applicable
provisions of our Declaration of Trust, including the articles
supplementary for the applicable series of preferred shares, and
our Bylaws.
The applicable prospectus supplement or other applicable
offering materials will describe the specific terms as to each
issuance of preferred shares, including:
|
|
|
|
|
the description or designation of the preferred shares;
|
|
|
|
the number of the preferred shares offered;
|
|
|
|
the voting rights, if any, of the holders of the preferred
shares;
|
|
|
|
the offering price of the preferred shares;
|
|
|
|
whether distributions will be cumulative and, if so, the
distribution rate, when distributions will be paid, or the
method of determining the distribution rate if it is based on a
formula or not otherwise fixed;
|
|
|
|
the date from which distributions on the preferred shares shall
accumulate;
|
|
|
|
the provisions for any auctioning or remarketing, if any, of the
preferred shares;
|
|
|
|
the provision, if any, for redemption or a sinking fund;
|
|
|
|
the liquidation preference per share;
|
|
|
|
any listing of the preferred shares on a securities exchange;
|
15
|
|
|
|
|
whether the preferred shares will be convertible and, if so, the
security into which they are convertible and the terms and
conditions of conversion, including the conversion price or the
manner of determining it;
|
|
|
|
whether interests in the preferred shares will be represented by
depositary shares as more fully described below under
Description of Depositary Shares;
|
|
|
|
a discussion of material federal income tax considerations;
|
|
|
|
the relative ranking and preferences of the preferred shares as
to distribution and liquidation rights;
|
|
|
|
any limitations on issuance of any preferred shares ranking
senior to or on a parity with the series of preferred shares
being offered as to distribution and liquidation rights;
|
|
|
|
any limitations on direct or beneficial ownership and
restrictions on transfer, in each case as may be appropriate to
preserve our status as a real estate investment trust or
otherwise; and
|
|
|
|
any other specific preferences, conversion or other rights,
voting powers, restrictions, limitations as to dividends or
other distributions, qualifications and terms and conditions of
redemption of the preferred shares.
|
As described under Description of Depositary Shares,
we may, at our option, elect to offer depositary shares
evidenced by depositary receipts. If we elect to do this, each
depositary receipt will represent a fractional interest in a
share of the particular series of the preferred shares issued
and deposited with a depositary. The applicable prospectus
supplement or other applicable offering materials will specify
that fractional interest.
Rank
Unless our Board of Trustees otherwise determines and we so
specify in the applicable prospectus supplement or other
applicable offering materials, we expect that the preferred
shares will, with respect to distribution rights and rights upon
liquidation or dissolution, rank senior to all of our common
shares.
Distributions
Holders of preferred shares of each series will be entitled to
receive dividends at the rates and on the dates shown in the
applicable prospectus supplement or other offering materials.
Even though the preferred shares may specify a fixed rate of
distribution, our Board of Trustees must authorize and declare
those distributions and they may be paid only out of assets
legally available for payment. We will pay each distribution to
holders of record as they appear on our share transfer books on
the record dates fixed by our Board of Trustees. In the case of
preferred shares represented by depositary receipts, the records
of the depositary referred to under Description of
Depositary Shares will determine the persons to whom
distributions are payable.
Distributions on any series of preferred shares may be
cumulative or noncumulative, as provided in the applicable
prospectus supplement or other offering materials. We refer to
each particular series, for ease of reference, as the applicable
series. Cumulative distributions will be cumulative from and
after the date shown in the applicable prospectus supplement or
other applicable offering materials. If our Board of Trustees
fails to authorize a distribution on any applicable series that
is noncumulative, the holders will have no right to receive, and
we will have no obligation to pay, a distribution in respect of
the applicable distribution period, whether or not distributions
on that series are declared payable in the future.
Unless otherwise provided in the applicable prospectus or other
applicable offering materials, if the applicable series is
entitled to a cumulative distribution, we may not declare, or
pay or set aside for payment, any full distributions on any
other series of preferred shares ranking, as to distributions,
on a parity with or junior to the applicable series, unless we
declare, and either pay or set aside for payment, full
cumulative distributions on the applicable series for all past
distribution periods and the then current distribution period.
If the applicable series does not have a cumulative
distribution, we must declare, and pay or set aside for payment,
full distributions for the then current distribution period only
unless otherwise provided in the applicable prospectus
supplement or other applicable offering materials. Unless
otherwise provided in the applicable prospectus or other
applicable offering materials, when distributions are not paid,
or set aside for payment, in full upon any applicable series and
the shares
16
of any other series ranking on a parity as to distributions with
the applicable series, we must declare, and pay or set aside for
payment, all distributions upon the applicable series and any
other parity series proportionately, in accordance with accrued
and unpaid distributions of the several series. Unless otherwise
provided in the applicable prospectus supplement or other
applicable offering materials, for these purposes, accrued and
unpaid distributions do not include unpaid distribution periods
on noncumulative preferred shares. No interest will be payable
in respect of any distribution payment that may be in arrears
unless otherwise provided in the applicable prospectus or other
applicable offering materials.
Unless otherwise provided in the applicable prospectus
supplement or other applicable offering materials, except as
provided in the immediately preceding paragraph, unless we
declare, and pay or set aside for payment, full cumulative
distributions, including for the then current period, on any
cumulative applicable series, we may not declare, or pay or set
aside for payment, any distributions upon common shares or any
other equity securities ranking junior to or on a parity with
the applicable series as to distributions or upon liquidation.
The foregoing restriction does not apply to distributions paid
in common shares or other equity securities ranking junior to
the applicable series as to distributions and upon liquidation,
unless otherwise provided in the applicable prospectus
supplement or other applicable offering materials. Unless
otherwise provided in the applicable prospectus supplement or
other applicable offering materials, if the applicable series is
noncumulative, we need only declare, and pay or set aside for
payment, the distribution for the then current period, before
declaring distributions on common shares or junior or parity
securities. In addition, under the circumstances that we could
not declare a distribution, we may not redeem, purchase or
otherwise acquire for any consideration any common shares or
other parity or junior equity securities, except upon conversion
into or exchange for common shares or other junior equity
securities, unless otherwise provided in the applicable
prospectus supplement or other applicable offering materials. We
may, however, make purchases and redemptions otherwise
prohibited pursuant to certain redemptions or pro rata offers to
purchase the outstanding shares of the applicable series and any
other parity series of preferred shares, unless otherwise
provided in the applicable prospectus supplement or other
applicable offering materials.
We will credit any distribution payment made on an applicable
series first against the earliest accrued but unpaid
distribution due with respect to the series.
Redemption
We may have the right or may be required to redeem one or more
series of preferred shares, as a whole or in part, in each case
upon the terms, if any, and at the times and at the redemption
prices shown in the applicable prospectus supplement or other
applicable offering materials.
If a series of preferred shares is subject to mandatory
redemption, we will specify in the applicable prospectus
supplement or other applicable offering materials the number of
shares we are required to redeem, when those redemptions start,
the redemption price, and any other terms and conditions
affecting the redemption. The redemption price will include all
accrued and unpaid distributions, except in the case of
noncumulative preferred shares. The redemption price may be
payable in cash or other property, as specified in the
applicable prospectus supplement or other applicable offering
materials. If the redemption price for preferred shares of any
series is payable only from the net proceeds of our issuance of
shares of beneficial interest, the terms of the preferred shares
may provide that, if no shares of beneficial interest shall have
been issued or to the extent the net proceeds from any issuance
are insufficient to pay in full the aggregate redemption price
then due, the preferred shares will automatically and
mandatorily be converted into shares of beneficial interest
pursuant to conversion provisions specified in the applicable
prospectus supplement or other applicable offering materials.
Liquidation
Preference
The applicable prospectus supplement or other applicable
offering materials will show the liquidation preference of the
applicable series. Upon our voluntary or involuntary
liquidation, before any distribution may be made to the holders
of our common shares or any other shares of beneficial interest
ranking junior in the distribution of assets upon any
liquidation to the applicable series, the holders of that series
will be entitled to receive, out of our assets legally available
for distribution to shareholders, liquidating distributions in
the amount of the liquidation preference, plus an amount equal
to all distributions accrued and unpaid. In the case of a
17
noncumulative applicable series, accrued and unpaid
distributions include only the then current distribution period.
After payment of the full amount of the liquidating
distributions to which they are entitled, the holders of
preferred shares will have no right or claim to any of our
remaining assets. If liquidating distributions shall have been
made in full to all holders of preferred shares, our remaining
assets will be distributed among the holders of any other shares
of beneficial interest ranking junior to the preferred shares
upon liquidation, according to their rights and preferences and
in each case according to their number of shares.
If, upon any voluntary or involuntary liquidation, our available
assets are insufficient to pay the amount of the liquidating
distributions on all outstanding shares of that series and the
corresponding amounts payable on all shares of beneficial
interest ranking on a parity in the distribution of assets with
that series, then the holders of that series and all other
equally ranking shares of beneficial interest shall share
ratably in the distribution in proportion to the full
liquidating distributions to which they would otherwise be
entitled.
For these purposes, our consolidation or merger with or into any
other trust or corporation or other entity, or the sale, lease
or conveyance of all or substantially all of our property or
business, or a statutory share exchange, will not be a
liquidation unless otherwise provided in the applicable
prospectus supplement or other applicable offering materials.
Voting
Rights
Holders of our preferred shares will not have any voting rights,
except as shown below or as otherwise from time to time
specified in the applicable prospectus supplement or other
applicable offering materials.
Unless otherwise specified in the applicable prospectus
supplement or other applicable offering materials, holders of
our preferred shares (voting separately as a class with all
other series of preferred shares with similar voting rights)
will be entitled to elect two additional trustees to our Board
of Trustees at our next annual meeting of shareholders or at a
special meeting called for such purpose, if at any time
distributions on the applicable series are in arrears for six or
more quarterly periods. If the applicable series has a
cumulative distribution, the right to elect additional trustees
described in the preceding sentence shall remain in effect until
we declare and pay or set aside for payment all distributions
accrued and unpaid on the applicable series. In the event the
preferred shareholders are so entitled to elect trustees, the
entire Board of Trustees will be increased by two trustees.
Unless otherwise specified in the applicable prospectus
supplement or other applicable offering materials, so long as
any preferred shares are outstanding, we may not, without the
affirmative vote or consent of two-thirds of the shares of each
series of preferred shares (and other shares having like voting
rights) outstanding at that time:
|
|
|
|
|
effect a share exchange, consolidation or merger into another
entity unless the series remains outstanding and its terms are
not materially and adversely changed or the series is converted
into or exchanged for preferred shares having identical terms
(except for changes that do not materially and adversely affect
the holders of such series);
|
|
|
|
amend, alter or repeal the provisions of our Declaration of
Trust or Bylaws that materially and adversely affects the series
of preferred shares;
|
|
|
|
increase the authorized amount of such series of preferred
shares or decrease the authorized amount of such series of
preferred shares below the number then issued and outstanding;
|
|
|
|
authorize, create or increase the authorized or issued amount of
any class or series of shares ranking senior to that series of
preferred shares;
|
|
|
|
reclassify any class or series of shares ranking senior to that
series of preferred shares or any security or obligation
convertible into any class of shares ranking senior to that
series of preferred shares; and
|
|
|
|
create, authorize or increase the authorized or issued amount of
any security or obligation convertible into or evidencing the
right to purchase any shares ranking senior to that series of
preferred shares.
|
The authorization, creation, increase or decrease of the
authorized amount of any class or series of shares ranking on
parity or junior to a series of preferred shares with respect to
distribution and liquidation rights, or the issuance of such
shares, will not be deemed to materially and adversely affect
that series.
18
The foregoing voting provisions will not apply if, at or prior
to the time of such amendment, provisions are made for the
redemption of all of the outstanding shares of the series of
preferred with the right to vote.
As more fully described under Description of Depositary
Shares below, if we elect to issue depositary shares, each
representing a fraction of a share of a series, each depositary
will in effect be entitled to a fraction of a vote per
depositary share.
Conversion
Rights
We will describe in the applicable prospectus supplement or
other applicable offering materials the terms and conditions, if
any, upon which you may, or we may require you to, convert
shares of any series of preferred shares into common shares or
any other class or series of securities. The terms will include
the number of common shares or other securities into which the
preferred shares are convertible, the conversion price (or the
manner of determining it), the conversion period, provisions as
to whether conversion will be at the option of the holders of
the series or at our option, the events requiring an adjustment
of the conversion price, and provisions affecting conversion
upon the redemption of shares of the series.
Our
Exchange Rights
We will describe in the applicable prospectus supplement or
other applicable offering materials the terms and conditions, if
any, upon which we can require you to exchange shares of any
series of preferred shares for debt securities. If an exchange
is required, you will receive debt securities with a principal
amount equal to the liquidation preference of the applicable
series of preferred shares. The other terms and provisions of
the debt securities will not be materially less favorable to you
than those of the series of preferred shares being exchanged.
Series A
Cumulative Redeemable Preferred Shares
Our Series A Preferred Shares provide for quarterly
payments of cumulative dividends at the rate of 9.50% of the
$25 per share liquidation preference of the Series A
Preferred Shares, or a fixed rate of $2.375 per share each
year. Dividends not declared or paid in any quarter continue to
accumulate. On liquidation of the Company, holders of the
Series A Preferred Shares are entitled to a liquidation
preference of $25 per share plus all accumulated, accrued
and unpaid dividends before any amount is payable to the holders
of our common shares. The Series A Preferred Shares are not
redeemable prior to May 29, 2007, except in limited
circumstances relating to the preservation of our status as a
REIT. On or after that date, we may at our own option redeem the
Series A Preferred Shares in whole or in part by paying the
$25 per share liquidation preference plus all accumulated,
accrued and unpaid dividends. The Series A Preferred Shares
rank senior to our common shares and on a parity with our
Series B Preferred Shares, Series C Preferred Shares
and other parity securities we may issue in the future with
respect to the payment of dividends and amounts on liquidation,
dissolution and winding up. Holders of Series A Preferred
Shares generally have no voting rights, except that if dividends
on the Series A Preferred Shares have not been paid for six
or more quarterly periods (whether or not consecutive), holders
of the Series A Preferred Shares (together with other
shares having like voting rights) are entitled to elect two
additional trustees to the Board of Trustees to serve until all
unpaid dividends have been paid or declared and set aside for
payment. In addition, certain material and adverse changes to
the terms of the Series A Preferred Shares cannot be made
without the affirmative vote of at least two-thirds of the
outstanding Series A Preferred Shares and the holders of
all other shares on a parity with the Series A Preferred
Shares and having like voting rights.
Series B
Cumulative Redeemable Preferred Shares
Our Series B Preferred Shares provide for quarterly
payments of cumulative dividends at the rate of 7.75% of the
$25 per share liquidation preference of the Series B
Preferred Shares, or a fixed rate of $1.9375 per share each
year. Dividends not declared or paid in any quarter continue to
accumulate. On liquidation of the Company, holders of the
Series B Preferred Shares are entitled to a liquidation
preference of $25 per share plus all accumulated, accrued
and unpaid dividends before any amount is payable to the holders
of our common shares. The Series B Preferred Shares are not
redeemable prior to January 19, 2010, except in limited
circumstances relating to the preservation of our status as a
REIT. On or after that date, we may at our own option redeem the
Series B Preferred
19
Shares in whole or in part by paying the $25 per share
liquidation preference plus all accumulated, accrued and unpaid
dividends. The Series B Preferred Shares rank senior to our
common shares and on a parity with our Series A Preferred
Shares, Series C Preferred Shares and other parity
securities we may issue in the future with respect to the
payment of dividends and amounts on liquidation, dissolution and
winding up. Holders of Series B Preferred Shares generally
have no voting rights, except that if dividends on the
Series B Preferred Shares have not been paid for six or
more quarterly periods (whether or not consecutive), holders of
the Series B Preferred Shares (together with other shares
having like voting rights) are entitled to elect two additional
trustees to the Board of Trustees to serve until all unpaid
dividends have been paid or declared and set aside for payment.
In addition, certain material and adverse changes to the terms
of the Series B Preferred Shares cannot be made without the
affirmative vote of at least two-thirds of the outstanding
Series B Preferred Shares and the holders of all other
shares on a parity with the Series B Preferred Shares and
having like voting rights.
Series C
Cumulative Convertible Preferred Shares
Our Series C Preferred Shares provide for quarterly
payments of cumulative dividends at the rate of 5.75% of the
$25 per share liquidation preference of the Series C
Preferred Shares, or a fixed rate of $1.4375 per share each
year. Dividends not declared or paid in any quarter continue to
accumulate. On liquidation of the Company, holders of the
Series C Preferred Shares are entitled to a liquidation
preference of $25 per share plus all accumulated, accrued
and unpaid dividends before any amount is payable to the holders
of our common shares. The Series C Preferred Shares are not
redeemable. Holders of Series C Preferred Shares may, at
their option, convert the Series C Preferred Shares into
our common shares subject to certain conditions at the then
applicable conversion rate. The conversion rate is subject to
adjustment upon the occurrence of specified events. On or after
January 15, 2012, we may, at our option, convert some or
all of the Series C Preferred Shares into common shares at
the then applicable conversion rate in certain circumstances
based on the market price of our common shares. Upon any
conversion of Series C Preferred Shares, we will have the
option to deliver either (1) a number of common shares
based upon the applicable conversion rate, or (2) an amount
of cash and common shares as specified in the articles
supplementary for such shares. If the holders of Series C
Preferred Shares elect to convert their Series C Preferred
Shares in connection with a fundamental change that occurs on or
prior to January 15, 2017, we will increase the conversion
rate for the Series C Preferred Shares surrendered for
conversion to the extent described in the articles supplementary
for the Series C Preferred Shares. In addition, upon a
fundamental change, when the actual applicable price of our
common shares, as determined in accordance with the article
supplementary, is less than $59.45 per share, the holders
of Series C Preferred Shares may require us to convert some
or all of their Series C Preferred Shares at a conversion
rate equal to the liquidation preference of the Series C
Preferred Shares being converted plus accrued and unpaid
distributions divided by 98% of the market price of our common
shares. We will have the right to repurchase for cash some or
all of the Series C Preferred Shares that would otherwise
be required to be converted. The Series C Preferred Shares
rank senior to our common shares and on a parity with our
Series A Preferred Shares, Series B Preferred Shares
and other parity securities we may issue in the future with
respect to the payment of dividends and amounts on liquidation,
dissolution and winding up. Holders of Series C Preferred
Shares generally have no voting rights, except that if dividends
on the Series C Preferred Shares have not been paid for six
or more quarterly periods (whether or not consecutive), holders
of the Series C Preferred Shares (together with shares
having like voting rights) are entitled to elect two additional
trustees to the Board of Trustees to serve until all unpaid
dividends have been paid or declared and set aside for payment.
In addition, certain material and adverse changes to the terms
of the Series C Preferred Shares cannot be made without the
affirmative vote of at least two-thirds of the outstanding
Series C Preferred Shares and the holders of all other
shares on a parity with the Series C Preferred Shares and
having like voting rights.
20
DESCRIPTION
OF DEPOSITARY SHARES
The following is a summary of the material provisions of any
deposit agreement and of the depositary shares and depositary
receipts representing depositary shares. Because it is a
summary, it does not contain all of the information that may be
important to you. If you want more information, you should read
the form of deposit agreement and depositary receipts which we
will file as exhibits to the registration statement of which
this prospectus is part prior to an offering of depositary
shares. See Available Information. This summary also
is subject to and qualified by reference to the descriptions of
the particular terms of the securities described in the
applicable prospectus supplement or other applicable offering
materials and by the terms of the applicable final deposit
agreement and depositary receipts.
General
We may, at our option, elect to offer fractional interests in
shares of preferred shares, rather than shares of preferred
shares. If we exercise this option, we will appoint a depositary
to issue depositary receipts representing those fractional
interests. Preferred shares of each series represented by
depositary shares will be deposited under a separate deposit
agreement between us and the depositary. The prospectus
supplement or other offering materials relating to a series of
depositary shares will show the name and address of the
depositary. Subject to the terms of the applicable deposit
agreement, each owner of depositary shares will be entitled to
all of the distribution, voting, conversion, redemption,
liquidation and other rights and preferences of the preferred
shares represented by those depositary shares.
Depositary receipts issued pursuant to the applicable deposit
agreement will evidence ownership of depositary shares. Upon
surrender of depositary receipts at the office of the
depositary, and upon payment of the charges provided in and
subject to the terms of the applicable deposit agreement, a
holder of depositary shares will be entitled to receive the
preferred shares underlying the surrendered depositary receipts.
Distributions
A depositary will be required to distribute all cash
distributions received in respect of the applicable preferred
shares to the record holders of depositary receipts evidencing
the related depositary shares in proportion to the number of
depositary receipts owned by the holders. Fractions will be
rounded down to the nearest whole cent.
If the distribution is other than in cash, a depositary will be
required to distribute property received by it to the record
holders of depositary receipts entitled thereto, unless the
depositary determines that it is not feasible to make the
distribution. In that case, the depositary may, with our
approval, sell the property and distribute the net proceeds from
the sale to the holders.
Depositary shares that represent preferred shares converted or
exchanged will not be entitled to distributions. The deposit
agreement also will contain provisions relating to the manner in
which any subscription or similar rights we offer to holders of
the preferred shares will be made available to holders of
depositary shares. All distributions will be subject to
obligations of holders to file proofs, certificates and other
information and to pay certain charges and expenses to the
depositary.
Withdrawal
of Preferred Shares
You may receive the number of whole shares of your series of
preferred shares and any money or other property represented by
those depositary receipts after surrendering the depositary
receipts at the corporate trust office of the depositary.
Partial shares of preferred shares will not be issued. If the
depositary shares that you surrender exceed the number of
depositary shares that represent the number of whole preferred
shares you wish to withdraw, then the depositary will deliver to
you at the same time a new depositary receipt evidencing the
excess number of depositary shares. Once you have withdrawn your
preferred shares, you will not be entitled to re-deposit those
preferred shares under the deposit agreement in order to receive
depositary shares. We do not expect that there will be any
public trading market for withdrawn preferred shares.
21
Redemption
of Depositary Shares
If we redeem a series of the preferred shares underlying the
depositary shares, the depositary will redeem those shares from
the proceeds received by it. The depositary will mail notice of
redemption not less than 30 days, and not more than
60 days, before the date fixed for redemption to the record
holders of the depositary receipts evidencing the depositary
shares we are redeeming at their addresses appearing in the
depositarys books. The redemption price per depositary
share will be equal to the applicable fraction of the redemption
price per share payable with respect to the series of the
preferred shares. The redemption date for depositary shares will
be the same as that of the preferred shares. If we are redeeming
less than all of the depositary shares, the depositary will
select the depositary shares we are redeeming by lot or pro rata
as the depositary may determine.
After the date fixed for redemption, the depositary shares
called for redemption no longer will be deemed outstanding. All
rights of the holders of the depositary shares and the related
depositary receipts will cease at that time, except for the
right to receive the money or other property to which the
holders of depositary shares were entitled upon redemption.
Receipt of the money or other property is subject to surrender
to the depositary of the depositary receipts evidencing the
redeemed depositary shares.
Voting of
the Preferred Shares
Upon receipt of notice of any meeting at which the holders of
the applicable preferred shares are entitled to vote, a
depositary will be required to mail the information contained in
the notice of meeting to the record holders of the applicable
depositary receipts. Each record holder of depositary receipts
on the record date will be entitled to instruct the depositary
as to the exercise of the voting rights pertaining to the amount
of preferred shares represented by the holders depositary
shares. The depositary will try, as practical, to vote the
shares as you instruct. We will agree to take all reasonable
action that the depositary deems necessary in order to enable it
to do so.
If you do not instruct the depositary how to vote your shares,
the depositary will abstain from voting those shares. The
depositary will not be responsible for any failure to carry out
an instruction to vote or for the effect of any such vote made
so long as the action or inaction of the depositary is in good
faith and is not the result of the depositarys gross
negligence or willful misconduct.
Liquidation
Preference
Upon our liquidation, whether voluntary or involuntary, each
holder of depositary shares will be entitled to the fraction of
the liquidation preference accorded each preferred share
represented by the depositary shares, as shown in the applicable
prospectus supplement or other applicable offering materials.
Conversion
or Exchange of Preferred Shares
The depositary shares will not themselves be convertible into or
exchangeable for common shares, preferred shares or any of our
other securities or property. Nevertheless, if so specified in
the applicable prospectus supplement or other applicable
offering materials, the depositary receipts may be surrendered
by holders to the applicable depositary with written
instructions to it to instruct us to cause conversion of the
preferred shares represented by the depositary shares.
Similarly, if so specified in the applicable prospectus
supplement or other applicable offering materials, we may
require you to surrender all of your depositary receipts to the
applicable depositary upon our requiring the conversion or
exchange of the preferred shares represented by the depositary
shares into our debt securities. We will agree that, upon
receipt of the instruction and any amounts payable in connection
with the conversion or exchange, we will cause the conversion or
exchange using the same procedures as those provided for
delivery of preferred shares to effect the conversion or
exchange. If you are converting only a part of the depositary
shares, the depositary will issue you a new depositary receipt
for any unconverted depositary shares.
Federal
Income Tax Consequences Relating to Depositary Shares
As an owner of depositary shares, you will be treated for
U.S. federal income tax purposes as if you were an owner of
the series of preferred shares represented by the depositary
shares. Therefore, you will be required to take
22
into account, for U.S. federal income tax purposes, income
and deductions to which you would be entitled if you were a
holder of the underlying series of preferred shares. In addition:
|
|
|
|
|
no gain or loss will be recognized for U.S. federal income
tax purposes upon the withdrawal of preferred shares in exchange
for depositary shares provided in the deposit agreement;
|
|
|
|
the tax basis of each preferred share to you as an exchanging
owner of depositary shares will, upon exchange, be the same as
the aggregate tax basis of the depositary shares exchanged for
the preferred shares; and
|
|
|
|
if you held the depositary shares as a capital asset at the time
of the exchange for preferred shares, the holding period for the
preferred shares will include the period during which you owned
the depositary shares.
|
Amendment
and Termination of a Deposit Agreement
We and the applicable depositary will be permitted to amend the
provisions of the depositary receipts and the deposit agreement.
However, the holders of at least a majority of the applicable
depositary shares then outstanding must approve any amendment
that adds or increases fees or charges or prejudices an
important right of holders. Every holder of an outstanding
depositary receipt at the time any amendment becomes effective,
by continuing to hold the receipt, will be bound by the
applicable deposit agreement, as amended.
Any deposit agreement may be terminated by us upon not less than
30 days prior written notice to the applicable
depositary if (1) the termination is necessary to preserve
our status as a Maryland real estate investment trust or
(2) a majority of each series of preferred shares affected
by the termination consents to the termination. When either
event occurs, the depositary will be required to deliver or make
available to each holder of depositary receipts, upon surrender
of the depositary receipts held by the holder, the number of
whole or fractional shares of preferred shares as are
represented by the depositary shares evidenced by the depositary
receipts, together with any other property held by the
depositary with respect to the depositary receipts. In addition,
a deposit agreement will automatically terminate if:
|
|
|
|
|
all depositary shares have been redeemed;
|
|
|
|
there shall have been a final distribution in respect of the
related preferred shares in connection with our liquidation and
the distribution has been made to the holders of depositary
receipts evidencing the depositary shares underlying the
preferred shares; or
|
|
|
|
each related preferred share shall have been converted or
exchanged into securities not represented by depositary shares.
|
Charges
of a Depositary
We will pay all transfer and other taxes and governmental
charges arising solely from the existence of a deposit
agreement. In addition, we will pay the fees and expenses of a
depositary in connection with the initial deposit of the
preferred shares and any redemption of preferred shares.
However, holders of depositary receipts will pay any transfer or
other governmental charges and the fees and expenses of a
depositary for any duties the holders request to be performed
that are outside of those expressly provided for in the
applicable deposit agreement.
Resignation
and Removal of Depositary
A depositary may resign at any time by delivering to us notice
of its election to do so. In addition, we may at any time remove
a depositary. Any resignation or removal will take effect when
we appoint a successor depositary and it accepts the
appointment. We must appoint a successor depositary within
60 days after delivery of the notice of resignation or
removal.
23
Miscellaneous
A depositary will be required to forward to holders of
depositary receipts any reports and communications from us that
it receives with respect to the related preferred shares.
Holders of depositary receipts will be able to inspect the
transfer books of the depositary and the list of holders of
depositary receipts upon reasonable notice.
Neither a depositary nor our company will be liable if it is
prevented from or delayed in performing its obligations under a
deposit agreement by law or any circumstances beyond its
control. Our obligations and those of the depositary under a
deposit agreement will be limited to performing duties in good
faith and without gross negligence or willful misconduct.
Neither we nor any depositary will be obligated to prosecute or
defend any legal proceeding in respect of any depositary
receipts, depositary shares or related preferred shares unless
satisfactory indemnity is furnished. We and each depositary will
be permitted to rely on written advice of counsel or
accountants, on information provided by persons presenting
preferred shares for deposit, by holders of depositary receipts,
or by other persons believed in good faith to be competent to
give the information, and on documents believed in good faith to
be genuine and signed by a proper party.
If a depositary receives conflicting claims, requests or
instructions from any holders of depositary receipts, on the one
hand, and us, on the other hand, the depositary shall be
entitled to act on the claims, requests or instructions received
from us.
24
DESCRIPTION
OF WARRANTS
The following is a summary of the material terms of our
warrants and the warrant agreement. Because it is a summary, it
does not contain all of the information that may be important to
you. If you want more information, you should read the forms of
warrants and the warrant agreement which we will file as
exhibits to the registration statement of which this prospectus
is part. See Available Information. This summary
also is subject to and qualified by reference to the
descriptions of the particular terms of the securities described
in the applicable prospectus supplement or other applicable
offering materials and the terms of the applicable final warrant
agreement and warrants.
We may issue, together with any other securities being offered
or separately, warrants entitling the holder to purchase from or
sell to us, or to receive from us the cash value of the right to
purchase or sell, debt securities, preferred shares, depositary
shares or common shares. We and a warrant agent will enter a
warrant agreement pursuant to which the warrants will be issued.
The warrant agent will act solely as our agent in connection
with the warrants and will not assume any obligation or
relationship of agency or trust for or with any holders or
beneficial owners of warrants. We will file a copy of the forms
of warrants and the warrant agreement with the SEC at or before
the time of the offering of the applicable series of warrants.
In the case of each series of warrants, the applicable
prospectus supplement or other applicable offering materials
will describe the terms of the warrants being offered thereby.
These include the following, if applicable:
|
|
|
|
|
the title of the warrants
|
|
|
|
the offering price for the warrants
|
|
|
|
the aggregate number of the warrants
|
|
|
|
the designation and terms of the securities purchasable upon
exercise of the warrants
|
|
|
|
if applicable, the designation and terms of the securities that
the warrants are issued with and the number of warrants issued
with each security
|
|
|
|
if applicable, the date after which the warrants and any
securities issued with them will be separately transferable
|
|
|
|
the number or amount of securities that may be purchased upon
exercise of a warrant and the price at which the securities may
be purchased upon exercise
|
|
|
|
the dates on which the right to exercise the warrants will
commence and expire
|
|
|
|
if applicable, the minimum or maximum amount of the warrants
that may be exercised at any one time
|
|
|
|
whether the warrants represented by the warrant certificates or
securities that may be issued upon exercise of the warrants will
be issued in registered or bearer form
|
|
|
|
information relating to book-entry procedures
|
|
|
|
anti-dilution provisions of the warrants, if any
|
|
|
|
redemption, repurchase or analogous provisions, if any,
applicable to the warrants
|
|
|
|
any additional terms of the warrants, including terms,
procedures and limitations relating to the exchange and exercise
of the warrants.
|
Warrants may be exercised at the appropriate office of the
warrant agent or any other office indicated in the applicable
prospectus supplement or other applicable offering materials.
Before the exercise of warrants, holders will not have any of
the rights of holders of the securities purchasable upon
exercise and will not be entitled to payments made to holders of
those securities.
25
The warrant agreement may be amended or supplemented without the
consent of the holders of the warrants to which the amendment or
supplement applies to effect changes that are not inconsistent
with the provisions of the warrants and that do not adversely
affect the interests of the holders of the warrants. However,
any amendment that materially and adversely alters the rights of
the holders of warrants will not be effective unless the holders
of at least a majority of the applicable warrants then
outstanding approve the amendment. Every holder of an
outstanding warrant at the time any amendment becomes effective,
by continuing to hold the warrant, will be bound by the
applicable warrant agreement as amended thereby. The prospectus
supplement or other offering materials applicable to a
particular series of warrants may provide that certain
provisions of the warrants, including the securities for which
they may be exercisable, the exercise price, and the expiration
date, may not be altered without the consent of the holder of
each warrant.
26
DESCRIPTION
OF CERTAIN PROVISIONS OF MARYLAND LAW AND EPRS
DECLARATION OF TRUST AND BYLAWS
We are organized as a Maryland real estate investment trust.
The following is a summary of our Declaration of Trust and
Bylaws and several provisions of Maryland law. Because it is a
summary, it does not contain all the information that may be
important to you. If you want more information, you should read
our entire Declaration of Trust and Bylaws, copies of which we
have previously filed with the SEC, or refer to the provisions
of Maryland law. See Available Information for
information about how to obtain copies of our Declaration of
Trust and Bylaws.
Trustees
Our Declaration of Trust and Bylaws provide that only our Board
of Trustees will establish the number of Trustees, provided
however that the term of office of a Trustee will not be
affected by any decrease in the number of Trustees. Any vacancy
on the Board of Trustees may be filled only by a majority of the
remaining Trustees, even if the remaining trustees do not
constitute a quorum, or by the sole Trustee. Any Trustee elected
to fill a vacancy will hold office until the next annual meeting
of shareholders and until a successor is elected and qualified.
Our Declaration of Trust divides our Board of Trustees into
three classes. Shareholders elect the Trustees of each class for
three-year terms upon the expiration of their current terms.
Shareholders elect only one class of Trustees each year.
We believe that classification of our Board of Trustees helps to
assure the continuity of our business strategies and policies.
There is no cumulative voting in the election of Trustees.
Consequently, at each annual meeting of shareholders, the
holders of a majority of our common shares are able to elect all
of the successors of the class of Trustees whose term expires at
that meeting. The classified Board of Trustees provision could
have the effect of making the replacement of our incumbent
Trustees more time consuming and difficult. At least two annual
meetings of shareholders are generally required to effect a
change in a majority of our Board of Trustees.
Our Declaration of Trust provides that, subject to the rights of
holders of one or more classes of preferred shares to elect or
remove one or more Trustees, a Trustee may be removed for cause
by the affirmative vote of the holders of at least two-thirds of
our common shares entitled to be cast in the election of
trustees. This provision precludes shareholders from removing
our incumbent Trustees unless cause, as defined in the
Declaration of Trust, exists, and they can obtain a substantial
affirmative vote of shares.
Advance
Notice of Trustee Nominations and New Business
Our Bylaws provide that nominations of persons for election to
our Board of Trustees and business to be transacted at
shareholder meetings may be properly brought pursuant to our
notice of the meeting, by our Board of Trustees, or by a
shareholder who (i) is a shareholder of record at the time
of giving the advance notice and at the time of the meeting,
(ii) is entitled to vote at the meeting and (iii) has
complied with the advance notice provisions set forth in our
Bylaws.
Under our Bylaws, a shareholders notice of nominations for
Trustee or business to be transacted at an annual meeting of
shareholders must be delivered to our secretary at our principal
office not later than the close of business on the 60th day
and not earlier than the close of business on the 90th day
prior to the first anniversary of the preceding years
annual meeting. In the event that the date of the annual meeting
is advanced by more than 30 days or delayed by more than
60 days from the anniversary date of the preceding
years annual meeting, a shareholders notice must be
delivered to us not earlier than the close of business on the
90th day prior to such annual meeting and not later than
the later of: (i) the 60th day prior to such annual
meeting, or (ii) the 10th day following the day on
which we first make a public announcement of the date of such
meeting. The public announcement of a postponement or of an
adjournment of such annual meeting to a later date or time will
not commence a new time period for the giving of a
shareholders notice. If the number of Trustees to be
elected to our Board of Trustees is increased and we make no
public announcement of such action at least 70 days prior
to the first anniversary of the preceding years annual
meeting, a shareholders notice also will be considered
timely, but only with respect to nominees for any new positions
created by such increase, if the notice is delivered to our
secretary at
27
our principal office not later than the close of business on the
10th day immediately following the day on which such public
announcement is made.
For special meetings of shareholders, our Bylaws require a
shareholder who is nominating a person for election to our Board
of Trustees at a special meeting at which Trustees are to be
elected to give notice of such nomination to our secretary at
our principal office not earlier than the close of business on
the 90th day prior to such special meeting and not later
than the close of business on the later of: (1) the
60th day prior to such special meeting or (2) the
10th day following the day on which public announcement is
first made of the date of the special meeting and of the
nominees proposed by the Trustees to be elected at such meeting.
The public announcement of a postponement or adjournment of a
special meeting to a later date or time will not commence a new
time period for the giving of a shareholders notice as
described above.
Meetings
of Shareholders
Under our Bylaws, our annual meeting of shareholders will take
place during the second quarter of each year following delivery
of the annual report. Our Chairman, President, or one-third of
our Trustees may call a special meeting of the shareholders. Our
secretary also may call a special meeting of shareholders upon
the written request of holders of at least a majority of the
shares entitled to vote at the meeting.
Liability
and Indemnification of Trustees and Officers
The laws relating to Maryland real estate investment trusts (the
Maryland REIT Law) permit a real estate investment
trust to indemnify and advance expenses to its trustees,
officers, employees and agents to the same extent permitted by
the Maryland General Corporation Law (the MGCL) for
directors and officers of Maryland corporations. The MGCL
permits a corporation to indemnify its present and former
directors and officers against judgments, penalties, fines,
settlements and reasonable expenses incurred in connection with
any proceeding to which they may be made, or are threatened to
be made, a party by reason of their service in those capacities.
However, a Maryland corporation is not permitted to provide this
type of indemnification if the following is established:
|
|
|
|
|
the act or omission of the director or officer was material to
the matter giving rise to the proceeding and was committed in
bad faith or was the result of active and deliberate dishonesty;
|
|
|
|
the director or officer actually received an improper personal
benefit in money, property or services; or
|
|
|
|
in the case of any criminal proceeding, the director or officer
had reasonable cause to believe that the act or omission was
unlawful.
|
Additionally, a Maryland corporation may not indemnify a
director or officer for an adverse judgment in a suit by or in
the right of that corporation or for a judgment of liability on
the basis that personal benefit was improperly received, unless
in either case a court orders indemnification and then only for
expenses. The MGCL permits a corporation to advance reasonable
expenses to a director or officer upon the corporations
receipt of the following:
|
|
|
|
|
a written affirmation by the director or officer of his good
faith belief that he has met the standard of conduct necessary
for indemnification by the corporation; and
|
|
|
|
a written undertaking by him or on his behalf to repay the
amount paid or reimbursed by the corporation if it is ultimately
determined that this standard of conduct was not met.
|
Our officers and trustees are and will be indemnified under our
Declaration of Trust against certain liabilities. Our
Declaration of Trust provides that we will, to the maximum
extent permitted by Maryland law in effect from time to time,
indemnify: (a) any individual who is a present or former
trustee or officer of EPR; or (b) any individual who, while
a trustee or officer of EPR and at the request of EPR, serves or
has served as a director, officer, shareholder, partner,
trustee, employee or agent of any real estate investment trust,
corporation, partnership, joint venture, trust, employee benefit
plan or any other enterprises against any claim or liability,
together with reasonable expenses actually incurred in advance
of a final disposition of a legal proceeding, to which such
person may become subject or which such person may incur by
reason of his or her status as such. We have the power, with the
approval of our Board of Trustees, to provide such
indemnification and advancement of expenses to a person who
served a
28
predecessor of EPR in any of the capacities described in
(a) or (b) above and to any employee or agent of EPR
or its predecessors.
We have also entered into indemnification agreements with our
trustees and certain of our officers providing for procedures
for indemnification by us to the fullest extent permitted by law
and advancements by us of certain expenses and costs relating to
claims, suits or proceedings arising from their service to us.
We have obtained trustees and officers liability
insurance for the purpose of funding the provision of any such
indemnification.
The SEC has expressed the opinion that indemnification of
trustees, officers or persons otherwise controlling a company
for liabilities arising under the Securities Act is against
public policy and is therefore unenforceable.
Shareholder
Liability
Under Maryland law, a shareholder is not personally liable for
the obligations of a real estate investment trust solely as a
result of his or her status as a shareholder. Despite this, our
legal counsel has advised us that in some jurisdictions the
possibility exists that shareholders of a trust entity such as
ours may be held liable for acts or obligations of the trust.
While we intend to conduct our business in a manner designed to
minimize potential shareholder liability, we can give no
assurance that you can avoid liability in all instances in all
jurisdictions. Our Trustees have not provided in the past and do
not intend to provide insurance covering these risks to our
shareholders.
Actions
by Shareholders by Written Consent
Our Bylaws provide procedures governing actions by shareholders
by written consent. The Bylaws specify that any written consents
must be signed by shareholders entitled to cast a sufficient
number of votes to approve the matter, as required by statute,
our Declaration of Trust or our Bylaws, and such consent must be
filed with minutes of the proceedings of the shareholders.
Restrictions
on Ownership and Transfer of Shares
Our Declaration of Trust restricts the number of shares which
may be owned by shareholders. Generally, for us to qualify as a
REIT under the Code, not more than 50% in value of our
outstanding shares may be owned, directly or indirectly, by five
or fewer individuals (defined in the Code to include certain
entities and constructive ownership among specified family
members) at any time during the last half of a taxable year. The
shares also must be beneficially owned by 100 or more persons
during at least 335 days of a taxable year. In order to
maintain our qualification as a REIT, our Declaration of Trust
contains restrictions on the acquisition of shares intended to
ensure compliance with these requirements.
Our Declaration of Trust generally provides that any person (not
just individuals) holding more than 9.8% in number of shares or
value, of the outstanding shares of any class or series of our
common stock or preferred stock (the Ownership
Limit) may be subject to forfeiture of the shares
(including common shares and preferred shares) owned in excess
of the Ownership Limit. We refer to the shares in excess of the
Ownership Limit as Excess Shares. The Excess Shares
may be transferred to a trust for the benefit of one or more
charitable beneficiaries. The trustee of that trust would have
the right to vote the voting Excess Shares, and dividends on the
Excess Shares would be payable to the trustee for the benefit of
the charitable beneficiaries. Holders of Excess Shares would be
entitled to compensation for their Excess Shares, but that
compensation may be less than the price they paid for the Excess
Shares. Persons who hold Excess Shares or who intend to acquire
Excess Shares must provide written notice to us.
Our Ownership Limit may also act to deter an unfriendly takeover
of the Company.
Business
Combinations
The MGCL contains a provision which regulates business
combinations with interested shareholders. This provision
applies to Maryland real estate investment trusts like us. Under
the MGCL, business combinations such as
29
mergers, consolidations, share exchanges and the like between a
Maryland real estate investment trust and an interested
shareholder or an affiliate of an interested shareholder are
prohibited for five years after the most recent date on which
the shareholder becomes an interested shareholder. Under the
MGCL the following persons are deemed to be interested
shareholders:
|
|
|
|
|
any person who beneficially owns 10% or more of the voting power
of the trusts shares; or
|
|
|
|
an affiliate or associate of the trust who, at any time within
the two-year period prior to the date in question, was the
beneficial owner of 10% or more of the voting power of the then
outstanding voting shares of the trust.
|
After the five-year prohibition period has ended, a business
combination between a trust and an interested shareholder must
be recommended by the board of trustees of the trust and must
receive the following shareholder approvals:
|
|
|
|
|
the affirmative vote of at least 80% of the votes entitled to be
cast; and
|
|
|
|
the affirmative vote of at least two-thirds of the votes
entitled to be cast by holders of shares other than shares held
by the interested shareholder with whom or with whose affiliate
or associate the business combination is to be effected or held
by an affiliate or associate of the interested shareholder.
|
The shareholder approvals discussed above are not required if
the trusts shareholders receive the minimum price set
forth in the MGCL for their shares and the consideration is
received in cash or in the same form as previously paid by the
interested shareholder for its shares.
The foregoing provisions of the MGCL do not apply, however, to
business combinations that are approved or exempted by the board
of trustees of the trust prior to the time that the interested
shareholder becomes an interested shareholder. A person is not
an interested shareholder under the MGCL if the board of
trustees approved in advance the transaction by which the person
otherwise would have become an interested shareholder. The board
of trustees may provide that its approval is subject to
compliance with any terms and conditions determined by the board
of trustees.
Control
Share Acquisitions
The MGCL contains a provision which regulates control share
acquisitions. This provision also applies to Maryland real
estate investment trusts. The MGCL provides that control shares
of a Maryland real estate investment trust acquired in a control
share acquisition have no voting rights except to the extent
approved by a vote of two-thirds of the votes entitled to be
cast on the matter. Shares owned by the acquiror, by officers or
by trustees who are employees of the trust are excluded from
shares entitled to vote on the matter. Control shares are voting
shares which, if aggregated with all other shares owned by the
acquiror, or in respect of which the acquiror is able to
exercise or direct the exercise of voting power (except solely
by virtue of a revocable proxy), would entitle the acquiror to
exercise voting power in electing trustees within one of the
following ranges of voting power:
|
|
|
|
|
One-tenth or more but less than one-third;
|
|
|
|
One-third or more but less than a majority; or
|
|
|
|
a majority or more of all voting power.
|
Control shares do not include shares which the acquiring person
is entitled to vote as a result of having previously obtained
shareholder approval. A control share acquisition means the
acquisition of control shares, subject to certain exceptions.
A person who has made or proposes to make a control share
acquisition may compel the board of trustees to call a special
meeting of shareholders to be held within 50 days of demand
to consider the voting rights of the shares. The right to compel
the calling of a special meeting is subject to the satisfaction
of certain conditions, including an undertaking to pay the
expenses of the meeting. If no request for a meeting is made,
the trust may itself present the question at any shareholders
meeting.
30
If voting rights are not approved at the meeting or if the
acquiring person does not deliver an acquiring person statement
as required by the MGCL, then the trust may redeem for fair
value any or all of the control shares, except those for which
voting rights have previously been approved. The right of the
trust to redeem control shares is subject to conditions and
limitations. Fair value is determined, without regard to the
absence of voting rights for the control shares, as of the date
of the last control share acquisition by the acquiror or of any
meeting of shareholders at which the voting rights of the shares
are considered and not approved. If voting rights for control
shares are approved at a shareholders meeting and the acquiror
becomes entitled to vote a majority of the shares entitled to
vote, all other shareholders may exercise appraisal rights. The
fair value of the shares as determined for purposes of 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 of the MGCL does not apply
to the following:
|
|
|
|
|
shares acquired in a merger, consolidation or share exchange if
the trust is a party to the transaction; or
|
|
|
|
acquisitions approved or exempted by a provision in the
declaration of trust or bylaws of the trust adopted before the
acquisition of shares.
|
Anti-Takeover
Effect of Maryland Law and of Our Declaration of Trust and
Bylaws
The following provisions in our Declaration of Trust and Bylaws
and in Maryland law could delay or prevent a change in control
of EPR:
|
|
|
|
|
the limitation on ownership and acquisition of more than 9.8% of
our shares;
|
|
|
|
the classification of our Board of Trustees into classes and the
election of each class for three-year staggered terms;
|
|
|
|
the requirement of cause and a two-thirds majority vote of
shareholders for removal of our Trustees;
|
|
|
|
the fact that the number of our Trustees may be fixed only by
vote of our Board of Trustees and that a vacancy on our Board of
Trustees may be filled only by the affirmative vote of a
majority of our remaining Trustees;
|
|
|
|
the limitations on our shareholders abilities to act
without a meeting;
|
|
|
|
the advance notice requirements for shareholder nominations for
Trustees and other proposals;
|
|
|
|
the business combination provisions of the MGCL;
|
|
|
|
the control share acquisition provisions of the MGCL; and
|
|
|
|
the power of our Board of Trustees to authorize and issue
additional shares, including additional classes of shares with
rights defined at the time of issuance, without shareholder
approval.
|
31
U.S. FEDERAL
INCOME TAX CONSIDERATIONS
The following discussion summarizes the material United
States (U.S.) federal income tax considerations
regarding EPR and the acquisition, ownership and disposition of
our securities. If we offer debt securities, depositary shares
or warrants, information about any additional income tax
consequences to holders of those securities will be included in
the prospectus supplement or other applicable offering materials
under which those securities are offered.
This summary is based on current law, is for general
information only and is not tax advice. The tax treatment to
holders of our securities will vary depending on a holders
particular situation. This summary does not address all aspects
of federal income taxation that may be relevant to a holder of
securities in light of his or her personal investments or tax
circumstances. Moreover, this summary does not address tax
considerations applicable to certain types of holders subject to
special treatment under the federal income tax laws (including,
without limitation dealers or traders in securities, financial
institutions, insurance companies and shareholders that hold our
stock as part of a hedge, straddle, conversion transaction or
other arrangement) except to the extent discussed under the
subheadings Taxation of Tax-Exempt
Shareholders and Taxation of
Non-U.S. shareholders.
In addition, the summary below does not consider the effect of
any foreign, state, local or other tax laws that may be
applicable to holders of our shares.
The information in this section is based on the
U.S. Internal Revenue Code (the Code), current,
temporary and proposed Treasury Regulations promulgated under
the Code, the legislative history of the Code, current
administrative interpretations and practices of the Internal
Revenue Service (the IRS), and court decisions, all
as of the date of this prospectus. Future legislation, Treasury
Regulations, administrative interpretations and practices and
court decisions may adversely affect, perhaps retroactively, the
tax considerations described herein. We have not requested, and
do not plan to request, any rulings from the IRS concerning our
tax treatment and the statements in this prospectus are not
binding on the IRS or any court. Thus, we can provide no
assurance that these statements will not be challenged by the
IRS or sustained by a court if challenged by the IRS.
You are advised to consult your tax advisor regarding the
specific tax consequences to you of the acquisition, ownership
and sale of our securities, and of our election to be taxed as a
REIT, including the federal, state, local, foreign and other tax
consequences of such acquisition, ownership, sale and election
and of potential changes in applicable tax laws.
Taxation
of the Company
General
We elected to be taxed as a REIT under Sections 856 through
860 of the Code, commencing with our taxable year ended
December 31, 1997. We believe we have been organized and
have operated in a manner which allows us to qualify for
taxation as a REIT under the Code commencing with our taxable
year ended December 31, 1997. We intend to continue to
operate in this manner.
In the opinion of Stinson Morrison Hecker LLP, we have qualified
as a REIT under the Code for our taxable years ended
December 31, 1997 through December 31, 2006, we are
organized in conformity with the requirements for qualification
as a REIT, and our current and proposed method of operation will
enable us to meet the requirements for qualification and
taxation as a REIT under the Code for our taxable year ending
December 31, 2007 and for future taxable years. It must be
emphasized that this opinion is based upon certain assumptions
and representations as to factual matters made by us, including
representations made by us in a representation letter and
certificate provided by our officers and our factual
representations set forth herein and in registration statements
previously filed with the SEC. Any variation from the factual
statements set forth herein, in registration statements
previously filed with the SEC, or in the representation letter
and certificate we have provided to Stinson Morrison Hecker LLP
may affect the conclusions upon which its opinion is based.
The opinions of Stinson Morrison Hecker LLP are based on
existing law as contained in the Code and Treasury Regulations
promulgated thereunder, in effect on the date of this
prospectus, and the interpretations of such provisions and
Treasury Regulations by the IRS and court decisions, all of
which are subject to change either prospectively or
retroactively, and to possibly different interpretations.
Stinson Morrison Hecker LLP will have no
32
obligation to advise us or the holders of our securities of any
subsequent change in the matters stated, represented or assumed,
or of any subsequent change in the applicable law. You should be
aware that the opinions expressed are not binding upon the IRS
or any court. Accordingly, there can be no assurance that
contrary positions may not successfully be asserted by the IRS.
Moreover, our qualification and taxation as a REIT depends upon
our ability, through actual annual operating results and methods
of operation, to satisfy various qualification tests imposed
under the Code, such as distributions to shareholders, asset
composition levels, and diversity of stock ownership, the actual
results of which have not been and will not be reviewed by
Stinson Morrison Hecker LLP. In addition, our ability to qualify
as a REIT also depends in part upon the operating results,
organizational structure and entity classification for federal
income tax purposes of certain affiliated entities, including
affiliates that have made elections to be taxed as REITs, and
for whom the actual results of the various REIT qualification
tests have not been and will not be reviewed by Stinson Morrison
Hecker LLP.
Accordingly, no assurance can be given that the actual results
of our operations for any particular taxable year will satisfy
such requirements for qualification and taxation as a REIT.
If we qualify for taxation as a REIT, we generally will not be
subject to federal corporate income taxes on our taxable income
that is distributed currently to our shareholders. This
treatment substantially eliminates the double
taxation (once at the corporate level when earned and once
again at the shareholders level when distributed) that
generally results from investment in an ordinary Subchapter C
corporation. However, we will be subject to federal income tax
as follows:
First, we will be taxed at regular corporate rates on any
undistributed REIT taxable income, including undistributed net
capital gains.
Second, we may be subject to the alternative minimum
tax on our items of tax preference under certain
circumstances.
Third, if we have (a) net income from the sale or other
disposition of foreclosure property (defined
generally as property we acquired through foreclosure or after a
default on a loan secured by the property or a lease of the
property) which is held primarily for sale to customers in the
ordinary course of business or (b) other nonqualifying
income from foreclosure property, we will be subject to tax at
the highest U.S. federal corporate income tax rate on this
income.
Fourth, we will be subject to a 100% tax on any net income from
prohibited transactions (which are, in general, certain sales or
other dispositions of property (other than foreclosure property)
held primarily for sale to customers in the ordinary course of
business).
Fifth, if we fail to satisfy the 75% or 95% gross income tests
(as discussed below), but have maintained our qualification as a
REIT because we satisfied certain other requirements, we will be
subject to a 100% tax on an amount equal to (a) the gross
income attributable to the greater of the amounts by which we
fail the 75% or 95% gross income tests multiplied by (b) a
fraction intended to reflect our profitability.
Sixth, if we fail to distribute during each calendar year at
least the sum of (a) 85% of our REIT ordinary income for
the year, (b) 95% of our REIT capital gain net income for
the year (other than certain long-term capital gains for which
we make a capital gains designation (described below) and on
which we pay the tax), and (c) any undistributed taxable
income from prior periods, we would be subject to a 4% excise
tax on the excess of the required distribution over the amounts
actually distributed.
Seventh, if we acquire any asset from a corporation which is or
has been a Subchapter C corporation in a transaction in which
the basis of the asset in our hands is determined by reference
to the basis of the asset in the hands of the Subchapter C
corporation, and we subsequently recognize gain on the
disposition of the asset during the ten year period beginning on
the date on which we acquired the asset, then we will be subject
to tax at the highest regular corporate tax rate on the excess
of (a) the fair market value of the asset over (b) our
adjusted basis in the asset, in each case determined as of the
date we acquired the asset. The results described in this
paragraph with respect to the recognition of gain assume that we
will not make an election pursuant to existing Treasury
Regulations to recognize such gain at the time we acquire the
asset.
33
Eighth, we will be required to pay a 100% tax on any
redetermined rents, redetermined
deductions or excess interest. In general,
redetermined rents are rents from real property that are
overstated as a result of services furnished to any of our
tenants by a taxable REIT subsidiary of ours.
Redetermined deductions and excess interest generally represent
amounts that are deducted by a taxable REIT subsidiary of ours
for amounts paid to us that are in excess of the amounts that
would have been deducted based on arms length negotiations.
Ninth, if we fail to satisfy any of the REIT asset tests, as
described below, by more than a de minimis amount, due to
reasonable cause and we nonetheless maintain our REIT
qualification because of specified cure provisions, we will be
required to pay a tax equal to the greater of $50,000 or the
highest corporate tax rate multiplied by the net income
generated by the nonqualifying assets that caused us to fail
such test.
Tenth, if we fail to satisfy any provision of the Code that
would result in our failure to qualify as a REIT (other than a
violation of the REIT gross income tests or certain violations
of the asset tests described below) and the violation is due to
reasonable cause, we may retain our REIT qualification but we
will be required to pay a penalty of $50,000 for each such
failure.
Requirements
for Qualification as a REIT
The Code defines a REIT as a corporation, trust or association:
(1) which is managed by one or more trustees or directors;
(2) the beneficial ownership of which is evidenced by
transferable shares or transferable certificates;
(3) which would be taxable as a domestic corporation, but
for Sections 856 through 859 of the Code;
(4) which is neither a financial institution or an
insurance company within the meaning of certain provisions of
the Code;
(5) the beneficial ownership of which is held by 100 or
more persons;
(6) not more than 50% in value of the outstanding shares of
which is owned, actually or constructively, by five or fewer
individuals (as defined in the Code to include certain entities)
during the last half of each taxable year;
(7) that meets certain other tests, described below,
regarding the nature of its income and assets and the amount of
its distributions; and
(8) that elects to be a REIT, or has made such election for
a previous year, and satisfies the applicable filing and
administrative requirements to maintain qualification as a REIT.
The Code provides that conditions (1) through (4),
inclusive, must be met during the entire taxable year and that
condition (5) must be met during at least 335 days of
a taxable year of 12 months, or during a proportionate part
of a taxable year of less than 12 months. Conditions
(5) and (6) do not apply until after the first taxable
year for which an election is made to be taxed as a REIT. For
purposes of condition (6), pension funds and certain other
tax-exempt entities are treated as individuals, subject to a
look-through exception with respect to pension
funds. A REIT also must report its income for federal income tax
purposes based on a calendar year accounting period.
We believe that we have satisfied each of the above conditions.
In addition, our Declaration of Trust provides for restrictions
regarding ownership and transfer of shares to prevent further
concentration of share ownership (as summarized below
Description of Certain Provisions of Maryland Law and
EPRs Declaration of Trust and Bylaws). These
restrictions are intended to assist us in continuing to satisfy
the share ownership requirements described in (5) and
(6) above. These restrictions, however, may not ensure that
we will, in all cases, be able to satisfy the share ownership
requirements described in (5) and (6) above. In
general, if we fail to satisfy these share ownership
requirements, our status as a REIT will terminate. However, if
we comply with the rules in applicable Treasury Regulations that
require us to ascertain the actual ownership of our shares, and
we do not know, or would not have known through the exercise of
reasonable diligence, that we failed to meet the requirement
described in condition (6) above, we will be treated as
having met this requirement.
34
Ownership
of Interests in Partnerships, Limited Liability Companies and
Qualified REIT Subsidiaries and Taxable REIT
Subsidiaries.
In the case of a REIT which is a partner in a partnership, or a
member in a limited liability company treated as a partnership
for federal income tax purposes, Treasury Regulations provide
that the REIT will be deemed to own its proportionate share of
the assets of the partnership or limited liability company,
based on its interest in partnership capital, subject to special
rules relating to the 10% REIT asset test described below. Also,
the REIT will be deemed to be entitled to its proportionate
share of the income of that entity. The assets and items of
gross income of the partnership or limited liability company
retain the same character in the hands of the REIT for purposes
of Section 856 of the Code, including satisfying the gross
income tests and the asset tests. Thus, our proportionate share
of the assets and items of income of partnerships and limited
liability companies taxed as partnerships, in which we are,
directly or indirectly through other partnerships or limited
liability companies taxed as partnerships, a partner or member,
are treated as our assets and items of income for purposes of
applying the REIT qualification requirements described in this
prospectus (including the income and asset tests described
below).
We own 100% of the stock of a number of corporate subsidiaries
that are qualified REIT subsidiaries (each, a QRS)
and may acquire stock of one or more new subsidiaries. A
corporation qualifies as a QRS if 100% of its outstanding stock
is held by us, and we do not elect to treat the corporation as a
taxable REIT subsidiary, as described below. A QRS is not
treated as a separate corporation, and all assets, liabilities
and items of income, deduction and credit of a QRS are treated
as our assets, liabilities and items of income, deduction and
credit for all purposes of the Code, including the REIT
qualification tests. For this reason, references to our income
and assets include the income and assets of any QRS. A QRS is
not subject to federal income tax, and our ownership of the
voting stock of a QRS is ignored for purposes of determining our
compliance with the ownership limits described below under
Asset Tests.
A taxable REIT subsidiary (TRS) is a corporation
other than a REIT in which a REIT directly or indirectly holds
stock, and that has made a joint election with the REIT to be
treated as a TRS. A TRS also includes any corporation other than
a REIT with respect to which a TRS owns securities possessing
more than 35% of the total voting power or value of the
outstanding securities of such corporation. Other than some
activities relating to lodging and health care facilities, a TRS
generally may engage in any business, including the provision of
customary or non-customary services to tenants of its parent
REIT.
A taxable REIT subsidiary is subject to Federal income tax at
regular corporate rates (currently a maximum rate of 35%), and
also may be subject to state and local taxation. Any dividends
paid or deemed paid by any one of the Companys taxable
REIT subsidiaries will be taxable to the Companys
stockholders to the extent the dividends received from the
taxable REIT subsidiary are paid to the Companys
stockholders. The Company may own more than 10% of the stock of
a taxable REIT subsidiary without jeopardizing its qualification
as a REIT. However, as noted below, in order for the Company to
quality as a REIT, the securities of all of the taxable REIT
subsidiaries in which it has invested either directly or
indirectly may not represent more than 20% of the total value of
its assets. The Company expects that the aggregate value of all
of its interests in taxable REIT subsidiaries will represent
less than 20% of the total value or its assets; however, the
Company cannot assure that this will always be true. In
addition, a TRS may be prevented from deducting interest on debt
funded directly or indirectly by its parent REIT if certain
tests regarding the taxable REIT subsidiarys debt to
equity ratio and interest expense are not satisfied. A
REITs ownership of securities of a TRS will not be subject
to the 10% or 5% asset tests described below, and its operations
will be subject to the provisions described above.
Asset
Tests
At the close of each quarter of our taxable year, we must
satisfy four tests relating to the nature and diversification of
our assets. First, at least 75% of the value of our total assets
must be represented by (1) interests in real property,
(2) interests in mortgages on real property, (3) share
(or transferable certificates of beneficial interest) in other
REITs, (4) cash, (5) cash items (including
receivables arising in the ordinary course of the REITs
business) and (6) government securities (as well as certain
temporary investments in stock or debt instruments purchased
with the proceeds of new capital raised by EPR for the one-year
period beginning on the date of receipt of such new capital).
Second, not more than 25% of our total assets may be represented
by securities, other than those securities
35
includable in the 75% asset test. Third, of the investments
included in the 25% asset class, and except for investments in
another REIT, a QRS or a TRS, the value of any one issuers
securities may not exceed 5% of the value of our total assets,
and we may not own more than 10% of the total vote or value of
the outstanding securities of any one issuer except, in the case
of the 10% value test, securities satisfying the straight
debt safe-harbor. Certain types of securities we may own
are disregarded as securities solely for purposes of the 10%
value test, including, but not limited to, any loan to an
individual or an estate, any obligation to pay rents from real
property and any security issued by a REIT. In addition,
commencing January 1, 2005, solely for purposes of the 10%
value test, the determination of our interest in the assets of a
partnership or limited liability company in which we own an
interest will be based on our proportionate interest in any
securities issued by the partnership or limited liability
company, excluding for this purpose certain securities described
in the Code. Fourth, no more than 20% of the value of our assets
may be comprised of securities of one or more TRSs.
After initially meeting the asset tests at the close of any
quarter, we will not lose our status as a REIT for failure to
satisfy the asset tests at the end of a later quarter solely by
reason of changes in asset values. If we fail to satisfy an
asset test because we acquire securities or other property
during a quarter, we can cure this failure by disposing of
sufficient nonqualifying assets within 30 days after the
close of that quarter. We believe we have maintained and intend
to continue to maintain adequate records of the value of our
assets to ensure compliance with the asset tests. If we fail to
cure any noncompliance with the asset tests within the
30 day cure period, we would cease to qualify as a REIT
unless we are eligible for certain relief provisions discussed
below.
Commencing with our taxable year beginning January 1, 2005,
certain relief provisions may be available to us if we fail to
satisfy the asset tests described above after the 30 day
cure period. Under these provisions, we will be deemed to have
met the 5% and 10% REIT asset tests if (i) the value of our
nonqualifying assets does not exceed the lesser of (a) 1%
of the total value of our assets at the end of the applicable
quarter or (b) $10,000,000, and (ii) we dispose of the
nonqualifying assets or otherwise satisfy such tests within six
months after the last day of the quarter in which the failure to
satisfy the asset tests is discovered or the period of time
prescribed by Treasury Regulations. For a failure that exceeds
the de minimis thresholds described above which is due to
reasonable cause and not willful neglect, we may avoid
disqualification as a REIT under any of the asset tests, after
the 30 day cure period, by taking steps including
(i) disposing of sufficient nonqualifying assets, or taking
other actions, which allow us to meet the asset test within six
months after the last day of the quarter in which the failure to
satisfy the asset tests is discovered or the period of time
prescribed by Treasury Regulations, (ii) paying a tax equal
to the greater of (a) $50,000 or (b) the highest
corporate tax rate multiplied by the net income generated by the
nonqualifying assets and (iii) filing a schedule describing
each asset that caused the failure in accordance with applicable
Treasury Regulations.
Although we expect to satisfy the asset tests described above
and plan to take steps to ensure that we satisfy such tests for
any quarter end, there can be no assurance we always will be
successful. If we fail to cure any noncompliance with the asset
tests in a timely manner, and the relief provisions described
above are not available, we would cease to qualify as a REIT.
Gross
Income Tests
We must satisfy two gross income requirements for each taxable
year to maintain our qualification as a REIT. First, in each
taxable year at least 75% of our gross income must be
qualifying income. Qualifying income generally
includes (i) rents from real property (except
as modified below), (ii) interest on obligations
collateralized by mortgages on, or interests in, real property
and real estate mortgages, other than gain from property held
primarily for sale to customers in the ordinary course of our
trade or business (dealer property),
(iii) dividends or other distributions on shares in other
REITs, as well as gain from the sale of those shares,
(iv) abatements and refunds of real property taxes,
(v) income from the operation, and gain from the sale, of
property acquired at or in lieu of a foreclosure of the mortgage
collateralized by such property (foreclosure
property), (vi) commitment fees received for agreeing
to make loans collateralized by mortgages on real property or to
purchase or lease real property, (vii) qualified
temporary investment income, and (viii) gain from the
sale or other disposition of a real estate asset which is not a
prohibited transaction. Second, in each taxable year at least
95% of our gross income (excluding gross income from prohibited
transactions) must be derived directly or indirectly from income
from the
36
real property investments described above or dividends, interest
and gain from the sale or disposition of stock or securities (or
from any combination of the foregoing).
Rents we receive will qualify as rents from real
property for purposes of satisfying the gross income tests
for a REIT described above only if all of the following
conditions are met:
|
|
|
|
|
The amount of rent must not be based in any way on the income or
profits of any person, although rents generally will not be
excluded solely because they are based on a fixed percentage or
percentages of gross receipts or gross sales.
|
|
|
|
We, or an actual or constructive owner of 10% or more of our
capital shares, must not actually or constructively own 10% or
more of the interests in the tenant, or, if the tenant is a
corporation, 10% or more of the voting power or value of all
classes of stock of the tenant. Rents received from any such
tenant that is our TRS, however, will not be excluded from the
definition of rents from real property as a result
of this condition if at least 90% of the space at the property
to which the rents relate is leased to third parties, and the
rents paid by the TRS are comparable to rents paid by our other
tenants for comparable space. Whether rents paid by a TRS are
substantially comparable to rents paid by other tenants is
determined at the time the lease with the TRS is entered into,
extended, and modified, if such modification increases the rents
due under such lease. Notwithstanding the foregoing, however, if
a lease with a controlled taxable REIT subsidiary is
modified and such modification results in an increase in the
rents payable by such TRS, any such increase will not qualify as
rents from real property. For purposes of this rule,
a controlled taxable REIT subsidiary is a TRS in
which we own stock possessing more than 50% of the voting power
or more than 50% of the total value of outstanding stock of such
TRS.
|
|
|
|
Rent attributable to personal property, leased in connection
with a lease of real property, must not be greater than 15% of
the total rent received under the lease. If this condition is
not met, then the portion of the rent attributable to personal
property will not qualify as rents from real
property.
|
|
|
|
The REIT generally must not operate or manage the property for
which the rents are received or furnish or render services to
the tenants of the property (subject to a 1% de minimis
exception), other than through an independent contractor from
whom the REIT derives no revenue or through a TRS. The REIT may,
however, directly perform certain services that are
usually or customarily rendered in connection with
the rental of space for occupancy only and are not otherwise
considered rendered to the occupant of the property.
Any amounts we receive from a TRS with respect to the TRSs
provision of non-customary services will be nonqualifying income
under the 75% gross income test and, except to the extent
received through the payment of dividends, the 95% gross income
test.
|
We do not intend to charge rent for any property that is based
in whole or in part on the net income or profits of any person
(except by reason of being based on a percentage of gross
receipts or sales, as described above), and generally we do not
intend to rent any personal property (other than in connection
with a lease of real property where either less than 15% of the
total rent is attributable to personal property or an amount
immaterial to our operations is attributable to personal
property). We directly perform services under certain of our
leases, but such services are not rendered to the occupant of
the property. Furthermore, these services are usual and
customary management services provided by landlords renting
space for occupancy in the geographic areas in which we own
property. To the extent that the performance of any services
provided by us would cause amounts received from our tenants to
be excluded from rents from real property, we intend to hire a
TRS, or an independent contractor from whom we derive no
revenue, to perform such services.
The term interest generally does not include any
amount received or accrued (directly or indirectly) if the
determination of some or all of the amount depends in any way on
the income or profits of any person. However, an amount received
or accrued generally will not be excluded from the term
interest solely by reason of being based on a fixed
percentage or percentages of receipts or sales.
From time to time, we may enter into hedging transactions with
respect to one or more of our assets or liabilities. Our hedging
activities may include entering into interest rate swaps, caps,
and floors, options to purchase these items, and futures and
forward contracts. Any income we derive from a hedging
transaction will be nonqualifying income for purposes of the 75%
gross income test. The term hedging transaction, as
used above,
37
generally means any transaction we enter into in the normal
course of our business primarily to manage the risk of interest
rate changes or fluctuations with respect to borrowings made or
to be made by us. To the extent that we hedge with other types
of financial instruments, the income from those transactions is
not likely to be treated as qualifying income for purposes of
the gross income tests. We intend to structure any hedging
transactions in a manner that does not jeopardize our status as
a REIT.
If we fail to satisfy one or both of the 75% or 95% gross income
tests for any taxable year, we may nevertheless qualify as a
REIT for the year if we are entitled to relief under certain
provisions of the Code. Commencing with our taxable year
beginning January 1, 2005, we generally may make use of the
relief provisions if:
(i) our failure to meet these tests was due to reasonable
cause and not due to willful neglect; and
(ii) following our identification of the failure to meet
the 75% or 95% gross income tests for any taxable year, we file
a schedule with the IRS setting forth each item of our gross
income for purposes of the 75% or 95% gross income tests for
such taxable year in accordance with Treasury Regulations.
For our taxable year ended December 31, 2006, we generally
may avail ourselves of the relief provisions if:
(i) our failure to meet these tests was due to reasonable
cause and not due to willful neglect;
(ii) we attach a schedule of the sources of our income to
our federal income tax return; and
(iii) any incorrect information on the schedule was not due
to fraud with intent to evade tax.
It is not possible, however, to state whether in all
circumstances we would be entitled to the benefit of these
relief provisions. For example, if we fail to satisfy the gross
income tests because nonqualifying income that we intentionally
accrue or receive exceeds the limits on nonqualifying income,
the IRS could conclude that our failure to satisfy the tests was
not due to reasonable cause. If these relief provisions do not
apply to a particular set of circumstances, we will not qualify
as a REIT. As discussed above, even if these relief provisions
apply, and we retain our status as a REIT, a tax would be
imposed with respect to our nonqualifying income. We may not
always be able to comply with the gross income tests for REIT
qualification despite periodic monitoring of our income.
Prohibited
Transaction Income
Any gain we realize on the sale of any property, other than
foreclosure property, held primarily for sale to customers in
the ordinary course of business, will be treated as income from
a prohibited transaction that is subject to a 100% penalty tax.
Whether property is held primarily for sale to customers in the
ordinary course of a trade or business depends on all the facts
and circumstances surrounding the particular transaction. We do
not intend to engage in prohibited transactions.
Penalty
Tax
Any redetermined rents, redetermined deductions or excess
interest we generate will be subject to a 100% penalty tax. In
general, redetermined rents are rents from real property that
are overstated as a result of any services furnished to any of
our tenants by one of our TRSs, and redetermined deductions and
excess interest generally represent any amounts that are
deducted by a TRS for amounts paid to us that are in excess of
the amounts that would have been deducted based on
arms-length negotiations. Rents we receive will not
constitute redetermined rents if they qualify for certain safe
harbor provisions contained in the Code. These determinations
are inherently factual, and the IRS has broad discretion to
assert that amounts paid between related parties should be
reallocated to clearly reflect their respective incomes. If the
IRS successfully makes such an assertion, we would be required
to pay a 100% penalty tax on the excess of an arms-length
fee for tenant services over the amount actually paid.
Annual
Distribution Requirements
To maintain our qualification as a REIT, we are required to
distribute dividends (other than capital gain dividends) to our
shareholders each year in an amount at least equal to
(A) the sum of (i) 90% of our REIT taxable
income (computed before deductions for dividends paid and
excluding net capital gain) and (ii) 90% of our net
38
income (after tax), if any, from foreclosure property; minus
(B) the excess of the sum of certain items of noncash
income (i.e., income attributable to leveled stepped rents,
original issue discount on purchase money debt, or a like-kind
exchange that is later determined to be taxable) over 5% of
REIT taxable income as described above.
In addition, if we dispose of any asset we acquired from a
corporation which is or has been a Subchapter C corporation in a
transaction in which our basis in the asset is determined by
reference to the basis of the asset in the hands of that
Subchapter C corporation, within the ten year period following
our acquisition of such asset, we would be required to
distribute at least 90% of the after-tax built in gain, if any,
we recognized on the disposition of the asset.
We must pay the distributions described above in the taxable
year to which they relate (current distributions),
or in the following taxable year if they are either
(i) declared before we timely file our tax return for such
year and paid on or before the first regular dividend payment
after such declaration (throwback distributions) or
(ii) paid during January to shareholders of record in
October, November or December of the prior year (deemed
current distributions). To the extent that we do not
distribute all of our net capital gain or distribute at least
90%, but less than 100%, of our REIT taxable income,
as adjusted, we will be subject to tax thereon at regular
ordinary and capital gain corporate tax rates. In addition, we
would be subject to a 4% excise tax to the extent we fail to
distribute during each calendar year (or in the case of
distributions with declaration and record dates falling in the
last three months of the calendar year, by the end of January
immediately following such year) at least the sum of 85% of our
REIT ordinary income for such year, 95% of our REIT capital gain
income for the year (other than certain long-term capital gains
for which we make a capital gains designation and on which we
pay the tax), and any undistributed taxable income from prior
periods. Any REIT taxable income and net capital gain on which a
REIT-level corporate income tax is imposed for any year is
treated as an amount distributed during that year for purposes
of calculating the excise tax.
We believe we have made, and intend to continue to make, timely
distributions sufficient to satisfy these annual distribution
requirements.
We generally expect that our REIT taxable income will be less
than our cash flow because of the allowance of depreciation and
other non-cash charges in computing REIT taxable income.
Accordingly, we anticipate that we generally will have
sufficient cash or liquid assets to enable us to satisfy the
distribution requirements described above. However, from time to
time, we may not have sufficient cash or other liquid assets to
meet these distribution requirements because of timing
differences between the actual receipt of income and actual
payment of deductible expenses, and the inclusion of income and
deduction of expenses in arriving at our taxable income.
Further, it is possible that from time to time we may be
allocated a share of net capital gain attributable to any
depreciated property we sell that exceeds our allocable share of
cash attributable to that sale. If these circumstances occur, we
may need to arrange for borrowings, or may need to pay dividends
in the form of taxable share dividends, in order to meet the
distribution requirements.
Under certain circumstances, we may be able to rectify a failure
(due to, for example, an IRS adjustment such as an increase in
our taxable income or a reduction in reported expenses) to meet
the 90% distribution requirement for a year by paying
deficiency dividends to shareholders in a later
year, which may be included in our deduction for dividends paid
for the earlier year. Thus, we may be able to avoid being taxed
on amounts distributed as deficiency dividends. However, we will
be required to pay interest to the IRS based on the amount of
any deduction taken for deficiency dividends.
Failure
to Qualify
If we fail to qualify for taxation as a REIT in any taxable
year, and the relief provisions do not apply, we will be subject
to tax (including any applicable alternative minimum tax) on our
taxable income at regular corporate rates. Distributions to
shareholders in any year in which we fail to qualify will not be
deductible by us, and we will not be required to distribute any
amounts to our shareholders. As a result, our failure to qualify
as a REIT would reduce the cash available for distribution by us
to our shareholders. In addition, if we fail to qualify as a
REIT, all distributions to shareholders would be taxable as
ordinary income to the extent of our current and accumulated
earnings and profits, and, subject to certain limitations of the
Code, corporate distributees may be eligible for the dividends
received deduction. Unless entitled to relief under specific
statutory provisions, we also would be disqualified from
39
taxation as a REIT for the four taxable years following the year
during which we lost our qualification. It is not possible to
state whether in all circumstances we would be entitled to this
statutory relief.
Commencing with our taxable year beginning January 1, 2005,
specified cure provisions are available to us in the event that
we violate a provision of the Code that would result in our
failure to qualify as a REIT. These cure provisions would reduce
the instances that could lead to our disqualification as a REIT
for violations due to reasonable cause and would instead
generally require the payment of a monetary penalty.
Taxation
of Taxable U.S. Shareholders
The following summary describes certain federal income tax
consequences to U.S. shareholders with respect to an
investment in our shares. This discussion does not address the
tax consequences to persons who receive special treatment under
the federal income tax law. Shareholders subject to special
treatment include, without limitation, insurance companies,
financial institutions or broker-dealers, tax-exempt
organizations, shareholders holding securities as part of a
conversion transaction, or a hedge or hedging transaction or as
a position in a straddle for tax purposes, foreign corporations
or partnerships and persons who are not citizens or residents of
the United States.
As used herein, the term U.S. shareholders
means a holder of shares who, for United States federal income
tax purposes:
(i) is a citizen or resident of the United States;
(ii) is a corporation, partnership or other entity
classified as a corporation or partnership for United States
federal income tax purposes, created or organized in or under
the laws of the United States or any political subdivision
thereof unless, in the case of a partnership, Treasury
Regulations provide otherwise;
(iii) is an estate the income of which is subject to United
States federal income taxation regardless of its source; or
(iv) is a trust whose administration is subject to the
primary supervision of a United States court and which has one
or more United States persons who have the authority to control
all substantial decisions of the trust.
Distributions
Generally
As long as we qualify as a REIT, distributions made out of our
current or accumulated earnings and profits (and not designated
as capital gain dividends), generally will constitute dividends
taxable to our U.S. shareholders as ordinary income. For
purposes of determining whether distributions to holders of
shares are out of current or accumulated earnings and profits,
our earnings and profits will be allocated first to our
outstanding preferred shares and then to our common shares.
These distributions will not be eligible for the
dividends-received deduction in the case of
U.S. shareholders that are corporations.
Because we generally are not subject to federal income tax on
the portion of our REIT taxable income distributed to our
shareholders, our ordinary dividends generally are not
qualified dividend income eligible for the reduced
15% rate available to most non-corporate taxpayers through 2010
under the Tax Increase Prevention and Reconciliation Act of
2006, and will continue to be taxed at the higher tax rates
applicable to ordinary income. However, the reduced 15% rate
does apply to our distributions:
(i) 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 tax at a 25%
rate);
(ii) to the extent attributable to dividends received by us
from non-REIT corporations or other taxable REIT
subsidiaries; and
(iii) to the extent attributable to income upon which we
have paid corporate income tax (for example, if we distribute
taxable income that we retained and paid tax on in the prior
year).
It is not likely that a significant amount of our dividends paid
to individual U.S. shareholders will constitute
qualified dividend income eligible for the current
reduced tax rate of 15%.
40
To the extent that we make distributions (not designated as
capital gain dividends) in excess of our current and accumulated
earnings and profits, these distributions will be treated as a
tax-free return of capital to each U.S. shareholder. This
treatment will reduce the adjusted basis which each
U.S. shareholder has in his or her shares of stock for tax
purposes by the amount of the distribution (but not below zero).
Distributions in excess of a U.S. shareholders
adjusted basis in his or her shares will be taxable as capital
gains (provided that the shares have been held as a capital
asset) and will be taxable as long-term capital gain if the
shares have been held for more than one year. Dividends we
declare in October, November, or December of any year and
payable to a shareholder of record on a specified date in any of
these months shall be treated as both paid by us and received by
the shareholders on December 31 of that year, provided we
actually pay the dividend on or before January 31 of the
following calendar year. Shareholders may not include in their
own income tax returns any of our net operating losses or
capital losses.
Capital
Gain Distributions
Distributions that we properly designate as capital gain
dividends (and undistributed amounts for which we properly make
a capital gains designation) will be taxable to
U.S. shareholders as gains (to the extent that they do not
exceed our actual net capital gain for the taxable year) from
the sale or disposition of a capital asset. Depending on the
period of time we have held the assets which produced these
gains, and on certain designations, if any, which we may make,
these gains may be taxable to non-corporate
U.S. shareholders at either a 15% or 25% rate, depending on
the nature of the asset giving rise to the gain. Corporate
U.S. shareholders may, however, be required to treat up to
20% of certain capital gain dividends as ordinary income.
Passive
Activity Losses and Investment Interest
Limitations
Distributions we make and gain arising from the sale or exchange
by a U.S. shareholder of our shares will be treated as
portfolio income. As a result, U.S. shareholders generally
will not be able to apply any passive losses against
this income or gain. A U.S. shareholder may elect to treat
capital gain dividends, capital gains from the disposition of
stock and qualified dividend income as investment income for
purposes of computing the investment interest limitation, but in
such case, the shareholders will be taxed at ordinary income
rates on such amounts. Other distributions we make (to the
extent they do not constitute a return of capital) generally
will be treated as investment income for purposes of computing
the investment interest limitation. Gain arising from the sale
or other disposition of our shares, however, will not be treated
as investment income under certain circumstances.
Retention
of Net Long-Term Capital Gains
We may elect to retain, rather than distribute as a capital gain
dividend, our net long-term capital gains. If we make this
election (a Capital Gains Designation) we would
pay tax on our retained net long-term capital gains. In
addition, to the extent we make a Capital Gains Designation, a
U.S. shareholder generally would:
(i) include its proportionate share of our undistributed
long-term capital gains in computing its long-term capital gains
in its return for its taxable year in which the last day of our
taxable year falls (subject to certain limitations as to the
amount that is includable);
(ii) be deemed to have paid the capital gains tax imposed
on us on the designated amounts included in the
U.S. shareholders long-term capital gains;
(iii) receive a credit or refund for the amount of tax
deemed paid by it;
(iv) increase the adjusted basis of its shares by the
difference between the amount of includable gains and the tax
deemed to have been paid by it; and
(v) in the case of a U.S. shareholder that is a
corporation, appropriately adjust its earnings and profits for
the retained capital gains in accordance with Treasury
Regulations to be promulgated.
41
Dispositions
of Shares
Generally, if you are a U.S. shareholder and you sell or
dispose of your shares, you will recognize gain or loss for
federal income tax purposes in an amount equal to the difference
between (i) the amount of cash and the fair market value of
any property you receive on the sale or other disposition and
(ii) your adjusted basis in the shares for tax purposes.
This gain or loss will be capital in nature if you have held the
shares as a capital asset and will be long-term capital gain or
loss if you have held the shares for more than one year.
However, if you are a U.S. shareholder and you recognize
loss upon the sale or other disposition of shares that you have
held for six months or less (after applying certain holding
period rules), the loss you recognize will be treated as a
long-term capital loss, to the extent you received distributions
from us or which were retained by us and which were required to
be treated as long-term capital gains.
The maximum tax rate for individual taxpayers on net long-term
capital gains (i.e., the excess of net long-term capital gain
over net short-term capital loss) is currently 15% for most
assets. In the case of individuals whose ordinary income is
taxed at a 10% or 15% rate, the 15% rate is reduced to 5%.
Absent future legislation, the maximum tax rate on long-term
capital gains will return to 20% in 2011.
Redemption
of Shares
If we redeem any of our shares held by you, the tax treatment of
the redemption must be determined based on facts at the time of
redemption. In general, you will recognize gain or loss (as
opposed to dividend income) equal to the difference between the
amount received by you in the redemption and your adjusted tax
basis in your shares redeemed if such redemption results in a
complete termination of your interest in all classes
of our equity securities, is a substantially
disproportionate redemption or is not essentially
equivalent to a dividend with respect to you. In applying
these tests, you must take into account your ownership of all
classes of our equity securities. You also must take into
account any equity securities that are considered to be
constructively owned by you.
If, as a result of a redemption by us of your shares, you no
longer own (either actually or constructively) any of our equity
securities or only own (actually and constructively) an
insubstantial percentage of our equity securities, then it is
likely that the redemption of your shares would be considered
not essentially equivalent to a dividend and, thus,
would result in gain or loss to you. Gain from the sale or
exchange of our shares held for more than one year is taxed at a
maximum long-term capital gain rate of 15% through 2010.
However, whether a distribution is not essentially
equivalent to a dividend depends on all of the facts and
circumstances, and if you rely on any of these tests at the time
of redemption, you should consult your tax advisor to determine
their application to your situation.
Generally, if the redemption does not meet the tests described
above, then the proceeds received by you from the redemption of
your shares will be treated as a distribution taxable as a
dividend to the extent of the allocable portion of current or
accumulated earnings and profits. If the redemption is taxed as
a dividend, your adjusted tax basis in the redeemed shares will
be transferred to any other shares in us that you own. If you
own no other shares in us, under certain circumstances, such
basis may be transferred to a related person, or it may be lost
entirely.
Backup
Withholding
We report to our U.S. shareholders and the IRS the amount
of dividends paid during each calendar year, and the amount of
any tax withheld. Under the backup withholding rules, a
shareholder may be subject to backup withholding with respect to
dividends paid at the fourth lowest rate of tax under
Section 1(c) of the Code (which is currently 28%) unless
the holder is a corporation or comes within certain other exempt
categories and, when required, demonstrates this fact, or
provides a taxpayer identification number, certifies as to no
loss of exemption from backup withholding, and otherwise
complies with applicable requirements of the backup withholding
rules. A U.S. shareholder that does not provide us with its
correct taxpayer identification number may also be subject to
penalties imposed by the IRS. Backup withholding is not an
additional tax. Any amount paid as backup withholding will be
creditable against the shareholders income tax liability.
In addition, we may be required to withhold a portion of capital
gain distributions to any shareholders who fail to certify their
non-foreign status. See Taxation of
Non-U.S. shareholders.
42
Taxation
of Tax-Exempt Shareholders
The IRS has ruled that amounts distributed as dividends by a
REIT to a tax-exempt employees pension trust do not
constitute unrelated business taxable income (UBTI).
Based on that ruling, dividend income from us should not be UBTI
to a tax-exempt shareholder so long as the tax-exempt
shareholder (except certain tax-exempt shareholders described
below) has not held its shares as debt financed
property within the meaning of the Code (generally,
shares, the acquisition of which was financed through a
borrowing by the tax-exempt shareholders) and the shares are not
otherwise used in an unrelated trade or business of the
tax-exempt entity. Similarly, income from the sale of shares
will not constitute UBTI unless a tax-exempt shareholder has
held its shares as debt financed property within the
meaning of the Code or has used the shares in a trade or
business.
For shareholders which are social clubs, voluntary employee
benefit associations, supplemental unemployment benefit trusts
and qualified group legal services plans exempt from federal
income taxation under Code Sections 501(c)(7), (c)(9),
(c)(17) and (c)(20), respectively, income from an investment in
our shares will constitute UBTI unless the organization is able
to properly deduct amounts set aside or placed in reserve for
certain purposes so as to offset the income generated by its
investment in our shares. These prospective investors should
consult their own tax advisors concerning these set
aside and reserve requirements.
In addition to the above, a portion of the dividends paid by a
pension held REIT may be treated as UBTI certain
types of trusts that hold more than 10% (by value) of the
interests in the REIT. A pension held REIT is any REIT if more
than 25% (by value) of its shares are owned by at least one
pension trust, or one or more pension trusts, each of whom owns
more than 10% (by value) of such shares, and in the aggregate
such pension trusts own more than 50% (by value) of its shares.
We do not expect to be classified as a pension held
REIT, but because our shares are publicly traded. We
cannot guarantee this will always be the case.
Tax-exempt shareholders should consult their own tax advisors
concerning the U.S. federal, state, local and foreign tax
consequences of an investment in our shares.
Taxation
of
Non-U.S. Shareholders
The rules governing United States federal income taxation of the
ownership and disposition of shares by persons that are not
U.S. shareholders
(Non-U.S. shareholders)
are complex and no attempt is made herein to provide more than a
brief summary of such rules. Accordingly, this discussion does
not address all aspects of U.S. federal income taxation
that may be relevant to a
Non-U.S. shareholder
in light of its particular circumstances and does not address
any state, local or foreign tax consequences.
Non-U.S. shareholders
should consult their own tax advisors to determine the impact of
U.S. federal, state, local and foreign tax consequences to
them of an investment in our shares, including tax return filing
requirements.
Distributions
Distributions that are neither attributable to gain from our
sale or exchange of United States real property interests nor
designated by us as capital gain dividends will be treated as
dividends of ordinary income to the extent that they are made
out of our current or accumulated earnings and profits. Such
distributions ordinarily will be subject to
U.S. withholding tax at a 30% rate or such lower rate as
may be specified by an applicable income tax treaty unless the
distributions are treated as effectively connected with the
conduct by you of a United States trade or business (or, if an
income tax treaty applies, are attributable to a
U.S. permanent establishment of the
Non-U.S. shareholder).
Under certain treaties, however, lower withholding rates
generally applicable to dividends do not apply to dividends from
a REIT. Certain certification and disclosure requirements must
be satisfied to be exempt from withholding under the effectively
connected income exemption. In general,
Non-U.S. shareholders
will not be considered engaged in a U.S. trade or business
(or in the case of an income tax treaty, as having a
U.S. permanent establishment) solely by reason of their
ownership of shares.
Dividends that are treated as effectively connected with such a
trade or business (or, if an income tax treaty applies, is
attributable to a U.S. permanent establishment of the
Non-U.S. shareholder)
will be subject to tax on a net basis (that is, after allowance
for deductions) at graduated rates, in the same manner as
dividends paid to U.S. shareholders are subject to tax, and
are generally not subject to withholding. Any such dividends
received by a
43
Non-U.S. shareholder
that is a corporation also may be subject to an additional
branch profits tax at a 30% rate or such lower rate as may be
specified by an applicable income tax treaty.
We expect to withhold United States income tax at the rate of
30% on any distributions made to a
Non-U.S. shareholder
unless:
|
|
|
|
|
you file with us an IRS
Form W-8BEN
evidencing eligibility for a reduced treaty rate of withholding
under an applicable treaty; or
|
|
|
|
you file an IRS
Form W-8ECI
with us claiming that the distribution is income effectively
connected with your trade or business.
|
Return
of Capital Distributions
Distributions in excess of our current and accumulated earnings
and profits will not be taxable to you to the extent that such
distributions do not exceed your adjusted basis in our shares,
but rather will reduce the adjusted basis of such shares.
Distributions in excess of your adjusted basis in our shares
will give rise to gain from the sale or exchange of such shares.
The tax treatment of this gain is described below.
For withholding purposes, we expect to treat all distributions
as made out of our current or accumulated earnings and profits.
However, amounts withheld generally should be refundable if it
is subsequently determined that the distribution was, in fact,
in excess of our current and accumulated earnings and profits.
Capital
Gain Dividends and Distributions Attributable to a Sale or
Exchange of U.S. Real Property Interests
Distributions to you that we properly designate as capital gain
dividends, other than those arising from the disposition of a
U.S. real property interest, generally should not be
subject to U.S. federal income taxation, unless:
(1) the investment in our shares is treated as effectively
connected with your U.S. trade or business, in which case
you will be subject to the same treatment as
U.S. shareholders with respect to such gain, except that a
Non-U.S. shareholder
(or, if an income tax treaty applies, it is attributable to a
U.S. permanent establishment of the
Non-U.S. shareholder)
that is a foreign corporation may also be subject to the 30%
branch profits tax, as discussed above; or
(2) you are a nonresident alien individual who is present
in the U.S. for 183 days or more during the taxable
year and certain other conditions are met, in which case you
will be subject to a 30% tax on your capital gains.
For each year during which we qualify as a REIT, distributions
that are attributable to net capital gain from the sale or
exchange of U.S. real property interests, such as
properties beneficially owned by us, will be taxed to a
Non-U.S. shareholder
under the provisions of the Foreign Investment in Real Property
Tax Act of 1980 (FIRPTA). Under FIRPTA, such
distributions paid to a
Non-U.S. shareholder
who owns more than 5% of the value of our shares at any time
during the one-year period ending on the date of distribution
will be subject to U.S. federal income tax as income
effectively connected with a United States trade or business.
The FIRPTA tax will apply to these distributions whether or not
the distribution is designated as a capital gain dividend.
Generally, you will be taxed at the same capital gain rates
applicable to U.S. shareholders (subject to applicable
alternative minimum tax and a special alternative minimum tax in
the case of nonresident alien individuals). We will be required
to withhold and to remit 35% of any distribution to you that
could be treated as a capital gain dividend. The amount withheld
is creditable against your U.S. federal income tax
liability. However, any distribution with respect to any class
of shares which is regularly traded on an established securities
market located in the United States is not subject to FIRPTA,
and therefore, not subject to the 35% U.S. withholding tax
described above, if you did not own more than 5% of such class
of shares at any time during the one-year period ending on the
date of the distribution (the 5% Exception).
Instead, such distributions will be treated as ordinary dividend
distributions.
44
Retention
of Net Capital Gains
Although the law is not clear on the matter, it appears that
amounts designated by us as retained capital gains in respect of
the shares held by
Non-U.S. shareholders
generally should be treated in the same manner as actual
distributions by us of capital gain dividends. Under this
approach, you would be able to offset as a credit against your
U.S. federal income tax liability resulting from your
proportionate share of the tax paid by us on such retained
capital gains, and to receive from the IRS a refund to the
extent your proportionate share of such tax paid by us exceeds
your actual U.S. federal income tax liability.
Sale
of Shares
Gain recognized by a
Non-U.S. shareholder
upon the sale or exchange of our shares generally will not be
subject to U.S. taxation unless such shares constitutes a
U.S. real property interest. Our shares will not constitute
a U.S. real property interest so long as (i) we are a
domestically-controlled qualified investment entity, which
includes a REIT, if at all times during a specified testing
period less than 50% in value of its stock is held directly or
indirectly by
non-U.S. shareholders
or (ii) such class of our shares is regularly traded, as
defined by applicable Treasury regulations, on an established
securities market such as the NYSE; and you owned, actually and
constructively, 5% or less in value of such class of our shares
throughout the shorter of the period during which you held such
shares or the five-year period ending on the date of the sale or
exchange.
Notwithstanding the foregoing, gain from the sale or exchange of
our shares not otherwise subject to FIRPTA will be taxable to
you if either (1) the investment in our shares is treated
as effectively connected with your U.S. trade or business
or (2) you are a nonresident alien individual who is
present in the U.S. for 183 days or more during the
taxable year and certain other conditions are met. In addition,
even if we are a domestically controlled qualified investment
entity, upon disposition of our shares (subject to the 5%
exception applicable to regularly traded stock described above),
you may be treated as having gain from the sale or exchange of a
U.S. real property interest if you (1) dispose of our
shares within a
30-day
period preceding the ex-dividend date of a distribution, any
portion of which, but for the disposition, would have been
treated as gain from the sale or exchange of a U.S. real
property interest and (2) acquire, or enter into a contract
or option to acquire, or are deemed to acquire, substantially
identical shares within 30 days after such ex-dividend date.
If gain on the sale or exchange of our shares were subject to
taxation under FIRPTA, you would be subject to regular United
States federal income tax with respect to such gain in the same
manner as a taxable U.S. shareholder (subject to any
applicable alternative minimum tax and a special alternative
minimum tax in the case of nonresident alien individuals) and
the purchaser of the shares would be required to withhold and
remit to the IRS 10% of the purchase price.
Backup
Withholding Tax and Information Reporting
Generally, we must report annually to the IRS the amount of
dividends paid to you, your name and address, and the amount of
tax withheld, if any. A similar report is sent to you. Pursuant
to tax treaties or other agreements, the IRS may make its
reports available to tax authorities in your country of
residence.
Payments of dividends or of proceeds from the disposition of
shares made to you may be subject to information reporting and
backup withholding unless you establish an exemption, for
example, by properly certifying your
Non-U.S. shareholder
status on an IRS
Form W-8BEN
or another appropriate version of IRS
Form W-8.
Notwithstanding the foregoing, backup withholding and
information reporting may apply if either we have or our paying
agent has actual knowledge, or reason to know, that you are a
U.S. person.
Backup withholding is not an additional tax. Rather, the United
States income tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If
withholding results in an overpayment of taxes, a refund or
credit may be obtained, provided that the required information
is furnished to the IRS.
Possible
Legislative or Other Actions Affecting Tax
Consequences
Prospective investors should recognize that the present
U.S. federal income tax treatment of an investment in us
may be modified by legislative, judicial or administrative
action at any time, and that any such action may affect
45
investments and commitments previously made. The rules dealing
with U.S. federal income taxation are constantly under
review by persons involved in the legislative process and by the
IRS and the U.S. Treasury Department, resulting in
revisions of regulations and revised interpretations of
established concepts as well as statutory changes. Revisions in
U.S. federal tax laws and interpretations thereof could
adversely affect the tax consequences of an investment in us.
State and
Local Tax Consequences
We may be subject to state or local taxation or withholding in
various state or local jurisdictions, including those in which
we transact business, and our shareholders may be subject to
state or local taxation or withholding in various state or local
jurisdictions, including those in which they reside. The state
and local tax treatment of us may not conform to the federal
income tax treatment discussed above. Several states in which we
may own properties treat REITs as ordinary Subchapter C
corporations subject to tax at the corporate level. In addition,
your state and local tax treatment may not conform to the
federal income tax treatment discussed above. You should consult
your own tax advisors regarding the effect of state and local
tax laws on an investment in our shares.
PLAN OF
DISTRIBUTION
We may sell common shares, preferred shares, depositary shares,
warrants and debt securities:
|
|
|
|
|
through underwriters or dealers
|
|
|
|
through agents
|
|
|
|
directly to one or more purchasers, including our affiliates
|
|
|
|
directly to shareholders
|
|
|
|
or through any combination of these methods
|
We may effect the distribution of common shares, preferred
shares, depositary shares, warrants and debt securities from
time to time in one or more transactions either:
|
|
|
|
|
at a fixed price or prices which may be changed
|
|
|
|
at market prices prevailing at the time of sale
|
|
|
|
at prices relating to those market prices
|
|
|
|
at negotiated prices
|
For each offering of common shares, preferred shares, depositary
shares, warrants or debt securities, the prospectus supplement
or other offering materials will describe:
|
|
|
|
|
the plan of distribution
|
|
|
|
the terms of the offering
|
|
|
|
the names of any agents
|
|
|
|
the name or names of any managing underwriter or underwriters
|
|
|
|
the purchase price of the securities
|
|
|
|
the net proceeds from the sale of the securities
|
|
|
|
any delayed delivery arrangements
|
|
|
|
any underwriting discounts, commissions and other items
constituting underwriters compensation
|
|
|
|
any initial public offering price
|
46
|
|
|
|
|
any discounts or concessions allowed or reallowed or paid to
dealers
|
|
|
|
any commissions paid to agents
|
If we use underwriters in the sale, they will buy the securities
for their own account. The underwriters may then resell from
time to time the securities in one or more transactions at a
fixed public offering price, at any market price in effect at
the time of sale or at a discount from any such market price.
The obligations of the underwriters to purchase the securities
will be subject to certain conditions. The underwriters will be
obligated to purchase all the securities offered if they
purchase any securities. Any discounts or concessions allowed or
re-allowed or paid to dealers may be changed by the underwriters
from time to time.
In order to facilitate the offering of securities, the
underwriters may engage in transactions that stabilize, maintain
or otherwise affect the price of securities. Specifically, the
underwriters may over-allot in connection with the offering,
creating a short position in the securities for their account.
In addition, to cover over-allotments or to stabilize the price
of the shares, the underwriters may bid for, and purchase,
shares in the open market. Finally, an underwriting syndicate
may reclaim selling concessions allowed to an underwriter or a
dealer for distributing the securities in the offering if the
syndicate repurchases previously distributed shares in
transactions to cover syndicate short positions, in
stabilization transactions, or otherwise. Any of these
activities may stabilize or maintain the market price of the
offered securities above independent market levels. The
underwriters are not required to engage in these activities and
may end any of these activities at any time.
Some or all of the securities that we offer through this
prospectus may be new issues of securities with no established
trading market. Any underwriters to whom we sell securities for
public offering and sale may make a market in those securities,
but they will not be obligated to and they may discontinue any
market making at any time without notice. Accordingly, we cannot
assure you of the liquidity of, or continued trading markets
for, any securities offered pursuant to this prospectus. If we
use dealers in the sale, we will sell securities to those
dealers as principals. The dealers may then resell the
securities to the public at any market price or other prices to
be determined by the dealers at the time of resale. If we use
agents in the sale, unless we inform you otherwise in the
prospectus supplement or other applicable offering materials
they will use their reasonable best efforts to solicit
purchasers for the period of their appointment. If we sell
directly, no underwriters or agents would be involved. In the
prospectus supplement or other applicable offering materials, we
will name any agent involved in the offer or sale of the offered
securities, and we will describe any commissions payable to the
agent. We are not making an offer of securities in any state
that does not permit such an offer.
Underwriters, dealers and agents that participate in the
distribution of securities may be deemed to be underwriters as
defined in the Securities Act. Any discounts, commissions or
profit they receive when they resell the securities may be
treated as underwriting discounts and commissions under the
Securities Act. We may have agreements with underwriters,
dealers and agents to indemnify them against certain civil
liabilities, including certain liabilities under the Securities
Act, or to contribute to payments they may be required to make.
We may authorize underwriters, dealers or agents to solicit
offers from institutions in which the institution contractually
agrees to purchase the securities from us on a future date at a
specified price. This type of agreement may be made only with
institutions that we specifically approve. These institutions
could include banks, insurance companies, pension funds,
investment companies and educational and charitable
institutions. The underwriters, dealers or agents will not be
responsible for the validity or performance of these agreements.
Underwriters, dealers or agents may engage in transactions with
us and may perform services for us in the ordinary course of
business.
We may sell the securities directly to institutional investors
or others who may be deemed to be underwriters within the
meaning of the Securities Act with respect to any sale of those
securities. We will describe the terms of any such sales in the
prospectus supplement or other applicable offering materials.
LEGAL
OPINIONS
Stinson Morrison Hecker LLP will issue an opinion about the
validity of the securities and EPRs qualification and
taxation as a REIT under the Code. In addition, the description
of EPRs taxation and qualification as a REIT
47
under the caption U.S. Federal Income Tax
Considerations is based upon the opinion of Stinson
Morrison Hecker LLP. Underwriters, dealers or agents who we
identify in a prospectus supplement or other applicable offering
materials may have their counsel give an opinion on certain
legal matters relating to the securities or the offering.
EXPERTS
Our consolidated financial statements and schedules as of
December 31, 2006 and December 31, 2005 and for each
of the years in the three-year period ended December 31,
2006 and managements assessment of the effectiveness of
internal control over financial reporting as of
December 31, 2006 have been incorporated by reference in
this prospectus and in the registration statement of which this
prospectus is a part, in reliance upon the reports of KPMG LLP,
independent registered public accounting firm, incorporated by
reference herein, and upon the authority of said firm as experts
in accounting and auditing. The audit report covering the
December 31, 2006 financial statements refers to a change
in the method of quantifying errors in 2006.
AVAILABLE
INFORMATION
We are subject to the informational requirements of the Exchange
Act, and in accordance with those requirements, we file reports
and other information with the SEC. The reports and other
information can be inspected and copied at the public reference
facilities maintained by the SEC at Room 1580, 100 F
Street, N.E., Washington, D.C. 20549. Copies of this
material can be obtained by mail from the Public Reference
Section of the SEC at Room 1580, 100 F Street, N.E.,
Washington, D.C. 20549 at prescribed rates. The public may
obtain information on the operation of the public reference room
by calling the SEC at
1-800-SEC-0330.
The SEC maintains an Internet website (http://www.sec.gov) that
contains reports, proxy and information statements and other
materials that are filed through the SEC Electronic Data
Gathering Analysis and Retrieval (EDGAR) system. In addition,
our common shares, Series A Preferred Shares, Series B
Preferred Shares and Series C Preferred Shares are listed
on the New York Stock Exchange and we are required to file
reports, proxy and information statements and other information
with the New York Stock Exchange. These documents can be
inspected at the principal office of the New York Stock
Exchange, 20 Broad Street, New York, New York 10005.
We have filed with the SEC a registration statement on
Form S-3,
of which this prospectus is a part, covering the securities
described in this prospectus. You should be aware that this
prospectus does not contain all of the information contained or
incorporated by reference in the registration statement and its
exhibits and schedules. You may inspect and obtain the
registration statement, including exhibits, schedules, reports
and other information that we have filed with the SEC, as
described in the preceding paragraph. Statements contained in
this prospectus concerning the contents of any document we refer
you to are not necessarily complete and in each instance we
refer you to the applicable document filed with the SEC for more
complete information.
48
3,000,000
Shares
Entertainment Properties
Trust
9.00% Series E cumulative
convertible preferred shares
liquidation preference $25.00
per share
Prospectus Supplement
March 27, 2008
RBC Capital Markets