FORM 424B5
Filed
Pursuant To Rule 424(b)(5)
Registration No. 333-159328
CALCULATION
OF REGISTRATION FEE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proposed Maximum
|
|
|
|
Title of Each Class of
|
|
|
Amount to
|
|
|
Aggregate
|
|
|
Amount of
|
Securities Offered
|
|
|
be Registered(1)
|
|
|
Offering Price(1)
|
|
|
Registration Fee(2)
|
Common Stock
|
|
|
1,600,000 shares
|
|
|
$52,264,000
|
|
|
$2,916
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Determined in accordance with Rule 457(c) under the
Securities Act of 1933 based on the average of the high and low
reported sales prices on the New York Stock Exchange on
May 13, 2009.
|
|
(2)
|
This filing fee is calculated in accordance with
Rule 457(r) and relates to the Registration Statement on
Form S-3
(No. 333-159328) filed by EastGroup Properties, Inc. on
May 18, 2009.
|
PROSPECTUS
SUPPLEMENT
(To Prospectus dated May 18, 2009)
1,600,000 Shares
EastGroup Properties,
Inc.
Common Stock
We may offer and sell up to 1,600,000 shares of our common
stock from time to time through BNY Mellon Capital Markets, LLC,
or BNYMCM, as our agent under a sales agency financing agreement.
The common stock will be offered at market prices prevailing at
the time of sale. We will pay BNYMCM a commission equal to 1.0%
of the sales price of all shares of common stock sold through it
as our agent.
Our common stock is listed on the New York Stock Exchange under
the symbol EGP. The last reported sales price of our
common stock on May 18, 2009 was $34.27 per share.
Investing in our common stock involves risks. Before
investing in our common stock, you should carefully read the
discussion of material risks of investing in our common stock on
page 1 of the accompanying prospectus under the heading
Risk Factors, as well as the risk factors discussed
in the documents we file with the Securities and Exchange
Commission pursuant to the Securities Exchange Act of 1934, and
which we incorporate into this prospectus by reference.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or determined if this prospectus supplement or the
accompanying prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
BNY Mellon Capital Markets,
LLC
The date of this prospectus supplement is May 19, 2009.
You should rely only on the information contained or
incorporated by reference in this prospectus supplement and the
accompanying prospectus. We have not, and BNYMCM has not,
authorized anyone 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 BNYMCM
is not, making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted. You
should assume that the information appearing in this prospectus
supplement, the accompanying prospectus and the documents
incorporated by reference herein and therein is accurate only as
of their respective dates or on 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
|
|
|
|
|
|
|
Page
|
|
|
|
|
S-1
|
|
|
|
|
S-1
|
|
|
|
|
S-1
|
|
|
|
|
S-1
|
|
|
|
|
S-3
|
|
|
|
|
S-3
|
|
Prospectus
Dated May 18, 2009
|
|
|
|
|
|
|
Page
|
|
|
|
|
1
|
|
|
|
|
1
|
|
|
|
|
2
|
|
|
|
|
2
|
|
|
|
|
2
|
|
|
|
|
3
|
|
|
|
|
4
|
|
|
|
|
5
|
|
|
|
|
6
|
|
|
|
|
9
|
|
|
|
|
23
|
|
|
|
|
25
|
|
|
|
|
25
|
|
|
|
|
25
|
|
|
|
|
25
|
|
|
|
|
26
|
|
ABOUT
THIS PROSPECTUS SUPPLEMENT
This document has two parts. The first part is the prospectus
supplement, which describes the specific terms of this offering
and also adds to and updates information contained in the
accompanying prospectus and the documents incorporated by
reference. The second part is the accompanying prospectus, which
gives more general information, some of which may not apply to
this offering.
All references to we, our and
us in this prospectus supplement means EastGroup
Properties, Inc. and all entities owned or controlled by us
except where it is made clear that the term means only the
parent company. The term you refers to a prospective
investor.
To the extent that any subject matter is addressed in both this
prospectus supplement and the accompanying prospectus, the
information contained in or incorporated by reference to this
prospectus supplement updates or supersedes the information
contained in the accompanying prospectus.
EASTGROUP
PROPERTIES, INC.
We are an equity real estate investment trust, or REIT, focused
on the development, acquisition and operation of industrial
properties in major Sunbelt markets throughout the United States
with an emphasis in the states of Florida, Texas, Arizona and
California. Our goal is to maximize shareholder value by being
the leading provider of functional, flexible, and quality
business distribution space for location sensitive tenants
primarily in the 5,000 to 50,000 square foot range. Our
strategy for growth is based on ownership of premier
distribution facilities generally clustered near major
transportation features in supply constrained submarkets.
Substantially all of our revenue is generated from renting real
estate.
We are a corporation organized under the laws of the State of
Maryland. Our principal executive offices are located at 190
East Capitol Street, Suite 400, Jackson, MS
39201-2195,
and our telephone number is
(601) 354-3555.
We also have a web site at www.eastgroup.net. The information
found on, or otherwise accessible through, our web site is not
incorporated into, and does not form a part of, this prospectus.
USE OF
PROCEEDS
We expect to use the net proceeds from the sale of our common
stock under the sales agency financing agreement from this
offering for general corporate purposes, including working
capital and the payment of costs of acquisition or development
of industrial properties. Pending such use, the net proceeds
will be used to reduce our outstanding variable rate debt. The
weighted average interest rate on our variable rate debt was
1.1% as of May 15, 2009.
PLAN OF
DISTRIBUTION
We have entered into a sales agency financing agreement, dated
as of May 19, 2009, with BNY Mellon Capital Markets, LLC,
or BNYMCM, under which we may issue and sell up to
1,600,000 shares of our common stock from time to time
through BNYMCM, as our agent for the offer and sale of the
shares, for a
36-month
period. The sales, if any, of the common stock under this sales
agency financing agreement will be made in at the
market offerings as defined in Rule 415 of the
Securities Act of 1933, including sales made directly on the New
York Stock Exchange, the existing trading market for our common
stock, or sales made to or through a market maker or through an
electronic communications network. In addition, our common stock
may be offered and sold by such other methods, including
privately negotiated transactions, as we and BNYMCM agree to in
writing.
From time to time during the term of the sales agency financing
agreement, we may deliver an issuance notice to BNYMCM
specifying the length of the selling period (not to exceed 20
trading days), the amount of common stock to be sold (the
aggregate sales price of such shares not to exceed $40,000,000
during any selling period without BNYMCMs prior written
consent) and the minimum price below which sales may not be
made. Upon receipt of an issuance notice from us, and subject to
the terms and conditions of the sales agency financing
agreement, BNYMCM has agreed to use its commercially reasonable
efforts consistent with its normal trading and
S-1
sales practices to sell such shares on such terms. We or BNYMCM
may suspend the offering of our common stock at any time upon
proper notice to the other, upon which the selling period will
immediately terminate. Settlement for sales of our common stock
will occur on the later of: (i) the third trading day
immediately following the last day of the selling period and
(ii) the third trading day following the date on which any
sales were made. The obligation of BNYMCM under the sales agency
financing agreement to sell shares pursuant to any issuance
notice is subject to a number of conditions, which BNYMCM
reserves the right to waive in its sole discretion.
We will pay BNYMCM a commission equal to 1% of the sales price
of all shares sold through it as agent under the sales agency
financing agreement. We have also agreed to reimburse BNYMCM for
its reasonable documented
out-of-pocket
expenses, including fees and expenses of counsel (initial amount
not to exceed $60,000 and continuing due diligence in an amount
not to exceed $5,000 per fiscal quarter), in connection with the
sales agency financing agreement.
We will deliver to the New York Stock Exchange copies of this
prospectus supplement pursuant to the rules of the exchange. We
will report at least quarterly the number of shares of our
common stock sold through BNYMCM, as agent, in
at-the-market
offerings, the net proceeds to us and the compensation paid by
us to BNYMCM in connection with such sales of our common stock.
Sales of our common stock as contemplated by this prospectus
supplement will be settled through the facilities of The
Depository Trust Company or by such other means as we and
BNYMCM may agree upon.
In connection with the sale of our common stock hereunder,
BNYMCM may be deemed to be an underwriter within the
meaning of the Securities Act of 1933, and the compensation paid
to BNYMCM may be deemed to be underwriting commissions or
discounts. We have agreed to indemnify BNYMCM against certain
civil liabilities, including liabilities under the Securities
Act of 1933.
The offering of our common stock pursuant to the sales agency
financing agreement will terminate upon the earlier of
(1) the sale of the 1,600,000 shares of our common
stock subject to the sales agency financing agreement,
(2) the third anniversary of the date of the sales agency
financing agreement and (3) termination of the sales agency
financing agreement by either BNYMCM or us. The sales agency
financing agreement may be terminated by BNYMCM or us at any
time upon 10 days notice, and by BNYMCM in certain
circumstances, including certain bankruptcy events relating to
us or any material subsidiary, our failure to maintain a listing
of our common stock on the New York Stock Exchange or the
occurrence of a material adverse effect in our company.
We have agreed not to directly or indirectly sell, offer to
sell, contract to sell, grant any option to sell or otherwise
dispose of, our common stock or securities convertible into or
exchangeable for our common stock, warrants or any rights to
purchase or acquire our common stock for a period beginning on
the first trading day prior to the delivery of any issuance
notice to BNYMCM and ending on the first trading day following
the settlement date for our common stock sold pursuant to the
applicable issuance notice, without the prior written consent of
BNYMCM. This consent may be given at any time without public
notice. The restriction described in this paragraph does not
apply to sales of:
|
|
|
|
|
common stock we offer or sell pursuant to the sales agency
financing agreement;
|
|
|
|
our common stock that we issue as consideration in connection
with acquisitions of businesses, assets or securities of other
persons;
|
|
|
|
our common stock that we issue upon conversion of convertible
securities, or the exercise of warrants, options or other
rights; or
|
|
|
|
our common stock or options to purchase common stock that we
issue, in either case, pursuant to any employee or director
stock option, incentive or benefit plan, any stock purchase or
ownership plan or dividend reinvestment plan.
|
In the ordinary course of business, BNYMCM
and/or its
affiliates have provided, and may in the future provide,
investment banking, commercial banking, corporate trust services
and other services for us from time to time for which they have
received, and will in the future receive, customary fees and
reimbursement of expenses.
S-2
EXPERTS
The consolidated financial statements and schedules of EastGroup
Properties, Inc., as of December 31, 2008 and 2007, and for
each of the years in the three-year period ended
December 31, 2008, and managements assessment of the
effectiveness of internal control over financial reporting as of
December 31, 2008, have been incorporated by reference
herein 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.
LEGAL
MATTERS
The legality of the securities offered hereby will be passed
upon for us by Jaeckle Fleischmann & Mugel, LLP,
Buffalo, New York who may rely upon an opinion of DLA Piper LLP
(US), Baltimore, Maryland as to certain Maryland law matters.
Morrison & Foerster LLP, Palo Alto, California will
pass upon certain legal matters in connection with this offering
for BNYMCM.
S-3
COMMON
STOCK, PREFERRED STOCK, WARRANTS
From time to time, we or one or more selling securityholders to
be identified in the future, may offer to sell common stock,
preferred stock, and warrants to purchase preferred stock or
common stock covered by this prospectus independently, or
together in any combination that may include other securities
set forth in an accompanying prospectus supplement. Our common
stock is listed on the New York Stock Exchange under the symbol
EGP. This prospectus provides you with a general
description of the securities we or the selling securityholders
may offer.
Each time securities are sold using this prospectus, we or the
selling securityholder will provide a supplement to this
prospectus or possibly other offering material containing
specific information about the offering. The supplement or other
offering material may also add, update or change information
contained in this prospectus. This prospectus may not be used to
offer or sell any securities unless accompanied by a prospectus
supplement. You should read this prospectus and any supplement
and/or other
offering material carefully before you invest.
This prospectus contains summaries of certain provisions
contained in some of the documents described herein, but
reference is made to the actual documents for complete
information. All of the summaries are qualified in their
entirety by the actual documents. Copies of some of the
documents referred to herein have been filed or will be filed or
incorporated by reference as exhibits to the registration
statement of which this prospectus is a part, and you may obtain
copies of those documents as described below under Where
You Can Find More Information.
Investment in any securities offered by this prospectus
involves risk. See Risk Factors on page 1 of
this prospectus, in our periodic reports filed from time to time
with the Securities and Exchange Commission and in the
applicable prospectus supplement.
Neither the Securities and Exchange Commission nor any other
regulatory body has approved or disapproved of the securities or
passed upon the accuracy or adequacy of this prospectus. Any
representation to the contrary is a criminal offense.
The date of this Prospectus is May 18, 2009.
TABLE OF
CONTENTS
|
|
|
|
|
|
|
Page
|
|
|
|
|
1
|
|
|
|
|
1
|
|
|
|
|
2
|
|
|
|
|
2
|
|
|
|
|
2
|
|
|
|
|
3
|
|
|
|
|
4
|
|
|
|
|
5
|
|
|
|
|
6
|
|
|
|
|
9
|
|
|
|
|
23
|
|
|
|
|
25
|
|
|
|
|
25
|
|
|
|
|
25
|
|
|
|
|
25
|
|
|
|
|
26
|
|
You should rely only on the information contained in or
incorporated by reference into this prospectus and any related
prospectus supplement. We have not authorized any other person
to provide you with different information. If anyone provides
you with different or inconsistent information, you should not
rely on it. We and the selling securityholders are not making an
offer to sell these securities in any jurisdiction where the
offer or sale is not permitted. You should assume that the
information appearing in this prospectus, the related prospectus
supplement and the documents incorporated by reference herein is
accurate only as of its respective date or dates or on the date
or dates which are specified in these documents. Our business,
financial condition, results of operations and prospects may
have changed since those dates.
RISK
FACTORS
Investment in any securities offered pursuant to this prospectus
involves risks. You should carefully consider the risk factors
incorporated by reference to our most recent Annual Report on
Form 10-K
and our subsequent Quarterly Reports on
Form 10-Q
and the other information contained in this prospectus, as
updated by our subsequent filings under the Exchange Act and the
risk factors and other information contained in the applicable
prospectus supplement before acquiring any of such securities.
FORWARD-LOOKING
INFORMATION
This prospectus, the prospectus supplement, the documents
incorporated by reference in this prospectus and other written
reports and oral statements made from time to time by the
company may contain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995.
Such forward-looking statements may include statements with
respect to our financial condition, results of operations and
business and on the possible impact of this offering on our
financial performance. Words such as anticipates,
expects, intends, plans,
believes, seeks, estimates
and similar expressions as they relate to us or our management,
are intended to identify forward-looking statements.
Because such statements are subject to risks and uncertainties,
actual results may differ materially from those expressed or
implied by such forward-looking statements. Investors are
cautioned not to place undue reliance on such statements, which
speak only as of the date the statements were made.
Among the factors that could cause actual results to differ
materially are: national, regional and local economic climates,
changes in financial markets, interest rates, increased or
unanticipated competition for our properties, risks associated
with acquisitions, maintenance of our REIT status, availability
of financing and capital, changes in demand for developed
properties, and other risks detailed from time to time in the
reports filed with the SEC by us.
Except for ongoing obligations to disclose material information
as required by the federal securities laws, we do not undertake
any obligation to release publicly any revisions to any
forward-looking statements to reflect events or circumstances
after the date of the filing of this prospectus or to reflect
the occurrence of unanticipated events.
ABOUT
EASTGROUP PROPERTIES, INC.
We are an equity real estate investment trust, or REIT, focused
on the development, acquisition and operation of industrial
properties in major Sunbelt markets throughout the United States
with an emphasis in the states of Florida, Texas, Arizona and
California. Our goal is to maximize shareholder value by being
the leading provider of functional, flexible, and quality
business distribution space for location sensitive tenants
primarily in the 5,000 to 50,000 square foot range. Our
strategy for growth is based on ownership of premier
distribution facilities generally clustered near major
transportation features in supply constrained submarkets.
Substantially all of our revenue is generated from renting real
estate.
We are a corporation organized under the laws of the State of
Maryland. Our principal executive offices are located at 190
East Capitol Street, Suite 400, Jackson, MS
39201-2195,
and our telephone number is
(601) 354-3555.
We also have a web site at www.eastgroup.net. The information
found on, or otherwise accessible through, our web site is not
incorporated into, and does not form a part of, this prospectus.
Additional information regarding EastGroup, including our
audited financial statements, is contained in the documents
incorporated by reference in this prospectus. Please also refer
to the section below entitled Where You Can Find More
Information.
1
RATIO OF
EARNINGS TO FIXED CHARGES
Our ratio of earnings to combined fixed charges and preferred
stock dividends for the three months ended March 31, 2009
and the years ended December 31, 2008, 2007, 2006, 2005 and
2004 was 1.66, 1.62, 1.56, 1.49, 1.47 and 1.64, respectively.
For purposes of calculating these ratios, earnings represent
income from continuing operations before adjustments for
non-controlling interest in consolidated subsidiary and income
from equity investee, plus fixed charges, plus distributed
income of equity investee, minus capitalized interest, minus
preferred stock dividends. Fixed charges represent interest
expense and preferred stock dividends from our consolidated
statements of operations plus capitalized interest, amortization
of mortgage premiums and an estimated interest component of
rental expense. The ratios are based solely on historical
financial information and no pro forma adjustments have been
made thereto.
USE OF
PROCEEDS
Unless otherwise specified in a prospectus supplement
accompanying this prospectus, the net proceeds from the sales of
the securities to which this prospectus relates will be used for
general corporate purposes. General corporate purposes may
include, without limitation, the repayment of debt and the
development and acquisition of additional properties.
Unless otherwise set forth in a prospectus supplement, we will
not receive any proceeds in the event that securities are sold
by a selling securityholder.
DESCRIPTION
OF CAPITAL STOCK
The following description is only a summary of certain terms and
provisions of our capital stock. You should refer to our charter
and bylaws for the complete provisions thereof.
The total number of shares of capital stock of all classes that
we are authorized to issue is 100,000,000. Our charter
authorizes the issuance of 70,000,000 shares of common
stock, par value $.0001 per share and 30,000,000 shares of
Excess Stock, par value $.0001 per share. As of May 15,
2009, 25,207,655 shares of common stock and no shares of
Excess Stock were issued and outstanding. Our common stock is
currently listed on the New York Stock Exchange under the
symbols EGP.
Our Board of Directors is authorized by the charter, to classify
and reclassify any of our unissued shares of capital stock, by,
among other alternatives, setting, altering or eliminating the
designation, preferences, conversion or other rights, voting
powers, qualifications and terms and conditions of redemption
of, limitations as to dividends and any other restrictions on,
our capital stock. The power of the Board of Directors to
classify and reclassify any of the shares of capital stock
includes the authority to classify or reclassify such shares
into a class or classes of preferred stock or other stock.
Pursuant to the provisions of our charter, if a transfer of
stock occurs such that any person would own, beneficially or
constructively (applying the applicable attribution rules of the
Code), more than 9.8% (in value or in number, whichever is more
restrictive) of our outstanding equity stock (excluding shares
of Excess Stock), then the amount in excess of the 9.8% limit
will automatically be converted into shares of Excess Stock, any
such transfer will be void from the beginning, and we will have
the right to redeem such stock. These restrictions also apply to
any transfer of stock that would result in our being
closely held within the meaning of
Section 856(h) of the Code, or otherwise failing to qualify
as a REIT for federal income tax purposes. Upon any transfer
that results in Excess Stock, such Excess Stock shall be held in
trust for the exclusive benefit of one or more charitable
beneficiaries designated by us. Upon the satisfaction of certain
conditions, the person who would have been the recordholder of
the equity stock if the transfer had not resulted in Excess
Stock may designate a beneficiary of an interest in the trust.
Upon such transfer of an interest in the trust, the
corresponding shares of Excess Stock in the trust shall be
automatically exchanged for an equal number of shares of equity
stock of the same class as such stock had been prior to it
becoming Excess Stock and shall be transferred of record to the
designated beneficiary. Excess Stock has no voting
2
rights, except as required by law, and any vote cast by a
purported transferee in respect of shares of Excess Stock prior
to the discovery that shares of equity stock had been converted
into Excess Stock shall be void from the beginning. Excess Stock
shall not be entitled to dividends. Any dividend paid prior to
our discovery that equity stock has been converted into Excess
Stock shall be repaid to us upon demand. In the event of our
liquidation, each holder of Excess Stock shall be entitled to
receive that portion of our assets that would have been
distributed to the holder of equity stock in respect of which
such Excess Stock was issued. The trustee of the trust holding
Excess Stock shall distribute such assets to the beneficiaries
of such trust. These restrictions will not prevent the
settlement of a transaction entered into through the facilities
of any interdealer quotation system or national securities
exchange upon which shares of our capital stock are traded.
Notwithstanding the prior sentence, certain transactions may be
settled by providing shares of Excess Stock.
Our Board of Directors, upon receipt of a ruling from the
Internal Revenue Service or an opinion of counsel or other
evidence satisfactory to the Board of Directors and upon at
least 15 days written notice from a transferee prior to a
proposed transfer that, if consummated, would result in the
intended transferee beneficially owning (as defined
in our charter, and determined after the application of the
applicable attribution rules of the Code) equity stock in excess
of the 9.8% ownership limit and the satisfaction of such other
conditions as the Board may direct, may in its sole and absolute
discretion exempt a person from the 9.8% ownership limit.
Additionally, our Board of Directors, upon receipt of a ruling
from the Internal Revenue Service or an opinion of counsel or
other evidence satisfactory to our Board, may in its sole and
absolute discretion exempt a person from the limitation on a
person constructively owning (as defined in our
charter, and determined after the application of the applicable
attribution rules of the Code) equity stock in excess of the
9.8% ownership limit if (i) such person does not and
represents that it will not directly or constructively
own (after the application of the applicable attribution
rules of the Code) more than a 9.8% interest in a tenant of
ours; (ii) we obtain such representations and undertakings
as are reasonably necessary to ascertain this fact; and
(iii) such person agrees that any violation or attempted
violation of such representations, undertakings and agreements
will result in such equity stock in excess of the ownership
limit being converted into and exchanged for Excess Stock. Our
Board of Directors may from time to time increase or decrease
the 9.8% limit, provided that the 9.8% limit may be increased
only if five individuals could not beneficially own
or constructively own (applying the applicable
attribution rules of the Internal Revenue Code) more than 50.0%
in value of the shares of equity stock then outstanding.
DESCRIPTION
OF COMMON STOCK
Distributions. Subject to the preferential
rights of any shares of preferred stock currently outstanding or
subsequently classified and to the provisions of our charter
regarding restrictions on transfer and ownership of shares of
common stock, a holder of our common stock is entitled to
receive distributions, if, as and when authorized and declared
by our Board of Directors, out of our assets that we may legally
use for distributions to stockholders and to share ratably in
our assets that we may legally distribute to our stockholders in
the event of our liquidation, dissolution or winding up after
payment of, or adequate provision for, all of our known debts
and liabilities. We currently pay regular quarterly
distributions on our common stock.
Relationship to Preferred Stock and Other Shares of Common
Stock. The rights of a holder of shares of common
stock will be subject to, and may be adversely affected by, the
rights of holders of preferred stock that may be issued in the
future. Our Board of Directors may cause preferred stock to be
issued to obtain additional capital, in connection with
acquisitions, to our officers, directors and employees pursuant
to benefit plans or otherwise and for other corporate purposes.
A holder of our common stock has no preferences, conversion
rights, sinking fund, redemption rights, appraisal rights or
preemptive rights to subscribe for any of our securities.
Subject to the provisions of our charter regarding restrictions
on ownership and transfer, all shares of common stock have equal
distribution, liquidation, voting and other rights.
Voting Rights. Subject to the provisions of
our charter regarding restrictions on transfer and ownership of
shares of common stock, a holder of common stock has one vote
per share on all matters submitted to a vote of stockholders,
including the election of directors.
3
Under Maryland law, a Maryland corporation generally cannot
dissolve, amend its charter, merge, sell all or substantially
all of its assets, engage in a share exchange or engage in
similar transactions outside the ordinary course of business,
unless approved by the affirmative vote of stockholders holding
at least two thirds of the shares entitled to vote on the
matter. However, a Maryland corporation may provide in its
charter for approval of these matters by a lesser percentage,
but not less than a majority of all of the votes entitled to be
cast on the matter. Our charter provides that such actions need
to be approved by a majority of the votes entitled to be cast on
the matter. However, any merger, consolidation, share exchange,
recapitalization, dissolution, sale of all or substantially all
of our assets or any amendment to the provisions of our charter
regarding the Board of Directors, indemnification of our
directors and officers or amendment of the charter must be
approved by at least two-thirds of our Board of Directors.
Additionally, no amendment to our charter may be made that
would, (i) in the determination of our Board of Directors,
cause us not to qualify as a REIT, (ii) amend the
provisions of our charter regarding removal of directors,
(iii) amend our Bylaws, (iv) amend the provisions of
our charter regarding the indemnification of directors and
officers, (v) amend our charter, or (vi) impose
cumulative voting in the election of directors, in each case,
unless approved by the holders of not less than 80% of the votes
entitled to be cast on the matter.
There is no cumulative voting in the election of directors,
which means that the holders of a plurality of the outstanding
shares of common stock voting can elect all of the directors
then standing for election and the holders of the remaining
shares of common stock, if any, will not be able to elect any
directors, except as otherwise provided for any series of our
preferred stock.
Stockholder Liability. Under Maryland law
applicable to Maryland corporations, holders of common stock
will not be liable as stockholders for our obligations solely as
a result of their status as stockholders.
Transfer Agent. The registrar and transfer
agent for shares of our common stock is Wells Fargo Shareholder
Services.
DESCRIPTION
OF PREFERRED STOCK
General. Our charter authorizes our Board of
Directors to classify and reclassify any unissued shares of our
stock into other classes or series of stock, including classes
or series of preferred stock. Shares of preferred stock may be
issued from time to time, in one or more series, as authorized
by our Board of Directors. Before issuance of shares of each
series, the Board of Directors is required to fix for each such
series, subject to the provisions of Maryland law and our
charter, the powers, designations, preferences and relative,
participating, optional or other special rights of such series
and qualifications, limitations or restrictions thereof,
including such provisions as may be desired concerning voting,
redemption, dividends, dissolution or the distribution of
assets, conversion or exchange, and such other matters as may be
fixed by resolution of the Board of Directors or a duly
authorized committee thereof. The Board of Directors could
authorize the issuance of shares of preferred stock with terms
and conditions which could have the effect of discouraging a
takeover or other transaction which holders of some, or a
majority of, shares of common stock might believe to be in their
best interests, or in which holders of some, or a majority of,
shares of common stock might receive a premium for their shares
of common stock over the then market price of such shares. The
shares of preferred stock will, when issued, be fully paid and
nonassessable and will have no preemptive rights.
The prospectus supplement relating to any shares of preferred
stock offered thereby will contain the specific terms, including:
(i) The title and stated value of such shares of preferred
stock;
(ii) The number of such shares of preferred stock offered,
the liquidation preference per share and the offering price of
such shares of preferred stock;
(iii) The voting rights of such shares of preferred stock;
(iv) The dividend rate(s), period(s)
and/or
payment date(s) or method(s) of calculation thereof applicable
to such shares of preferred stock;
4
(v) The date from which dividends on such shares of
preferred stock will accumulate, if applicable;
(vi) The procedures for any auction or remarketing, if any,
for such shares of preferred stock;
(vii) The provision for a sinking fund, if any, for such
shares of preferred stock;
(viii) The provisions for redemption, if applicable, of
such shares of preferred stock;
(ix) Any listing of the shares of preferred stock on any
securities exchange;
(x) The terms and conditions, if applicable, upon which the
shares of preferred stock will be convertible into shares of our
common stock, including the conversion price (or manner of
calculation thereof);
(xi) A discussion of federal income tax considerations
applicable to such shares of preferred stock;
(xii) The relative ranking and preferences of such shares
of preferred stock as to dividend rights and rights upon
liquidation, dissolution or winding up of our affairs;
(xiii) Any limitations on issuance of any series of shares
of preferred stock ranking senior to or on a parity with such
series of shares of preferred stock as to dividend rights and
rights upon liquidation, dissolution or winding up of our
affairs;
(xiv) Any limitations on direct or beneficial ownership and
restrictions on transfer of such shares of preferred stock, in
each case as may be appropriate to preserve our status as a
REIT; and
(xv) Any other specific terms, preferences, rights,
limitations or restrictions of such shares of preferred stock.
The registrar and transfer agent for the shares of preferred
stock will be set forth in the applicable prospectus supplement.
The description of the provisions of the shares of preferred
stock set forth in this prospectus and in the related prospectus
supplement is only a summary, does not purport to be complete
and is subject to, and is qualified in its entirety by,
reference to the definitive Articles Supplementary to our
Charter relating to such series of shares of preferred stock.
You should read these documents carefully to fully understand
the terms of the shares of preferred stock. In connection with
any offering of shares of preferred stock,
Articles Supplementary will be filed with the Securities
and Exchange Commission as an exhibit or incorporated by
reference in the Registration Statement.
DESCRIPTION
OF WARRANTS
We may issue warrants for the purchase of shares of preferred
stock or shares of common stock. Warrants may be issued
independently or together with any other securities offered by
any prospectus supplement and may be attached to or separate
from such securities. Each series of warrants will be issued
under a separate warrant agreement to be entered into between us
and a warrant agent specified in the applicable prospectus
supplement. The warrant agent will act solely as our agent in
connection with the warrants of such series and will not assume
any obligation or relationship of agency or trust for or with
any holders or beneficial owners of warrants. Further terms of
the warrants and the applicable warrant agreements will be set
forth in the applicable prospectus supplement.
The applicable prospectus supplement will describe the terms of
the warrants in respect of which this prospectus is being
delivered, including, where applicable, the following:
(1) the title of such warrants; (2) the aggregate
number of such warrants; (3) the price or prices at which
such warrants will be issued; (4) the designation, terms
and number of shares of our preferred stock or common stock
purchasable upon exercise of such warrants; (5) the
designation and terms of the offered securities, if any, with
which such warrants are issued and the number of such warrants
issued with each such offered security; (6) the date, if
any, on and after which such warrants and the related preferred
stock or common stock will be separately transferable, including
any limitations on ownership and transfer of such warrants as
may be appropriate to preserve our
5
status as a REIT; (7) the price at which each share of
preferred stock or common stock purchasable upon exercise of
such warrants may be purchased; (8) the date on which the
right to exercise such warrants shall commence and the date on
which such right shall expire; (9) the minimum or maximum
amount of such warrants which may be exercised at any one time;
(10) information with respect to book-entry procedures, if
any; (11) a discussion of certain federal income tax
consequences; and (12) any other terms of such warrants,
including terms, procedures and limitations relating to the
exchange and exercise of such warrants.
CERTAIN
PROVISIONS OF MARYLAND LAW AND OUR CHARTER AND BYLAWS
The following paragraphs summarize certain material provisions
of Maryland law applicable to Maryland corporations. The summary
does not purport to be complete and is subject to and qualified
in its entirety by reference to Maryland law, our charter,
including any articles supplementary, and bylaws. You should
read these documents carefully to fully understand the terms of
Maryland law, our charter and our bylaws.
Maryland, the state of our incorporation, has certain
anti-takeover statutes, including the business
combination provisions and control share
acquisition provisions, which may also have the effect of
making it difficult to gain control of us or to change existing
management. To date, we have not opted out of the business
combination provisions or the control share acquisition
provisions of the Maryland General Corporation Law (the
MGCL).
Business
Combinations
Under Maryland law, business combinations between a
Maryland corporation and an interested stockholder or an
affiliate of an interested stockholder are prohibited for five
years after the most recent date on which the interested
stockholder becomes an interested stockholder. These business
combinations include a merger, consolidation, share exchange,
or, in circumstances specified in the statute, an asset transfer
or issuance or reclassification of equity securities. An
interested stockholder is defined as:
|
|
|
|
|
any person who beneficially owns ten percent or more of the
voting power of the corporations shares; or
|
|
|
|
an affiliate or associate of the corporation who, at any time
within the two-year period prior to the date in question, was
the beneficial owner of ten percent or more of the voting power
of the then outstanding voting stock of the corporation.
|
A person is not an interested stockholder under the statute if
the Board of Directors approved in advance the transaction by
which he otherwise would have become an interested stockholder.
However, in approving a transaction, the Board of Directors may
provide that its approval is subject to compliance, at or after
the time of approval, with any terms and conditions determined
by the Board.
After the five-year prohibition, any business combination
between the Maryland corporation and an interested stockholder
generally must be recommended by the Board of Directors of the
corporation and approved by the affirmative vote of at least:
|
|
|
|
|
80% of the votes entitled to be cast by holders of outstanding
shares of voting stock of the corporation; and
|
|
|
|
two-thirds of the votes entitled to be cast by holders of voting
stock of the corporation other than shares held by the
interested stockholders with whom or with whose affiliate the
business combination is to be effected or held by an affiliate
or associate of the interested stockholder.
|
These super-majority vote requirements do not apply if the
corporations common stockholders receive a minimum price,
as defined under Maryland law, for their shares in the form of
cash or other consideration in the same form as previously paid
by the interested stockholder for its shares.
The statute permits various exemptions from its provisions,
including business combinations that are exempted by the Board
of Directors before the time that the interested stockholder
becomes an interested stockholder.
6
Control
Share Acquisitions
Maryland law provides that control shares of a Maryland
corporation 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 directors who
are employees of the corporation are excluded from shares
entitled to vote on the matter. Control shares are voting shares
of stock which, if aggregated with all other shares of stock
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 directors within
one of the following ranges of voting power:
|
|
|
|
|
one-fifth 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 the acquiring person is
then entitled to vote as a result of having previously obtained
stockholder approval. A control share acquisition means the
acquisition of control shares, subject to certain exceptions.
A person who has made or proposes to make a control share
acquisition may compel the Board of Directors of the corporation
to call a special meeting of stockholders to be held within
50 days of demand to consider the voting rights of the
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 corporation may itself present the
question at any stockholders meeting.
If voting rights are not approved at the meeting or if the
acquiring person does not deliver an acquiring person statement
as required by the statute, then the corporation may redeem for
fair value any or all of the control shares, except those for
which voting rights have previously been approved. The right of
the corporation to redeem control shares is subject to certain
conditions and limitations. Fair value is determined, without
regard to the absence of voting rights for the control shares,
as of the date of the last control share acquisition by the
acquiror or of any meeting of stockholders at which the voting
rights of the shares are considered and not approved. If voting
rights for control shares are approved at a stockholders meeting
and the acquiror becomes entitled to vote a majority of the
shares entitled to vote, all other stockholders may exercise
appraisal rights. The fair value of the shares as determined for
purposes of appraisal rights may not be less than the highest
price per share paid by the acquiror in the control share
acquisition.
The control share acquisition statute does not apply (i) to
shares acquired in a merger, consolidation or share exchange if
the corporation is a party to the transaction, or (ii) to
acquisitions approved or exempted by the charter or bylaws of
the corporation.
Certain
Elective Provisions of Maryland Law
Maryland law provides, among other things, that the board of
directors has broad discretion in adopting stockholders
rights plans and has the sole power to fix the record date, time
and place for special meetings of the stockholders. Furthermore,
Maryland corporations that:
|
|
|
|
|
have three independent directors who are not officers or
employees of the entity or related to an acquiring person; and
|
|
|
|
are subject to the reporting requirements of the Securities
Exchange Act,
|
may elect in their charter or bylaws or by resolution of the
board of directors to be subject to all or part of a special
subtitle which provides that:
|
|
|
|
|
the corporation will have a staggered board of directors;
|
7
|
|
|
|
|
any director may be removed only for cause and by the vote of
two-thirds of the votes entitled to be cast in the election of
directors generally, even if a lesser proportion is provided in
the charter or bylaws;
|
|
|
|
the number of directors may only be set by the board of
directors, even if the procedure is contrary to the charter or
bylaws;
|
|
|
|
vacancies may only be filled by the remaining directors, even if
the procedure is contrary to the charter or bylaws; and
|
|
|
|
the secretary of the corporation is required to call a special
meeting of stockholders only on the written request of the
stockholders entitled to cast at least a majority of all the
votes entitled to be cast at the meeting, even if the procedure
is contrary to the charter or bylaws.
|
To date, we have not made any of the elections described above,
although, independent of these elections, our charter and bylaws
contain provisions that special meetings of stockholders are
only required to be held upon the request of a majority of the
stockholders, that directors may be removed only for cause and
by the vote of two-thirds of the votes entitled to be cast and
that vacancies may be filled only by our Board of Directors.
Board of
Directors
Our bylaws provide that the number of our directors may be
established by the Board of Directors but may not be fewer than
three (unless there is no stock outstanding, in which case it
may not be fewer than one) nor more than 15. Any vacancy may be
filled by the stockholders at any regular meeting or special
meeting called for that purpose. Any vacancy may also be filled
by a majority of the remaining directors, except that a vacancy
resulting from an increase in the number of directors must be
filled by a majority of the entire Board of Directors.
Our charter provides that a director may be removed only for
cause and only by the affirmative vote of at least two-thirds of
the combined voting power of all shares of capital stock
entitled to be cast in the election of directors voting together
as a single class. This provision, when coupled with the
provision in our bylaws authorizing the Board of Directors to
fill vacant directorships, may preclude stockholders from
removing incumbent directors, except for cause and by a
substantial affirmative vote, and filling the vacancies created
by the removal with their own nominees.
Our bylaws provide that with respect to an annual meeting of
stockholders, nominations of persons for election to the Board
of Directors and the proposal of business to be considered by
stockholders may be made only (i) pursuant to our notice of
the meeting, (ii) by the Board of Directors or
(iii) by a stockholder who is entitled to vote at the
meeting and who has complied with the advance notice procedures
of the bylaws. With respect to special meetings of stockholders,
only the business specified in our notice of the meeting may be
brought before the meeting. Nominations of persons for election
to the Board of Directors at a special meeting may be made only
(i) pursuant to our notice of the meeting, (ii) by the
Board of Directors or (iii) provided that the Board of
Directors has determined that directors will be elected at the
meeting, by a stockholder who is entitled to vote at the meeting
and who has complied with the advance notice provisions of the
bylaws.
Power to
Issue Additional Shares of Common Stock and Preferred
Stock
Our charter authorizes our Board of Directors to issue stock of
any class, whether now or hereafter authorized. We believe that
the power to issue additional shares of common or preferred
stock and to classify or reclassify unissued shares of common or
preferred stock and thereafter to issue the classified or
reclassified shares provides us with increased flexibility in
structuring possible future financings and acquisitions and in
meeting other needs which might arise. These actions can be
taken without stockholder approval, unless stockholder approval
is required by applicable law or the rules of any stock exchange
or automated quotation system on which our securities may be
listed or traded. Although we have no present intention of doing
so, we could issue a class or series of stock that could delay,
defer or prevent a transaction or a change in control of the
Company that might involve a premium price for holders of common
stock or otherwise be in their best interest.
8
Consideration
of All Relevant Factors
In addition, as permitted by the Maryland General Corporation
Law, our charter includes a provision that requires our Board of
Directors, in their evaluation of any potential business
combination or any actual or proposed transaction that could
result in a change of control, to consider all relevant factors,
including, the economic effect on our stockholders, the social
and economic effect on our employees, suppliers, customers and
creditors and the communities in which we have offices or other
operations.
MATERIAL
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
Introductory
Notes
The following discussion describes the material federal income
tax considerations relating to our taxation as a REIT, and the
ownership and disposition of the securities offered under this
prospectus. A prospectus supplement will contain information
about additional federal income tax considerations, if any,
relating to a particular offering.
The following discussion is not exhaustive of all possible tax
considerations and does not provide a detailed discussion of any
state, local or foreign tax considerations, nor does it discuss
all of the aspects of federal income taxation that may be
relevant to a prospective stockholder in light of his or her
particular circumstances or to stockholders (including insurance
companies, tax-exempt entities, financial institutions or
broker-dealers, foreign corporations, persons holding common
stock as part of a hedging or conversion transaction or a
straddle, and persons who are not citizens or residents of the
United States) who are subject to special treatment under the
federal income tax laws. Unless otherwise noted, this discussion
only addresses stockholders that hold shares of our stock as
capital assets within the meaning of the Internal Revenue Code
of 1986, as amended (the Code).
Jaeckle Fleischmann & Mugel, LLP has provided an
opinion to the effect that this discussion, to the extent that
it contains descriptions of applicable federal income tax law,
is correct in all material respects and fairly summarizes in all
material respects the federal income tax laws referred to
herein. This opinion, however, does not purport to address the
actual tax consequences of the purchase, ownership and
disposition of our capital stock to any particular holder. The
opinion and the information in this section are based on the
Code, current, temporary and proposed Treasury regulations, the
legislative history of the Code, current administrative
interpretations and practices of the Internal Revenue Service,
and court decisions. The reference to Internal Revenue Service
interpretations and practices includes Internal Revenue Service
practices and policies as endorsed in private letter rulings,
which are not binding on the Internal Revenue Service except
with respect to the taxpayer that receives the ruling. In each
case, these sources are relied upon as they exist on the date of
this prospectus. No assurance can be given that future
legislation, regulations, administrative interpretations and
court decisions will not significantly change current law, or
adversely affect existing interpretations of existing law, on
which the opinion and information in this section are based. Any
change of this kind could apply retroactively to transactions
preceding the date of the change. Moreover, opinions of counsel
merely represent counsels best judgment with respect to
the probable outcome on the merits and are not binding on the
Internal Revenue Service or the courts. Accordingly, even if
there is no change in applicable law, no assurance can be
provided that such opinion, or the statements made in the
following discussion, will not be challenged by the Internal
Revenue Service or will be sustained by a court if so challenged.
EACH PROSPECTIVE INVESTOR IS ADVISED TO CONSULT WITH HIS OR HER
OWN TAX ADVISOR TO DETERMINE THE IMPACT OF HIS OR HER PERSONAL
TAX SITUATION ON THE ANTICIPATED TAX CONSEQUENCES OF THE
OWNERSHIP AND SALE OF THE SECURITIES OFFERED UNDER THIS
PROSPECTUS. THIS INCLUDES THE FEDERAL, STATE, LOCAL, FOREIGN AND
OTHER TAX CONSEQUENCES OF THE OWNERSHIP AND SALE OF THE
SECURITIES OFFERED UNDER THIS PROSPECTUS AND THE POTENTIAL
CHANGES IN APPLICABLE TAX LAWS.
9
Taxation
of Our Company as a REIT
We have elected to be taxed as a REIT under Sections 856
through 860 of the Code, commencing with our initial taxable
year. Our qualification and taxation as a REIT depends upon our
ability to meet on a continuing basis, through actual annual
operating results, distribution levels and diversity of stock
ownership, the various qualification tests and organizational
requirements imposed under the Code, as discussed below. We
believe that we are organized and have operated in such a manner
as to qualify under the Code for taxation as a REIT since the
effective date of our election, and we intend to continue to
operate in such a manner. No assurances, however, can be given
that we will operate in a manner so as to qualify or remain
qualified as a REIT. See Failure to
Qualify below.
The following is a general summary of the material Code
provisions that govern the federal income tax treatment of a
REIT and its stockholders. These provisions of the Code are
highly technical and complex. This summary is qualified in its
entirety by the applicable Code provisions, the regulations
promulgated thereunder (Treasury Regulations), and
administrative and judicial interpretations thereof.
Jaeckle Fleischmann & Mugel, LLP has provided to us an
opinion to the effect that we have been organized and have
operated in conformity with the requirements for qualification
and taxation as a REIT, effective for each of our taxable years
ended December 31, 1997 through December 31, 2008, and
our current and proposed organization and method of operation
will enable us to continue to meet the requirements for
qualification and taxation as a REIT for taxable year 2009 and
thereafter. It must be emphasized that this opinion is
conditioned upon certain assumptions and representations made by
us to Jaeckle Fleischmann & Mugel, LLP as to factual
matters relating to our organization and operation and that of
our subsidiaries. In addition, this opinion is based upon our
factual representations concerning our business and properties
as described in the reports filed by us under the federal
securities laws.
Qualification and taxation as a REIT depends upon our ability to
meet on a continuing basis, through actual annual operating
results, the various requirements under the Code described in
this prospectus with regard to, among other things, the sources
of our gross income, the composition of our assets, our
distribution levels, and our diversity of stock ownership. While
we intend to operate so that we continue to qualify as a REIT,
given the highly complex nature of the rules governing REITs,
the ongoing importance of factual determinations, and the
possibility of future changes in our circumstances, no assurance
can be given that we satisfy all of the tests for REIT
qualification or will continue to do so.
If we qualify for taxation as a REIT, we generally will not be
subject to federal corporate income taxes on net income that we
currently distribute to stockholders. This treatment
substantially eliminates the double taxation (at the
corporate and stockholder levels) that generally results from
investment in a corporation.
Notwithstanding our REIT election, however, we will be subject
to federal income tax in the following circumstances. First, we
will be taxed at regular corporate rates on any undistributed
taxable income, including undistributed net capital gains.
(However, we can elect to pass through any of our
taxes paid on undistributed net capital gains income to our
stockholders on a pro rata basis.) Second, under certain
circumstances, we may be subject to the alternative
minimum tax on any items of tax preference and alternative
minimum tax adjustments. Third, if we have (i) net income
(including certain foreign currency gains recognized subsequent
to July 30, 2008) from the sale or other disposition
of foreclosure property (which is, in general,
property acquired by foreclosure or otherwise on default of a
loan secured by the property) that is held primarily for sale to
customers in the ordinary course of business or (ii) other
nonqualifying income from foreclosure property, we will be
subject to tax at the highest corporate rate on such income.
Fourth, if we have net income (including certain foreign
currency gains recognized subsequent to July 30,
2008) 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), such income will be subject to
a 100% tax. Fifth, if we should fail to satisfy the 75% gross
income test or the 95% gross income test (as discussed below),
and have nonetheless maintained our qualification as a REIT
because certain other requirements have been met, we will be
subject to a 100% tax equal to the gross income attributable to
the greater of either (i) the amount by which 75% of our
gross income exceeds the amount qualifying under the 75% test
for the taxable year or (ii) the amount by which 90% of our
gross
10
income (95% in the case of a failure occurring for our tax year
beginning January 1, 2005 and thereafter) exceeds the
amount of our income qualifying under the 95% test for the
taxable year, multiplied in either case by a fraction intended
to reflect our profitability. Sixth, if we should fail to
distribute during each calendar year at least the sum of
(i) 85% of our REIT ordinary income for such year;
(ii) 95% of our REIT capital gain net income for such year
(for this purpose such term includes capital gains which we
elect to retain but which we report as distributed to our
stockholders; see Annual Distribution
Requirements below); and (iii) any undistributed
taxable income from prior years, we would be subject to a 4%
excise tax on the excess of such required distribution over the
amounts actually distributed. Seventh, if we acquire any asset
from a C corporation (i.e., a corporation generally subject
to full corporate level tax) in a transaction in which the basis
of the asset in our hands is determined by reference to the
basis of the asset (or any other property) in the hands of the C
corporation, and we recognize gain on the disposition of such
asset during the 10 year period beginning on the date on
which such asset was acquired by us, then, to the extent of such
propertys built in gain (the excess of the fair market
value of such property at the time of acquisition by us over the
adjusted basis of such property at such time), such gain
generally will be subject to tax at the highest regular
corporate rate then applicable. Eighth, we will be subject to a
100% penalty tax on amounts received (or on certain expenses
deducted by a taxable REIT subsidiary) if arrangements among us,
our tenants and a taxable REIT subsidiary are not comparable to
similar arrangements among unrelated parties. Ninth, effective
for taxable years beginning on and after October 22, 2004,
if we fail to satisfy the 5% or the 10% assets tests, and the
failure qualifies under the Non De Minimis Exception, as
described below under Asset Tests, or if
we fail to satisfy the other asset tests, then we will have to
pay an excise tax equal to the greater of (i) $50,000; or
(ii) an amount determined by multiplying the net income
generated during a specified period by the assets that caused
the failure by the highest federal income tax applicable to
corporations. Tenth, effective for taxable years beginning on
and after October 22, 2004, if we fail to satisfy any REIT
requirements other than the income test or asset test
requirements, described below under Income
Tests and Asset Tests,
respectively, and would qualify for a reasonable cause
exception, then we will have to pay a penalty equal to $50,000
for each such failure.
Requirements
for Qualification
The Code defines a REIT as a corporation, trust or association
(i) which is managed by one or more trustees or directors;
(ii) the beneficial ownership of which is evidenced by
transferable shares or by transferable certificates of
beneficial interest; (iii) which would be taxable as a
domestic corporation but for Sections 856 through 859 of
the Code; (iv) which is neither a financial institution nor
an insurance company subject to certain provisions of the Code;
(v) the beneficial ownership of which is held by 100 or
more persons; (vi) of which not more than 50% in value of
the outstanding capital stock is owned, directly or indirectly,
by five or fewer individuals (as defined in the Code to include
certain entities) during the last half of each taxable year
after applying certain attribution rules; (vii) that makes
an election to be treated as a REIT for the current taxable year
or has made an election for a previous taxable year which has
not been revoked; and (viii) which meets certain other
tests, described below, regarding the nature of its income and
assets. The Code provides that conditions (i) through (iv),
inclusive, must be met during the entire taxable year and that
condition (v) 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. Condition
(vi) must be met during the last half of each taxable year
other than the first taxable year for which an election to
become a REIT is made. For purposes of determining stock
ownership under condition (vi), a supplemental unemployment
compensation benefits plan, a private foundation or a portion of
a trust permanently set aside or used exclusively for charitable
purposes generally is considered an individual. However, a trust
that is a qualified trust under Section 401(a) of the Code
generally is not considered an individual, and beneficiaries of
a qualified trust are treated as holding shares of a REIT in
proportion to their actuarial interests in the trust for
purposes of condition (vi). Conditions (v) and (vi) do
not apply until after the first taxable year for which an
election is made to be taxed as a REIT. We have issued
sufficient common stock with sufficient diversity of ownership
to allow us to satisfy requirements (v) and (vi). In
addition, our charter contains restrictions regarding the
transfer of our shares intended to assist us in continuing to
satisfy the share ownership requirements described in
(v) and (vi) above. See Description of Capital
Stock above. These restrictions, however, may not ensure
that
11
we will be able to satisfy these share ownership requirements.
If we fail to satisfy these share ownership requirements and do
not qualify for certain statutory relief provisions, we will
fail to qualify as a REIT.
In addition, a corporation may not elect to become a REIT unless
its taxable year is the calendar year. Our taxable year is the
calendar year.
To qualify as a REIT, we cannot have at the end of any taxable
year any undistributed earnings and profits that are
attributable to a non-REIT taxable year. We believe that we have
complied with this requirement.
For our tax years beginning prior to January 1, 1998,
pursuant to applicable Treasury Regulations, to be taxed as a
REIT, we were required to maintain certain records and request
on an annual basis certain information from our stockholders
designed to disclose the actual ownership of our outstanding
shares. We have complied with such requirements. For our tax
years beginning on or after January 1, 1998, these records
and informational requirements are no longer a condition to REIT
qualification. Instead, a monetary penalty will be imposed for
failure to comply with these requirements. If we comply with
these regulatory rules, and we do not know, or exercising
reasonable diligence would not have known, whether we failed to
meet requirement (vi) above, we will be treated as having
met the requirement.
Qualified
REIT Subsidiaries
If a REIT owns a corporate subsidiary that is a qualified
REIT subsidiary, the separate existence of that subsidiary
will be disregarded for federal income tax purposes. Generally,
a qualified REIT subsidiary is a corporation, other than a
taxable REIT subsidiary, all of the capital stock of which is
owned by the REIT. All assets, liabilities and items of income,
deduction and credit of the qualified REIT subsidiary will be
treated as assets, liabilities and items of income, deduction
and credit of the REIT itself. A qualified REIT subsidiary of
ours will not be subject to federal corporate income taxation,
although it may be subject to state and local taxation in some
states.
Taxable
REIT Subsidiaries
A taxable REIT subsidiary is a corporation in which
we directly or indirectly own stock and that elects with us to
be treated as a taxable REIT subsidiary under
Section 856(l) of the Code. In addition, if one of our
taxable REIT subsidiaries owns, directly or indirectly,
securities representing more than 35% of the vote or value of a
subsidiary corporation, that subsidiary will automatically be
treated as a taxable REIT subsidiary of ours. A taxable REIT
subsidiary is a corporation subject to federal income tax, and
state and local income tax where applicable, as a regular
C corporation. No more than 20% (or 25% for tax
years beginning after July 30, 2008) of our assets may
consist of the securities of one or more taxable REIT
subsidiaries.
Generally, a taxable REIT subsidiary can perform impermissible
tenant services without causing us to receive impermissible
tenant services income under the REIT income tests. However,
several provisions regarding the arrangements between a REIT and
its taxable REIT subsidiaries ensure that a taxable REIT
subsidiary will be subject to an appropriate level of federal
income taxation. For example, a taxable REIT subsidiary is
limited in its ability to deduct interest payments made to us.
In addition, we will be obligated to pay a 100% penalty tax on
some payments that we receive or on certain expenses deducted by
the taxable REIT subsidiary if the economic arrangements among
us, our tenants and the taxable REIT subsidiary are not
comparable to similar arrangements among unrelated parties.
We have established a wholly owned taxable REIT subsidiary,
EastGroup TRS, Inc., for the purpose of developing and selling
certain real property and we may establish other taxable REIT
subsidiaries in the future.
Income
Tests
In order for us to maintain qualification as a REIT, two
percentage tests relating to the source of our gross income must
be satisfied annually. First, at least 75% of our gross income
(excluding (i) gross income from prohibited transactions
and, (ii) real estate foreign exchange gain
recognized after July 30, 2008) for
12
each taxable year must be derived directly or indirectly from
investments relating to real property or mortgages on real
property (including rents from real property and, in
certain circumstances, interest) or from certain types of
temporary investments. Second, at least 95% of our gross income
(excluding (i) gross income from prohibited transactions
and, (ii) passive foreign exchange gain
recognized after July 30, 2008) for each taxable year
must be derived from such real property investments described
above, dividends, interest and gain from the sale or disposition
of stock or other securities that are not dealer property, or
from any combination of the foregoing. The exclusions for real
estate foreign exchange gain and passive foreign exchange gain
do not apply to certain foreign currency gain derived from
engaging in substantial and regular trading or dealing in
securities.
Gross income from certain transactions entered into by us after
October 22, 2004 but before July 30, 2008 to hedge
indebtedness we incurred to acquire or carry real estate assets
and that were properly and timely identified as hedging
transactions was not included in gross income for purposes of
the 95% income test, but was taken into account as nonqualifying
income for purposes of the 75% income test. To the extent that
we hedged with other types of financial instruments, or in other
situations, it is not entirely clear how the income from those
transactions will be treated for purposes of the income tests.
For hedging transactions entered into after July 30, 2008,
income and gain from hedging transactions will be
excluded from gross income for purposes of both the 75% and 95%
gross income tests. A hedging transaction means
either (1) any transaction entered into in the normal
course of our trade or business primarily to manage the risk of
interest rate, price changes, or currency fluctuations with
respect to borrowings made or to be made, or ordinary
obligations incurred or to be incurred, to acquire or carry real
estate assets or (2) for transactions entered into after
July 30, 2008, any transaction entered into primarily to
manage the risk of currency fluctuations with respect to any
item of income or gain that would be qualifying income under the
75% or 95% gross income test (or any property which generates
such income or gain). We will be required to clearly identify
any such hedging transaction before the close of the day on
which it was acquired, originated, or entered into and to
satisfy other identification requirements. We intend to
structure any hedging transactions in a manner that does not
jeopardize our status as a REIT.
Rents received by us will qualify as rents from real
property in satisfying the above gross income tests only
if several conditions are met. First, the amount of rent must
not be based in whole or in part on the income or profits of any
person. However, amounts received or accrued generally will not
be excluded from rents from real property solely by
reason of being based on a fixed percentage or percentages of
receipts or sales.
Second, rents received from a tenant will not qualify as
rents from real property if we, or a direct or
indirect owner of 10% or more of our stock, actually or
constructively owns 10% or more of such tenant. We may, however,
lease our properties to a taxable REIT subsidiary and rents
received from that subsidiary will not be disqualified from
being rents from real property by reason of our
ownership interest in the subsidiary if at least 90% of the
property in question is leased to unrelated tenants and the rent
paid by the taxable REIT subsidiary is substantially comparable
to the rent paid by the unrelated tenants for comparable space.
However, if we own more than 50% of the vote or value of the
taxable REIT subsidiary, and the rent payable is increased
pursuant to a lease renegotiation, then the increase in rent
will not be treated as qualifying rent.
Third, if rent attributable to personal property that is leased
in connection with a lease of real property is greater than 15%
of the total rent received under the lease, then the portion of
rent attributable to such personal property will not qualify as
rents from real property. Under prior law, this 15%
test was based on the relative adjusted tax basis of both the
real and personal property. For taxable years beginning after
December 31, 2000, the test is based on the relative fair
market value of the real and personal property.
Generally, for rents to qualify as rents from real
property for the purposes of the gross income tests, we
are only allowed to provide services that are both usually
or customarily rendered in connection with the rental of
real property and not otherwise considered rendered to the
occupant. Income received from any other service will be
treated as impermissible tenant service income
unless the service is provided through an independent contractor
that bears the expenses of providing the services and from whom
we derive no revenue or through a taxable REIT subsidiary,
subject to specified limitations. The amount of impermissible
13
tenant service income we receive is deemed to be the greater of
the amount actually received by us or 150% of our direct cost of
providing the service. If the impermissible tenant service
income exceeds 1% of our total income from a property, then all
of the income from that property will fail to qualify as rents
from real property. If the total amount of impermissible tenant
service income from a property does not exceed 1% of our total
income from that property, the income will not cause the rent
paid by tenants of that property to fail to qualify as rents
from real property, but the impermissible tenant service income
itself will not qualify as rents from real property.
Our investment in commercial and industrial properties generally
gives rise to rental income that is qualifying income for
purposes of the 75% and 95% gross income tests. We do not
receive any rent that is based on the income or profits of any
person. In addition, we do not own, directly or indirectly, 10%
or more of any tenant (other than, perhaps, a tenant that is a
taxable REIT subsidiary where other requirements are satisfied).
Furthermore, we believe that any personal property rented in
connection with our facilities is well within the 15%
restriction. Moreover, we do not provide services, other than
within the 1% de minimis exception described above, to our
tenants that are not customarily furnished or rendered in
connection with the rental of property, other than through an
independent contractor or a taxable REIT subsidiary. Finally, we
anticipate that income on our other investments will not result
in our failing the 75% or 95% gross income test for any year.
If we fail to satisfy one or both of the 75% or 95% gross income
tests for any taxable year beginning after October 22,
2004, we may nevertheless qualify as a REIT for such year if we
are entitled to relief under certain provisions of the Code.
These relief provisions generally will be available if our
failure to meet such tests was due to reasonable cause and not
due to willful neglect, and if we timely file a schedule
describing each item of our gross income in accordance with
Treasury Regulations.
We cannot predict, however, whether in all circumstances we
would qualify for the relief provisions. In addition, as
discussed above in Taxation of Our Company as
a REIT, even if the relief provisions were to apply, we
would incur a 100% tax on the gross income attributable to the
greater of (i) the amount by which we fail the 75% gross
income test and (ii) the amount by which 90% (95% in the
case of a failure occurring during a taxable year beginning
after October 22, 2004), in each case, of our gross income
exceeds the amount of qualifying income under the 95% gross
income test, multiplied in either case by a fraction intended to
reflect our profitability.
Asset
Tests
At the close of each quarter of our taxable year, we must
satisfy six tests relating to the nature of our assets.
1. At least 75% of the value of our total assets must be
represented by real estate assets, cash, cash items
(which beginning for tax years after July 30, 2008 includes
certain foreign currency) and government securities. Our real
estate assets include, for this purpose, our allocable share of
real estate assets held by the partnerships in which we own an
interest, and the noncorporate subsidiaries of these
partnerships, as well as stock or debt instruments held for less
than one year purchased with the proceeds of an offering of our
shares or a public offering of our long-term debt.
2. Not more than 25% of our total assets may be represented
by securities, other than those in the 75% asset class.
3. The value of any one nongovernment issuers
securities owned by us may not exceed 5% of the value of our
total assets.
4. We may not own more than 10% of any one issuers
outstanding voting securities.
5. We may not own more than 10% of the total value of the
outstanding securities of any one issuer.
6. Not more than 20% (or 25% for tax years beginning after
July 30, 2008) of our total assets may be represented
by the securities of one or more taxable REIT subsidiaries.
14
For purposes of these asset tests, the securities of qualified
REIT subsidiaries are not taken into account, and any assets
owned by our qualified REIT subsidiaries are treated as owned
directly by us.
For purposes of these asset tests, the term
securities does not include stock in another REIT,
equity or debt securities of a qualified REIT subsidiary or
taxable REIT subsidiary, mortgage loans that constitute real
estate assets or equity interests in a partnership or any entity
that is disregarded for federal income tax purposes. For
purposes of the 10% value test, debt instruments issued by a
partnership are not classified as securities to the
extent of our interest as a partner in such partnership (based
on our proportionate share of the partnerships equity
interests and certain debt securities) or if at least 75% of the
partnerships gross income, excluding income from
prohibited transactions, is qualifying income for purposes of
the 75% gross income test. For purposes of the 10% value test,
the term securities also does not include securities
issued by another REIT, certain straight debt
securities (for example, qualifying debt securities of a
corporation of which we own no equity interest), loans to
individuals or estates, and accrued obligations to pay rent.
With respect to each issuer in which we currently own an
interest that does not qualify as a REIT, a qualified REIT
subsidiary or a taxable REIT subsidiary, we believe that our pro
rata share of the value of the securities, including unsecured
debt, of any such issuer does not exceed 5% of the total value
of our assets and that we comply with the 10% voting securities
limitation and 10% value limitation (taking into account the
straight debt exceptions with respect to certain
issuers). In addition, we believe that our securities of taxable
REIT subsidiaries do not exceed 20% (or, beginning with tax
years after July 30, 2008, 25%) of the value of our total
assets. With respect to our compliance with each of these asset
tests, however, we cannot provide any assurance that the
Internal Revenue Service might not disagree with our
determination.
We will monitor the status of our assets for purposes of the
various asset tests and will manage our portfolio in order to
comply at all times with such tests. If we fail to satisfy the
asset tests at the end of a calendar quarter, we will not lose
our REIT status if one of the following exceptions applies:
|
|
|
|
|
we satisfied the asset tests at the end of the preceding
calendar quarter, and the discrepancy between the value of our
assets and the asset test requirements arose from changes in the
market values of our assets and was not wholly or partly caused
by the acquisition of one or more nonqualifying assets; or
|
|
|
|
we eliminate any discrepancy within 30 days after the close
of the calendar quarter in which it arose.
|
Moreover, if we fail to satisfy the asset tests at the end of a
calendar quarter during a taxable year beginning after
October 22, 2004, we will not lose our REIT status if one
of the following additional exceptions applies:
|
|
|
|
|
De Minimis Exception. The failure is due to a
violation of the 5% or 10% asset tests referenced above and is
de minimis (for this purpose, a de
minimis failure is one that arises from our ownership of
assets the total value of which does not exceed the lesser of 1%
of the total value of our assets at the end of the quarter in
which the failure occurred and $10 million), and we either
dispose of the assets that caused the failure or otherwise
satisfy the asset tests within 6 months of the last day of
the quarter in which we identify the failure; or
|
|
|
|
Non De Minimis Exception. All of the following
requirements are satisfied: (i) the failure does not
qualify for the De Minimis Exception, (ii) the failure is
due to reasonable cause and not willful neglect, (iii) we
file a schedule in accordance with Treasury Regulations
providing a description of each asset that caused the failure,
(iv) we either dispose of the assets that caused the
failure or otherwise satisfy the asset tests within
6 months of the last day of the quarter in which we
identify the failure, and (v) we pay an excise tax as
described in Taxation of Our Company as a
REIT.
|
Annual
Distribution Requirements
In order to qualify as a REIT, we are required to distribute
dividends (other than capital gain dividends) to our
stockholders in an amount at least equal to (i) the sum of
(a) 90% of our REIT taxable income (computed
without regard to the dividends paid deduction and our net
capital gain) and (b) 90% of the net income (after tax), if
any, from foreclosure property, minus (ii) the sum of
certain items of noncash income
15
over 5% of our REIT taxable income. Such distributions generally
must be paid in the taxable year to which they relate. Dividends
may be paid in the following year in two circumstances. First,
dividends may be declared in the following year if the dividends
are declared before we timely file our tax return for the year
and if made before the first regular dividend payment after such
declaration. Second, if we declare a dividend in October,
November or December of any year with a record date in one of
these months and pay the dividend on or before January 31 of the
following year, we will be treated as having paid the dividend
on December 31 of the year in which the dividend was declared.
To the extent that we do not distribute all of our net capital
gain or distribute at least 90%, but less than 100%, of our
REIT taxable income, as adjusted, we will be subject
to tax on the nondistributed amount at regular capital gains and
ordinary corporate tax rates. Furthermore, if we should fail to
distribute during each calendar year at least the sum of
(i) 85% of our REIT ordinary income for such year;
(ii) 95% of our REIT capital gain net income for such year;
and (iii) any undistributed taxable income from prior
periods, we will be subject to a 4% excise tax on the excess of
such required distribution over the amounts actually distributed.
We may elect to retain and pay tax on our net long-term capital
gains and require our stockholders to include their
proportionate share of such undistributed net capital gains in
their income. If we make such election, our stockholders would
receive a tax credit attributable to their share of the capital
gains tax paid by us, and would receive an increase in the basis
of their shares in us in an amount equal to the
stockholders share of the undistributed net long-term
capital gain reduced by the amount of the credit. Further, any
undistributed net long-term capital gains that are included in
the income of our stockholders pursuant to this rule will be
treated as distributed for purposes of the 4% excise tax.
We have made and intend to continue to make timely distributions
sufficient to satisfy the annual distribution requirements. It
is possible, however, that we, from time to time, may not have
sufficient cash or liquid assets to meet the distribution
requirements due to timing differences between the actual
receipt of income and actual payment of deductible expenses and
the inclusion of such income and deduction of such expenses in
arriving at our taxable income, or if the amount of
nondeductible expenses such as principal amortization or capital
expenditures exceeds the amount of noncash deductions. In the
event that such timing differences occur, in order to meet the
distribution requirements, we may arrange for short term, or
possibly long term, borrowing to permit the payment of required
dividends. If the amount of nondeductible expenses exceeds
noncash deductions, we may refinance our indebtedness to reduce
principal payments and may borrow funds for capital
expenditures. In addition, pursuant to recently issued Revenue
Procedure
2009-15, we
are permitted to make taxable distributions of our shares (in
lieu of cash) if (1) such distribution is declared with
respect to a taxable year ending on or before December 31,
2009; (2) each of our stockholders is permitted to elect to
receive the stockholders entire entitlement under the
declaration in either money or shares of equivalent value
subject to a limitation on the amount of money to be distributed
in the aggregate to all stockholders; provided that (i) the
amount of money to be distributed is not less than 10% of the
aggregate distribution so declared, and (ii) if too many
stockholders elect to receive money, each stockholder electing
to receive money will receive a pro rata amount of money
corresponding to the stockholders respective entitlement
under the declaration, but in no event will any stockholder
electing to receive money receive less than 10% of its
entitlement in money under the declaration; and (3) the
calculation of the number of shares to be received by any
stockholder will be determined, as close as practicable to the
payment date, based upon a formula utilizing market prices that
is designed to equate in value the number of shares to be
received with the amount of money that could be received instead.
Under certain circumstances, we may be able to rectify a failure
to meet the distribution requirement for a year by paying
deficiency dividends to stockholders in a later year
that may be included in our deduction for dividends paid for the
earlier year. Thus, we may avoid being taxed on amounts
distributed as deficiency dividends; however, we will be
required to pay interest to the Internal Revenue Service based
upon the amount of any deduction taken for deficiency dividends.
Prohibited
Transaction Rules
A REIT will incur a 100% penalty tax on the net income derived
from a sale or other disposition of property, other than
foreclosure property, that the REIT holds primarily for sale to
customers in the ordinary
16
course of a trade or business (a prohibited
transaction). We believe that none of our assets is held
for sale to customers and that a sale of any of our assets would
not be in the ordinary course of its business. Whether a REIT
holds an asset primarily for sale to customers in the
ordinary course of a trade or business depends, however,
on the facts and circumstances in effect from time to time,
including those related to a particular asset. Although we will
attempt to ensure that none of our sales of property will
constitute a prohibited transaction, we cannot assure investors
that none of such sales will be so treated. Under a safe harbor
provision in the Internal Revenue Code, however, income from
certain sales of real property held by the REIT will not be
treated as income from a prohibited transaction if the following
requirements are met:
|
|
|
|
|
the REIT has held the property for not less than four years (or,
for sales made after July 30, 2008, two years);
|
|
|
|
the aggregate expenditures made by the REIT, during the four
year period (or, for sales made after July 30, 2008,
two-year period) preceding the date of the sale that are
includable in the basis of the property do not exceed 30% of the
net selling price of the property;
|
|
|
|
either (1) during the year in question, the REIT did not
make more than seven sales of property other than foreclosure
property or sales to which Section 1033 of the Code
applies, (2) the aggregate adjusted bases of all such
property sold by the REIT during the year did not exceed 10% of
the aggregate bases of all the assets of the REIT at the
beginning of the year or (3) for sales made after
July 30, 2008, the aggregate fair market value of all such
property sold by the REIT during the year did not exceed 10% of
the aggregate fair market value of all of the assets of the REIT
at the beginning of the year;
|
|
|
|
in the case of property not acquired through foreclosure or
lease termination, the REIT has held the property for at least
four years (or, for sales made after July 30, 2008, two
years) for the production of rental income; and
|
|
|
|
if the REIT has made more than seven sales of non-foreclosure
property during the taxable year, substantially all of the
marketing and development expenditures with respect to the
property were made through an independent contractor from whom
the REIT derives no income.
|
Failure
to Qualify
Effective for taxable years beginning after October 22,
2004, if we fail to qualify as a REIT and such failure is not an
asset test or income test failure, we generally will be eligible
for a relief provision if the failure is due to reasonable cause
and not willful neglect and we pay a penalty of $50,000 with
respect to such failure.
If we fail to qualify for taxation as a REIT in any taxable year
and no relief provisions apply, we will be subject to tax
(including any applicable alternative minimum tax) on our
taxable income at regular corporate rates. Distributions to
stockholders in any year in which we fail to qualify will not be
deductible by us, nor will such distributions be required to be
made. In such event, to the extent of our current and
accumulated earnings and profits, all distributions to
stockholders will be taxable as ordinary income, and, subject to
certain limitations in the Code, corporate distributees may be
eligible for the dividends received deduction. Unless entitled
to relief under specific statutory provisions, we will also be
disqualified from taxation as a REIT for the four taxable years
following the year during which qualification was lost. It is
not possible to state whether in all circumstances we would be
entitled to such statutory relief.
Tax
Aspects of Our Investments in Partnerships
Many of our investments are held through subsidiary partnerships
and limited liability companies. This structure may involve
special tax considerations. These tax considerations include the
following:
1. the status of each subsidiary partnership and limited
liability company taxed as a partnership (as opposed to an
association taxable as a corporation) for income tax
purposes; and
2. the taking of actions by any of the subsidiary
partnerships or limited liability companies that could adversely
affect our qualification as a REIT.
17
We believe that each of the subsidiary partnerships and each of
the limited liability companies that are not disregarded
entities for federal income tax purposes will be treated for tax
purposes as partnerships (and not as associations taxable as
corporations). If any of the partnerships were to be treated as
a corporation, it would be subject to an entity level tax on its
income. In such a situation, the character of our assets and
items of gross income would change, which could preclude us from
satisfying the asset tests and possibly the income tests, and in
turn prevent us from qualifying as a REIT. In addition, if any
of the partnerships were treated as a corporation, it is likely
that we would hold more than 10% of the voting power or value of
the entity and would fail to qualify as a REIT. See
Asset Tests.
A REIT that is a partner in a partnership will be deemed to own
its proportionate share of the assets of the partnership and
will be deemed to earn its proportionate share of the
partnerships income. In addition, the assets and gross
income of the partnership retain the same character in the hands
of the REIT for purposes of the gross income and asset tests
applicable to REITs. Thus, our proportionate share of the assets
and items of income of each subsidiary partnership and limited
liability company that is treated as a partnership for federal
income tax purposes is treated as our assets and items of income
for purposes of applying the asset and income tests. We have
sufficient control over all of the subsidiaries that are treated
as partnerships for federal income tax purposes to protect our
REIT status and intend to operate them in a manner that is
consistent with the requirements for our qualification as a REIT.
Taxation
of Stockholders
Taxation of Taxable U.S. Stockholders. As
used in the remainder of this discussion, the term
U.S. Stockholder means a beneficial owner of
equity stock that is for United States federal income tax
purposes:
1. a citizen or resident, as defined in
Section 7701(b) of the Code, of the United States;
2. a corporation, or other entity treated as a corporation
for federal income tax purposes, created or organized in or
under the laws of the United States or any state or the District
of Columbia;
3. an estate the income of which is subject to United
States federal income taxation regardless of its source; or
4. in general, a trust subject to the primary supervision
of a United States court and the control of one or more United
States persons.
If an entity treated as a partnership for U.S. federal
income tax purposes holds our stock, the tax treatment of a
partner in the partnership will generally depend upon the status
of the partner and the activities of the partnership.
Partnerships that hold our stock, and partners in such
partnerships, should consult their tax advisors regarding the
tax consequences of the ownership and disposition of our stock.
As long as we qualify as a REIT, distributions made to our
taxable U.S. Stockholders out of current or accumulated
earnings and profits (and not designated as capital gain
dividends or retained capital gains) will be taken into account
by them as ordinary income, and corporate stockholders will not
be eligible for the dividends received deduction as to such
amounts. Distributions in excess of current and accumulated
earnings and profits will not be taxable to a stockholder to the
extent that they do not exceed the adjusted basis of such
stockholders stock, but rather will reduce the adjusted
basis of such shares (but not below zero) as a return of
capital. To the extent that such distributions exceed the
adjusted basis of a stockholders stock, they will be
included in income as long-term capital gain (or short-term
capital gain if the shares have been held for one year or less).
In addition, any dividend declared by us in October, November or
December of any year payable to a stockholder of record on a
specific date in any such month shall be treated as both paid by
us and received by the stockholder on December 31 of such year,
provided that the dividend is actually paid by us during January
of the following calendar year. For purposes of determining what
portion of a distribution is attributable to current or
accumulated earnings and profits, earnings and profits will
first be allocated to distributions made to holders of the
shares of preferred stock. Stockholders may not include in their
individual income tax returns any net operating losses or
capital losses of ours.
18
Distributions that we properly designate as capital gain
dividends will be taxable to stockholders 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 held for greater than one year. If we designate any
portion of a dividend as a capital gain dividend, a
U.S. Stockholder will receive an Internal Revenue Service
Form 1099-DIV
indicating the amount that will be taxable to the stockholder as
capital gain. However, stockholders that are corporations may be
required to treat up to 20% of certain capital gain dividends as
ordinary income. Noncorporate taxpayers are generally taxed at a
maximum rate of 15% on net long-term capital gain (generally,
the excess of net long-term capital gain over net short-term
capital loss) attributable to gains realized on the sale of
property held for greater than one year. However, a portion of
capital gain dividends received by noncorporate taxpayers may be
subject to tax at a 25% rate to the extent attributable to
certain gains realized on the sale of real property.
Distributions we make and gain arising from the sale or exchange
by a stockholder of shares of our stock will not be treated as
passive activity income, and, as a result, stockholders
generally will not be able to apply any passive
losses against such income or gain. Distributions we make
(to the extent they do not constitute a return of capital)
generally will be treated as investment income for purposes of
computing the investment interest limitation. Gain arising from
the sale or other disposition of our stock (or distributions
treated as such) will not be treated as investment income under
certain circumstances.
Upon any taxable sale or other disposition of our stock, a
U.S. Stockholder will recognize gain or loss for federal
income tax purposes in an amount equal to the difference between
|
|
|
|
|
the amount of cash and the fair market value of any property
received on such disposition; and
|
|
|
|
the U.S. Stockholders adjusted tax basis in such
stock for tax purposes.
|
Gain or loss will be capital gain or loss , and will be
long-term capital gain or loss if the U.S. Stockholder held
the stock for more than one year. Noncorporate
U.S. Stockholders are generally taxable at a current
maximum rate of 15% on long-term capital gain. The Internal
Revenue Service has the authority to prescribe, but has not yet
prescribed, regulations that would apply a capital gain tax rate
of 25% to the portion of capital gain realized by a noncorporate
U.S. Stockholder on the sale of REIT stock that corresponds
to the REITs unrecaptured Section 1250
gain. U.S. Stockholders are urged to consult with
their own tax advisors with respect to their capital gain tax
liability. A corporate U.S. Stockholder will be subject to
tax at a maximum rate of 35% on capital gain from the sale of
our stock regardless of its holding period.
In general, any loss upon a sale or exchange of our stock by a
U.S. Stockholder who has held such stock for six months or
less (after applying certain holding period rules) will be
treated as a long-term capital loss to the extent of
distributions (actually made or deemed made in accordance with
the discussion above) from us required to be treated as
long-term capital gain.
The maximum individual tax rate for long-term capital gains and
for certain qualified dividends is currently 15% through taxable
years beginning on or before December 31, 2010. Absent
legislative action, in 2011 the maximum tax rate on long term
capital gains will return to 20% and the maximum rate on
dividends will be 39.6%. Because we are not generally subject to
federal income tax on the portion of our REIT taxable income or
capital gains distributed to our stockholders, our dividends
will generally not be eligible for the 15% tax rate on qualified
dividends. As a result, our ordinary REIT dividends will
continue to be taxed at the higher tax rates applicable to
ordinary income. However, the 15% tax rate for long-term capital
gains and dividends will generally apply to:
1. your long-term capital gains, if any, recognized on the
disposition of our shares;
2. our distributions designated as long-term capital gain
dividends (except to the extent attributable to
unrecaptured Section 1250 gain, in which case
such distributions would continue to be subject to a 25% tax
rate);
3. our dividends attributable to dividends received by us
from non-REIT corporations, such as taxable REIT
subsidiaries; and
19
4. our dividends to the extent attributable to income upon
which we have paid corporate income tax (e.g., to the extent
that we distribute less than 100% of our taxable income).
Economic Accrual of Redemption Premium on Preferred
Stock. For federal income tax purposes, if a
corporation issues preferred stock that may be redeemed at a
price that is more than a de minimis amount higher than its
issue price, the difference may be treated as a redemption
premium that is taxable to the holder on an annual
economic accrual basis. If a U.S. Stockholder recognizes
income as a result of redemption premium on the preferred stock,
the holders tax basis in the preferred stock will increase
by the amount included in the holders gross income.
Taxation of Tax-Exempt Stockholders. Provided
that a tax-exempt stockholder has not held its stock as
debt financed property within the meaning of the
Code and such stock is not otherwise used in a trade or
business, the dividend income from us will not be unrelated
business taxable income, referred to as UBTI, to a tax-exempt
stockholder. Similarly, income from the sale of stock will not
constitute UBTI unless the tax-exempt stockholder has held its
stock as debt financed property within the meaning of the Code
or has used the stock in a trade or business. However, for a
tax-exempt stockholder that is a social club, voluntary employee
benefit association, supplemental unemployment benefit trust, or
qualified group legal services plan exempt from federal income
taxation under Sections 501(c)(7), (c)(9), (c)(17) and
(c)(20) of the Code, respectively, or a single parent
title-holding corporation exempt under Section 501(c)(2) of
the Code the income of which is payable to any of the
aforementioned tax-exempt organizations, income from an
investment in us will constitute UBTI unless the organization
properly sets aside or reserves such amounts for purposes
specified in the Code. These tax exempt stockholders should
consult their own tax advisors concerning these set
aside and reserve requirements.
A qualified trust (defined to be any trust described
in Section 401(a) of the Code and exempt from tax under
Section 501(a) of the Code) that holds more than 10% of the
value of the shares of a REIT may be required, under certain
circumstances, to treat a portion of distributions from the REIT
as UBTI. This requirement will apply for a taxable year only if
(i) the REIT satisfies the requirement that not more than
50% of the value of its shares be held by five or fewer
individuals (the five or fewer requirement) only by
relying on a special look through rule under which
shares held by qualified trust stockholders are treated as held
by the beneficiaries of such trusts in proportion to their
actuarial interests therein; and (ii) the REIT is
predominantly held by qualified trusts. A REIT is
predominantly held by qualified trusts if either
(i) a single qualified trust holds more than 25% of the
value of the REIT shares, or (ii) one or more qualified
trusts, each owning more than 10% of the value of the REIT
shares, hold in the aggregate more than 50% of the value of the
REIT shares. If the foregoing requirements are met, the
percentage of any REIT dividend treated as UBTI to a qualified
trust that owns more than 10% of the value of the REIT shares is
equal to the ratio of (i) the UBTI earned by the REIT
(computed as if the REIT were a qualified trust and therefore
subject to tax on its UBTI) to (ii) the total gross income
(less certain associated expenses) of the REIT for the year in
which the dividends are paid. A de minimis exception applies
where the ratio set forth in the preceding sentence is less than
5% for any year.
The provisions requiring qualified trusts to treat a portion of
REIT distributions as UBTI will not apply if the REIT is able to
satisfy the five or fewer requirement without relying on the
look through rule. The restrictions on ownership of
stock in our charter should prevent application of the foregoing
provisions to qualified trusts purchasing our stock, absent a
waiver of the restrictions by the board of directors.
Taxation of
Non-U.S. Stockholders. The
rules governing U.S. federal income taxation of nonresident
alien individuals, foreign corporations and other foreign
stockholders (collectively,
Non-U.S. Stockholders)
are complex, and no attempt will be made herein to provide more
than a limited summary of such rules. The discussion does not
consider any specific facts or circumstances that may apply to a
particular
Non-U.S. Stockholder.
Prospective
Non-U.S. Stockholders
should consult with their own tax advisors to determine the
impact of U.S. federal, state and local income tax laws
with regard to an investment in our common stock, including any
reporting requirements.
Distributions that are not attributable to gain from sales or
exchanges by us of U.S. real property interests and not
designated by us as capital gain dividends or retained capital
gains will be treated as dividends of
20
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 a withholding tax equal to 30% of
the gross amount of the distribution unless an applicable tax
treaty reduces such rate. However, if income from the investment
in our stock is treated as effectively connected with the
Non-U.S. Stockholders
conduct of a U.S. trade or business, the
Non-U.S. Stockholder
generally will be subject to a tax at graduated rates in the
same manner as U.S. Stockholders are taxed with respect to
such dividends (and may also be subject to a branch profits tax
of up to 30% if the stockholder is a foreign corporation). We
expect to withhold U.S. federal income tax at the rate of
30% on the gross amount of any dividends paid to a
Non-U.S. Stockholder
that are not designated as capital gain dividends, unless
(i) a lower treaty rate applies and the
Non-U.S. Stockholder
files an IRS
Form W-8BEN
evidencing eligibility for that reduced rate with us or
(ii) the
Non-U.S. Stockholder
files an IRS
Form W-8ECI
with us claiming that the distribution is income treated as
effectively connected to a U.S. trade or business. Such
forms shall be filed every three years unless the information on
the form changes before that date.
Unless our stock is considered a U.S. real property
interest, as described below, distributions in excess of our
current and accumulated earnings and profits will not be taxable
to a stockholder to the extent that they do not exceed the
adjusted basis of the stockholders stock, but rather will
reduce the adjusted basis of such shares. To the extent that
such distributions exceed the adjusted basis of a
Non-U.S. Stockholders
shares, they will give rise to tax liability if the
Non-U.S. Stockholder
would otherwise be subject to tax on any gain from the sale or
disposition of his or her stock, as described below. If it
cannot be determined at the time that such a distribution is
made whether or not such distribution will be in excess of
current and accumulated earnings and profits, the distribution
will be subject to withholding at the rate applicable to
dividends. However, the
Non-U.S. Stockholder
may seek a refund of such amounts from the Internal Revenue
Service if it is subsequently determined that such distribution
was, in fact, in excess of our current and accumulated earnings
and profits. If our stock is considered a U.S. real
property interest, distributions in excess of our current and
accumulated earnings and profits will be subject to a 10%
withholding tax and may be subject to additional taxation under
FIRPTA, as described below. The 10% withholding tax will not
apply, however, to distributions already subject to 30%
withholding.
Distributions that are attributable to gain from sales or
exchanges by us of U.S. real property interests will be
taxed to a
Non-U.S. Stockholder
under the provisions of the Foreign Investment in Real Property
Tax Act of 1980 (FIRPTA). Subject to the discussion
in the next paragraph, under FIRPTA, these distributions would
be taxed to a
Non-U.S. Stockholder
as if such gain were effectively connected with a
U.S. business. Thus,
Non-U.S. Stockholders
would be taxed on such distributions at the normal capital gain
rates applicable to U.S. Stockholders (subject to
applicable alternative minimum tax and a special alternative
minimum tax in the case of nonresident alien individuals). Also,
distributions subject to FIRPTA may be subject to a 30% branch
profits tax in the hands of a corporate
Non-U.S. Stockholder
not entitled to treaty relief or exemption. If the foregoing
rules applied, we would be required by applicable Treasury
Regulations to withhold 35% of any distribution that could be
designated by us as a capital gain dividend. This amount is
creditable against the
Non-U.S. Stockholders
FIRPTA tax liability.
However, for any taxable year beginning after October 22,
2004, a
Non-U.S. Stockholder
that owns no more than 5% of our common stock at all times
during the one year period preceding the distribution will not
be subject to 35% FIRPTA withholding with respect to
distributions that are attributable to gain from our sale or
exchange of U.S. real property interests, provided that our
common stock continues to be regularly traded on an established
securities market located in the United States. Instead, any
distributions made to such
Non-U.S. Stockholder
will be subject to the general withholding rules discussed above
in Taxation of
Non-U.S. Stockholders,
which generally impose a withholding tax equal to 30% of the
gross amount of each distribution (unless reduced by treaty).
Gain recognized by a
Non-U.S. Stockholder
upon the sale or exchange of our stock generally would not be
subject to U.S. taxation unless:
|
|
|
|
|
the investment in our stock is effectively connected with the
Non-U.S. Stockholders
U.S. trade or business, in which case the
Non-U.S. Stockholder
will be subject to the same treatment as U.S. Stockholders
with respect to any gain;
|
21
|
|
|
|
|
the
Non-U.S. Stockholder
is a non-resident alien individual who is present in the United
States for 183 days or more during the taxable year and has
a tax home in the United States, in which case the non-resident
alien individual will be subject to a 30% tax on the
individuals net capital gains for the taxable year; or
|
|
|
|
our stock constitutes a U.S. real property interest within
the meaning of FIRPTA, as described below.
|
Our stock will not constitute a U.S. real property interest
if we are a domestically-controlled REIT. We will be a
domestically-controlled REIT if, at all times during a specified
testing period, less than 50% in value of our stock is held
directly or indirectly by
Non-U.S. Stockholders.
We believe that, currently, we are a domestically controlled
REIT and, therefore, that the sale of our stock would not be
subject to taxation under FIRPTA. Because our stock is publicly
traded, however, we cannot guarantee that we are or will
continue to be a domestically-controlled REIT.
Even if we do not qualify as a domestically-controlled REIT at
the time a
Non-U.S. Stockholder
sells our stock, gain arising from the sale still would not be
subject to FIRPTA tax if:
|
|
|
|
|
the class or series of shares sold is considered regularly
traded under applicable Treasury Regulations on an established
securities market, such as the NYSE, located in the United
States; and
|
|
|
|
the selling
Non-U.S. Stockholder
owned, actually or constructively, 5% or less in value of the
outstanding class or series of stock being sold throughout the
five-year period ending on the date of the sale or exchange.
|
If gain on the sale or exchange of our stock were subject to
taxation under FIRPTA, the
Non-U.S. Stockholder
would be subject to regular U.S. federal income tax with
respect to any gain in the same manner as a taxable
U.S. Stockholder, subject to any applicable alternative
minimum tax and special alternative minimum tax in the case of
non-resident alien individuals.
Backup
Withholding Tax and Information Reporting
U.S. Stockholders. In general,
information-reporting requirements will apply to certain
U.S. Stockholders with regard to payments of dividends on
our stock and payments of the proceeds of the sale of our stock,
unless an exception applies.
The payor will be required to withhold tax on such payments at
the rate of 28% through 2010 (absent legislative action, 31% in
2011 and thereafter) if (i) the payee fails to furnish a
taxpayer identification number, or TIN, to the payor or to
establish an exemption from backup withholding, (ii) the
Internal Revenue Service notifies the payor that the TIN
furnished by the payor is incorrect (iii) there has been a
notified payee under-reporting with respect to interest,
dividends or original issue discount described in
Section 3406(c) of the Code, or (iv) there has been a
failure of the payee to certify under the penalty of perjury
that the payee is not subject to backup withholding under the
Code.
Some holders, including corporations, may be exempt from backup
withholding. Any amounts withheld under the backup withholding
rules from a payment to a holder will be allowed as a credit
against the holders U.S. federal income tax and may
entitle the holder to a refund, provided that the required
information is furnished to the Internal Revenue Service.
Non-U.S. Stockholders. Generally,
information reporting will apply to payments of dividends on our
stock, interest, including original issue discount, and backup
withholding as described above for a U.S. Stockholder,
unless the payee certifies that it is not a U.S. person or
otherwise establishes an exemption.
The payment of the proceeds from the disposition of our stock to
or through the U.S. office of a U.S. or foreign broker
will be subject to information reporting and backup withholding
as described above for U.S. Stockholders unless the
Non-U.S. Stockholder
satisfies the requirements necessary to be an exempt
Non-U.S. Stockholder
or otherwise qualifies for an exemption. The proceeds of a
disposition by a
Non-U.S. Stockholder
of our stock to or through a foreign office of a broker
generally will not be subject to information reporting or backup
withholding. However, if the broker is a U.S. person, a
controlled foreign
22
corporation for U.S. tax purposes, a foreign person 50% or
more of whose gross income from all sources for specified
periods is from activities that are effectively connected with a
U.S. trade or business, a foreign partnership if partners
who hold more than 50% of the interests in the partnership are
U.S. persons, or a foreign partnership that is engaged in
the conduct of a trade or business in the U.S., then information
reporting generally will apply as though the payment was made
through a U.S. office of a U.S. or foreign broker.
Applicable Treasury Regulations provide presumptions regarding
the status of holders when payments to the holders cannot be
reliably associated with appropriate documentation provided to
the payor. Under these Treasury Regulations, some holders are
required to provide new certifications with respect to payments
made after December 31, 2000. Because the application of
these Treasury Regulations varies depending on the
stockholders particular circumstances, you are advised to
consult your tax advisor regarding the information reporting
requirements applicable to you.
State and
Local Taxes
We and our stockholders 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 (although
U.S. Stockholders who are individuals generally should not
be required to file state income tax returns outside of their
state of residence with respect to our operations and
distributions). The state and local tax treatment of us and our
stockholders may not conform to the federal income tax
consequences discussed above. Consequently, prospective
stockholders should consult their own tax advisors regarding the
effect of state and local tax laws on an investment in our stock.
Sunset of
Tax Provisions and Possible Legislative or Other Actions
Affecting Tax Considerations
Several of the tax considerations described herein are subject
to a sunset provision. The sunset provision generally provides
that for taxable years beginning after December 31, 2010,
certain provisions that are currently in the Code will revert
back to a prior version of those provisions. These provisions
include provisions related to qualified dividend income, the
application of the reduced 15% rate to long-term capital gains
and qualified dividend income and other tax rates described
herein. The impact of this reversion generally is not discussed
herein. Consequently, prospective security holders should
consult their own tax advisors regarding the effect of sunset
provisions on an investment in our stock.
In addition, prospective investors should recognize that the
present U.S. federal income tax treatment of an investment
in our stock 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 Internal Revenue Service and the U.S. Treasury
Department, resulting in revisions of Treasury 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 stock.
PLAN OF
DISTRIBUTION
The securities being offered by this prospectus may be sold by
us or by a selling securityholder:
|
|
|
|
|
through agents;
|
|
|
|
to or through underwriters;
|
|
|
|
through broker-dealers (acting as agent or principal);
|
|
|
|
directly by us or a selling securityholder to purchasers,
through a specific bidding or auction process or otherwise;
|
|
|
|
through a combination of any such methods of sale; or
|
|
|
|
through any other methods described in a prospectus supplement.
|
23
The distribution of securities may be effected, from time to
time, in one or more transactions, including: (a) block
transactions (which may involve crosses) and transactions on the
New York Stock Exchange or any other organized market where the
securities may be traded; (b) purchases by a broker-dealer
as principal and resale by the broker-dealer for its own account
pursuant to a prospectus supplement; (c) ordinary brokerage
transactions and transactions in which a broker-dealer solicits
purchasers; (d) sales at the market to or
through a market maker or into an existing trading market, on an
exchange or otherwise, for securities; and (e) sales in
other ways not involving market makers or established trading
markets, including direct sales to purchasers. The securities
may be sold at a fixed price or prices, which may be changed, or
at market prices prevailing at the time of sale, at prices
relating to the prevailing market prices or at negotiated
prices. The consideration may be cash or another form negotiated
by the parties. Agents, underwriters or broker-dealers may be
paid compensation for offering and selling the securities. That
compensation may be in the form of discounts, concessions or
commissions to be received from us or from the purchasers of the
securities. Dealers and agents participating in the distribution
of the securities may be deemed to be underwriters, and
compensation received by them on resale of the securities may be
deemed to be underwriting discounts and commissions under the
Securities Act. If such dealers or agents were deemed to be
underwriters, they may be subject to statutory liabilities under
the Securities Act.
Agents may, from time to time, solicit offers to purchase the
securities. If required, we will name in the applicable
prospectus supplement any agent involved in the offer or sale of
the securities and set forth any compensation payable to the
agent. Unless otherwise indicated in the prospectus supplement,
any agent will be acting on a best efforts basis for the period
of its appointment. Any agent selling the securities covered by
this prospectus may be deemed to be an underwriter, as that term
is defined in the Securities Act, of the securities.
If underwriters are used in an offering, securities will be
acquired by the underwriters for their own account and may be
resold, from time to time, in one or more transactions,
including negotiated transactions, at a fixed public offering
price or at varying prices determined at the time of sale, or
under delayed delivery contracts or other contractual
commitments. Securities may be offered to the public either
through underwriting syndicates represented by one or more
managing underwriters or directly by one or more firms acting as
underwriters. If an underwriter or underwriters are used in the
sale of securities, an underwriting agreement will be executed
with the underwriter or underwriters at the time an agreement
for the sale is reached. The applicable prospectus supplement
will set forth the managing underwriter or underwriters, as well
as any other underwriter or underwriters, with respect to a
particular underwritten offering of securities, and will set
forth the terms of the transactions, including compensation of
the underwriters and dealers and the public offering price, if
applicable. The prospectus and the applicable prospectus
supplement will be used by the underwriters to resell the
securities.
If a dealer is used in the sale of the securities, we, a selling
securityholder, or an underwriter will sell the securities to
the dealer, as principal. The dealer may then resell the
securities to the public at varying prices to be determined by
the dealer at the time of resale. To the extent required, we
will set forth in the prospectus supplement the name of the
dealer and the terms of the transactions.
We or a selling securityholder may directly solicit offers to
purchase the securities and we or a selling securityholder may
make sales of securities directly to institutional investors or
others. These persons may be deemed to be underwriters within
the meaning of the Securities Act with respect to any resale of
the securities. To the extent required, the prospectus
supplement will describe the terms of any such sales, including
the terms of any bidding or auction process, if used.
Agents, underwriters and dealers may be entitled under
agreements which may be entered into with us to indemnification
by us against specified liabilities, including liabilities
incurred under the Securities Act, or to contribution by us to
payments they may be required to make in respect of such
liabilities. If required, the prospectus supplement will
describe the terms and conditions of such indemnification or
contribution. Some of the agents, underwriters or dealers, or
their affiliates may be customers of, engage in transactions
with or perform services for us or our subsidiaries in the
ordinary course of business.
Under the securities laws of some states, the securities offered
by this prospectus may be sold in those states only through
registered or licensed brokers or dealers.
24
Any person participating in the distribution of common stock
registered under the registration statement that includes this
prospectus will be subject to applicable provisions of the
Exchange Act, and the applicable SEC rules and regulations,
including, among others, Regulation M, which may limit the
timing of purchases and sales of any of our common stock by any
such person. Furthermore, Regulation M may restrict the
ability of any person engaged in the distribution of our common
stock to engage in market-making activities with respect to our
common stock. These restrictions may affect the marketability of
our common stock and the ability of any person or entity to
engage in market-making activities with respect to our common
stock.
Certain persons participating in an offering may engage in
over-allotment, stabilizing transactions, short-covering
transactions and penalty bids in accordance with
Regulation M under the Exchange Act that stabilize,
maintain or otherwise affect the price of the offered
securities. If any such activities will occur, they will be
described in the applicable prospectus supplement.
SELLING
SECURITYHOLDERS
Selling securityholders are persons or entities that, directly
or indirectly, have acquired or will from time to time acquire
common stock, preferred stock, or warrants, as applicable, from
us. Such selling securityholders may be parties to registration
rights agreements with us, or we otherwise may have agreed or
will agree to register their securities for resale. The initial
purchasers of our securities, as well as their transferees,
pledgees, donees or successors, all of whom we refer to as
selling securityholders, may from time to time offer
and sell the securities pursuant to this prospectus and any
applicable prospectus supplement.
The selling securityholders may offer for sale all or some
portion of the securities that they hold. To the extent that any
of the selling securityholders are broker or dealers, they are
deemed to be, under interpretations of the SEC,
underwriters within the meaning of the Securities
Act.
The applicable prospectus supplement will set forth the name of
each of the selling securityholders and the number and classes
of our securities beneficially owned by such selling
securityholders that are covered by such prospectus supplement.
The applicable prospectus supplement will also disclose whether
any of the selling securityholders has held any position or
office with, has been employed by or otherwise has had a
material relationship with us during the three years prior to
the date of the prospectus supplement.
LEGAL
MATTERS
The legality of the securities offered hereby will be passed
upon for us by Jaeckle Fleischmann & Mugel, LLP,
Buffalo, New York who may rely upon an opinion of DLA Piper LLP
(US), Baltimore, Maryland as to certain Maryland law matters.
EXPERTS
The consolidated financial statements and schedules of EastGroup
Properties, Inc., as of December 31, 2008 and 2007, and for
each of the years in the three-year period ended
December 31, 2008, and managements assessment of the
effectiveness of internal control over financial reporting as of
December 31, 2008, have been incorporated by reference
herein 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.
WHERE YOU
CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission, or
the SEC, a registration statement under the Securities Act with
respect to the securities offered hereunder. As permitted by the
SECs rules and regulations, this prospectus does not
contain all of the information set forth in the registration
statement. For further information regarding our company and our
equity stock, please refer to the registration statement and
25
the contracts, agreements and other documents filed as exhibits
to the registration statement. Additionally, we file annual,
quarterly and special reports, proxy statements and other
information with the SEC.
You may read and copy all or any portion of the registration
statement or any other materials that we file with the SEC at
the SEC public reference room at 100 F Street, N.E.,
Washington, D.C., 20549. Please call the SEC at
1-800-SEC-0330
for further information on the public reference room. Our SEC
filings, including the registration statement, are also
available to you on the SECs web site (www.sec.gov). We
also have a web site (www.eastgroup.net) through which you may
access our SEC filings. In addition, you may view our SEC
filings at the offices of the New York Stock Exchange, Inc.,
which is located at 20 Broad Street, New York, New York
10005. Our SEC filings are available at the NYSE because our
common stock is listed and traded on the NYSE under the symbol
EGP.
The information found on, or otherwise accessible through, our
web site is not incorporated into, and does not form a part of,
this prospectus.
INCORPORATION
OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to incorporate by reference the information
contained in documents that we file with them. The information
incorporated by reference is considered to be part of this
prospectus, and information that we file later with the SEC will
automatically update and supersede this information.
We incorporate by reference the documents listed below and any
future filings we make with the SEC pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act prior to the completion of this offering:
|
|
|
|
|
our annual report on
Form 10-K
for the year ended December 31, 2008;
|
|
|
|
the information specifically incorporated by reference into our
annual report on
Form 10-K
for the fiscal year ended December 31, 2008 from our
definitive proxy statement on Schedule 14A, filed with the
SEC on April 28, 2009;
|
|
|
|
our quarterly report on
Form 10-Q
for the three months ended March 31, 2009;
|
|
|
|
our current reports on
Form 8-K
filed January 7, 2009 and May 18, 2009; and
|
|
|
|
the description of our common stock contained in our
registration statement on
Form 8-B,
filed on June 5, 1997, and all amendments and reports
updating that description.
|
You may request a free copy of these filings (other than
exhibits, unless they are specifically incorporated by reference
in the documents) by writing or telephoning us at the following
address and telephone number:
EastGroup Properties, Inc.
Attention: Chief Financial Officer
190 East Capitol Street, Suite 400
Jackson, MS
39201-2195
(601) 354-3555
26