Unassociated Document
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AS
FILED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION ON JULY
14, 2009
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REGISTRATION
NO. 333-_____________
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UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
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WASHINGTON,
D.C. 20549
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FORM
S-3
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REGISTRATION
STATEMENT
UNDER
THE
SECURITIES ACT OF 1933
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BRT
REALTY TRUST
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(Exact
name of registrant as specified in its charter)
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MASSACHUSETTS
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13-2755856
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(State
or other jurisdiction of
incorporation
or organization)
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(I.R.S.
Employer
Identification
No.)
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60
Cutter Mill Road
Great
Neck, New York 11021
(516)
466-3100
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(Address,
including zip code, and telephone number, including area code,
of
registrant’s principal executive offices)
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Mark
H. Lundy, Esq.
Senior
Vice President
BRT
Realty Trust
60
Cutter Mill Road
Great
Neck, New York 11021
(516)
466-3100
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(Name,
address, including zip code, and telephone number, including area code, of
agent for service)
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Copy
to:
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Jeffrey
A. Baumel, Esq.
Sonnenschein
Nath & Rosenthal LLP
1221
Avenue of the Americas
New
York, New York 10020
(212)
768-6700
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Approximate
date of commencement of proposed sale to the public:
From time
to time after the effective date of this Registration Statement.
If the
only securities being registered on this Form are being offered pursuant to
dividend or interest reinvestment plans, please check the following
box. o
If any of
the securities being registered on this Form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, other
than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. x
If this
Form is filed to register additional securities for an offering pursuant to Rule
462(b) under the Securities Act, please check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. o
If this
Form is a post-effective amendment filed pursuant to Rule 462(c) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. o
If this
Form is a registration statement pursuant to General Instruction I.D. or a post
effective amendment thereto that shall become effective upon the filing with the
Commissions pursuant to Rule 462(e) under the Securities Act check the following
box. o
If this
Form is a post-effective amendment to a registration statement filed pursuant to
General Instruction I.D. filed to register additional securities or additional
classes of securities pursuant to Rule 413(b) under the Securities Act, check
the following box. o
Indicate
by check mark whether registrant is large accelerated, an accelerated filer, a
non-accelerated filer, or a smaller reporting company under Rule 12b-2 of the
Exchange Act. Check one:
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Large Accelerated
filer |
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Accelerated
Filer |
x |
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Non-Accelerated
filer |
o |
Smaller reporting
Company |
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CALCULATION
OF REGISTRATION FEE
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Title
of each class of securities
to
be registered
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Amount
to be Registered
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Proposed
maximum aggregate offering price per unit
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Proposed
maximum aggregate offering price (1)
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Amount
of
registration
fee (3)
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Common
Shares of Beneficial Interest, par value $3.00
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(1)
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(2)
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$50,000,000
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$2,790
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(1)
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There
are being registered under this registration statement such indeterminate
number of common shares of beneficial interest of the registrant as shall
have an aggregate offering price not to exceed $50,000,000. At no time
will the aggregate maximum offering price of all securities issued under
this registration statement in any given 12-month period exceed the amount
allowed for in General Instruction I.B.6. to Form
S-3.
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(2)
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The
proposed maximum initial offering price per unit will be determined, from
time to time, by the registrant.
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(3)
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Estimated
solely for purposes of calculating the registration fee pursuant to
Rule 457(o) under the Securities
Act.
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The
registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date
until the registrant shall file a further amendment which
specifically states that this registration statement shall thereafter
become effective in accordance with Section 8(a) of the Securities Act or
until the registration statement shall become effective on such date as
the Commission, acting pursuant to said Section 8(a), may
determine.
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The
information in this prospectus is not complete and may be changed. We may not
sell these securities until the Securities and Exchange Commission declares
our registration statement effective. This prospectus is
not an offer to sell these securities and is not soliciting an offer to buy
these securities in any state where the offer or sale is not
permitted.
PROSPECTUS
BRT
REALTY TRUST
Common
Shares of Beneficial Interest
$50,000,000
We may sell, from time to time, our
common shares of beneficial interest, par value $3.00 per share, in one or more
offerings up to a total dollar amount of $50,000,000.
Our common shares are listed for
trading on the New York Stock Exchange under the trading symbol
“BRT.”
We will
offer our securities in amounts, at prices and on the terms to be determined at
the time we offer the securities. We will provide specific terms of
these securities in prospectus supplements to this prospectus. We are
organized and conduct our operations so as to qualify as a real estate
investment trust, or REIT, for federal income tax purposes. The
specific terms of the securities may include limitations on actual, beneficial
or constructive ownership and restrictions on the transfer of the securities
that may be appropriate to preserve our status as a REIT.
The securities may be offered on a
delayed or continuous basis directly by us, through agents, underwriters or
dealers as designated from time to time, through a combination of these methods
or through any other method provided in the applicable prospectus
supplement. If any underwriters are involved in the sale of the
securities, the names of such underwriters and any applicable commissions or
discounts will be set forth in a prospectus supplement. For
additional information on the methods of sale of the securities, you should
refer to the section entitled “Plan of Distribution” in this
prospectus. You should read this prospectus and the applicable
prospectus supplement carefully before you invest.
Investing in our securities involves
risks. Before buying our securities, you should refer to the risk
factors included in our periodic reports, in prospectus supplements relating to
specific offerings and in other information that we file with the Securities and
Exchange Commission. See “Risk Factors” on page 4.
The aggregate market value of our
outstanding common shares held by non-affiliates is $32,153,531, based on
11,578,029 outstanding common shares, of which 7,145,229 are held by
non-affiliates, and a per share price of $4.50 based on the closing sale price
of our common shares on the New York Stock Exchange on June 30, 2009. We have
not offered any securities pursuant to General Instruction I.B.6. of Form S-3
during the prior 12 calendar month period that ends on and includes the date of
this prospectus.
Neither the Securities and Exchange
Commission nor any state securities commission has approved or disapproved of
these securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal
offense.
The date
of this prospectus
is ,
2009
TABLE
OF CONTENTS
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ABOUT
THIS PROSPECTUS
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2
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WHERE
YOU CAN FIND MORE INFORMATION
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3
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WHO
WE ARE
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4
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SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
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4
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RISK
FACTORS
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5
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USE
OF PROCEEDS
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5
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DESCRIPTION
OF SECURITIES TO BE REGISTERED
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5
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PROVISIONS
OF OUR DECLARATION OF TRUST
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6
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FEDERAL
INCOME TAX CONSIDERATIONS
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8
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IMPORTANCE
OF OBTAINING PROFESSIONAL TAX ADVICE
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PLAN
OF DISTRIBUTION
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LEGAL
MATTERS
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EXPERTS
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ABOUT
THIS PROSPECTUS
This
prospectus is part of a registration statement that we filed with the Securities
and Exchange Commission (the “SEC”), utilizing a “shelf” registration process,
which allows us to sell shares of beneficial interest from time to time in one
or more offerings up to an aggregate public offering price of
$50,000,000.
This
prospectus only provides you with a general description of the securities we may
offer. Each time we sell securities, we will provide a supplement to
this prospectus that will contain specific information about the terms of the
securities offered, including the amount, the price and the terms determined at
the time of the offering. The prospectus supplement may also add to,
update or change information contained in this prospectus. Before
purchasing any securities, you should carefully read both this prospectus and
any supplement, together with additional information described under the heading
“Where You Can Find More Information.”
You
should rely only on the information contained or incorporated by reference in
this prospectus and any prospectus supplement or amendment. We have
not authorized any other person to provide you information different from that
contained in this prospectus or incorporated by reference in this prospectus or
any prospectus supplement or amendment. You should assume that the
information appearing in this prospectus or any applicable prospectus supplement
or the documents incorporated by reference herein or therein is accurate only as
of the date on the cover page. Our business, financial condition,
results of operations and prospects may have changed since that
date.
In this
prospectus, references to “BRT”, “Company,” “we,” “us,” “our,” and “registrant”
refer to BRT Realty Trust and all our subsidiaries. The phrase “this
prospectus” refers to this prospectus and the applicable prospectus supplement,
unless the context otherwise requires. References to “securities” and
“common shares” refer to the common shares of beneficial interest offered by
this prospectus, unless we specify or the context indicates or requires
otherwise.
We file
annual, quarterly and special reports, proxy statements and other information
with the SEC. Our electronic filings with the SEC are available to
the public on the Internet at the SEC’s web site at http://www.sec.gov. You
may also read and copy any document we file with the SEC at the SEC’s Public
Reference Room located at 100 F Street, N.E., Washington,
DC 20549. Please call the SEC at 800-SEC-0330 for more
information about their public reference room and their copy
charges.
The SEC
allows us to “incorporate by reference” the information we file with the SEC,
which means that we can disclose information to you by referring you to those
documents. Any information that we refer to in this manner is
considered part of this prospectus. Any information that we file with
the SEC after the date of this prospectus will automatically update and
supersede the information contained in this prospectus.
We are
incorporating by reference the following documents that we have previously filed
with the SEC (Commission File No. 001-07172), except for any document or portion
thereof “furnished” to the SEC:
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Our
Annual Report on Form 10-K for the year ended September 30, 2008, filed on
December 11, 2008, including information incorporated by reference therein
to our Definitive Proxy Statement filed on January 28,
2009;
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Our
Quarterly Reports on Form 10-Q for the quarters ended December 31, 2008
and March 31, 2009, filed on February 6, 2009 and May 8, 2009,
respectively;
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Our
Current Reports on Form 8-K, filed on October 2, 2008, December 8, 2008,
December 18, 2008, December 24, 2008, June 1, 2009, June 9, 2009 and June
22, 2009; and
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The
description of our shares contained in our Registration Statement on Form
8-A, filed on December 10, 1987, as updated by the description of our
capital stock included in our Current Report on Form 8-K, filed on
September 10, 2004, including any amendment or report filed for the
purpose of updating such
description.
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All
documents and reports filed by us with the SEC (other than Current Reports on
Form 8-K furnished pursuant to Item 2.02 or Item 7.01 of Form 8-K, unless
otherwise indicated therein) pursuant to Section 13(a), 13(c), 14 or 15(d) of
the Securities Exchange Act of 1934, as amended (the “Exchange Act”), after the
date of this prospectus and prior to the termination of this offering shall be
deemed incorporated by reference in this prospectus and shall be deemed to be a
part of this prospectus from the date of filing of such documents and
reports. Any statement in a document incorporated or deemed to be
incorporated by reference in this prospectus shall be deemed to be modified or
superseded for purposes of this prospectus to the extent that a statement in
this prospectus or in any subsequently filed document or report incorporated or
deemed to be incorporated by reference in this prospectus modifies or supersedes
such statement. Any such statement so modified or superseded shall
only be deemed to constitute a part of this prospectus as it is so modified or
superseded.
We will
provide without charge to each person, including any beneficial owner, to whom
this prospectus is delivered, upon written or oral request of such person, a
copy of any or all of the documents incorporated by reference in this prospectus
other than exhibits, unless such exhibits specifically are incorporated by
reference into such documents or this prospectus.
Requests
for such documents should be addressed in writing or by telephone to: Mark H.
Lundy, BRT Realty Trust, 60 Cutter Mill Road, Great
Neck, N.Y. 11021 or 516-466-3100.
WHO
WE ARE
Our
Business
We are a
real estate investment trust, also known as a REIT. Our primary
business is and has been for over twenty years, to originate and hold for
investment short-term senior and junior commercial mortgage loans secured by
real property in the United States. Our objective is to provide our
shareholders with returns over time, including quarterly cash distributions and
capital appreciation, by originating mortgage loans secured by a diversified
portfolio of real property. Due to the current credit crisis however, our
business focus has temporarily shifted emphasis from originating loans to
servicing our loan portfolio, workout activities, pursuing foreclosure actions,
acquiring the underlying property in a foreclosure proceeding and supervising
real estate assets.
The
continuing crisis in the credit and real estate markets has had a substantial
effect on our lending business by significantly limiting investments in real
estate and substantially reducing demand for short-term commercial mortgage
loans. In addition, in the current credit environment we have
concerns about the ability of potential borrowers to be able to (i) refinance
and repay loans we originate, (ii) sell the underlying collateral for an amount
in excess of a loan we originate or (iii) otherwise raise funds to repay
loans.
During
the last fiscal year and the first half of this fiscal year, many of our
borrowers defaulted on their monetary obligations to us, which has required us
to focus significant resources on servicing our loan portfolio, work-out
activities, pursuing foreclosure actions and acquiring the underlying real
property by foreclosure or deed in lieu of foreclosure, operating and
stabilizing real property acquired by us (including interfacing with receivers
and local property managers), and engaging in activities related to the sale
process with respect to properties we are attempting to sell.
Until the
credit markets stabilize and credit is made available to real estate owners and
developers, we could experience (i) more borrower defaults, (ii) additional
foreclosure actions (with an increase in direct and indirect expenses in
pursuing such actions), (iii) the acquisition of additional properties in
foreclosure or by deed in lieu of foreclosure, (iv) a continuing decline in real
estate values, and (v) limited origination activity, all of which will result in
a decline in our revenues and net income (or an increase in our net
loss).
We were
organized as a business trust in 1972 under the laws of the Commonwealth of
Massachusetts. Our principal executive offices are located at 60
Cutter Mill Road, Great Neck, N.Y., 11021 and our telephone number is
516-466-3100. Our website is www.brtrealty.com. The
information contained on our website is not part of this prospectus and you
should not rely on it in deciding whether to invest in our
securities.
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
prospectus and other documents we file with the SEC contain forward-looking
statements that are based on current expectations, estimates, forecasts and
projections about us, our future performance, the industries in which we
operate, our beliefs and our management’s assumptions. In addition,
other written or oral statements that constitute forward-looking statements may
be made by or on behalf of us. Words such as “expects,”
“anticipates,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,”
“seeks,” “estimates,” variations of such words and similar expressions are
intended to identify such forward-looking statements. These
statements are not guarantees of future performance and involve certain risks,
uncertainties and assumptions that are difficult to
predict. Therefore, actual outcomes and results may differ materially
from what is expressed or forecasted in such forward-looking
statements. Except as required under the federal securities laws and
the rules and regulations of the SEC, we do not have any intention or obligation
to update publicly any forward-looking statements after the distribution of this
prospectus, whether as a result of new information, future events, changes in
assumptions, or otherwise.
RISK
FACTORS
Before
you invest in any of our securities, in addition to the other information in
this prospectus and the applicable prospectus supplement, you should carefully
consider the risk factors under the heading “Risk Factors” contained in Part I,
Item 1A in our most recent Annual Report on Form 10-K and any risk factors
disclosed under the heading “Risk Factors” in Part II, Item 1A in any Quarterly
Report on Form 10-Q that we file after our most recent Annual Report on Form
10-K, which are incorporated by reference into this prospectus and the
applicable prospectus supplement, as the same may be updated from time to time
by our future filings under the Exchange Act.
The risks
and uncertainties we describe are not the only ones facing our Company.
Additional risks and uncertainties not presently known to us or that we
currently deem immaterial may also impair our business or operations. Any
adverse effect on our business, financial condition or operating results could
result in a decline in the value of the securities and the loss of all or part
of your investment.
USE
OF PROCEEDS
Unless
otherwise indicated in the applicable prospectus supplement, we anticipate that
the net proceeds from the sale of the securities that we may offer under this
prospectus will be used for general corporate purposes. General
corporate purposes may include repayment of debt, originating loans, capital
expenditures, payment of dividends and any other purposes that we may specify in
the applicable prospectus supplement. If a material part of the net
proceeds is used to repay indebtedness, we will set forth the interest rate and
maturity of such indebtedness in a prospectus supplement, as
required.
We will
have significant discretion in the use of any net proceeds. Investors
will be relying on the judgment of our management regarding the application of
the proceeds from any sale of the securities. We may invest the net
proceeds temporarily until we use them for their stated purpose.
DESCRIPTION
OF SECURITIES TO BE REGISTERED
The
following paragraphs constitute a summary of our common shares of beneficial
ownership as of the date of this prospectus and do not purport to be a complete
description of these securities. The following paragraphs are
qualified in their entirety by our Declaration of Trust, as amended and
restated, our Bylaws, as amended, and Massachusetts law. For a
complete description of our securities, we refer you to our Declaration of
Trust, as amended and restated, and our Bylaws, as amended, each of which is
incorporated by reference in this prospectus and any accompanying prospectus
supplement.
Overview
Our
authorized capital consists of an unlimited number of common shares of
beneficial interest, par value $3.00 per share, which we refer to in this
prospectus as our common shares, and 10,000,000 shares of preferred stock, par
value $1.00 per share. As of June 30, 2009,
there were 11,578,029 common shares and no shares of preferred stock
outstanding. We may issue and sell as many common shares as our board
of trustees determines in its sole discretion.
Common
Shares of Beneficial Ownership
Unless
otherwise provided for in the applicable prospectus supplement, our common
shares have equal non-cumulative voting, distribution, liquidation, redemption
and other rights and have one vote per share on all matters submitted to a vote
of the shareholders. Holders of common shares have no preference, conversion,
exchange, sinking fund, redemption or preemptive rights. Holders of common
shares are entitled to receive distributions, when and as authorized
by our board of trustees, out of legally available funds. All of our
common shares issuable under this prospectus have been duly authorized and will
be fully paid and non-assessable.
Subject
to our declaration of trust, each outstanding common share entitles the holder
to one vote on all matters submitted to a vote of shareholders. Our declaration
of trust provides that shareholders are entitled to vote only upon the following
matters:
· election
or removal of trustees;
· amendment
of our declaration of trust or termination of the trust;
· any
transaction involving our merger or consolidation, or the sale, lease or
exchange of all or substantially all of our property and assets;
· termination
of any contract with an advisor to which our trustees have delegated the
authority to conduct our business; and
· determination
of whether a court action, proceeding or claim should be brought or maintained
derivatively or as a class action on our behalf or on behalf of our
shareholders.
Except as
otherwise expressly provided in our Declaration of Trust, each of these matters
shall require the affirmative vote of the holders of not less than a majority of
the shares then outstanding and entitled to vote. Except with respect
to these matters, no action taken by our shareholders at any meeting shall in
any way bind our board of trustees.
As there
is no cumulative voting in the election of trustees, holders of a majority of
the outstanding common shares entitled to vote in any election of trustees may
elect all of the trustees standing for election, subject to the voting rights,
if any, of any class or series of our preferred shares that may be outstanding
from time to time.
PROVISIONS
OF OUR DECLARATION OF TRUST
Restrictions
on Acquisition and Transfer
Our board
of trustees may (1) refuse to issue, sell, transfer or deliver an amount of our
common shares or preferred shares to any person or entity, or (2) call for the
redemption of an amount of our common shares or preferred shares from any person
or entity if, in either case, the acquisition of an amount of our common shares
or preferred shares by such person or entity would, in the opinion of our board
of trustees, result in our disqualification as a REIT. All certificates
representing our common shares bear a legend referring to these restrictions
and, in the event we issue any preferred shares, all certificates representing
such preferred shares shall also bear a legend referring to these restrictions.
If so requested by us, you must file a written response to our request for share
ownership information which we will mail to you. In addition, you must disclose
to us in writing any additional information we request in order to determine the
extent of your direct or indirect ownership of our shares and its effect, if any
on our REIT status.
Restrictions
on Acquisition of Control
Our
declaration of trust contains provisions that may delay, defer or prevent a
takeover attempt, which may prevent shareholders from receiving a “control
premium” for their shares. These provisions may defer or prevent tender offers
for our common shares or purchases of large blocks of our common shares which
could thereby limit the opportunities for our shareholders to receive a premium
for their common shares over then-prevailing market prices. These provisions
include the following:
· Authorization of “blank check”
preferred shares. Under the terms of our declaration of trust, we are
authorized to issue up to 10 million “blank check” preferred shares and to
determine the price, privileges and terms of those shares. Specific rights we
may grant to future holders of preferred shares could be used to restrict an
ability to merge with, or sell our assets to, a third party.
· Classified board structure.
Our board of trustees is divided into three classes. Trustees in each class are
elected to serve for a term of three years, with the terms of each class
beginning in different years.
· Restrictions on Transfer. Our
board of trustees has the power to prevent the sale, transfer or delivery of our
shares to any person or entity if the board of trustees determines, in good
faith and in its sole discretion, that any such sale, transfer or delivery of
our shares would result in a concentration of ownership, whether direct or
indirect, of our shares not permitted by the provisions of the Internal Revenue
Code applicable to REITs.
Amendment
to Declaration of Trust or Termination of Trust
Our
declaration of trust may be amended or terminated (1) by written consent of a
majority of the trustees and the holders of a majority of our outstanding shares
entitled to vote or (2) at a meeting called for such purpose, by vote of a
majority of our outstanding shares entitled to vote. Two-thirds of the trustees
may, on the advice of counsel, amend our declaration of trust without the
consent of our shareholders to the extent necessary to comply with the
provisions of the Internal Revenue Code of 1986, as amended, applicable to
REITs, the regulations thereunder, and any ruling thereunder or interpretation
thereof.
Trustees
Our
declaration of trust requires that we have not less than five nor more than 15
trustees as fixed from time to time by the board of trustees. We currently have
nine trustees. Our board of trustees is divided into three classes, each of
which is elected for a staggered term of three years. A classified board may
delay, defer or prevent a change in control or other transaction that might
involve a premium over the then prevailing market price for our shares or may
delay, defer or prevent other changes that our shareholders consider desirable.
In addition, a classified board could prevent shareholders who disagree with the
policies of our board from replacing a majority of our board for two years,
except in the event of removal for cause.
A trustee
may be removed by a vote of two-thirds of the other trustees only for cause. A
trustee may be removed, with or without cause, at any meeting of the
shareholders by the affirmative vote of a majority of the outstanding shares
entitled to vote, provided a quorum is present at such meeting. Any vacancy on
the board of trustees, resulting from the death, resignation, or removal of a
trustee, or from another cause specified in our declaration of trust, may be
filled by a majority of the remaining trustees. No bond is required to secure
the performance of a trustee.
Responsibility
of Trustees
Our board
of trustees is responsible for our general policies and for such general
supervision and management of our business as may be necessary to insure that
our business conforms to the provisions of our declaration of trust. Our
declaration of trust provides that the trustees have full, absolute and
exclusive power, control, and authority over and management of our assets and
over our business and our affairs to the same extent as if the trustees were the
sole owners thereof in their own right, subject to the limitations expressly
stated in the declaration of trust. The trustees have the power to enter into
commitments to make any investment, purchase or acquisition or to exercise any
power authorized by our declaration of trust, including the power to retain,
employ or contract with an advisor and to delegate any of the trustees’ powers
and duties to an advisor.
Indemnification
of Trustees, Officers, Employees and Agents
Our
declaration of trust provides that we will indemnify and hold harmless our
trustees, officers, employees and agents, or an Indemnified Party, against
expense or liability, including attorneys’ fees reasonably incurred, in
connection with the defense or disposition of any action, suit or proceeding in
which they may be involved or which they may be threatened because of being or
having been our trustees, officers, employees or agents to the fullest extent
permitted by applicable law; provided, however, that (1) no such indemnification
shall be made with respect to any matter in which the Indemnified Party is
adjudicated to have not acted in good faith in the reasonable belief that his
actions were in our best interests, or with respect to any matter in which the
Indemnified Party is adjudicated to have acted with bad faith, willful
misconduct, reckless disregard of his duties or gross negligence, (2) no
indemnification shall be provided in a case where any matter is disposed of by a
compromise payment by an Indemnified Party unless such compromise payment is
approved by a majority of the disinterested trustees or unless we have received
a written opinion from independent legal counsel indicating that such
Indemnified Party appears to have acted in good faith in the reasonable belief
that his action was in our best interests.
Pursuant
to our declaration of trust, an Indemnified Party may only satisfy any right of
indemnity out of our assets, and no shareholder shall be personally liable with
respect to any claim for indemnity.
Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to our trustees, officers and controlling persons pursuant to the
foregoing provisions, or otherwise, we have been advised that in the opinion of
the SEC such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by us of
expenses incurred or paid by one of our trustees, officers or controlling
persons in the successful defense of any action, suit or proceeding) is asserted
by such trustee, officer or controlling person in connection with the securities
being registered, we will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
Possible
Shareholder Liability; Indemnification of Shareholders
It is
possible that certain states may not recognize the limited liability of our
shareholders, although our declaration of trust provides that our shareholders
will not be subject to any personal liability for our acts or obligations. Our
declaration of trust provides that we will indemnify our shareholders against
expense or liability, including attorney’s fees reasonably incurred, as a result
of being or having been shareholders; provided however, that we will not
indemnify shareholders for taxes assessed against them because of ownership of
our shares and we will not reimburse shareholders for losses suffered because of
changes in the market value of our shares.
FEDERAL
INCOME TAX CONSIDERATIONS
This
section summarizes the U.S. federal income tax issues that you, as a prospective
investor, may consider relevant. The applicable prospectus supplement delivered
with this prospectus may, to the extent necessary, provide additional
information about certain other federal income tax considerations that may be
considered relevant with respect to the particular securities then being
offered. Because this section is a summary, it does not address all
of the tax issues that may be important to you. In particular, this section does
not address any tax issues applicable to any holder of our warrants. In
addition, this section does not address the tax issues that may be important to
certain types of prospective investors that are subject to special treatment
under U.S. federal income tax laws, including, without limitation, insurance
companies, tax-exempt organizations (except to the extent discussed in “Taxation
of Tax-Exempt Shareholders” below), financial institutions or broker-dealers,
and non-U.S. individuals and foreign corporations (except to the extent
discussed in “Taxation of Non-U.S. Shareholders” below).
The
statements in this section are based on current U.S. federal income tax laws. We
cannot assure you that new laws, interpretations of law, or court decisions, any
of which may have retroactive effect, will not cause one or more statements in
this section to be inaccurate.
We have
not requested and do not intend to request a ruling from the Internal Revenue
Service (“IRS”) as to our current status as a REIT. However,
Sonnenschein Nath & Rosenthal LLP (“Sonnenschein”) is rendering an opinion,
which will be filed as an exhibit to the registration statement of which this
prospectus is a part. Sonnenschein will opine that we have been
organized and have operated in conformity with the requirements for
qualification and taxation as a REIT the Internal Revenue Code of 1986, as
amended (the “Code”), commencing with the taxable year ended December 31, 1982,
through and including the taxable year ended December 31, 2008, and that our
organization and proposed method of operation will enable us to continue to meet
the requirements for qualification and taxation as a REIT under the
Code. It must be emphasized that this opinion is based on various
assumptions and on our representations concerning our organization and
operations, including representations regarding the nature of our assets and the
conduct and method of operation of our business, and it cannot be relied upon if
any of those assumptions and representations later prove
incorrect. Moreover, continued qualification and taxation as a REIT
depends upon our ability to meet, through actual annual operating results,
distribution levels and diversity of share ownership, as well as the other
various qualification tests imposed under the Code, the results of which will
not be reviewed by Sonnenschein. Accordingly, no assurance can be
given that the actual results of our operations will satisfy such requirements.
The opinion of Sonnenschein is based upon current law, which is subject to
change either prospectively or retroactively. Changes in applicable law could
modify the conclusions expressed in its opinion. Moreover, unlike a
tax ruling (which we will not seek), an opinion of counsel is not binding on the
IRS, and no assurance can be given that the IRS will not or could not
successfully challenge our status as a REIT.
WE URGE
YOU TO CONSULT YOUR OWN TAX ADVISOR REGARDING THE SPECIFIC TAX CONSEQUENCES TO
YOU OF INVESTING IN OUR SECURITIES AND OF OUR ELECTION TO BE TAXED AS A REIT.
SPECIFICALLY, YOU SHOULD CONSULT YOUR OWN TAX ADVISOR REGARDING THE FEDERAL,
STATE, LOCAL, FOREIGN, AND OTHER TAX CONSEQUENCES OF SUCH INVESTMENT AND
ELECTION AND REGARDING POTENTIAL CHANGES IN APPLICABLE TAX LAWS.
Taxation
of our Company as a REIT
We have
elected to be taxed as a REIT under the U.S. federal income tax laws. We believe
that we have operated in a manner qualifying us as a REIT since our election and
intend to operate in a manner that will preserve that qualification. No
assurance, however, can be given that we in fact have qualified or will remain
qualified as a REIT.
This
section discusses the material aspects of the laws governing the U.S. federal
income tax treatment of a REIT and its shareholders. These laws are highly
technical and complex. This section is qualified in its entirety by the
applicable Code provisions, rules and regulations promulgated under the Code,
and the administrative and judicial interpretations of the Code.
Our
qualification as a REIT depends on our ability to meet, on a continuing basis,
qualification tests set forth in the U.S. federal tax laws. Those qualification
tests involve the percentage of income that we earn from specified sources, the
percentages of our assets that fall within specified categories, the diversity
of our share ownership, and the percentage of our earnings that we distribute.
While we intend to operate so that we 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 or in
the law, no assurance can be given that we so qualify or will continue to so
qualify. We describe the REIT qualification tests in more detail
below. For a discussion of the tax treatment of us and our shareholders if we
fail to qualify as a REIT, see “Failure to Qualify,” below.
If we
qualify as a REIT, we generally will not be subject to U.S. federal income tax
on the taxable income that we distribute to our shareholders. The benefit of
that tax treatment is that it avoids the “double taxation” (i.e., taxation at
both the corporate and shareholder levels) that generally results from owning
stock in a corporation. However, even if we qualify as a REIT, we will be
subject to U.S. federal tax in the following circumstances:
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We
will pay U.S. federal income tax at regular corporate rates on taxable
income, including net capital gain, that we do not distribute to
shareholders during, or within a specified time period after, the calendar
year in which the income is earned.
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We
may be subject to the “alternative minimum tax” on any items of tax
preference under certain
circumstances.
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We
will pay income tax at the highest corporate rate
on:
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net
income from the sale or other disposition of property acquired through
foreclosure (“foreclosure property”) that we hold primarily for sale to
customers in the ordinary course of business,
and
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other
non-qualifying income from foreclosure
property.
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We
will pay a 100% tax on net income from “prohibited transactions” (i.e.,
sales or other dispositions of property, other than foreclosure property,
that we hold primarily for sale to customers in the ordinary course of
business).
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If
we fail to satisfy the 75% gross income test or the 95% gross income test,
as described below under “Requirements for Qualification,” and nonetheless
continue to qualify as a REIT because we meet other requirements, we will
pay a 100% tax on the gross income attributable to the greater of the
amounts by which we fail the 75% and 95% gross income tests, multiplied by
a fraction intended to reflect our
profitability.
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If
we fail to satisfy the REIT asset tests, as described below, by more than
a de
minimis amount, due to reasonable cause and not willful
neglect and we nonetheless maintain our REIT qualification because of
specified cure provisions, we will be required to pay a tax equal to the
greater of $50,000 or the highest corporate tax rate multiplied by the net
income generated by the non-qualifying
assets.
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If we
fail to satisfy any provisions of the Code that would result in our
failure to qualify as a REIT (other than a violation of the REIT gross
income and assets tests summarized in the preceding two bullet points) and
the violation is due to reasonable cause and not willful neglect, we may
retain our REIT qualification but we will be required to pay a penalty of
$50,000 for each such failure.
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If
we fail to distribute during a calendar year at least the sum
of:
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85%
of our REIT ordinary income for the
year,
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95%
of our REIT capital gain net income for the year,
and
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any
undistributed taxable income from earlier periods,
then
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we will
pay a 4% excise tax on the excess of the required distribution over the amount
we actually distributed.
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We
may elect to retain and pay income tax on our net long-term capital
gain.
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We
will be subject to a 100% excise tax on transactions with a taxable REIT
subsidiary that are not conducted on an arm’s-length
basis.
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If
we acquire any asset from a “C” corporation (or any other corporation that
generally is subject to full corporate-level tax) in a merger or other
transaction in which we acquire a basis in the asset that is determined by
reference either to the C corporation’s basis in the asset or to another
asset (a “conversion transaction”), we will pay tax at the highest regular
corporate rate applicable if we recognize any net built-in gain on the
sale or disposition of such asset during the 10-year period after we
acquire such asset.
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We
will generally be subject to tax on the portion of any “excess inclusion
income” derived from an investment in residual interests in real estate
mortgage investment conduits (or REMICs) to the extent our shares are held
by specified tax exempt organizations not subject to tax on unrelated
business taxable income.
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We
may be required to pay monetary penalties to the IRS in certain
circumstances, including if we fail to meet record-keeping requirements
intended to monitor our compliance with rules relating to the composition
of a REIT’s stockholders.
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Requirements
for Qualification as a REIT
A REIT is
an entity that meets each of the following requirements:
1. It
is managed by trustees or directors.
2. Its
beneficial ownership is evidenced by transferable shares, or by transferable
certificates of beneficial interest.
3. It
would be taxable as a domestic corporation, but for the REIT provisions of the
U.S. federal income tax laws.
4. It
is neither a financial institution nor an insurance company subject to special
provisions of the U.S. federal income tax laws.
5. At
least 100 persons are beneficial owners of its shares or ownership
certificates.
6. Not
more than 50% in value of its outstanding shares or ownership certificates is
owned, directly or indirectly, by five or fewer individuals, which the U.S.
federal income tax laws define to include certain entities, during the last half
of any taxable year.
7. It
elects to be a REIT, or has made such election for a previous taxable year, it
uses a calendar year for federal income tax purposes, and satisfies all relevant
filing and other administrative requirements established by the IRS that must be
met to elect and maintain REIT status.
8. It
meets certain other qualification tests, described below, regarding the nature
of its income and assets and the amount of its distributions.
We must
meet requirements 1 through 4 during our entire taxable year and must meet
requirement 5 during at least 335 days of a taxable year of 12 months, or during
a proportionate part of a taxable year of less than 12 months. If we comply with
all the applicable requirements for ascertaining the ownership of our
outstanding shares in a taxable year and we do not know, or would not have known
through the exercise of reasonable diligence, that we violated requirement 6, we
will be deemed to have satisfied requirement 6 for that taxable year. For
purposes of determining share ownership under requirement 6, an “individual”
generally includes a supplemental unemployment compensation benefits plan, a
private foundation, or a portion of a trust permanently set aside or used
exclusively for charitable purposes. An “individual,” however, generally does
not include a trust that is a qualified employee pension or profit sharing trust
under the U.S. federal income tax laws, and beneficiaries of such a trust will
be treated as holding our shares in proportion to their actuarial interests in
the trust for purposes of requirement 6. We have issued sufficient shares to
facilitate satisfaction of requirements 5 and 6. In addition, our declaration of
trust restricts the acquisition and transfer of the shares in order to ensure
that there is sufficient diversity of ownership. The provisions of our
declaration of trust restricting the acquisition and transfer of common shares
are described in “Provisions of our Declaration of Trust - Restrictions on
Acquisition and on Transfer.”
A
corporation that is a “qualified REIT subsidiary” is not treated as a
corporation separate from its parent REIT. All assets, liabilities and items of
income, deduction and credit of a “qualified REIT subsidiary” are treated as
assets, liabilities and items of income, deduction and credit of the parent
REIT. A “qualified REIT subsidiary” is a corporation, all of the capital stock
of which is owned by the REIT and for which no election has been made to treat
such corporation as a “taxable REIT subsidiary.” We own certain of our
properties through corporate subsidiaries. All but one of our corporate
subsidiaries qualify as “qualified REIT subsidiaries” under U.S. federal income
tax law. Accordingly, for U.S. federal income tax purposes, these
subsidiaries are ignored as separate entities and all of their assets,
liabilities and items of income, deduction and credit are treated as our assets,
liabilities and items of income, deduction and credit.
An
unincorporated domestic entity with two or more owners is generally treated as a
partnership for U.S. federal income tax purposes. In the case of a REIT that is
a partner in an entity treated as a partnership, the REIT is treated as owning
its proportionate share of the assets of the partnership and as earning its
allocable share of the gross income of the partnership for purposes of the
applicable REIT qualification tests. Thus, our proportionate share of the
assets, liabilities and items of income of any partnership or limited liability
company that is treated as a partnership for U.S. federal income tax purposes in
which we have acquired or will acquire an interest, directly or indirectly (a
“subsidiary partnership”), will be treated as our assets and gross income for
purposes of applying the various REIT qualification tests. We hold ownership
interests as a partner or member in five business entities taxed as partnerships
for federal income tax purposes. Accordingly, our proportionate share of the
assets, liabilities and items of income of such entities will be treated as our
assets and gross income for purposes of applying the various REIT qualification
tests discussed in this section.
Tax
legislation enacted in 1999 allows a REIT to own up to 100% of the stock of a
“taxable REIT subsidiary” (“TRS”), in taxable years beginning on or after
January 1, 2001. A TRS may earn income that would not be qualifying income if
earned directly by the parent REIT. Both the subsidiary and the REIT must
jointly elect to treat the subsidiary as a TRS. A TRS will pay income tax at
regular corporate rates on any income that it earns. In addition, the Code
contains rules that limit the deductibility of interest paid or accrued by a TRS
to its parent REIT to assure that the TRS is subject to an appropriate level of
corporate taxation. Further, the rules impose a 100% excise tax on transactions
between a TRS and its parent REIT (or the REIT’s tenants) that are not conducted
on an arm’s-length basis. We currently have one TRS and cannot exclude the
possibility that we will form additional TRSs in future taxable
years.
Income
Tests
We must
satisfy two gross income tests annually to maintain our qualification as a REIT.
First, at least 75% of our gross income (excluding gross income from prohibited
transactions, as described below) for each taxable year must consist of specific
types of income that we derive, directly or indirectly, from investments
relating to real property or mortgages on real property or qualified temporary
investment income. Qualifying income for purposes of this 75% gross income test
generally includes:
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rents
from real property;
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interest
on debt secured by mortgages on real property, or on interests in real
property;
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dividends
or other distributions on, and gain from the sale of, shares in other
REITs;
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gain
from the sale or other disposition of real property, including interests
in real property and interests in mortgages on real property, that is not
inventory or dealer property;
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income
and gain derived from foreclosure property (as described below);
and
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non-contingent
amounts received or accrued as consideration for entering into agreements
to make loans secured by mortgages on real property, or on interests in
real property, or to purchase or lease real
property.
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Second,
in general, at least 95% of our gross income (excluding gross income from
prohibited transactions, as described below) for each taxable year must consist
of income that is qualifying income for purposes of the 75% gross income test,
other types of interest and dividends, gain from the sale or disposition of
stock or securities, or any combination of the foregoing.
A REIT
will incur a 100% tax on the net income derived from any “prohibited
transactions” (i.e., any sale or other disposition of property, other than
foreclosure property, that the REIT holds primarily for sale to customers in the
ordinary course of a trade or business). We believe that none of our assets are
held primarily for sale to customers and that a sale of any of our assets would
not be in the ordinary course of our business. Whether a REIT holds an asset
“primarily for sale to customers in the ordinary course of a trade or business”
depends, however, on the facts and circumstances in effect from time to time,
including those related to a particular asset. Nevertheless, we will attempt to
comply with the terms of safe-harbor provisions in the U.S. federal income tax
laws prescribing when an asset sale will not be characterized as a prohibited
transaction. We cannot assure you, however, that we can comply, or that we have
complied, with the safe-harbor provisions or that we will avoid owning property
that may be characterized as property that we hold “primarily for sale to
customers in the ordinary course of a trade or business.”
While
income from foreclosure property qualifies for purposes of satisfying the 75%
and 95% gross income tests, we will be subject to tax at the maximum corporate
rate on any income from such foreclosure property, other than any portion of
such income that otherwise would be qualifying income for purposes of the 75%
gross income test, less expenses directly connected with the production of that
income. “Foreclosure property” is any real property, including interests in real
property, and any personal property incident to such real property:
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that
is acquired by a REIT as a result of the REIT having bid on such property
at foreclosure, or having otherwise reduced such property to ownership or
possession by agreement or process of law, after there was a default (or
default was imminent) on a lease of such property or on indebtedness that
such property secured;
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for
which the related loan was acquired by the REIT at a time when the default
was not imminent or anticipated;
and
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for
which the REIT makes a proper election to treat the property as
foreclosure property.
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However,
a REIT will not be considered to have foreclosed on a property where the REIT
takes control of the property as a mortgagee-in-possession and cannot receive
any profit or sustain any loss except as a creditor of the mortgagor. Property
generally ceases to be foreclosure property at the end of the third taxable year
following the taxable year in which the REIT acquired the property, or longer if
an extension is granted by the Secretary of the Treasury. This grace period
terminates and foreclosure property ceases to be foreclosure property on the
first day:
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on
which a lease is entered into for the property that, by its terms, will
give rise to income that does not qualify for purposes of the 75% gross
income test, or any amount is received or accrued, directly or indirectly,
pursuant to a lease entered into on or after such day that will give rise
to income that does not qualify for purposes of the 75% gross income
test;
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on
which any construction takes place on the property, other than completion
of a building or any other improvement where more than 10% of the
construction of such building or other improvement was completed before
default became imminent; or
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which
is more than 90 days after the day on which the REIT acquired the property
and the property is used in a trade or business which is conducted by the
REIT, other than through an independent contractor from whom the REIT
itself does not derive or receive any
income.
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If we
fail to satisfy one or both of the gross income tests for any taxable year, we
nevertheless may qualify as a REIT for that year if we qualify for relief under
certain provisions of the U.S. federal income tax laws. Those relief provisions
generally will be available if:
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our
failure to meet such tests is due to reasonable cause and not due to
willful neglect;
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we
attach a schedule of the sources of our income to our tax return (for our
2004 and prior taxable years), the inclusion of any incorrect information
on such schedule is not due to fraud with intent to evade tax;
and
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Not
all of the rent received under a lease of real property will qualify as
“rents from real property” if the rent attributable to the personal
property leased in connection with such lease is more than 15% of the
total rent received under the lease. If rent attributable to the personal
property leased is more than 15% of the total rent received, none of the
rent allocable to the personal property will be considered “rents from
real property” for purposes of the 75% and 95% gross income tests. The
allocation of rent between real and personal property is based on the
relative fair market values of the real and personal
property.
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We
believe that the rents we receive meet all of these conditions.
However,
commencing with our taxable year beginning January 1, 2005, these relief
provisions have been modified, as follows: If we fail to satisfy one or both of
the gross income tests, such failure must be due to reasonable cause and not due
to willful neglect, and, following our identification of such failure for any
taxable year, we must set forth a description of each item of our gross income
that satisfied the REIT gross income tests in a schedule for the taxable year
filed in accordance with regulations prescribed by the U.S. Department of
Treasury.
We cannot
predict whether in any relevant circumstance we would qualify for the relief
provisions referenced above. If the relief provisions referenced above do not
apply to the relevant circumstance, we would fail to qualify as a REIT. In
addition, as discussed above in “Taxation of our Company as a REIT,” even if the
relief provisions apply, we would incur a 100% tax on the gross income
attributable to the greater of the amounts by which we fail the 75% and 95%
gross income tests, multiplied by a fraction intended to reflect our
profitability.
We
believe that we have satisfied the gross income tests described above for REIT
qualification and will endeavor to manage our income and operations to continue
to satisfy such gross income tests. Despite our efforts to continue to satisfy
the gross income tests for REIT qualification, we may not always be able to
maintain compliance with such gross income tests.
Asset
Tests
To
maintain our qualification as a REIT, we also must satisfy certain asset tests
at the end of each quarter of each taxable year as hereinafter described. First,
at least 75% of the value of our total assets must consist of:
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cash
or cash items, including certain
receivables;
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interests
in real property, including leaseholds and options to acquire real
property and leaseholds;
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interests
in mortgages on real property;
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shares
in other REITs; and
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investments
in stock or debt instruments during the one-year period following our
receipt of new capital that we raise through equity offerings or offerings
of debt featuring at least a five-year
term.
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Furthermore,
not more than 25% of the value of our total assets may be securities other than
securities in the 75% asset class described above.
Also,
except for (i) securities in the 75% asset class, (ii) securities in a TRS or
qualified REIT subsidiary, (iii) certain partnership interests, and (iv) for
purposes of the 10% value asset test described in the third bullet below,
certain straight debt obligations:
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no
more than 5% of the value of our total assets may be represented by
securities of any one issuer;
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we
may not own securities that possess more than 10% of the total voting
power of the outstanding securities of any one
issuer;
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we
may not own securities that have a value of more than 10% of the total
value of the outstanding securities of any one issuer;
and
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no
more than 20% (25% for our 2009 taxable year and thereafter) of the value
of our total assets may be represented by securities of one or more
TRSs.
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We
believe that we have satisfied and will be able to satisfy the asset test for
each calendar quarter. 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.
After
meeting the asset tests at the close of any quarter, we will not lose our status
as a REIT if we fail to satisfy the asset tests at the end of a later quarter
solely by reason of changes in asset values. In addition, if we fail to satisfy
the asset tests because we acquire assets during a quarter, we can cure this
failure by disposing of sufficient non-qualifying assets within 30 days after
the close of that quarter. Commencing with our taxable year beginning January 1,
2005, in the event that we violate the 5% value test or the 10% vote or value
tests described above at the end of any calendar quarter, we will not lose our
REIT status if (i) the failure does not exceed the lesser of 1% of our assets or
$10 million and (ii) we dispose of assets or otherwise comply with the asset
tests within six months after the last day of the quarter during which the
failure is identified. If we fail any of the other asset tests or our failure of
the 5% or 10% asset test is in excess of the amount described in the preceding
sentence, as long as the failure was due to reasonable cause and not willful
neglect, we will not lose our REIT status if we (i) dispose of assets or
otherwise comply with such asset tests within six months after the last day of
the quarter during which the failure is identified and (ii) pay a tax equal to
the greater of $50,000 or the highest federal corporate tax rate multiplied by
the net income from the non-qualifying assets during the period in which we
failed to satisfy such asset tests; provided that we file a schedule for such
quarter describing each asset that causes us to fail to satisfy the asset test
in accordance with the regulations prescribed by the U.S. Department of
Treasury. Although we plan to take steps to ensure that we satisfy the various
asset tests for any quarter in which testing is to occur, there can be no
assurance that such steps will always be successful. If we fail to timely cure
any noncompliance with these asset tests, we would fail to qualify as a
REIT.
In
taxable years beginning after December 31, 2001, REITs are permitted to own up
to 100% of the stock of one or more TRSs. TRSs can perform activities unrelated
to our tenants, such as third-party management, development, and other
independent business activities, as well as provide services to our tenants.
Should such an entity be organized, we and the relevant subsidiary must elect
for the subsidiary to be treated as a TRS. A corporation of which a TRS directly
or indirectly owns more than 35% of the voting power or value of the stock will
automatically be treated as a TRS itself. The deductibility of interest paid or
accrued by a TRS to us is limited to assure that the TRS is subject to an
appropriate level of corporate taxation. Further, there is a 100% excise tax on
transactions between a TRS and us or our tenants that are not conducted on an
arm’s-length basis. We may not own more than 10% of the voting power or value of
the stock of a taxable subsidiary that is not treated as a TRS. As noted above,
no more than 20% (25% for our 2009 taxable year and thereafter) of our assets
can consist of securities of TRSs. As described above, we currently
own stock in one TRS.
Distribution
Requirements
We must
distribute dividends, other than capital gain dividends and deemed distributions
of retained capital gain, to our shareholders in an aggregate amount at least
equal to:
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90%
of our “REIT taxable income,” computed without regard to the dividends
paid deduction and excluding net capital gain,
and
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90%
of our after-tax net income, if any, from foreclosure property,
minus
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the
sum of certain items of non-cash
income.
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We are
generally required to distribute income in the taxable year in which it is
earned, or in the following taxable year. If dividend distributions are declared
during the last three months of the taxable year, payable to shareholders of
record on a specified date during such period and paid during January of the
following year, such distributions are treated as paid by us and received by our
shareholders on December 31 of the year in which they are declared. In addition,
at our election, a distribution for a taxable year may be declared before we
timely file our tax return and paid on or before our first regular dividend
payment following such declaration, provided such payment is made during the
twelve-month period following the close of such taxable year. Such distributions
are taxable to holders of shares in the year in which paid, even though they
relate to our prior year for purposes of our 90% distribution
requirement.
We will
pay U.S. federal income tax at the applicable corporate tax rates on taxable
income, including net capital gain, that we do not distribute to shareholders.
Furthermore, if we fail to distribute during a calendar year, or by the end of
January following the calendar year in the case of distributions with
declaration and record dates falling in the last three-months of the calendar
year, at least the sum of:
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85%
of our REIT ordinary income for such
year,
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95%
of our REIT capital gain net income for such year,
and
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any
undistributed taxable income from prior
periods,
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we will
incur a 4% nondeductible excise tax on the excess of such required distribution
over the amounts we actually distributed. We may elect to retain and pay income
tax on the net long-term capital gain we receive in a taxable year. See
“Taxation of Taxable U.S. Shareholders,” below. If we so elect, we will be
treated as having distributed any such retained amount for purposes of the 4%
excise tax described above. We have made, and we intend to continue to make,
timely distributions sufficient to satisfy the foregoing annual distribution
requirements.
It is
possible that, from time to time, we may not have sufficient cash or other
liquid assets to meet the above distribution requirement due to timing
differences between the actual receipt of income and actual payment of
deductible expenses, and the inclusion of that income and the deduction of such
expenses in arriving at our REIT taxable income. If these timing differences
occur, we may need to incur short-term, or possibly long-term, borrowings in
order to meet the REIT distribution requirements.
Under
certain circumstances, we may be able to correct a failure to meet the
distribution requirement for a year by paying “deficiency dividends” to our
shareholders in a later year. We may include such deficiency dividends in our
deduction for dividends paid for the earlier year. Although we may be able to
avoid income tax on amounts distributed as deficiency dividends, we will be
required to pay interest to the IRS based upon the amount of any deduction we
take for deficiency dividends.
Recordkeeping
Requirements
We must
maintain certain records in order to qualify as a REIT. In addition, to avoid a
monetary penalty, we must request information from our shareholders on an annual
basis designed to disclose the actual ownership of our outstanding shares. We
have complied, and we intend to continue to comply, with these
requirements.
Excess
Inclusion Income
If we are
deemed to have issued debt obligations having two or more maturities, the
payments on which correspond to payments on mortgage loans owned by us, such
arrangement will be treated as a “taxable mortgage pool” for federal income tax
purposes. If all or a portion of our Company is considered a taxable mortgage
pool, our status as a REIT generally should not be impaired; however, a portion
of our taxable income may be characterized as “excess inclusion income” and
allocated to our shareholders. In addition, if we hold residual interests in
real estate mortgage conduits, a portion of our taxable income may be
characterized as “excess inclusion income” and allocated to our shareholders.
Any excess inclusion income:
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Could
not be offset by unrelated net operating loses of a
shareholder;
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Would
be subject to tax as “unrelated business taxable income” to a tax-exempt
shareholder;
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Would
be subject to the application of federal income tax withholding (without
reduction pursuant to any otherwise applicable income tax treaty) with
respect to amounts allocable to non-U.S. shareholders;
and
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Would
be taxable (at the highest corporate tax rate) to us, rather than our
shareholders, to the extent allocable to our shares held by disqualified
organizations (generally, tax-exempt entities not subject to unrelated
business income tax, including governmental
organizations).
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Failure
to Qualify
If we
fail to qualify as a REIT in any taxable year, and no relief provision is
available, we would be subject to U.S. federal income tax, including any
applicable alternative minimum tax, and possibly increased state and local tax,
on our taxable income at regular corporate rates. Such taxation would reduce the
cash available for distribution by us to our shareholders. In calculating our
taxable income in a year in which we fail to qualify as a REIT, we would not be
able to deduct distributions paid to shareholders. Moreover, we would not be
required to distribute any amounts to shareholders in that year. In such event,
distributions to our shareholders will be subject to tax to the extent of our
current and accumulated earnings and profits (which may be subject to tax at
preferential rates) and corporate shareholders may be eligible for the dividends
received deduction. Unless we qualified for relief under specific statutory
provisions, we also would be disqualified from taxation as a REIT for the four
taxable years following the year during which we ceased to qualify as a REIT.
Commencing with our taxable year beginning January 1, 2005, if we violate a
provision of the Code that would otherwise result in our failure to qualify as a
REIT (other than violations of the REIT gross income or asset tests, described
above, for which other specific cure provisions are available), we will be
granted relief if (i) the violation is due to reasonable cause and not willful
neglect, and (ii) we pay a penalty of $50,000 for each failure to satisfy the
provision. We cannot predict whether, under any applicable circumstances, we
would qualify for any available statutory relief if we ever fail to qualify as a
REIT.
Taxation
of Taxable U.S. Shareholders
When
using the term “U.S. shareholder,” we mean a holder of our common shares or our
preferred shares (which are referred to collectively herein as our shares) that,
for U.S. federal income tax purposes, is:
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a
citizen or resident of the U.S.,
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a
corporation (including an entity treated as a corporation for federal
income tax purposes) created or organized under the laws of the U.S. or of
a political subdivision of the
U.S.,
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an
estate whose income is includible in gross income for U.S. federal income
tax purposes regardless of its source,
or
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any
trust with respect to which a U.S. court is able to exercise primary
supervision over its administration and one or more U.S. persons have the
authority to control all of its substantial
decisions.
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If an
entity taxed as a partnership for U.S. federal income tax purposes holds our
shares, the tax treatment of any partner or member of such entity will generally
depend upon the status of such partner or member and the activities of such
entity. If you are a partner or member of an entity taxed as a partnership for
U.S. federal income tax purposes that holds our shares, you should consult with
your own tax advisor regarding the consequences of the ownership and disposition
of our shares.
As long
as we qualify as a REIT, distributions made out of our current or accumulated
earnings and profits that we do not designate as capital gain dividends or
retained long-term capital gain must be taken into account by a taxable U.S.
shareholders as ordinary income. For purposes of determining whether a
distribution is made out of our current or accumulated earnings and profits, our
earnings and profits will be allocated first to dividends on outstanding
preferred shares (if any) and then to dividends on our outstanding common
shares. Provided we qualify as a REIT, a corporate U.S. shareholder will not
qualify for the dividends received deduction generally available to corporations
with respect to such distributions. Dividends received from REITs are generally
not eligible to be taxed at the preferential qualified dividend income rates,
currently up to 15% through 2010, applicable to individual U.S. shareholders who
receive dividends from taxable “C” corporations. Provided certain holding period
requirements are met with respect to the dividend-paying shares, an exception
applies, however, and individual U.S. shareholders are taxed at such
preferential qualified dividend income rates on dividends designated by and
received from REITs, to the extent that the dividends are attributable to (i)
“REIT taxable income” that the REIT previously retained in the prior year, and
on which it was subject to corporate level tax, (ii) dividends received by the
REIT from taxable domestic C corporations, taxable REIT subsidiaries (TRS) and
certain foreign corporations, or (iii) income from sales of appreciated property
acquired from “C” corporations in carryover basis transactions that has been
subject to tax.
A U.S.
shareholder will not incur tax on a distribution with respect to such
shareholder’s shares in excess of our current and accumulated earnings and
profits if the distribution does not exceed the adjusted tax basis that such
shareholder has in our shares. Instead, the distribution will reduce the
adjusted tax basis of the shares in the U.S. shareholder’s hands. A U.S.
shareholder will recognize and pay tax on a distribution in excess of both our
current and accumulated earnings and profits and such shareholder’s adjusted tax
basis in his, her or its shares as long-term capital gain (or short-term capital
gain if the shares have been held by the shareholder for one year or less)
assuming the shares are a capital asset in the hands of the U.S.
shareholder.
A U.S.
shareholder generally will recognize and be taxed on distributions that we
designate as capital gain dividends as long-term capital gain without regard to
the period for which the U.S. shareholder has held his, her or its shares.
Long-term capital gains are generally taxable at maximum federal tax rates of
15% (through 2010) in the case of U.S. shareholders who are individuals and 35%
for corporations, however, capital gains attributable to the sale of depreciable
real property held for more than 12 months are subject to a 25% maximum federal
income tax rate for U.S. shareholders who are individuals, to the extent of
previously claimed depreciation deductions. A corporate U.S. shareholder,
however, may be required to treat up to 20% of certain capital gain dividends as
ordinary income.
We may
elect to retain, rather than distribute as a capital gain dividend, all or a
portion of our net long-term capital gain. If this election is made, we would
pay tax on such retained capital gains and a U.S. shareholder would be taxed on
his, her or its proportionate share of our undistributed long-term capital gain.
The U.S. shareholder would, however, receive a credit or refund for his, her or
its proportionate share of the tax we paid with respect to such retained capital
gains. The U.S. shareholder would increase the basis in his, her or its shares
by the amount of such shareholder’s proportionate share of our undistributed
long-term capital gain, minus such shareholder’s share of the tax we paid with
respect to such retained capital gains.
Dividends
that we declare in October, November or December of any year and actually pay to
you during January of the following year generally are treated as if we had
paid, and you had received such dividends, on December 31 of the calendar year
and not on the date actually paid or received. In addition, we may elect to
treat other dividends distributed after the close of the taxable year as having
been paid during the taxable year, so long as they meet the requirements
described in the applicable U.S. federal income tax laws, but you will be
treated as having received these dividends in the taxable year in which the
distribution is actually made.
Shareholders
may not include in their individual income tax returns any of our net operating
losses or capital losses. Instead, these losses are generally carried over by us
for potential offset against our future income. Taxable distributions from us
and gain from the disposition of shares will not be treated as passive activity
income and, therefore, shareholders generally will not be able to apply any
“passive activity losses” against such income or gain. In addition, taxable
distributions from us generally will be treated as investment income for
purposes of the investment interest limitations.
Taxation
of U.S. Shareholders on the Disposition of Shares
In
general, a U.S. shareholder who sells or otherwise disposes of his, her or its
shares will recognize gain or loss for federal income tax purposes in an amount
equal to the difference between (i) the amount of cash and the fair market value
of any property received on the sale or other disposition, and (ii) such
shareholder’s adjusted tax basis in such shares. In general, capital gains
recognized by individuals and other non-corporate U.S. shareholders upon the
sale or disposition of our shares will, pursuant to current U.S. federal income
tax laws, be subject to a maximum federal income tax rate of 15% for taxable
years through 2010, if the shares are held for more than 12 months, and at
ordinary income rates (of up to 35% through 2010) if the shares are held for 12
months or less. Gains recognized by U.S. shareholders that are corporations are
subject to federal income tax at a maximum rate of 35%, whether or not
classified as long-term capital gains. Capital losses recognized by a U.S.
shareholder upon the disposition of our shares, if held for more than one year
at the time of disposition, will be considered long-term capital losses, and are
generally available only to offset capital gain income of the U.S. shareholder
but not ordinary income (except in the case of individuals, who may offset up to
$3,000 of ordinary income each year). In addition, any loss incurred upon a sale
or exchange of shares by a U.S. shareholder who has held the shares for six
months or less, after applying the holding period rules, will be treated as a
long-term capital loss to the extent of distributions received from us that are
required to be treated by the U.S. shareholder as long-term capital
gain.
Information
Reporting Requirements and Backup Withholding
We will
report to our shareholders and to the IRS the amount of distributions we pay
during each calendar year, and the amount of tax we withhold, if any. Under the
backup withholding rules, a shareholder may be subject to backup withholding
with respect to distributions unless the holder:
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is
a corporation or comes within certain other exempt categories and, when
required, demonstrates this fact;
or
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provides
a taxpayer identification number or social security number, certifies as
to no loss of exemption from backup withholding, and otherwise complies
with the applicable requirements of the backup withholding
rules.
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A
shareholder who does not provide us with its correct taxpayer identification
number or social security number also may be subject to penalties imposed by the
IRS. Backup withholding is not an additional tax. Any amount paid as backup
withholding will be creditable against the shareholder’s income tax liability.
In addition, we may be required to withhold a portion of capital gain
distributions to any shareholders who fail to certify their non-foreign status
to us. For a discussion of certain withholding rules as applied to non-U.S.
shareholders, see “Taxation of Non-U.S. Shareholders,” below.
Taxation
of Tax-Exempt Shareholders
Tax-exempt
entities, including qualified employee pension and profit sharing trusts and
individual retirement accounts, generally are exempt from U.S. federal income
taxation. However, they are subject to taxation on their unrelated business
taxable income. While many investments in real estate generate unrelated
business taxable income, the IRS has issued a ruling that dividend distributions
from a REIT to an exempt employee pension trust do not constitute unrelated
business taxable income. Based on that ruling, provided that a tax-exempt U.S.
shareholder has not held its shares as “debt financed property” (within the
meaning of the U.S. federal income tax laws), the shares are not otherwise used
in an unrelated trade or business and the REIT has not incurred any “excess
inclusion income,” as described above, amounts that we distribute to tax-exempt
shareholders generally should not constitute unrelated business taxable income.
If, however, a tax-exempt shareholder were to finance its acquisition of our
shares with debt, a portion of the income that it receives from us would
constitute unrelated business taxable income pursuant to the “debt-financed
property” rules. Furthermore, social clubs, voluntary employee benefit
associations, supplemental unemployment benefit trusts and qualified group legal
services plans that are exempt from taxation under special provisions of the
U.S. federal income tax laws are subject to different unrelated business taxable
income rules, which generally will require them to characterize distributions
that they receive from us as unrelated business taxable income. Finally, in
certain circumstances, a qualified employee pension or profit sharing trust that
owns more than 10% of our shares must treat a percentage of the dividends that
it receives as unrelated business taxable income. Such percentage is equal to
the gross income we would be deemed to derive from an unrelated trade or
business, determined as if we were a pension trust, divided by our total gross
income for the year in which we pay the dividends. This rule applies to a
pension trust holding more than 10% of our shares only if:
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the
percentage of our dividends that the tax-exempt trust must treat as
unrelated business taxable income is at least
5%;
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we
qualify as a REIT by reason of the modification of the rule requiring that
no more than 50% of our shares be owned by five or fewer individuals that
allows the beneficiaries of the pension trust to be treated as holding our
shares in proportion to their actuarial interests in the pension trust;
and
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one
pension trust owns more than 25% of the value of our shares;
or
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a
group of pension trusts individually holding more than 10% of the value of
our shares collectively owns more than 50% of the value of our
shares.
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Taxation
of Non-U.S. Shareholders
The rules
governing U.S. federal income taxation of nonresident alien individuals, foreign
corporations, foreign partnerships, and other foreign shareholders are complex.
This section is only a summary of such rules. WE URGE PROSPECTIVE NON-U.S.
SHAREHOLDERS TO CONSULT THEIR OWN TAX ADVISORS TO DETERMINE THE IMPACT OF U.S.
FEDERAL, STATE, AND LOCAL INCOME TAX LAWS (AS WELL AS THE TAX LAWS OF THEIR HOME
JURISDICTIONS) ON OWNERSHIP OF OUR SECURITIES, INCLUDING ANY REPORTING
REQUIREMENTS.
A
non-U.S. shareholder that receives a distribution that is not attributable to
gain from our sale or exchange of U.S. real property interests, as defined
below, and that we do not designate as a capital gain dividend or retained
capital gain will recognize ordinary income to the extent that we pay the
distribution out of our current or accumulated earnings and profits. A
withholding tax equal to 30% of the gross amount of the distribution ordinarily
will apply unless an applicable tax treaty reduces or eliminates the tax.
However, if a distribution is treated as effectively connected with the non-U.S.
shareholder’s conduct of a U.S. trade or business, the non-U.S. shareholder
generally will be subject to U.S. federal income tax on the distribution at
graduated rates, in the same manner as U.S. shareholders are taxed on
distributions and also may be subject to the 30% branch profits tax in the case
of a non-U.S. shareholder that is a non-U.S. corporation. We plan to withhold
U.S. income tax at the rate of 30% on the gross amount of any distribution paid
to a non-U.S. shareholder unless either:
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a
lower treaty rate applies and the non-U.S. shareholder files the required
form evidencing eligibility for that reduced rate with us,
or
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the
non-U.S. shareholder files the required form with us claiming that the
distribution is effectively connected
income.
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Any
portion of a dividend paid by us to a non-U.S. shareholder that is treated as
excess inclusion income from a REMIC will not be eligible for exemption from the
30% withholding tax or a reduced treaty rate. In addition, if U.S. Department of
Treasury regulations are issued allocating our excess inclusion income (if any)
from taxable mortgage pools among our shareholders, some percentage of our
dividends would not be eligible for exemption from the 30% withholding tax or a
reduced treaty withholding tax rate in the hands of non-U.S.
shareholders.
A
non-U.S. shareholder will not incur tax on a distribution with respect to such
shareholder’s shares that is in excess of our current and accumulated earnings
and profits if the distribution does not exceed the adjusted basis of such
shareholder’s shares. Instead, the distribution will reduce the adjusted basis
of such non-U.S. shareholder in those shares. A non-U.S. shareholder will be
subject to tax on a distribution with respect to such shareholder’s shares that
exceeds both our current and accumulated earnings and profits and the adjusted
basis of such shareholder’s shares if such shareholder otherwise would be
subject to tax on gain from the sale or disposition of his, her or its shares,
as described below. Because we generally cannot determine at the time we make a
distribution whether or not the distribution will exceed our current and
accumulated earnings and profits, we normally will withhold tax on the entire
amount of any distribution at the same rate as we would withhold on a dividend.
However, a non-U.S. shareholder may obtain a refund of amounts that we withhold
if we later determine that a distribution, in fact, exceeded our current and
accumulated earnings and profits.
We also
may be required to withhold 10% of any distribution that exceeds our current and
accumulated earnings and profits. Consequently, although we intend to withhold
at a rate of 30% on the entire amount of any distribution, to the extent that we
do not do so, we may withhold at a rate of 10% on any portion of a distribution
not subject to withholding at a rate of 30%.
For any
year in which we qualify as a REIT, a non-U.S. shareholder will incur tax on
distributions that are attributable to gain from our sale or exchange of “U.S.
real property interests” under special provisions of the U.S. federal income tax
laws known as “FIRPTA.” The term “U.S. real property interests” includes
interests in U.S. real property (but generally does not include mortgage loans)
and shares in corporations at least 50% of whose assets consists of interests in
U.S. real property. Under those rules, a non-U.S. shareholder is taxed on
distributions attributable to gain from sales of U.S. real property interests as
if the gain were effectively connected with a U.S. business of the non-U.S.
shareholder. A non-U.S. shareholder thus would be taxed on the distribution at
the normal capital gain rates applicable to U.S. shareholders, subject to
applicable alternative minimum tax and a special alternative minimum tax in the
case of a nonresident alien individual. A non-U.S. corporate shareholder not
entitled to treaty relief or exemption also may be subject to the 30% branch
profits tax on such a distribution. We must withhold 35% of any distribution to
a non-U.S. shareholder that we could designate as a capital gain dividend. The
amount withheld is creditable against the non-U.S. shareholder’s FIRPTA tax
liability and, to the extent it exceeds such non-U.S. shareholder’s tax
liability, will be refundable. Commencing with our taxable year beginning
January 1, 2005, any capital gain dividend with respect to our shares will not
be subject to FIRPTA, and therefore will not be subject to the 35% withholding
tax if the non-U.S. shareholder does not own more than 5% of our shares at any
time during the taxable year and our shares are regularly traded on an
established securities market located in the United States. Instead, any capital
gain dividend paid to such a non-U.S. shareholder will be treated as an ordinary
dividend distribution (generally subject to withholding at a rate of 30% unless
a reduced treaty withholding rate applies).
A
non-U.S. shareholder generally will not incur tax under FIRPTA as long as at all
times, non-U.S. persons hold, directly or indirectly, less than 50% in value of
our shares. We cannot assure you that that test will be met at all times or at
any specific time. However, a non-U.S. shareholder that owned, actually or
constructively, 5% or less of our shares at all times during a specified testing
period will not incur tax under FIRPTA if the shares are “regularly traded” on
an established securities market. If the gain on the sale of our shares were
taxed under FIRPTA, a non-U.S. shareholder would be taxed on that gain in the
same manner as U.S. shareholders subject to applicable alternative minimum tax,
a special alternative minimum tax in the case of nonresident alien individuals,
and the possible application of the 30% branch profits tax in the case of
non-U.S. corporations. Furthermore, a non-U.S. shareholder generally will incur
tax on gain not subject to FIRPTA if:
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the
gain is effectively connected with the non-U.S. shareholder’s U.S. trade
or business, in which case the non-U.S. shareholder will be subject to the
same tax treatment as U.S. shareholders with respect to such gain,
or
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the
non-U.S. shareholder is a nonresident alien individual who was present in
the U.S. for 183 days or more during the taxable year and other conditions
are met, in which case the non-U.S. shareholder will incur a 30% tax on
his or her capital gains.
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State
and Local Taxes
We and/or
our shareholders may be subject to taxation by various states and localities,
including those in which we or a shareholder transacts business, owns property
or resides. The state and local tax treatment may differ from the U.S. federal
income tax treatment described above. Consequently, shareholders should consult
their own tax advisors regarding the effect of state and local tax laws upon an
investment in our securities.
Possible
Legislation or Other Actions Affecting REITs
The rules
dealing with U.S. federal income taxation are constantly under review by persons
involved in the legislative process and by the IRS and the U.S. Treasury
Department. Changes to the tax law, which may have retroactive application,
could adversely affect us and our shareholders. It cannot be predicted whether,
when, in what forms or with what effective dates, the tax law applicable to us
or our shareholders will be changed.
IMPORTANCE
OF OBTAINING PROFESSIONAL TAX ADVICE
THE TAX
DISCUSSION SET FORTH ABOVE IS FOR GENERAL INFORMATION ONLY. TAX CONSEQUENCES MAY
VARY BASED UPON THE PARTICULAR CIRCUMSTANCES OF EACH INVESTOR. PROSPECTIVE
INVESTORS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE U.S.
FEDERAL, STATE AND LOCAL AND APPLICABLE FOREIGN TAX CONSEQUENCES OF AN
INVESTMENT IN OUR SECURITIES.
PLAN
OF DISTRIBUTION
These
securities may be sold directly by us, through dealers or agents designated from
time to time, or to or through underwriters or may be sold directly by us for
consideration consisting of goods and property, including real property, or
through a combination of these methods. The prospectus supplement
with respect to the securities being offered will set forth the terms of the
offering, including the names of the underwriters, dealers or agents, if any,
the purchase price of the securities, our net proceeds, any underwriting
discounts and other items constituting underwriters' compensation, public
offering price and any discounts or concessions allowed or reallowed or paid to
dealers and any securities exchanges on which such securities may be
listed. These securities may also be offered by us to our
shareholders in lieu of dividends.
If
underwriters are used in an offering, we will execute an underwriting agreement
with such underwriters and will specify the name of each underwriter and the
terms of the transaction (including any underwriting discounts and other terms
constituting compensation of the underwriters and any dealers) in a prospectus
supplement. If an underwriting syndicate is used, the managing
underwriter(s) will be specified on the cover of the prospectus
supplement. If underwriters are used in the sale, the offered
securities will be acquired by the underwriters for their own accounts 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. Any public offering price and any discounts or
concessions allowed or reallowed or paid to dealers may be changed from time to
time. Unless otherwise set forth in the prospectus supplement, the
obligations of the underwriters to purchase the offered securities will be
subject to conditions precedent and the underwriters will be obligated to
purchase all of the offered securities if any are purchased.
If
dealers are used in an offering, we will sell the securities to the dealers as
principals. The dealers may resell the securities to the public at
varying prices, which they determine at the time of resale. The names
of the dealers and the terms of the transaction will be specified in a
prospectus supplement.
The
securities may be sold directly by us or through agents we
designate. If agents are used in an offering, the names of the agents
and the terms of the agency will be specified in a prospectus
supplement. Unless otherwise indicated in a prospectus supplement,
the agents will act on a best-efforts basis for the period of their
appointment.
Dealers
and agents named in a prospectus supplement may be deemed to be underwriters
(within the meaning of the Securities Act) of the securities described
therein. In addition, we may sell the securities directly to
institutional investors or others who may be deemed to be underwriters within
the meaning of the Securities Act with respect to any resales
thereof.
Underwriters,
dealers and agents, may be entitled to indemnification by us against specific
civil liabilities, including liabilities under the Securities Act, or to
contribution with respect to payments which the underwriters or agents may be
required to make in respect thereof, under underwriting or other
agreements. The terms of any indemnification provisions will be set
forth in a prospectus supplement. Certain underwriters, dealers or
agents and their associates may engage in transactions with and perform services
for us in the ordinary course of business.
If so
indicated in a prospectus supplement, we will authorize underwriters or other
persons acting as our agents to solicit offers by institutional investors to
purchase securities pursuant to contracts providing for payment and delivery on
a future date. We may enter contracts with commercial and savings
banks, insurance companies, pension funds, investment companies, educational and
charitable institutions and other institutional investors. The
obligations of any institutional investor will be subject to the condition that
its purchase of the offered securities will not be illegal at the time of
delivery. The underwriters and other agents will not be responsible
for the validity or performance of contracts.
Any
common shares of beneficial interest sold pursuant to a prospectus supplement
will be eligible for trading on the New York Stock Exchange, subject to official
notice of issuance. Any underwriters to whom securities are sold by
us for public offering and sale may make a market in the securities, but such
underwriters will not be obligated to do so and may discontinue any market
making at any time without notice.
LEGAL
MATTERS
The
validity of the common shares offered pursuant to this prospectus will be passed
upon by Sonnenschein Nath & Rosenthal LLP.
EXPERTS
The
consolidated financial statements of BRT Realty Trust and Subsidiaries appearing
in BRT Realty Trust’s Annual Report (Form 10-K) for the year ended September 30,
2008 (including schedules appearing therein), and the effectiveness of BRT
Realty Trust and Subsidiaries’ internal control over financial reporting as of
September 30, 2008 have been audited by Ernst & Young LLP, independent
registered public accounting firm, as set forth in their reports thereon,
included therein, and incorporated herein by reference. Such
consolidated financial statements are incorporated herein by reference in
reliance upon such report given on the authority of such firm as experts in
accounting and auditing.
PART
II. INFORMATION NOT REQUIRED IN PROSPECTUS
Item
14. Other Expenses of Issuance and Distribution.
The
following table sets forth the estimated expenses payable in connection with the
sale and distribution of the common shares registered hereby. All
amounts other than the SEC registration fee are estimated.
|
SEC
Registration Fee
|
$
|
2,790
|
|
Accounting
Fees
|
$
|
25,000
|
|
Legal
Fees and Disbursements
|
$
|
30,000
|
|
Printing
Fees
|
$
|
10,000
|
|
Miscellaneous
|
$
|
2,210
|
|
|
|
|
|
Total:
|
$
|
70,000
|
Item
15. Indemnification of Officers and Directors.
Our
declaration of trust provides that we will indemnify and hold harmless our
trustees, officers, employees and agents (each, an “Indemnified Party”) against
expense or liability, including attorneys’ fees reasonably incurred, in
connection with the defense or disposition of any action, suit or proceeding in
which they may be involved or which they may be threatened because of being or
having been our trustees, officers, employees or agents; provided, that, (1) the
majority of independent trustees determine, or independent legal counsel
provides an opinion, that the Indemnified Party acted in good faith, (2) such
liability or loss was not the result of bad faith, reckless disregard,
negligence or misconduct on the part of the Indemnified Party and (3) such
indemnification or agreement to hold harmless is recoverable only out of our
assets and not from our shareholders.
We
purchased and maintain insurance on behalf of our trustees and officers against
liability asserted against such trustees and officers in their capacities as
such.
Section
67 of Chapter 156B of the Massachusetts General Laws provides that
indemnification of directors and officers may be provided to the extent
specified or authorized by the articles of organization or bylaws, provided that
no indemnification may be provided with respect to any matter as to which the
director or officer shall have been adjudicated not to have acted in good faith
in the reasonable belief that his or her action was in the best interest of the
company.
Item
16. Exhibits.
See the
index to exhibits, which is incorporated herein by reference.
Item
17. Undertakings.
(A) The
undersigned registrant hereby undertakes:
|
|
(1)
|
To
file, during the period in which offers or sales are being made, a
post-effective amendment to this registration
statement:
|
|
|
(i)
|
To
include any prospectus required by Section 10(a)(3) of the Securities
Act;
|
|
|
(ii)
|
To
reflect in the prospectus any facts or events arising after the effective
date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any deviation from
the low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the SEC pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price represent no
more than a 20% change in the maximum aggregate offering price set forth
in the “Calculation of Registration Fee” table in the effective
registration statement;
|
|
|
(iii)
|
To
include any material information with respect to the plan of distribution
not previously disclosed in the registration statement or any material
change to such information in the registration
statement;
|
Provided, however, That
paragraphs (A)(1)(i), (A)(1)(ii) and (A)(1)(iii) do not apply if the information
required to be included in a post-effective amendment by those paragraphs is
contained in reports filed with or furnished to the SEC by the registrant
pursuant to Section 13 or 15(d) of the Exchange Act that are incorporated by
reference in the registration statement, or is contained in a form of prospectus
filed pursuant to Rule 424(b) that is part of the registration
statement.
|
|
(2)
|
That,
for the purpose of determining any liability under the Securities Act,
each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide
offering thereof.
|
|
|
(3)
|
To
remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of the
offering.
|
|
|
(4)
|
That,
for the purpose of determining liability under the Securities Act to any
purchaser:
|
|
|
(i)
|
Each
prospectus filed by the registrant pursuant to Rule 424(b)(3) shall be
deemed to be part of the registration statement as of the date the filed
prospectus was deemed part of and included in the registration statement;
and
|
|
|
(ii)
|
Each
prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or
(b)(7) as part of a registration statement in reliance on Rule 430B
relating to an offering made pursuant to Rule 415(a)(1)(i), (vii), or (x)
for the purpose of providing the information required by section 10(a) of
the Securities Act shall be deemed to be part of and included in the
registration statement as of the earlier of the date such form of
prospectus is first used after effectiveness or the date of the first
contract of sale of securities in the offering described in the
prospectus. As provided in Rule 430B, for liability purposes of
the issuer and any person that is at that date an underwriter, such date
shall be deemed to be a new effective date of the registration statement
relating to the securities in the registration statement to which that
prospectus relates, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering
thereof. Provided, however, that
no statement made in a registration statement or prospectus that is part
of the registration statement or made in a document incorporated or deemed
incorporated by reference into the registration statement or prospectus
that is part of the registration statement will, as to a purchaser with a
time of contract of sale prior to such effective date, supersede or modify
any statement that was made in the registration statement or prospectus
that was part of the registration statement or made in any such document
immediately prior to such effective
date.
|
|
|
(5)
|
That,
for the purpose of determining liability of the registrant under the
Securities Act to any purchaser in the initial distribution of the
securities, the undersigned registrant undertakes that in a primary
offering of securities of the undersigned registrant pursuant to this
registration statement, regardless of the underwriting method used to sell
the securities to the purchaser, if the securities are offered or sold to
such purchaser by means of any of the following communications, the
undersigned registrant will be a seller to the purchaser and will be
considered to offer or sell such securities to such
purchaser:
|
|
|
(i)
|
Any
preliminary prospectus or prospectus of the undersigned registrant
relating to the offering required to be filed pursuant to Rule
424;
|
|
|
(ii)
|
Any
free writing prospectus relating to the offering prepared by or on behalf
of the undersigned registrant or used or referred to by the undersigned
registrant;
|
|
|
(iii)
|
The
portion of any other free writing prospectus relating to the offering
containing material information about the undersigned registrant or its
securities provided by or on behalf of the undersigned registrant;
and
|
|
|
(iv)
|
Any
other communication that is an offer in the offering made by the
undersigned registrant to the
purchaser.
|
(B) The
undersigned registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act, each filing of the registrant’s annual
report pursuant to Section 13(a) or 15(d) of the Exchange Act (and, where
applicable, each filing of an employee benefit plan’s annual report pursuant to
Section 15(d) of the Exchange Act) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
(C) Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the SEC such indemnification is against public
policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, the registrant certifies that
it has reasonable grounds to believe that it meets all of the requirements for
filing on Form S-3 and has duly caused this registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the Village of
Great Neck Plaza, State of New York on July 14, 2009.
| |
BRT
REALTY TRUST,
Registrant
|
|
| |
|
|
|
|
|
By:
|
/s/ Jeffrey
A. Gould |
|
| |
Jeffrey
A. Gould |
|
| |
President, Chief Executive
Officer and Trustee |
|
| |
|
|
|
POWER
OF ATTORNEY
KNOW ALL
MEN BY THESE PRESENTS, each of the undersigned constitutes and appoints Mark H.
Lundy and Simeon Brinberg, and each of them, as attorneys-in-fact and agents,
with full power of substitution and resubstitution, for and in the name, place
and stead of the undersigned, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this registration statement
or any registration statement for this offering that is to be effective upon the
filing pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and
all post-effective amendments thereto, and to file the same, with all exhibits
thereto and all other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as the undersigned might or could do in person, hereby ratifying and
confirming all that each of said attorney-in-fact or substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.
Pursuant
to the requirements of the Securities Act of 1933, this registration statement
has been signed by the following persons in the capacities indicated, on July
14, 2009.
|
(Signature)
|
|
(Title)
|
| |
|
|
|
/s/ Fredric H. Gould
|
|
Chairman
of the Board of Directors
|
| Fredric
H. Gould |
|
|
|
|
|
|
|
/s/ Jeffrey
A. Gould
|
|
President,
Chief Executive Officer and Trustee
(principal
executive officer)
|
|
Jeffrey
A. Gould
|
|
|
| |
|
|
| |
|
|
|
/s/ Kenneth
Bernstein
|
|
Trustee
|
|
Kenneth
Bernstein
|
|
|
| |
|
|
| |
|
|
|
/s/ Alan
Ginsburg
|
|
Trustee
|
|
Alan
Ginsburg
|
|
|
| |
|
|
|
/s/ Louis C.
Grassi
|
|
Trustee
|
|
Louis
C. Grassi
|
|
|
| |
|
|
| |
|
|
|
/s/ Matthew
J. Gould
|
|
Trustee
|
|
Matthew
J. Gould
|
|
|
| |
|
|
| |
|
|
|
/s/ Gary
Hurand
|
|
Trustee
|
|
Gary
Hurand
|
|
|
| |
|
|
| |
|
|
|
/s/ Jeffrey
Rubin
|
|
Trustee
|
|
Jeffrey
Rubin
|
|
|
| |
|
|
| |
|
|
|
/s/ Jonathan
Simon
|
|
Trustee
|
|
Jonathan
Simon
|
|
|
| |
|
|
| |
|
|
|
/s/ Elie
Weiss
|
|
Trustee
|
|
Elie
Weiss
|
|
|
| |
|
|
|
/s/ George E.
Zweier
|
|
Chief
Financial Officer, Vice President (Principal Financial and Accounting
Officer)
|
|
George
E. Zweier
|
|
|
INDEX
TO EXHIBITS
|
Exhibit
No.
|
Description
of Exhibit |
| |
|
|
3.1
|
Third
Amended and Restated Declaration of Trust (incorporated by reference to
Exhibit 3.1 to the Form 10-K of BRT Realty Trust for the year ended
September 30, 2005).
|
|
3.2
|
By-laws
of BRT Realty Trust, formerly known as Berg Enterprise Realty Group
(incorporated by reference to Exhibit 3.2 to the Form 10-K of BRT Realty
Trust for the year ended September 30,
2005).
|
|
3.3
|
Amendment
to By-laws, dated December 10, 2007 (incorporated by reference to Exhibit
3.1 to the Form 8-K of BRT Realty Trust filed December 11,
2007).
|
|
4.1
|
Junior
Subordinated Indenture, dated as of May 26, 2009, between BRT Realty Trust
and The Bank of New York Mellon (incorporated by reference to Exhibit 4.1
to the Form 8-K of BRT Realty Trust filed June 1,
2009).
|
|
5.1
|
Opinion
of Sonnenschein Nath & Rosenthal LLP
*
|
|
8.1
|
Tax
Opinion of Sonnenschein Nath & Rosenthal LLP
*
|
|
10.1
|
Amended
and Restated Advisory Agreement, effective as of January 1, 2007, between
BRT Realty Trust and REIT Management Corp. (incorporated by reference to
Exhibit 10.1 to the Form 8-K of BRT Realty Trust filed November 27,
2006).
|
|
10.2
|
Shared
Services Agreement, dated as of January 1, 2002, by and among Gould
Investors L.P., BRT Realty Trust, One Liberty Properties, Inc., Majestic
Property Management Corp., Majestic Property Affiliates, Inc. and REIT
Management Corp. (incorporated by reference to Exhibit 10.2 to the Form
10-K of BRT Realty Trust filed December 11,
2008).
|
|
10.3
|
Limited
Liability Company Agreement of BRT Funding LLC, dated as of November 2,
2006, by and among BRT Funding LLC, CIT Capital USA, Inc. and BRT Joint
Venture No. 1 LLC (incorporated by reference to Exhibit 1 to the Form 8-K
of BRT Realty Trust filed November 8,
2006).
|
|
10.4
|
Exchange
Agreement, dated as of May 26, 2009, by and among BRT Realty Trust and
Taberna Preferred Funding IV, Ltd., Taberna Preferred Funding V, Ltd., and
Taberna Preferred Funding VI, Ltd. (incorporated by reference to Exhibit
10.1 to the Form 8-K of BRT Realty Trust filed June 1,
2009).
|
|
23.1
|
Consent
of Sonnenschein Nath & Rosenthal LLP (to be included in its opinion
filed as Exhibits 5.1 and 8.1 hereto).
*
|
|
23.2
|
Consent
of Ernst & Young LLP, independent registered public accountants.
*
|
|
24.1
|
Powers
of Attorney *
|
* Filed
herewith.