PROSPECTUS
Lexington
Realty Trust
17,823,195
Common Shares of Beneficial Interest
Our former operating partnership, The
Lexington Master Limited Partnership, issued and sold $450,000,000 aggregate
principal amount of 5.45% Exchangeable Guaranteed Notes due 2027, or the
“notes,” in private transactions exempt from registration under the Securities
Act of 1933, as amended, or the “Securities Act.” On December 31, 2008, The
Lexington Master Limited Partnership was merged with and into us and we assumed
the notes pursuant to a supplemental indenture. As of June 30, 2009,
$134,400,000 aggregate principal amount of the notes are
outstanding. Under certain circumstances, we may issue our shares of
beneficial interest classified as common stock, par value $0.0001 per share, or
common shares, upon the exchange or redemption of the notes. In such
circumstances, the recipients of such common shares, whom we refer to as the
selling shareholders, may use this prospectus to resell from time to time the
common shares that we may issue to them upon the exchange or redemption of the
notes. Additional selling shareholders may be named by future prospectus
supplements, post-effective amendments or in filings we make with the Securities
and Exchange Commission under the Exchange Act of 1934, as amended, which are
incorporated by reference in this prospectus.
The registration of the common shares
covered by this prospectus does not necessarily mean that any of the selling
shareholders will exchange their notes for our common shares or that any
common shares received upon exchange or redemption of the notes will be sold by
the selling shareholders. Pursuant to the terms of the notes, upon an
exchange of the notes, we are required to deliver cash or a combination of cash
and common shares with an aggregate value, which we refer to as the “exchange
value,” equal to the exchange rate multiplied by the average price of the common
shares as follows: (1) an amount in cash, which we refer to as the “principal
return,” equal to the lesser of (a) the principal amount of the exchanged notes
and (b) the exchange value; and (2) if the exchange value is greater than the
principal return, an amount with a value equal to the difference between the
exchange value and the principal return, which we refer to as the “net
amount.” The net amount may be paid, at our option, in cash, common
shares or a combination of cash and common shares. We may also enter
into negotiated transactions with the selling shareholders outside of the terms
of the notes, pursuant to which we will exchange the notes for our common
shares.
We will receive no proceeds from any
issuance of our common shares to the selling shareholders or from any sale of
such common shares by the selling shareholders, but we have agreed to pay
certain registration expenses relating to such common shares. The selling
shareholders from time to time may offer and sell the common shares held by them
directly or through agents or broker-dealers on terms to be determined at the
time of sale, as described in more detail in this prospectus.
To ensure
that we maintain our qualification as a real estate investment trust, or “REIT,”
under the applicable provisions of the Internal Revenue Code of 1986, as
amended, ownership of our equity securities by any person is subject to certain
limitations. See “Certain Provisions of Maryland Law and of our Declaration of
Trust and Bylaws—Restrictions Relating to REIT Status.”
Our
common shares are listed on the New York Stock Exchange under the symbol “LXP”.
On August 31, 2009, the last reported sale price of our common shares on the New
York Stock Exchange was $4.66 per share.
Investing
in our common shares involves risks. See “Risk Factors” referred to on page 5 of
this prospectus before investing in our securities.
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 September 4, 2009
TABLE
OF CONTENTS
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ABOUT
THIS PROSPECTUS
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1
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CAUTIONARY
STATEMENTS CONCERNING FORWARD-LOOKING INFORMATION
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1
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OUR
COMPANY
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2
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RISK
FACTORS
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2
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USE
OF PROCEEDS
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2
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DESCRIPTION
OF COMMON SHARES
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3
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CERTAIN
PROVISIONS OF MARYLAND LAW AND OF OUR DECLARATION OF TRUST AND
BYLAWS
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4
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FEDERAL
INCOME TAX CONSIDERATIONS
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7
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SELLING
SHAREHOLDERS
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21
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PLAN
OF DISTRIBUTION
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27
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EXPERTS
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29
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LEGAL
MATTERS
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29
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WHERE
YOU CAN FIND MORE INFORMATION
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29
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You
should rely only on the information contained in this prospectus, in an
accompanying prospectus supplement or incorporated by reference herein or
therein. We have not authorized anyone to provide you with information or make
any representation that is different. If anyone provides you with different or
inconsistent information, you should not rely on it. This prospectus and any
accompanying prospectus supplement do not constitute an offer to sell or a
solicitation of an offer to buy any securities other than the registered
securities to which they relate, and this prospectus and any accompanying
prospectus supplement do not constitute an offer to sell or the solicitation of
an offer to buy securities in any jurisdiction where, or to any person to whom,
it is unlawful to make such an offer or solicitation. You should not assume that
the information contained in this prospectus and any accompanying prospectus
supplement is correct on any date after the respective dates of the prospectus
and such prospectus supplement or supplements, as applicable, even though this
prospectus and such prospectus supplement or supplements are delivered or common
shares are sold pursuant to the prospectus and such prospectus supplement or
supplements at a later date. Since the respective dates of the prospectus
contained in this registration statement and any accompanying prospectus
supplement, our business, financial condition, results of operations and
prospects may have changed.
ABOUT
THIS PROSPECTUS
This
prospectus is part of a registration statement that we filed with the Securities
and Exchange Commission, which we refer to as the SEC, using a “shelf”
registration process or continuous offering process. Under this shelf
registration process, the selling shareholders may, from time to time, sell the
securities described in this prospectus in one or more offerings. This
prospectus provides you with a general description of the securities that may be
offered by the selling shareholders. We may also file, from time to time, a
prospectus supplement or an amendment to the registration statement of which
this prospectus forms a part containing additional information about the selling
shareholders and the terms of the offering of the securities. That prospectus
supplement or amendment may include additional risk factors or other special
considerations applicable to the securities. Any prospectus supplement or
amendment may also add, update, or change information in this prospectus. If
there is any supplement or amendment, you should rely on the information in that
prospectus supplement or amendment.
This
prospectus and any accompanying prospectus supplement do not contain all of the
information included in the registration statement. For further information, we
refer you to the registration statement and any amendments to such registration
statement, including its exhibits. Statements contained in this prospectus and
any accompanying prospectus supplement about the provisions or contents of any
agreement or other document are not necessarily complete. If the SEC’s rules and
regulations require that an agreement or document be filed as an exhibit to the
registration statement, please see that agreement or document for a complete
description of these matters.
You
should read both this prospectus and any prospectus supplement together with
additional information described below under the heading “Where You Can Find
More Information.” Information incorporated by reference with the SEC after the
date of this prospectus, or information included in any prospectus supplement or
an amendment to the registration statement of which this prospectus forms a
part, may add, update, or change information in this prospectus or any
prospectus supplement. If information in these subsequent filings, prospectus
supplements or amendments is inconsistent with this prospectus or any prospectus
supplement, the information incorporated by reference or included in the
subsequent prospectus supplement or amendment will supersede the information in
this prospectus or any earlier prospectus supplement. You should not assume that
the information in this prospectus or any prospectus supplement is accurate as
of any date other than the date on the front of each document.
All
references to the “Company,” “we” and “us” in this prospectus means Lexington
Realty Trust and all entities owned or controlled by us except where it is clear
that the term means only the parent company. The term “you” refers to a
prospective investor.
CAUTIONARY
STATEMENTS CONCERNING FORWARD-LOOKING INFORMATION
This prospectus and the information
incorporated by reference in this prospectus include “forward-looking
statements” within the meaning of Section 27A of the Securities Act of 1933, as
amended, or the “Securities Act,” and Section 21E of the Securities Exchange Act
of 1934, as amended, or the “Exchange Act,” and as such may involve known and
unknown risks, uncertainties and other factors that may cause our actual
results, performance or achievements to be materially different from future
results, performance or achievements expressed or implied by these
forward-looking statements. Forward-looking statements, which are based on
certain assumptions and describe our future plans, strategies and expectations,
are generally identifiable by use of the words “may,” “will,” “should,”
“expect,” “anticipate,” “estimate,” “believe,” “intend,” “project,” or the
negative of these words or other similar words or terms. Factors which could
have a material adverse effect on our operations and future prospects include,
but are not limited to:
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changes
in general business and economic
conditions;
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increases
in real estate construction costs;
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changes
in interest rates;
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changes
in accessibility of debt and equity capital markets;
and
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the
other risk factors set forth in our Annual Report on Form 10-K filed on
March 2, 2009, and in any other documents incorporated by reference in
this prospectus, including without limitation any updated risks included
in our subsequent periodic reports.
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These risks and uncertainties should be
considered in evaluating any forward-looking statements contained or
incorporated by reference in this prospectus. We caution you that any
forward-looking statement reflects only our belief at the time the statement is
made. Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee our future results, levels of
activity, performance or achievements. Except as required by law, we undertake
no obligation to update any of the forward-looking statements to reflect events
or developments after the date of this prospectus.
OUR
COMPANY
We are a self-managed and
self-administered real estate investment trust, or a REIT, formed under the laws
of the State of Maryland. Our primary business is the acquisition, ownership and
management of a geographically diverse portfolio of net leased office and
industrial properties. Substantially all of our properties are subject to triple
net leases, which are generally characterized as leases in which the tenant
bears all or substantially all of the costs and cost increases for real estate
taxes, utilities, insurance and ordinary repairs and maintenance.
We elected to be taxed as a REIT under
Sections 856 through 860 of the Internal Revenue Code of 1986, as amended, or
the “Code,” commencing with our taxable year ended December 31, 1993. If we
qualify for taxation as a REIT, we generally will not be subject to federal
corporate income taxes on our net income that is currently distributed to
shareholders.
Our principal executive offices are
located at One Penn Plaza, Suite 4015, New York, New York 10119-4015 and our
telephone number is (212) 692-7200.
RISK
FACTORS
Investing in our securities involves
risks and uncertainties that could affect us and our business as well as the
real estate industry generally. You should carefully consider the risks
described and discussed under the caption “Risk Factors” included in our Annual
Report on Form 10-K filed on March 2, 2009, and in any other documents
incorporated by reference in this prospectus, including without limitation any
updated risks included in our subsequent periodic reports. These risk factors
may be amended, supplemented or superseded from time to time by risk factors
contained in any prospectus supplement or post-effective amendment we may file
or in other reports we file with the Commission in the future. In addition, new
risks may emerge at any time and we cannot predict such risks or estimate the
extent to which they may affect our financial performance.
USE
OF PROCEEDS
We are filing the registration
statement of which this prospectus forms a part pursuant to our contractual
obligation to the holders of the notes named in the section entitled “Selling
Shareholders.” We will not receive any of the proceeds from the resale of our
common shares covered by this prospectus from time to time by such selling
shareholders.
The selling shareholders will pay any
underwriting discounts and commissions and expenses they incur for brokerage,
accounting, tax or legal services or any other expenses they incur in disposing
of the common shares. We will bear all other costs, fees and expenses incurred
in effecting the registration of the common shares covered by this prospectus.
These may include, without limitation, all registration and filing fees, New
York Stock Exchange listing fees, fees and expenses of our counsel and
accountants, and blue sky fees and expenses.
DESCRIPTION
OF OUR COMMON SHARES
The following summary of the material
terms and provisions of our common shares does not purport to be complete and is
subject to the detailed provisions of our declaration of trust and our By-Laws,
each as supplemented, amended or restated, each of which is incorporated by
reference into this prospectus. You should carefully read each of
these documents in order to fully understand the terms and provisions of our
common shares. For information on incorporation by reference, and how
to obtain copies of these documents, see the section entitled “Where You Can
Find More Information” on page 29 of this prospectus.
General
Under our declaration of trust, we have
the authority to issue up to 1,000,000,000 shares of beneficial interest, par
value $0.0001 per share, of which 400,000,000 shares are classified as common
shares, 500,000,000 are classified as excess stock, or excess shares, and
100,000,000 shares are classified as preferred stock, or preferred
shares.
Terms
Subject to the preferential rights of
any other shares or series of equity securities and to the provisions of our
declaration of trust regarding excess shares, holders of our common shares are
entitled to receive dividends on our common shares if, as and when authorized by
our board of trustees and declared by the Company out of assets legally
available therefor and to share ratably in those of our assets legally available
for distribution to our shareholders in the event that we liquidate, dissolve or
wind up, after payment of, or adequate provision for, all of our known debts and
liabilities and the amount to which holders of any class of shares classified or
reclassified or having a preference on distributions in liquidation, dissolution
or winding up have a right.
Subject to the provisions of our
declaration of trust regarding excess shares, each outstanding common share
entitles the holder to one vote on all matters submitted to a vote of
shareholders, including the election of trustees and, except as otherwise
required by law or except as otherwise provided in our declaration of trust with
respect to any other class or series of shares, the holders of our common shares
will possess exclusive voting power. There is no cumulative voting in
the election of trustees, which means that the holders of a majority of our
outstanding common shares can elect all of the trustees then standing for
election, and the holders of the remaining common shares will not be able to
elect any trustees.
Holders of our common shares have no
conversion, sinking fund, redemption rights or preemptive rights to subscribe
for any of our securities.
We furnish our shareholders with annual
reports containing audited consolidated financial statements and an opinion
thereon expressed by an independent public accounting firm.
Subject to the provisions of our
declaration of trust regarding excess shares, all of our common shares will have
equal dividend, distribution, liquidation and other rights and will generally
have no preference, appraisal or exchange rights.
Pursuant to Maryland statutory law
governing real estate investment trusts organized under Maryland law, a real
estate investment trust generally cannot amend its declaration of trust or merge
unless approved by the affirmative vote of shareholders holding at least
two-thirds of the shares entitled to vote on the matter unless a lesser
percentage (but not less than a majority of all of the votes entitled to be cast
on the matter) is set forth in our declaration of trust. Our
declaration of trust provides that those actions, with the exception of certain
amendments to our declaration of trust for which a higher vote requirement has
been set, will be valid and effective if authorized by holders of a majority of
the total number of shares of all classes outstanding and entitled to vote
thereon.
Restrictions
on Ownership
For the Company to qualify as a REIT
under the Internal Revenue Code of 1986, as amended (which is commonly referred
to as the Code), not more than 50% in value of its outstanding capital shares
may be owned, directly or indirectly, by five or fewer individuals (as defined
in the Code to include certain entities) during the last half of a taxable
year. To assist the Company in meeting this requirement, the Company
may take certain actions to limit the beneficial ownership, directly or
indirectly, by a single person of the Company's outstanding equity
securities. See “Certain Provisions of Maryland Law and Our
Declaration of Trust” below.
Transfer
Agent
The
transfer agent and registrar for our common shares is BNY Mellon Shareowner
Services.
CERTAIN
PROVISIONS OF MARYLAND LAW AND OF OUR DECLARATION OF TRUST
AND
BYLAWS
This summary does not purport to be
complete and is qualified in its entirety by reference to our declaration of
trust and bylaws, each as amended or restated, and Maryland Law. See “Where You
Can Find More Information” in this prospectus.
Restrictions
Relating To REIT Status
For us to
qualify as a REIT under the Code, among other things, not more than 50% in value
of the outstanding shares of our capital stock may be owned, directly or
indirectly, by five or fewer individuals (defined in the Code to include certain
entities) during the last half of a taxable year, and such shares of our capital
stock must be beneficially owned by 100 or more persons during at least 335 days
of a taxable year of 12 months or during a proportionate part of a shorter
taxable year (in each case, other than the first such year). To
assist us in continuing to remain a qualified REIT, our declaration of trust,
subject to certain exceptions, provides that no holder may own, or be deemed to
own by virtue of the attribution provisions of the Code, more than 9.8% of our
equity shares, defined as common shares or preferred shares. We refer
to this restriction as the Ownership Limit. Our board of trustees may
exempt a person from the Ownership Limit if evidence satisfactory to our board
of trustees is presented that the changes in ownership will not then or in the
future jeopardize our status as a REIT. Any transfer of equity shares
or any security convertible into equity shares that would create a direct or
indirect ownership of equity shares in excess of the Ownership Limit or that
would result in our disqualification as a REIT, including any transfer that
results in the equity shares being owned by fewer than 100 persons or results in
us being “closely held” within the meaning of Section 856(h) of the Code, will
be null and void, and the intended transferee will acquire no rights to such
equity shares. The foregoing restrictions on transferability and
ownership will not apply if our board of trustees determines that it is no
longer in our best interests to attempt to qualify, or to continue to qualify,
as a REIT.
Equity
shares owned, or deemed to be owned, or transferred to a shareholder in excess
of the Ownership Limit, will automatically be exchanged for an equal number of
excess shares that will be transferred, by operation of law, to us as trustee of
a trust for the exclusive benefit of the transferees to whom such shares of our
capital stock may be ultimately transferred without violating the Ownership
Limit. While the excess shares are held in trust, they will not be
entitled to vote, they will not be considered for purposes of any shareholder
vote or the determination of a quorum for such vote and, except upon
liquidation, they will not be entitled to participate in dividends or other
distributions. Any dividend or distribution paid to a proposed
transferee of excess shares prior to our discovery that equity shares have been
transferred in violation of the provisions of our declaration of trust will be
repaid to us upon demand. The excess shares are not treasury shares,
but rather constitute a separate class of our issued and outstanding
shares. The original transferee-shareholder may, at any time the
excess shares are held by us in trust, transfer the interest in the trust
representing the excess shares to any individual whose ownership of the equity
shares exchanged into such excess shares would be permitted under our
declaration of trust, at a price not in excess of the price paid by the original
transferee-shareholder for the equity shares that were exchanged into excess
shares, or, if the transferee-shareholder did not give value for such shares, a
price not in excess of the market price (as determined in the manner set forth
in our declaration of trust) on the date of the purported
transfer. Immediately upon the transfer to the permitted transferee,
the excess shares will automatically be exchanged for equity shares of the class
from which they were converted. If the foregoing transfer
restrictions are determined to be void or invalid by virtue of any legal
decision, statute, rule or regulation, then the intended transferee of any
excess shares may be deemed, at our option, to have acted as an agent on our
behalf in acquiring the excess shares and to hold the excess shares on our
behalf.
In
addition to the foregoing transfer restrictions, we will have the right, for a
period of 90 days during the time any excess shares are held by us in trust, to
purchase all or any portion of the excess shares from the original
transferee-shareholder for the lesser of the price paid for the equity shares by
the original transferee-shareholder or the market price (as determined in the
manner set forth in our declaration of trust) of the equity shares on the date
we exercise our option to purchase. The 90-day period begins on the
date on which we receive written notice of the transfer or other event resulting
in the exchange of equity shares for excess shares.
Each
shareholder will be required, upon demand, to disclose to us in writing any
information with respect to the direct, indirect and constructive ownership of
beneficial interests as our board of trustees deems necessary to comply with the
provisions of the Code applicable to REITs, to comply with the requirements of
any taxing authority or governmental agency or to determine any such
compliance.
This
Ownership Limit may have the effect of precluding an acquisition of control
unless our board of trustees determines that maintenance of REIT status is no
longer in our best interests.
Authorized
Capital
Under our declaration of trust, we have
authority to issue up to 1,000,000,000 shares of beneficial interest, par value
$0.0001 per share, of which 400,000,000 shares are classified as common shares,
500,000,000 shares are classified as excess stock and 100,000,000 shares are
classified as preferred shares. We may issue such shares (other than
reserved shares) from time to time in the discretion of our board of trustees to
raise additional capital, acquire assets, including additional real properties,
redeem or retire debt or for any other business purpose. In addition, the
undesignated preferred shares may be issued in one or more additional classes or
series with such designations, preferences and relative, participating, optional
or other special rights including, without limitation, preferential dividend or
voting rights, and rights upon liquidation, as will be fixed by our board of
trustees. Our board of trustees is authorized to classify and reclassify any of
our unissued shares of our beneficial interest by setting or changing, in any
one or more respects, the preferences, conversion or other rights, voting
powers, restrictions, limitations as to dividends, qualifications or terms or
conditions of redemption of such shares. This authority includes, without
limitation, subject to the provisions of our declaration of trust, authority to
classify or reclassify any unissued shares into a class or classes of preferred
shares, preference shares, special shares or other shares, and to divide and
reclassify shares of any class into one or more series of that
class.
In some
circumstances, the issuance of preferred shares, or the exercise by our board of
trustees of its right to classify or reclassify shares, could have the effect of
deterring individuals or entities from making tender offers for our common
shares or seeking to change incumbent management.
Maryland
Law
Business
Combinations. Under Maryland
law, “business combinations” between a Maryland real estate investment trust and
an interested shareholder or an affiliate of an interested shareholder are
prohibited for five years after the most recent date on which the interested
shareholder becomes an interested shareholder. These business combinations
include a merger, consolidation, share exchange, or, in circumstances specified
in the statute, an asset transfer or issuance or reclassification of equity
securities. An interested shareholder is defined as:
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any
person who beneficially owns ten percent or more of the voting power of
the trust’s shares; or
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an
affiliate or associate of the trust who, at any time within the two-year
period prior to the date in question, was the beneficial owner of ten
percent or more of the voting power of the then outstanding voting shares
of the trust.
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A person
is not an interested shareholder under the statute if the board of trustees
approved in advance the transaction by which he otherwise would have become an
interested shareholder. However, in approving a transaction, the board of
trustees may provide that its approval is subject to compliance, at or after the
time of approval, with any terms or conditions determined by the
board.
After the
five-year prohibition, any business combination between the Maryland real estate
investment trust and an interested shareholder generally must be recommended by
the board of trustees of the trust and approved by the affirmative vote of at
least:
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eighty
percent of the votes entitled to be cast by holders of outstanding voting
shares of the trust; and
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two-thirds
of the votes entitled to be cast by holders of voting shares of the trust
other than shares held by the interested shareholder with whom or with
whose affiliate the business combination is to be effected or held by an
affiliate or associate of the interested
shareholder.
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These
super-majority vote requirements do not apply if the trust’s common shareholders
receive a minimum price, as defined under Maryland law, for their shares in the
form of cash or other consideration in the same form as previously paid by the
interested shareholder for its shares.
The
statute permits various exemptions from its provisions, including business
combinations that are exempted by the board of trustees prior to the time that
the interested shareholder becomes an interested shareholder.
Our board
of trustees has exempted Vornado Realty Trust and its affiliates, to a limited
extent, from these restrictions
The
business combination statute may discourage others from trying to acquire
control of us and increase the difficulty of consummating any
offer.
Control Share
Acquisitions. Maryland law
provides that control shares of a Maryland real estate investment trust acquired
in a control share acquisition have no voting rights except to the extent
approved by a vote of two-thirds of the votes entitled to be cast on the
matter. Shares owned by the acquiror, by officers or by employees who
are trustees of the trust are excluded from shares entitled to vote on the
matter. Control Shares are voting shares which, if aggregated with all other
shares owned by the acquiror or in respect of which the acquiror is able to
exercise or direct the exercise of voting power (except solely by virtue of a
revocable proxy), would entitle the acquiror to exercise voting power in
electing trustees within one of the following ranges of voting
power:
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one-tenth
or more but less than one-third;
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one-third
or more but less than a majority;
or
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a
majority or more of all voting
power.
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Control
shares do not include shares the acquiring person is then entitled to vote as a
result of having previously obtained shareholder approval. A control share
acquisition means the acquisition of control shares, subject to certain
exceptions.
A person
who has made or proposes to make a control share acquisition may compel the
board of trustees of the trust to call a special meeting of shareholders to be
held within 50 days of demand to consider the voting rights of the shares. The
right to compel the calling of a special meeting is subject to the satisfaction
of certain conditions, including an undertaking to pay the expenses of the
meeting. If no request for a meeting is made, the trust may itself present the
question at any shareholders meeting.
If voting
rights are not approved at the meeting or if the acquiring person does not
deliver an acquiring person statement as required by the statute, then the trust
may redeem for fair value any or all of the control shares, except those for
which voting rights have previously been approved. The right of the trust to
redeem control shares is subject to certain conditions and limitations. Fair
value is determined, without regard to the absence of voting rights for the
control shares, as of the date of the last control share acquisition by the
acquiror or of any meeting of shareholders at which the voting rights of the
shares are considered and not approved. If voting rights for control shares are
approved at a shareholders meeting and the acquirer becomes entitled to vote a
majority of the shares entitled to vote, all other shareholders may exercise
appraisal rights. The fair value of the shares as determined for purposes of
appraisal rights may not be less than the highest price per share paid by the
acquiror in the control share acquisition.
The
control share acquisition statute does not apply (a) to shares acquired in a
merger, consolidation or share exchange if the trust is a party to the
transaction or (b) to acquisitions approved or exempted by the declaration of
trust or by-laws of the trust.
Our
by-laws contain a provision exempting from the control share acquisition statute
any and all acquisitions by any person of our shares. There can be no assurance
that this provision will not be amended or eliminated at any time in the
future.
Certain Elective
Provisions of Maryland Law. Publicly-held Maryland statutory
real estate investment trusts (“Maryland REITs”) may elect to be governed by all
or any part of Maryland law provisions relating to extraordinary actions and
unsolicited takeovers. The election to be governed by one or more of
these provisions can be made by a Maryland REIT in its declaration of trust or
bylaws (“charter documents”) or by resolution adopted by its board of trustees
so long as the Maryland REIT has at least three trustees who, at the time of
electing to be subject to the provisions, are not:
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officers
or employees of the Maryland REIT;
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persons
seeking to acquire control of the Maryland
REIT;
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trustees,
officers, affiliates or associates of any person seeking to acquire
control; or
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nominated
or designated as trustees by a person seeking to acquire
control.
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Articles
supplementary must be filed with the Maryland State Department of Assessments
and Taxation if a Maryland REIT elects to be subject to any or all of the
provisions by board resolution or bylaw amendment. Shareholder
approval is not required for the filing of these articles
supplementary.
The
Maryland law provides that a Maryland REIT can elect to be subject to all or any
portion of the following provisions, notwithstanding any contrary provisions
contained in that Maryland REIT’s existing charter documents:
Classified
Board: The Maryland REIT may divide its board into three
classes which, to the extent possible, will have the same number of trustees,
the terms of which will expire at the third annual meeting of shareholders after
the election of each class;
Two-thirds Shareholder Vote to
Remove Trustees: The shareholders may remove any trustee only by the
affirmative vote of at least two-thirds of all votes entitled to be cast by the
shareholders generally in the election of trustees;
Size of Board Fixed by Vote of
Board: The number of trustees will be fixed only by resolution
of the board;
Board Vacancies Filled by the Board
for the Remaining Term: Vacancies that result from an increase
in the size of the board, or the death, resignation, or removal of a trustee,
may be filled only by the affirmative vote of a majority of the remaining
trustees even if they do not constitute a quorum. Trustees elected to
fill vacancies will hold office for the remainder of the full term of the class
of trustees in which the vacancy occurred, as opposed to until the next annual
meeting of shareholders, and until a successor is elected and qualified;
and
Shareholder Calls of Special
Meetings: Special meetings of shareholders may be called by
the secretary of the Maryland REIT only upon the written request of shareholders
entitled to cast at least a majority of all votes entitled to be cast at the
meeting and only in accordance with procedures set out in the Maryland General
Corporation Law.
We have
not elected to be governed by these specific provisions. However, our
declaration of trust and/or by-laws, as applicable, already provide for an 80%
shareholder vote to remove trustees and then only for cause, and that the number
of trustees may be determined by a resolution of our Board, subject to a minimum
number. In addition, we can elect to be governed by any or all of the
provisions of the Maryland law at any time in the future.
FEDERAL
INCOME TAX CONSIDERATIONS
The following discussion summarizes the
material United States federal income tax considerations to you as a prospective
holder of our common shares and assumes that you will hold such shares as
capital assets (within the meaning of Section 1221 of the Code). The following
discussion is for general information purposes only, is not exhaustive of all
possible tax considerations and is not intended to be and should not be
construed as tax advice. For example, this summary does not give a detailed
discussion of any state, local or foreign tax considerations. In addition, this
discussion is intended to address only those federal income tax considerations
that are generally applicable to all of our shareholders. It does not discuss
all of the aspects of federal income taxation that may be relevant to you in
light of your particular circumstances or to certain types of shareholders who
are subject to special treatment under the federal income tax laws including,
without limitation, regulated investment companies, insurance companies,
tax-exempt entities, financial institutions or broker-dealers, expatriates,
persons subject to the alternative minimum tax and partnerships or other pass
through entities.
The information in this section is
based on the Code, existing, temporary and proposed regulations under the Code,
the legislative history of the Code, current administrative rulings and
practices of the Internal Revenue Service, or IRS, and court decisions, all as
of the date hereof. No assurance can be given that future legislation,
regulations, administrative interpretations and court decisions will not
significantly change current law or adversely affect existing interpretations of
current law. Any such change could apply retroactively to transactions preceding
the date of the change. In addition, we have not received, and do not plan to
request, any rulings from the IRS. Thus no assurance can be provided that the
statements set forth herein (which do not bind the IRS or the courts) will not
be challenged by the IRS or that such statements will be sustained by a court if
so challenged. PROSPECTIVE HOLDERS OF OUR COMMON SHARES ARE ADVISED TO CONSULT
THEIR OWN TAX ADVISORS REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX
CONSEQUENCES OF INVESTING IN OUR COMMON SHARES IN LIGHT OF THEIR PARTICULAR
CIRCUMSTANCES.
Taxation
of the Company
General. We
elected to be taxed as a REIT under Sections 856 through 860 of the Code,
commencing with our taxable year ended December 31, 1993. We believe that we
have been organized, and have operated, in such a manner so as to qualify for
taxation as a REIT under the Code and intend to conduct our operations so as to
continue to qualify for taxation as a REIT. No assurance, however, can be given
that we have operated in a manner so as to qualify or will be able to operate in
such a manner so as to remain qualified as a REIT. Qualification and taxation as
a REIT depend upon our ability to meet on a continuing basis, through actual
annual operating results, the required distribution levels, diversity of share
ownership and the various qualification tests imposed under the Code discussed
below, the results of which will not be reviewed by counsel. Given the highly
complex nature of the rules governing REITs, the ongoing importance of factual
determinations, and the possibility of future changes in our circumstances, no
assurance can be given that the actual results of our operations for any one
taxable year have satisfied or will continue to satisfy such
requirements.
In connection with the initial filing
of the Registration Statement of which this prospectus is a part, Paul,
Hastings, Janofsky & Walker LLP delivered an opinion that, based on certain
assumptions and factual representations that are described in this section and
in officer’s certificates provided by us, Concord Debt Holdings LLC and Concord
Debt Funding Trust (both subsidiaries in which we indirectly hold interests),
commencing with our taxable year ended December 31, 1993, we have been organized
and operated in conformity with the requirements for qualification as a REIT and
our current and proposed method of operation will enable us to continue to meet
the requirements for qualification and taxation as a REIT. It must be emphasized
that this opinion is based on various assumptions and is conditioned upon
certain representations made by us, Concord Debt Holdings LLC and Concord Debt
Funding Trust as to factual matters including, but not limited to, those set
forth herein, and those concerning our business and properties as set forth in
this prospectus. An opinion of counsel is not binding on the IRS or the
courts.
The following is a general summary of
the Code provisions that govern the federal income tax treatment of a REIT and
its shareholders. These provisions of the Code are highly technical and complex.
This summary is qualified in its entirety by the applicable Code provisions,
Treasury Regulations and administrative and judicial interpretations thereof,
all of which are subject to change prospectively or retroactively.
If we qualify for taxation as a REIT,
we generally will not be subject to federal corporate income taxes on our net
income that is currently distributed to shareholders. This treatment
substantially eliminates the “double taxation” (at the corporate and shareholder
levels) that generally results from investment in a corporation. However, we
will be subject to federal income tax as follows:
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First,
we will be taxed at regular corporate rates on any undistributed REIT
taxable income, including undistributed net capital
gains.
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Second,
under certain circumstances, we may be subject to the “alternative minimum
tax” on our items of tax
preference.
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Third,
if we have (a) net income from the sale or other disposition of
“foreclosure property,” which is, in general, property acquired on
foreclosure or otherwise on default on a loan secured by such real
property or a lease of such property, which is held primarily for sale to
customers in the ordinary course of business or (b) other nonqualifying
income from foreclosure property, we will be subject to tax at the highest
corporate rate on such income.
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Fourth,
if we have net income from prohibited transactions such income will be
subject to a 100% tax. Prohibited transactions are, in general, certain
sales or other dispositions of property held primarily for sale to
customers in the ordinary course of business other than foreclosure
property.
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Fifth,
if we should fail to satisfy the 75% gross income test or the 95% gross
income test (as discussed below), but nonetheless maintain our
qualification as a REIT because certain other requirements have been met,
we will be subject to a 100% tax on an amount equal to (a) the gross
income attributable to the greater of the amount by which we fail the 75%
gross income test or the amount by which 95% (90% for taxable years ending
on or prior to December 31, 2004) of our gross income exceeds the amount
of income qualifying under the 95% gross income test multiplied by (b) a
fraction intended to reflect our
profitability.
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Sixth,
if we should fail to satisfy the asset tests (as discussed below) but
nonetheless maintain our qualification as a REIT because certain other
requirements have been met and we do not qualify for a de minimis
exception, we may be subject to a tax that would be the greater of (a)
$50,000; or (b) an amount determined by multiplying the highest rate of
tax for corporations by the net income generated by the assets for the
period beginning on the first date of the failure and ending on the day we
dispose of the nonqualifying assets (or otherwise satisfy the requirements
for maintaining REIT
qualification).
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Seventh,
if we should fail to satisfy one or more requirements for REIT
qualification, other than the 95% and 75% gross income tests and other
than the asset tests, but nonetheless maintain our qualification as a REIT
because certain other requirements have been met, we may be subject to a
$50,000 penalty for each failure.
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Eighth,
if we should fail to distribute during each calendar year at least the sum
of (a) 85% of our REIT ordinary income for such year, (b) 95% of our REIT
capital gain net income for such year, and (c) any undistributed taxable
income from prior periods, we would be subject to a nondeductible 4%
excise tax on the excess of such required distribution over the amounts
actually distributed.
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Ninth,
if we acquire any asset from a C corporation (i.e., a corporation
generally subject to full corporate level tax) in a transaction in which
the basis of the asset in our hands is determined by reference to the
basis of the asset (or any other property) in the hands of the C
corporation and we do not elect to be taxed at the time of the
acquisition, we would be subject to tax at the highest corporate rate if
we dispose of such asset during the ten-year period beginning on the date
that we acquired that asset, to the extent of such property’s “built-in
gain” (the excess of the fair market value of such property at the time of
our acquisition over the adjusted basis of such property at such time) (we
refer to this tax as the “Built-in Gains
Tax”).
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Tenth,
we will incur 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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Finally,
if we own a residual interest in a real estate mortgage investment
conduit, or “REMIC,” we will be taxable at the highest corporate rate on
the portion of any excess inclusion income that we derive from the REMIC
residual interests equal to the percentage of our shares that is held in
record name by “disqualified organizations.” Similar rules apply if we own
an equity interest in a taxable mortgage pool. A “disqualified
organization” includes the United States, any state or political
subdivision thereof, any foreign government or international organization,
any agency or instrumentality of any of the foregoing, any rural
electrical or telephone cooperative and any tax-exempt organization (other
than a farmer’s cooperative described in Section 521 of the Code) that is
exempt from income taxation and from the unrelated business taxable income
provisions of the Code. However, to the extent that we own a REMIC
residual interest or a taxable mortgage pool through a taxable REIT
subsidiary, we will not be subject to this tax. See the heading
“Requirements for Qualification”
below.
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Requirements for
Qualification. A REIT is a corporation,
trust or association (1) that is managed by one or more trustees or directors,
(2) the beneficial ownership of which is evidenced by transferable shares, or by
transferable certificates of beneficial interest, (3) that would be taxable as a
domestic corporation, but for Sections 856 through 859 of the Code, (4) that is
neither a financial institution nor an insurance company subject to certain
provisions of the Code, (5) that has the calendar year as its taxable year, (6)
the beneficial ownership of which is held by 100 or more persons, (7) during the
last half of each taxable year, not more than 50% in value of the outstanding
stock of which is owned, directly or indirectly, by five or fewer individuals
(as defined in the Code to include certain entities), and (8) that meets certain
other tests, described below, regarding the nature of its income and assets. The
Code provides that conditions (1) through (5), inclusive, must be met during the
entire taxable year and that condition (6) must be met during at least 335 days
of a taxable year of twelve (12) months, or during a proportionate part of a
taxable year of less than twelve (12) months.
We may redeem, at our option, a
sufficient number of shares or restrict the transfer thereof to bring or
maintain the ownership of the shares in conformity with the requirements of the
Code. In addition, our declaration of trust includes restrictions regarding the
transfer of our shares that are intended to assist us in continuing to satisfy
requirements (6) and (7). Moreover, if we comply with regulatory rules pursuant
to which we are required to send annual letters to our shareholders requesting
information regarding the actual ownership of our shares, and we do not know, or
exercising reasonable diligence would not have known, whether we failed to meet
requirement (7) above, we will be treated as having met the
requirement.
The Code allows a REIT to own
wholly-owned corporate subsidiaries which are “qualified REIT subsidiaries.” The
Code provides that a qualified REIT subsidiary is not treated as a separate
corporation, and all of its assets, liabilities and items of income, deduction
and credit are treated as assets, liabilities and items of income, deduction and
credit of the REIT. Thus, in applying the requirements described herein, our
qualified REIT subsidiaries will be ignored, and all assets, liabilities and
items of income, deduction and credit of such subsidiaries will be treated as
our assets, liabilities and items of income, deduction and credit.
For taxable years beginning on or after
January 1, 2001, a REIT may also hold any direct or indirect interest in a
corporation that qualifies as a “taxable REIT subsidiary,” as long as the REIT’s
aggregate holdings of taxable REIT subsidiary securities do not exceed 20% of
the value of the REIT’s total assets (for taxable years beginning after July 30,
2008, 25% of the value of the REIT’s total assets) at the close of each quarter.
A taxable REIT subsidiary is a fully taxable corporation that generally is
permitted to engage in businesses (other than certain activities relating to
lodging and health care facilities), own assets, and earn income that, if
engaged in, owned, or earned by the REIT, might jeopardize REIT status or result
in the imposition of penalty taxes on the REIT. To qualify as a taxable REIT
subsidiary, the subsidiary and the REIT must make a joint election to treat the
subsidiary as a taxable REIT subsidiary. A taxable REIT subsidiary also includes
any corporation (other than a REIT or a qualified REIT subsidiary) in which a
taxable REIT subsidiary directly or indirectly owns more than 35% of the total
voting power or value. See “Asset Tests” below. A taxable REIT subsidiary will
pay tax at regular corporate income rates on any taxable income it earns.
Moreover, the Code contains rules, including rules requiring the imposition of
taxes on a REIT at the rate of 100% on certain reallocated income and expenses,
to ensure that contractual arrangements between a taxable REIT subsidiary and
its parent REIT are at arm’s-length.
In the case of a REIT which is a
partner in a partnership, Treasury Regulations provide that the REIT will be
deemed to own its proportionate share of each of the assets of the partnership
and will be deemed to be entitled to the income of the partnership attributable
to such share for purposes of satisfying the gross income and assets tests (as
discussed below). In addition, the character of the assets and items of gross
income of the partnership will retain the same character in the hands of the
REIT. Thus, our proportionate share (based on equity capital) of the assets,
liabilities, and items of gross income of the partnerships in which we own an
interest are treated as our assets, liabilities and items of gross income for
purposes of applying the requirements described herein. The treatment described
above also applies with respect to the ownership of interests in limited
liability companies or other entities that are treated as partnerships for tax
purposes.
A significant number of our investments
are held through partnerships. If any such partnerships were treated as an
association, the entity would be taxable as a corporation and therefore would be
subject to an entity level tax on its income. In such a situation, the character
of our assets and items of gross income would change and might preclude us from
qualifying as a REIT. We believe that each partnership in which we hold a
material interest (either directly or indirectly) is properly treated as a
partnership for tax purposes (and not as an association taxable as a
corporation).
Special rules apply to a REIT, a
portion of a REIT, or a qualified REIT subsidiary that is a taxable mortgage
pool. An entity or portion thereof may be classified as a taxable mortgage pool
under the Code if:
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substantially
all of the assets consist of debt obligations or interests in debt
obligations;
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more
than 50% of those debt obligations are real estate mortgage loans or
interests in real estate mortgage loans as of specified testing
dates;
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the
entity has issued debt obligations that have two or more maturities;
and
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the
payments required to be made by the entity on its debt obligations “bear a
relationship” to the payments to be received by the entity on the debt
obligations that it holds as
assets.
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Under Treasury Regulations, if less
than 80% of the assets of an entity (or the portion thereof) consist of debt
obligations, these debt obligations are considered not to comprise
“substantially all” of its assets, and therefore the entity would not be treated
as a taxable mortgage pool.
An entity or portion thereof that is
classified as a taxable mortgage pool is generally treated as a taxable
corporation for federal income tax purposes. However, the portion of the REIT’s
assets, held directly or through a qualified REIT subsidiary, that qualifies as
a taxable mortgage pool is treated as a qualified REIT subsidiary that is not
subject to corporate income tax and therefore the taxable mortgage pool
classification does not change that treatment. The classification of a REIT,
qualified REIT subsidiary or portion thereof as a taxable mortgage pool could,
however, result in taxation of a REIT and certain of its shareholders as
described below.
IRS guidance indicates that a portion
of income from a taxable mortgage pool arrangement, if any, could be treated as
“excess inclusion income.” Excess inclusion income is an amount, with respect to
any calendar quarter, equal to the excess, if any, of (i) income allocable to
the holder of a REMIC residual interest or taxable mortgage pool interest over
(ii) the sum of an amount for each day in the calendar quarter equal to the
product of (a) the adjusted issue price at the beginning of the quarter
multiplied by (b) 120% of the long-term federal rate (determined on the basis of
compounding at the close of each calendar quarter and properly adjusted for the
length of such quarter). Under the recent guidance, such income would be
allocated among our shareholders in proportion to dividends paid and, generally,
may not be offset by net operating losses of the shareholder, would be taxable
to tax exempt shareholders who are subject to the unrelated business income tax
rules of the Code and would subject non-U.S. shareholders to a 30% withholding
tax (without exemption or reduction of the withholding rate). To the extent that
excess inclusion income is allocated from a taxable mortgage pool to any
disqualified organizations that hold our shares, we may be taxable on this
income at the highest applicable corporate tax rate (currently 35%). Because
this tax would be imposed on the REIT, all of the REIT’s shareholders, including
shareholders that are not disqualified organizations, would bear a portion of
the tax cost associated with the classification of any portion of our assets as
a taxable mortgage pool.
If we own less than 100% of the
ownership interests in a subsidiary that is a taxable mortgage pool, the
foregoing rules would not apply. Rather, the subsidiary would be treated as a
corporation for federal income tax purposes and would potentially be subject to
corporate income tax. In addition, this characterization would affect our REIT
income and asset test calculations and could adversely affect our ability to
qualify as a REIT.
We have made and in the future intend
to make investments or enter into financing and securitization transactions that
may give rise to our being considered to own an interest, directly or
indirectly, in one or more taxable mortgage pools. Prospective holders are urged
to consult their own tax advisors regarding the tax consequences of the taxable
mortgage pool rules to them in light of their particular
circumstances.
Income
Tests. In order to maintain qualification as a REIT, we must
satisfy annually certain gross income requirements. First, at least 75% of our
gross income (excluding gross income from prohibited transactions) for each
taxable year must be derived directly or indirectly from investments relating to
real property or mortgages on real property (including “rents from real
property;” gain from the sale of real property other than property held for sale
to customers in the ordinary course of business; dividends from, and gain from
the sale of shares of, other qualifying REITs; certain interest described
further below; and certain income derived from a REMIC) or from certain types of
qualified temporary investments. Second, at least 95% of our gross income
(excluding gross income from prohibited transactions) for each taxable year must
be derived from income that qualifies under the foregoing 75% gross income test,
other types of dividends and interest, gain from the sale or disposition of
stock or securities and certain other specified sources. Any income from a
hedging transaction entered into after December 31, 2004 that is clearly and
timely identified and hedges indebtedness incurred or to be incurred to acquire
or carry real estate assets will not constitute gross income, rather than being
treated as qualifying or nonqualifying income, for purposes of the 95% gross
income test and, with respect to such hedging transactions entered into after
July 30, 2008, for purposes of the 75% gross income test as well. For
transactions entered into after July 30, 2008, a hedging transaction also
includes a transaction entered into to manage foreign currency risks with
respect to items of income and gain (or any property which generates such income
or gain) that would be qualifying income under the 75% or 95% gross income
tests, but only if such transaction is clearly identified before the close of
the day it was acquired, originated or entered into. In addition,
certain foreign currency gains recognized after July 30, 2008 will be excluded
from gross income for purposes of one or both of the gross income
tests.
Rents received by us will qualify as
“rents from real property” in satisfying the gross income requirements for a
REIT described above only if several conditions are met. First, the amount of
rent must not be based in whole or in part on the income or profits of any
person. However, an amount received or accrued generally will not be excluded
from the term “rents from real property” solely by reason of being based on a
fixed percentage or percentages of receipts or sales. Second, the Code provides
that rents received from a tenant will not qualify as “rents from real property”
in satisfying the gross income tests if we, or an owner of 10% or more of our
shares, actually or constructively own 10% or more of such tenant. Third, if
rent attributable to personal property, leased in connection with a lease of
real property, is greater than 15% of the total rent received under the lease,
then the portion of rent attributable to such personal property (based on the
ratio of fair market value of personal and real property) will not qualify as
“rents from real property.” Finally, in order for rents received to qualify as
“rents from real property,” we generally must not operate or manage the property
(subject to a de minimis exception as described below) or furnish or render
services to the tenants of such property, other than through an independent
contractor from whom we derive no revenue or through a taxable REIT subsidiary.
We may, however, directly perform certain services that are “usually or
customarily rendered” in connection with the rental of space for occupancy only
and are not otherwise considered “rendered to the occupant” of the property
(“Permissible Services”).
For our taxable years commencing on or
after January 1, 1998, rents received generally will qualify as rents from real
property notwithstanding the fact that we provide services that are not
Permissible Services so long as the amount received for such services meets a de
minimis standard. The amount received for “impermissible services” with respect
to a property (or, if services are available only to certain tenants, possibly
with respect to such tenants) cannot exceed one percent of all amounts received,
directly or indirectly, by us with respect to such property (or, if services are
available only to certain tenants, possibly with respect to such tenants). The
amount that we will be deemed to have received for performing “impermissible
services” will be the greater of the actual amounts so received or 150% of the
direct cost to us of providing those services.
We believe that substantially all of
our rental income will be qualifying income under the gross income tests, and
that our provision of services will not cause the rental income to fail to be
qualifying income under those tests.
Generally, interest on debt secured by
a mortgage on real property or interests in real property qualifies for purposes
of satisfying the 75% gross income test described above. However, if
the highest principal amount of a loan outstanding during a taxable year exceeds
the fair market value of the real property securing the loan as of the date the
REIT agreed to originate or acquire the loan, a proportionate amount of the
interest income from such loan will not be qualifying income for purposes of the
75% gross income test, but will be qualifying income for purposes of the 95%
gross income test. In addition, any interest amount that is based in
whole or in part on the income or profits of any person does not qualify for
purposes of the foregoing 75% and 95% income tests except (a) amounts that are
based on a fixed percentage or percentages of receipts or sales and (b) amounts
that are based on the income or profits of a debtor, as long as the debtor
derives substantially all of its income from the real property securing the debt
from leasing substantially all of its interest in the property, and only to the
extent that the amounts received by the debtor would be qualifying “rents from
real property” if received directly by the REIT.
If a loan contains a provision that
entitles a REIT to a percentage of the borrower’s gain upon the sale of the real
property securing the loan or a percentage of the appreciation in the property’s
value as of a specific date, income attributable to that loan provision will be
treated as gain from the sale of the property securing the loan, which is
generally qualifying income for purposes of both gross income
tests.
If we fail to satisfy one or both of
the 75% or 95% gross income tests for any taxable year, we may nevertheless
qualify as a REIT for such year if such failure was due to reasonable cause and
not willful neglect and we file a schedule describing each item of our gross
income for such taxable year in accordance with Treasury Regulations (and for
taxable years beginning on or before October 22, 2004, any incorrect information
on the schedule was not due to fraud with intent to evade tax). It is not
possible, however, to state whether in all circumstances we would be entitled to
the benefit of this relief provision. Even if this relief provision applied, a
100% penalty tax would be imposed on the amount by which we failed the 75% gross
income test or the amount by which 95% (90% for taxable years ending on or prior
to December 31, 2004) of our gross income exceeds the amount of income
qualifying under the 95% gross income test (whichever amount is greater),
multiplied by a fraction intended to reflect our profitability.
Subject to certain safe harbor
exceptions, any gain (including certain foreign currency gain recognized after
July 30, 2008) realized by us on the sale of any property held as inventory or
other property held primarily for sale to customers in the ordinary course of
business will be treated as income from a prohibited transaction that is subject
to a 100% penalty tax. Such prohibited transaction income may also have an
adverse effect upon our ability to qualify as a REIT. In June 2007, we announced
a restructuring of our investment strategy, focusing on core and core plus
assets. While we believe that the dispositions of our assets pursuant
to the restructuring of our investment strategy should not be treated as
prohibited transactions, and although we intend to conduct our operations so
that we will not be treated as holding our properties for sale, whether a
particular sale will be treated as a prohibited transaction depends on all the
facts and circumstances with respect to the particular
transaction. We have not sought and do not intend to seek a ruling
from the IRS regarding any dispositions. Accordingly, there can be no
assurance that the IRS will not successfully assert a contrary position with
respect to our dispositions. If all or a significant portion of our
dispositions were treated as prohibited transactions, we would incur a
significant U.S. federal tax liability, which could have a material adverse
effect on our results of operations.
We will be subject to tax at the
maximum corporate rate on any income from foreclosure property (including
certain foreign currency gains and related deductions recognized after July 30,
2008), other than income that otherwise would be qualifying income for purposes
of the 75% gross income test, less expenses directly connected with the
production of that income. However, gross income from foreclosure
property will qualify under the 75% and 95% gross income
tests. Foreclosure property is any real property, including interests
in real property, and any personal property incident to such real property (1)
that is acquired by a REIT as the result of the REIT having bid on such property
at foreclosure, or having otherwise reduced such property to ownership or
possession by agreement or process of law, after there was a default or default
was imminent on a lease of such property or on indebtedness that such property
secured; (2) for which the related loan was acquired by the REIT at a time when
the default was not imminent or anticipated; and (3) for which the REIT makes a
proper election to treat the property as foreclosure property. Any
gain from the sale of property for which a foreclosure property election has
been made will not be subject to the 100% tax on gains from prohibited
transactions described above, even if the property would otherwise constitute
inventory or dealer property.
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, unless a longer extension is granted by
the Secretary of the Treasury or the grace period terminates earlier due to
certain nonqualifying income or activities generated with respect to the
property.
Asset
Tests. At
the close of each quarter of our taxable year, we must also satisfy the
following tests relating to the nature of our assets. At least 75% of the value
of our total assets, including our allocable share of assets held by
partnerships in which we own an interest, must be represented by real estate
assets, stock or debt instruments held for not more than one year purchased with
the proceeds of an offering of equity securities or a long-term (at least five
years) public debt offering by us, cash, cash items (including certain
receivables) and government securities. For this purpose, real estate assets
include interests in real property, such as land, buildings, leasehold interests
in real property, stock of other corporations that qualify as REITs, and certain
kinds of mortgage-backed securities (including regular or residual interests in
a REMIC to the extent provided in the Code) and mortgage loans. In
addition, not more than 25% of our total assets may be represented by securities
other than those in the 75% asset class. Not more than 20% of the value of our
total assets (for taxable years beginning after July 30, 2008, 25% of the value
of our total assets) may be represented by securities of one or more taxable
REIT subsidiaries (as defined above under “Requirements for Qualification”).
Except for investments included in the 75% asset class, securities in a taxable
REIT subsidiary or qualified REIT subsidiary and certain partnership interests
and debt obligations, (1) not more than 5% of the value of our total assets may
be represented by securities of any one issuer (the “5% asset test”), (2) we may
not hold securities that possess more than 10% of the total voting power of the
outstanding securities of a single issuer (the “10% voting securities test”) and
(3) we may not hold securities that have a value of more than 10% of the total
value of the outstanding securities of any one issuer (the “10% value
test”).
The following assets are not treated as
“securities” held by us for purposes of the 10% value test (i) “straight debt”
meeting certain requirements, unless we hold (either directly or through our
“controlled” taxable REIT subsidiaries) certain other securities of the same
corporate or partnership issuer that have an aggregate value greater than 1% of
such issuer’s outstanding securities; (ii) loans to individuals or estates;
(iii) certain rental agreements calling for deferred rents or increasing rents
that are subject to Section 467 of the Code, other than with certain related
persons; (iv) obligations to pay us amounts qualifying as “rents from real
property” under the 75% and 95% gross income tests; (v) securities issued by a
state or any political subdivision of a state, the District of Columbia, a
foreign government, any political subdivision of a foreign government, or the
Commonwealth of Puerto Rico, but only if the determination of any payment
received or accrued under the security does not depend in whole or in part on
the profits of any person not described in this category, or payments on any
obligation issued by such an entity; (vi) securities issued by another
qualifying REIT; and (vii) other arrangements identified in Treasury Regulations
(which have not yet been issued or proposed). In addition, any debt instrument
issued by a partnership will not be treated as a “security” under the 10% value
test if at least 75% of the partnership’s gross income (excluding gross income
from prohibited transactions) is derived from sources meeting the requirements
of the 75% gross income test. If the partnership fails to meet the 75% gross
income test, then the debt instrument issued by the partnership nevertheless
will not be treated as a “security” to the extent of our interest as a partner
in the partnership. Also, in looking through any partnership to determine our
allocable share of any securities owned by the partnership, our share of the
assets of the partnership, solely for purposes of applying the 10% value test in
taxable years beginning on or after January 1, 2005, will correspond not only to
our interest as a partner in the partnership but also to our proportionate
interest in certain debt securities issued by the partnership.
Through our investment in Concord Debt
Holdings LLC, we may hold mezzanine loans that are secured by equity interests
in a non-corporate entity that directly or indirectly owns real property. IRS
Revenue Procedure 2003-65 provides a safe harbor pursuant to which a mezzanine
loan to such a non-corporate entity, if it meets each of the requirements
contained in the Revenue Procedure, will be treated by the IRS as a real estate
asset for purposes of the REIT asset tests, and interest derived from it will be
treated as qualifying mortgage interest for purposes of the 75% gross income
test. Although the Revenue Procedure provides a safe harbor on which taxpayers
may rely, it does not prescribe rules of substantive tax law. Moreover, not all
of the mezzanine loans that we hold meet all of the requirements for reliance on
this safe harbor. We have invested, and intend to continue to invest,
in mezzanine loans in a manner that will enable us to continue to satisfy the
gross income and asset tests.
We may also hold through our investment
in Concord Debt Holdings LLC certain participation interests, or “B-Notes,” in
mortgage loans and mezzanine loans originated by other lenders. A B-Note is an
interest created in an underlying loan by virtue of a participation or similar
agreement, to which the originator of the loan is a party, along with one or
more participants. The borrower on the underlying loan is typically not a party
to the participation agreement. The performance of a participant’s investment
depends upon the performance of the underlying loan, and if the underlying
borrower defaults, the participant typically has no recourse against the
originator of the loan. The originator often retains a senior position in the
underlying loan, and grants junior participations, which will be a first loss
position in the event of a default by the borrower. The appropriate treatment of
participation interests for federal income tax purposes is not entirely
certain. We believe that we have invested, and intend to continue to
invest, in participation interests that qualify as real estate assets for
purposes of the asset tests, and that generate interest that will be treated as
qualifying mortgage interest for purposes of the 75% gross income test, but no
assurance can be given that the IRS will not challenge our treatment of these
participation interests.
We believe that substantially all of
our assets consist of (1) real properties, (2) stock or debt investments that
earn qualified temporary investment income, (3) other qualified real estate
assets, including qualifying REITs, and (4) cash, cash items and government
securities. We also believe that the value of our securities in our
taxable REIT subsidiaries will not exceed 20% of the value of our total assets
(or, beginning with our 2009 taxable year, 25% of the value of our total
assets). We may also invest in securities of other entities, provided that such
investments will not prevent us from satisfying the asset and income tests for
REIT qualification set forth above. If any interest we hold in any
REIT (including Concord Debt Funding Trust) or other category of permissible
investment described above does not qualify as such, we would be subject to the
5% asset test and the 10% voting securities and value tests with respect to such
investment.
After initially meeting the asset tests
at the close of any quarter, we will not lose our status as a REIT for failure
to satisfy the asset tests at the end of a later quarter solely by reason of
changes in asset values (including, for taxable years beginning after July 30,
2008, discrepancies caused solely by a change in the foreign currency exchange
rate used to value a foreign asset). If we inadvertently fail one or more of the
asset tests at the end of a calendar quarter because we acquire securities or
other property during the quarter, we can cure this failure by disposing of
sufficient nonqualifying assets within 30 days after the close of the calendar
quarter in which it arose. If we were to fail any of the asset tests at the end
of any quarter without curing such failure within 30 days after the end of such
quarter, we would fail to qualify as a REIT, unless we were to qualify under
certain relief provisions enacted in 2004. Under one of these relief provisions,
if we were to fail the 5% asset test, the 10% voting securities test, or the 10%
value test, we nevertheless would continue to qualify as a REIT if the failure
was due to the ownership of assets having a total value not exceeding the lesser
of 1% of our assets at the end of the relevant quarter or $10,000,000, and we
were to dispose of such assets (or otherwise meet such asset tests) within six
months after the end of the quarter in which the failure was identified. If we
were to fail to meet any of the REIT asset tests for a particular quarter, but
we did not qualify for the relief for de minimis failures that is described in
the preceding sentence, then we would be deemed to have satisfied the relevant
asset test if: (i) following our identification of the failure, we were to file
a schedule with a description of each asset that caused the failure; (ii) the
failure was due to reasonable cause and not due to willful neglect; (iii) we
were to dispose of the non-qualifying asset (or otherwise meet the relevant
asset test) within six months after the last day of the quarter in which the
failure was identified, and (iv) we were to pay a penalty tax equal to the
greater of $50,000, or the highest corporate tax rate multiplied by the net
income generated by the non-qualifying asset during the period beginning on the
first date of the failure and ending on the date we dispose of the asset (or
otherwise cure the asset test failure). These relief provisions will be
available to us in our taxable years beginning on or after January 1, 2005,
although it is not possible to predict whether in all circumstances we would be
entitled to the benefit of these relief provisions.
Annual
Distribution Requirement. With respect to each
taxable year, we must distribute to our shareholders as dividends (other than
capital gain dividends) at least 90% of our taxable income. Specifically, we
must distribute an amount equal to (1) 90% of the sum of our “REIT taxable
income” (determined without regard to the deduction for dividends paid and by
excluding any net capital gain), and any after-tax net income from foreclosure
property, minus (2) the sum of certain items of “excess noncash income” such as
income attributable to leveled stepped rents, cancellation of indebtedness and
original issue discount. REIT taxable income is generally computed in the same
manner as taxable income of ordinary corporations, with several adjustments,
such as a deduction allowed for dividends paid, but not for dividends
received.
We will be subject to tax on amounts
not distributed at regular United States federal corporate income tax rates. In
addition, a nondeductible 4% excise tax is imposed on the excess of (1) 85% of
our ordinary income for the year plus 95% of capital gain net income for the
year and the undistributed portion of the required distribution for the prior
year over (2) the actual distribution to shareholders during the year (if any).
Net operating losses generated by us may be carried forward but not carried back
and used by us for 15 years (or 20 years in the case of net operating losses
generated in our tax years commencing on or after January 1, 1998) to reduce
REIT taxable income and the amount that we will be required to distribute in
order to remain qualified as a REIT. As a REIT, our net capital losses may be
carried forward for five years (but not carried back) and used to reduce capital
gains.
In general, a distribution must be made
during the taxable year to which it relates to satisfy the distribution test and
to be deducted in computing REIT taxable income. However, we may elect to treat
a dividend declared and paid after the end of the year (a “subsequent declared
dividend”) as paid during such year for purposes of complying with the
distribution test and computing REIT taxable income, if the dividend is (1)
declared before the regular or extended due date of our tax return for such year
and (2) paid not later than the date of the first regular dividend payment made
after the declaration, but in no case later than 12 months after the end of the
year. For purposes of computing the nondeductible 4% excise tax, a subsequent
declared dividend is considered paid when actually distributed. Furthermore, any
dividend that is declared by us in October, November or December of a calendar
year, and payable to shareholders of record as of a specified date in such
quarter of such year will be deemed to have been paid by us (and received by
shareholders) on December 31 of such calendar year, but only if such dividend is
actually paid by us in January of the following calendar year.
For purposes of complying with the
distribution test for a taxable year as a result of an adjustment in certain of
our items of income, gain or deduction by the IRS or us, we may be permitted to
remedy such failure by paying a “deficiency dividend” in a later year together
with interest. Such deficiency dividend may be included in our deduction of
dividends paid for the earlier year for purposes of satisfying the distribution
test. For purposes of the nondeductible 4% excise tax, the deficiency dividend
is taken into account when paid, and any income giving rise to the deficiency
adjustment is treated as arising when the deficiency dividend is
paid.
The IRS has published guidance
providing temporary relief for a publicly-traded REIT to satisfy the annual
distribution requirement with distributions consisting of its stock and at least
a minimum percentage of cash. Pursuant to this IRS guidance, a REIT
may treat the entire amount of a distribution consisting of both stock and cash
as a qualifying distribution for purposes of the annual distribution requirement
provided that such distribution is declared on or after January 1, 2008 and the
following requirements are met: (1) the distribution is made by the REIT to its
shareholders with respect to its stock; (2) stock of the REIT is publicly traded
on an established securities market in the United States; (3) the distribution
is declared with respect to a taxable year ending on or before December 31,
2009; (4) pursuant to such declaration, each shareholder may elect to receive
its proportionate share of the declared distribution in either money or stock of
the REIT of equivalent value, subject to a limitation on the amount of money to
be distributed in the aggregate to all shareholders (the “Cash Limitation”),
provided that – (a) such Cash Limitation is not less than 10% of the aggregate
declared distribution, and (b) if too many shareholders elect to receive money,
each shareholder electing to receive money will receive a pro rata amount of
money corresponding to the shareholder’s respective entitlement under the
declaration, but in no event will any shareholder electing to receive money
receive less than 10% of the shareholder’s entire entitlement under the
declaration in money; (5) the calculation of the number of shares to be received
by any shareholder will be determined, as close as practicable to the payment
date, based upon a formula utilizing market prices that is designed to equate in
value the number of shares to be received with the amount of money that could be
received instead; and (6) with respect to any shareholder participating in a
dividend reinvestment plan (“DRIP”), the DRIP applies only to the extent that,
in the absence of the DRIP, the shareholder would have received the distribution
in money under subsection (4) above.
We believe that we have distributed and
intend to continue to distribute to our shareholders in a timely manner such
amounts sufficient to satisfy the annual distribution requirements. However, it
is possible that timing differences between the accrual of income and its actual
collection, and the need to make nondeductible expenditures (such as capital
improvements or principal payments on debt) may cause us to recognize taxable
income in excess of our net cash receipts, thus increasing the difficulty of
compliance with the distribution requirement. In addition, excess inclusion
income might be non-cash accrued income, or “phantom” taxable income, which
could therefore adversely affect our ability to satisfy our distribution
requirements. In order to meet the distribution requirement, we might find it
necessary to arrange for short-term, or possibly long-term,
borrowings.
Failure to
Qualify. Commencing with our
taxable year beginning January 1, 2005, if we were to fail to satisfy one or
more requirements for REIT qualification, other than an asset or income test
violation of a type for which relief is otherwise available as described above,
we would retain our REIT qualification if the failure was due to reasonable
cause and not willful neglect, and if we were to pay a penalty of $50,000 for
each such failure. It is not possible to predict whether in all circumstances we
would be entitled to the benefit of this relief provision. If we fail to qualify
as a REIT for any taxable year, and if certain relief provisions of the Code do
not apply, we would be subject to federal income tax (including applicable
alternative minimum tax) on our taxable income at regular corporate rates.
Distributions to shareholders in any year in which we fail to qualify will not
be deductible from our taxable income nor will they be required to be made. As a
result, our failure to qualify as a REIT would reduce the cash available for
distribution by us to our shareholders. In addition, if we fail to qualify as a
REIT, all distributions to shareholders will be taxable as ordinary income, to
the extent of our current and accumulated earnings and profits. Subject to
certain limitations of the Code, corporate distributees may be eligible for the
dividends-received deduction and shareholders taxed as individuals may be
eligible for a reduced tax rate on “qualified dividend income” from regular C
corporations.
If our failure to qualify as a REIT is
not due to reasonable cause but results from willful neglect, we would not be
permitted to elect REIT status for the four taxable years after the taxable year
for which such disqualification is effective. In the event we were to fail to
qualify as a REIT in one year and subsequently requalify in a later year, we may
elect to recognize taxable income based on the net appreciation in value of our
assets as a condition to requalification. In the alternative, we may be taxed on
the net appreciation in value of our assets if we sell properties within ten
years of the date we requalify as a REIT under federal income tax
laws.
Taxation
of Shareholders
As used herein, the term “U.S.
shareholder” means a beneficial owner of our common shares who (for United
States federal income tax purposes) (1) is a citizen or resident of the United
States, (2) is a corporation or other entity treated as a corporation for
federal income tax purposes created or organized in or under the laws of the
United States or of any political subdivision thereof, (3) is an estate the
income of which is subject to United States federal income taxation regardless
of its source or (4) is a trust whose administration is subject to the primary
supervision of a United States court and which has one or more United States
persons who have the authority to control all substantial decisions of the trust
or a trust that has a valid election to be treated as a U.S. person pursuant to
applicable Treasury Regulations. As used herein, the term “non U.S. shareholder”
means a beneficial owner of our common shares who is not a U.S. shareholder or a
partnership.
If a partnership (including any entity
treated as a partnership for U.S. federal income tax purposes) is a shareholder,
the tax treatment of a partner in the partnership generally will depend upon the
status of the partner and the activities of the partnership. A shareholder that
is a partnership and the partners in such partnership should consult their own
tax advisors concerning the U.S. federal income tax consequences of acquiring,
owning and disposing of our common shares.
Taxation of
Taxable U.S. Shareholders.
As long as we qualify as a REIT,
distributions made to our U.S. shareholders out of current or accumulated
earnings and profits (and not designated as capital gain dividends) will be
taken into account by them as ordinary income and corporate shareholders will
not be eligible for the dividends-received deduction as to such amounts. For
purposes of computing our earnings and profits, depreciation for depreciable
real estate will be computed on a straight-line basis over a 40-year period. For
purposes of determining whether distributions on the shares constitute dividends
for tax purposes, our earnings and profits will be allocated first to
distributions with respect to the Series B Preferred Shares, Series C Preferred
Shares, Series D Preferred Shares and all other series of preferred shares that
are equal in rank as to distributions and upon liquidation with the Series B
Preferred Shares, Series C Preferred Shares and Series D Preferred Shares, and
second to distributions with respect to our common shares. There can be no
assurance that we will have sufficient earnings and profits to cover
distributions on any common shares. Certain “qualified dividend income” received
by domestic non-corporate shareholders in taxable years prior to 2011 is subject
to tax at the same tax rates as long-term capital gain (generally a maximum rate
of 15% for such taxable years). Dividends paid by a REIT generally do not
qualify as “qualified dividend income” because a REIT is not generally subject
to federal income tax on the portion of its REIT taxable income distributed to
its shareholders. Therefore, our dividends will continue to be subject to tax at
ordinary income rates, subject to two narrow exceptions. Under the first
exception, dividends received from a REIT may be treated as “qualified dividend
income” eligible for the reduced tax rates to the extent that the REIT itself
has received qualified dividend income from other corporations (such as taxable
REIT subsidiaries) in which the REIT has invested. Under the second exception,
dividends paid by a REIT in a taxable year may be treated as qualified dividend
income in an amount equal to the sum of (i) the excess of the REIT’s “REIT
taxable income” for the preceding taxable year over the corporate-level federal
income tax payable by the REIT for such preceding taxable year and (ii) the
excess of the REIT’s income that was subject to the Built-in Gains Tax (as
described above) in the preceding taxable year over the tax payable by the REIT
on such income for such preceding taxable year. We do not expect to distribute a
material amount of qualified dividend income, if any.
Distributions that are properly
designated as capital gain dividends will be taxed as gains from the sale or
exchange of a capital asset held for more than one year (to the extent they do
not exceed our actual net capital gain for the taxable year) without regard to
the period for which the shareholder has held its shares. However, corporate
shareholders may be required to treat up to 20% of certain capital gain
dividends as ordinary income under the Code. Capital gain dividends, if any,
will be allocated among different classes of shares in proportion to the
allocation of earnings and profits discussed above.
Distributions in excess of our current
and accumulated earnings and profits will constitute a non-taxable return of
capital to a shareholder to the extent that such distributions do not exceed the
adjusted basis of the shareholder’s shares, and will result in a corresponding
reduction in the shareholder’s basis in the shares. Any reduction in a
shareholder’s tax basis for its shares will increase the amount of taxable gain
or decrease the deductible loss that will be realized upon the eventual
disposition of the shares. We will notify shareholders at the end of each year
as to the portions of the distributions which constitute ordinary income,
capital gain or a return of capital. Any portion of such distributions that
exceeds the adjusted basis of a U.S. shareholder’s shares will be taxed as
capital gain from the disposition of shares, provided that the shares are held
as capital assets in the hands of the U.S. shareholder.
Aside from the different income tax
rates applicable to ordinary income and capital gain dividends for noncorporate
taxpayers, regular and capital gain dividends from us will be treated as
dividend income for most other federal income tax purposes. In particular, such
dividends will be treated as “portfolio” income for purposes of the passive
activity loss limitation and shareholders generally will not be able to offset
any “passive losses” against such dividends. Capital gain dividends and
qualified dividend income may be treated as investment income for purposes of
the investment interest limitation contained in Section 163(d) of the Code,
which limits the deductibility of interest expense incurred by noncorporate
taxpayers with respect to indebtedness attributable to certain investment
assets.
In general, dividends paid by us will
be taxable to shareholders in the year in which they are received, except in the
case of dividends declared at the end of the year, but paid in the following
January, as discussed above.
In general, a U.S. shareholder will
realize capital gain or loss on the disposition of shares equal to the
difference between (1) the amount of cash and the fair market value of any
property received on such disposition and (2) the shareholder’s adjusted basis
of such shares. Such gain or loss will generally be short-term capital gain or
loss if the shareholder has not held such shares for more than one year and will
be long-term capital gain or loss if such shares have been held for more than
one year. Loss upon the sale or exchange of shares by a shareholder who has held
such shares for six months or less (after applying certain holding period rules)
will be treated as long-term capital loss to the extent of distributions from us
required to be treated by such shareholder as long-term capital
gain.
We may elect to retain and pay income
tax on net long-term capital gains. If we make such an election, you, as a
holder of shares, will (1) include in your income as long-term capital gains
your proportionate share of such undistributed capital gains (2) be deemed to
have paid your proportionate share of the tax paid by us on such undistributed
capital gains and thereby receive a credit or refund for such amount and (3) in
the case of a U.S. shareholder that is a corporation, appropriately adjust its
earnings and profits for the retained capital gains in accordance with Treasury
Regulations to be promulgated by the IRS. As a holder of shares you will
increase the basis in your shares by the difference between the amount of
capital gain included in your income and the amount of tax you are deemed to
have paid. Our earnings and profits will be adjusted appropriately.
Taxation
of Non-U.S. Shareholders.
The following discussion is only a
summary of the rules governing United States federal income taxation of non-U.S.
shareholders such as nonresident alien individuals and foreign corporations.
Prospective non-U.S. shareholders should consult with their own tax advisors to
determine the impact of federal, state and local income tax laws with regard to
an investment in shares, including any reporting requirements.
Distributions. Distributions
that are not attributable to gain from sales or exchanges by us of “United
States real property interests” or otherwise effectively connected with the
non-U.S. shareholder’s conduct of a U.S. trade or business and that are not
designated by us as capital gain dividends will be treated as dividends of
ordinary income to the extent that they are made out of our current or
accumulated earnings and profits. Such distributions ordinarily will be subject
to a withholding tax equal to 30% of the gross amount of the distribution unless
an applicable tax treaty reduces or eliminates that tax. Certain tax treaties
limit the extent to which dividends paid by a REIT can qualify for a reduction
of the withholding tax on dividends. Our dividends that are attributable to
excess inclusion income will be subject to 30% U.S. withholding tax without
reduction under any otherwise applicable tax treaty. See “—Taxation of the
Company—Requirements for Qualification” above. Distributions in excess of our
current and accumulated earnings and profits will not be taxable to a non-U.S.
shareholder to the extent that they do not exceed the adjusted basis of the
shareholder’s shares, but rather will reduce the adjusted basis of such shares.
To the extent that such distributions exceed the adjusted basis of a non-U.S.
shareholder’s shares, they will give rise to tax liability if the non-U.S.
shareholder would otherwise be subject to tax on any gain from the sale or
disposition of his shares, as described below. If 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
federal income tax on the distribution at graduated rates, in the same manner as
U.S. shareholders are taxed with respect to such distribution, and a non-U.S.
shareholder that is a corporation also may be subject to the 30% branch profits
tax with respect to the distribution.
For withholding tax purposes, we are
generally required to treat all distributions as if made out of our current or
accumulated earnings and profits and thus intend to withhold at the rate of 30%
(or a reduced treaty rate if applicable) on the amount of any distribution
(other than distributions designated as capital gain dividends) made to a
non-U.S. shareholder. We would not be required to withhold at the 30% rate on
distributions we reasonably estimate to be in excess of our current and
accumulated earnings and profits. If it cannot be determined at the time a
distribution is made whether such distribution will be in excess of current and
accumulated earnings and profits, the distribution will be subject to
withholding at the rate applicable to ordinary dividends. However, the non-U.S.
shareholder may seek a refund of such amounts from the IRS if it is subsequently
determined that such distribution was, in fact, in excess of our current or
accumulated earnings and profits, and the amount withheld exceeded the non-U.S.
shareholder’s United States tax liability, if any, with respect to the
distribution.
For any year in which we qualify as a
REIT, distributions to non-U.S. shareholders who own more than 5% of our shares
and that are attributable to gain from sales or exchanges by us of United States
real property interests will be taxed under the provisions of the Foreign
Investment in Real Property Tax Act of 1980 (“FIRPTA”). Under FIRPTA, a non-U.S.
shareholder is taxed as if such gain were effectively connected with a United
States business. Non-U.S. shareholders who own more than 5% of our shares would
thus be taxed 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 non-resident alien individuals). Also, distributions made to
non-U.S. shareholders who own more than 5% of our shares may be subject to a 30%
branch profits tax in the hands of a corporate non-U.S. shareholder not entitled
to treaty relief or exemption. We are required by applicable regulations to
withhold 35% of any distribution that could be designated by us as a capital
gain dividend regardless of the amount actually designated as a capital gain
dividend. This amount is creditable against the non-U.S. shareholder’s FIRPTA
tax liability.
Under the Tax Increase Prevention and
Reconciliation Act of 2005 (“TIPRA”), enacted on May 17, 2006, distributions,
made to REIT or regulated investment company (“RIC”) shareholders, that are
attributable to gain from sales or exchanges of United States real property
interests will retain their character as gain subject to the rules of FIRPTA
discussed above when distributed by such REIT or RIC shareholders to their
respective shareholders. This provision is effective for taxable years beginning
after December 31, 2005.
If a non-U.S. shareholder does not own
more than 5% of our shares during the one-year period prior to a distribution
attributable to gain from sales or exchanges by us of United States real
property interests, such distribution will not be considered to be gain
effectively connected with a U.S. business as long as the class of shares
continues to be regularly traded on an established securities market in the
United States. As such, a non-U.S. shareholder who does not own more than 5% of
our shares would not be required to file a U.S. Federal income tax return by
reason of receiving such a distribution. In this case, the distribution will be
treated as a REIT dividend to that non-U.S. shareholder and taxed as a REIT
dividend that is not a capital gain distribution as described above. In
addition, the branch profits tax will not apply to such distributions. If our
common shares cease to be regularly traded on an established securities market
in the United States, all non-U.S. shareholders of our common shares would be
subject to taxation under FIRPTA with respect to capital gain distributions
attributable to gain from the sale or exchange of United States real property
interests.
Dispositions. Gain
recognized by a non-U.S. shareholder upon a sale or disposition of our common
shares generally will not be taxed under FIRPTA if we are a “domestically
controlled REIT,” defined generally as a REIT in which at all times during a
specified testing period less than 50% in value of our shares was held directly
or indirectly by non-U.S. persons. We believe, but cannot guarantee, that we
have been a “domestically controlled REIT.” However, because our shares are
publicly traded, no assurance can be given that we will continue to be a
“domestically controlled REIT.”
Notwithstanding the general FIRPTA
exception for sales of domestically controlled REIT stock discussed above, a
disposition of domestically controlled REIT stock will be taxable if the
disposition occurs in a wash sale transaction relating to a distribution on such
stock. In addition, FIRPTA taxation will apply to substitute dividend payments
received in securities lending transactions or sale-repurchase transactions of
domestically controlled REIT stock to the extent such payments are made to
shareholders in lieu of distributions that would have otherwise been subject to
FIRPTA taxation. The foregoing rules regarding wash sales and substitute
dividend payments with respect to domestically controlled REIT stock will not
apply to stock that is regularly traded on an established securities market
within the United States and held by a non-U.S. shareholder that held five
percent or less of such stock during the one-year period prior to the related
distribution. These rules are effective for distributions on and after June 16,
2006. Prospective purchasers are urged to consult their own tax advisors
regarding the applicability of the new rules enacted under TIPRA to their
particular circumstances.
In addition, a non-U.S. shareholder
that owns, actually or constructively, 5% or less of a class of our shares
through a specified testing period, whether or not our shares are domestically
controlled, will not be subject to tax on the sale of its shares under FIRPTA if
the shares are regularly traded on an established securities market. If the gain
on the sale of shares were to be subject to taxation under FIRPTA, the non-U.S.
shareholder would be subject to the same treatment as U.S. shareholders with
respect to such gain (subject to applicable alternative minimum tax, special
alternative minimum tax in the case of nonresident alien individuals and
possible application of the 30% branch profits tax in the case of foreign
corporations) and the purchaser would be required to withhold and remit to the
IRS 10% of the purchase price.
Gain not subject to FIRPTA will be
taxable to a non-U.S. shareholder if (1) investment in the shares 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 treatment as U.S.
shareholders with respect to such gain, or (2) the non-U.S. shareholder is a
nonresident alien individual who was present in the United States for 183 days
or more during the taxable year and such nonresident alien individual has a “tax
home” in the United States, in which case the nonresident alien individual will
be subject to a 30% tax on the individual’s capital gain.
Taxation
of Tax-Exempt Shareholders.
Tax-exempt entities, including
qualified employee pension and profit sharing trusts and individual retirement
accounts (“Exempt Organizations”), generally are exempt from federal income
taxation. However, they are subject to taxation on their unrelated business
taxable income (“UBTI”). While investments in real estate may generate UBTI, the
IRS has issued a published ruling to the effect that dividend distributions by a
REIT to an exempt employee pension trust do not constitute UBTI, provided that
the shares of the REIT are not otherwise used in an unrelated trade or business
of the exempt employee pension trust. Based on that ruling, amounts distributed
by us to Exempt Organizations generally should not constitute UBTI. However, if
an Exempt Organization finances its acquisition of our shares with debt, a
portion of its income from us, if any, will constitute UBTI pursuant to the
“debt-financed property” rules under the Code. In addition, our dividends that
are attributable to excess inclusion income will constitute UBTI for most Exempt
Organizations. See “—Taxation of the Company—Requirements for Qualification”
above. Furthermore, social clubs, voluntary employee benefit associations,
supplemental unemployment benefit trusts, and qualified group legal services
plans that are exempt from taxation under specified provisions of the Code are
subject to different UBTI rules, which generally will require them to
characterize distributions from us as UBTI.
In addition, a pension trust that owns
more than 10% of our shares is required to treat a percentage of the dividends
from us as UBTI (the “UBTI Percentage”) in certain circumstances. The UBTI
Percentage is our gross income derived 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 the dividends are paid. The UBTI rule applies only if (i) the
UBTI Percentage is at least 5%, (ii) we qualify as a REIT by reason of the
modification of the 5/50 Rule 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 (iii) either (A) one pension trust owns more than 25%
of the value of our shares or (B) a group of pension trusts individually holding
more than 10% of the value of our capital shares collectively owns more than 50%
of the value of our capital shares.
Information
Reporting and Backup Withholding
U.S.
Shareholders.
We will report to U.S. shareholders and
the IRS the amount of dividends paid during each calendar year, and the amount
of tax withheld, if any, with respect thereto. Under the backup withholding
rules, a U.S. shareholder may be subject to backup withholding, currently at a
rate of 28%, with respect to dividends paid unless such holder (a) is a
corporation or comes within certain other exempt categories and, when required,
demonstrates this fact, or (b) provides a taxpayer identification number,
certifies as to no loss of exemption from backup withholding and otherwise
complies with the applicable requirements of the backup withholding rules. A
U.S. shareholder who does not provide us with its correct taxpayer
identification number also may be subject to penalties imposed by the IRS.
Amounts withheld as backup withholding will be creditable against the
shareholder’s income tax liability if proper documentation is supplied. In
addition, we may be required to withhold a portion of capital gain distributions
made to any shareholders who fail to certify their non-foreign status to
us.
Non-U.S.
Shareholders.
Generally, we must report annually to
the IRS the amount of dividends paid to a non-U.S. shareholder, such holder’s
name and address, and the amount of tax withheld, if any. A similar report is
sent to the non-U.S. shareholder. Pursuant to tax treaties or other agreements,
the IRS may make its reports available to tax authorities in the non-U.S.
shareholder’s country of residence. Payments of dividends or of proceeds from
the disposition of stock made to a non-U.S. shareholder may be subject to
information reporting and backup withholding unless such holder establishes an
exemption, for example, by properly certifying its non-United States status on
an IRS Form W-8BEN or another appropriate version of IRS Form W-8.
Notwithstanding the foregoing, backup withholding and information reporting may
apply if either we have or our paying agent has actual knowledge, or reason to
know, that a non-U.S. shareholder is a United States person.
Backup
withholding is not an additional tax. Rather, the United States income tax
liability of persons subject to backup withholding will be reduced by the amount
of tax withheld. If withholding results in an overpayment of taxes, a refund or
credit may be obtained, provided that the required information is furnished to
the IRS.
SELLING
SHAREHOLDERS
The 5.45%
Exchangeable Guaranteed Notes due 2027, or the notes, were originally issued by
our former operating partnership subsidiary, The Lexington Master Limited
Partnership, and sold by the initial purchasers of the notes in transactions
exempt from the registration requirements of the Securities Act to persons
reasonably believed by the initial purchasers to be qualified institutional
buyers as defined by Rule 144A under the Securities Act. On December 31, 2008,
The Lexington Master Limited Partnership was merged with and into us and we
assumed the notes pursuant to a supplemental indenture. Under certain
circumstances, we may issue our common shares upon the exchange or redemption of
the notes in accordance with the terms of the notes or in negotiated
transactions. In such circumstances, the recipients of common shares, whom we
refer to as the selling shareholders, may use this prospectus to resell from
time to time the common shares that we may issue to them upon the exchange or
redemption of the notes. Information about selling shareholders is set forth
herein and information about additional selling shareholders may be set forth in
a prospectus supplement, in a post-effective amendment, or in filings we make
with the Securities and Exchange Commission under the Exchange Act which are
incorporated by reference in this prospectus.
Selling
shareholders, including their transferees, pledgees or donees or their
successors, may from time to time offer and sell pursuant to this prospectus and
any accompanying prospectus supplement any or all of the common shares which we
may issue upon the exchange or redemption of the notes.
The
following table sets forth information, as of August 28, 2009, with respect to
the selling shareholders and the number of common shares that would become
beneficially owned by each selling shareholder should we issue the common shares
to such selling shareholder that may be offered pursuant to this prospectus upon
the exchange or redemption of the notes to such selling shareholder. The
information is based on information provided by or on behalf of the selling
shareholders in Selling Security Holders Notice and Questionnaires. The selling
shareholders may offer all, some or none of the common shares which we may issue
upon the exchange or redemption of the notes. Because the selling shareholders
may offer all or some portion of such common shares, we cannot estimate the
number of common shares that will be held by the selling shareholders upon
termination of any of these sales. In addition, the selling shareholders
identified below may have sold, transferred or otherwise disposed of all or a
portion of their notes or common shares since the date on which they provided
the information regarding their notes in transactions exempt from the
registration requirements of the Securities Act.
The
number of common shares issuable upon the exchange or redemption of the notes
shown in the table below assumes exchange of the full amount of notes held by
each selling shareholder at the current exchange rate of 49.6681 of our
common shares per $1,000 principal amount of notes and a cash payment in lieu of
any fractional share, even though (x) only $134,400,000 aggregate principal
amount of the notes were outstanding as of June 30, 2009 and
(y) we are required to pay the first $1,000 of exchange value in cash. The
exchange rate is subject to adjustment in certain events. Accordingly, the
number of our common shares issued upon the exchange or redemption of the notes
may increase or decrease from time to time. The number of our common shares
owned by the other selling shareholders or any future transferee from any such
holder assumes that they do not beneficially own any common shares other than
the common shares that we may issue to them upon the exchange or redemption of
the notes.
Except as
provided below, none of the selling shareholders nor any of their affiliates,
officers, directors or principal equity holders has held any positions or office
or has had any material relationship with us within the past three
years.
To the
extent any of the selling shareholders identified below are broker-dealers, they
may be deemed to be, under interpretations of the staff of the Securities and
Exchange Commission, “underwriters” within the meaning of the Securities
Act.
|
|
|
Number of Shares
Beneficially Owned Prior
to the Offering(1)(2)
|
|
|
Percentage of
Shares
Beneficially
Owned Prior
to the Offering(3)
|
|
|
Number of Shares
Offered Pursuant
to this Prospectus
|
|
|
Number of Shares
Beneficially Owned
After the Offering(4)
|
|
|
Percentage of Shares
Beneficially Owned
After the Offering(3)
|
|
|
Admiral
Flagship Master Fund, Ltd.
|
|
|
74,502 |
|
|
|
* |
|
|
|
74,502 |
|
|
|
0 |
|
|
|
* |
|
|
Advent
Enhanced Phoenix Fund(5)
|
|
|
149,004 |
|
|
|
* |
|
|
|
149,004 |
|
|
|
0 |
|
|
|
* |
|
|
Akanthos
Arbitrage Master Fund, L.P.(6)
|
|
|
3,725,107 |
|
|
|
3.16 |
% |
|
|
3,725,107 |
|
|
|
0 |
|
|
|
* |
|
|
Argent
Classic Convertible Arbitrage Fund II, L.P. (7)
|
|
|
2,930 |
|
|
|
* |
|
|
|
2,930 |
|
|
|
0 |
|
|
|
* |
|
|
Argent
Classic Convertible Arbitrage Fund L.P. (7)
|
|
|
118,210 |
|
|
|
* |
|
|
|
118,210 |
|
|
|
0 |
|
|
|
* |
|
|
Argent
Classic Convertible Arbitrage Fund Ltd. (7)
|
|
|
1,105,214 |
|
|
|
* |
|
|
|
1,105,214 |
|
|
|
0 |
|
|
|
* |
|
|
Argent
LowLev Convertible Arbitrage Fund II, LLC (7)
|
|
|
5,463 |
|
|
|
* |
|
|
|
5,463 |
|
|
|
0 |
|
|
|
* |
|
|
Argent
LowLev Convertible Arbitrage Fund Ltd. (7)
|
|
|
354,133 |
|
|
|
* |
|
|
|
354,133 |
|
|
|
0 |
|
|
|
* |
|
|
Argentum
Multi-Strategy Fund, LLC (7)
|
|
|
6,456 |
|
|
|
* |
|
|
|
6,456 |
|
|
|
0 |
|
|
|
* |
|
|
Argentum
Multi-Strategy Fund Ltd - Classic (7)
|
|
|
19,867 |
|
|
|
* |
|
|
|
19,867 |
|
|
|
0 |
|
|
|
* |
|
|
Barclays
Capital Securities Limited
|
|
|
620,851 |
|
|
|
* |
|
|
|
620,851 |
|
|
|
0 |
|
|
|
* |
|
|
Bayerische
Hypo-und Vereinsbank AG(8)
|
|
|
1,390,706 |
|
|
|
1.20 |
% |
|
|
1,390,706 |
|
|
|
0 |
|
|
|
* |
|
|
Bear,
Stearns & Co. Inc.(9)
|
|
|
471,846 |
|
|
|
* |
|
|
|
471,846 |
|
|
|
0 |
|
|
|
* |
|
|
Black
Diamond Convertible Offshore LDC(10)
|
|
|
49,668 |
|
|
|
* |
|
|
|
49,668 |
|
|
|
0 |
|
|
|
* |
|
|
Black
Diamond Offshore Ltd.(10)
|
|
|
21,853 |
|
|
|
* |
|
|
|
21,853 |
|
|
|
0 |
|
|
|
* |
|
|
BMO
Nesbitt Burns Inc.(11)
|
|
|
273,174 |
|
|
|
* |
|
|
|
273,174 |
|
|
|
0 |
|
|
|
* |
|
|
Canyon
Capital Arbitrage Master Fund, Ltd. (12)
|
|
|
161,669 |
|
|
|
* |
|
|
|
161,669 |
|
|
|
0 |
|
|
|
* |
|
|
Canyon
Value Realization Fund, L.P. (13)
|
|
|
57,118 |
|
|
|
* |
|
|
|
57,118 |
|
|
|
0 |
|
|
|
* |
|
|
Canyon
Value Realization MAC 18, Ltd. (14)
|
|
|
45,446 |
|
|
|
* |
|
|
|
45,446 |
|
|
|
0 |
|
|
|
* |
|
|
CC
Arbitrage, Ltd.(15)
|
|
|
422,178 |
|
|
|
* |
|
|
|
422,178 |
|
|
|
0 |
|
|
|
* |
|
|
Classic
C Trading Company, Ltd. (7)
|
|
|
244,367 |
|
|
|
* |
|
|
|
244,367 |
|
|
|
0 |
|
|
|
* |
|
|
CQS
Convertible and Quantitative Strategies Master Fund Limited
(15A)
|
|
|
397,344 |
|
|
|
* |
|
|
|
397,344 |
|
|
|
0 |
|
|
|
* |
|
|
CSS,
LLC(16)
|
|
|
49,668 |
|
|
|
* |
|
|
|
49,668 |
|
|
|
0 |
|
|
|
* |
|
|
DBAG
London(17)
|
|
|
3,357,563 |
|
|
|
2.85 |
% |
|
|
3,357,563 |
|
|
|
0 |
|
|
|
* |
|
|
Deutsche
Bank Securities Inc.(18)
|
|
|
149,004 |
|
|
|
* |
|
|
|
149,004 |
|
|
|
0 |
|
|
|
* |
|
|
Double
Black Diamond Offshore LDC(10)
|
|
|
176,818 |
|
|
|
* |
|
|
|
176,818 |
|
|
|
0 |
|
|
|
* |
|
|
Elite
Classic Convertible Arbitrage Ltd. (7)
|
|
|
64,568 |
|
|
|
* |
|
|
|
64,568 |
|
|
|
0 |
|
|
|
* |
|
|
HFR
CA Select Master Trust Account(7)
|
|
|
100,826 |
|
|
|
* |
|
|
|
100,826 |
|
|
|
0 |
|
|
|
* |
|
|
HFR
CA Select Master Trust Fund(19)
|
|
|
49,668 |
|
|
|
* |
|
|
|
49,668 |
|
|
|
0 |
|
|
|
* |
|
|
Highbridge
Convertible Arbitrage Master Fund LP(20)
|
|
|
382,444 |
|
|
|
* |
|
|
|
382,444 |
|
|
|
0 |
|
|
|
* |
|
|
Highbridge
International LLC(21)
|
|
|
2,483,405 |
|
|
|
2.13 |
% |
|
|
2,483,405 |
|
|
|
0 |
|
|
|
* |
|
|
ICVC
Global Balanced Distribution Bonds(22)
|
|
|
49,668 |
|
|
|
* |
|
|
|
49,668 |
|
|
|
0 |
|
|
|
* |
|
|
Institutional
Benchmarks Series (Master Feeder, Ltd.)(19)
|
|
|
94,369 |
|
|
|
* |
|
|
|
94,369 |
|
|
|
0 |
|
|
|
* |
|
|
Jefferies
Umbrella Global Convertible Bond(23)
|
|
|
481,780 |
|
|
|
* |
|
|
|
481,780 |
|
|
|
0 |
|
|
|
* |
|
|
JMG
Capital Partners, L.P. (24)
|
|
|
397,344 |
|
|
|
* |
|
|
|
397,344 |
|
|
|
0 |
|
|
|
* |
|
|
JMG
Triton Offshore Fund, Ltd.(25)
|
|
|
223,506 |
|
|
|
* |
|
|
|
223,506 |
|
|
|
0 |
|
|
|
* |
|
|
JP
Morgan Securities Inc. (26)
|
|
|
2,235,064 |
|
|
|
1.92 |
% |
|
|
2,235,064 |
|
|
|
91 |
|
|
|
* |
|
|
Kamunting
Street Master Fund Ltd.(27)
|
|
|
496,681 |
|
|
|
* |
|
|
|
496,681 |
|
|
|
0 |
|
|
|
* |
|
|
Lehman
Brothers, Inc.(28)
|
|
|
223,506 |
|
|
|
* |
|
|
|
223,506 |
|
|
|
0 |
|
|
|
* |
|
|
Lyxor
Master Fund Ref: Argent/LowLev CB c/o Argent (7)
|
|
|
104,303 |
|
|
|
* |
|
|
|
104,303 |
|
|
|
0 |
|
|
|
* |
|
|
Lyxor/Canyon
Capital Arbitrage Fund Limited (29)
|
|
|
45,446 |
|
|
|
* |
|
|
|
45,446 |
|
|
|
0 |
|
|
|
* |
|
|
Lyxor/Canyon
Value Realization Fund Limited (30)
|
|
|
74,502 |
|
|
|
* |
|
|
|
74,502 |
|
|
|
0 |
|
|
|
* |
|
|
Millenium
Partners, L.P.(31)
|
|
|
248,340 |
|
|
|
* |
|
|
|
248,340 |
|
|
|
0 |
|
|
|
* |
|
|
National
Bank of Canada - Tenor(32)
|
|
|
24,834 |
|
|
|
* |
|
|
|
24,834 |
|
|
|
0 |
|
|
|
* |
|
|
Partners
Group Alternative Strategies PCC Ltd (7)
|
|
|
234,433 |
|
|
|
* |
|
|
|
234,433 |
|
|
|
0 |
|
|
|
* |
|
|
PNC
Equity Securities LLC(33)
|
|
|
149,004 |
|
|
|
* |
|
|
|
149,004 |
|
|
|
0 |
|
|
|
* |
|
|
Polygon
Global Opportunities Master Fund(34)
|
|
|
432,658 |
|
|
|
* |
|
|
|
432,658 |
|
|
|
0 |
|
|
|
* |
|
|
Redbrick
Capital Master Fund Ltd.(35)
|
|
|
372,510 |
|
|
|
* |
|
|
|
372,510 |
|
|
|
0 |
|
|
|
* |
|
|
Reflex
Master Portfolio Ltd (36)
|
|
|
124,170 |
|
|
|
* |
|
|
|
124,170 |
|
|
|
0 |
|
|
|
* |
|
|
Royal
Bank of Canada(37)
|
|
|
496,681 |
|
|
|
* |
|
|
|
496,681 |
|
|
|
0 |
|
|
|
* |
|
|
S.A.C.
Arbitrage Fund, LLC(38)
|
|
|
496,681 |
|
|
|
* |
|
|
|
496,681 |
|
|
|
0 |
|
|
|
* |
|
|
Sailfish
Multi-Strategy Fixed Income Master Fund (G2), Ltd.(39)
|
|
|
248,340 |
|
|
|
* |
|
|
|
248,340 |
|
|
|
0 |
|
|
|
* |
|
|
San
Diego County Employees Retirement Association(19)
|
|
|
104,303 |
|
|
|
* |
|
|
|
104,303 |
|
|
|
0 |
|
|
|
* |
|
|
Sanno
Point Master Fund Ltd.(40)
|
|
|
620,851 |
|
|
|
* |
|
|
|
620,851 |
|
|
|
0 |
|
|
|
* |
|
|
Tenor
Opportunity Master Fund, Ltd.(32)
|
|
|
223,506 |
|
|
|
* |
|
|
|
223,506 |
|
|
|
0 |
|
|
|
* |
|
|
The
Canyon Value Realization Fund (Cayman), Ltd. (41)
|
|
|
147,514 |
|
|
|
* |
|
|
|
147,514 |
|
|
|
0 |
|
|
|
* |
|
|
Topaz
Fund(42)
|
|
|
496,681 |
|
|
|
* |
|
|
|
496,681 |
|
|
|
0 |
|
|
|
* |
|
|
Universal
Investment Gesellschaft REF Aventis (43)
|
|
|
248,340 |
|
|
|
* |
|
|
|
248,340 |
|
|
|
0 |
|
|
|
* |
|
|
Vicis
Capital Master Fund(19)
|
|
|
372,510 |
|
|
|
* |
|
|
|
372,510 |
|
|
|
0 |
|
|
|
* |
|
|
Wachovia
Securities International Ltd. (44)
|
|
|
248,340 |
|
|
|
* |
|
|
|
248,340 |
|
|
|
0 |
|
|
|
* |
|
|
Xavex
Convertible Arbitrage 2 Fund (7)
|
|
|
50,164 |
|
|
|
* |
|
|
|
50,164 |
|
|
|
0 |
|
|
|
* |
|
|
Xavex
Convertible Arbitrage 10 Fund (7)
|
|
|
157,447 |
|
|
|
* |
|
|
|
157,447 |
|
|
|
0 |
|
|
|
* |
|
|
Zazove
Convertible Arbitrage Fund, L.P.(19)
|
|
|
218,539 |
|
|
|
* |
|
|
|
218,539 |
|
|
|
0 |
|
|
|
* |
|
|
Zazove
Hedged Convertible Fund, L.P.(19)
|
|
|
208,606 |
|
|
|
* |
|
|
|
208,606 |
|
|
|
0 |
|
|
|
* |
|
|
Zurich
Institutional Funds Wandelanleihen Global(45)
|
|
|
139,070 |
|
|
|
* |
|
|
|
139,070 |
|
|
|
0 |
|
|
|
* |
|
|
TOTAL(46)
|
|
|
17,823,195 |
|
|
|
13.49 |
% |
|
|
17,823,195 |
|
|
|
0 |
|
|
|
* |
|
___________________
|
(1)
|
Based
on information available to us as of August 28, 2009 in Selling Security
Holder Notice and Questionnaires delivered by the selling
shareholders.
|
|
(2)
|
The
number of common shares issuable upon the exchange or redemption of the
notes, except for the total, assumes exchange of the full amount of
notes held by each selling shareholder at the current exchange rate
of 49.6681 common shares per $1,000 principal amount of notes and a
cash payment in lieu of any fractional share, even though we are required
to pay the first $1,000 of exchange value in cash. The exchange rate is
subject to adjustment in certain events.
|
|
(3)
|
Based
on a total of 114,255,649 of our common shares outstanding as of
August 28, 2009. For purposes of computing the percentage of outstanding
shares held by each selling shareholder named above, the common shares
beneficially owned by such selling shareholders are deemed to be
outstanding, but such shares are not deemed to be outstanding for the
purpose of computing the percentage of ownership of any other selling
shareholder.
|
|
(4)
|
Assumes
the selling shareholder sells all of its common shares offered pursuant to
this prospectus.
|
|
(5)
|
Desmond
Singh exercises voting and/or dispositive powers with respect to these
securities.
|
|
(6)
|
Akanthos
Capital Management, LLC and Michael Kao exercise voting and/or dispositive
powers with respect to these securities.
|
|
(7)
|
Nathanial
Brown and Robert Richardson exercise voting and/or dispositive powers with
respect to these securities.
|
|
(8)
|
Carsten
Richter has voting and dispositive power over the notes held by Bayerische
Hypo-und Vereinsbank AG, which as reported currently having, or previously
having, an open short position in our common shares.
|
|
(9)
|
Michael Lloyd,
Senior Managing Director, exercises voting and/or dispositive powers with
respect to these securities. In December 2004 and January 2005, Bear
Stearns & Co. served as sole lead manager for public offerings of our
$155,000,000 liquidation preference 6.50% Series C Cumulative Convertible
Preferred Stock (“Series C Preferred Shares”). In January and March 2007,
Bear Stearns & Co. served as joint book-running manager for our
private offerings of an aggregate $450,000,000 original principal amount
of the notes. Bear Stearns & Co. and its affiliates have performed
various financial advisory and investment banking services for us from
time to time. Bear Stearns & Co. and its affiliates have received
customary fees and commissions for these transactions. An affiliate of
Bear, Stearns & Co. is a party to a master repurchase agreement with a
subsidiary of Concord Debt Holdings LLC, the Lexington Master Limited
Partnership’s joint venture with Winthrop Realty Trust. Bear Stearns &
Co. has reported (i) a short position in our common shares of 203,300 as
of September 5, 2007 and (ii) a short position in our 7.55% Series D
Cumulative Redeemable Preferred Stock of 81,300 shares as of September 5,
2007. As of August 14, 2007, an affiliate of Bear Stearns & Co. held
an additional $9,500,000 original principal 5.45% Exchangeable Guaranteed
Notes due 2027. Carl D. Glickman, a former independent director of The
Bear Stearns Companies, is Lead Trustee and the Chairman of the Executive
Committee of our Board of Trustees.
|
|
(10)
|
Clint
D. Carlson exercises voting and/or dispositive powers with respect to
these securities.
|
|
(11)
|
Stephen
Church exercises voting and/or dispositive powers with respect to these
securities. The selling shareholder is an underwriter.
|
|
(12)
|
Canyon
Capital Advisors LLC is the investment advisor for Canyon Capital
Arbitrage Master Fund, Ltd. and has the power to direct investments by
Canyon Capital Arbitrage Master Fund, Ltd. The managing
partners of Canyon Capital Advisors LLC are Joshua S. Friedman, Mitchell
R. Julis, and K. Robert Turner. Canyon Capital Arbitrage Master
Fund, Ltd. is an Exempted Company incorporated in the Cayman Islands with
limited liability.
|
|
(13)
|
The
general partner of Canyon Value Realization Fund, L.P. is Canpartners
Investments III, L.P. and as such has the voting power. (The
general partner of Canpartners Investments III, L.P. is Canyon Capital
Advisors LLC.) Canyon Capital Advisors LLC is the investment advisor for
Canyon Value Realization Fund, L.P. and as such, has the power to direct
investments by Canyon Capital Arbitrage Master Fund, Ltd. The
managing partners of Canyon Capital Advisors LLC are Joshua S. Friedman,
Mitchell R. Julis, and K. Robert Turner. Canyon Value Realization Fund,
L.P. is a limited partnership formed in Delaware.
|
|
(14)
|
Canyon
Capital Advisors LLC is the investment advisor for Canyon Value
Realization MAC 18, Ltd. and as such, has the power to direct investments
by Canyon Value Realization MAC 18, Ltd. The managing partners
of Canyon Capital Advisors LLC are Joshua S. Friedman, Mitchell R. Julis,
and K. Robert Turner. Canyon Value Realization MAC 18, Ltd. is an Exempted
Company incorporated in the Cayman Islands with limited
liability.
|
|
(15)
|
As
investment manager under a management agreement, Castle Creek Arbitrage
LLC may exercise dispositive and voting power with respect to the common
shares owned by CC Arbitrage, Ltd. Castle Creek Arbitrage LLC disclaims
beneficial ownership of such common shares. Daniel Asher and Allan Weine
are the managing members of Castle Creek Arbitrage LLC. Messrs. Asher and
Weine disclaim beneficial ownership of the common shares owned by CC
Arbitrage Ltd. The selling shareholder is an “affiliate” of a
broker-dealer and certifies that it bought the securities in the ordinary
course of business, and at the time of the purchase of the securities to
be resold, it had no agreements or understandings, directly or indirectly,
with any person to distribute the securities.
|
|
(15A)
|
Dennis
Hunter, Karla Bodden, Jane Flemming, Alan Smith, Jonathan Crowther and
Gary Gladstein, as directors, exercise voting and/or dispositive powers
with respect to these securities. |
|
(16)
|
Nicholas
D. Schoewe and Clayton A. Strave exercise voting and/or dispositive powers
with respect to these securities.
|
|
(17)
|
The
selling shareholder is an “affiliate” of a broker-dealer and certifies
that it bought the securities in the ordinary course of business, and at
the time of the purchase of the securities to be resold, it had no
agreements or understandings, directly or indirectly, with any person to
distribute the securities. Does not include 3,043,899 common shares held
by Deutsche Bank AG (based on a Schedule 13G/A filed with the SEC on April
9, 2007). The selling shareholder disclaims beneficial ownership of the
common shares held by Deutsche Bank AG.
|
|
(18)
|
The
selling shareholder is an underwriter. Does not include 3,043,899 common
shares held by Deutsche Bank AG (based on a Schedule 13G/A filed with the
SEC on April 9, 2007). The selling shareholder disclaims beneficial
ownership of the common shares held by Deutsche Bank
AG.
|
|
(19)
|
Gene
Pretti exercises voting and/or dispositive powers with respect to these
securities.
|
|
(20)
|
Highbridge
Capital Management, LLC is the trading manager of Highbridge Convertible
Arbitrage Master Fund, L.P. and has voting control and investment
discretion over the securities held by Highbridge Convertible Arbitrage
Master Fund, L.P. Glenn Dubin and Henry Swieca control Highbridge Capital
Management, LLC and have voting control and investment discretion over the
securities held by Highbridge Convertible Master Fund, L.P. Each of
Highbridge Capital Management, LLC, Glenn Dubin and Henry Swieca disclaims
beneficial ownership of the securities held by Highbridge Arbitrage Master
Fund, L.P.
|
|
(21)
|
Highbridge
Capital Management, LLC is the trading manager of Highbridge International
LLC and has voting control and investment discretion over the securities
held by Highbridge International LLC. Glenn Dubin and Henry Swieca control
Highbridge Capital Management, LLC and have voting control and investment
discretion over the securities held by Highbridge International LLC. Each
of Highbridge Capital Management, LLC, Glenn Dubin and Henry Swieca
disclaims beneficial ownership of the securities held by Highbridge
International LLC.
|
|
(22)
|
David
Clott exercises voting and/or dispositive powers with respect to these
securities.
|
|
(23)
|
Autandil
Gigineishuili exercises voting and/or dispositive power with respect to
these securities.
|
|
(24)
|
JMG
Capital Partners, L.P. (“JMG Partners”) is a California limited
partnership. Its general partner is JMG Capital Management, LLC
(the “Manager”), a Delaware limited liability company and an investment
adviser that has voting and dispositive power of JMG Partners’
investments, including the shares beneficially owned prior to the
offering. The equity interests of the Manager are owned by JMG
Capital Management, Inc. (“JMG Capital”) a California corporation, and
Asset Alliance Holding Corp., a Delaware corporation. Jonathan
M. Glaser is the Executive Officer and Director of JMG Capital and has
sole investment discretion over JMG Partners’ portfolio
holdings. JMG Capital Partners has reported currently having,
or previously having, an open short position in our common
shares.
|
|
(25)
|
JMG
Triton Offshore Fund, Ltd. (the “Fund”) is an international business
company organized under the laws of the British Virgin
Islands. The Fund’s investment manager is Pacific Assets
Management LLC, a Delaware limited liability Company (the “Manager”) that
has voting and dispositive power over the Fund’s investments, including
the shares set forth above. The equity interests of the Manager
are owned by Pacific Capital Management, Inc., a California corporation
(“Pacific”) and Asset Alliance Holding Corp., a Delaware
corporation. The equity interests of Pacific are owned by
Messrs. Roger Richter, Jonathan M. Glaser and Daniel A.
David. Messrs. Glaser and Richter have sole investment
discretion over the Fund’s portfolio holdings. The Fund has
reported currently having, or previously having, an open short position in
our common shares.
|
|
(26)
|
JP
Morgan Securities Inc. is a wholly-owned subsidiary of JPMorgan Chase
& Co. JP Morgan Securities Inc. owns 91 of our common
shares and has reported currently having, or previously having, an open
short position in our common shares.
|
|
(27)
|
Allan
Teh exercises voting and/or dispositive powers with respect to these
securities.
|
|
(28)
|
Lehman
Brothers, Inc. was a publicly held company. In January and March 2007,
Lehman Brothers Inc. served as joint-book running manager for our private
offerings of an aggregate $450,000,000 original principal amount of the
notes.
|
|
(29)
|
Canyon
Capital Advisors LLC is the investment advisor for Lyxor/Canyon Capital
Arbitrage Fund, Ltd. and has the power to direct investments by
Lyxor/Canyon Capital Arbitrage Fund, Ltd. The managing partners
of Canyon Capital Advisors LLC are Joshua S. Friedman, Mitchell R. Julis,
and K. Robert Turner. Lyxor/Canyon Capital Arbitrage Fund, Ltd.
is a multi-class investment company with limited liability incorporated in
Jersey.
|
|
(30)
|
Canyon
Capital Advisors LLC is the investment advisor for Lyxor/Canyon Value
Realization Fund, Ltd. and has the power to direct investments by
Lyxor/Canyon Value Realization Fund, Ltd. The managing partners
of Canyon Capital Advisors LLC are Joshua S. Friedman, Mitchell R. Julis,
and K. Robert Turner. Lyxor/Canyon Value Realization Fund, Ltd.
is a multi-class investment company with limited liability incorporated in
Jersey under the companies (Jersey) Law 1991.
|
|
(31)
|
Millenium
Management, L.L.C., a Delaware limited liability company, is the general
partner of Millenium Partners, L.P., a Cayman Islands exempted limited
partnership, and consequently may be deemed to have voting control and
investment discretion over securities owned by Millenium Partners, L.P.
Israel A. Englander is the managing member of Millennium Management,
L.L.C. As a result, Mr. Englander may be deemed to be the beneficial owner
of any shares deemed to be beneficially owned by Millenium Management,
L.L.C. The foregoing should not be construed in and of itself as an
admission by either of Millennium Management, L.L.C. or Mr. Englander as
to beneficial ownership of the common shares owned by Millenium Partners,
L.P. The selling shareholder is an “affiliate” of a broker-dealer and
certifies that it bought the securities in the ordinary course of
business, and at the time of the purchase of the securities to be resold,
it had no agreements or understandings, directly or indirectly, with any
person to distribute the securities.
|
|
(32)
|
Robin
R. Shah exercises voting and/or dispositive power with respect to these
securities.
|
|
(33)
|
PNC
Equity Securities LLC is a wholly-owned subsidiary of the PNC Financial
Services Group, Inc., a publicly held company.
|
|
(34)
|
Polygon
Investment Partner LLP and Polygon Investment Partners LP (the “Investment
Managers”), Polygon Investments Ltd. (the “Manager”), Alexander E.
Jackson, Reade E. Griffith and Patrick G. G. Dear share voting and
dispositive power of the securities held by Polygon Global Opportunities
Master Fund. The Investment Managers, the Manager, Alexander E. Jackson,
Reade E. Griffith and Patrick G. G. Dear disclaim beneficial ownership of
the securities held by Polygon Global Opportunities Master
Fund.
|
|
(35)
|
Jeff
Baum and Tony Morgan, as principles for Redbrick Capital Management, Ltd.,
exercise voting and/or dispositive power with respect to these
securities.
|
|
(36)
|
Deutsche
Bank Trust Companies America may be deemed to exercise dispositive power
or investment control over the securities stated as beneficially owned by
Reflex Master Portfolio Ltd.
|
|
(37)
|
The
selling shareholder is an “affiliate” of a broker-dealer and certifies
that it bought the securities in the ordinary course of business, and at
the time of the purchase of the securities to be resold, it had no
agreements or understandings, directly or indirectly, with any person to
distribute the securities.
|
|
(38)
|
Pursuant
to investment agreements, each of S.A.C. Capital Advisors, LLC a Delaware
limited liability company (“SAC Capital Advisors”), and S.A.C. Capital
Management, LLC, a Delaware limited liability company (“SAC Capital
Management”), share all investment and voting power with respect to the
securities held by S.A.C. Arbitrage Fund, LLC. Mr. Steven A. Cohen
controls both SAC Capital Advisors and SAC Capital Management. Each of SAC
Capital Advisors, SAC Capital Management and Mr. Cohen disclaim beneficial
ownership of any of these securities.
|
|
(39)
|
Messrs.
Mark Fishman and Sal Naro may be deemed to share beneficial ownership of
the common shares owned of record by Sailfish Multi-Strategy Fixed Income
Master Fund (G2), Ltd., by virtue of their status as managing members of
Sailfish Capital Partners, LLC, a Delaware limited liability company, the
principal business of which is serving as the Investment Manager of
Sailfish Multi-Strategy Fixed Income Master Fund (G2), Ltd., a Cayman
Island limited company. Each of Mr. Fishman and Mr. Naro share investment
and voting power with respect to the ownership interests of the common
shares owned by Sailfish Multi-Strategy Fixed Income Master Fund (G2),
Ltd. but disclaim beneficial ownership of such
interests.
|
|
(40)
|
David
Hammend and Mark Tanaka exercise dispositive powers with respect to these
securities.
|
|
(41)
|
Canyon
Capital Advisors LLC is the investment advisor for The Canyon Value
Realization Fund (Cayman), Ltd. and has the power to direct investments by
The Canyon Value Realization Fund (Cayman), Ltd. The managing
partners of Canyon Capital Advisors LLC are Joshua S. Friedman, Mitchell
R. Julis, and K. Robert Turner. The Canyon Value Realization
Fund (Cayman), Ltd. is an Exempted Company incorporated in the Cayman
Islands with limited liability.
|
|
(42)
|
Robert
Marx exercises voting and/or dispositive powers with respect to these
securities.
|
|
(43)
|
Autandil
Giginershvili exercises voting and/or dispositive powers with respect to
these securities.
|
|
(44)
|
Wachovia
Securities International Ltd. is a wholly-owned subsidiary of Wachovia
Corporation. Wachovia Corporation and its affiliates in
the past have provided financing services to us. An affiliate of Wachovia
Corporation acted as placement agent for us for secured mortgage
indebtedness of $10.1 million in aggregate principal amount in 2005,
$51.5 million in aggregate principal amount in 2004 and
$13.4 million in aggregate principal amount in 2003. Additionally, an
affiliate of Wachovia Corporation acted as lender to us for
$7.7 million of secured mortgage indebtedness in 2004. In addition,
an affiliate of Wachovia Corporation acted as sole book-running manager in
public offerings of our common shares for $61.7 million in July 2005,
$127.2 million in February 2004, $102.6 million in October 2003,
$77.0 million in April 2003 and $42.6 million in September 2002.
Furthermore, an affiliate of Wachovia Corporation acted as lead arranger
for our $200.0 million credit facility in June 2005, pursuant to
which an affiliate of Wachovia Corporation committed $45.0 million.
An affiliate of Wachovia Corporation also acted as placement agent for us
in a private placement of our common shares of $35.0 million in June
2004. An affiliate of Wachovia Corporation as our exclusive
financial advisor with respect to the merger of Newkirk Realty Trust with
and into us. In January 2007, an affiliate of Wachovia Corporation served
as co-manager for our private offering of an aggregate
$300,000,000 original principal amount of the
notes.
|
|
(45)
|
Shad
Stastney, John Succo and Sky Lucas exercise voting and/or dispositive
power with respect to these securities.
|
|
(46)
|
The
total assumes exchange of the full amount of notes originally issued at
the initial exchange rate of 39.6071 of common shares per $1,000 principal
amount of notes and a cash payment in lieu of any fractional share, even
though (x) only $134,400,000 aggregate principal amount of the notes were
outstanding as of June 30, 2009 and (y) we are required to
pay the first $1,000 of exchange value in cash. Additional selling
shareholders not named in this prospectus will not be able to use this
prospectus for resales until they are named in the selling shareholder
table by prospectus supplement or post-effective amendment. Transferees,
successors and donees of identified selling shareholders who are selling
more than 500 common shares will not be able to use this prospectus for
resales until they are named in the selling shareholder table by
prospectus supplement or post-effective amendment. If required, we will
add transferees, successors and donees by prospectus supplement in
instances where the transferee, successor or donee has acquired its shares
from holders named in this prospectus after the effective date of this
prospectus.
|
PLAN
OF DISTRIBUTION
This
prospectus relates to the resale of our common shares issued upon the exchange
or redemption of the notes. In such circumstances, the selling
shareholders, may use this prospectus to resell from time to time the common
shares that we may issue to them upon the exchange or redemption of the
notes.
As used
in this section of the prospectus, the term “selling shareholders” includes the
selling shareholders named in the table above and any of their pledgees, donees,
transferees or other successors-in-interest who receive our common shares
offered hereby from a selling shareholder as a gift, pledge, partnership
distribution or other non-sale related transfer and who subsequently sell any of
such common shares after the date of this prospectus.
All
costs, expenses and fees in connection with the registration of the common
shares offered hereby will be borne by us. Underwriting discounts, brokerage
commissions and similar selling expenses, if any, attributable to the sale of
the securities covered by this prospectus will be borne by the respective
selling shareholders.
The
selling shareholders may sell under this prospectus the common shares which are
outstanding at different times. The selling shareholders will act independently
of us in making decisions as to the timing, manner and size of each sale. The
sales may be made on any national securities exchange or quotation system on
which the common shares may be listed or quoted at the time of sale, in the
over-the-counter market or other than in such organized and unorganized trading
markets, in one or more transactions, at:
|
·
|
fixed
prices, which may be changed;
|
|
·
|
prevailing
market prices at the time of sale, including in “at the market
offerings”;
|
|
·
|
varying
prices determined at the time of sale;
or
|
The
common shares may be sold by one or more of the following methods in addition to
any other method permitted under this prospectus:
|
·
|
a
block trade in which the broker-dealer so engaged may sell the common
shares as agent, but may position and resell a portion of the block as
principal to facilitate the
transaction;
|
|
·
|
a
purchase by a broker-dealer as principal and resale by such broker-dealer
for its own account;
|
|
·
|
an
ordinary brokerage transaction or a transaction in which the broker
solicits purchasers;
|
|
·
|
a
privately negotiated transaction;
|
|
·
|
an
underwritten offering;
|
|
·
|
securities
exchange or quotation system sale that complies with the rules of the
exchange or quotation system;
|
|
·
|
in
“at the market offerings” to or through a market maker or into an existing
trading market, or a securities exchange or
otherwise;
|
|
·
|
through
short sale transactions following which the common shares are delivered to
close out the short positions;
|
|
·
|
through
the writing of options relating to such common shares;
or
|
|
·
|
through
a combination of the above methods of
sale.
|
The
selling shareholders may enter into derivative transactions with third parties,
or sell securities not covered by this prospectus to third parties in privately
negotiated transactions. In connection with those derivatives, the third parties
may sell common shares covered by this prospectus, including in short sale
transactions. If so, the third party may use common shares pledged by the
selling shareholders or borrowed from the selling shareholders or others to
settle those sales or to close out any related open borrowings of common shares,
and may use common shares received from the selling shareholders in settlement
of those derivatives to close out any related open borrowings of common shares.
We will file a supplement to this prospectus to describe any derivative
transaction effected by the selling shareholders and to identify the third party
in such transactions as an “underwriter” within the meaning of Section 2(a)(11)
of the Securities Act.
The
selling shareholders may effect such transactions by selling the common shares
covered by this prospectus directly to purchasers, to or through broker-dealers,
which may act as agents for the seller and buyer or principals, or to
underwriters who acquire common shares for their own account and resell them in
one or more transactions. Such broker-dealers or underwriters may receive
compensation in the form of discounts, concessions, or commissions from the
selling shareholders and/or the purchasers of the common shares covered by this
prospectus for whom such broker-dealers may act as agents or to whom they sell
as principal, or both (which compensation as to a particular broker-dealer might
be in excess of customary commissions) and such discounts, concessions, or
commissions may be allowed or re-allowed or paid to dealers. Any public offering
price and any discounts or concessions allowed or paid to dealers may be changed
at different times.
The
selling shareholders and any broker-dealers that participate with the selling
shareholders or third parties to derivative transactions in the sale of the
common shares covered by this prospectus may be deemed to be “underwriters”
within the meaning of Section 2(a)(11) of the Securities Act, and any
commissions received by such broker-dealers and any profit on the resale of the
common shares sold by them while acting as principals might be deemed to be
underwriting discounts or commissions under the Securities Act.
We will
make copies of this prospectus available to the selling shareholders and have
informed them of their obligation to deliver copies of this prospectus to
purchasers at or before the time of any sale of common shares.
The
selling shareholders also may resell all or a portion of their common shares in
open market transactions in reliance upon Rule 144 under the Securities Act, or
any other available exemption from required registration under the Securities
Act, provided they meet the criteria and conform to the requirements of such
exemption.
We will
file a supplement to this prospectus, if required, pursuant to Rule 424(b) under
the Securities Act upon being notified by a selling shareholder that any
material arrangements have been entered into with an underwriter, a
broker-dealer for the sale of common shares through an underwritten offering, a
block trade, special offering, exchange or secondary distribution or a purchase
by a broker-dealer. Such supplement will disclose:
|
·
|
the
name of each such selling shareholder and of the participating
underwriters or broker-dealers;
|
|
·
|
the
number of common shares involved;
|
|
·
|
the
price at which such common shares were
sold;
|
|
·
|
the
commissions paid or discounts or concessions allowed to such underwriters
or broker-dealers, where
applicable;
|
|
·
|
as
appropriate, that such broker-dealers did not conduct any investigation to
verify the information set out or incorporated by reference in this
prospectus; and
|
|
·
|
other
facts material to the transaction.
|
In
addition, upon receiving notice from a selling shareholder that a donee, pledgee
or transferee or other successor-in-interest intends to sell more than 500
common shares covered by this prospectus, we will file a supplement to this
prospectus pursuant to Rule 424(b) under the Securities Act to identify the
non-sale transferee.
The
selling shareholders are not restricted as to the price or prices at which they
may sell their common shares. Sales of such common shares may have an adverse
effect on the market price of the securities, including the market price of the
common shares. Moreover, the selling shareholders are not restricted as to the
number of common shares that may be sold at any time, and it is possible that a
significant number of common shares could be sold at the same time, which may
have an adverse effect on the market price of the common shares.
We and
the selling shareholders may agree to indemnify any underwriter, broker-dealer
or agent that participates in transactions involving sales of the common shares
against certain liabilities, including liabilities arising under the Securities
Act.
EXPERTS
The
consolidated financial statements and related financial statement schedule of
Lexington Realty Trust and subsidiaries included in our Annual Report on Form
10-K as of December 31, 2008 and 2007, and for each of the years in the
three-year period ended December 31, 2008, as updated by our Current Report on
Form 8-K filed on September 1, 2009, and Management’s Annual Report on
Internal Controls over Financial Reporting as of December 31, 2008, have been
incorporated by reference herein and in the Registration Statement in reliance
upon the reports of KPMG LLP, independent registered public accounting firm,
incorporated by reference herein, and upon the authority of said firm as experts
in accounting and auditing.
The
financial statements of Lex-Win Concord LLC incorporated in the
Prospectus by reference to Lexington Realty Trust’s Current Report on
Form 8-K dated September 1, 2009, have been so incorporated in reliance on the
report of PricewaterhouseCoopers LLP, an independent registered public
accounting firm, given on the authority of said firm as experts in auditing and
accounting.
The
consolidated financial statements and related financial statement schedule of
Net Lease Strategic Asset Fund L.P. and subsidiaries included in our Annual
Report on Form 10-K as of December 31, 2008 and for the year then ended, have
been incorporated by reference herein and in the Registration Statement in
reliance upon the report of KPMG LLP, independent registered public accounting
firm, incorporated by reference herein, and upon the authority of said firm as
experts in accounting and auditing.
LEGAL
MATTERS
Certain
legal matters, including tax matters, will be passed upon by Paul, Hastings,
Janofsky & Walker LLP, New York, New York, our counsel. Certain legal
matters relating to Maryland law, including the validity of our common shares,
will be passed upon by Venable LLP, our counsel with respect to Maryland
law.
WHERE
YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current
reports, proxy statements and other information with the SEC. Our filings with
the SEC are available to the public on the Internet at the SEC’s website at
http://www.sec.gov. You may also read and copy any document that we file with
the SEC at its Public Reference Room, 100 F Street, N.E., Washington, D.C.
20549. Please call the SEC at 1-800-SEC-0330 for further information on the
Public Reference Room and its copy charges.
The information incorporated by
reference herein is an important part of this prospectus. Any statement
contained in a document which is incorporated by reference in this prospectus is
automatically updated and superseded if information contained in a subsequent
filing or in this prospectus, or information that we later file with the SEC
prior to the termination of this offering, modifies or replaces this
information. The following documents filed with the SEC are incorporated by
reference into this prospectus, 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 December 31, 2008, filed
with the SEC on March 2, 2009;
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our
Quarterly Reports on Form 10-Q and Form 10-Q/A for the quarter ended March
31, 2009 filed with the SEC on May 8, 2009, and the quarter ended June 30,
2009 filed with the SEC on August 7,
2009;
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our
Definitive Proxy Statement on Schedule 14A filed with the SEC on April 6,
2009;
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our
Current Reports on Form 8-K filed on January 2, 2009, February 17, 2009,
April 27, 2009, June 15, 2009, June 26, 2009, August 4,
2009, September 1, 2009; and
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all
documents that we file with the SEC pursuant to Sections 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.
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To receive a free copy of any of the
documents incorporated by reference in this prospectus (other than exhibits,
unless they are specifically incorporated by reference in the documents), write
us at the following address or call us at the telephone number listed
below:
Lexington
Realty Trust
One Penn
Plaza
Suite
4015
Attention:
Investor Relations
New York,
New York 10119-4015
(212)
692-7200
We also maintain a website at http://www.lxp.com through
which you can obtain copies of documents that we filed with the SEC. The contents of that website are not
incorporated by reference in or otherwise a part of this
prospectus.